One of my favorite activities when I’m doing analysis is to track various sectors, and the stocks within, as I start to see movement in their relative strength. Although I have many tools to set up watch lists, Finviz Elite has become one of my favorites due to intraday pricing and quick pop-up charts. I can set up an unlimited number of portfolios that I can quickly scan during the day.
Two groups that have seen exceptional movement in the past several weeks have been the solar stocks and natural gas stocks. Although energy stocks have been one of the strongest sectors in the market this year, even allowing for the sharp sell-off the past week, solar stocks -- which tend to generally follow to some degree -- have been getting annihilated. Natural gas stocks have performed very well, considering natural gas itself has been relatively flat the past month.
Solar stocks have recently been hurt somewhat by certain legislation and changes in reimbursement policies in certain European countries. Because of that, certain companies have lowered guidance in the near term. However, it’s hard to believe that legislation in a couple of countries has accounted for the drastic sell-off we’ve seen across the board. As you can see from the chart below, a portfolio of most of the well-known stocks is down nearly 19% in less than 30 days.
[Click all to enlarge]
My thoughts on this sector are several:
- What’s causing this extreme dichotomy in this sector versus energy stocks in general?
- Some of these stocks are nearing or are at intermediate support levels.
- With potential nuclear problems being manifested in Japan at the moment, will this help revive interest in this sector?
- Is it time to be doing some selective buying in this sector for a potential bounce, or are solar stocks just the leading sector in a potential correction in the entire energy sector?
One sector that has been improving in the energy sector is natural gas stocks. Just a few of many that I’ve been following are below:
As you can see, this portfolio was created on the same date as that of the solar sector above, but with drastically different results. Even thought the SPX is down approximately 3%, this sector has risen nearly 6% in the past several weeks.