Solar Stocks Break Down
Speculative stocks typically get hit the hardest during correctionsin the stock market, and solar stocks definitely qualify for a beating.In the past 4 days of selling, TAN, the Claymore/MAC Global SolarEnergy Index, is already down 10%. Solar stocks have been big laggardsthis year as TAN is now back to even on the year. See chart below:
When I last did a round-up of solar stocks,they had suffered greatly during the brief sell-off that began themonth of October but most remained comfortably within trading ranges.The current correction has caused some serious breakdowns that willlikely take most stocks in the group much lower before the carnageends. Rather than post a bunch of charts, I am just listing stocks bytheir position relative to the important daily moving averages: 50DMAand 200DMA.
Above 50DMA and 200DMA (still trending upward)
Trina Solar Ltd. (TSL)
Below 50DMA only
Yingli Green Energy Holdings (YGE)*, Canadian Solar (CSIQ)*,
Below 50 and 200DMA
Ja Solar Holdings (JASO)*, GT Solar International (SOLR), LDK Solar(LDK), SunPower Corporation (SPWRA)*, First Solar (FSLR), EnergyConversion Devices (ENER), Solarfun Power Holdings (SOLF), ChinaSunergy (CSUN), Suntech Power Holdings (STP), ReneSolar (SOL),Evergreen Solar (ESLR), MEMC Electronic Materials Inc (WFR)
*still within trading range
TSL remains the biggest winner in this group. However, what sticksout the most from this list is that most solar stocks are not onlybreaking down from important technical levels, but also have alreadybroken down below (multi-month) trading ranges. The freshdisappointment in FSLR’s earnings almost guarantees that thesebreakdowns will continue in the near-term. TAN should also break downbelow its 200 DMA.
I started scaling back into SPWRa during this selling. In a quarterwhere most companies are still reporting tremendous year-over-yeardeclines in revenue, SPWRa reported a 56% increase. These shares stilllook exceptionally cheap to me and are pricing in the rough watersahead. I am sticking by STP for now, but I am wary of earnings. TheNovember speculative calls on SOL are likely a complete loss. I remainvery intrigued by TSL, and I eagerly await the company’s next earningsreport. WFR proved once again that it cannot escape its operationalissues. I will not be surprised if ESLR breaks its March lows andtrades under a dollar by year-end. Finally, I am still net short FSLR,but I will likely scale back some of the position amidst thepost-earnings wreckage. As expected, gross margins continue to declinefor FSLR. For some reason, the market continues to be surprised by thisdecline although FSLR telegraphed this decline at its analyst’s day back in June.
Be careful out there!
Full disclosure: TAN and positions explained above.
Dr. Duru Dr. Duru attended Stanford University, receiving a B.S. inMechanical Engineering, an honors degree in Values, Technology, Scienceand Society, and a Ph.D. in Engineering-Economic Systems (nowManagement, Science, and Society). He has done some independentconsulting in mathematical modeling, slogged through management consultingin product development and technology strategy, and is now pounding thepavement helping companies to improve the monetization of onlineadvertising through analytic software and rigorous analysis.
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