Trina Solar Limited trading below offer price

Aug 29th, 2016 – 1 Comment

Double bottom in June signalled a trend reversal


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Trina Solar Ltd. (TSL NYSE) is the world’s biggest solar panel maker which manufactures photovoltaic wafers, ingots, cells, and modules. The company recently announced plans to go private and also to merge with Fortune Solar Holdings Limited and its subsidiary Red Viburnum Company Limited.

China is expected to reduce subsidies to the solar industry in the second half of 2016 which maybe the catalyst for the mergers. There have also been reports of delays in the payment of subsidies and the quality of some project locations. In addition there is already a surplus of capacity in the sector which will generally find willing sellers meeting motivated buyers and rushing to the alter. There’s an old saw in business that if the top line is shrinking the best tactic is to reduce the number of players in the game to gain efficiencies, reduce competition, and with the grace of God Almighty regain some pricing power.

A review of the charts will help in understanding what is in play with this stock.

 

 

TSL

The three-year chart has a lot of the patterns we have seen with other solar energy stocks. There is an established downtrend line that started in 2014 that has provided resistance to any attempts to move higher.  Similar to the study of JA Solar Holdings Co. (JASO Nasdaq) the shares are trading in a down channel offering trading opportunities as they bounced off the support provided by the lower rail.

What is also evident is the double bottom that formed in June of 2016 prior to the early August announcement that the company would be taken private.

 

 

 

 

TSL2

The six-month chart pulls focus on the double bottom in June that indicated investors could expect a trend reversal. The stock moved off support at $7.00 and took off on the announcement of the proposed transaction to take the company private. If all goes smoothly and the deal gets completed the offer price of the takeover is $11.60 so there could be a bit more in the tank. However the risk is that the deal gets scuppered. Proceed with caution.

 

Next time I’ll inspect the charts for Jinkosolar Holdings Co.Ltd. (JKS NYSE).

 

Make it a profitable day and happy capitalism!

Categories: Solar Energy
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