I recently replaced some aging Malibu lights with new ones. Several days after a recent rain all the new lights stopped turning on. The lamps closest to the transformer (the originals) still worked. I checked the new lamps for water, but they were completely dry on the inside. My question is whether or not water could get into the wire enough to short-circuit only half the lights? If it is a short, how do you find it and fix it?

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No, If the circuit trips all the lights should go out.  I would expose all the wiring and check for nicks or cuts.  Sometimes the wire gets partially cut by a shovel which may explain your problem.

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