First Solar Is Still a Short

By Dr. Duru written for One-Twenty

June 17, 2009

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First Solar (FSLR) is still a short after breaking a six week support line today. Last month, I tagged FSLR as a short mainly because massive insider selling combined with a premium valuation is a huge red flag to me. I pared back some of the position today and will look to add on any near-term bounce. TraderMike beat me to the punch on a technical review of FSLR's chart, so I will just add that today's break below the 50-day moving average (DMA) greatly increases the odds that FSLR will fill its May post-earnings gap sooner than later.

FSLR is holding an analyst/investor meeting next Wednesday, so I suspect the stock will not experience much more downside in the next week (not without some new bad news anyway). Look for FSLR to reassure investors that falling prices in polysilicon are not impacting its business. I will be very interested to find out how much financing FSLR is extending to its customer base.

In related news, each one of the short-term (speculative) solar trades I noted yesterday blew up in spectacular fashion: Ja Solar Holdings (JASO), LDK Solar (LDK), Suntech Power (STP), and Yingli Green Energy Holdings (YGE). I guess every solar trader saw the same encouraging short-term technical signs that I did and rushed in at once on Tuesday's open. Each stock opened fast and strong, topped out around mid-day, faded hard into the close, and violated stops today. The opens were so strong that I did not even get a chance to think about executing on any of these stocks (I tend to avoid executing trades within the first 30-60 minutes of the day, and I LOATHE chasing anything). Uptrends remain intact, but lower support lines are bound to get tested on the more speculative names (like YGE falling to its 50DMA). It now seems even more likely that Evergreen Solar's (ESLR's) late arrival to the solar rally signaled the conclusion of this latest run. It is now FSLR's turn to lead again...downward.

Be careful out there!

Full disclosure: net short FSLR; long TAN. For other disclaimers click here.

DR. DURU®, 2009