Wednesday, January 19, 2011

First Solar: Setting up for a new 52-Week High (FSLR)

Just so you know, I've no dog in the fight and over the years have actually called FSLR better on the downside.
The stock is down $4.27 at $143.68.
Here's the two year weekly chart from BigCharts:

Look at that double bottom in 2010. We caught the second touch of the hundo line in this post:
Hapoalim Cuts First Solar Target to $65 on Cadmium Telluride Risk; It Won't Matter and Probably Sets an Intermediate Low (FSLR)
That was the exact day of the low.

On November 23 2010 we caught the bounce off the 120 line with "First Solar: Trading the Dec. 14 Investors and Analysts Guidance Call--Buy it NOW (FSLR)" at $124 and posted "Corrected: Selling First Solar (FSLR)" 17 days later with a triple in the calls and this comment:
I have a history of selling early, First Solar has a history of selling off.
That was the immediate-term top-tick, the stock sold off through the month of December.
I recite this history so you know there are some possibilities.
August and December set higher lows around $120 and give the launchpad for the next move up.
On the current go-round a hold above $135 or so sets up a run to the 52 week high of $153.30.
Minyanville seems to have similar thoughts, albeit a lower potential bottom:
.Chart of First Solar stock
Click to enlarge

First Solar (FSLR) is perhaps the best-known solar company in a fast-changing arena. In the 2007 bull market, First Solar ran up tenfold on brightening prospects for the solar names. With competitor LDK Solar (LDK) reporting outsized earnings on Monday, the entire sector enjoyed a nice pop. (First Solar reports on February 17.) From a chartist’s viewpoint, many names are particularly attractive at current levels. In fact, I have positions in China Sunergy (CSUN), SunPower (SPWRA) and Guggenheim Solar ETF (TAN) for my clients.

The only fly in the ointment for First Solar has been the manic action it has undertaken over the years. From a high north of $300 in 2008, First Solar has oscillated in a wide range, touching $85 the same year. Since the market bubble has seemingly subsided in its extreme emotional reactions, First Solar’s chart has tightened up to the point that it has once again become attractive. On the weekly shown above, First Solar is holding above the key long-term 50-period moving average, which is flattening after a two-year descent. Also visible are the ever-narrowing price swings that made holding First Solar a nightmare.

With the tightening pattern, prudent stops can now be put in place that don't expose a trader’s capital to undue risk. While I'm not currently an owner of First Solar stock, I like the risk/reward at these levels with two separate areas for stops highly visible. The recent swing low around $120.90 could be a wider stop, or traders could use the flattening 50-period, which is currently around $127.50. Either way, First Solar is one to watch in the solar arena....MORE