Not surprisingly, the next two non-leveraged ETFs topping the charts for year-to-date gains are also clean energy super stars NASDAQ Clean Edge Green Energy Index (QCLN) and MarketVectors Solar Energy ETF (KWT). These funds have notched 2013 gains of 72% and 65% respectively as of this writing.
What’s The Best Way To Play Solar Today?
A quick look at the chart above, shows that this ETF has recently hit a new 52-week high and is showing no signs of losing momentum. From a trading perspective, I am naturally wary about buying a fund after it has doubled in price and is on its recent highs. One spot to consider making an allocation to TAN, or an associated solar energy fund, is at the 50-day moving average which has been a technical line of support since the April low.
I would consider making a modest allocation to this sector because of its smaller capitalization stocks and concentrated positions which can enhance volatility. This is definitely more of an aggressive industry group because of its technological nature and competition from traditional energy behemoths. Volatility can be both a blessing and a curse depending on your risk tolerance and ability to withstand price declines. That is why trading location and risk management will be key to successfully adding new money.
I think that the future prospects of the solar energy industry are shining bright and that continued innovation will lead to further adoption in homes, businesses, cars, and other industries. However, as with any investment, it’s important to keep a level head and not get swept up in the euphoria of past performance. Purchasing these stocks or ETFs on a modest pullback will enhance your odds of success over the next 12 months.
David Fabian is the chief operating officer at Fabian Capital Management LLC.
