First Solar (FSLR) _Update
(7/30/07)

We'd recommended FSLR as a short back in May, which offered some nice downside, especially on the options.  That sell-off in the stock was profitable but short-lived, as it remained fairly well bid.  FSLR went on to reach a high of 119 over the following weeks.  The P/E on the stock is still ridiculously high, but the build of short interest and Put interest has done nothing to really offset its advance.  The pullback that followed was fully corrective and sideways throughout the month of July.  There's now some evidence of completion, and we're looking for a $7 to $11 move in the short-term.  The trade has its risks, and is really recommended for those who don't mind taking it, as I think the rewards could be quite good and quickly.  Options would be the recommended way to go.

I've revised our wave count following the subsequent developments since the previous short play. As the daily chart suggests, the stock has been rising since the 61.43 low in an extended Wave (5) advance.  Wave 3 of (5) reached 119.85, and the subsequent pullback to 105.05 is counted as Wave 4.  Assuming it bottomed, for which there is evidence, then the next move up should be Wave 5 of (5).  The 119.85 high should be retested successfully under this outlook, with Wave (5) possibly terminating with a high at 123, or 127.  We want to see the stock get through resistance at 115, which should help confirm the new advance.  There is a lot of intraday volatility in this stock, so I'd suggest using a money stop to control your risk if we're wrong.  There is support at 111.

For an option play, you can consider the Sept. 2007 $120 Call (symbol QHBID.X), currently selling for $9 with the Delta at 0.49.  This is a tighter contract month than we usually recommend, but we don't expect this to take too long either if we're correct.

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