Canadian Solar Inc. (NASDAQ: CSIQ)

Canadian Solar Inc., together with its subsidiaries, designs, develops, manufactures, and sells solar wafers, cells, and solar module products worldwide. The company operates in two segments, Module and Project. Its products include various solar modules that are used in residential, commercial, and industrial solar power generation systems. The company also provides specialty solar modules and products consisting of Andes Solar Home System, an off-grid solar system, designed to provide an economical source of electricity to homes and communities without access to grid; and Maple Solar System, a clean energy solution for families, as well as sells solar system kits, which are a ready-to-install packages comprising third party supplied components, such as inverters, racking system, and other accessories.

Take a look at the 1-year chart of Canadian (Nasdaq: CSIQ) below with my added notations:

1-year chart of Canadian (Nasdaq: CSIQ)

Over the last 6 months CSIQ created a key trendline of support (red) and that line was also the “neckline” support for the stock’s head and shoulders (H&S) reversal pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S occurred when CSIQ broke below its trendline support.

Next up is the key support level at $22 (purple), which was just tested earlier this week. CSIQ could get a bounce off of that level, but a break of $22 should lead to lower prices.

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The Tale of the Tape: CSIQ has confirmed a head & shoulders pattern and is now at the key level of $22. A long trade could be made at $22 with a stop placed below that level, but ideally a short trade could be entered on a break below $22 instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach