Daily charts across nearly every sector over the past couple of months show that the swift losses that have resulted from the rise of the COVID-19 pandemic have wiped out multiple years' worth of gains. However, while these short-term charts can appear as though the trend has reversed and that prices could be headed lower, trend traders and followers of key technical indicators are finding that a longer-term perspective is suggesting that the sell-off could be presenting those willing to assume risk with an interesting buying opportunity.
One of the sectors that will likely be of specific interest to active traders in the weeks ahead and the focus in this article is solar energy. Nearby trendlines, which have acted as strong levels are support, are being tested again and could act as guides for those looking to enter positions in the sector.
Invesco Solar ETF (TAN)
Active traders who want to get a sense where a niche sector such as solar could be headed in the future often turn to exchange-traded products such as the Invesco Solar ETF (TAN) for ideas. As you can see from the weekly chart below, the sharp sell-off from the highs near $42.50 sent the price of the fund toward the support of its 200-week moving average.
The bounce near $23 suggests that the bulls are still in control of the long-term momentum and that the nearby trendlines could act as stronger guides for the placement of buy orders than many are noticing at the moment. Active trader will most likely look to buy as close to the combined support levels as possible and set their stop-loss orders below these levels in case of a sudden shift in underlying fundamentals.
First Solar, Inc. (FSLR)
With a weighting of 8.71%, First Solar Inc. (FSLR) represents the top holding of the TAN ETF. Taking a look at the weekly chart below, you can see that the price of the stock is trading near the bottom of a defined range that has influenced the price of the stock over the past seven years. Active traders will likely use the recent bounce off of the lower trendline as confirmation that the range is still intact and that the price could be headed back to the mid-point or even the upper trendline over the coming year.
SolarEdge Technologies, Inc. (SEDG)
Another top holding of the TAN ETF is SolarEdge Technologies, Inc. (SEDG), which currently features one of the most interesting long-term charts in the markets. As you can see from the chart below, the price of the stock has recently experienced a sharp drop from its 2020 high of $143.73 and has found support near two influential dotted trendlines. The recent bounce off of the support suggests that the bulls are still in control of the underlying trend and that the price could be poised to make a move higher again.
The Bottom Line
Solar energy has not received much attention in recent weeks as other segments of the market such as oil, gold, and technology have dominated the spotlight. Based on the charts discussed above, nearby trendlines on the weekly charts suggest that the long-term uptrend is still in place and that bulls will likely remain in control until prices close below the aforementioned support.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.