Struggling energy prices have not been a problem for the alternative energy sector during the past several weeks. In fact, the PowerShares WilderHill Clean Energy (NYSE: PBW, Stock Forum) exchange-traded fund (ETF) has rallied more than 14% since the beginning of November, despite a 10% decline in crude futures for the same time frame. Technically speaking, PBW has barely outperformed the S&P 500 Index (SPX) on a year-to-date basis, gaining 24.9% versus the SPX's advance of 23.3%. However, the ETF has begun to show signs of life during the past 20 days, besting the SPX by 3% on a relative-strength basis. What's more, the PBW has garnered steady support from its 10-day and 20-day moving averages during this time frame.

Within the sector, energy-saving LED manufacturer Cree Inc. (NASDAQ: CREE, Stock Forum) has emerged as an outperformer, logging a whopping year-to-date gain of more than 226%. The security has bested the SPX by an impressive 36% from a relative-strength perspective during the prior 60 trading days, and has maintained a steady uptrend along support at its 10-week moving average since the start of 2009.

Currently, the shares have outstripped this intermediate-term trendline, and are consolidating into support at their rising 10-day moving average. CREE has not closed a session below this short-term trendline since Nov. 23. There is the potential for resistance in the 52 region, as the stock has struggled in this area since early December. Given the stock's sentiment backdrop, however, a convincing move above this area could be an indication that CREE is ready for its next leg higher.

One other concern for CREE bulls exists in the stock's open interest configuration. Specifically, there are heavy accumulations of both call and put open interest at the 50 strike in the December series of options. As December expiration draws nearer, we could see CREE pinned to this option-heavy strike as traders unwind the hedges related to these positions. That said, this heavy open interest all but vanishes in the January 2010 option series, and CREE should have smooth sailing higher as a result.

Turning to the stock's sentiment outlook, investors continue to stare in disbelief at CREE's impressive rally, and these bears could be forced to abandon ship very soon. For instance, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.77 ranks above 60% of all those taken during the past year, hinting at lingering pessimism among options traders. This negativity may already be unwinding, as CREE's International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) 10-day call/put volume ratio of 1.26 indicates that calls bought to open have outnumbered puts purchased during the prior two weeks.

Outside the options pits, short sellers are also placing heavy bets against a continued run higher from CREE. Despite a 7.7% decline in the number of CREE shares sold short during the most recent reporting period, roughly 6.6% of the stock's float remains shorted. As the security extends its rally skyward, this short-covering trend could gain momentum, thus creating a tailwind for the equity.

Finally, CREE also stands to benefit from a change in heart from the analyst community. Currently, 11 of the 22 analysts following the shares rate them a "hold" or worse, according to Zacks. What's more, the consensus 12-month price target rests at $49.93 per share - a discount of about 5% to the stock's current trading range near $52 per share. Any upgrades or price-target increases could provide additional fuel for CREE's trek higher.

Disclosure:  Joseph Hargett has no financial interest in any of the equities or products mentioned in this column.