Clean energy searches for greener pastures

09/23/21
  • SPWR still in trading range despite rallying more than 6% on Wednesday
  • Stock gained more than 1,600% between April 2020–Jan. 2021
  • Recent range part of post-correction support level

With a few exceptions (like First Solar), most clean-energy stocks have been trading sideways since retreating from their January highs—and some have been more sideways than others. SunPower (SPWR), for example, has traded in a roughly $2 range for the past month—the narrowest part of a choppy congestion phase that developed after the stock fell more than 60% from its January 29 all-time high:

Chart 1: SunPower (SPWR), 10/26/20–9/22/21. SunPower (SPWR) price chart. Post-correction support level.

Source: Power E*TRADE (For illustrative purposes. Not a recommendation.)


Of course, that correction followed a 1,642% rally (dating back to April 2020), only the last portion of which is shown here. As of yesterday, the support initially defined by the May low has remained intact, marking the bottom of the recent consolidation.

While its general path over the past 18 months or so has been similar to that of many other solar stocks, SPWR is somewhat unusual in that in the middle of last year’s huge clean-energy rally it completed the spin-off of its solar-panel production business to focus on being a technology company that provides the hardware and software required for solar installations. (The panel business became Maxeon Solar Technologies, MAXN.)

That transition may have gotten overlooked during the rush into all things solar in 2020, but it’s potentially important. One of the long-time challenges in the solar-panel industry—especially the residential arm—is very tight profit margins. The costs of residential panels may be continuing to decline, but this has been more of a boon for consumers than the companies making them.1 In short, the increased adoption of residential solar hasn’t been enough to offset producers’ increasingly thin margins.

Whether SPWR’s pivot away from this business will pay off in the long run remains to be seen. The shorter-term chart below shows that except for portions of two days, the stock has traded between $20.42 and $22.55 since August 17:

Chart 2: SunPower (SPWR), 4/20/21–9/22/21. SunPower (SPWR) price chart. Rallied toward top of range.

Source: Power E*TRADE (For illustrative purposes. Not a recommendation.)


SunPower’s day-to-day volatility has decreased, too. The 14-day Average True Range (ATR) reading at the bottom of the chart shows that SPWR’s average maximum move (up or down) from one day to next was around $1.16—about half of what it was in May when the stock formed its sell-off low, and just above its lowest levels of the past year.

SPWR’s 6%-plus intraday rally yesterday—a day testing the range low—may have put the stock back on the screens of traders who haven’t paid attention to it in a while. Markets don’t ring bells when they’re about to break out any more than they do when reversing a trend, but given the tendency for low-volatility price action to (eventually) give way to increased momentum (and vice versa), many traders like to keep tabs on stocks that have been confined to tight ranges.

Market Mover Update: Vail Resorts (MTN) rallied more than 3% intraday yesterday, with earnings due after today’s bell (see “Earnings-day options”).

Today’s numbers include (all times ET): Weekly jobless claims (8:30 a.m.), Chicago Fed National Activity Index (8:30 a.m.), PMI Composite Flash (9:45 a.m.), Leading Indicators (10 a.m.).

Today’s earnings include: Nike (NKE), Costco (COST), Accrenture (ACN).

Today’s IPOs include: Knowlton Development (KDC), Sovos Brands (SOVO), EngageSmart (ESMT), Thorne Healthtech (THRN), Sterling Check (STER), Brilliant Earth (BRLT).

 

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1 The New York Times. Home Solar Is Growing, but Big Installers Are Still Losing Money. 1/4/21.

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