Are you getting frustrated waiting for a meaningful pullback in US equity ETFs? There have been pullbacks in some sectors if you know where to look.

If you like to buy on pullbacks in bull markets (like me), you may have trouble swallowing some of the price levels and medium-term overbought technicals on many instruments right now.

Digging deeper into the trenches, some areas have had meaningful pullbacks, and we are going to get into one ETF right now that is currently trading at/near key technical levels.

Figure 1 - Invesco Solar ETF (TAN) August 21, 2020 - June 14, 2021, Daily Candles Source stockcharts.com

I like to find bullish short to medium-term technicals, and the Invesco Solar ETF (NYSE: TAN) just closed over its 50-day moving average yesterday. This technical action comes after a period of retracement and consolidation that dates back to the beginning of 2021. Its 52-week high close is $121.94, put in back on February 9, 2021.

The TAN ETF strategy and top holdings can be viewed here .

So, while everyone is still talking about inflation and the upcoming Fed decision, we can focus our attention on an ETF that has pulled back nicely over a four + month time period and is exhibiting some signs of bullish technical strength. Also, take note of the RSI above 50 (57) and the MACD poised to cross the zero line.

We can see that June 14ths candle was a gap higher and a close above the 50-day moving average. More clarity can be obtained by viewing an intraday 15-minute chart:

Figure 2 - Invesco Solar ETF (TAN) June 10, 2021 - June 14, 2021, 15 Minute Candles Source stooq.com

The gap-up volume and TAN ’s ability to stay above and close above its 50-day moving average could be a bullish signal.

US Administration and Solar Outlook

Just like some of the other markets that I am currently following, TAN seems to make sense given the current US administration and democratic congressional majority. In fact, just as I am writing this, Reuters published an article about first-quarter US solar installations soaring . I do wish that this article would come out later instead, but it is out now.

Although there are some supply chain concerns in solar right now (think commodities), there ought to be many initiatives and subsidies put forth by the Biden administration in the coming years. Regardless of your personal opinion on solar vs. fossil fuels, the idea is to try to profit from economic conditions. TAN could be a great addition to holdings to get exposure from a sector that has already experienced a meaningful pullback; brought on partially by the buy the rumor, sell the fact type of trading action that we saw in TAN from November 2020 (US presidential election) and January 2021 (inauguration).

Based on the technicals that we have covered above and the pullback/consolidation that we have seen in the medium-term in TAN , this seems like a potentially solid entry point area.

For additional details on the US Solar Market, the SEIA (Solar Energy Industries Association) just released their Q2 2021 report. You can view it here . It contains numerous datasets, charts, and other data, including projected residential and commercial installation projections.

Figure 3 - Invesco Solar ETF (TAN) April 14, 2008 - June 14, 2021, Weekly Candles Source stockcharts.com

Let’s also take note that TAN has traded at these levels before. It traded north of $220 back in the Summer of 2008. Hint, hint: there was $4 per gallon retail gasoline in the US at that time. I think it is wise to know the long-term trading history of instruments that are covered.

What could TAN do if additional solar subsidies are issued by the Biden administration and residential + commercial installations increase? Time will tell.

Rafael Zorabedian  Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

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