Solar stocks have continued their weakness relative to the marketsince the beginning of the year continuing their sub-par performancesince January of 2010.
As I have mentioned a number of times in the past one of the bestand simplest indicators, from my experience, is to compare the price ofany stock to its 50 day moving average (50 Day MA) and its 200 daymoving average (200 Day MA).
IF a stock price’s is below its 50 Day MA it is a short termnegative and it if is above its 50 Day MA it is a short term positive.These two points can be very successfully used to trade a stock – it ismoves above the 50 Day MA you buy it and if it breaks below its 50 DayMA you sell it.
If you look at the table below it lists all of the 22 Photovoltaicpublicly traded stocks we follow in the U.S. markets. I think thenumbers speak for themselves:
91% of the stocks are trading BELOW their 50 day MA. The only exceptions being SOLR which is the last remaining stock we hold and SPWRA which is up as a result of a purchase of control of the company by the French oil company TOTAL.
86% of the stocks are trading BELOW their 200 Day MA. The only exceptions being SOLR,SPWRA and EMKR.
In addition, 82% of the stocks (18 of 22) have their 50 Day MABELOW their 200 day MA – another very negative indicator. A healthystock will always have its 50 Day MA ABOVE its 200 Day MA.
US Photovoltaic Companies – as of the close 5-27-2011
|ASTI||Ascent Solar Technologies, Inc.||1.32||1.802||2.988|
|CSIQ||Canadian Solar Inc.||9.28||10.19||12.839|
|CSUN||China Sunergy Company Ltd.||2.38||3.549||4.19|
|DSTI||DayStar Technologies Inc.||0.72||0.824||1.451|
|ENER||Energy Conversion Devices Inc||1.37||1.924||3.811|
|ESLR||Evergreen Solar, Inc.||0.73||1.355||3.163|
|FSLR||First Solar, Inc.||121.37||138.56||140.413|
|HSOL||Solarfun Power Holdings Co.||5.9||6.566||8.928|
|JASO||JA Solar Holdings Co., Ltd||5.67||6.348||7.212|
|JKS||JinkoSolar Holding Company Limited||25.29||25.539||26.526|
|LDK||LDK Solar Company Ltd.||7.02||10.461||10.793|
|RSOL||Real Goods Solar, Inc.||2.42||2.491||2.709|
|SOL||ReneSola, Ltd. (United Kingdom) ADR||7.2||8.795||9.948|
|SOLR||GT Solar International Inc||11.53||10.763||9.507|
|STP||Suntech Power Holdings (China) ADR||8.04||8.725||8.74|
|TSL||Trina Solar Limited (China)||22.02||26.703||26.346|
|WEST||Akeena Solar, Inc.||1.18||1.743||2.084|
|WFR||MEMC Electronic Materials, Inc.||10.12||11.601||11.932|
|YGE||Yingli Green Energy Holding Company||8.74||11.425||11.437|
Solar Seven Selection Criteria
Back in the beginning of 2010 I explained that we were rating allof our solar stocks and that the seven strongest stocks – later named -"The Solar Seven" were the strongest stocks among the industry. Myrating system to select the "strongest" stocks is a proprietarycombination of various relative strength measures, technical measuresand some fundamental components.
What can we learn from this amazing performance in a terrible solar market?
What we can learn is that there are always stocks going upsomewhere, even in a terrible market and if you select the "strongest"stocks in a given market segment you will, on average, do quite well.Even if, the strongest stocks are all umbrella’s companies and we are in a drought – regardless of what you "think" you know or "think" shouldbe – always remember that "what is, is" and always buy the strongeststocks in a sector or market. You may not always know "why" somethinghappens, but you will, on average, do much better than most investorsand most likely better than the market.
Why are Solar Stocks down and when will they turn around?
As to why solar stocks are down – there are ONLY opinions and no real answer. It could be a number of things:
- Worldwide capacity is almost double worldwide projected demand
- Margins are, as a result of #1, probably going to shrink industry wide.
- The U.S. Treasury Grant may not be renewed after it expires at the end of 2011
- Recession has cast further doubt on the status of feed in tariffs worldwide
- General lack of any long term or coherent energy policy in the U.S. despite over 30 years of talk only and ZERO significant action.
But it is really not important to understand exactly why solarstocks have dramatically underperformed over the last 18 months. Whatis important is understand when to buy them and when to sell them. Itrequires buying and selling utilizing some form of system and to beconstant. The system can be as simple as buying when a stock goes ABOVE its 50 Day MA and selling when it goes BELOW.
What you should NOT do is to buy stocks because you "think" orsomehow "know" what they should do. That is a system that will, withoutquestion, leave you with far less money than you started with. You have to remember to look at "what is" and NOT what you think should be andalways remember the words of Warren Buffer – "Never lose money"…..if you find a system that works it will minimize your loses and let yourprofits run.
When will solar stocks turn around?
Solar stocks will give us a signal when they are starting to turnaround. Stocks 50 Day MA will move ABOVE their 200 Day MA and stock’sprices will break above their 50 Day MA. It will happen right beforeour eyes and also, at the same time, you will probably read in the press how hopeless the solar sector is and that it will never get better. At that point, the final group of sellers will finally give up and through in the towel and all that will be left will be buyers. That is the wayit has always worked and I certainly believe it will happen this wayagain.
Keep in mind that there are two basic types of equity (stock)analysis. Below is a brief description of each and its primary purpose:
Fundamental Analysis – this is the analysis ofthe fundamental financial condition of the company to identify whichstocks are stocks you may want to buy when the timing is right. Thisform of analysis will give you NO indication of the best time to buy the stock.
Technical Analysis – this form of analysis willtell you "when" to buy a stock. It will do this by showing you (in chart format) the basic interaction of supply and demand and when the twochange and shift which will indicate a time to buy or a time to sell.
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