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2015/12/02

Solar Sucks. But a Sharp Rebound is Set to Pay You Double-Digit Gains…

Rude Awakening
December 2, 2015
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Solar Sucks. But a Sharp Rebound is Set to Pay You Double-Digit Gains...

  • Clouds roll in for one slammed sector…
  • The trouble with "story stocks"
  • Plus: Is a choppy market trying to tell us something? 

Greg Guenthner coming to you from Baltimore, MD...

Greg GuenthnerThe sun has set on solar stocks.

Just as the so-called climate change summit wraps up in Paris, it looks like solar companies are about to enter a new dark age. Not even the feel-good Save the Earth vibes can drum up buyers for these maligned stocks.

Remember former highflier SunEdison (NYSE:SUNE)?

This stock traded for more than $30 a share as recently as late July. Now you can pick it up for three bucks a pop. That's a 90% drop in less than five months. Take a look for yourself:

Sun Spots

If all this is enough to make you want to swear off solar for good, I understand.

As the bears thrashed the markets in late August, I warned you that owning "story stocks" like solar companies would crush your returns…

"When it comes to the stock market, there's no shortage of compelling stories out there. We have the speculative biotechs with new and exciting drugs nearing potential approval. Then there are the innovative solar companies (some of my personal favorites, by the way) that are looking to change how we get our energy."

I wrote that the day after the Dow puked up 530 points. And like clockwork, these stocks dropped like stones. When the clouds rolled in, these stocks were punished as folks made a run for the exits.

At the time, the Guggenheim Solar ETF was down a cool 17% year-to-date after having been up a red-hot 45% in the spring.

Now the Guggenheim Solar ETF is down 21% on the year and no one (and I mean no one) gives a hoot about these stocks anymore. All you'll hear about the rest of 2015 is how many Kindle Fires Amazon has managed to sell for the holidays…

It's tough to find a reliable sector to trade when the major averages are in such flux—as they've been since the August swoon pushed us into correction mode. Yet despite its recent woes, there might be a sliver of sunshine peeking through the clouds on these discarded solar stocks…

I'm not telling you to spend your mortgage payment on shares of SunEdison. But the solar sector as a whole is starting to look bottomy.

Just look at how the Guggenheim Solar ETF could be starting to perk up here:

Guggenheim Solar ETF

After a painful six-month blackout, the power might be coming back on for this solar ETF. Note the higher low forming just above $26. That gives aggressive traders a clean shot at playing a potential run here (along with an easy out if the trade gets hairy).

Solar might not be on traders' minds this week. But it's certainly offering you a shot at double-digit gains with a short-term snapback trade…

Sincerely,

Greg Guenthner

[Ed. Note: Send your feedback here: rude@agorafinancial.com -- and follow me on Twitter: @GregGuenthner]


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Rude Numbers

When to Buy... When to Sell
168

points were added to the Dow Jones Industrial Average on Tuesday. That's good enough for a gain of nearly 1%...

58%

of all stocks trading on major U.S. exchanges remain below their respective 200-day moving averages...

$41.34

buys a barrel of crude today. Oil is creeping lower once again this morning. It's off by more than 1% in early trading...

$1,066

is where you'll find gold futures this morning. The yellow metal is up a little more than $2 this morning...

2,099

marks the spot for S&P futures just before the morning bell. Stocks are set to open slightly in the red today...


Rude Trends

When to Buy... When to Sell

"I understand that the S&P is still in a long term uptrend, but it appears to me that the choppy, sometimes volatile, movement over the last year is trying to tell us something," a reader says. "Is there precedent in looking back where such a long consolidation in the broad market ends with a breakout to the upside? I keep looking at the 2007 top and wonder if we are repeating that scenario. What do you think?"

Well, it's easy to look back at 2007 and note some similarities with this year's market action. History rhymes, as they say—but it rarely repeats.

Time will tell if 2015's choppy market leads to a broader downturn. But let's not allow recency bias to cloud our judgment. In the early 1990s, we saw choppy markets resolve to the upside—most notably in 1990 and 1994. In both of these instances, a major bear market was avoided.

Your first priority is to be ready for anything. Remember, markets rarely crash from their highs. 2008 was no exception to this rule. If we do get a powerful move lower, there will be plenty of clues along the way…


Ignore At Your Own Peril

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