My previous two attempts failedas I bought calls instead of shares. Purchasing shares instead of callswould have left me flat at this point. I am looking for a charmed thirdtime with SOL. Both SOL’s post-earnings performance and the technical set-up caught my eye this time. SOL is now up 18% since reporting earnings on November 16when the company generated record product shipments and revenue aboveguidance. The outlook appeared very positive and was a lot moreoptimistic than I could have expected given the earnings warning thatSOL produced at the end of September:
“We were pleased to see strong improvements in revenues and shipmentvolumes during the third quarter as we continue to witness strongcustomer demand and continue to gain market share globally. We are onequarter away from completely working through our high cost inventories.As such, we expect substantial margin improvements and a return toprofitability in Q1 2010.”
The post-earnings bounce off the recent lows (and lower BollingerBand) were the early buy signals, but I missed those. Now, SOL hasmoved above both the 50-day moving average (DMA) and 200DMA. I amlooking for both to provide firmer support this time. The chart belowsummarizes the current (price-only) technical set-up:
SOL is once again in a bullish trading position
The clincher was strong call activity on Monday. Schaeffer’s noticed it too:
“Short-term option traders are betting on additionalupside for the shares of ReneSola Ltd. as indicated by today’s surge infront-month call activity. So far today, the China-based manufacturerof solar wafers has seen more than 1,500 calls cross the tape – nearlytripling the norm – with more than half of the calls changing hands atthe ask price, suggesting they were likely bought.
The influx in call buying echoes the recent trend on theInternational Securities Exchange (ISE), where speculators during thepast couple of weeks have bought to open more than 69 times as many SOLcalls as puts.”
The January 2010 calls at the 5 strike experienced the bulk of theaction. I purchased those on Tuesday as SOL fell back slightly fromMonday’s strong performance. Depending on how trading and industryevents unfold in the next month, I may consider finally buying sharesand hanging onto them for a while.
Be careful out there!
Full disclosure: long SOL calls