Sunday Rock Blog: Iko Iko and FSLR's +50% week via a massive short squeeze on x7 avg daily volume

Disclosure: I am long FSLR, but hedged with cover calls.

FSLR 1 yr chart (+possible support levels)

Disclosure:  I am long FSLR and short $40-strike June calls against the entire position.  The calls make me nervous, because I think FSLR is in the early stages of a long term uptrend which started almost a year ago.  That being said, the bulls would do well to consolidate their (massive) gains of late, but not to beyond recent levels of resistance (i.e. build support above $30).  So I'd like to see FSLR hang out here or drift lower to these levels ($33.3-35.6) for a few weeks at least (i.e. form a bull flag and wait for MA's to catch up).  Plus, hedging against a broad market decline seems prudent given the circumstances.

Sunday Rock Blog: Time For Shorts to Fry

Taking a look at the (market leading) small caps (IWM), its pretty clear that something violent has just happened. Stocks were in the midst of a healthy correction (pennant pattern) and finding support at the rising 200 dma in late October. After a shaky bounce IWM got slammed through its 200 dma but ultimately reversed in a V-bottom-like pattern retaking its 200 dma. Recently the CCI and stochastics have given buy signals and now that IWM has regained its 50 dma I see nothing but pain ahead for shorts in the coming weeks:

While most people point to the poor performance of former market leaders (like AAPL and GOOG) new leaders are emerging. Take a look at FB over the past few weeks, the rally is relentless and on strong volume. The ~3.5 month base is really paying off now:

Whether they are new leaders or just heavily shorted stocks getting squeezed (shorts fear higher taxes in 2013), 100%+ gains in popular stocks like FSLR, GMCR, and RIMM over the past six months makes for some very positive sentiment. FSLR seems to be just getting started after breaking $26 last week. It should see ~$32 by Christmas:

Shorts seem to be panicking on GMCR as it has soared 100% on huge volume spikes:

RIMM, the stock that everybody loves to hate, bulls sure aren't hating it right now. Volume has been through the roof as RIMM surged above its 200 dma (declining):

The point is, despite all the negative press lately about the "fiscal cliff" stocks have rebounded very strongly from the November lows and appear to be starting a new leg up. While many stocks have struggled lately, others have been exploding higher (see above). I'd be surprised if we don't see a continuation of the recent rally to new 52 week highs on the indexes by the end of the year. Happy holidays to all!

Disclosure: I am long IWM calls and FSLR stock.

PS.  I see all solar rallying strongly here (I am long TAN, SPWR, JASO, ASTI, ENPH, MCP also)

FSLR Symmetric Triangle

Disclosure: I am long FSLR stock and calls

Bullish Solar ETF Chart (TAN) ~$18 neckline

Disclosure: I am long stock and Oct calls on FSLR, SPWR and JASO.

Saturday Rock Blog: Remain in Light ('96)

Disclosure: I am long FSLR

Saturday Rock Blog: Healthy Body

I'll be the first to admit that I've been very wrong on solar stocks this year. When the bottoms fell out on FSLR, SPWR and others they got into a "death spiral" and kept going insanely lower. Now that they are priced for bankruptcy you could probably make some good valuation arguments to go long these stocks. I won't do that though. I just wanted to note how great FSLR's chart is shaping up after it spent the past month consolidating the 40% rally from the all time low at $11.50. I especially like how FSLR closed Friday above its now rising 50 dma near the high of the day. Closing near the high seems like a simple feat to accomplish but shorts and nervous longs have prevented this from happening for months. On days when there is a big rally in FSLR you always see a 2-3%+ tail on the daily candle. We could imagine this whole move as a healthy retracement of the long term downtrend and call it a ABC correction or we could call this a long term bottom. Regardless, using a measured rule approach, you get targets around $20-22 should FSLR break out above $15.50-$16. I see this as a very likely possibility but I don't plan to exit my position at $20 should it get there, I might sell some covered calls though. Of course this all depends on Earnings which FSLR reports Wednesday after the close. QE3 from Bernanke won't hurt either. Disclosure: FSLR is my largest long position by far so I might put on some sort of hedge before Wednesday. I am also long SPWR.

