More Trouble Ahead For Solar ETFs?

solarThe Solar ETF space has had a pretty rocky—and for the most part—unfavorable history. However, 2013 was a banner year for the space with a number of solar power stocks accelerating and seeing huge gains.

In fact, thanks to solid earnings and a bright outlook, the solar ETF segment easily outperformed the market in the YTD time frame. Both the Guggenheim Solar ETF (NYSEARCA:TAN) and the Market Vectors Solar ETF (NYSEARCA:KWT) have surged more than 80% YTD, thoroughly crushing the broad market’s performance over the same time period.

Still, most of these gains came earlier in the year and especially over the summer when solar ETFs were roaring higher. As of late, the solar ETF market has been a bit choppier as investors have sought to lock in some gains in this impressive market segment (see 3 Sector ETFs Crushing the Market in 2013).

This profit taking—coupled with some concerns over high flying stocks thanks to the Fed and their easing program—has sent solar shares sharply lower in the past few weeks. Concerns are really starting to build over this space, particularly if you take a technical look at the most popular ETF in the segment, TAN.

A Technical Look at TAN

While TAN had strong momentum earlier in the year, events have become far choppier as of late. The product is now well off of its 52 week high, and recent trading has been pretty negative.

In fact, TAN recently saw its 9 Day SMA (Simple Moving Average) fall below its 50 Day SMA, suggesting short term bearishness. The product is also seeing a sluggish reading in its Parabolic SAR, further confirming the short term bearishness for the solar space.

Fundamental Factors

Beyond these worrying technicals, there have also been some concerns creeping up in the fundamental side of the equation as well. This is particularly true on the earnings front, as results have come in a bit more mixed as of late. Two companies that have been great examples of this recent trend are SolarCity Corp (NASDAQ:SCTY) and ReneSola Ltd. (ADR) (NYSE:SOL).

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