A Solar Stock To Watch Despite Industry Difficulties

Just about every trader has some stocks, currency pairs, or commodities that, no matter what, they just don't seem to ever get right. Even when everything points to trading in one direction, they just seem destined to make a loss. It is infuriating, and most people's response is the perfectly logical one of not getting involved in that security anymore, no matter how clear a signal might be, or how much fundamentals point to a trade. If they took the time to analyze why that happens, I think that in most cases they would find that there is something basic that they are getting wrong about the stock or something missing in their fundamental analysis, but most don't bother to think about why. They just say that it is one they get wrong and move on.

Conversely, there are some stocks or whatever that you seem to get right a lot more than you get wrong. First Solar (FSLR) is one of those for me. The last time I talked about it was back in March when I suggested that the push up above $200 was a sell signal. At that time, I did a simple options trade, buying some out-of-the-money puts, that I then sold for a nice profit a couple of weeks later. Previous to that, I had been long FSLR for a while when it made some serious gains. With one false start when I took profit too soon on a long position and pivoted to a short that lost money, that has been the way of trading FSLR for me: long on the way up and short on the way down.

I am not sure why that is the case, but I believe a large part of it is because FSLR trades reliably according to some chart signals that I regard as clear and obvious. Even though it is at heart a stock that trades on fundamentals, solar power is such a trendy industry that a lot of people get involved, and those people look for obvious places to buy and sell. We are very close to one of those places right now, so I am once again going long FSLR.

The relevant level is right around $142, which marked a strong support on two occasions straddling the end of last year, and became a pivot point, with the stock climbing consistently after forming that double bottom…

Actually, if you extend the chart out to two years, you will see that support around that level made sense, being where resistance was shown just a couple of months earlier…

Normally, stock trades for me start with fundamentals. The chart just offers confirmation of entry points and reasonably close, obvious levels off of which to set stop loss orders. With FSLR, though, technical signals have proven to be so reliable in the past that I look for them first, almost regardless of the fundamental situation. This is a case in point, where the economic and industry conditions and outlook are at best neutral. The impact of a year and a half of rate hikes are just being felt, here in the US and elsewhere, and the outlook for the solar industry in the important Chinese market is unclear. 

However, FSLR is at a level that says "buy", and paying attention to that and that alone has served me well in the past. So that is what I will be doing over the next couple of trading days, buying on down days to average into a long position somewhere around that $142 level, with a stop somewhere around the $115 52-week low.