In an article over at CNBC Suntech Solar (STP) CEO Zhengrong Shi said he is upbeat on the solar sector highlighting the fact it is now becoming competitive with traditional energy sources, dropping from $6/watt 10 years ago to nearly $1/watt now.

While upbeat in the longer term, he did acknowledge the difficulty short term as over supply continues to be an issue.

“Right now, there is an oversupply situation, manufacturing capacity is expanding faster than growth in the market. The industry is going through consolidation,” he said.

Commenting on demand, he sees sizable growth in the US, China, India and South American markets and mentioned that in India solar power is already cheaper than diesel.

I’ve been saying it for several weeks now and still believe it.  The likelihood of a solar bottom has increased significantly in recent weeks with many solar stocks pushing above resistance of the 50 day moving average.  Currently, they are resting and pulling back to what is now support of those 50 day moving averages creating nice entry points for those that missed the initial run.  I do think you can be patient and scale in slowly.  The overall market is extended and due for a pull back which would likely put decent pressure on solar stocks in the coming weeks.

Shares of LED stocks are under pressure this morning after Needham downgraded both Veeco Instruments (VECO) and Rubicon Technology (RBCN) due to slowing demand and over capacity.  That’s essentially the same analysis analysts have made for solar stocks which have mirrored the performance of LED stocks.  It should be noted that both green sectors are emerging from the dead and are greatly improved technically.  I mentioned solar stocks bottomed out a few weeks ago and seeing signs that LED stocks may be bottoming out as well as they have now taken out resistance of the 50 day moving averages and now returning to what is now support of those levels.

Anyway, on to the downgrades as highlighted by Forbes.  I’ll summarize here.

Veeco:  cut from Buy to Hold with price target reduction from $34 to $25 (about where it trades now).  They believe the recent run in the stock limits near term potential and that a slow down in demand may be more prolonged than first thought.

===> Click Here For Your FREE Daily VECO Analysis

The Rubicon notes are nearly identical, but it’s getting hit the hardest today most likely due to the fact it’s most reliant on the LED market while Veeco is better diversified.

==> Click Here For Your FREE Daily Rubicon Analysis

MEMC Electronic Materials (WFR) is reporting Q4 preliminary results this morning.  The company anticipates revenue in the range of $753 – $792 million with non GAAP EPS loss in the range of .17 – .23/share.

==> Click Here For Your FREE Daily WFR Analysis

"We responded to the continuing cyclical downturn in the semiconductor industry and the severe market disruption in the solar market by taking decisive action through a significant restructuring that we believe will strengthen our business going forward," said Ahmad Chatila, MEMC’s Chief Executive Officer. "Although our solar business achieved record growth in 2011, interconnections, which exceeded 100 MW in the fourth quarter, fell short of our expectations. As we begin 2012, our focus is on operational excellence in completing our restructuring plan and profitably growing our solar and semiconductor businesses."

The company is expected to report official results after the bell on Feb 15th.

The stock is holding up well this morning despite the less than bullish news and technically, there is some glimmer of hope for WFR.  The stock surged above the 50 day moving average Jan 11th and has been able to hold what is now a new support level.  I think shares of WFR are compelling down here at least for a smaller scale in trade.  It appears the worst may indeed be over for shares of WFR.

I was away from the market Friday and getting caught up with all the latest today.  Looks like I missed quite a day for Tesla on Friday with the stock plummeting 20% on news two key engineers working on the Model S left the company. 

It appears based on today’s quick recovery that fears of internal turmoil may be overblown.  The Fool has a great run down on the events, I’ll summarize here.

Initially the company including Musk dismissed the report as overblown, but decided to do a conference call following the big move lower ahead of today’s open.  The PR move worked well with the stock gapping up big and nearly closing the entire gap on Friday’s loss.

==> Click Here For Your FREE Daily Tesla Analysis

According to Musk, the two engineers were important to the Model S development but one was not the head engineer as Bloomberg reported and they were not responsible for the initial design but rather optimizers. .. specifically finding ways to reduce weight without compromising safety.  Musk went on to say that their departure wasn’t unexpected as the company scaled to higher volume production and that the real problem was with how their departures were communicated.  He acknowledged it should have been done sooner before the earnings call which is when the company had planned to announce it.  Bloomberg got out in front and created an impression that Tesla wanted to dump the news on a Friday afternoon in addition to reporting the inaccuracy. 

More importantly Tesla indicated they are on track with the Model S and that extensive crash and safety testing continues.  The plan to use many small batteries instead of a few larger ones will improve safety and help avoid the issues the Volt has had.  The company highlighted the fact that the more than 2000 Tesla’s, some of which have been in serious accidents, haven’t had fire issues.  It plans to launch the Model S with a five star rating in all crash testing.

In my experience, these kind of events where there is some management credibility issue or some uncertainty related to news, a stock is weighed down for a period of time.  If you had the guts to jump in at the lows Friday, that was a heck of a trade, but I’d avoid it up here for a few weeks to a few months and see how this all plays out.  Technically, shares of TSLA are still in a basing period and below both key support areas of the 50 and 200 day moving averages, so no reason to get in at current levels.   Wait for the dust to settle.

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