Commodities in the energy sector have experienced extreme levels of volatility over the past several months. While many prices are near historic lows, which has dominated headlines, the alternative energy sector has been quietly trending higher. In this article, we'll take a look at some charts from within the solar sector and try to determine how active traders will be positioning themselves over the weeks and months ahead.
Invesco Solar ETF (TAN)
Traders who are interested in adding exposure to solar stocks often turn to the Invesco Solar ETF (TAN) for investment ideas and details around timing. Taking a look at the week chart below, you can see that the sector has been slowly trending higher since notching a low in late 2016.
The two levels that will likely be most noteworthy for traders are the horizontal trendline near $27.50 and the 200-week moving average at $23.44. Trend traders will most likely look to place orders as close to these support lines as possible and protect their positions by placing stop-losses nearby. Based on this pattern, we'd expect bullish traders to continue to dominate the momentum over the long term.
SolarEdge Technologies, Inc. (SEDG)
Given it is the top holding of the TAN ETF, many traders will likely look to analyze the chart of SolarEdge Technologies, Inc. (SEDG), which you can see below. Traders will most likely note the bounce off of the long-term support near $70 and how the price is now trading near the 2019 highs.
The strong trend suggests that the bulls are in clear control of the momentum. If the price is able to break above $143.73 over the next couple of weeks, then there will be no other resistance levels standing in the way of a move higher.
Enphase Energy, Inc. (ENPH)
Another top holding of the TAN ETF that is worth a closer look is Enphase Energy, Inc. (ENPH). Trend traders will likely want to keep their eyes on a long-term channel pattern on the weekly chart.
As you can see below, the ascending trendline has acted as a strong guidepost for traders looking to determine where to buy and sell. Buy orders are placed as close to the lower trendline and the 50-week moving average as possible. Sell orders are placed when the price nears the upper trendline, which based on the logarithmic scale used on this chart, is significantly higher from current levels.
The Bottom Line
Many energy-related commodities are trading near historic lows, while on the other hand, prices in the alternative energy landscape have quietly been moving higher. Based on the patterns discussed above, it appears as though we could be in the early stages of a long-term uptrend, and significant levels of support and resistance on weekly charts will most likely used by followers of technical analysis in setting up their positions.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.