Replies to post #71 on PowerShares WilderHill Clean Energy Portfolio (PBW)

[frenchee]

MONDAY, JANUARY 5, 2009
GETTING TECHNICAL



Energy Stocks Get Energetic
By MICHAEL KAHN | MORE ARTICLES BY AUTHOR
Oil, coal and even solar power ETFs are attracting buyers again after a brutal bear market.
WITH THE PRICE OF CRUDE oil cascading down from $147 to $35 per barrel in just five months last year, many had given up on this commodity. Their argument stems from the global economic slowdown and the attendant "demand destruction" has been thrown around quite liberally.
The market's emotional pendulum swung too far to the greed side early last year and then too far to the fear side in the final quarter. Even if we never see those peak prices again, energy markets are technically oversold and ripe for a rally. That means we can look forward to a reversion to a mean price that is higher than what we see today.
The same is true for stocks of energy companies and one look at the Sector Select SPDR energy ETF (XLE) bears this out (see Chart 1).
Chart 1

From a peak over $91 a share in May 2008 to a low of $39 in October, this ETF clearly had a rough few months. It settled into a trading range after the decline, in which it still resides today. But unlike the broad market, it did not set a lower low in November. In other words, the bears attacked other parts of the market and left energy alone, relatively speaking.
Chart watchers consider this positive performance relative to the market a harbinger of better things to come for the sector. Indeed, the ETF was up Monday as the market was down. At $51 a share, the ETF is now knocking on the ceiling of its trading range.
Further, money continued to flow into the ETF over the past few months as evidenced by on-balance volume analysis. This indicator keeps a running tab of volume traded on days when prices rise -- supposedly thanks to increased demand -- less volume on days when prices fall -- supposedly on increased supply. When on-balance volume rises we can surmise that demand is beating supply and that bodes well for an eventual upside breakout from the trading range.
When oil-based energy faltered last year, so, too, did the incentive to move to other sources. Witness similar price collapses in natural gas, uranium for nuclear power, coal and their related stocks.
The Market Vectors-Coal ETF (KOL) sports a different chart than that of the SPDR energy ETF but it shows several reasons to believe that it has already seen its worst levels (see Chart 2).
Chart 2

While it did set its lowest level in November, it has been in a rising trend ever since. And during last week's low volume trading for the market as a whole, the coal ETF saw rising prices on volume that was above its own 50-day average. http://investorshub.advfn.com/boards/board.aspx?board_id=11590
Solid price action on solid volume is a technical positive. So is a 73% gain over that period vs. a 26% gain for the Standard & Poor's 500. This may not be a true bull market but for those looking to play what I expect to be a multi-week advance already in progress, this ETF does seem to be a good choice.
In the alternative energy arena, the Claymore/Mac Global Solar Energy ETF (TAN) was one of the brightest lights in the market last week. After falling more than 80% from its peak in 2008, the solar ETF is up 70% from its November nadir (see Chart 3).
Chart 3

To be sure, despite the mathematical trickery, this remains one beaten down sector. But the facts of money flowing back into the sector, a rising trend from November, a move above the key 50-day moving average and nice gains Monday when the rest of the market was weak tell us that investors are coming back.
For those looking for a bit more diversity in the alternative energy area, the Powershares Wilder Hill Clean Energy ETF (PBW) has a similar chart to that of the solar ETF (see Chart 4). The clean energy ETF covers solar, wind, and other "green" energy companies and also sports such positive technical features as a move above its 50-day average, rising trend and rising on-balance volume. http://investorshub.advfn.com/boards/board.aspx?board_id=8307
Chart 4

The bottom line is that the energy market, whether conventional or alternative, is set up nicely to lead stocks higher. Again, I must stress that this is no buy-and-hold bull market but for those looking for a short-term trade of just a few weeks, the opportunity in energy stocks and ETFs seems very good.

[frenchee]

Rays of Hope for Solar Stocks
Wedbush Morgan sees a more favorable U.S. policy under Obama.

Wedbush Morgan Securities

WE CONTINUE TO LIKE THE long-term prospects for the solar industry but remain concerned about negative short-term industry trends. We expect shares to continue to remain volatile, moving upward in response to positive headlines surrounding favorable long-term industry prospects and downward in response to short-term negative data points until the near-term industry correction is over.

Cabinet member and White House post selections signal the environmentally friendly attitude of President-elect Barack Obama. Secretary of Energy nominee Steven Chu; Carol Browner selected for a new White House post to oversee energy, environmental, and climate policies; Lisa Jackson, chosen to oversee the Environmental Protection Agency; and Nancy Sutley picked to head the White House Council on Environmental Quality are all strong proponents of renewable energy.

More favorable U.S. policy under the Obama administration could provide a boost to the sector in 2009. President-elect Obama has signaled that he is committed to tackling climate change and moving the U.S. toward energy dependence.

Industry lobbying groups are also pushing to attach several measures to the stimulus package expected in February 2009. Such measures include a massive investment in solar energy for federal government and military installations, revisions to the investment tax credit (ITC) that passed on Oct. 3, 2008, and creation of tax incentives to promote solar manufacturing in the U.S. passage of a national renewable portfolio standard (RPS) for electricity production and national climate change legislation could also benefit the sector.

The rapid advanced-solar-photonics decline during the fourth quarter of 2008 signals a difficult environment for solar companies. Companies have attributed this rapid drop in advanced solar photonics to the global economic slowdown, decline in the euro, reduced demand, tightening of credit markets, seasonality, and a supply glut in Spain following the country's revision of its feed-in-tariff.

The drop in advanced solar photonics has forced companies throughout the solar value chain to renegotiate contracts with customers and suppliers. We believe investor expectations are incorporating a 30%-plus drop in 2009 advanced solar photonics.

A recent DigiTimes article cited prices for spot polysilicon dropping to $150 to $175 per kilogram with prices as low as $100 per kilogram for product with less-stable quality and from new suppliers. We expect several companies may have to take inventory charges during fourth quarter 2008 to reflect the drop in spot poly prices. If the decline in poly prices continues, expect companies with supply contracts priced greater than the spot market to take write-downs and seek new terms for contracts. If spot poly prices reach $70 to $90 per kilogram, we would expect some silicon module manufacturers to approach the $1.00 per watt manufacturing costs achieved by thin film manufacturers.

The drop in the price of oil makes some projects appear less attractive. Given the drop in oil prices to less than $50 per barrel, it is likely that some renewable energy projects will be delayed or cancelled. While government subsidies have been the driving factor for recent industry growth, positive sentiment toward the industry is expected to be muted in an environment where the prices of fossil fuels are coming down. We have not yet seen any signs that countries with photovoltaic incentives are looking to reduce or eliminate subsidy programs due to the lower oil price and economic crisis.

We are maintaining ratings and price targets for Ascent Solar Technologies (ticker: ASTI), Energy Conversion Devices (ENER), Evergreen Solar (ESLR), First Solar (FSLR) and SunPower (SPWRA).