SunPower Corporation (NASDAQ: SPWR) seems to be getting ready for a price bump as per the latest charts. SunPower Corporation is an American company specializing in solar power generation and energy storage worldwide. It operates through Residential, Light Commercial; Commercial and Industrial Solutions; and Others segments. The stock was also a part of our recent watchlist.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern with high volume and is currently moving higher. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
SPWR – Daily Chart
#2 Price above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, indicating that the bulls are presently in control.
#3 MACD above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line and the ADX line are above the (-DI) line, and the ADX line has started to rise from below the (-DI) and (+DI) lines.
#5 Bullish Stochastic: The stochastic indicator shows that the %K line is above the %D line in the daily chart, indicating possible bullishness.
#6 Double Bottom Pattern Breakout: The weekly chart shows that the stock had recently broken out a double bottom pattern. This is marked in pink color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could move upwards. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are firmly in control.
SPWR – Weekly Chart
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SPWR is above the price of $32.10. This is marked as a green color dotted line in the daily chart.
TP: Our target prices are $37 and $41 in the next 1-6 months.
SL: To limit risk, place a stop loss below $29.20. Note that the stop loss is on a closing basis.
Our target potential upside is 15% to 28% in the next 1-6 months.
For a risk of $2.90, our first target reward is $4.90 and the second target reward is $8.90. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the energy sector.
Happy Trading!
Tara
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