After years of trending lower and collapsing at each critical juncture, solar stocks are surging on a daily basis with heavy buy volume and are as unforgiving to shorts as any group of stocks we have seen in a while.
On the weekly ETF for the sector, below, despite how rare and unsustainable daily moves of 50%+ higher truly are, there is, ironically, not much out of the ordinary about this weekly chart. You can visually make out the inverse head and shoulders bullish bottom dating back to summer 2012. It is all by-the-book in terms of a long-term bearish-to-bullish reversal being made in real-time.
That pattern has triggered with a vengeance, surging to weekly overbought RSI territory (top pane, above 70). But it is not yet dramatically overbought (above 80), which means the solar run could get crazier before it settles down.
At that point, making the all-important higher low to build the longer-term bearish to bullish reversal case becomes the focus. With a slanted “neckline” on that inverse head and shoulders it seems like anything over $20 on the sector ETF would be bullish.
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