Two important positive catalysts are poised to boost solar stocks over the medium to long-term. Specifically, an upcoming China-U.S. trade deal and a tremendous Saudi investment in solar energy should greatly increase the sector's bottom line, sparking a stock rally in the process.

As I've written in the past, a comprehensive trade deal between the U.S. and China appears likely to occur within the next few months. Since I made that prediction, the U.S. has announced that it is sending a high-level delegation, led by Treasury Secretary Steve Mnuchin, to negotiate a trade deal with Beijing, and Mnuchin said that he is "cautiously optimistic" about the talks. These developments have made me even more optimistic that a deal will get done.

Meanwhile, there is no doubt that China strongly values its solar sector.  The country invested $86.5 billion in solar energy last year. Consequently, it stands to reason that Beijing cares a great deal about the profits of its solar companies and would look to use the trade talks as a means to convince the Trump administration to drop the tariffs it leveled on solar imports. Of course, any decision by the Trump administration to cancel the tariffs would provide a tremendous boost to solar stocks, including First Solar (FSLR), SunPower (SPWR), and JinkoSolar (JKS).

And in March, Saudi Arabia and Softbank, a major Japanese bank, announced that they intend to spend $200 billion on a huge, 200-gigawatt solar power installation. By meaningfully increasing demand for solar panels, the project should at least keep the prices of the panels stable, increasing the profits and stock prices of solar energy companies around the world.