Hello readers,
We had a very successful day yesterday with our Short Sale of the Day in Advanced Energy Solutions Inc. (AESI). We bought into AESI at 15.90 after moving our entry range down in my morning Oxen Morning Levels Alert. That entry price was near the high for the day, and the stock moved into the low 15s from there. We got out at 15.42 for a solid 3% cover. We only had the one play, but you had to love this one. Today, we are looking at what I think is an exceptional play in the solar industry.
Overnight Trade of the Day: Solarfun Power Holdings Inc. (SOLF)
Analysis: Typically, when I do these trades we are looking for a short term undervalued stock that is going to surprise us on earnings. Today, however, I am mixing it up and putting my faith in the volatility and success of the solar market, as a whole, based on First Solar’s earnings that are going to be released tomorrow evening. This trade actually will be a two day trade, unless we have some amazing success tomorrow. I am expecting SOLF to go up tomorrow, but we are looking to gain around 5% or more.
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The solar industry has had some pretty compelling earnings come through so far with beats from GT Solar and JA Solar Holdings. This quarter may be a much better improvement for this group of stocks over the past two quarters. First Solar buzz will get us going tomorrow, especially after being down 3% today. That sets the stock up for some buying interest tomorrow and reduces the price of entry. First Solar is really simply the beacon of light for this industry. What happens with this company affects the entire industry.
Over the past couple weeks, solar has been bouncing back on the good earnings, and with the extreme sell off we are seeing today, it is creating a great buying opportunity. Solarfun is perfect for this kind of play because of its really high beta and volatility. The stock can make a move to the upside very quickly or the reverse. That is why I think with the solar industry poised for a solid end to the week, SOLF creates an attractive play.
Going into today, the stock was slightly overbought in the short term and nearing its upper bollinger band. The pullback of som signifinance today, however, has put the stock closer to its lower band and put buyers on the sidelines. Fast stochastics should adjust down rather significantly. I like the technicals being set up in this short term for a pop back up. The bollinger bands are also narrowing, which means this is a dip to new highs above ones already set, which is what we are hoping for based on the First Solar buzz. Or, we are faced with a major pullback, but I do not think this happens unless FSLR really blows it, which just does not seem to be the case with the undervalued EPS estimates we are seeing in the sector.
Get in today at this discount and hang on tomorrow and Friday!
Entry: We should look for an entry of 7.55 – 7.65 today.
Exit: We are looking to sell out Friday morning for whatever gains or losses we can accrue, but if we get 5%+ before then, we want to sell.
Stop Loss: None.
