SOLAR STOCKS TURNING UPWARD

Soak up the sun…It's time to take another look at solar stocks
Michael Kahn, May 3, 2010 (MarketWatch)

"…From a zenith near $30 in May 2008, the Claymore/MAC Global Solar Energy Index exchange-traded fund (TAN) collapsed to a low under five bucks 10 months later…Talk about the sun setting…Solar stocks have been moving quietly sideways for many months, and in technical parlance they have been building a base from which to rise again.

"A base is simply a chart pattern, possibly a regular trading range, which allows bulls and bears to reassess their positions…Nobody cares about solar stocks anymore…And that is just the time savvy investors start to take another look."

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"The solar ETF has been in such a base between $8.75 and $11.50. At the top of the range, investors consider it to be expensive and selling pressures increase. What is more interesting is that investors stepped up their buying at the bottom of the range even though the news was mostly negative. In other words, investors are not dissuaded by bad news and that suggests an underlying demand for shares.

"Using a long-term investment perspective, technicals suggest that nibbling on these stocks is a good plan for the patient…JA Solar Holdings (JASO), a China-based manufacturer of solar cells, has actually been in a bona fide rising trend since March 2009…[and] has outperformed the Standard & Poor's 500 Index…In the short term, the stock does look a bit shaky but should it pull back to its rising trend line…"

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"First Solar Inc. (FSLR) is another candidate for patient investors…[with] a chart formation called a triangle…Rallies and declines within the pattern become smaller…[suggesting] that interest in the sector and the stock in particular has declined. Again, that is when savvy investors should start to look at it once again…With its floor near 100, the stock has plenty of short-term risk…[but] on several occasions over the past 19 months, investors found 100 to be a cheap price. If and when the stock gets there, the risk/reward ratio will once again be on investors' sides.

"To be sure, the solar energy group carries a higher degree of risk and volatility than the broader stock market. But if you believe that rising energy prices due to a recovering economy, if not other factors, are on the horizon then alternatives make sense. And now that the charts show that the sector has gone through a sizable period of healing it makes sense to put solar energy stocks back on your radar screen."