China is going solar. Here’s my take on First Solar (FSLR).
Discussed in this article: First Solar Inc. ( $FSLR )
I want to look at solar stocks today; we’ll focus on First Solar ( NASDAQ:FSLR ) here. You can look and see that the stock has been in this volatility squeeze, and we can see that by how narrow these Bollinger Bands have been; I mean they’ve really squeezed, and that’s a function of the stock basically trading sideways.
So, we’ve got this squeeze, China announces that they’re going to be raising their capacity for solar power to 35 gigawatts, energy drive by solar power. Apparently that’s a lot, I’m not a real gigawatt guy, and I don’t really understand the metrics. But the way the market’s reacting, what it really reflects is the fact that China’s said they’re going to be spending a lot more money on solar, so all the solar stocks are up.
First Solar’s ( NASDAQ:FSLR ) the big dog here so I want to focus on this. I think First Solar ( NASDAQ:FSLR ) ultimately goes higher. The fact that it’s not up even six percent on that news is actually pretty significant to me particularly given the fact that 26 percent of the float the short. So this has a pretty high short interest here; also the company announces earnings on July 29th, that is two weeks from today.
So this stock, in my view, doesn’t have a lot of reason to be trading down, I just don’t see a lot of traders wanting to sell this stock before earnings. Perhaps they will sell it just before earnings or perhaps just when earnings are released and maybe the stock gaps down to here, or maybe the stock moves up to here and then flips either this way or this way. I don’t know about that, I don’t really care about that right now. What I care about is the fact that First Solar’s ( NASDAQ:FSLR ) coming out of a volatility squeeze, it’s moving up on good volume.
So the way you trade this is to take some stock now, but only buy a little bit because this stock’s gone up almost six percent, and then you keep a stop basically right in the middle of this last little cluster here. Because if First Solar ( NASDAQ:FSLR ) falls back down to where your stop would be hit you don’t really want to buy it anyway; because the stock will then just be proven to be in consolidation and this breakout will really be a fake out, you don’t want to go there.
That’s how I would trade First Solar ( NASDAQ:FSLR ). And then just watch it as earnings approach, and then we’ll figure it out from there.