Is it too late to buy First Solar (FSLR)? (August 27, 2012)
FSLR
I’m Dan Fitzpatrick at StockMarketMentor.com on Monday, August 27th. Let’s look at First Solar ( $ FSLA First Solar, Inc. ); this is a stock that had been down trending like forever. It’s amazing what happens when an industry that largely exists on government subsidies, when those subsidies go away isn’t it funny what happens? This stock just implodes; not going to zero though, it didn’t go to zero. The stock consolidated here in a fairly tight squeeze; Boom! And blew out to the upside. Okay this turned out to be a really good trade to the long side, I mean for crying out loud, you buy the first day of the break-out at even the close you’ve still got a 42 percent gain, so this has been an extremely profitable trade. Now if you’re already long then what I’d suggest doing is recognizing that the 200 day moving average looms right overhead, that you are 42 percent profitable if you took this at the close of the first day; if you’re buying down here, or down here, and a lot of folks did, which is why the stock found support, then you’ve got even more profits. So how many folks, how many traders, how many funds do you think would say, “Well I bought this thing because it was so deeply extended below the 200 day moving average; when it gets back to the 200 day moving average that is, you know to put in a technical term, fair value that’s like it’s neither overbought nor oversold in the longer-range view instead it’s pretty much right at the mean so I think that’s where I’ll sell it?” so I suspect that you’re going to get a fair amount of supply here right now at about $27.00 which is where the 200 day moving average is but we don’t know that for sure, I mean First Solar ( $ FSLA First Solar, Inc. ) you can see has come down quite a ways, so this may just push right through the 200 day moving average and go on its merry way to $40.00. So I wouldn’t outright self but what I would do is definitely set an alert or trigger or maybe a sell order for some years shares, when the stock does test $27.00 or so, but also keep a trailing stop on your position, make it maybe a couple percent two, three, four percent something like that, so that if the stock does start to pull back, yes you’ve lost a little bit of your profits but you’re not holding the whole thing as it falls down to $18.00; now you’re wondering whether the stock’s going to go back up and of course it’s going to take like two or three months for it to do that best-case scenario. Instead recognize that you’ve got resistance up here it’s a good time to be selling not a particularly good time to be buying and so you have to recognize that there’s your source of resistance and using a trailing stop can eliminate the need for you to identify support instead you’re locking in your profits. One other thing you can say, “Where would you put a stop right now Dan?” Well let’s think about this, I’d say $20.00 is the low, well that’s 20 percent below where the stock is right now, so let this stock go all the way back down here and if it breaks twenty you’re going to sell it at that particular time. How many folks do you think were down here waiting? The stock comes down here and right when you’re selling it some traders that are flat are saying, “That’s great! Thanks, I got the pull back so-and-so’s selling his shares I’m in.” So you don’t want to set your stop to loose, to a point where the only time your stop would be triggered would be also at the same time that dip buyers would buy. Instead use a trailing stop on a position that you have, do not buy the stock now simply because it is so close to resistance, so you use this, manage your risk and let this position run as long as it’s prudent to do so. I hope that helps. Okay members, head to the Strategy Session; I got a little bit over but the last six, seven, eight minutes what I’m really talking about is a concept of trading psychology and that is speaking to yourself, to others, how you can really monitor where you are in your trading by just focusing on yourself, listening to yourself and making sure that you’re saying the right things that will ultimately lead to doing the right things; so I left that at the end of the video just because maybe some of you guys don’t like to hear the psychological mumbo-jumbo; so get over there now. Free Chart