WFR Long Set Up

WFR is a stock that I was bearish on a few months ago when the steep uptrend in MEMC Electronics broke. The pattern began to look more and more like the Oneil proper short sale point with the stock vascillating about it's 50 dma. While the stock has been in this pattern is has consistently found support just below in the $50-55 range and it is about unchanged from where I became bearish. If WFR can break this series of lower highs and get out of the current range that its in, then there could be a nice move to the upside.



As you may have noticed, solar stocks have been hot lately (see JASO and LDK) as the demand for solar power is exploding. Currently the industry is unable to meet demand because there is a shortage of polysilicon supply, the primary semiconductor used in large scale solar cell manufacturing. MEMC Electronics (WFR) is one of the largest producers of poliysilicon and single crystal silicon in the world, so they stand to benefit greatly from the rapidly increasing price of the undersupplied polysilicon. In addition, the semiconductor sector has been showing signs of strength lately, so the stock may get some boost from that action too.


After doing a little digging I found out that the reason why WFR's run had paused was because they will miss expectations in the next quarterly report to be filed in November. They had some electrical problems during the expansion of one of their foundrys (material production plant). It sounds like an engineer hooked up a transformer backwards causing a brief power outage which led to a week long setback. If people are interested I can get into this into more detail, but generally speaking this minor setback should be viewed as a buying opportunity.


Ok, I usually don't like to get too deep into the fundamentals, but it just so happens that I actually know quite a bit about microfabrication as I am working on a PhD in electronic materials. Anyways, I think the stock is a buy on a clear close above that blue down trendline or during an intraday break of $62.50. The November $65 calls are attractive to me and I'd get out of those if the stock were to close below $55.