Solar stocks are losing their shine.
The TAN Solar ETF rallied on Friday and early Monday, although it is still down almost 30% from its high in January. The group has come under pressure after rising more than 280% in the past 12 months.
Federal grants have made solar panels inexpensive to install, and President Joe Biden’s administration places an emphasis on clean energy. A proposal last week for a California utility company to charge fees New customers a monthly fee if they have solar roofs startled the group.
Danielle Shay, director of operations at Simpler Trading, told CNBC’s “Trading Nation” that the decision to invest in solar stocks depends on the timing.
“I think it all depends on your timeframe. In the short term the charts have shifted and they are definitely on a downward pattern. I can see TAN in particular drop to around $ 70,” Shay said Friday.
At the close of trading on Friday, it was trading just below $ 90 and rose 3.5% to $ 92.76 on the Monday before entering the market. Shay’s downside target implies a 22% decline from Friday’s close.
A long-term investment in solar could mean a bright future, according to Shay.
“Over the next five to ten years this area will continue to grow. For long-term investors looking to get started, I think this is a great place to start,” she said.
Craig Johnson, chief market technician at Piper Sandler, warns that these stocks may be too overwhelmed after their rally from the lows. The TAN ETF is up 322% since last March.
“In the last 30 years I have only seen three times that the 26-week price momentum in some of our work has become as high as it is now. Once we see these high levels, it is overrun and the group typically has about three years corrected before you find your next sustainable entry point, “Johnson said in the same interview.
Unlike Shay, Johnson says it makes sense to sell any strength rather than buy it on a pullback.
“I would sell this relief rally at this point and not try to buy it yet. It’s too early,” he said.
Disclosure: Shay is long solar stocks.
Disclaimer of Liability