If you have attended the free DecisionPoint.com Trading Room or you are a DecisionPoint Diamonds Report subscriber, you'll know that I have been very bullish on renewable energy stocks since the beginning of autumn. While they can be very volatile, overall they are an industry group that is flourishing and, if you can take those ups and downs, it will continue to be a prosperous sector.
Originally, Renewable Energy had been listed as part of the Energy sector on StockCharts. Since then, it has been moved to the Technology sector, where it has found a home among other outperformers. Technology's one failing is that it is a "leading" sector -- meaning it generally picks the direction for the overall market. That works well most of the time, as it outperforms in bull markets; however, when the market gets toppy like it is right now, you're exposed to positions in a sector that will likely lead to the downside.
This is why I like solar. I believe it is a "teflon" area of the market that will enjoy a rising trend for many years to come as renewable energy technology continues to improve and become the norm, with new homes being built with solar, more electric vehicles on the road, etc. There is the addition of a Biden administration that is expected to be adding more money to these companies to speed up innovation. Let's look at TAN, one of the Renewable Energy ETFs. Full disclosure, I own this particular ETF.
It has made a great run, but I don't think it's over. There is the problem of an overbought RSI, but, as you can see, overbought conditions can persist for weeks and even months. The last two times it declined from overbought RSI conditions, it pulled back about 18% and then resumed the rally. You need to be prepared for those heavy pullbacks in this sector. As long as price remains above the 50-EMA, the trend seems very safe. I set a stop on TAN just below support at the November top, but, as I noted above, you may need to accept deeper pullbacks. There is a PMO BUY signal and we can see from the OBV that price is following volume. We have higher OBV tops that coordinate with higher price tops. The PMO is not overbought even though price is, which makes it more attractive. The SCTR at 99.9 for months is a testament to how strong this ETF is within the universe of all ETFs.
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Rather than do a "Diamond of the Week", I thought I would review two of my favorite stocks within this space. Full disclosure, I do own SPWR.
TPI Composites, Inc. (TPIC)
EARNINGS: 2/25/2021 (AMC)
TPI Composites, Inc. is a holding company that engages in the manufacture of composite wind blades for the wind energy market. It operates through the following segments: United States (US); Asia; Mexico; and Europe, the Middle East, and Africa (EMEA). The US segment includes the production of wind blades in Newton, Iowa plant; and manufacturing of precision molding and assembly systems used for the manufacture of wind blades in Warren, Rhode Island facility, and composite solutions for the transportation industry. The Asia segment produces wind blades in Taicang Port, Dafeng, and Yangzhou, China facilities. The Mexico segment focuses its operation of wind blades in Juárez and Matamoros, Mexico. The EMEAI segment offers wind blades from two facilities in Izmir, Turkey; and also performs wind blade inspection and repair services. The company was founded by Everett Pearson and Neil Tillotson in 1968 and is headquartered in Scottsdale, AZ.
I presented this one yesterday in the DecisionPoint Diamonds Report. Below is what the chart looked like on Thursday with my comments:
12/16: "This one comes from my favorite industry group, Renewable Energy. If you aren't in solar, I recommend you consider it. It can be bouncy, but overall the returns have been excellent! Right now, TPIC has an ascending triangle which is bullish with an expectation of an upside breakout. The RSI is positive and not overbought. The PMO is headed back up for a BUY signal."
Here is the current chart. As you can see, today that triangle resolved as expected to the upside. I wasn't expecting a rally this powerful, but the set up was nice yesterday. This has moved TPIC into overbought territory as far as the RSI. The PMO is overbought, but it is rising strongly. As noted with TAN in the opening, these stocks can stay overbought for some time, but they generally will include a pullback or pause before the next leg up. I would watch for a pullback toward the breakout point to make an entry.
SunPower Corp. (SPWR)
EARNINGS: 2/10/2021 (AMC)
SunPower Corp. engages in the design, manufacture and deliver of solar panels and systems. It operates through the SunPower Energy Services and SunPower Technologies segments: The SunPower Energy Services Segment deals with the sales of solar energy solutions in the North America region including direct sales of turn-key engineering, procurement and construction. The SunPower Technologies Segment involves technology development, worldwide solar panel manufacturing operations, equipment supply to resellers, commercial and residential end-customers outside of North America. The company was founded by Thomas L. Dinwoodie, Robert Lorenzini and Richard M. Swanson in April 1985 and is headquartered in San Jose, CA.
I covered SunPower Corp back on September 30th for Diamonds subscribers. Below is my commentary:
9/30: "This area of the market has been enjoying a huge rally. It has broken out of a bullish falling wedge and has now popped above the September top. It was up much higher than this intraday, so this mid-day pullback could work to our advantage. The PMO is rising nicely and isn't that overbought. The RSI has remained strong along with the SCTR. Volume has been pouring in and price is following that volume based on the OBV breaking to a new high with price."
Here is the same chart today. SPWR has enjoyed a 103% gain since I presented it. The PMO has just triggered a BUY signal. The RSI is getting overbought, but the PMO is not overbought, which tells me there is more upside on this stock. Notice that our stop level was never hit.
Conclusion: If this type of analysis is appealing to you, join me in the free trading room on Mondays. Registration links are above. I've been talking about solar in those free trading rooms as well. Overall, I do believe that the renewable energy group is teflon. I believe that while it will take some punches when the market does, overall I expect the long-term rising trend to remain intact.
Have a great holiday and don't forget, all DecisionPoint.com subscriptions are 15% off when you use the coupon code: holiday2020. Treat yourself to a prosperous new year with top-notch technical analysis and stock picks!
Happy Charting! - Erin
eheim@decisionpoint.com
Technical Analysis is a windsock, not a crystal ball.
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