Solar stocks have posted solid gains so far in the second quarter and could add points into year end, finally ending a multi-year bear market. Sector installations have plummeted in the past year in reaction to tariffs, but panel costs have fallen as well, underpinning predictions for a sales resurgence into the next decade. Other tailwinds are lining up as well, brightening the future for this struggling industry.
Short interest has dropped substantially in recent months, indicating that smart money is stepping aside ahead of the 2020 election, which may elect a leader who reverses the fossil fuel-friendly policies of the Trump administration. Long-suffering solar shareholders can also thank the state of California for a good chunk of the group's upside, with a law that requires solar installations in new home construction set to go into effect in 2020.
The Invesco Solar ETF (TAN) posted an all-time high at $307.90 in May 2008, just a few weeks after going public, and entered a steep downtrend that hit an all-time low at $12.60 in November 2012. A bounce into 2014 stalled in the upper $40s, yielding a 2015 breakout attempt that completed a double top reversal. The subsequent downturn tested the prior low at the end of 2016 and again in 2018, turning higher into the second quarter of 2019.
The uptick reached multi-year resistance at the 200-week exponential moving average (EMA) in March and mounted that level this week, exhibiting unusual strength. Equally potent resistance at the 2018 high above $27 is now in play, with a breakout signaling the completion of a multi-year double bottom reversal. In turn, this bullish action should open the door to a strong advance that may reach the 2014 high in the upper $40s.
Domestic industry giant First Solar, Inc. (FSLR) has struggled through feast and famine for 12 years, hitting an all-time high at $317 in 2008 and an all-time low at $11.43 just four years later. It bounced into the mid-$70s in 2014, establishing a resistance level that is still in play as we head toward the new decade. Upside in 2019 has lifted the stock back above the 200-day EMA for the first time since June 2018, but it is still trading more than 15 points under range resistance.
Price action since 2014 has carved a potential inverse head and shoulders basing pattern, with favorable odds that the 2019 uptick will eventually complete the right shoulder and a long-term breakout. If so, the rally may gain enormous traction and head for a measured move target in the $120s. Even so, resistance in the mid-$70s won't give up without a fight, perhaps delaying a breakout into 2020 or 2021.
Utah-based Vivant Solar, Inc. (VSLR) should benefit greatly from California's installation rule in the coming years. The stock came public in the upper teens in 2014 and dropped into a trading range with support near $7.50. It broke down in February 2016, entering a steep downtrend that posted an all-time low at $2.16 in May. A 2018 buying wave reversed at $7.44 in November, yielding a major pullback that tested the will of long-term shareholders.
The stock rallied within a few cents of the 2018 high in May and has been consolidating near that level for the last month. Meanwhile, the on-balance volume (OBV) accumulation-distribution indicator has posted an all-time high, indicating healthy speculation on the impact of California's rule. This bullish action bodes well for a breakout that also mounts resistance at the 2016 breakdown, opening the door to double digits and a long-awaited return to 2014 resistance in the mid-teens.
The Bottom Line
Solar stocks are gaining ground in 2019, shaking off headwinds from 2018 tariffs on foreign panels.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.