By Stoyan Bojinov
U.S. equities floundered between smalls gains and losses on Monday before succumbing to the red in the late part of the session. After a discussion with the U.S. Justice Department, the Nasdaq OMX Group Inc. (NDAQ) and Intercontinental Exchange (ICE) withdrew their $11 billion bid to acquire NYSE Euronext (NYX). Regulatory hurdles were the main road-block, and officials from Nasdaq commented that they were both surprised and disappointed with the Justice Department’s decision. In commodity markets, gold traded mixed for the day, finishing the session just shy of the $1,500/oz. mark. Meanwhile silver continued its weakness, plunging by over 3% while crude oil continued its volatile ways as futures contracts fluctuated around $100 a barrel just after Wall Street’s opening bell. Investors have a full plate of economic news due out later in the week including Bank of England Minutes, U.S. FOMC Minutes, and Japan GDP all on Wednesday, followed by Canada’s Consumer Price Index on Friday morning.
On the equities front, alternative energy has come across our radar screen as Trina Solar (TSL) is reporting earnings today before the market opens. The Market Vectors Solar Energy ETF (KWT) is on our watchlist as Trina Solar accounts for 9% of this fund’s total holdings. KWT tracks the Ardour Solar Energy Index, which provides exposure to publicly traded companies from around the world that derive at least 66% of their revenues from solar power and related products and services. Analysts are expecting the company to rake in $629 million in total sales and generate $1.15 per share in profits this quarter.
Technical Analysis: Market Vectors Solar Energy (KWT)
KWT has been range bound for the past two years, and likewise this fund hasn’t received too much attention even as the alternative energy asset class has been gaining popularity. Consider the two-year daily chart of KWT below:
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Notice how the fund declined to just under $10 a share after making four attempts to break out past the $17 level back in June 2009 until March of 2010. Since bottoming out in June of 2010, KWT has been trending higher, twice hitting the $14 mark and subsequently selling off. Given that KWT is trending higher, and the fact that this asset-class has under-performed lately, it’s most recent dip could present an appealing opportunity for those seeking to establish exposure within the alternative energy asset class.
Consider the chart below and notice how KWT has been more or less bouncing off the blue trend line:
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The Stochastic Momentum Index is showing that KWT is oversold, however, further downside should not be ruled out as a possibility given the volatile nature of the fund. If KWT resumes its uptrend in the next couple of days then the next level of resistance in terms of upside is anywhere from $13-$14 a share. Likewise, if KWT fails to close above $12 a share in the coming days it could quickly decline to the $11 level and perhaps dip as low as $10.50 a share.
As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No position at time of writing.
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