Investing in alternative energy such as solar and other forms of sustainability was a dominant theme in 2020 and will undoubtedly be a key focus over the coming years. For active traders, well-defined trends marked by strong trendlines will likely be used as guideposts for determining the placement of buy and stop orders. In this article, we will look at chart patterns from across the solar sector and try to determine in detail how active traders will be positioning themselves to profit from a potential move higher.
- Sustainable investing strategies were very popular in 2020 and will likely continue to be a dominant strategy for years to come.
- Bullish chart patterns on charts across the solar sector suggest that this is one of the key areas of alternative energy that active traders will focus on over the months ahead.
- Nearby support levels are providing traders with clear guides for determining the placement of buy and stop orders.
Invesco Solar ETF (TAN)
Active traders who are interested in gaining exposure to the solar sector often first turn to the Invesco Solar ETF (TAN). Fundamentally, the fund comprises 37 world-leading solar companies with a weighted average market capitalization of $9.5 billion. Looking at the chart below, you can see that the sector is trading within an extremely strong uptrend, as shown by the dotted trendline. Followers of technical analysis will likely use this trendline when determining the placement of orders, most of which will likely hold a bullish bias due to recent price action. Buy orders will likely continue to be placed as close to the trendline as possible to maximize the risk/reward. Conversely, stop-loss orders will likely be placed below the psychological $100 level, which coincides with the trendline and 50-day moving average.
Enphase Energy, Inc. (ENPH)
As one of the top holdings of the TAN ETF, Enphase Energy, Inc. (ENPH) will likely jump onto the radars of technical traders over the weeks ahead. The ascending channel pattern suggests that the bulls are in control of the momentum and that prices could be ready to move higher. Range-bound traders often look to buy near the bottom of the range and then trade a bounce back toward resistance. The bullish price action in recent sessions suggests that this stock is one to watch over the weeks and months to ahead.
SolarEdge Technologies, Inc. (SEDG)
Another top holding of the TAN ETF that could capture the attention of traders over the weeks ahead is SolarEdge Technologies, Inc. (SEDG). Looking at the chart below, you can see that the stock price has been trading within a strong uptrend since recovering from the 2020 lows. The recent pullback toward the dotted trendline could be used as a buying opportunity by some due to the lucrative risk/reward setup. Buy orders will likely be placed as close to the trendline as possible, and then stop-loss orders would likely be set below either the trendline or the longer-term moving average, depending on risk tolerance and outlook.
The Bottom Line
Sustainable investing as a strategy was extremely popular in 2020 and will likely continue to grow in prominence over the years ahead. Bullish chart patterns across the solar sector, as discussed above, suggest that this could be one of the segments of particular interest to active traders over the weeks and months ahead.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.