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Solar Energy Stocks Poised to Re-Breakout

David Becker
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Solar Energy Stocks Poised to Re-Breakout

Solar Energy ETF (TAN) is perking up with a bounce off its rising 200-day moving average and a break above the 50-day moving average. TAN hit a new high near 50 and correcting back to the 37-38 area. The decline from the early March high to the mid May low was over 25%, which shows just how volatile this ETF can be. The decline also formed a falling wedge, which is typical for corrective patterns. The move above the wedge trend line and above the 50-day suggests that the correction is ending and the bigger uptrend is resuming. The 200-day is the first support level. A close back below this line (39) would suggest a failed breakout and call for a reassessment.

The individual components of the ETF are also gaining traction. There are many foreign holdings in the Solar Energy ETF, but seven of the top ten are traded in the US. First Solar is surging above resistance in March with a move to 75 and then correcting back to the breakout with a decline to the upper 50s. These volatile stocks have shown significant movements. FSLR bounced off the 62% retracement and broken resistance in mid-May. The stock is now challenging the April trend line and a breakout at 67.50 would be bullish.

SolarCity (NASDAQ:SCTY) is hitting a new high in late February and then giving a big chuck back from March to May. This stock, however, IPO’d in December 2012 and surged from 10 to 85 in fourteen months. The March-May decline to 50 retraced around 62% of the September-February advance, which is normal for a correction within a bigger uptrend. SCTY is currently firming in the 50 area and a break above the May highs would be bullish.

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