Suniva Inc., a U.S. manufacturer of high-efficiency crystalline silicon photovoltaic solar cells and high-power solar modules, recently filed for bankruptcy under Sections 201 and 202 of the Trade Act of 1974. The petition calls for “global safeguard relief” from the import of crystalline silicon solar photovoltaic cells and modules, which the company says has driven it to bankruptcy as foreign suppliers undercut it on price.
International trade agreements typically prevent protectionist measures – such as tariffs – but Section 201 provides a loophole when imports are causing serious injury to domestic products. If the petition is approved, President Trump will have the option to institute “relief or remedy” to adjust the industry to the import competition. This could mean higher taxes on imported solar cells and modules, which could provide a boost to domestic manufacturers.
The biggest beneficial would be domestic manufactures like First Solar Inc. (FSLR), which designs, manufactures, and sells photovoltaic solar modules with a thin-film semiconductor technology, and is a leading U.S. solar manufacturer.
From a technical standpoint, First Solar rebounded sharply from its lows made in early-April to its pivot point and 50-day moving average at $30.51. Traders should watch for a breakout from these levels to R1 resistance at $33.63 or the 200-day moving average at $35.21. Looking at technical indicators, the RSI appears lofty at 60.70 but the MACD appears to have experienced a bullish crossover in early- to mid-April, suggesting a trend higher.
The long-term outlook for solar has been dampened by President Trump’s pro-energy industry stance, but his tendency towards protectionism could increase the odds of a Section 201 trade action in support of the domestic solar industry. Traders may want to keep an eye on First Solar and other stocks in the domestic solar industry as the situation unfolds.
Charts courtesy of StockCharts.com. Author holds no position in stock(s) mentioned except through passively-managed index funds.