How are you going to trade First Solar (FSLR) tomorrow?
Discussed in this article: First Solar Inc. ( $FSLR )
We’re looking at First Solar ( NASDAQ:FSLR ). Now after hours today the company announced earnings and this little blue triangle there, tells you that the market wasn’t all too happy with them. They basically blew away the numbers to the downside, they missed horribly and the stocks getting pummeled because of that; down 7-8 percent, something like that. So what do you do? If you want to be like a lot the retail traders tomorrow morning you’re going to just rush to sell this stock, you’ve got to get out of this before everybody else does.
So you’re going to be rushing to sell right at the open, put in that market sell order because you bought the stock at 58.00 expecting the stock to go up to 70.00, this is just too much pain. There are about seven points of downside here; you’ve got to get rid of that stock right? Well wrong, you do have pain if you bought it up here. The stock opened up here, but at 9:30 and two seconds you have to forget about this okay; this is already in the can, nothing you can do about it, this is where you start, this is your starting point here. What I mean by that is, if you had a stop, for whatever reason, at here, or here, or something, and it didn’t get hit, then you definitely need to sell this stock. You’re down more than you planned on, so you need to sell this stock.
However, before you do that, at least follow it in the opening rotation. Now, if the stock just continues lower, then you better sell it. Let’s say the stock drops another percent, which is like 50 cents, let’s say the stock opens and drops another percent; okay you need to get out of the position. First loss is your best loss; you didn’t get that first loss because the stock gapped down through it, take the next loss and be happy that you’re not selling at even lower prices. So you’ve risked like one percent, you’re already screwed when the stock opens up, okay, get used to it, you are, sorry. So you’re risking another one percent just to give the stock a chance to bounce so maybe you can sell for a little bit higher price, and get at least some of your money back, regain some of your pride, and get out at a more acceptable level. That is not to be confused with just saying, “Oh well I’m not going to sell this stock, it’s down so low I can’t afford to sell, I’ll just wait until it comes back.” Don’t do that, all I’m saying is that you want to create a new risk profile based on the opening print.
Now, let’s look and see what I think is likely to happen. We’ll look at the hourly chart on First Solar ( NASDAQ:FSLR ), to me if the stock falls down lower than it is here, I would say $48.00 is probably the low. Now again, does that mean that if you bought the stock here, you wanted to sell it there, then you wanted to sell it here just because I’m saying $48.00 is the low, then you hang on for another $3.00 and know that you’re going to ride through, and then when the stock bounces it’s all going to be good? No, you still go ahead and adhere to your stop; you get out onto the parameters I talked about above. You’re out of the trade; now at least you can think clearly, you’re kind of kicking yourself, you’re a little bruised and your knees a little twisted because you’ve been kicking yourself for holding over earnings like this, but at least you’re out at the trade.
Now when the stock comes down here, you can trade it and not get some of your money back, that money is lost. You cannot get your money back; you have to make new money. So you’re out of this trade, it’s a losing trade, now you’re watching, now you’re acting like the pros do; you’re waiting for a good viable support level, you’re buying the stock here, you’re putting a stop just below this level here, now you’re trading. I hope this helps with First Solar ( NASDAQ:FSLR ), try to apply that strategy tomorrow.