The solar stocks have been experiencing some distribution lately despite the general markets remaining near their recent highs. Some stocks in this sector have started to break down and are testing some important support levels. This is a clear divergence from the price action in the general markets and provides traders with valuable information that money is likely rotating away from this group in the near term. Whether this group finds support at these levels or not, it is likely that this sector will underperform in the near future. (For background reading, see Spotlight On The Solar Industry.)
In Pictures: Top 10 Green Industries

First Solar (Nasdaq:FSLR) is likely the most widely followed stock in this group, and the recent price action is a little troubling for current investors. FSLR fell apart when it tested the $150 level back in May, dropping all the way to $100 per share a few weeks later. It then spent the next four months on a tedious climb back up to $150. After briefly climbing above this level, FSLR once again failed to break out and instead gapped lower on high volume. It also fell under a rising trendline that was marking its prior trading channel and also broke under its last pivot low in October. These are all warning signals that sellers are starting to overwhelm buyers in FSLR. (For more, see Trading Failed Breaks.)


Solarfun Power Holdings Co. (Nasdaq:SOLF) is another solar stock that has been under pressure recently, even as the markets trade near highs. SOLF was actually looking pretty good about a month ago, as it attempted to have a secondary breakout after clearing its base in July. However, SOLF quickly reversed after clearing $13. Volume was also higher than average near the top of the range, which is hinting at distribution. SOLF should be watched here as a break below current support near $10 could put SOLF back into its prior base.


Trina Solar LTD
(NYSE:TSL) has been one of the better performing solar stocks over the past two years, but it's starting to see some signs of distribution. TSL has very strong resistance in the low $30s, as it has marked several tops over its brief lifetime. TSL failed on a few occasions near this area back in 2007, and then again in early 2010. After correcting over the first half of this year, TSL managed to trade back to this level in October. However, the initial thrust into this resistance area was met with a high volume reversal. TSL is also sitting near the bottom of its recent trading range and just broke under a trendline that had been framing its recent trading channel. If TSL falls back under $26, it could see renewed selling pressure.


JinkoSolar Holding Company (NYSE:JKS) is the one solar that continues to sport a very healthy looking chart pattern, but it has experienced some possible distribution. JKS has had quite a run over the past few months as it traded from single digits to over $30 in just four months. JKS had been consolidating the sharp rally from September through late October before a gap higher on November 1. While the gap held above the base, JKS did pull back from its highs. Traders should monitor JKS to see if it can continue to consolidate above the prior base before pushing higher. If JKS fails to hold above the breakout area near $32.50, it could quickly come back down into its prior base. (For more, see The Anatomy Of Trading Breakouts.)


While the many solars have not technically broken down, they have been experiencing selling at a time when the markets have been pushing higher. This is not healthy price action, and could be hinting at lower prices in the future. Of course these stocks could easily find support at their current levels, but it may take much more time before they are ready to resume moving higher. On the contrary, if the markets pull back from these levels, these stocks will likely have trouble holding on to current support. If these levels are broken, the implications are for much lower prices, so traders should remain vigilant when it comes to this group.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Technical Indicators

    Explaining Autocorrelation

    Autocorrelation is the measure of an internal correlation with a given time series.
  2. Chart Advisor

    ChartAdvisor for October 9 2015

    Weekly technical summary of the major U.S. indexes.
  3. Chart Advisor

    These Oil & Gas Stocks Have Reversed

    It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
  4. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  5. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  6. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  7. Technical Indicators

    Why MACD Divergence Is an Unreliable Signal

    MACD divergence is a popular method for predicting reversals, but unfortunately it isn't very accurate. Learn the weaknesses of indicator divergence.
  8. Chart Advisor

    Expecting a Big Breakout In These 4 Stocks

    These stocks are tightly wound following big moves, and upon breakout more big moves could ensue.
  9. Chart Advisor

    Trade Base Metals With These 3 ETFs

    News out of Alcoa is causing active traders to turn toward base metals for opportunities. Before diving into the market, check out the charts of these three ETFs.
  10. Charts & Patterns

    The Importance Of Tracking The Whisper Number

    Don't let the name fool you: Whisper numbers are making themselves heard. Here's why you should be paying attention.
  1. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  2. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  3. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  4. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  5. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!