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I used to run a limited partnership, boutique hedge fund in the 90s. Retired in 2000 and moved from New York City to Toronto, Canada, got married, raised a family and basically settled down. After a few years in Toronto, my wife got tired of the city’s 8 months of cold weather and insisted that... More
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  • Why I Am Bullish On ReneSola (SOL) 39 comments
    Oct 28, 2013 1:11 AM | about stocks: SOL, SPWR

    There has been a lot of chatter on this board about the prospects of China based solar company, ReneSola (NYSE: SOL). A number of my blog's readers have asked for my opinion...So, in a nutshell, here are my thoughts...

    When I started my blog a little over 10 months ago, one of my first investments for my Options2Wealth portfolio was in a company whose shares were then trading at barely $5.00...That company, was of course, SunPower.

    What attracted me to Sunpower was the fact that the company's entire marketcap then was around $500 million while its annual sales were more than $1 billion. Then 2 days after I allocated 40% of my portfolio's initial capital into SunPower's options, Warren Buffett's company MidAmerican Energy agreed to purchase 2 solar power plants from SunPower for $2.5 billion. In other words, just that order alone was more than 4x SunPower's then entire marketcap. The rest, as we all know, is history...LOL!

    Fundamentally, what attracted me to ReneSol is the fact that the company's marketcap, as of Friday, October 25, 2013's closing share price of $4.50, is barely $389 million, while its revenue per share, according to Yahoo, is $13.73. In other words, 3x greater than its current share price. Since most American solar companies today trade at greater than 1x sales and most China based solar companies, trade close to 1x sales, SOL's meager marketcap is an anomaly that Mr. Market should correct relatively soon. At an absolute minimum, I expect SOL share price to at least double, just to keep up with the Joneses...

    Technically, the stock, recently blew through its Bearish Resistance Line (BRL) and in the process, also broke a double top on its PnF chart...Those following my blog know how much importance I place on this technical signal which basically telegraphed to us that the stock has reversed its previous bearish down trend and has started a brand new up trend. Here is its current PnF chart which technically is a piece of beauty:

    (click to enlarge)

    To those who are concerned by the stock's recent pullback after piercing its BRL...I would like to point out that historically, this pullback is par for the course for this stock and very much part of its modus operandi...If you look closely at the stock's 3 year weekly chart, you will notice that every time the stock made a substantial, weekly percentage move up, it immediately pulled back, rather violently, sometimes as much as 50%, from its previous weekly high to its new weekly pullback low...

    (click to enlarge)

    Cases in point:

    1) Week of 2/18/2013: High of $2.85 and 6 weeks later, the week of 4/01/2013, low of $1.25, Down 56.14%

    2) Week of 9/02/2013: High of $5.90 and 3 weeks later, the week of 9/23/2013, low of $3.95, Down 33.00%

    3) Week of 7/22/2013: High of $4.75 and 3 weeks later, the week of 8/12/2013, low of $3.52, Down 25.89%

    So far, on its recent uptrend move, the stock hit an intraday high of $6.00 during the week of 10/07/2013 and 2 weeks later, this past Friday, October 25th, 2013, SOL printed an intraday low of $4.44...in other words, a pullback of 26%. This pullback matches the pullback of #3 above but it is nowhere close to the 56% pullback of #1 above.

    So you get the picture...

    This current pullback is very much within the stock's DNA and I don't yet see anything that would make me take cover...

    :-)

    Additionally, on its 3 year weekly chart, you will also notice a beautiful cup and handle being formed from June of 2011 up to the present...And as I have mentioned many times here in the past, typically the handle needs to be 8 weeks long and as of this past Friday, this handle is only 7 weeks long...so we have at least another week of consolidation before the stock breaks out in earnest...

    And breakout it will...it's only a matter of time...all we need is patience...

    :-)

    kp

    DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you. On the other hand, if the move(s) result in a profit for you, I am open to discussing a split. ;-)

    Disclosure: I am long AAPL, GALE, HALO, RMTI, SOL, SPWR, VTUS, ZIOP.

    Themes: Options, Solar Sector Stocks: SOL, SPWR
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Comments (39)
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  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Thanks KP! :-)
    28 Oct 2013, 11:11 PM Reply Like
  • rshayeg
    , contributor
    Comments (6) | Send Message
     
    KP thank you for the article, greatly appreciated. One question I had, do you think SPWR will have another massive selloff after earnings or will the market recognize a good earnings report and drive the stock higher?? Best.
    29 Oct 2013, 09:44 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Thanks so much for the analysis KP! Appreciate it. I have the same question as rshayeg, but am hoping for great earnings and the stock to run up. your thoughts?
    29 Oct 2013, 11:38 AM Reply Like
  • goferit
    , contributor
    Comments (19) | Send Message
     
    kp,
    Great article! By the way....what's your take on SCTY. I'm thinking it's about ready for another run, depending on SPWR e/r on Wed, & FSLR e/r on Thurs. SCTY e/r next week, Nov 06. Do you think stk price could reach $75-$100 by end of this year?
    ....Thanks!
    29 Oct 2013, 01:22 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » Goferit, Thanks for bringing SCTY back on my radar...I had stopped following it...Its PnF chart is forming a picture perfect "flag" pattern with a print of $62 being an intermediate breakout and $65 a confirmed breakout...As for its target price, since SCTY does not have any history @ $65, your guess is as good as mine...however, it does have the potential to reach those levels...

