There is an interesting pattern taking shape in the Solar Stocks. More specifically, the Guggenheim Solar ETF $TAN is breaking out of what could be an inverse head & shoulders continuation pattern. I first brought up the possibility of this breakout on Saturday in a post showing some of the highlights from a long charting session.

This one is pretty standard: In October, the Solar exchange traded fund ran into resistance in the low 40s. After a brief correction, prices rallied right back up there in November and rolled over once again. This time TAN made lower lows into December. After one more rally and retest of this resistance, prices once again rolled over. As always, the more times that a level is tested, the higher the likelihood that it breaks. Sure enough, Tuesday morning Solar stocks broke out to new highs, finally clearing all of that supply (resistance):

As long as prices hold this breakout, prices should be heading a lot higher. The measured move based on the size of this pattern takes us above $50. This target is based on the 9 points between the bottom of the head and neckline.

From a risk/reward standpoint, this one is definitely skewed in favor of the bulls. Not to mention, the trend is clearly up in this space – up 245% over the past 15 months. Look at the relative chart of Solars vs the S&P500 putting in a similar pattern:

This ETF seeks to mirror the performance of the MAC Global Solar Energy Index. Some of the top holdings include $SCTY $MBTN $FSLR $REC $GTAT $CSIQ $SUNE $YGE $SPWR and $TSL. Feel free to look through the Guggenheim Fund summary for more information on the Solars.

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