Suntech Power Holdings (STP) is one of the recent high-flying solar energy companies. This company, like many of the other solar energy stocks, experienced very good sales increases last quarter. STP was up by 137% since Q3 of 2006. Next quarter EPS is estimated to increase by 57% and Q3 was 71%. There are lots of solar energy companies out there, but this is the only one that falls into IBD's (Investor's Business Daily) top 10 fundamentally strong stocks. Plus it is in the process of breaking out of a solid base.
Explanation of technicals from my chart:
- A trading range/channel was formed at the beginning of December and as you can see the stock hasn't suffered much through the recent correction, representing buying strength and a new leading sector (solar energy) emerging out of this correction.
- On Friday, the stock tried to break out above the upper trend line but failed, on heavy volume.
- Monday's half-day trading session brought the stock to close at all-time highs, but since it was a half-day, it is hard to determine the power of this move, so the next several trading sessions should prove whether this stock truly has broken out and has buying support, or it will be dragged back down into the trading channel.
- We also see complementing decreasing volume during the formation of the trading channel.
- The MACD has not made a bullish cross-over, but it is close. The next few trading sessions will show which way the stock is headed in the short term. If the MACD makes a bullish-cross over, volume is heavy and the price keeps going up, expect this stock to stay in a bullish trend for a couple of weeks.
- One thing to watch for is the RSI, which is approaching the overbought area and could trigger selling with a few more powerful up days for this stock.
- Buy point would be right here, but with heavy volume and good market conditions. It is crucial for this stock to get a good follow through day above the upper trend line.
$87.99 (12/26/07)
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