An Earnings Beat For SunPower Or Sunrun Could Scorch Shorts

SunPower Corporation SPWR and Sunrun Inc. RUN are set to report first-quarter 2021 earnings on Wednesday, with SunPower reporting before the opening bell and Sunrun after the close.

These two solar power-focused companies received bearish reactions to their fourth-quarter 2021 earnings released in February. Traders and investors will be watching to see if this quarter can mark a turnaround for SunPower and Sunrun.

For the fourth quarter of 2021 SunPower reported an earnings per share decrease of 39.13% to 14 cents, which beat the Street’s estimate of 7 cents, and a decrease in revenues of 43.68% year over year to $341.81 million, which missed the $355.84-million estimate.

Sunrun reported a loss of 88 cents per share and sales of $320.41 million, beating the estimate of $303.49 million.

Both SunPower and Sunrun have been trading in a four-month long downtrend, exacerbated by their last earnings reports, but both have set up bullish patterns and an earnings beat announced by either company could kick start a massive bullish reversal.

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The SunPower Chart: SunPower’s stock is trading down 55% from its Jan. 28 all-time high of $57.52. On Feb. 1 the stock began a months-long downtrend, making lower highs and higher lows and eventually set itself into a bullish falling wedge pattern. On April 21, SunPower broke up out of the falling wedge but was unable to get any substantial follow through.

The stock has two gaps above that were left from the two days following the release of SunPower’s fourth-quarter earnings and since gaps fill 90% of the time, it’s likely the share price will trade in those ranges in the future.

SunPower is trading below both the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day EMA, both of which are bearish indicators.

Bulls want to see SunPower’s stock hold support at, and bounce from, $24.80 and for earnings to prompt bullish volume to return. If the stock could reach $32.08, it has room to move up to $37.88 before meeting further resistance.

Bears want to see sustained bear volume in SunPower, which could drop it below support near the $24 mark. If the stock can’t hold support there, it could fall towards $18.

The Sunrun Chart: Similar to SunPower, Sunrun’s stock is down over 50% from its all-time high of $100 it made on Jan. 12 and, also similarly, Sunrun fell into a bullish falling wedge pattern and broke up from it on April 21.

Sunrun wasn't able to sustain the bullish break, however, and is again trading under the eight-day and 21-day EMAs with the eight-day EMA trending below the 21-day EMA.

Bulls want to see a positive reaction to earnings and for big bull volume to enter into the stock. If Sunrun can hold resistance at $48.13, volume could move it up towards $57.58.

Bears want to see sustained bear volume to keep adding pressure to Sunrun’s stock. If Sunrun can’t hold support near the $48 level, it could fall towards the $42 mark before finding more support.