September 29th, 2009

SOLR: A Winner When Clean and Alternative Energy Heats Up

Thomas Friedman had an excellent piece in Sunday’s New York Times Editorial Section entitled “The New Sputnik” in which he wrote:

“future historians may well conclude that the most important thing to happen in the last 18 months was that Red China decided to become Green China….when China decides it has to go green out of necessity, watch out. You will not just be buying your toys from China. You will buy your next electric car, solar panels, batteries and energy-efficiency software from China…..Well, folks. Sputnik just went up again: China’s going clean-tech…..China is focused on low-cost manufacturing of solar, wind and batteries and building the world’s biggest market for these products.”

The editorial was intriguing and prompted me to look at the sector and I find that the alternative or clean energy groups have lagged the general market but appear to be on the verge of a breaking out. You can get a sense of how the group’s been doing through GEX, the Market Vectors Global Alternative Energy ETF (click on image to enlarge):

As beautiful a cup-and-handle formation as you can ever hope to see. Moving averages have turned up and are about to cross the lagging 300-day moving average as volume trends, as measured by OBV (On-Balance-Volume) is also trending higher. Stocks comprising this ETF are a globally diversified group of companies engaged in the production of alternative fuels and/or related technologies.

Another group of companies in the field, those involved in solar energy, are included in KWT, the Market Vectors Solar Energy ETF (click on image to enlarge):

You could call its reversal pattern as a cup-and-handle (dashed red lines) also or as a head-and-shoulders; regardless, it’s clearly a bottom that’s building towards a breakout. The volume patterns in this chart aren’t as compelling so any increased volume associated with a price move above the neckline would be compelling.

These are only two of many ETFs covering various aspects of the space (PWND for wind, TAN for solar, PBW for clean energy, PZD for clean technology) but one place to begin is at the beginning of the pipeline, the manufacturer of equipment for making silicon wafers, SOLR, GT Solar Int. (click on image to enlarge):

SOLR was a 2008 IPO but one can already see clearly a symmetrical triangle consolidation forming in its limited public trading. When the solar and alternative energy space begins to heat up again, which it looks like it might soon, SOLR could be among the winners. To avoid sitting with some “dead money”, I’d add the stock to my watchlist, waiting for a breakout move above 7.00, perhaps even 8.00, confirmed by higher volumes before making a commitment.