Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of U.S. residential solar leader SolarCity (NASDAQ:SCTY) jumped nearly 11% Monday as investors pile back into energy stocks. But the reason for the move may not be what you might think.
So what: Solar stocks, led by SolarCity, are charging higher Monday because oil is rising again. After closing about 7% higher on Friday, crude oil prices have jumped another 2% today and WTI crude is now over $49 per barrel.
What's crazy is that crude oil has little to nothing to do with the solar industry, yet solar stocks are sharply higher Monday. But this isn't a one-day phenomenon. You can see below that SolarCity stock has been crushed over the last six months as oil has fallen. Monday is just a reversal of that trend.
Now what: While Monday's move for SolarCity stock may be illogical from a fundamental perspective, it will likely continue if oil prices continue to rise. Traders, who move the market on a day-to-day basis have made a correlation between oil and solar and that's what will drive short-term movements.
What long-term investors should be focused on is SolarCity's earnings growth and the Feb. 18 release of fourth-quarter results. Continued installation growth is what will drive the stock higher over the next decade, not the price of oil's short-term movements. That's where long-term investors' focus should be, not on oil markets, despite the move today.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.