Evolution of a trade in First Solar

Posted Jun 3rd 2009 2:20PM by Todd Harrison
Filed under: Commodities, Technology

This post was written by Minyanville contributor Smita Sadana.

A trade doesn't simply have an initiation and finale – the most important part of a trade is its evolution and constant re-assessment if the original thesis that the trade was initiated with, still holds true.

On that note, let's look at First Solar (NASDAQ:FSLR). I started a short position in it on 6/1 when instead of participating in the market advance, it lagged (due to a LA Times story that FSLR's acquisition of "strategic land rights" is under scrutiny). Recall, it came on the heels of a cautious mention in Barron's on May 26th. So, both times, FSLR reacted negatively to negative news and volume picked up on both those instances.

Today, Pacific Crest Securities reiterated its buy rating on FSLR and called the recent weakness a "buying opportunity."

If the short thesis has any merit, this piece of news shouldn't distract it from going lower! The first range of levels I would be watching, as I have repeatedly shared, is the congregation of the lows of the recent move, just around $178-180. Any sign of strength at or around that level will be the next time to reassess this trade and take required action.

Just watching a stock's behavior to news and support/ resistance levels can be very instructive, if you can be objective.

I have long known that holding a stock can impact ones bias toward it. As a matter of fact, my first large loss when I started trading, was a fallout of my `Ownership Bias'. (To borrow a term from Dan Ariely who talks about 'Ownership-Bias' in his book, 'Predictable Irrationality').

For instance, if I am short FSLR, I'd tend to play-up the negative news and brush-off the positive news, regardless of price action. The natural tendency would be to 'justify' my current stance (whatever it is), rather than to be callously objective about it. This series of self-justifications can lead one to blow through the stops.

Even had that happened to you?

Tags: energy, first solar, FirstSolar, fslr, solar, trading

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Reader Comments (Page 1 of 1)

6-03-2009 @ 4:12PM

Jonny Quimby said...

"holding a stock can impact ones bias "

Please ask someone to teach you about apostrophes before you post your next article.

Many thanks in advance.