Medium term
Trade view / 04 September 2014 at 13:51 GMT

First Solar breaks out higher

Trader / TheSteadyTrader.com
United States
Instrument: FSLR:xnas
Price target:
Market price:
Background

I discussed a breakout trade setup on August 18 which yesterday began to marginally trigger. I still think the setup is valid to enter, so here is an updated look.

As a reminder, on the multi-year weekly chart below note the still intact up-trend off the 2012 lows, when the stock formed a solid bottoming pattern. Ever since, the stock has moved higher by gyrating back and forth in a channel. This is bullish until the trend breaks. It's that simple, so let's not over-complicate things, particularly for a trending cult stock such as First Solar (FSLR:xnas).

First Solar Inc
Source: Saxo Bank

After topping in March on the back of a vertical leap, First Solar stock has made a series of lower highs, which now look to be broken very soon. The stock held its 200-day moving average (red line) in August and on August 6 reversed lower with a big bullish outside day. Over the past couple of weeks the stock has consolidated right below the black diagonal resistance line. On Wednesday the stock rallied 3.25% on increased volume and by so doing scored a marginal breakout past the diagonal resistance line. Momentum has also begun to curl up again and is thus supportive of a break higher. 

First Solar Inc
Source: esignal

Management and risk description

While the setup in First Solar is strong, because the stock is heavily traded by the momentum crowd, any bearish reversal must be respected and would nullify the setup until further notice.

Parameters

Entry: buy the stock using the CFD at US$71.50 or higher.

Options: alternatively, one could buy a November 72.50 call, or buy the November 72.50-77.50 call spread.

Stop: US$69.25.

Target: US$77.00.

Time horizon: 2-4 weeks.

— Edited by Oliver Morrison

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Non-independent investment research
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