     

    BTW, I love your "goferit" handle because it is exactly how I live my life...LOL!

     

    kp
    30 Oct 2013, 09:32 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    I think SPWR ER will set the tone for solar stocks. Hope it doesn't repeat the sell off. Sell on the news event :-) Good luck to all
    29 Oct 2013, 01:57 PM Reply Like
  • darween
    , contributor
    Comments (20) | Send Message
     
    Thanks for the analysis which options would you buy
    29 Oct 2013, 11:44 PM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    I'd buy the ones with more volume/interest & not too far from current price
    30 Oct 2013, 01:21 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Great day in Solar today!!! Thanks KP!
    4 Nov 2013, 04:42 PM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Thanks KP, I bought SOL calls today. Hope to see your target price soon. This might be my X'mas/ New year's gift :-)
    4 Nov 2013, 06:22 PM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Hi KP. So far earnings season has been pretty darn good for your calls. I have a few questions so I thought I would split them up in different posts so you can pick and choose which ones to respond to for the benefit of all your loyal followers. Thanks in advance!
    7 Nov 2013, 01:44 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    SunPower
    SPWR exceeded your PT of $33 and I expect it to cool off a bit before continuing its way up. It always seems to cool off for about 20 days after earnings announcements and when its weekly RSI hits 80 (beginning of Oct). It hasn’t seen this price territory since 2009

     

    Question: Do you have another price target for SPWR going forward and expiration date of a slightly out of the money call option? Still expect Market Cap of SPWR ($5.35B) to continue to eclipse FSLR ($5.97B) this year? FLSR went on a run to get back in front of SPWR as of late. After selling a good portion of your options pre-earnings from your suspicions around the 8-K filing, are you loading back up? waiting for better prices? Or making SOL your portfolio leader? I am personally hoping for that 10% pullback down to $30 and then right back up to continue SPWR consistent flag formations.
    7 Nov 2013, 01:44 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    ReneSola
    SOL is still in its Consolidation stage as you pointed out, and we are playing the waiting game for it to break out of the handle. Unfortunately, it has lagged the rest of the Solar Market but I have high hopes (hopefully it’s the same story as SPWR at the beginning of January like you said). That being said, hoping it turns around from its current price of $4.71 and gets to $6.50 (for an ascending quadruple top breakout->BEAUTIFUL Chart by the way) and then continues riding that momentum up to our $10.50 PT.

     

    Question: What is going to push SOL upwards? They do not announce earnings until Nov 25. Are we hoping the price increases before earnings like SPWR, SCTY, and FSLR did?
    7 Nov 2013, 01:44 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    SunEdison
    SUNE beat earnings this morning and is making its way to your $13.50 PT, though it looks like you have exited your options for probably better choices. It went up significantly in early trading but could have been even more if the entirity of the solar market (which was down today) didnt hold it back a bit. Is this no longer one of your favorites in the sector and do you prefer SOL over SUNE?
    7 Nov 2013, 01:45 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Apple
    AAPL appears to be consolidating after a good quarter, but I am hoping it turns right around into X’s and hits $540 for a nice double top breakout. Catalyst in my opinion is the possibility of an announcement by China Mobile here between 11/9-11/12. http://bit.ly/1cFAzwX Although we have heard this rumor many times.

     

    Question: That being said, I would like to know your thoughts on a couple of things. I believe Apple is going to absolutely crush its earnings for its Q1 (quarter ending Dec 31) when it announces on Jan 24th for many reasons (listed below), but how would you play this? I don’t think we want January Call Options because that won’t capture the earnings announcement. February 22, is a good bet but the time premium of the option will begin to dissolve more quickly once it is within a month of expiration. Finally, I think April is just too far out there and costs too much for the timing premium, however you always say not to try to hit a home run and buy short term options, so are Jan and Feb too short term for your tastes?

     

    Other Catalysts -> Tim Cook believes it will be “an iPad Christmas” with the new iPad Air (iPad Air is seeing 5 times the usage the iPad 4 did two days after launch and 3x that of the mini) and Retina iPad mini (on sale Nov 21?). Cook also alluded to an announcement on changes in the company’s share buyback plan to wait until the Jan earnings announcement. Also, the iPhone 5S supply still can’t meet demand, so they cut 5C production and increased 5S for the time being. However, the Company is looking to contract another 5C manufacturer which is another possible clue that a CHL deal is close.
    7 Nov 2013, 01:46 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Biotech/Pharma Sector
    KP, looks like you are changing sectors as of late. Seems you have put some emphasis in the Biotech/MedDevice/Pharma industries with your new Long Positions in mostly small cap plays. Has something changed or shifted? This may take an entire post for you to discuss but this is very interesting to me. I can’t figure out you changed portfolio emphasis/weighting, but I am extremely interested in your obviously well educated decision. I took a quick look and though I don’t know why the industry change to begin with, I had some thoughts on the specific companies technical. Would you mind adding any color around these, especially if you believe there is a whale sitting here and you have committed a significant portion of your portfolio to one or two in particular PLEASE??

