SolarEdge's 30% June drawdown could be an intriguing entry point for contrarians
SolarEdge Technologies Inc (NASDAQ:SEDG) stock has pivoted into the red today, down 1.8% to trade at $51.42 after opening the session higher. The alternative energy stock has taken a 32% haircut this month and is 36% off its May 29 two-year high of $81.25. The good news is that if past is precedent, the pullback could have historically bullish implications.
According to Schaeffer's Senior Quantitative Analyst Rocky White, SEDG is trading within 0.75 times its 80-day moving average's 20-day average true range (ATR), after spending at least 80% of the previous two weeks and 80% of the prior 42 trading sessions above that trendline.
This setup has appeared 10 times over the last decade, after which the stock was higher one month later 60% of the time, averaging a 13.4% gain. A move of similar magnitude would have SolarEdge back above $60.
Despite an 80% year-to-date gain on the year, bearish bettors have piled on during the pullback, with short interest up 7.3% in the two most recent reporting periods. The 10.95 million shares sold short account for 18.2% of SEDG's total available float.
A shift in sentiment among analysts could also fuel tailwinds. SEDG is up 175% in the last 12 months, yet 25 of the 26 brokerages covering the stock maintain "hold" or "strong sell" ratings. Plus, the equity's consensus 12-month price target of $40.87 is a 20.6% discount from its current perch.