The Bottom in Solar Shares

Today the long awaited preliminary results of the US Commerce Department's investigation into unfair trade practices by Chinese solar companies were released. While the Commerce Department's investigation hasn't yet concluded, and a decision on the charges of dumping by Chinese solar companies hasn't been made yet, they said today that "countervailable subsidies are financial assistance from foreign governments that benefit the production of goods from foreign companies." You'd think this is a good thing for US solar companies, after all this should boost their margins as they see higher module prices in the US. You might think the beaten down, and heavily shorted, shares of FSLR and SPWR would squeeze on this sort of news. But in fact, just the opposite happened. Shares in Chinese solar companies (eg. STP, JASO, YGE) surged 10-20% on the news today while FSLR languished in the red and SPWR sold off 7.5%. Wall Street was clearly looking for larger tariffs on Chinese modules with one analyst claiming that the 3-5% tariffs are too small to be meanginful. I don't claim to know enough about the economics of solar to know whether 3-5% tarifs will be meaningful fundamentally, but psychologically this feels like a meaningful event. If this means that module prices will rise in the US, then great, anything that can stop the death spiral in solar panel prices is welcome. If US producers see higher contract prices going forward, then that will mean analysts will have to revise their earnings estimates higher, also good. Naysayers will say that this will dampen the US solar growth, but much to the surprise of those who follow the stock prices of US solar companies, the US solar market doubled last year. I find it hard to beleive that a 3-5% tarif on modules from China will significantly dampen growth. I could go on an on about how bullish I am on solar for the long run, but finally things seem to be starting to improve on the shorter term.

Despite the weakness in US solar shares, the solar etf TAN managed a gain today on more than triple the three month average volume. I see this as a sign that the tariff news is seen by the market, on the whole, as good for the solar industry. We can speculate as to why investors are buying or covering, but the price and volume action is how the market speaks. Should the strength continue, solar will have carved out a very solid looking inverse head and shoulders bottom. If the bears want to push their solar shorts further, they'll need to quickly reverse today's action. More later...
Disclosure: I am long FSLR, SPWR and JASO.

FSLR descending triangle coming to apex, big move expected

(click chart for higher resolution)

One great fundamental bull case for First Solar is outlined in this report by morningstar, just to quote a few lines:

"We expect an industry rebound will not occur until mid-2012 at the earliest. Solar demand growth remains promising in the long term, but near-term growth rates are going to be very modest...

First Solar is the only solar company whose shares have a clear near-term catalyst: its pipeline of utility-scale projects in North America. We project this business segment to constitute more than 70% of the firm's revenue and 35%-40% of production output in 2012, while also serving as the overwhelming source of near-term earnings beginning in the third quarter of 2011.

Pricing on First Solar's 2011-13 backlog of utility-scale projects was set before the industry downturn, and none are subject to renegotiation. These projects were priced using First Solar's 2008-09 project installation cost levels, which were 35%-40% higher than they are today. Also adding to the bottom line will be the reduction in costs of capital for the 1,070 megawatts' worth of projects that received Department of Energy loan guarantees, which allow the company to realize higher selling prices. Putting it all together, this book of business isn't just going to provide an earnings buffer, but will in fact mint the company a great deal of money...

The big risk to First Solar's longer-term story is what will happen to the company's profitability and returns when these lucrative projects are completed in 2013. Any new utility-scale deals will be signed at lower prices. Without another large reduction in costs, the company could encounter some major headwinds. But we don't think this risk will be influencing the stock for quite a while, as 2014 is a lifetime away in the solar sector."

To the best of my knowledge, First Solar presents the greatest long term (5-10 yrs) investment opportunity in the market today. Despite this, an obviously bearish descending triangle has formed in the daily chart appearing as a continuation to the long term downtrend. Unfortunately, with the broader market in bear mode, solar will continue to struggle despite soaring energy prices.

Is FSLR trying to fill the 2007 gap to $35?

Related post.

Disclosure: I am long FSLR stock and calls. I expect to continue buying FSLR for years to come.

