Solar energy stocks have been one of the strongest groups in 2020, but they’re lagging this month.
One potential warning sign is the bearish engulfing candle on the Invesco Solar Energy ETF (TAN) on November 30. TAN has bled steadily lower since. The fact it occurred at precisely the end of last month could create the risk of a broader investor rotation away from the sector.
There’s also risk of over-enthusiasm for solars now that Democratic leadership is priced in.
Solars have benefited from the ESG trade in 2020: environmental, social and governance. This trend has been accompanied by record inflows to dedicated ESG funds. Electric cars have been the other big beneficiaries.
This might raise questions about Tesla (TSLA), which is down today after offering $5 billion of stock. It gets added to the S&P 500 on December 21, but traders may want to be wary of profit taking in this uber-bullish ESG trade.