Solar stocks were on fire in 2007, leading with market with a momentum-driven rally. The vertical uptrend was so powerful it reminded old timers of the historic surge in the 'Net sector. But the upside evaporated as the calendar flipped into January, with gravity taking over, dropping these issues back to Planet Earth.

The sector marched in lockstep with the energy futures during last year's uptrend, as each rally wave corresponded with an equal surge in crude oil and natural gas. The logic driving this tight alignment was simple enough, i.e., higher energy prices made solar alternatives more viable and cost-effective.

However, this linked trade broke down entirely in the first quarter, with crude oil running to historic highs, while solar stocks trended lower. Worries about Congressional legislation and prices that got way ahead of fundamentals contributed to the dramatic decoupling, which isn't likely to return in coming months.

That's why I thought last week's sector action was unusual. Solar stocks got hit with broad selling pressure during the mid-week rally, at the same time that cash flowed out of energy and other 2008 momentum groups. Why should solar be denied the benefits of a four-month energy rally and then get sold when oil and gas comes under pressure?

Recent trading in First Solar (FSLR) offers one possible explanation for this lose-lose scenario. The industry leader reported earnings on Wednesday morning, lifting quickly into a test of the rally high at 308, which was posted less than two weeks ago. But the uptrend peaked just an hour onto the session, with price selling off almost 50 points by Thursday afternoon.

The downturn put a heavy drag on the solar sector right in the middle of the powerful rally that was lifting the major averages to multimonth highs. It didn't help that sharp rotation out of a number of momentum groups was feeding the uptick, even though it's a misnomer to include the solar sector in that elite category this year.

As for First Solar's prospects, I'm at peace with the current decline because it should set up a reliable basing pattern for a notable breakout to new highs. In particular, I'm watching how the stock trades at 50-day moving-average support, which is currently near 250. A two-week pause near this price pivot should be enough to jumpstart that rally.

It might seem like a contradiction to talk about bullish stocks selling off now in order to move higher later, but it isn't. Uptrends show orderly wave characteristics, which is why it's so easy to get stopped out of good positions. In this case, a selloff after a surge into an old high is common because longs are taking profits, while short-sellers open positions.

In a perfect world, these shorts generate the rocket fuel needed for a run to new highs. But bull dynamics take time to set up when the first test of a high shows a vertical spike, as it does with the First Solar pattern. In this case, a decline is needed to overcrowd the short side and set up ideal conditions for a covering rally that completes the breakout.

Unfortunately, this stock's bootstraps won't be pulling up the entire solar sector. In fact, just a handful of group components look like they'll recover fully in the second or third quarter. These are the issues you need to focus on if you believe in the sector's bullish prospects. To help you out, here are three more solar stocks bucking the downward tide.

1. JA Solar (JASO) tagged a new high just two weeks ago. It's pulling back now and, like First Solar, should offer a great buying opportunity at lower price levels.

2. Canadian Solar (CSIQ) offers an excellent small-cap play, as it attracts intense buying interest and works its way up to new highs.

3. Trina Solar (TSL ) hasn't tagged a new high since July but the chart shows one of the most bullish accumulation patterns in the industry.

I predicted the Sunpower (SPWR) decline in early January, but had no idea the downtrend would carry almost 50 points beyond my target. The stock finally bounced in March, starting a recovery that exhausted shareholders hoped would carry up to last year's high. But a buzzsaw of resistance near 100 stopped the rally dead in its tracks.

The stock has now fallen into the convergence of 50- and 200-day moving-average support in the lower 80s. This is a major inflection point because a breakdown opens the door to a test at the March low. However, a bounce from current levels doesn't help that much because an unlikely turnaround is still needed to push above the April high.

Sunpower isn't the only 2007 solar rocket that's stuck at depressed levels, despite the sector recovery that began seven weeks ago. In addition, SunTech Power (STP) has been cut in half since the start of January, while institutional favorite MEMC Electronic Materials (WFR) is threatening to drop through its January selloff low.

The laggard list grow more startling with Cypress Semiconductor (CY) sitting just 9 points off it's 2008 low and Solarfun Power (SOLF) getting ready to fall back into single digits. I could talk about another six or seven solar issues, but you get the picture. Simply stated, you're hurting badly right now if you own any of these stocks.

To sum up, the bounce off first-quarter lows hasn't been enough to improve the technical outlook on a broad variety of solar companies. But it isn't the end of the world, if you're a long-term shareholder. The huge 2007 rally has yielded a necessary period of consolidation and basebuilding, while short-term reality catches up with long-term fundamentals. As long as the bull story on the sector remains solid, and it should, solar stocks will eventually embark on a full recovery. But into the foreseeable future, this remains a stockpicker's market, in which a handful of companies with the strongest profit margins will outperform the slew of marginal players that lifted in last year's rocket ride.