The Guggenheim Solar ETF (NYSE: TAN) stumbled last
year, but the largest solar exchange-traded fund is showing signs of shaking out of those doldrums. Year-to-date, TAN is higher by
more than 7 percent, and with a move of just over 5 percent, the ETF will reclaim its 200-day moving average.
TAN, its holdings and other solar stocks are often favorite targets of short sellers. That gives traders the a contrarian
opportunity with TAN during solar earnings season in the event positive earnings surprises arrive, forcing bearish
traders to cover positions in TAN constituents.
Bears, Shorts And Covering Positions
Among the most heavily shorted companies reporting earnings this week are Sunpower Corporation (NASDAQ: SPWR) and Solaredge Technologies Inc (NASDAQ: SEDG). In fact, Markit data indicate that short interest those stock is at record
highs. Solaredge Technologies and Sunpower combine for over 8 percent of TAN's weight.
Related Link: Axiom's
Gordon Johnson On Why PV Installations In The U.S. Could Be Cooling
“Solar firms haven’t experienced nearly the same amount of covering as their conventional peers. Two solar firms, Sunpower and
Solaredge, both make this week’s list of heavily shorted names. Both have been profitable short targets over the last 12 months as
their shares have fallen by 70 percent and 46 percent over this period respectively,” said Markit.
Short Sellers And Shares Outstanding
According to Markit data, both Solaredge and Sunpower have 16.7
percent of their shares outstanding on loan to short sellers. Short interest in Sunpower is higher by 5 percent over the past
month. Both companies report earnings Wednesday.
"Recent bullish factors for solar stocks include (1) strong overall world demand for solar with the sector set to grow by at
least 20 percent this year (see page 4 for the world solar growth outlook), (2) the strong prospects for U.S. solar in coming years
after Congress in December 2015 approved a 5-year extension of the U.S. solar investment tax credit (ITC), (3) strong demand for
solar power worldwide due to the increasingly competitive price of solar versus alternatives and as countries seek to meet their
carbon reduction targets under December's Paris COP21 global climate agreement,” added MAC Solar, TAN's index provider.
TAN holds 28 stocks with an average market value of $9.8 billion, underscoring the point that this is primarily a mid-cap ETF.
On that note, TAN is volatile as highlighted by its three-year standard deviation of 32.8 percent.
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.