{"id":16568,"date":"2013-01-30T06:23:19","date_gmt":"2013-01-30T14:23:19","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=16568"},"modified":"2013-01-30T06:24:14","modified_gmt":"2013-01-30T14:24:14","slug":"time-to-protect-positions-first-solar","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/01\/30\/time-to-protect-positions-first-solar\/","title":{"rendered":"Shorts Are Still Retreating, But It Is Time to Protect Positions In First Solar"},"content":{"rendered":"

It has been a good run, but it seems that First Solar’s best gains are behind it for now. First Solar (FSLR) declined 5.9% on Tuesday, January 29 on heavy trading volume. FSLR is now trading below its 50-day moving average (DMA) for the first time since October. This breaks a primary uptrend that has delivered a 151% gain for FSLR since the end of July (all-time lows were set the month before). The stock is now down 9.5% year-to-date while the S&P 500 (SPY) is UP 5.7% on a strong run of its own.<\/p>\n


\n
\"First<\/a>
First Solar's strong run looks like it is finally ending<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

I have argued before that FSLR has lifted largely thanks to the absence of bad news<\/a>. Now, I am assuming this breakdown is occurring in advance of imminent bad news. Other indicators of imminent bad news are mixed. <\/p>\n

Shorts continue to back off FSLR with shares short back to levels last seen at the end of February, 2012. <\/p>\n


\n
\"Shorts<\/a>
Shorts continue to back away from First Solar<\/figcaption><\/figure>
\nSource: NASDAQ.com short interest<\/strong>
\n<\/center><\/p>\n

Normally, I would consider this retreat bullish and the resulting short-covering an explanation for the rise in FSLR’s stock. However, short interest peaked in mid-August of last year. After FSLR peaked another two weeks later, it took another three months before the stock could gain a fresh high. Indeed, it is very possible that FSLR bears have cashed in their short shares for (much less risky) put options. The open interest put\/call ratio<\/a> has soared from 0.90 ahead of November earnings to as high as 1.42 last week (hitting the 99 percentile rank). The put\/call interest has settled back down to 1.23. All things considered, I interpret this as a sign that traders are still betting on an imminent sell-off in the stock. Moreover, shorts are STILL 38% of float<\/a>. <\/p>\n

First Solar’s valuation is still at rock bottom levels: price\/sales of 0.82 and price\/book of 0.70. These levels reflect the on-going liquidity risk in FSLR if anything goes awry in its large-scale utility solar power business. FSLR’s cash levels<\/a> remain relatively high at $717M, but free cash flow has been negative three of the last four reported quarters. Total debt is now at $530M<\/a>. These are some of the reasons why I continue to maintain that FSLR is still just a trading stock.<\/p>\n

In early March, 2012, I recommended selling long-dated puts (LEAPS) on FSLR as a way to speculate on an eventual recovery in the stock. It was basically a bet that at some point in two years the stock would experience a substantial rally. I was definitely early as the stock proceeded to get chopped in half over the next three months. While I did not sell another put as I should have, I did stay patient. Now, ironically, over 10 months later, FSLR is trading where I first launched the trade. Whereas shares would have gotten me nowhere, the short put has benefited from the erosion of time premium and a drop in implied volatility<\/a>. When FSLR erased all its early gains for the year on January 7th, I rushed in to buy a protective March 27 put. If I had not done it then, I would definitely do it now with the current breakdown in the stock. With earnings about a month away that should include extremely conservative (if not poor) guidance for 2013, it is finally time to protect bullish positions in FSLR.<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long and short FSLR puts<\/p>\n","protected":false},"excerpt":{"rendered":"

It has been a good run, but it seems that First Solar’s best gains are behind it for now. First Solar (FSLR) declined 5.9% on Tuesday, January 29 on heavy trading volume. FSLR is now trading below its 50-day moving average (DMA) for the first time since October. This breaks a primary uptrend that has … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[483,32,3,62],"tags":[6,7,155,419,16],"class_list":["post-16568","post","type-post","status-publish","format-standard","hentry","category-breakdown","category-options","category-solar-energy","category-technical-analysis","tag-first-solar","tag-fslr","tag-options-trading","tag-short-interest","tag-solar-stocks"],"yoast_head":"\nShorts Are Still Retreating, But It Is Time to Protect Positions In First Solar - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/01\/30\/time-to-protect-positions-first-solar\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shorts Are Still Retreating, But It Is Time to Protect Positions In First Solar - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"It has been a good run, but it seems that First Solar’s best gains are behind it for now. 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