Enphase Energy

This is a chart of Enphase Energy (ENPH). For those who are not familiar with the company, Enphase Energy develops and manufactures microinverter systems for the solar photovoltaic industry. They are one of the preeminent companies in solar power. Recently, price gapped up on the daily chart following news that Congress would pass legislation to fund sustainable infrastructure projects.

In the above chart, each candlestick represents a 6-month period. Analyzing higher timeframes can often help us determine trend reversals long before they happen. This higher timeframe chart reveals a very peculiar candlestick pattern: the sneaky bearish tri-star pattern. This pattern occurs when three Doji candlesticks form after a bull run. This pattern can warn that a major reversal is coming. See below image.

A bearish tri-star pattern is an insidious topping pattern that Wall Street smart money would love for you to not know about. In short, it appears because Wyckoff distribution is occurring underneath the surface.

While I cannot describe the entirety of Wyckoff distribution in this post, I can say that, in short, Wyckoff distribution is when smart money gradually distributes or sells their shares near the top. The gradual nature of the selloff traps the unsuspecting "weak hands" (mostly small retail traders) who buy while unaware that the bull run is in its final phase. Sometimes, since smart money is especially manipulative, they manufacture a sudden upthrust in price near the end of the Wyckoff distribution, which may be what's happening right now.

This sudden upthrust (UT or UTAD) is a price move above resistance that quickly reverses and closes lower. The upthrust is a test of the remaining demand. It is also a bull trap: It appears to signal the resumption of the bull run but in reality, is intended to trick uninformed breakout traders. A UT or UTAD allows Wall Street smart money to mislead the public about the future trend direction and, subsequently, sell additional shares at elevated prices to breakout traders before the markdown begins. In addition, a UTAD may induce smaller traders in short positions to cover and surrender their shares to the larger interests who have engineered this move.

In my years of trading experience I have seen the above chart many times before, and the result is almost always the same. This chart is in the phase that some of us traders call a "fake out". A fake out occurs when price appears to be breaking out when actually it is just forming an upper wick. This occurs when price has been moving within an ascending wedge and after bearish divergence has occurred on the RSI. The final phase is when the RSI breaks out after bearish divergence and while in overbought territory. Price then pulls back down strongly and a long upper wick forms on the candlestick. In essence, this is just another way of visualizing the upthrust phase of Wyckoff distribution. The final RSI breakout is the UTAD of Wyckoff distribution.

Here's another Trading View user who is apparently seeing the same thing as I am, though this post is from before the current upthrust:

Also worth mentioning is that it is interesting that corporate insiders have been only selling their positions and there has been no reported insider buying for nearly a year (see below). This is not usually predictive of future price action, but it can give a general sense of sentiment among insiders at a company.

So it's worth watching to see if ENPH will reverse downward. Perhaps it will blast through this level and my analysis prove wrong. As a trader, you must always be willing to accept when you're wrong because your money is more important than your ego. With that said, just remember this is a long-term chart and price may continue moving up before reversing down. Some related charts, including the charts of ETFs that hold ENPH and the ENPH/SPY relative chart, suggest that ENPH does have the momentum necessary to break out to the upside. It's just looking very suspicious right now.

This post is not making a short call on ENPH, it is just an observation. It is not financial advice. Although I may choose to open a position, at the time of writing this, I have neither a long nor a short position open on ENPH. This is an objective, non-biased analysis.

I'll be keeping an investigative eye on this chart.

Comment:

Enphase's chart continues to show that smart money is trapping both bulls and bears at the top.

Bulls get trapped because smart money allows for a false breakout to trick as many bulls into entering a breakout trade as possible. It is bulls' greed that leads them into getting trapped at the top.

Bears get trapped because, during this false breakout, they are forced to close their short positions to manage risks, or otherwise because they succumb to the fear of complete loss in their short position.

The chart does not lie, and it shows a very high probability that ENPH is about to undergo a major Fibonacci retracement. Just look at how the month candles are looking. These literally could not look more like a bull trap. The monthly charts are printing long upper wicks, which is how false breakouts look on higher timeframes. Smart money keeps selling to breakout traders who think a breakout is occurring.

Now with this said, I love Enphase and I know sustainable energy will proliferate in the future. There's no arguing against its potential for future growth. However, I simply cannot buy it with this kind of chart. Perhaps I am wrong, as anything can happen, but I definitely know how to read charts on an advanced level. I visualize charts using logistic functions. Logistic functions typically need to retrace back to the golden ratio before jumping S curves. Since we have not retraced to the golden ratio, Enphase is not ready to jump S curve.

As a disclosure: Although I have held ENPH both long and short in the past, I currently hold no position whatsoever and am merely objectively analyzing the chart.

Comment:

Also look at the Stochastic RSI and ask yourself this question:

If the monthly candles are printing long upper wicks, which means that the sellers are strong enough to undo each breakout, and this is occurring while momentum to the upside is rising, how much stronger will the selling become once that momentum shifts back to the downside?

For a true breakout, you need the exact opposite to occur. You need buyers to be stepping in even while the momentum is to the downside.

Comment:

Smart money trapped so many with this one. This one was typical Wyckoff distribution.

While this stock has huge growth potential, it is also hugely overvalued for the current high-interest rate environment.

Comment:

Since posting this on July 29, 2022, Enphase has fallen about 60%.
I knew then that this chart was faking out but caught a lot of grief since the bullishness at the time was extreme. Enphase was producing a topping pattern that looked very suspicious for Wyckoff Distribution.

Comment:

Now trading in the $90s.