Solar ETFs Breaking Support

Steve Sollheiser KWT Breaks Support There is very interesting price-action in the Market Vectors Solar Energy ETF ( KWT ) in the last trading day. We can see that price has closed below the support level of $3.40 which is a bearish signal. We can also see that the breakout price was touching an ascending resistance line twice - which creates this a Descending Broadening chart pattern . We would expect price to continue downwards with target at approximately $2.00. If price opens above the level it will be a sign that the support is still strong, and if price opens below the $3.40 level it is a sign of continuation of the bearish move. If price pulls back to the $3.40 (re-test the level from below) we will enter a short trade with stop loss right above $3.40 and target at $2.00. This trade should have very little risk and relatively high reward. TAN May Soon Break Support The Guggenheim Solar ETF ( TAN ) is showing the same signals as the KWT, which reenforces our analysis. When two correlated stocks show different signals one can conclude that the signal is weak - however in this case the same thing happened: price has closed very close to the $23.00, without breaking it. In case price opens below this level, we will expect a continuation of the bearish move. In case price opens above it (we expect a gap to occur, as price stopped near a very psychologically-charged level), it will be a signal that the level is still strong. In this case, we will still trade the pullback to the $23.00 level from below, with target at exactly $10.00. Note that that this chart pattern has 80% win rate, and the percentage of chart patterns that meet the projected target is 68%. So we will trade it, however if price reaches only half the target we will still take our profits and close the trade. Summary If price breaks the support level and re-tests it from below, we will enter a sell trade on both TAN and KWT. In case of a gap upwards we will wait for price to touch the resistance trend line before reacting. Disclosure: No Position. Steve Sollheiser is a trader and a writer with experience in trading stock chart patterns and trading Forex. In his site he shares his insight about chart trading and trading psychology.