After a small rough patch, solar stocks are bouncing back, and a related exchange traded fund has broken out to new highs, forming a bullish trend, technical analysts point out.
The Guggenheim Solar ETF (NYSEArca: TAN) jumped 5.2% Tuesday. TAN has gained 18% year-to-date.
Technical analysis shows a bullish inverse head and shoulders continuation pattern forming in TAN, writes J.C. Parets for All Star Charts.
TAN ran up against a resistance level in the low 40s in October before a brief correction, followed by another run up in November and a lower low in December. The ETF made another rally to retest its resistance at the low 40s and retreated in January.
“As always, the more times that a level is tested, the higher the likelihood that it breaks,” Parets said. “Sure enough, Tuesday morning Solar stocks broke out to new highs, finally clearing all of that supply (resistance).”
If prices stay above the resistance level, the solar ETF can be in for another bullish move, according to the technical analyst.
Solar stocks are breaking out ahead of earnings this week and the next, with SunEdison Inc (NYSE: SUNE) expected to release fourth quarter earnings results before the market open Wednesday, Feb. 19.