JA Solar (JASO) looks better than ever

As you know, I've been a fan of JA Solar since they did their IPO in 2007 but my opinion of the stock has varied with he times and the charts. I've kept a close eye on JASO ever since it broke out of its two year range in September, nearly doubling in price over two months. Since that peak JASO has sold off with the sector after a sharp decline in crude bringing JASO back to the breakout point for a perfect buying opportunity. Volume was strong on the initial breakout so I'd expect it to follow through (upward) from here. One word of caution on this chart, the stochastics look bearish and the CCI is giving a sell signal.

I'm no value investor by any stretch of the imagination but with a PE of under 7 and a PEG of 0.34 (five year expected) JASO looks like the cheapest growth stock on the planet. They just signed a massive five year 10GW polysilicon supply deal which is roughly equal to the annual total global production of solar cells. They certainly don't seem to be in any kind of trouble and are planning ahead for the long run, why such a low valuation? Since solar is really a call option on future energy prices, we have to check out crude:

Crude rallied to a new two year high at the close Friday, no issues there. You can draw your own conclusions about this situation. Other issues I like in the solar space are FSLR and the TAN etf.

Disclosure: I am long JASO calls.

Saturday Rock Blog: Israelites (Solars Bottomed?)

Sun Power (SPWRA) six month, daily:

First Solar (FSLR) three year, weekly:

A nice sound rounding base for solar?

I want to be bullish on solar. It seems obvious to me that in the not so distant future the cost of solar cell technology will drop enough as efficiency rises to make it the cheapest, and not to mention cleanest, source of energy. In the last energy bubble solar came close to competing without government subsidy (cost parity was effectively reached with natural gas at the peak by FSLR). I personally believe that the next leap forward for civilization (following the internet boom) will come cheap distributed energy provided by photovoltaics. Thus, I keep a close eye on the sector in the expectation that when the day comes for solar, the winning companies will see their stocks increase by orders of magnitude. Ok, enough of the anticipatory irrational exuberance, what do they look like today?

Well, not so great to be frank. Solar has underperformed the market in 2009 and as a whole is basically flat on the year. The sector is very mixed but I find that the ETF TAN is a good way to follow the industry trend. In the seven month chart above you can see that similar to JASO, the industry has been forming a wide rounding base. While TAN seems to be having difficulty getting any traction upwards, there is a series of higher lows and higher highs in place. Clearly, in order for this trend to continue TAN needs to take out $10.77 relatively soon. A break of $11.67 would be *big time* and target $18.69. I like how TAN has found support at its 200 dma for the past six months or so consistently (plus or minus a few days).

SPWRA is a stock that I bought last week in the sector but I'm not feeling so hot about right now. I picked it up after what I perceived to be an over reaction to accounting issues announced last week. The stock was down about 25% in two sessions and it seemed like a good value to me given their leadership in the single crystal silicon PV market. That being said, take a look at this beautiful bear of a long term chart:

Yikes! I think theres a good chance SPWRA is just washing out long term holders here given the volume last week and the severity of the break. But... this stock was at $165 in 2007 and aside from the global recession and a decline in energy prices nothing fundamental has gone wrong with this company (well and some recent, minor, accounting issues). I mean, many would argue that this company is the blue chip of the solar space. For the cheapest lower efficiency thin film PV its FSLR, but for the high efficiency single crystal PV its SPWRA. However, given the chart, I will have a very short patience with it. In the absence of a sharp rebound in the next week I'll be out and might even try a short. The chart is suggesting a price target in the $10 range.

Disclosure: I own JASO and SPRWA shares.

Stocks, the corporate ATM

American Electric Power lowered its 2009 forecast and plans to issue more stock.

NBT Bancorp prices common stock offering, proceeds of the offering are expected to be used for general corporate purposes.

"Corporate Office Properties Trust, getting more market clout when its stock is added to the S&P MidCap 400 this week, will sell more stock to the public."

There is speculation that GS will do an secondary offering soon.

FSLR is expected to do a secondary later this year.

Mall owner Simon Property Group Inc. said Friday it has priced its public offering of 15 million shares of its common stock at $31.50 apiece.

