Today I will begin a deep dive into solar energy stocks to examine the potential for investment in the sector. The first to go under the microscope is Canadian Solar Inc. (CSIQ NASDAQ). The company produces photovoltaic modules,has subsidiaries in 24 countries and has manufacturing facilities in Canada, China, and Vietnam.
The decline in fossil fuel prices since 2014 has thrown sand into the gears of alternative energy demand growth. Major oil and gas producers are scheduled to meet in late September which might resolve the excess supply situation to some degree.
A review of the charts will help identify the technical issues pertinent to this stock.
The three-year chart has a number of patterns that need to be acknowledged before racing for the buy button. The established downtrend line that started in May of 2015 when the stock hit resistance near $40.00 has taken the shares down to a 52-week low of $12.74. The breach of the 50-day moving average in May and the 200-day in June followed by a death cross in August of last year signalled that sellers were in control of the market.
The six-month chart isn’t providing any indication that we can expect a trend reversal in the near future. Best strategy if you are going to hunt this one is to be patient. If fossil fuel prices go up then the case for solar improves. Until then keep your powder dry.
Next time Innergex Renewable Energy Inc. (INE TSX) will be put under the spotlight.
Make it a profitable day and happy capitalism!