Shares of First Solar, Inc. (NASDAQ:FSLR) jumped more than 3% on Wednesday December 6th, taking its gains since the October earnings report to more than 30%. Wednesday’s price action scored another marginal breakout for FSLR stock following a multiweek consolidation phase, and could thus have signaled the beginning of another leg higher.
So you know, Wednesday’s rally was the result of the company’s strong guidance report, which in turn led brokers like Cowen to significantly raise their price target into high $70s.
When I last discussed shares of First Solar on Nov. 6 I offered that the post-earnings breakout from late October was constructive for the stock and ultimately stands a good chance of leading to a next higher price target in the high $60s. With Wednesday’s marginal breakout this next upside target now looks to be ever more within reach.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multi-year weekly chart we see that FSLR stock as a result of the late-October rally broke past the multi-year black diagonal resistance line as well as back above its red 200-week simple moving average.
To be clear, this moving average hasn’t been the best of reference points for this stock historically, but given that it still roughly coincides with the multi-year black diagonal line I am willing to assign a break above this moving average at current juncture a better probability of higher prices to come still.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Moving on to the daily chart we see that both the post-earnings rally from late October as well as the rally over the past two days came on notable volume spikes. This is what we want to see in healthy price behavior, more volume on strong rally days than on strong down days.
Also note that this Monday December 4th FSLR stock dropped below its tight multi-week trading range, only for this one-day drop to be quickly negated with the Tuesday-Wednesday rally that followed. In other words, sellers quickly exhausted themselves with the one-day drop on Monday.
While Wednesday’s rally in FSLR stock did not lead to a close near the daily highs (in fact well off the intraday highs), given the aforementioned posture I am willing to still consider the move a breakout worth respecting. From here and barring any quick bearish reversal the next upside price target is in the low $70s, i.e. the spring (March) 2016 highs.
Check out Anthony Mirhaydari’s Daily Market Outlook for Dec. 7.
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