April showers certainly did not fall on solar stocks, with the sun shining particularly bright on First Solar (NASDAQ:FSLR) this month. FSLR is up around 80% in the last few weeks, with the latest big move (+12%) coming today out of a pattern that we have been pounding the table on within the T3Live community. Even if you missed the move on the wide-range igniting bar April 9th, FSLR had many of the ideal ingredients we look for in a follow-through trade set-up.
Let's rewind to April 9. FSLR spiked more than 45% intraday after releasing a better-than-expected outlook for 2013 and solid guidance for the next three years in general. In addition, First Solar announced technology breakthroughs in terms of solar panel efficiency that the company believes will drive its ability to close more business. Project Desert Sunlight, based in Riverside County California, is also expected to be a big driver of future earnings performance. First Solar told analysts on April 9 that it expects to post a 2013 profit of $4 to $4.50 per share on $3.8 billion to $4 billion in revenue, while analysts polled by FactSet expected $3.60 per share in earnings and $3.17 billion in revenue.
The fact that FSLR is a highly shorted stock added fuel to what would already have been a monster move in response to the big guidance raise. Short sellers sprinted for the exits, but you had to be quick and bold to catch the move intraday. After a big move, though, we like to look for stocks that hold up and form bases to measure a follow-through trade from. FSLR did exactly that.
To take you through our thought process, below we will share all of the FSLR charts as they were featured on our Off the Charts newsletter:
APRIL 11th - Immediately after the big move, it was very bullish to see FSLR hold the majority of that igniting bar.
APRIL 16th - We continued to list FSLR as it held in the upper end of that igniting bar.
APRIL 23 - Last night we highlighted FSLR as it started to break out of the tight flag pattern. Now FSLR is up around 10% today.
So in summary, we had a stock with 1) extremely heavy short interest that had 2) seen a major igniting bar that often leads to higher prices, 3) held the vast majority of that wide-range move, and put in a 4) a tight flag to base entries and stop-loss points. The result has been a picture perfect breakout today that many in the community have taken advantage of.
First Solar (unconfirmed) is set to report its first quarter 2013’s earnings result on May 2nd after the close.
*DISCLOSURES: No relevant position