5 Trades to Take as the Market Returns to Normal

First Solar

Back in the spring, it must have felt like investors couldn't pay people to take solar stocks off their hands. But now the industry is making a conspicuous rebound -- and First Solar (FSLR) is leading it off.

Despite the fact that shares of this $2 billion solar stock have doubled since the start of June, there's additional upside in this stock right now. Here's why.

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At first glance, it looks like the rally in this stock is flattening out. In reality, though, First Solar is forming an ascending triangle pattern right now, a continuation pattern that points to higher levels for shares of FSLR. The triangle is formed by a horizontal resistance level at $26 and uptrending support that's been connecting the swing lows in FSLR since the start of September. Essentially, as FSLR bounces in between those two technical price levels, it's getting squeezed closer to a breakout above that $26 resistance level. When it happens, we've got a strong buy signal on our hands again.

The declining volume over the course of this pattern helps to make it a textbook example of the ascending triangle. Ideally, we'll want to see volume spike on the break above $26 -- that means buyers are participating in the move.

It's tempting, but don't be early on this trade. Wait for the breakout before putting your money on the line, then keep a protective stop just below the 50-day moving average.

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