Solar stocks are losing their shine.
The TAN solar ETF rallied Friday and early Monday, though it remains down nearly 30% from its January peak. The group has come under pressure after a more than 280% surge over the past 12 months.
Federal subsidies have made solar panel installation inexpensive, and President Joe Biden's administration is prioritizing clean energy. A proposal last week for a California utility company to charge new customers a monthly fee if they have solar roofs spooked the group.
We're making it easier for you to find stories that matter with our new newsletter — The 4Front. Sign up here and get news that is important for you to your inbox.
Danielle Shay, director of operations at Simpler Trading, told CNBC's "Trading Nation" that the decision to invest in solar stocks comes down to timing.
"I think it all depends on your time frame. In the short-term time frame, the charts have shifted, and they're definitely in a downward pattern. With TAN in particular, I can see it falling as low as about $70," Shay said Friday.
It traded just below $90 by Friday's close and was up 3.5% in Monday's premarket at $92.76. Shay's downside target implies a 22% decline from Friday's close.
A long-term investment in solar could show a bright future, according to Shay.
"In the next five to 10 years, this is an area that's going to continue to grow. For long-term investors looking for an entry place, I think it's a great spot to start looking," she said.
Craig Johnson, chief market technician at Piper Sandler, warns these stocks may be too overextended after their rally off the lows. The TAN ETF is up 322% since last March.
"Only three times, going back over the last 30 years, have I seen the 26-week price momentum in some of our work get as high as it is right now. Once we've seen those sort of high levels, it's rolled over and the group has corrected for typically around three years before you find your next sustainable entry point," Johnson said during the same interview.
Unlike Shay, Johnson says it makes sense to sell any strength rather than buy on a pullback.
"I'd be selling this relief rally at this point in time, not trying to buy it yet, it's too early," he said.
Disclosure: Shay is long solar stocks.