An Explosive Move in Canadian Solar Stock Is Brewing

Canadian solar stock
Credit:iStock.com/gopixa

CSIQ Stock: Anticipating a Move Towards Higher Stock Prices

The current market environment is absolutely on fire, and stocks are surging. The last time I saw a market anything like this one was in the midst of the dot-com bubble, and perhaps we are heading into such a euphoric environment once again. I am focusing on Canadian Solar Inc. (NASDAQ: CSIQ) stock because the CSIQ stock chart is compelling, indicating that it is setting up to make a move. A move that could possibly mimic one of its peers.

On Friday, October 27, First Solar stock surged by 20.35% following a better-than-expected earnings report, which pays tribute to the tailwind that is currently driving alternating energy plays, specifically solar power stocks. I am not staying that CSIQ stock is going to surge by 20.35% in one day, but such a move is indicative of the current market environment, and I have to believe that equities are going to continue moving higher because this is the path of least resistance.

Given this bullish market environment, it increases the chances that investments with compelling stock charts like the one found on the stock chart will play out in a bullish manner.

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The following Canadian Solar stock chart illustrates the setup pattern that I am currently watching.

Canadian Solar stock chart

Chart courtesy of StockCharts.com

A pattern began to develop shortly after the CSIQ stock price surged following a golden cross. This indication, which is highlighted on the stock chart, is created when the faster 50-day moving average crosses above the slower 200-day moving average.

A golden cross implies that a bull market is in development, and shortly after it was generated, The stock surged by 42%. Then a symmetrical triangle began to develop. This is the technical price pattern that I am currently watching.

Symmetrical triangles are very special consolidation patterns, and once they are resolved, explosive moves are expected to follow. The power generated by these patterns is a result of momentum being stored within the pattern as it develops. Symmetrical triangles act like coiled springs and the size of the pattern is directly related to the reaction that is expected once the pattern is resolved.

The triangle consolidation pattern has been in development for three months, so its size is not large but it is still significant. And once it is resolved, a move that will match or exceed the one that preceded it can be expected to follow. Resistance currently resides at $17.75, and support currently resides at $15.50. In order to suggest that higher prices are in development, Canadian Solar stock needs to close above resistance.

The bullish resolution of the triangle price pattern is being supported by a bullish backdrop that will also act to fuel the move towards higher prices once the pattern is resolved.

This indication suggests that a bullish backdrop is currently in play. It is illustrated in the following CSIQ stock chart.

canadian solar price chart

Chart courtesy of StockCharts.com

This bullish backdrop is being created by bullish momentum. In order to stage a bullish advance or a bearish decline, momentum is needed to drive the stock price higher or lower.

Luckily there is a moving average convergence/divergence (MACD) indicator that can distinguish between bullish and bearish momentum, and it is highlighted in the lower panel of the stock chart. This indicator uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing the trading action in an investment.

In August 2012, a bullish MACD cross was generated, indicating that bullish momentum was influencing the trading action in Canadian Solar stock. CSIQ proceeded to appreciate by 1,500% while this indication was engaged.

In October 2014, a bearish MACD cross was generated, indicating that bearish momentum was influencing the trading action, which also served to negate the bullish implications suggested by the bullish MACD cross. While the bearish MACD cross was engaged CSIQ stock lost 59% of its value proving that it is one indicator that should not be traded against.

In June 2017, a new bullish cross was generated, and it is creating a bullish backdrop suggesting that CSIQ stock is primed for higher stock prices.

Analyst Take: 

I am currently watching a triangular consolidation pattern on the Canadian Solar stock chart that will suggest when, and if, a move towards higher stock prices is set to begin. The bullish backdrop suggested by both the equity market and an influential momentum indicator is supporting the notion that higher CSIQ stock prices are on the horizon.