HSBC Raises $17.7 Billion in U.K.’s Largest-Ever Rights Offer

Year to Date 2009 Returns

There has been alot of talk lately about how some sectors and certain stocks have gains for 2009. Most of this talk centers around the nasdaq which was up .63% as of Thursday's close although after Friday's rout it now sits -2% for the year. Here I'm just gonna throw up a number of different charts highlighting the range of 2009 results for various index etfs and individual stocks. In each of these charts the blue line is horizontal from the close of 2008 and the purple line is some sort of trend I see in the lows. I should note that some of these are 3 month charts while the rest are 6 month charts. Lets start with the ugliest sector ETF, the financials XLF:

(click to enlarge)

The financials are down about 33% this year and I think the important level that needs to break before a test of the years highs is $9.50.

However, looking at the Nasdaq 100 (ticker QQQQ) over the past six months you can see certainly see some signs of a bottom. The 2008 lows have held, plus some change and the index is up in 2009. That being said, the majority of the gains in 2009 were on the first trading day of the year and this index has failed to take out the highs made early this year. I think $31.50 will be a key level to watch:

ICE is a stock which is sort of a tech-financial, and they are right on breakeven for the year. I will give ICE credit for a higher low this year but the longer term tendency to make lower highs below a falling 200 dma remains. If ICE could make new highs for '09 and take out that 200 dma I could be bullish, but until then this one looks like a great short. Recently it tried to break it's 200 dma and failed, that too me is a bearish sign and a suggests a short entry here:

Going back toward the pure technology stocks, GOOG is solidly up for thi s year. Only at a few times has it been in the red and those lows were progressively higher. With a rising 50 dma below this might be one of the better charts I've seen lately. If I were looking to be bullish on something I might choose GOOG after a pullback:

Before we get too excited about GOOG, I should also note that it is still very far from it's 2009 high at $381. So google is up 10% in 2009, but its down 10% from it's yearly high. Furthermore, that pesky declining 200 dma is much higher.

First Solar (ticker FSLR) is another decent looking tech stock. You can see that it's up for 2009 although most of that gain came on the first day of the year. FSLR has a nice looking base formation and I think that the recent cup n handle could take it higher int he context of a strong stock market:


I'll leave you with my favorite index ETF to watch, the Russell 200 small caps (ticker IWM). Its down for the year and in my opinion headed decisively lower:

Any thoughts on these, additional charts (links) are welcome in the comments.

Disclosure: I own QQQQ puts.

Things are looking a lot better

I know a lot of you out there are tempted to sell/short this bear market rally but given the chart above I have to caution against it. Divergences in multiple indicators have been signaling a rally for months and although markets have rallied significantly from their lows I see substantial room to run further in the context of a long term downtrend (the SPX 200 dma is 27% higher). Volume was weak on Friday's new year breakout and because of that I would expect a pullback early next week, but things are coming together for the extended rally I have been anticipating for some time now. The technical picture has improved dramatically with all major averages trading above their 50 dmas which may even start to turn up soon. While the October and November highs could and should provides significant resistance, I'd guess we reach the 200 dma before this bear market rally ends.

One sector that looks particularly good right now is solar energy. This chart is overbought but looks just fantastic. Couple a bottom in energy with a broad stock market rally and the solars will take the lead. After a pullback, perhaps to the 50 dma, I am going to be adding FSLR, SPWRA, JASO and ENER.


Disclosure: I am long DXO and USO calls. I also have calls on JASO, ENER and SPWRA.

Four Cases of Stocks Up on Bad News

Lately its seems like investor sentiment has been improving but its hard to pin down exactly why. One thing I've noticed over the past week or so is that stocks are shrugging off bad news. They will initially be down on some worst than expected headline number and reverse course later on in the day. Without thinking too hard you can see how this might be a good thing. If stocks aren't going down on bad news then what will happen if there is even a hint of good news? It seems to me like the mood is shifting towards more optimism about the market. When stocks are down it is being perceived as an opportunity rather than a reason to panic. So for you tonight I've got four extra ordinary cases of stocks going up on bad news recently.

1. Stock market rallies on worst than expected job losses, largest in 34 years.

From Bloomberg Friday Dec 5th, "Employers cut 533,000 jobs last month, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington. November’s drop exceeded all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 percent, the highest level since 1993. ...

