They continue to struggle at breaking down even the worst areas of the market. We keep seeing it.
Solar stocks are the latest example.
The whole group was bid up today with some huge moves from the heavily-shorted names.
Here’s the Solar Index $TAN:
TAN suffered its worst single day performance since the 2020 crash following the election in November. It fell over 10% to new cycle lows.
However, there has been little follow-through in the time since. And today, we saw a nice pop off the pivot lows from last month.
Also notice how TAN hasn’t been oversold for more than a year now as selling pressure has waned. I think bears are slowly losing control.
They are also positioned way offside when it comes to this basket of stocks. Some of the largest short positions in the market are in the indexes components.
And we can’t finish the bullish argument without discussing the obvious political tailwinds under the new Trump administration.
While I’m obviously being sarcastic there is actually some truth to this.
The data from the prior two presidential cycles would suggest the seasonal trend has shifted bullish. I wouldn’t overthink this, but it does prove we shouldn’t view a Republican coming into office as bearish for solar. These stocks did great during Trump’s last term.
While one big up day doesn’t make a new trend and there is still a ton of work for these stocks to do before we like them on a primary trend basis, I think there is a trade to be made here.
In flipping through some charts, I’m seeing big support levels, potential scoop n’ score setups, and bullish engulfing and piercing candles.
I think these failed breakdowns are about to spark a squeeze in solar stocks. And I think the favorable sentiment means the coming rally could have legs.
