NEW BEARISH Plays
Canadian Solar Inc. - CSIQ - close: 19.77 change: -0.59
Stop Loss: 21.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 28, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.5 million
New Positions: Yes, see below
Why We Like It:
Solar stocks have been hammered over the last few months. CSIQ has been underperforming its peers. Currently year to date in 2015 CSIQ is already down -2.89%.
According to a company press release, "Founded in 2001 in Ontario, Canada, Canadian Solar is one of the world's largest and foremost solar power companies. As a leading manufacturer of solar photovoltaic modules and provider of solar energy solutions, Canadian Solar has an industry leading and geographically diversified pipeline of utility-scale solar power projects as well as a track record of successful solar deployment boasting over 8 GW of premium quality modules installed in over 70 countries during the past decade. Canadian Solar is committed to providing high-quality solar products and solar energy solutions to customers around the world."
Oil's plunge has been labeled the main reason for solar stock declines. On Wall Street there is some weird relationship between lower oil prices and falling solar stocks. Crude oil is mainly used for transportation, after it has been refined. While solar energy is used to generate electricity. There does not seem to be a direct relationship but solar stocks continue to sink as oil prices fall. Inside the U.S. oil is used for maybe 1% of electricity consumption. We would be better off comparing solar to coal. Coal still accounts for about 30% of U.S. energy production and coal prices have been falling the last three years.
Technically CSIQ looks pretty ugly. Shares are in a bearish trend of lower highs and lower lows. They just recently broke through what should have been support at their 2014 lows. Now CSIQ is flirting with a breakdown under round-number support at the $20.00 level. The last few days appear to have formed a bear-flag consolidation pattern (counter-trend rally). The point & figure chart is very bearish and forecasting an $11 target.
Tonight I am suggesting a trigger to open bearish positions at $19.45. We'll try and limit our risk with a stop loss at $21.05. More conservative traders could use a stop closer to today's high instead (20.68). You might want to keep your position size small. CSIQ has been volatile in the past. The most recent data listed short interest at 13% of the small 37.9 million share float. You may want to use put options to limit your risk.
Trigger @ $19.45
- Suggested Positions -
Short CSIQ stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the MAR $20 PUT (CSIQ150320P20) current ask $2.30
Option Format: symbol-year-month-day-call-strike