After the latest inflation data caused a sell-off in the broad equity markets, one industry group stood out by surging higher – solar stocks. This increase was in reaction to the recent presidential debate, where there was renewed optimism for renewable energy. Specifically, the potential victory of Vice President Kamala Harris in the upcoming election has fueled this positive sentiment towards solar energy. Despite the fact that the technical configuration for solar stocks has not been particularly bullish in 2024, with the Invesco Solar ETF (TAN) down over 25% year-to-date, there is still hope for a turnaround in the sector.
Taking a closer look at two of the strongest charts in the solar stock group, we can examine the performance of First Solar Inc. (FSLR) and Sunrun Inc. (RUN). Earlier this year, FSLR demonstrated an impressive run of outperforming the S & P 500, reaching a high just above $300 in mid-June. However, the stock quickly dropped and found new support around $210, eventually settling into a trading range between $200 and $240. It is essential to note that this price range aligns well with previous resistance levels from 2023, emphasizing the importance of these levels.
When a stock is in a consolidation phase with clear support and resistance levels, the best approach is often to wait for a confirmed move outside of that range. In the case of First Solar, a break above the established resistance around $240 would complete the upside rotation and signal a likely retest of the 2024 high around $300. On the other hand, Sunrun (RUN) is in a more attractive technical configuration as it is already in a confirmed uptrend phase. Following support around $9 in late 2023 and subsequent retesting, the stock has established a clear pattern of higher highs and higher lows.
In the current market environment, when the markets are in a risk-off mode, it is beneficial to identify stocks and themes that are moving counter to the downward trend. While solar stocks still have challenges to overcome, their technical configurations suggest that investors should closely monitor this space leading up to the November elections. It is crucial to keep an eye on how solar stocks perform, especially in light of the upcoming election and the potential impact it could have on the renewable energy sector.
The recent surge in solar stocks amidst a broader market sell-off has captured the attention of investors. The renewed optimism for renewable energy, fueled by expectations surrounding the upcoming election, has played a significant role in driving the momentum in solar stocks. While there are challenges ahead, particularly in the technical configurations of individual stocks like FSLR and RUN, there is potential for upside if certain resistance levels are breached. As the market landscape continues to evolve, it will be interesting to see how solar stocks perform and whether they can maintain their current momentum. Investors should stay vigilant and monitor the developments in this space closely to capitalize on any potential opportunities that may arise.