SolarCity shares made a strong rally at the start of the week, following announcements of the production of more efficient solar panels. The stock has formed a double bottom pattern on its 4-hour time frame, signaling that a reversal from the previous downtrend is in order.
Price has yet to break past the neckline at the $50/share psychological level, with an upside move likely to spur a rally up to the previous highs at $60/share or much higher. However, stochastic is already moving down from the overbought zone, signaling potential profit-taking activity or a move back to the previous lows around $40/share.
The 100 SMA is still below the longer-term 200 SMA for now, suggesting that the path of least resistance is to the downside. In addition, RSI seems to be turning lower and indicating a pickup in selling pressure.
SolarCity Shares Outlook
The company announced that it will be starting the production of the world’s most efficient solar panel, with 22.04% module efficiency compared to the 21.5% efficiency of the previous front-runner, SunPower Corporation’s SPWR X-Series modules. According to SolarCity, these panels boast of 30-40% increased power production capacity, which would allow the company to retain its competitive edge even with looming challenges.
The federal tax credit for residential solar installations is set to expire next year, potentially weighing on sales for SolarCity and other companies. Nonetheless, the company remains the industry leader in the country, allowing SolarCity shares more upside.
In addition, environmental considerations could keep demand for solar panels steady, as the International Energy Agency reports continued growth in utility-scale solar power generation. For now, solar energy comprises only 0.8% of total U.S. utility-scale generation, which means that there’s still plenty of room for growth.
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