Technical Sunday: a bullish consolidation on the Solar ETF

Mike Zaccardi, CFA, CMT

Clean energy stocks have been on a roller coaster this year. TAN, the solar developer ETF, surged from under $30 in December 2019 to just shy of $42 at the February peak. It was a bit of a blow-off top, as we technicians like say. Then COVID-19 hit.

TAN was cut in half over the course of a few weeks. Buyers stepped in during late March – in a big way. The ETF surged from $21 to $36 in less than two months – more than +70%. Prices have since consolidated in the mid-$30s.

So that brings us to today. Where do solar stocks go from here? Well, I just look at the charts, not a crystal ball. The current consolidation in the last two weeks tells me the bulls are taking a breather. I tell my students to always look at what ‘the trend of larger degree’ is – well, it’s higher.

If TAN breaks out above $37, it may trigger a price objective to the $41-42 range – right near the highs from earlier this year.

Taking a step back, the highs from 2014 and 2015 are in the low $50s, so that could be the next significant area of resistance on the chart.

How about we go even further back – to 2008. Most of my undergraduate finance students were in 4 grade, I think. But I remember the 2008 market environment well. Solar stocks were all the rage as oil prices soared past $100 per barrel during the first half of that tumultuous year.

TAN peaked above $300 per share! We aren’t going to see that price level any time soon, but it goes to show how booms and busts happen.

For now, let’s stick to the charts to see where prices may be headed in the next few months.

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Chart used with permission from Tradingview.com