After a 70% move in one day, is there still a trade on Ja Solar (JASO)? Yep.
Discussed in this article: JA Solar Holdings Co. Ltd. ADS ( $JASO )
I want to look at JA Solar ( $JASO JA Solar Holdings Co., Ltd. (ADR) ) today. All the solar stocks we’re really screamin’ today. A lot of them in response to this, the company announced better than expected earnings. They also, and I think this is what has really kind of sparked this buying in the stock, they said that they’re going to meet all their debt obligations. Not so with some of these other solar companies where they defaulted on their bonds. I don’t know, color me crazy, but bondholders don’t like it when companies say, “Thanks for the money that you loaned us but we’re not going to give it back to you,” that tends to be a problem. So when JA Solar ( $JASO JA Solar Holdings Co., Ltd. (ADR) ) reaffirms that they are going to be making their debt obligations, they’ve got their outlook that they say, “Yeah, that’s good too.” They also focused on higher profit margins rather than volume; just like, “Oh well, we’re losing money but we’ll make it up in volume.” So they’re focusing on profit margins and apparently they sold more panels in Japan where it’s a higher margin economy over there. It’s just a higher margin business in Japan. So their gross margins rose.
The bottom line is, the company’s still losing money but just not as bad. You get this gap and run. It was a nice trade if you got it; 70 percent kind of works, but let’s talk about the trade itself and how we really manage this.
First of all just a little day trading stuff; if the stock gaps up like this, the stock gaps up so high the first thing you’ve got to do is ask ,why it is gapping up? Don’t just say, “Oh, a gap!” Look and check the news if you’re not watching that already, but know why the stock gaps up. You’ll see great earnings, at least relative to what the market was expecting. Now let’s see if desks sell into those earnings, into this gap. They didn’t, so if you’re just looking at the daily chart it will scare you to death. Don’t do that. Instead you zoom in, look at a chart like this, and this actually looks like kind of a nice uptrend, doesn’t it? So you see what the stock did back here, you see it continued to trade higher than it did during the first fifteen minutes of trading, and then the stock is off to the races and you’re on your own.
So what do we do now? Okay again, the fifteen minute chart. This is really where new support lies; you won’t see it in a daily chart. You really see like, “Okay, well now I see 8.50 support.” Dude, how are you going to see that? There’s no way you can see that. You have to zoom in to a tighter timeframe and then look and see where most of the trading action took place. It took place right around the $8.00 to $8.50 level. Finally you got this breakout above $8.50 and then we get another $1.25 run. So if the stock pulls back to $8.50 and if we get a weak day tomorrow, you’ve seen stocks do this, think Sohu ( $SOHU Sohu.com Inc ), I think so many think SolarCity ( $SCTY SolarCity Corp ), where a stock makes a run like this and intraday it does pull back; then it moves and closes higher again. If this stock pulls back to $8.50 – $8.60, something like that intraday, then this is a good buying opportunity for you, because you can define your risk. You know you’re not buying at the top and then you just buy a select size, such that you’re going to take a small loss if the stock starts trading down and costing you money.
So what about the upside? Well the high of the day is $9.89. So you set your price alert at about $9.90. Now where do you think resistance will be? My bet, right about ten o’clock. But you want to know that the stock is hitting $9.90, it will be a new high for this stock in this time frame. So you want to know when it’s hitting $9.90, then you can watch how the stock trades as it tests $10.00. Look at the move here, if this stock trades above $10.00 it could go appreciably higher. You zoom out to this timeframe and you can see, this would get anybody’s attention. It doesn’t necessarily have to mark the top in this stock because look how long the base has been, I mean this has been a prolonged base that goes clear back to the middle of last year.
So I think JA Solar ( $JASO JA Solar Holdings Co., Ltd. (ADR) ) is a stock that you can buy on a breakout; or if it pulls back to $8.50 or so, that’s also going to work for you. But once again I’ve got to tell you, I don’t make predictions here, I make risk assessments; the reason I’m saying that is because you have to make your own trade. A stock that goes up 70 percent is definitely worthy of attention, but it’s also worthy of being very cautious. You’ve got to give it a lot of respect. So I don’t want you piling into this at $9.90, then when it hits $10.00, and then ultimately tanks to $7.00. It’s okay if you blame me, I don’t really care about that; because that’s part of the position I put myself in. If you do you’re not learning you’re only learning that Dan sucks, and that’s okay too, but that’s not going to help you make money.
Instead you want to be focusing on making your decisions, making your risk assessments. You use the analysis that I provide, and I’m giving you the best ideas that I can. But you have to take that as just one more bit of research, okay? I’m not the ultimate arbiter of stocks; I’m just one bit of research. Now you take that, you make your own decision, you make your own risk assessment and you stand by your trade one way or another. If you can learn to do that you will find that you become of very good trader in a surprisingly short period of time.