Nowhere is a destination for the average solar stock these days. For example, TAN, the Claymore/MAC Global Solar Energy ETF, has been stuck in a trading range since May of last year. 16 months ago, TAN was selling at the current price of $8.33/share. This dramatic under-performance (for example, relative to the S&P 500) will likely only get worse before it gets better.
The chart below shows the weekly trading action in TAN. Note that the last bounce from the bottom of the trading range (starting in early November) occurred on very weak volume. This year, extremely heavy volume rapidly escorted TAN right back down to the bottom of the trading range. This is now the fourth test of these lows. Given the wide gulf between enthusiastic selling and lethargic buying, I am guessing that even if this trading range can survive the current test, it will not survive a fifth test.
*Chart created using TeleChart:
This poor technical outlook means that, more than likely, my plan for (bottom-)fishing in solar stocks at the end of last month is likely to go bust (Trina Solar [TSL] is the most likely exception). I am also monitoring the fates of three solar stocks that continue to scrape rock bottom:
- Evergreen Solar (ESLR) – I continue to claim that this company is worth a lot less than the $1.80 at which it did a stock offering last May. Perhaps the current $1.22 is more accurate.
- Memc Electronic Material (WFR) – another earnings-related disappointment last week.
- Energy Conversion Devices (ENER) – looks like another buy-out rumor cannot save this stock as it continues to deliver disappointing earnings and has now hit a 6-year low.
- LDK Solar (LDK) – still waiting to see whether it can survive.
- SunPower (SPWRa) – still waiting for final results of its accounting review. A surge in call activity in response to its acquisition of SunRay Renewable Energy may be a glimmer of positivity. SPWRa broke its March, 2009 low but survived its November, 2008, and all-time, low.
As if all these storm clouds were not enough, the Senate Committee on Environment and Public Works really threw me for a loop. I watched the “Full Committee and Subcommittee on Green Jobs and the New Economy Joint Hearing: Solar Energy Technology and Clean Energy Jobs” held on January 28, 2010, and I read all the prepared remarks. I think this was an extremely important hearing given solar executives were called to the stand to “plead their case” for more government assistance. I hope to provide my own summary and critique soon. For now, I will just say that I was underwhelmed by the arguments presented by the proponents of solar given the structured and sharp critique provided by the opponents (it looked like a partisan split with Democrats supporting solar and Republicans playing skeptics, several were clearly strong friends of oil, coal, natural gas, and/or nuclear). This hearing was a prelude to the introduction of a “10 million solar roofs” bill from Vermont Senator and committee member Bernie Sanders. Under the current circumstances, I will not be surprised if the bill fails: Congress is currently hopelessly divided and on a mission to accomplish absolutely nothing before 2010 elections. Regardless, it should be an interesting fight to watch.
Finally, sovereign debt issues also loom over solar. With governments finally looking to tighten their belts in the coming months and years, subsidies for solar, where viable and cheaper alternatives still exist, could become even more vulnerable than ever (the well-established subsidies for other energy industries will probably survive). Germany’s proposal to reduce subsidies faster and deeper than expected is just one example.
Be careful out there!
Full disclosure: long TSL, SPWRa
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