Technical Outlook for Solar Stocks Looking Bleak (TSL,SPWRA,LDK,ENER)

100212 TAN Technical Outlook for Solar Stocks Looking Bleak (TSL,SPWRA,LDK,ENER)

Nowhere isa destination for the average solar stock these days.

For example, TAN,the Claymore/MAC Global Solar Energy ETF, has been stuck in a tradingrange since May of last year. 16 months ago, TAN was selling at thecurrent price of $8.33/share. This dramatic under-performance (forexample, relative to the S&P 500) will likely only get worse beforeit gets better.

The chart shows the weekly trading action in TAN. Note thatthe last bounce from the bottom of the trading range (starting in earlyNovember) occurred on very weak volume. This year, extremely heavyvolume rapidly escorted TAN right back down to the bottom of thetrading range. This is now the fourth test of these lows. Given thewide gulf between enthusiastic selling and lethargic buying, I amguessing that even if this trading range can survive the current test,it will not survive a fifth test.

This poor technical outlook means that, more than likely, my plan for (bottom-)fishing in solar stocks at the end of last monthis likely to go bust (Trina Solar [TSL] is the most likely exception).I am also monitoring the fates of three solar stocks that continue toscrape rock bottom:

  1. Evergreen Solar (ESLR) – I continue to claim that this company isworth a lot less than the $1.80 at which it did a stock offering lastMay. Perhaps the current $1.22 is more accurate.
  2. Memc Electronic Material (WFR) – another earnings-related disappointment last week.
  3. Energy Conversion Devices (ENER) – looks like another buy-out rumorcannot save this stock as it continues to deliver disappointingearnings and has now hit a 6-year low.
  4. LDK Solar (LDK) – still waiting to see whether it can survive.
  5. SunPower (SPWRa) – still waiting for final results of its accounting review. A surge in call activityin response to its acquisition of SunRay Renewable Energy may be aglimmer of positivity. SPWRa broke its March, 2009 low but survived itsNovember, 2008, and all-time, low.

As if all these storm clouds were not enough, the Senate Committeeon Environment and Public Works really threw me for a loop. I watchedthe “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 thinkthis was an extremely important hearing given solar executives werecalled to the stand to “plead their case” for more governmentassistance. I hope to provide my own summary and critique soon. Fornow, I will just say that I was underwhelmed by the arguments presentedby the proponents of solar given the structured and sharp critiqueprovided by the opponents (it looked like a partisan split withDemocrats supporting solar and Republicans playing skeptics, severalwere 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 billfails: Congress is currently hopelessly divided and on a mission toaccomplish absolutely nothing before 2010 elections. Regardless, itshould be an interesting fight to watch.

Finally, sovereign debt issues also loom over solar. Withgovernments finally looking to tighten their belts in the coming monthsand years, subsidies for solar, where viable and cheaper alternativesstill exist, could become even more vulnerable than ever (thewell-established subsidies for other energy industries will probablysurvive). Germany’s proposal to reduce subsidies faster and deeper thanexpected is just one example.

Be careful out there!

Full disclosure: long TSL, SPWRa