by Anthony Mirhaydari | February 4, 2014 9:02 am
Back in November, I wrote about how solar stocks — one of the leading industry groups during the 2013 market melt up — were rolling over as emerging markets, in general, we lagging the march to new record high in U.S. equities.
The Guggenheim Solar ETF (TAN), tested its 50-day moving average before stumbling into mid-December. A number of recommended short positions worked well as the TAN suffered a 16% decline following that post.
The sector rebounded into January, despite the widespread attention the emerging market currency crisis gained during this period. But now, after sliding sideways over the last few weeks, solar stocks are under pressure again as a trade spat between China and the United States has broken out because both countries are trying to protect domestic producers amid falling demand and plunging prices.
With emerging-market economies more focused on avoiding a currency meltdown, green energy projects are being moved to the sidelines — setting up a renewed bout of selling pressure in solar stocks.
Here are three short candidates worth considering.
Click to Enlarge Trina Solar (TSL) is an integrated solar-power productions manufacturer out of China that provides both mono- and multicrystalline ingots, wagers, cells and related items.
Trina Solar is being impacted by a move by the U.S. Department of Commerce to initiate an anti-dumping investigation. A ruling by the U.S. International Trade Commission on whether to continue with a full-on investigation is due Feb. 14. If it is determined that the Chinese are hurting U.S. producers, a decision on subsidies and dumping will follow.
TSL stock dropped back below its 50-day moving average on Monday and are initiating a downtrend for the first time since November. A test of the December lows would be worth a 17% decline from here.
I’ve added a short position in TSL stock to my Edge Letter Sample Portfolio.
Click to Enlarge JA Solar (JASO), based in Shanghai, is another Chinese solar play that is under pressure from trade frictions.
Technically, JASO stock is the weakest of the three picks presented here as it threatens to break below its 200-day moving average for the first time since April. A volume-by-price analysis suggests shares could collapse from here, leaving support near $10 per share, all the way down to $6 — a 30% drop from here.
I’ve also added a short position in JASO to my Edge Letter Sample Portfolio.
Click to Enlarge First Solar (FSLR) is a U.S.-based manufacturer of solar modules as well as a constructor of turnkey solar power plants for utilities. While the company is benefiting from possible U.S. trade protection, it’s suffering from a move by the Chinese on Jan. 20 to impose tariffs on solar-grade polysilicon from the U.S. and South Korea.
FSLR stock has fallen through its 200-day moving average for the first time since August. A drop to the September low would be worth a 26% decline from here.
As of this writing, Anthony had recommended TSL and JASO short to his clients.
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