Trina Solar (TSL), our favourite solar play, is once again close to that 200 day moving average which seems to hold it back for some time. Below you can see the chart. We think that with every failed attempt, the chances of success the next time will increase.
Why? Because the fundamental news from the industry remains very good.
For instance, today Canadian Solar had very strong figures out and guided above analyst forecast for the coming quarter, and it’s up a whopping 30% today!
Also, there is optimism about the US energy bill, which is now likely to extend tax breaks for solar installations for several years instead of the one year extension originally planned. It’s not a done deal though, according to Citibank.
We think after some consolidation, either upside or downside break-out is likely, we see little reason for downside break-out. The only candidate (bar some disaster) would be an earnings disappointment, but since they were pretty cautious last time, the chances of that happening are not terribly high.
You can also accumulate on weakness (which is not today) and wait for the confirmation of the break-out to go in with more. If you get impatient, you could even buy into the rally today a little, but you run the risk there won’t be a break-out anytime soon.