Two out of three of our puppies are (or were, as in some cases things change by the hour) at pretty interesting technical points. This morning, before opening, we felt like both TSL and SIGM could break out. We didn’t argue you should buy back (TSL), or buy more (SIGM) before that happens. After a pretty nasty day on the markets, which didn’t exactly help either, how do things stand? 

Well, not too good. Let’s take TSL first, it went down pretty comprehensively today, notwithstanding the fact that oil had another good day. This 200 day moving average is proving quite a resistance. We have little doubt that TSL will be higher over the next year, but for the immediate future things are really not clear-cut.

In all likelihood, it will take good news. Perhaps first quarter earnings will do the trick, perhaps some signs that the short supply of polysilicon (the crucial and costly ingredient) is easing. It will take something like that.

There are those that argue that what happens in oil has no bearing on the solar sector, this is what Forbes wrote:

The high-flying solar sector rallied on the back of black-gold’s gains. “It’s more psychological than operational as the price of oil has no direct bearing on the price of electricity,” said Michael Carboy of Signal Hill Group. “What happens though is rising oil prices are equated to rising energy prices and solar gets a good tailwind as a result.”

They even portrayed it as a sign of ‘immaturity’ on the part of the solar sector. We gave you examples of some funny logic in the markets, that the prices of oil and solar companies are far from perfectly correlated and in fact have moved in opposite direction at times.

But this doesn’t make sense. Oil and solar are substitutes, albeit imperfect ones. There are no commercial cars driving on solar energy, but there are plenty of serious people predicting the day of ‘grid parity’, the time when electricity generated from solar energy can compete (without subsidies) with conventional electricity centrals (running on… oil, gas, coal).

Rising oil prices will bring that day forward, and solars will then compete in the utility market with fossil fuels. Today, they’re already competing in the residential market, but they need subsidies to be competitive. So even if solar stocks do not follow the price of oil, there are pretty good reasons it should.

EFUT remained pretty steady, it usually moves with the market, so we’re not unhappy. This is a long-time buy and hold, a stock that’s going to make a dramatic move at a time you least expect, and we think that move is going to be up.

Our recent puppy, SIGM, is another story. Actually, it needs to move up further to break it’s downward trend, as you can see here:

If you draw a straight line through the two tops early January and February, you’ll end up somewhere at 23-24. Breaking the 50 day moving average is not enough. We need another push. On fundamental reasons, we still think it’s likely, the sell-off seemed too dramatical for the fundamental news that was out. But the technical picture is far from clear-cut.

If it breaks $24 convincingly, it will run further, so one could add if that happens. We bought at $20, perhaps a stop-loss just above that eases the sleep at night. There is some risk that such stop-loss will be taken out and it will move upwards again, but nobody argued that there is such a thing as risk-free investing, and if anybody did, he (or she) should be locked up.

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