Sunday, May 04, 2008

The First Solar Bubble to Pop (Failed Breakout)

While I have my reasons for being bearish on FSLR longer term or until the valuation (stock price) drops significantly, the daily chart suggests the potential for short term capital gains. It recently broke out above its all time high at $283 made in the final days of 2008. FSLR then made slow progress eventually trading as high as $308.24 before quickly reversing back below $283 in the days after earnings last Wednesday. There was heavy volume traded above $283 which tells me a bunch of big boys sold their FSLR to new holders that are now under water. If it becomes clear that this FSLR breakout has failed, the stock could drop very far in a hurry. The only thing keeping this $22B bubble going for the past year and a half is incredible momentum. If that momentum is over...

One potential area for support is the rising trend line (in blue) which matches the 50 dma at around $245 . Then the $200 level has proven to be very significant over the past six months. Finally, the rising 200 dma has never been tested and currently lies at $183. Those would be areas I would be taking profits and making re-entries. The $285-$295 area seems good for a stop since FSLR is known to overshoot exact prices like $283 which is where I want to be buying puts. Click on the chart above and you can see nice bearish signals on the stochastics, rsi and cci. Also note the interesting price behavior (bearish) relative to the middle bollinger band line (green circles).

Just a chart for now.

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