The solar sector was pounded last week, following reports that Germany is planning to cut solar financial support for new roof and open-field sites by 16%-17%. What's more, the report detailed that additional subsidy cuts for projects generating more than 3,000 megawatts will take place in 2011. In response to the news, the Claymore/MAC Global Solar Index Fund (NYSE: TAN, Stock Forum) plunged nearly 11% last week. 

Technically speaking, TAN has underperformed the S&P 500 Index (SPX) by nearly 25% on a relative-strength basis during the past 60 trading days. What's more, last week's plunge forced TAN below formerly staunch support at its 10-day and 20-day moving averages. The shares are now perched precariously on round-number support at the 10 level. Should this support give way, it could bode ill for the sector as a whole.

Within TAN, First Solar Inc. (NASDAQ: FSLR, Stock Forum) has long been an underperformer. Since the beginning of the year, FSLR is down more than 8% versus the exchange-traded fund's loss of only about 2%. Meanwhile, the stock is currently trapped beneath a raft of technical resistance. For instance, FSLR has been in a steady downtrend since peaking near $210 per share in early May, creating a series of lower highs. During this time frame, the shares have been plagued by pressure from their declining 10-week and 20-week moving averages.

Sentiment toward this underperformer is heavily bearish, which should be expected given the stock's poor price action. Currently, FSLR's Schaeffer's put/call open interest ratio (SOIR) of 1.56 ranks above 93% of those taken during the past year.

Meanwhile, data from the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) indicates that puts bought to open on these exchanges easily outnumber calls bought to open during the prior 10 days. This data also reveals that put buying has accelerated at a faster pace only 7% of the time in the prior 12 months.

Elsewhere, short sellers are loading up on bearish FSLR positions. Following an increase of more than 23% since mid-August, nearly 15% of the stock's total float is now sold short. If the shares continue their recent decline, look for this short-selling trend to gain momentum, potentially creating a headwind for FSLR.

Finally, the shares are also vulnerable to potential downgrades from the brokerage community. Currently, 16 of the 35 analysts following FSLR still rate the shares a "buy" or better, according to Zacks. What's more, Thomson Reuters reports that the consensus 12-month price-target for FSLR rests at $146.60 per share, a premium of more than 18% to the stock's Friday close at $124.07. Any downgrades or price-target cuts in the wake of the equity's poor price action could provide additional selling pressure.

Disclosure:  Joseph Hargett has no financial interest in any of the equities or products mentioned in this column.