Payrolls were forecast to drop by 335,000, according to the median estimate in the Bloomberg survey. The jobless rate was projected to rise to 6.8 percent. Revisions for September and October increased job losses by 199,000. November was the 11th consecutive drop in payrolls. ...

Stock futures sank. Contracts on the Standard & Poor’s 500 index lost 2.1 percent to 829.90 at 8:34 a.m. in New York. "

Yep the futures sank alright, just before they popped to gain 4%+ on the day. Note the first red arrow in the chart below, the second red arrow is from #4.


2. Semiconductor stocks rallied on disappointing earnings and lowered guidance.

"Texas Instruments(TXN) tore down its estimates for fourth-quarter results late Monday, offering a revenue midpoint that was 30% below third-quarter results.

Similarly, National Semiconductor(NSM) said its fiscal third-quarter revenue would fall 30% sequentially, well below the Street's consensus analyst estimate. "


Despite the bad news NSM popped more than 10% and TXN was +6% along with the entire sector which had gaped lower Tuesday morning on all the bad news. Now some would make a lot bigger deal about the semiconductor strength than I will. In the last two bull markets this sector was a leader and was widely followed by traders looking for guidance. There may be some truth to this philosophy because the last peak for SMH was in July 2007, three months before the all time high in the dow and S&P. Personally, I preffer to follow the small caps for leadership.

3. Solar stocks held on lowered guidance and downgrades.

Tuesday, "shares of several solar companies sunk after German photovoltaic cell producer Q-Cells SE lowered its outlook through 2009 because of an expected inventory glut."

Then First Solar, was downgraded to Wednesday by Stanford Research.

And later that day, JASO CEO Samuel Yang said "over the past few weeks, we have seen a dramatic slowdown in orders, which we believe is related to macro economic conditions."


Well the solars didn't exactly pop on the news but they didn't sell off either. Each dip was met with buyers and TAN, the solar ETF, remained in a two week range. This is more of a case of stocks not dropping rather than rallying but its bullish that these stocks were able to shrug off bad news.

4. Broad market rallies with auto companies on Senate auto bailout rejection.

"Dec. 12 (Bloomberg) -- European and U.S. stock-index futures tumbled as the Senate’s rejection of a $14 billion rescue package for American automakers threatened to deepen the global economic slump. Treasuries rose, while the dollar slid. ...

“When something like this news hits the streets, all the good news is gone,” said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. “Given the concerns over the job losses if the auto industry were to collapse, and if the rescue fails, it will send a big dampening effect to investor sentiment.”

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 117, or 4.7 percent, to 2,369 at 7:42 a.m. in London. Standard & Poor’s 500 Index futures expiring in March slid 4.1 percent. The U.K.’s FTSE 100 Index is set to open 151 points lower, according to IG Markets. The MSCI Asia Pacific Index lost 3.4 percent. "

We got this news Friday morning, which nuked the overseas markets and US futures. Somehow stocks crawled back and managed to even close green. The dow and S&P gained about .7% while the small caps vaulted over 3%. GM closed down only 4% after having crashed 37% earlier in the day and Ford was up 5%. Now I realize there was alot of speculation in the media about a Treasury funded rescue but I think many agree that would have been expected in the event of a Senate rejection. The big news was that congress rejected the automaker's requests/plans, and stocks went up despite that news.

I think this another good reason to believe a major bottom has been made in stocks. I'm not saying the bear market is over or that the ultimate lows have been made. But I think stocks are due for a prolonged rally that may or may not develop into the next bull market. When I see stocks moving up on bad news I take that as a sign that its time to be buying dips rather than shorting rips.

Disclosure: I have bullish positions in solars, NSM and RUT.

Opportunities Abound in Solar

JA Solar, a long time favorite, has recovered my line in the sand: IPO support/resistance at $5.5. Things are looking good for JASO, I could see it hitting $12 easily. Beware earnings are coming up on the 12th but I think risk is limited, note the S&P upgrade today:

"“We expect strong earnings growth over the near-term,” he writes, “while the price of the shares has fallen notably based on various concerns such as margin pressure and the potential need for capital for expansion.” He notes that the stock trades for under 4x his 2009 EPS estimate of $1.50 a share. Montevirgen, however, slashed his price target on the stock to $9 from $20."

