Alternative energy remains a major theme among investors and society as a whole. From an investing standpoint, solar energy, in particular, offers active investors and traders a number of liquid stocks to participate in.

#-ad_banner-#Last week, First Solar (Nasdaq: FSLR), a leading designer and manufacturer of solar modules, staged a massive rally after the company gave positive guidance for the current fiscal year, as well as for 2015 and 2016. The forecast was better than analysts expected and also took investors by surprise, which led the stock to rally more than 35% on the week to levels last seen in 2011.

But not all companies in the space — and not all solar stocks — are created equal.

In stark contrast to FSLR, SolarCity (Nasdaq: SCTY), which offers solar energy systems, dropped close to 12% last week thanks to an unsatisfactory earnings report.

One stock that I routinely go to for calculated trades is SunEdison (NYSE: SUNE), a manufacturer of semiconductors and solar energy technology.

On March 20, SunEdison announced a series of transactions that are scheduled to take place concurrent with the initial public offering of its semiconductor division, SunEdison Semiconductor (SSL), splitting it off from its more lucrative solar operations. Among the announcements, it said Samsung Fine Chemicals will purchase $100 million of SSL’s ordinary shares at the IPO price through a private placement. SUNE rallied 4% on the day, but failed to break to a new high and has since pulled back.

The analyst community is mostly bullish on the stock. On March 4, Morgan Stanley (NYSE: MS) upgraded SUNE to “overweight” from “equal weight” with a $24 price target.

Keeping the positive news flow in mind, let’s turn to the charts to see what support and upside targets we can arrive at for SUNE stock.

First off, the weekly chart shows a familiar picture — one of a stock still very much recovering from the big drop-off in 2007 and 2008.

It is important to note that SUNE’s May 2012 lows coincided with a significant positive divergence between price and the Relative Strength Index (RSI), which made a higher low as the stock price bottomed. This set the stage for the stock to rally from below $1.50 to its recent highs in the low $20s, or roughly 1,400% in less than two years.

However, after such a strong rally, SUNE is just arriving at a major resistance level dating back to the June 2009 highs, which were the dead-cat bounce highs before the stock resumed its downtrend into the aforementioned 2012 bottom. Overcoming this resistance around the $21.30 level in a more significant manner could easily lift the stock another 10% in fairly short order.   

The daily chart of SUNE shows that the stock has settled into a constructive- looking consolidation phase following the strong February rally.

Closer up, we see the stock needs to push past $21.75 in order to create better separation from the long-term resistance level near $21.30.
 

SUNE has solid support at its rising 50-day moving average (lower blue line), and as long as it stays above the 21-day moving average (upper blue line), it stands a good chance of resolving higher sooner rather than later.

On Friday, the stock once again found resistance near $21.75, which could be blamed on noise around the quadruple witching options expiration day.

Action to Take –>
— Buy SUNE on a break past $21.75 resistance
— Set stop-loss at $20.80
— Set initial price target at $24 for a potential 10% gain in three to six weeks

This article was originally published at ProfitableTrading.com:
Solar Stock’s Pending Breakout Could Result in a Quick 10% Pop
 

P.S. If you’re confident SUNE is due for a pop, you may be interested in my colleague Michael Vodicka’s proprietary options system. In just six weeks, he’s used it to effectively multiply the dividend yields of the S&P 500’s most reliable dividend payers several times over. Click here to learn how he did it.