Recent announcements about the major shifts toward clean energy by countries such as China have investors bullish on everything from lithium to solar power. The defined uptrends on key charts of solar assets, which we discuss below, are acting as a strong guide for the placement of buy orders. The lucrative risk/reward setups in solar suggest that now could be an ideal time to buy. (For more, see: 3 Bullish Chart Patterns for Solar Stocks.)

Guggenheim Solar ETF (TAN)

Investors interested in gaining exposure to the growth in solar power often look to exchange-traded products such as the Guggenheim Solar ETF. In case you aren't familiar, TAN comprises companies from across the globe that span segments including solar equipment producers, suppliers of materials to solar equipment producers, other types of business that derive a significant portion of their business from solar power installation, integration or finance, and companies that specialize in selling electricity derived from solar.

Taking a look at the chart, you can see that the fund is trading within a defined uptrend. While the price has dipped below the support of the 50-day moving average, the nearby trendline seems to have propped up the price, which will likely happen again in the future in the case of a sell-off. Active traders will likely look to open positions close to the trendline and then protect them by placing stop-loss orders below the swing low or the 200-day moving average ($19.05), depending on risk tolerance. (For more, see: Sunny Times Ahead for the Solar Sector.)

Technical chart showing the performance of the Guggenheim Solar ETF (TAN)

SolarEdge Technologies, Inc. (SEDG)

When it comes to investing in the solar sector, one company that is often overlooked more than it should be is SolarEdge Technologies. The Israel-based company designs, develops and sells optimized inverter systems for solar installation.

Taking a look at the chart, you can see that the stock is trading within a well-defined uptrend with little signs of reversing. The bounce off the combined support levels is a clear technical buy sign and will likely be used as confirmation that the bulls are in control of the momentum. Another aspect of this chart that traders will find interesting is how the strong price action over the past several sessions has coincided with the bullish crossover between the moving average convergence divergence (MACD) and its signal line. From a risk management perspective, stop-loss orders will most likely be set below the 50-day moving average ($26.50) in case of a sudden shift in fundamentals. (For more, see: Top 4 Alternative Energy Stocks as of October 2017.)

Technical chart showing the performance of SolarEdge Technologies, Inc. (SEDG) stock

Canadian Solar Inc. (CSIQ)

One of the top holdings of the TAN ETF that is gaining attention from active traders is Canadian Solar because of its proximity to major support levels. As you can see from the chart, the price has moved above key long-term moving averages in recent months, and the underlying trend is now clearly in the process of shifting higher. The horizontal trendline will likely be used as a guide for determining the placement of buy orders, and most traders will likely give their positions some room to run in an attempt to reduce the chance of being taken out of their positions too early. More specifically, stops will likely be set below $14.18 to protect against a sell-off. (For more, see: Spotlight on the Solar Industry.)

Technical chart showing the performance of Canadian Solar Inc. (CSIQ) stock

The Bottom Line

Solar and related alternative energy segments have started to gain traction in the circles of many active traders. Bullish chart patterns such as those shown above highlight lucrative risk/reward setups that clearly put the momentum in the favor of the bulls. Based on these patterns, it appears as though the remainder of 2017 could be time for the solar sector to shine. (For more, see: Is It Time to Buy The Solar Sector?)

Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.

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