Solar Shares Show Signs Of Soaring

Posted by barkand on January 15, 2011 under Uncategorized | Be the First to Comment

Shares of solar energy companies, particularly the Chinese companies, just finished a strong week. There are good reasons to steer clear of stocks like these: investing in emerging technologies is always a risk, and you never know if what these Chinese companies are reporting is legit. But from a purely technical point of view, they are interesting to watch.

The whole sector jumped early in the week based on a very bullish earnings report from LDK. However, it was the chart of ReneSola (SOL) which caught my eye.

First, there is the apparent inverse head & shoulders that developed during the month of December. The head was formed in mid-December, and the neckline was broken the first week of January. That breaking of the neckline generates a “Buy” signal, with the caveat that this pattern can provide many false signals.

What is more telling, I think, is the amount of selling pressure on the way down from $14 to $8. The shares made three distinct lows which I cleverly labeled 1,2, and 3. Volume on the second leg down was lighter than the first, and the third push down was on still lighter volume. By mid-December, there was nobody left who wanted to sell.

This one looks like it will go higher in the near-term. Just keep an eye out for signs of trouble.