The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By David Gillie
Solar is highly dependent on oil prices sustaining the $100+/bbl price. Crude has good support around $95.00, but has been getting toppy at the $105.00 level. As long as oil fluctuates in this range, solar will be volatile.
Guggenheim Solar (TAN) was down 8.24% on Friday, but cushioned some of its largest holdings greater losses.
First Solar (FSLR), one of the most traded solar stocks and over 11% of the composition of TAN, took a whopping 10.43% loss on Friday. It was ignored by the end of the day rally.
Although not traded on the NYSE, TAN's largest holding, the Chinese solar stock GCL Poly, traded on the Hong Kong exchange had an 11.15% loss on Friday's selling. GT Advanced Technologies (GTAT) cushioned the fall with only a 1.66% loss and participated in the rally at the close.
Although TAN lost a third of the gains over the past quarter, it still managed to hold on to a gain for the week. The story on solar may not be over.
With the overall market conditions, TAN was significantly overbought and in need of a pullback. This ETF has built a strong bottom off of the $2.50 price and has the volume to sustain it. The 50-day moving average has turned upward and support at that level--around $3.00--would be bullish for TAN. Another factor to consider is rattling between Iran and Israel can very likely maintain high oil prices which would also be bullish for the solar sector.
This week, selling the solar sector makes a great case for ETFs. Although FSLR trades at nearly five times the volume of TAN, had you owned the individual stock, you'd have had a greater than 10% loss in a single day. Granted, TAN was "only" up 24% over the same period FSLR was up almost 50%, but is 24% so bad over a quarter? And, what assurance do you have that you'd pick the one top performing solar stock out of the many that are available? Additionally, ETFs may contain stocks that are not available to the average investor in the NYSE. In a sector prone to volatility, ETFs can be a very smart choice.
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