Regular readers here know that I’ve been an uber-bull on solar technology and the related stocks for over a year now (see here). I don’t give out stock ideas or trading recommendations (or investing advice of any kind) here at this site, but I do talk about the bigger-picture trends that interest me. Solar is at the top of the list – it’s having a huge impact on the economy and this will only grow. I also believe that the public stocks are misunderstood by a majority of investors, despite their big run. Companies like First Solar and SunPower are no longer a play on solar cell manufacturing. They grown up nto full-service construction and engineering firms that are selling into everything from consumer rooftop systems to massive electric utility projects.
I’ve talked about the fundamental story behind this sector a lot. Today, we’ll get a technical take from my friend Jonathan Krinsky at MKM Partners, who took a look at the space over the weekend. He’s got some individual names he likes, but here’s his take on the ETF that owns all of them, TAN.
So let’s look at how the solar sector is shaping up right now.
• The Guggenheim Solar ETF (TAN – $42) had a nice run earlier in 2014, before seeing a 28% correction into the May low. That now looks like
a successful test of the 200 Day Moving Average, from which the ETF has moved higher.
• This has created a descending triangle, with key support at $37.
• Last week TAN broke above its 50 DMA as well as downtrend resistance from the March highs.
• This breakout targets $54 based on the measured move out of the triangle pattern.
We recommend going long TAN on the breakout at $42, with a target of $54, and a stop below $39. This offers a 4-1 risk/reward ratio.
Technical Strategy – June 15th 2014
Full Disclosure: I own FSLR and SPWR in real life, I am using TAN for my playbook playoff’s contest portfolio on CNBC.