You will often hear traders talk about “Dirty” energy or “Big Oil” and largely referring to the Mega Caps primarily found within the (XLE) Energy Sector.
XLE has names such as Exxon Mobil or Chevron Corp, etc.
Also “Clean” energy, referring to companies that produce clean power or are involved in the clean/renewable energy business.
This includes names such as First Solar, or Enphase Energy, etc.
Often, these two will perform very differently in macroeconomic and geo/political environments.
Using a top down approach, we can first determine if one is outperforming the other by looking at relative chart comparisons, and then dig deeper to find specific names or baskets of stocks that might look attractive.
iShares Global Clean Energy Index (XCLN) vs. Energy Select Sector SPDR Fund (XLE)
The Lowdown:
- Coming into 2024, you can clearly see (XLE) or the Big Oil names outperforming (chart going down) “Clean” energy (XCLN).
- Until late April, when the chart stopped going down after a divergence in downward price and increasing underlying momentum and relative strength.
- On May 22nd, price gapped up and above a downward diagonal resistance line on continued momentum.
To potentially take advantage of the recent relative strength in “Clean” energy and this potential change in trend, one might consider the Solar ETF (TAN):
TAN vs S&P 500 Index (SPX)
In the chart above, TAN is gaining relative strength/momentum vs the S & P 500.
Investco Solar ETF – (TAN)
On an absolute basis, TAN is breaking out of a shorter term consolidation pattern with increasing momentum (weekly chart).
Should this strength continue, a shorter term price objective to possibly look for over time might be the former lows of Feb & May 2002 and the highs of early Jan 2024 around the $52.00 – $55.00 levels.
The Bottom Line: With Memorial Day behind us and summer coming fast, it might be time to get TAN!
The market likes to shift depending on the geopolitical environment.
The best way we keep up with the moves is with our Market Rover software…
If you don’t have the Market Rover – here’s your shot to take it on a test run with our TRIAL.
See you on the next one,
Serge & JB
