2 Solar Trades: FSLR Is Hot, But SCTY Is Not

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In recent days, solar stocks have turned into an area of sizzling “green energy” on the price chart, as investors have embraced-and-chased key subsidy extension legislation for the industry group on the heels of the recent global climate summit.

2 Solar Trades: FSLR Is Hot, But SCTY Is Not
Source: ©iStock.com/arcady_31

Looking ahead into 2016, however, and for two titans of the group, prospects are decidedly splintered. On the one hand, we have a solar stock that looks especially hot; while on the other hand, we have a big name in solar that looks more likely to burn investors.

We’ll discuss both below along with some positioning ideas.

A Hot Buy In Solar: First Solar, Inc. (FSLR)

Solar heavyweight First Solar, Inc. (FSLR), a commercial and broad-based solar energy solutions outfit, looks like a hot buy entering 2016.

Back in November, and prior to an extension of tax credits for solar operators, First Solar reported a blowout quarter with a sizable profit beat and solid earnings hike. Investors, of course, took notice sending shares of FSLR higher by roughly 12%.

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Source: Charts by TradingView

And, technically speaking, First Solar stock continues to distinguish itself from its peers as well. As the provided weekly chart of FSLR stock shows, shares of FSLR have established in a large and bullish, corrective double-bottom base.

A small, weekly price consolidation now developing in the upper half of the base and aligned at a key pivot high within the base’s construction, sets the stage for a supportive breakout and higher prices in FSLR stock in 2016.

Checking the First Solar options board in Monday’s afternoon trading — with shares of FSLR up about 3.5% near $65.65 — the Jan $67.50/$70 bull call spread for up to 85 cents is a reasonable, hedged and limited risk way to position shorter-term.

Should FSLR breakout in the next couple weeks, shares only need to follow through by about 4% in order for the spread to capture $1.65 in profit or return of 194% in less than one month’s time.

A Hot Short In Solar: SolarCity Corp (SCTY)

While First Solar has demonstrated its own, unassisted wherewithal on and off the price chart, SolarCity Corp (SCTY), an installer of residential panels, has demonstrated itself to be much more dependent on government assistance — as well as a substantial population of bears.

Famed short seller and hedge fund manager Jim Chanos has been the most vocal bear in SCTY stock. His fund Kynikos Associates remains short based on his position that SolarCity’s business is no better than that of a subprime lender. Remember how that business turned out for folks in 2008?

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Source: Charts by TradingView

Another factor which looks unsustainable for SCTY is its price chart. Technically, cheer over the climate change accord in Paris and the tax credit extension have put SolarCity shares in a vulnerable and extended position set against downtrend and Fibonacci resistance.

Looking at SCTY’s options board for ideas and shares down about 1.5% near $56, the $52.50/$50 bear put spread for up to 85 cents is attractive.

The initial debit is priced identical to the FSLR strategy, but in this case, the trader is looking to maximize their near 200% return of $1.65 if shares of SCTY are below $50 at expiration in January.

The SCTY vertical does require a larger bearish move of nearly 11% in order to maximize the spread’s profit potential. That’s a bit steeper than the required move for FSLR, but all the more reason to like a cost-and-risk reducing vertical spread for positioning.

Also, given SolarCity’s price spike last week, the near 55% of shorts in SCTY stock entering December and some anticipated selling from bulls could add up to big profits quickly.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

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The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2015/12/scty-fslr-solarcity-stock-first-solar-stock-options/.

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