As a part of the momentum stock selloff that occurred in May, solar stocks were severely punished, most losing 30% or more. The long term prospect for alternative energy, especially solar I believe is quite compelling.  Being the tightwad I am, when I see an overreaction pushing prices unnecessarily low in an investment that has excellent long term fundamentals, I start to salivate as I smell an opportunity to make money.

TAN, the solar stock  ETF, lost in excess of 30% during the March selloff, while the broader market index, the SP500, was able to eek out a tiny gain.  That is quite a divergence. Solar stocks, like many other names had gone too far too fast, became overbought, overstretched and warranted a correction. The market faithfully provided just what was needed.

You can see in the TAN chart below the March to May 30% decline. It subsequently broke out above the blue, dotted down trend line and marched nicely higher, up more than 25% from the bottom. Right now you can see we are sitting just under a (solid gold) resistance line where price stalled and fell back. The bulls didn't have enough in the tank to get it above  resistance. Those who are long have to wonder if this it or does it have more legs for another push higher?

As a long-term investor, success comes from investing with positions that are trending higher and avoiding those that are not.  Once that trend changes, it’s time to find another sandbox to play in. We can see that from the bottom, at 36.93, we have made higher highs and higher lows which is the definition of an uptrend. That combined with a MACD that is above zero, above its signal line and an RSI trending upwards and above its moving average provides strong technical reasoning to be long this stock. As long as the stock market continues to want to push higher, the first upside target is 10-12% higher with the potential for much more.

Please don’t take this as a recommendation to buy TAN. Momentum stocks are not for the uninitiated and should be respected for their volatility . If we do eventually see a market correction this summer/fall it is very likely this and momentum stocks in general will be in for a repeat pummeling, potentially even greater than what was seen in March. If that were to occur, that would be better time for us "value" (read tightwad) investors to leave the sunscreen at home and go get a TAN .

Invest safe!