It only took a day or two for First Solar (FSLR) and SunPower Corporation (SPWR) to confirm the bearish pattern I pointed out after the recent post-earnings celebration for SPWR. The charts below show rapid follow-through from the big fades that followed huge up days in each stock.

First Solar breaks down again

SunPower gives up almost all its post-earnings gains

Source: FreeStockCharts.com

Note well that the bears and sellers who were trapped by First Solar’s strong gap up are no longer trapped (or at least those shorts that did not panic out of their positions). SunPower has now given up almost all of its post-earnings gains. That solar fade is one powerful bearish signal. In the last post, I warned:

“Anyone who has traded solar stocks for a while knows this post-earnings fade as the signature reversal so common with solar stocks. It is solar’s typical warning sign of declines to come.”

That warning followed another cautionary note I sent out following the bankruptcy announcement from Energy Conversion Devices (ENER) where I declared the “solar fun is over for now.” We should duly note that the sudden weakness in many solar stocks is coming as the major indices are either at or challenging multi-year highs. Once the stock market corrects from this rally, we should expect solar stocks to suffer further and larger losses (relative to whatever portion of the solar rally remains intact at that time). Yingli Energy Holdings (YGE) has already given back all of its gains for 2012. FSLR, Trina Solar (TSL), and MEMC Electronic Material (WFR) have are not far behind.

For now, I have closed out my puts and covered calls on FSLR. I feel naked, but I suspect the wild volatility in solar stocks will give me ample opportunity for playing defense again at better prices.

Be careful out there!

Full disclosure: long FSLR