If you’ve been a reader of Green Stocks Central, then you know I’ve been increasingly bullish on solar in recent months calling Yingli Green Energy (YGE) a top play and initiating a position in Suntech Power (STP) in late October.  STP didn’t hold the bullish wedge formation and fell back into the base, but I’ve been patient scaling in slowly.  That position is now paying off  with yesterday’s move and it’s not too late to get in on STP and solar stocks in general.  However, it’s best to be patient which I’ll discuss in a bit. 

So why the big move yesterday?  Several of the China solar stocks surged 25-35%.  Certainly much of it was news driven as Germany announced installations of 3GW in December which is a record as well as higher poly prices.  Yes, it’s good news for a sector that has struggled mightily, but it’s just a start and it appears traders are looking for an excuse to buy solar.  That bodes well for a long term bottom which I continue to believe is in place.  Yesterday’s high volume move across the sector is the definitive bullish move I had been looking for.

Adding to the bullishness, Deutsche Bank’s Vishal Shah indicated inventory levels are at record lows and that a rush of installations could occur in the first quarter. 

On the flip side, the usually bullish Mark Bachman advised caution saying that cell and panel prices are still dropping amid oversupply and that the two day euphoria will wear off.  I have to agree with Bachman that the euphoria will wear off ahead of earnings season.  There will likely be some profit taking and technical back filling. Where solar stocks go from here will be based largely on guidance over the next couple of months.  In my opinion what that’s going to do is create an opportunity to scale into solar on the pull back.