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Before / After Analysis – Solar ETF vs. Refining ETF – March 2018

In March 2018 we published Solar Stocks Are Vowed to Crush Oil, Coal and Nuclear Stocks with several technical scenarios for the energy sector outlining an expected outperformance of solar stocks.

In particular it was envisioned for the ratio between the solar stocks and the refining stocks to break out from an identified bottoming pattern over the subsequent months:

Solar ETF / Refining ETF Weekly Price Ratio – March 11th 2018
TAN vs CRACK March 2018

Alas! technical scenarios do not always develop as planned and the ratio broke lower and decreased for the next six months.

Solar ETF / Refining ETF Weekly Price Ratio – June 21st 2018

Once the low was in the trend reverted and the ratio rallied straight into the proposed direction… one year later to conform more with fundamental motives underlying the envisioned bullishness rather than with the initial technical conditions.

All our scenarios are probabilistic and generally proposed with a trigger (such as a breakout event) and an invalidation criteria. We have many failed prediction that readers can review on our blog. Selective perception, overconfidence, or neglect in the analysis and hastened conclusions are some of the reasons for these failures.

In the above case the breakout did not happen as expected so that there was no case for investment.

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