by Serge Berger | February 19, 2014 8:09 am
Solar stocks rallied nicely Tuesday, and in particular, First Solar (FSLR) — a leading designer and manufacturer of solar modules — showed promising technical price action. First Solar earnings for Q4 are due out Feb. 25, so now’s a good time to look ahead to see what traders can expect out of FSLR stock around and after the fact.
FSLR stock and other competitors in the space — such as SolarCity (SCTY), also set to report next week — can be notable movers on any given day, but also routinely provide active investors with juicy opportunities.
These stocks can show great volatility following earnings, which is why it pays to have a plan for how to act or react once the announcement is out of the way and the initial price reaction has taken place.
For FSLR, Tuesday’s big-volume 7% rally resulted in a technically important breakout past multiple layers of resistance. This likely will result in somewhat more upside into earnings, although more important is how FSLR stock reacts after the report.
From a multiyear perspective, after a big selloff in 2011, First Solar shares found support in the second quarter of 2012 and ever since have worked their way higher in an orderly fashion, making a clearly defined series of higher lows and higher highs. In the Q4 2012, FSLR stock broke back above its 200-day moving average (red), which to this day acts as good support and also coincides with the 2012 up-trend line (blue).
On the daily chart, the support and resistance levels I am focusing around after the earnings report are more clearly visible. (While it is always important to view price action/charts in multiple time frames, it is particularly crucial to do so when trying to gain perspective on a post-earnings rally or selloff.)
First off, understand that Tuesday’s significant rally in FSLR stock resulted in it breaking out of a trading range (black parallel lines), as well as back above the confluence resistance zone made up of its 50- (yellow) and 100-day (blue) moving averages.
This brings me to the support and resistance levels that I will be focusing on around the First Solar earnings report next Tuesday.
Support: For support, I am looking at the 200-day MA, currently around the $49 area. Should FSLR stock break below there after earnings, I would either consider to short it for a quick trade, but more likely just leave it alone.
Resistance: If FSLR stock pushes or holds above the $58 level after earnings, I would look to buy the stock with a medium-term upside target closer to $72.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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