First Solar, Inc. (NASDAQ:FSLR) shares are heating up. Just like a bag of kernels ready to pop. And that makes it one of the top stock picks for the rest of the week. No need to worry about overbought conditions — it’s well rested. In fact, the consolidation in First Solar stock is entering its fifth week. It’s almost as if the leading solar stock is soaking up the rays, building up a big enough charge to power its next breakout.
‘Tis a breakout which may well be imminent.
The near-term technicals suggest buyers are getting antsy. Check out the past four candlesticks. Each boasts a bottoming tail or lower shadow which indicates intraday sell-offs that were gobbled up in short order. Consider it a sign that buyers are lurking beneath the surface just waiting to take a bite. What’s equally impressive is how First Solar stock has been able to close above its 20-day moving average for the past two weeks.
This oft-watched smoothing mechanism continues to support prices despite numerous attempts by sellers to take First Solar stock beneath it. Consider this another bullish tell weighing in favor of continued upside. The past month has formed a classic high base pattern similar to the one established in November which led to a robust rally.
The current setup could play out in a similar fashion. Let’s just hope we don’t first see a nasty shakeout like that of Dec. 4. To capitalize on an eventual breakout consider the following trade ideas.
The Fence Swinger
If the rousing start to 2018 has your inner bull frothing at the mouth and if you think a breakout in First Solar stock will deliver huge upside, then buying calls is in order. Buy the March $72.50 calls for $4.60. The risk is limited to the initial debit, and the reward is unlimited.
Give Me High Probabilities, Please
Alternatively, if embracing high probabilities is your bailiwick, consider selling the Feb $65/$60 bull put spread for around 95 cents credit. If First Solar sits above $65 at expiration, you’ll capture the entire premium. The max loss is $4.05 and will be forfeited if the stock falls below $60.
To minimize the damage in both strategies you could exit if First Solar stock breaks support at $66. Finally, if you want more confirmation the breakout has arrived then wait for a price break above $71.80 before pulling the trigger.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
