(This is an excerpt from an article I originally published on Seeking Alpha on December 31, 2014. Click here to read the entire piece.)
The concern for some solar investors going into December was that solar stocks were being unfairly sold off in sympathy with plunging oil prices. {snip}
Source: FreeStockCharts.com
In early December, I suggested that tax-loss related selling is a more likely culprit than plunging oil prices for solar’s losses. December’s stabilization is the result of a notable bounce from mid-December that may already represent some of the comeback I was anticipating for January. {snip}
Regardless, I have proceeded with a trade in anticipation of a January relief rally that starts to reverse losses incurred before December. The bounce going into year-end has forced me to hedge more heavily than I originally intended: there is a chance that the relief rally has already ended. To guide the positioning, I looked at sentiment on my main equities of interest: FSLR, Canadian Solar (CSIQ), and TAN. I decided on a final configuration shorting shares of TAN and CSIQ; and going long call options on CSIQ and FSLR. {snip}
Wildcard: Solar City (SCTY)
If January starts off well for solar as I am expecting, I plan to add SCTY shares and/or call options into the mix. (I may also add more FSLR call options). SCTY has strong name recognition and should be a favorite for traders who want to ride a resurgence of solar names.
Wildcard: Chinese solar plays
Given most Chinese solar plays were able to bounce along with the rest of solar and the general stock market despite the U.S. tariff ruling, I am on alert to watch how they trade going into the January 20th ITC ruling. I am NOT interested in shorting any of them, but will look for reasons to buy, especially if the ITC rules against the U.S. Also on my radar is Hong Kong based, recent IPO Sky Solar (SKYS). {snip}
Source: FreeStockCharts.com
Success versus Failure
This entire strategy could fail if First Solar does not lead the charge for a January comeback. {snip}
Be careful out there!
Full disclosure: long FSLR call options, long CSIQ call options, short TAN and CSIQ
(This is an excerpt from an article I originally published on Seeking Alpha on December 31, 2014. Click here to read the entire piece.)