Canadian Solar Stock on the Cusp of a Breakout

CSIQ-StockCSIQ Stock: Indications Support Higher Prices

I am inclined to believe that solar stocks are starting to heat up, and this is why I am focusing on Canadian Solar Inc. (NASDAQ:CSIQ) stock. There are indications on the CSIQ stock chart suggesting that the stock is attempting to put in a bottom and stage a rally. The same can be said of Canadian Solar stock’s peers, which is suggesting that this move toward higher stock prices is a sector-wide phenomenon.

Finding bottoming patterns in this stage of the equity bull market is not an easy task, but one thing is for certain: The best time to acquire an investment is when it is transitioning from a bear market into a bull market. Canadian Solar stock is currently painting a trend reversal pattern on its stock chart, suggesting that such a transition is about to take place.

The technical price pattern that is highlighted on the below CSIQ stock chart is a trend reversal known as an inverse head and shoulders pattern. This pattern is identified by its three distinct troughs. The first and third troughs (the shoulders) are usually of equal size, and the middle trough (the head) is the largest.

The following Canadian Solar stock chart illustrates the reversal pattern that is currently approaching completion.

canadian solar stock chart

Chart courtesy of StockCharts.com

This pattern is used to identify when a trend is set to transition from a bearish trend into a bullish one. This pattern is confirmed when the stock price closes above the neckline, which is created by connecting the reaction highs. The neckline currently sits at $16.00, and CSIQ stock needs to close above this level in order to confirm that a trend reversal is in the making.

Aside from suggesting that the trend is set to reverse, the pattern also provides an initial price objective for the initial move higher once the pattern is completed. This objective is produced by taking the depth of the head and extrapolating that value above the neckline. This method produces an initial price objective of $21.500, which should be targeted once the pattern is confirmed.

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The below Canadian Solar stock chart illustrates the same chart, but with an indicator that supports the notion of a break above the neckline.

CSIQ price chart

Chart courtesy of StockCharts.com

This CSIQ stock chart is focusing on the golden cross that was generated in June 2017. A golden cross is a bullish signal that is used by the investment community to indicate that a bull market is in development. This signal is generated when the blue 50-day moving average crosses above the red 200-day moving average. This signal captures the point in time where the shorter-term trend begins to accelerate versus the long-term trend.

The resistance level that is highlighted above, which is also the neckline, has thwarted three previous attempts to move beyond it. The only difference on this attempt is that the moving averages are now in bullish alignment, therefore increasing the odds that resistance will finally be broken.

If this indication was not supportive enough, there is another influential indicator that is reinforcing the notion that a bottom is being forged and higher stock prices are likely.

The following stock chart illustrates the other influential indicator that is suggesting that Canadian Solar stock is now set to appreciate.

canadian solar price chart

Chart courtesy of StockCharts.com

This CSIQ stock chart illustrates a very influential indicator known as the moving average convergence/divergence indicator (MACD.)

MACD is a simple indicator that is used to distinguish whether the dominating driving force behind a stock is bullish or bearish momentum. The stock chart clearly shows that this indicator is worth paying attention to.

In July 2012, a bullish cross was generated, indicating that the stock was set to appreciate. This investment appreciated to the tune of 837.84% before a bearish cross indicated that the advancement in price was complete, and that a correction was set to ensue. This bearish MACD cross was in effect for a little over two years, when Canadian Solar lost 35.55% value.

The bullish cross that was just generated is suggesting that bullish momentum is once again driving this investment. This bullish MACD cross serves to suggest that an advance is now set to take place, which will likely see the stock price close above the neckline, indicating that a trend reversal is in play and higher prices are likely to follow.

Bottom Line on Canadian Solar Stock

Canadian Solar stock is perfectly aligned in order for a multitude of indicators to confirm that the bearish trend has concluded and that a new bullish trend has commenced. A break above the neckline at $16.00 will put the wheels in motion, suggesting that higher CSIQ stock prices are on the horizon.