Canadian Solar On Fire: A Technical Look

Joel Elconin is the co-host of Benzinga's PreMarket Prep, a daily trading idea radio show.

Canadian Solar Inc. CSIQ shares are trading higher by $4.90 (23 percent) at $26.21 in Tuesday's session. The catalyst for the rally is the company's acquisition of Sharp's Recurrent Energy, a leading North American solar energy developer, for $265 million.

The acquisition adds 4.0 GW and expands its total project pipeline to 8.5 GW. The Street is focusing on the approximately 1.0 GW of late-state projects that represent a revenue opportunity of $2.3B over the next two years.

After a sharply higher opening (Monday's close was $21.32 and Tuesday's open was $23.47), it traded down only $0.01 before exploding to the upside. It sliced through every supposed resistance level until finding intraday resistance at $27.35. That level is just shy of its November 26 high ($27.65). Above that level, longs may find more resistance at the two highs from November 25 ($28.05) and November 26 ($28.10).

The rally is carrying over to other issues in the sector such First Solar, Inc. FSLR, which is trading higher by $2.80 (6 percent) at $48.30 and SolarCity Corp SCTY, which is trading higher by $1.35 (2.6 percent) at $54.11.

Investors waiting to purchase share of Canadian Solar on weakness may have to wait quite some time before it comes down to fill the “gap” (sharp move up or down with no trading occurring in between) from Tuesday's session. For that void in the price action to be satisfied, it would need to pull back to $21.58 (Monday's high).