Almost everywhere you read - blogs, twitter - people are either shorting solar stocks at will or advising others to do so. Now, that itself should make you cautious if you want to short them here. The trade (short side) is getting too crowded in my opinion, so I decided to have a look at some of the solar stocks.
And what do I see? I would rather be a buyer here then a seller! I know what you are thinking dear readers - why? Well, let me put forward my case with the help of some charts. You will notice all these charts have massive positive MACD and RSI divergences building up. That would make me very cautious in shorting any these stocks. Moreover, the selling volume seems to be drying up. In a nutshell, I am expecting a bounce in these stocks sooner rather than later. The last chart is of TAN, the solar ETF ,if you want to avoid playing any individual stocks. If you do decide to go long, I would advise you to start with a small position and give it room to run either way. The expected bounce should be large enough to give you ample time to add to your long position. The small initial position should limit your risk in case the bounce does not happen, though I think it will. Like I said in my post earlier today, trading is all about risk management!