Solar Flares Lead to Solar Pairs

• Posted by Greg Harmon
• on June 20th, 2011

Solar Stocks seem to have great runs and then fall back. A solar flare. But they do not all trade together and that creates opportunity as no two flares happen at the same spot at the same time. Take a look at how GT Solar International ($SOLR) and Hanwha SolarOne ($HSOL) are operating.

GT Solar International, Ticker: $SOLR

GT Solar was a Top Trade Idea for the week (link below) and is testing resistance at the top of an ascending triangle at 13.55 after a move higher. If it can get through that resistance then the target on a Measured Move (MM) is 16. Short interest is high at about 10% so it could also benefit from a short squeeze.

Hanwha SolarOne, Ticker: $HSOL

Hanwha SolarOne has been trending lower since September with a pause early in the year before continuing lower. It has a base settling in at 5.00 and may be establishing a descending triangle over it. Underneath 5.00 there is support at 4.75 and then 4.50 before a big move lower. The falling 50 day Simple Moving Average is providing resistance but that is quite a ways from the current level.

One way to play this solar flare and fade is via a pairs trade. Below is the ratio chart of $SOLR to $HSOL. Notice how it is approaching a triple top from a higher low with a rising Relative Strength

GT Solar International vs Hanwha SolarOne

Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that is rising as well. These both support further upside. If it can get through the 2.52 resistance then the target higher would be a ratio of 3.26.

Trade Idea: Buy 10 $SOLR and sell short 25 $HSOL on a break above 2.53 with a target of 3.26 and a stop loss at 2.45.

Top Trade Ideas for the Week of June 20, 2011: The Rest

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