Anatomy of a Trade - SPWRA

I like this 15 minute setup.  The 60, daily and weekly are cheering along.

FSLR - Long Trade setting up

FSLR reports next Friday, and I have taken a small March call position (160's 3 contracts),  the charts are setting up for a ramp into earnings.  I will buy 2 more contracts on the cross of the 10/30.

I intend to short FSLR next week as per my earlier post on FSLR, it always sells off after earnings.

Last few trades I made on FSLR

A few folks were interested in my FSLR trades, so here they are.  I reloaded as the MA cross is good, and FSLR did not break out of the channel.  Also looking at the daily, it has rode the the top of the Keltner channel for this whole move.

I intend to short it after earnings are announced, as it always retraces some of its pre earnings ramp.

Up arrows are buys or short covered and down arrows are shorts or long covered.

WHY I am Shorting FSLR

FSLR always ramps into earnings, I am speculating they will again this time, as well.  I bought Feb 145 puts Friday and today.  In 2011 headwinds in margins and in increased production out of China, and lower subsidies across the board will make it difficult to show profitable growth.  I have stops set, but will reshort if I am early and get blown out.

Read Barrons and WSJ this Weekend

For me at least, this weekends Barrons and WSJ opined on many sectors/areas of interest for me; Extreme exuberance, low volatility, rare earths, China's oil and gas industry, solar inverters and wind energy/components.  I have also recently posted my concerns in the area of rare earths, solar energy and China oil and gas, but a new name came up that I have traded in the past, American Superconductor.

American Superconductor relies on one, yes one Chinese supplier for 80% of their revenue.  That company is Sinovel, and in their latest filings they reported production vastly outstripping sales and wind energy farms sitting idle in China because they are not connected to the grid. 

If you are long this stock take heed, but these articles are speaking some larger truths, we have some serious imbalances forming due to the nature of how the Chinese manage their economy and the reliance some companies fortunes are tied to them (MCP, REE, AMSC), and if we build it, they will come mentality that is creating excess inventories in some hot industries that rely on Government largess to grow (PWER).  Power One's margins are twice that of the largest Inverter company SMA, and inverter prices are expected to fall up to 20% next year into the teeth of falling subsidies.  This is hardly a growth story for a growth stock.

Finally, the WSJ noted that margin is at extreme levels ($300 billion) and every time it reaches these levels a significant retracement occurs.  Also of note is the use of leveraged ETF buying on top of the use of margin, that is a recipe for disaster.

Be careful out there.

Solar Storm is Arriving

As I posted before, the Solar energy industry is producing a glut of solar panels.  Here is a quote by  John Hardy.  "Global annual manufacturing capacity for solar panels may reach 23,500 megawatts next year, exceeding demand by almost 40 percent, according to John Hardy, a solar analyst at Gleacher & Co. in Connecticut. Wind turbine makers will increase capacity to 64,200 megawatts, 30 percent more than expected orders, Bloomberg New Energy Finance forecasts." 

Note also, the glut in Windpower production.  Remember what goes into Wind Turbines, yes, that is right, Rare Earth materials.  I'd be selling on any momo push higher.

Check out these charts on Yingli Solar

If you want to buy solar, make it for your home or business instead. Deals will abound.