Investors’ desire to be involved with solar stocks will be tested the long oil prices languish, a grim outlook at a time when about two-thirds of TAN’s 29 holdings have traded lower over the past six months.

“The prime suspect for the recent decline has been the falling costs of hydrocarbons, whose continuing abundance and relative cheapness threaten to put a damper on solar appetite in the coming years. With oil prices down by a quarter in the last six months and with little sign of any impending rebound, commitments to solar projects will no doubt be tested even in the wake of the recent falling costs experienced by the industry,” according to Markit.

Traders have been positioning for further declines in TAN and the ETF’s holdings, a familiar scenario as solar stocks are often heavily shorted. That has allowed TAN to outpace its underlying index and, at times, deliver a decent dividend yield while tracking a sector not known for its dividends. [Short Covering Could Lift Solar ETFs]

“The average short interest in the constituents of the TAN ETF has surged in the last few months and now stands at 6.6%. Levels have increased significantly since September and recently hit a fresh annual high on November 18th when average short interest hit 7.2% of shares outstanding which is very high when compared to the average of just 2.2% for the average company in the S&P 500,” notes Markit.

Guggenheim Solar ETF