Good news for the bulls out there: After a really bearish stretch, we’re entering what’s likely to be a more bullish time. That makes right now the perfect time to go out and make some choice buys to make the most of what this upcoming seasonal trend has to offer us.

Green energy is ripe with targets, some better than others. The sector has had a rough few weeks as investors rotated from “pandemic” mode into “recovery” mode. Stocks like the cyclicals, financials, and especially old-line oil and gas companies have had an impressive run as investors anticipate increased demand as a result of economic recovery.

Those oil and gas companies I mentioned, as tracked by the Energy Select Sector SPDR Fund (NYSEArca: XLE), have tacked on around 26% over the past month.

On the other side of the proverbial coin, “green” and renewable energy stocks like the ones tracked by the iShares Global Clean Energy ETF (NASDAQ: ICLN) have taken a beating, down around 29% since Feb. 5.

But with renewable energy, it’s a case of “what goes down must come up.” We’ve talked about this many times before: Over the long run, government policy priorities and simple economic reality are incredibly bullish for this sector.

“Alternative energy” won’t be “alternative” for much longer…

A Bearish Present Meets a Bullish Future

Given the pounding they’ve taken, it’s naturally no surprise that green energy stocks have been in tough technical spots.

Again, using the ICLN ETF as a proxy for the entire sector, you can see it’s trading below the major 20-day and 50-day simple moving averages – for a trader, that’s just about every significant trend line in the book.

You can see by the relative strength index reading of 26.46 that the sector is oversold and undervalued right now, by quite a bit. That’s not necessarily bad news. In fact, it’s great news if you’re shopping for stocks (which you absolutely should be at a time like this); it’s certainly music to my ears.

ICLN would be one easy, one-stop shop for capturing the imminent rebound, but there’s one stock I like even better right now.

The Best Green Energy Play Out There Now

It’s a San Jose, Calif.–based maker and designer of solar panels and silicon photovoltaic cells. Solar – you know, the market that’s projected to grow 17.3% every year till 2025?

SunPower Corp.’s (NASDAQ: SPWR) chart also looks much uglier than it really is.

Shares are trading more than 443% higher over the last year and posting returns of about 20% for 2021. To put that into perspective, the S&P 500 has handed over… a whopping 3.2% year to date.

Setting aside even the bullish fundamentals of this sector and this particular stock, those types of returns put you in a special category of stocks that traders are looking to lock in profits on, regardless of where they see things going over the next six months (which for this group is… much higher).

Profit-taking is exactly why we’ve seen selling on SunPower and other alternative energy stocks over the last month, and it’s generating a buying opportunity.

SPWR is currently working on building a bottom at $30. This is the same price that saw the stock pause before its 20-day, 81% rally in January. Consolidation and pause is more or less exactly what you’d want to see in a chart reading like this.

The 20- and five-day suggest two different possible scenarios, both of which ultimately put cash in our pockets…

A break above the stock’s 50-day moving average, which is still trending higher, will shift SPWR shares back into bull mode as technical trades will begin accumulating shares again.

SPWR’s 20-day moving average is declining, just below $40. This may add pressure to the rally as it moves toward the same price. Failure to break above the “trader’s trend line” and a break below $30 will signal another round of selling that will target a $25 bottom, which is where we would likely find deep value investors aggressively buying a bottom.

My recommendation: Buy SunPower down to $25 and hold onto it. The rally’s coming.

— Chris Johnson

Source: Money Morning