Solar Stocks Getting Burned
The solar stocks have been under pressure recently, with many threatening to break under key support levels. This was one of the groups that held promise as a new market leader with the election of President Obama and promises of energy independence. While the solars have experienced a few impressive rallies since the election, many are currently below election-time levels and are threatening to drop even lower.
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The Claymore/MAV Global Solar Energy Index ETF (NYSE:TAN), which can be used as a proxy for the sector, is currently testing a critical level. TAN has been setting lower highs as it pulls back from its June high of $11.67. While technically TAN remains in a consolidation, some of the individual names in this space are already breaking down, which could be hinting at a failure for TAN to hold these levels.
First Solar, Inc. (Nasdaq:FSLR) for instance, had a high volume gap in late June that ignited a nasty downturn. FSLR was looking much like TAN is currently, setting lower highs while remaining in a consolidation. However, FSLR broke under the consolidation and continues to freefall lower. While FSLR is probably ready for a corrective move higher, substantial damage has been done to this pattern, and it appears that FSLR is in a new intermediate downtrend. (For more, see Spotlight On The Solar Industry.)
The chart for Energy Conversion Devices, Inc. (Nasdaq:ENER) looks even worse than the one for FSLR. ENER has been steadily setting lower highs and lower lows and recently broke under a base it had formed. This breakdown has led ENER to trade at multiyear lows. This breakdown is occurring on higher volume, so the picture is looking bleak for ENER.
JA Solar (Nasdaq:JASO) is a solar stock that has a similar chart to TAN, with one notable exception. While JASO also set a lower high in July and had been trading in consolidation, JASO actually is already breaking through support, and recently set a lower low. While JASO hasn't followed through to the downside yet, the situation is looking precarious at best right now.
The chart for Solarfun Power Holdings Co. Ltd. (Nasdaq:SOLF) is almost identical to JASO. It also recently broken under the base it was forming, after setting a lower high. Volume also increased on the downturn and the current action is decidedly bearish.
Bottom Line
The one thing that stands out across the solar charts is that most are already oversold. While stocks and markets can remain oversold much longer than everyone thinks, it is possible that these stocks are close to finding a near-term bottom. However, there is a lot of damage to these charts, and it's possible that if they do trade higher that they will only retrace a portion of the recent decline before setting up for further downside. The July highs remain a critical level of resistance to watch, and if these stocks somehow clear those levels, then the outlook would be much different. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
The author does not hold a position in any of the companies mentioned above at the time of this writing.
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The Claymore/MAV Global Solar Energy Index ETF (NYSE:TAN), which can be used as a proxy for the sector, is currently testing a critical level. TAN has been setting lower highs as it pulls back from its June high of $11.67. While technically TAN remains in a consolidation, some of the individual names in this space are already breaking down, which could be hinting at a failure for TAN to hold these levels.
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| Source: StockCharts.com |
First Solar, Inc. (Nasdaq:FSLR) for instance, had a high volume gap in late June that ignited a nasty downturn. FSLR was looking much like TAN is currently, setting lower highs while remaining in a consolidation. However, FSLR broke under the consolidation and continues to freefall lower. While FSLR is probably ready for a corrective move higher, substantial damage has been done to this pattern, and it appears that FSLR is in a new intermediate downtrend. (For more, see Spotlight On The Solar Industry.)
 |
| Source: StockCharts.com |
The chart for Energy Conversion Devices, Inc. (Nasdaq:ENER) looks even worse than the one for FSLR. ENER has been steadily setting lower highs and lower lows and recently broke under a base it had formed. This breakdown has led ENER to trade at multiyear lows. This breakdown is occurring on higher volume, so the picture is looking bleak for ENER.
 |
| Source: StockCharts.com |
JA Solar (Nasdaq:JASO) is a solar stock that has a similar chart to TAN, with one notable exception. While JASO also set a lower high in July and had been trading in consolidation, JASO actually is already breaking through support, and recently set a lower low. While JASO hasn't followed through to the downside yet, the situation is looking precarious at best right now.
 |
| Source: StockCharts.com |
The chart for Solarfun Power Holdings Co. Ltd. (Nasdaq:SOLF) is almost identical to JASO. It also recently broken under the base it was forming, after setting a lower high. Volume also increased on the downturn and the current action is decidedly bearish.
 |
| Source: StockCharts.com |
Bottom Line
The one thing that stands out across the solar charts is that most are already oversold. While stocks and markets can remain oversold much longer than everyone thinks, it is possible that these stocks are close to finding a near-term bottom. However, there is a lot of damage to these charts, and it's possible that if they do trade higher that they will only retrace a portion of the recent decline before setting up for further downside. The July highs remain a critical level of resistance to watch, and if these stocks somehow clear those levels, then the outlook would be much different. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
The author does not hold a position in any of the companies mentioned above at the time of this writing.
by
Joey Fundora
Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.
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