SolarEdge Technologies is grinding through a cup-with-handle base as solar stocks gain ground, fueled by rising energy prices. The hunt for alternative fuels is stoking buying interest but investors should expect energy market volatility to continue. This Israel-based maker of solar power solutions is an IBD 50 Stock to Watch.
Solar stocks have gained over the past two weeks as President Biden lashed out at oil companies for inflating energy prices. Earlier this month, the White House allocated $500 million for clean energy demonstration projects across U.S. mine lands, as authorized by the Bipartisan Infrastructure Law. Additional allocations through the midterms may be difficult, due to Congressional inaction. Biden also wants to pass legislation that brings U.S. companies up to par with Chinese counterparts, who now dominate the industry.
SolarEdge is currently ranked No. 4 in IBD's Solar Energy industry group, behind China's Daqo New Energy, according to IBD Stock Checkup. The group is ranked No. 3 among 197 industry groups.
SolarEdge fell 4.6% Monday but is forming a cup-with-handle base that shows a buy point of 314.62, according to MarketSmith pattern recognition. It dropped below the 200-day moving average during the session but remains above the 50-day moving average. It continues to display strong relative strength, underpinned by an impressive 93 RS Rating.
Solar Stocks Continue To Climb
SolarEdge has a near perfect IBD Composite Rating of 98 and EPS Rating of 91, powered by a 3-year 15% EPS growth rate. The company will report second-quarter earnings on Aug. 1. Eight analysts surveyed by Zacks expect SEDG to report a profit of 86 cents per share.
SolarEdge investor relations director Lior Danziger outlined the bull case in a recent call with analysts, noting, "We are seeing accelerated demand in Europe (45% of SolarEdge's business) almost in each and every country and each and every segment. We're operating both in residential and in commercial, and the demand is extremely strong. And I think it's driven mostly by heightened electricity prices. In some markets in Europe, it's 50% more."
Solar energy ETF leader Invesco Solar was added to the IBD Leaderboard this month. The ETF lowers some of the risk associated with individual companies. The fund has formed a new first stage base after undercutting its prior base. Research indicates that early stage patterns are more likely to succeed than extended patterns. TAN has a large weighting in key players, including Enphase Energy and SEDG.
TAN threatened to give up its 200-day line Monday, after reclaiming that key level Friday on heavy volume.
Follow Michael Molinski on Twitter @IMmolinski
