Are Solar Stocks Doomed This Quarter?

Solar stocks have fared poorly in the fourth quarter, especially Trina Solar Limited (ADR) (NYSE:TSL) and JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO)

Oct 2, 2015 at 2:44 PM
facebook X logo linkedin


Yesterday, we looked at the consumer staples sector, which has traditionally outperformed in the fourth quarter. Today, we'll shift our focus to break down one of the worst-performing groups of stocks: solars. The sector -- as expressed in the Market Vectors Solar Energy ETF (NYSEARCA:KWT) -- ranks dead last in average fourth-quarter returns over the past 10 years, according to the chart below (which comes courtesy of Schaeffer's Senior Quantitative Analyst Rocky White).

By the numbers, KWT has been positive just twice in the fourth quarter, since it became available in mid-2008. Moreover, the exchange-traded fund's (ETF) typical quarterly loss is 12.2%.

151001topsector1

Digging deeper, White broke down the performance of the eight U.S.-listed components in KWT, seen below. The two laggards that really stand out are Trina Solar Limited (ADR) (NYSE:TSL) and JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO).

151002worstsector

TSL has given up ground in six of the past eight third quarters, with an average drop of 6.2%. This year, the shares are off to a good start, thanks to today's 5.4% pop to trade at $9.41 -- amid some encouraging news from one sector peer -- though they've still given back 29% since topping out at an annual high of $13.33 in late April.

Amid TSL's longer-term pullback, bearish betting has picked up. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has amassed a 10-day put/call volume ratio of 0.76 -- ranking in the top quartile of its annual range. Along similarly bearish lines, 17.2% of the stock's float is sold short, representing eight times its average daily trading volume.

Meanwhile, JASO is up 4% today at $8.24, bringing slightly above its year-to-date breakeven mark. CVI Investments provided an upward catalyst, announcing a 9.9% passive stake in the solar firm. If past is precedent, today's advance could be tough to hold on to. The stock has posted fourth-quarter declines in six of the prior eight years, with an average loss of 4.3%.

That hasn't stopped option traders from buying to open calls over puts at a breakneck pace on the ISE, CBOE, and PHLX. Specifically, JASO's 10-day call/put volume ratio rests at a top-heavy 26.00, which ranks in the 83rd percentile of its annual range. With 12.5% of the stock's float sold short, though, some of this activity could be a result of short sellers hedging their bearish bets.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI