It is important to put the odds in your favor when trading stocks. Just as you would not want to swim against the current, you’d never want to fight the general market trend. Once you have the market at your back, the next logical step is to look for themes that are developing and industry groups that seem to be heating up. The solar sector has been showing increasing strength over the past few months. This makes sense given push for green energy with the Democrats in charge, as well as the fact that oil prices have been rising. Two of the leaders in the solar space appear to be Enphase Energy (ENPH) and SolarEdge (SEDG). ENPH first came across my radar in late October as it gapped up over 24% on massive volume. While I was not able to buy it, I always make a note to keep a stock like this on my watchlist in case it provides an excellent entry point. Enphase has had exceptionally strong earnings and sales in 2021 and has delivered a return on equity of 50%. ENPH has also seen a steady increase in fund ownership in 2021 which is an bullish sign. Moreover, management owns 5% of its’ sharing indicating they too are still bullish. SolarEdge, a competitor of ENPH, has also been acting well after gapping up on earnings in late October. While its’ fundamentals are not as strong as Enphase, it has still shown impressive sales growth in 2021. From a technical perspective, SEDG has held its' 20-day EMA after its' earnings gap up and has been consolidating in a very orderly fashion. On the weekly chart, it looks to be forming a cup and handle base. Continued strength in ENPH gives me added conviction that SolarEdge has the potential to be a big winner in the coming months. I will look to initiate a position in SEDG if it can break out on volume.
Risk right. Sit tight.
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