Trade of the Day: First Solar, Inc. Is Reaching for the Stars

FSLR stock is doing more than just getting back on its feet

By Serge Berger, InvestorPlace Contributor

Thanks to the most recent rally, shares of First Solar, Inc. (NASDAQ:FSLR) are now higher by close to 87% for the year. Although the stock is in need of some near-term consolidation time, in the bigger picture its rally may just be starting.

It’s no secret that solar energy stocks as a group have endured a great deal of pain this decade. Once a high-flying bunch, investors have largely stayed away from these names so far this decade, yet the price behavior of late, especially in FSLR stock, is beginning to look more promising.

FSLR Stock Charts

Click to Enlarge

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

Starting off with the multiyear weekly chart we see that after a precipitous drop starting in 2009 the stock finally bottomed out in 2011. Through a multiyear lens, we see that instead of bouncing higher into a new bull market FSLR stock has since largely been building a base.

The rally that started this past April and continued over the past two weeks has, however, managed to break the stock back above its red multiyear diagonal technical resistance line. This does not mean FSLR stock from here has to immediately ramp to the moon but it is great start from the technical analysis angle and in this time frame.

Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

Moving a little closer into the daily time frames, we see that FSLR stock after the initial rally off the April lows by early August became exhausted and slipped into a multimonth consolidation phase. As such consolidation phases go, usually they either lead to a next leg higher or break down altogether.

As we can see on the chart, FSLR stock following its October earnings reported opted to break higher in a violent manner on Oct. 27 and has moved into a new consolidation phase since.

Active investors and traders could look to play FSLR stock higher as a simple “continuation” trade if the stock can push and hold back above the $61.50 area. A next bigger upside target is closer to the $68 area, which would also fill a still unfilled down-gap.

Check out Serge’s Daily Market Outlook for Nov. 6.

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