I'd also note that Sun Power quietly posts blowout results during the market chaos of recent weeks. SPWR is another one of my favorite solar stocks as its the leading producer of Silicon based cells in the US.

I recently posted about FSLR looking great as well.

What I hear many traders talking about right now is the potential for an Obama election to boost certain stocks and solar is cited as a prime cannidate. While I would guess this is already priced into solar stocks, long term Obama seems to be very serious about subsidising solar. Whether or not you agree with the politics of it, US photovoltaic producers could see some greener pastures ahead.

"Finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office, assuming obviously that we have done enough to just stabilize the immediate economic situation." -Obama

Disclosure: I own JASO and SPWRA calls.

Awesome Examples of Failed Breakdowns

This is the 400th post, hurray! Both of these failed moves came from blowout earnings report and great guidance, I'd encourage you to look into these reports. FSLR and ICE both gaped higher and ran to the highs today on massive volume. In doing so they reversed significant chart breakdowns from the days prior. As I mentioned on Sunday, failed moves lead to fast moves and that's exactly whats going on with these two. Its hard to see these slowing their ascent for a few days. Click on the charts for more details.And by the way, yes, I am now bullish on First Solar. If you recall my multiple bearish posts before about FSLR, I thought it was an over bloated pig at $300 with a 150 PE. I said my target for it was $120 and it went there. Now their PE is a more reasonable ~25 and FSLR does have some good things going for them; Obama's energy policy, residential expansion, lowest cost per watt and they are demonstrating resiliancy in the face of economic hardship. I currently don't own any FSLR but looking to add and I have some JASO and SPWRA calls.

Saturday Rock Blog: Bust a Move

Now here's a stock that really busted a move. Energy conversion devices (ticker ENER) is involved in a number of different industries but it's recent runaway gap came from solar powered earnings. I've been following this stock for many years and it did nothing, I even had the privilege to sit down and chat about science and solar technology with the founder last year. Regretfully I did not purchase the stock, but after a pulback this thing will look very attractive to me. You know that I am extremely bullish on solar and thin film solar has the most promise (note FSLR). ENER makes thin film photovolataics like FSLR but out of Silicon instead of the extremely problematic CdTe. This is one of those stocks that could rally for ten years away from that gap, some say it could become the Microsoft of semiconductor technology. Expect more on ENER from me in the future.

The German Connection (FSLR)

One major reason why FSLR's rapid growth in earnings and market capitalization has been so huge: perfect timing. Whether by chance or pure skill, First Solar came to market when a surge in German subsidies for photovoltaic energy went into effect. As a result of the increased solar cell demand, Silicon prices surged as the semiconductor became scarce. Since First Solar does not depend on Silicon they were able to pump out their cells in higher volumes and at lower prices. A big part of this growth has come from Germany where FSLR does most of its business. Germany is leading the way with huge incentives to construct solar energy infrastructure. In fact, the world's largest solar power system, Waldpolenz Solar Park, is being constructed in Germany and boasts 40MW using 550,000 of First Solar's thin film CdTe modules. Recall FSLR only expects "$975 million to $1.50 billion" in revenues in 2008 (compared to a $22B market cap). There is little question of the importance of German subsidies for FSLR's huge run.

The planned 40 MW solar generating park in eastern Germany will occupy a space equal to 200 soccer fields and feature 550,000 PV thin-film modules. Construction on the project is expected to be completed by 2009.

Credit: juwi group, source

By the way, Germany is experiencing its own economic problems and I wouldn't expect those government subsidies to last with energy prices soaring (making solar more competitive). In the very least they could reduce the subsidies now that the market has provided an increased incentive via higher energy prices. As it turns out, recently the German ministry of economics released a report stating that "subsidies for the [solar] industry are too high and need to be reduced drastically." In fact, Germany's ruling party proposed on Monday to follow the advice of this report and slash subsidies by 30%. I haven't done the homework to know exactly how much of First Solar's sales are due to Germany, but I know its a very large portion. Maybe a reader can help me out with this. I think this is clearly a new downside risk to the stock and yet another reason to watch the FSLR bubble.

Recent FSLR chart here.

Disclosure: I own FSLR puts