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Technical Check: Solarfun Power at $20
Solarfun Power Holdings Co. (SOLF) is just barely holding above technical support, trying to hold the line at $20, down about 7% on surprisingly light volume of 3.6 million shares. The wings of the solar rally have been clipped as even the best of breed name First Solar has dramatically come off its mid-May high of $317 so there’s no doubt of some sector rotation out of solar, but it’s puzzling that given oil’s resurgence there hasn’t been any restart in momentum. Traders would go short on a breach given that the level is crucial - it’s a price marker tested and bounced up from already three times in the past couple of weeks, and a close below $20 would be extremely bearish - Solarfun’s first since May 15 and mark its lowest level since reporting first quarter earnings.
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Whilst there is a “link: between the price of oil and the viability of solar power, the link is not as dramatic as to effect the daily prices of solar stocks as rapidly as many people think it does.
And imagine what could happen to solar stocks if oil were to finally correct?
I would assume that there is still a lot of disbelief on the oil move, and folks are trying to position themselves ahead of a correction in oil…
Regardless, you have to believe in the long-term price trend in oil to directly connect oil prices and solar stocks. Solar is also competing with natural gas and oil, the politics of subsidies and environmental protection, and the on-going credit crunch that is probably going to force some big contracts to get cancelled for a lack of financing options.