Buy First Solar before Q1 earnings? What do technicals say

Amidst the fluctuations in the renewable energy market, First Solar (NASDAQ:FSLR) has emerged as a significant player, weathering both the highs and lows of the sector. From its remarkable ascent between July 2022 and May 2023, where it surged more than 350%, to its subsequent decline of nearly 20% from its 2023 peak, the stock has experienced its share of volatility.

However, even amidst broader challenges faced by the solar and green energy sector, First Solar has displayed resilience, outperforming many of its competitors. The renewable energy landscape has witnessed a series of shifts, from changes in regulatory policies to geopolitical uncertainties. Reductions in subsidies and tax breaks globally, particularly notable in California, have impacted investor sentiment.

Moreover, concerns over the potential outcome of elections, such as the fear of a Republican victory in November, have cast doubts on the future of renewable incentives in the United States. Despite these challenges, First Solar’s strategic evolution from a leading solar-farm builder and photovoltaic panel-maker to a top panel brand manufacturer has positioned it favorably in the market.

So, as the company prepares itself to declare its FY 2024, Q1 results let’s see what the charts have to say about its prospects.

First Solar’s journey since its IPO in November 2006 has been nothing short of a rollercoaster ride, as illustrated by its long-term monthly charts. Within just 15 months of going public, the company’s stock catapulted from under $30 to dizzying all-time highs surpassing $317, only to endure a four-year descent that bottomed out at a mere $11.47.

The subsequent phase unfolded as an 8-year period of accumulation, characterized by the stock’s meandering between the $25 and $75 thresholds. It wasn’t until the onset of the rally post-COVID-19 pandemic in 2020 that the stock finally broke free from this range, signaling the onset of what we have termed ‘Bull Phase 1’ in the chart.

FSLR chart by TradingView

While Bull Phase 1 remains ongoing, a more robust bullish trajectory emerged in July 2022, propelling the stock from around $60 to over $225 by May of the following year—an ascent denoted as ‘Bull Phase 2.’

As we analyze this long-term chart, it becomes clear that as long as First Solar’s stock maintains its position above the trendlines marking these two bullish phases, it stands poised for sustained success in the long haul.

First Solar’s short-term 4-hourly charts show two unique things. First, the stock has always seen a spike after its last two quarterly results. Second, the stock seems to have made a floor at $135 over the past six months.

Another thing that emerges from the short-term chart is that First Solar’s stock has been on a strong uptrend since mid-March, which took it from $145 to the recent high of $188.

FSLR chart by TradingView

Since First Solar’s stock is quite volatile, the best strategy for bullish investors would be to take a long position at these levels with an initial stop loss at $162 and a second and final stop loss at $145. If the Q1 results are good chances are the stock will breach its recent high at $188 and can also target its 2023 highs in a few weeks.

For bearish investors who want to short the stock going into earnings at these levels, they should better use options. They can buy $170 strike May 17 expiry Put options at close to $8, which will reduce their max loss to $8 if the stock spikes after earnings.

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