Roberto Perdone believes that, besides the banking sector post-2008 financial crisis, there is no group that’s as hated and despised as solar stocks. For whatever reason, this entire complex has become a favorite target of short-sellers. There are so many names in the solar sector that are heavily shorted that it’s hard to find a name the bears aren’t leaning all over.
But in today’s post I’ll argue that solar stocks, and specifically Suntech Power (STP), are primed for a reversal. (Note: Many Chinese companies, of which Suntech Power is one, have been devalued by investors due to concerns over questionable bookkeeping. These concerns have seemingly been extended to almost ALL publicly traded Chinese companies. Through my research I have not found any evidence of poor or deceitful record keeping on their part.)
So why do I think STP is a buy? Recently, solar-power stocks rose sharply after Germany’s government vowed to shut down its nuclear reactors by 2022 and increase the use of renewable energy. Besides the prospect of less competition from nuclear power in a key market, solar stocks might have looked like a bargain to investors.
Another catalyst that could soon shift investors back into the solar stocks is the rising price of crude oil. Crude oil was trading over $100 barrel on Wednesday after OPEC failed to lift output after talks broke down with Saudi Arabia over raising production. If oil wants to start another major bull run here, then we could easily see some of the heavily shorted solar stocks get squeezed.
Finally, by analyzing the SwamiChart above one can easily tell the starting of a green “buy” signal beginning to appear at the far end of the “Predict” indicator. This indicator even appears in conjunction with the recent blue “valley” signal from the WaveForm indicator.