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First Solar Developing a Bullish Move

Stocks in this article: FSLR

This article originally appeared Sept. 6, 2013, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE Click Here NOW.

First Solar ( FSLR), headquartered in Tempe, Ariz., is a manufacturer of thin film photovoltaic modules, or solar panels. It also provides PV power plants and supporting services that include finance, construction, maintenance and panel recycling. The company is quite popular among traders and investors alike. It trends very well with smooth fluctuations in the larger trading channels, and it has a reputation for explosive moves with entry triggers that appear at relatively reasonable price points.

Shares of First Solar have fallen in and out of favor quite often in recent months. After soaring in April to establish a third wave of buying on the weekly time frame, the shares began to pull back and correct over the summer months. Slowing momentum into May's highs helped fuel that corrective move. By the end of June, First Solar had given back about 50% of the gains it had made during the second-quarter rally.

Shareholders' disappointment continued as the correction unfolded. The strong price support at the midsummer lows resulted in a rally into July, but the momentum of that upside was still more gradual as a whole than the prior drop. This eventually led to a second major pullback on the weekly time frame throughout August.

FSLR Weekly
TradeStation

It may seem as though First Solar would be one of the last places one would watch for re-emerging strength, but the opposite is true. Two-wave corrective moves such as the correction this summer will often find support when the second wave has a measured move compared with the first -- in other words, a 100% Fibonacci expansion. First Solar hit this support zone on Tuesday, and it did so as the momentum of the selloff slowed. This type of momentum shift is one of the first signs I watch for when timing a reversal on the basis of this form of two-wave correction.

FSLR Daily
TradeStation

Another indicator that I watch for a reversal of a correction is a decline in trading volume as the correction occurs. Declining volume will often represent a lack of motivated sellers within the pullback, even when the price move is quite large.

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