Bullish Solar ETF Chart (TAN) ~$18 neckline

Disclosure: I am long stock and Oct calls on FSLR, SPWR and JASO.

The Bottom in Solar Shares

Today the long awaited preliminary results of the US Commerce Department's investigation into unfair trade practices by Chinese solar companies were released. While the Commerce Department's investigation hasn't yet concluded, and a decision on the charges of dumping by Chinese solar companies hasn't been made yet, they said today that "countervailable subsidies are financial assistance from foreign governments that benefit the production of goods from foreign companies." You'd think this is a good thing for US solar companies, after all this should boost their margins as they see higher module prices in the US. You might think the beaten down, and heavily shorted, shares of FSLR and SPWR would squeeze on this sort of news. But in fact, just the opposite happened. Shares in Chinese solar companies (eg. STP, JASO, YGE) surged 10-20% on the news today while FSLR languished in the red and SPWR sold off 7.5%. Wall Street was clearly looking for larger tariffs on Chinese modules with one analyst claiming that the 3-5% tariffs are too small to be meanginful. I don't claim to know enough about the economics of solar to know whether 3-5% tarifs will be meaningful fundamentally, but psychologically this feels like a meaningful event. If this means that module prices will rise in the US, then great, anything that can stop the death spiral in solar panel prices is welcome. If US producers see higher contract prices going forward, then that will mean analysts will have to revise their earnings estimates higher, also good. Naysayers will say that this will dampen the US solar growth, but much to the surprise of those who follow the stock prices of US solar companies, the US solar market doubled last year. I find it hard to beleive that a 3-5% tarif on modules from China will significantly dampen growth. I could go on an on about how bullish I am on solar for the long run, but finally things seem to be starting to improve on the shorter term.

Despite the weakness in US solar shares, the solar etf TAN managed a gain today on more than triple the three month average volume. I see this as a sign that the tariff news is seen by the market, on the whole, as good for the solar industry. We can speculate as to why investors are buying or covering, but the price and volume action is how the market speaks. Should the strength continue, solar will have carved out a very solid looking inverse head and shoulders bottom. If the bears want to push their solar shorts further, they'll need to quickly reverse today's action. More later...
Disclosure: I am long FSLR, SPWR and JASO.

JA Solar (JASO) looks better than ever

As you know, I've been a fan of JA Solar since they did their IPO in 2007 but my opinion of the stock has varied with he times and the charts. I've kept a close eye on JASO ever since it broke out of its two year range in September, nearly doubling in price over two months. Since that peak JASO has sold off with the sector after a sharp decline in crude bringing JASO back to the breakout point for a perfect buying opportunity. Volume was strong on the initial breakout so I'd expect it to follow through (upward) from here. One word of caution on this chart, the stochastics look bearish and the CCI is giving a sell signal.

I'm no value investor by any stretch of the imagination but with a PE of under 7 and a PEG of 0.34 (five year expected) JASO looks like the cheapest growth stock on the planet. They just signed a massive five year 10GW polysilicon supply deal which is roughly equal to the annual total global production of solar cells. They certainly don't seem to be in any kind of trouble and are planning ahead for the long run, why such a low valuation? Since solar is really a call option on future energy prices, we have to check out crude:

Crude rallied to a new two year high at the close Friday, no issues there. You can draw your own conclusions about this situation. Other issues I like in the solar space are FSLR and the TAN etf.

Disclosure: I am long JASO calls.

Ten reasons I have to buy JASO here

This crazy market sure has created some amazing opportunities, I think one of the best ones is JA Solar (JASO). This is a stock that I have been in and out of many times since their IPO a few years ago. When I first bought it I definitely underestimated the potential of the stock and sold way too early. That was summer of 2007 before the stock split when their growth really started to pick up speed. Well, here are ten reasons why I have to get back into the stock here for the long haul.

1. Its extremely cheap and profitable growth. Using lazy yahoo stats, the current PE is 15 and because their quarterly earnings growth is 321% (ttm), the forward PE is a mere 4. This growth is organic too, revenue grew 170% yoy last quarter.

2. It's a photovoltaic producer, and solar energy is the future.

3. It's China, and Jim Rogers is buying China.

4. Energy has fallen by more than 50%, it can't it go much lower.

5. Buying here is like buying the IPO, it went public just over $5.


6. JASO repeatedly found support at its 50 dma on the way up and resistance there on the way down. Currently JASO is a 100% gain from the 50 dma ($13) where I'd expect it to find resistance.

7. Positive divergence on the daily CCI.

8. It's oversold on the stochastics.

9. There are multiple unfilled gaps just above, any rally will find pockets of air up to $12-$13 (a double), which is where I'd target in the intermediate term.

10. The stock recently found support from post-IPO consolidation levels near $5.50. After breifly breaking to new 52 week lows (below this level) today, JASO sharply rebounded and now has the look of a failed breakdown. Failed moves lead to fast moves.

This situation has set up a very low risk to reward ratio. A stop can be set just below at around $5.2 and a good target would be $12. I would expect it to really take off once $7 breaks and so I've been buying March calls.

JASO Set Up

After recently breaking out of a perfect cup n handle, JASO has run into a confluence of bad news and counter trends. To start with, they announced a secondary offering to be priced based on today's closing price ($40.98). Second, Chinese solar plays have fallen hard as LDK Solar has been accused of cooking the books and essentially lying to investors. Barrons did a chop job on all Chinese solar this weekend and after recently exploding, many China stocks got hit today. All this bad news has merely pulled JASO back to the "neckline" of the cup n handle. From a chart perspective, this move looks like a typical throwback and a great low risk entry point with a measured rule target near $55.

And for anyone trying to call this a hype/momo/bs play as opposed to a true growth story, just take a look at some of these numbers.

Disclosure: I own JASO calls

I'm not bearish on all stocks...

The two sectors that make the most sense to me fundamentally are international growth areas like China and energy related issues (which are international typically). Combine these two sectors together and what do you get? JA Solar (ticker: JASO), a Chinese solar cell company that did an IPO about 7 months ago. This is a stock that I highlighted back at the beginning of the summer when it was 24, that was before it doubled and has now pulled back. Well I still like it, and it is still in a strong uptrend. Furthermore, earnings were great and an analyst upgraded the stock last week following the numbers.

Disclosure: I own JASO calls