Solar energy stocks are known to be rather choppy in behavior, which is why last Friday’s May 10th breakout to 2013 highs of the Guggenheim Solar ETF (TAN) sparked my interest. Through a multi-year lens the exchange traded fund, and hence its holdings, has seen a rough going in recent years. The bleeding however stopped in November 2012, when along with the broader market the solar energy stocks started to rise again. And so they did, with the Guggenheim Solar ETF (TAN) up roughly 40% year to date, this group has made a strong statement. Furthermore, last Friday’s breakout past its February highs saw follow-through buying on Monday and thus puts the group in a continued bullish spot for now.
The breakout of solar stocks last week is simply the continuation of the theme from the past few weeks where one group of stocks after another is breaking out. If the broader market can keep it up then this group too should see more investors chasing it higher.
So on the daily chart note the higher low that Guggenheim Solar ETF (TAN) developed in early April, versus its November 2012 low, which ultimately led to new 2013 highs just yesterday.
First Solar (FSLR), which is higher by 75% year to date is the largest holding in Guggenheim Solar ETF (TAN), with roughly 19% of the fund allocated to this stock. First Solar (FSLR), and by extension also the solar energy exchange traded fund, is somewhat overbought in the immediate term, however any constructive consolidation above $20.50 for Guggenheim Solar ETF (TAN) now favors further ups in coming weeks. Important to note however is that given the strong rally in the broader stock market, any significant one-day bearish reversal in the S&P 500 would likely also lead to some profit taking in the solar energy names as well as the exchange traded fund.