     

    GALE->Candlestick-the 50 day SMA is about to cross the 200 day SMA within the next couple of weeks and the candles have consolidated to a very tight formation, which is very bullish with the golden cross.
    HALO->Candlestick-d... a cup and handle pattern, will finish cup at 13.50, same as PnF PT. The 50 day SMA is about to cross the 200 day SMA within the next couple of weeks. (5 for 5’er)
    RMTI->Broke the Bullish Resistance Line in Sept. Forming a good consolidation stage here. PT is 27.75. Currently in O's with a sell signal at 10.00. Big news is if it breaks to 13.50 which is an ascending triple top breakout. (5 for 5’er)
    VTUS->negative trend. Consolidating between 3.75 and 2.75. PO is 7.5. Bollinger Bands are really, really close. Sell signal at 2.50 though which is very attainable. Buy signal is at 3.75 (0 for 5’er). What am I missing? There has to be something that makes this a buy but I don’t see it.
    ZIOP->just broke the BRL at the start of October. Then hit an ascending triple top at 5.0. since then, has reversed and shown a sell signal at 3.75. if it hits 3.25, it hits the Bearish support line, which is really close.

     

    Thanks for you comments and clarification!
    7 Nov 2013, 01:46 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Hi KP,
    What are the chances of SOL filing for bankruptcy?
    Also, others please share your views.
    15 Nov 2013, 12:38 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » That is a very funny question, IB...

     

    Before, I answer your question, may I ask you how long have you been following my blog?

     

    kp
    15 Nov 2013, 01:35 PM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    I know KP, I was expecting the same response from you. :-) Its just that I read lot of negative news about SOL. Suntech, Evergreen went bankrupt. May be LDK is next in the line? Looking at SOL's financials, total liability is going up while equity is going down. I had Evergreen share before it went bankrupt. It still shows up on my trading a/c under portfolio holdings :-( It always reminds me of my mistake when I see $7.5K in RED. I get skeptical about solar companies in general. After reading your blogs, I was convinced & bought calls of SPWR. That helped me recover the loss from Evergreen solar. Thanks to you. Now I'm more convinced with your calls on AAPL & SOL so my risk level has increased & at present holding ~$20K SOL calls. Earnings release is next week & SOL is stuck under $5. I'm concerned that if there is a selloff after earnings release then how low will this go? Last time SUNE went down from $11 to $6. If it's positive then sky is the limit. I think I'll take the risk & see what happens after earnings. :-) thanks!
    15 Nov 2013, 03:32 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » IB, As you know, I strongly believe that a stock's chart telegraphs its company's health, be it good, bad or ugly...

     

    So let's analyze SOL's PnF chart, shall we...

     

    SOL's stock price recently pierced through its bearish resistant line...Bullish.

     

    Again on its PnF chart and going all the way back to April of this year, on every pullback, designated by Os, the chart has consistently printed higher lows...Bullish.

     

    And finally, going back all the way back to May of 2012, not once has the chart violated its previous support...in other words, no double bottom breakdown...Bullish.

     

    Had the company's financial health been so precarious as to be flirting with bankruptcy, that information should have been telegraphed to us by now via its chart...

     

    Therefore, I don't believe that the potential of the company declaring bankruptcy exists...

     

    Of course, all of the above, in my humble opinion only...

     

    :-)

     

    And finally, please be aware that I don't recommend anyone to follow my moves here...my blog is only meant for me to keep a public record of my stock picks and my technical analysis of those picks...if, in spite of my exhortations, anyone here decides to follow my moves, then at the very least, I hope that they buy options with loads of time on the clock...

     

    Hope the above helps...

     

    :-)

     

    Best~
    kp
    17 Nov 2013, 10:55 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Hello KP,
    I agree with you. Thanks for patiently replying to my question. With today's SCTY selloff, the entire solar is in red, however, SOL is still range bound with less than 1% in red. Good sign? :-)
    18 Nov 2013, 03:27 PM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Let's hope not! I am just trying to be patient with SOL. Its just fluctuating up and down (which doesn't scare me from the great analysis KP did above, but it does give us better buying sale opportunities). I am hoping it runs up here the next week in preparation for earnings on 11/24, then shows a great quarter, and maybe gets a few more analysts to follow the company or maybe even upgrades like SUNE did a few days after earnings. Let's hope our patience pays off! :)
    15 Nov 2013, 02:15 PM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Jinko Solar and Trina Solar each announced pretty good quarters recently, and even raised their guidance for the rest of the year. That being said, today was a huge sell off for Solar - TSL went from up almost 10% this morning to down nearly 6% on the day. The whole sector hit a wall. That being said, seems like more bullish news as two very similar companies (with higher Mkt Caps, surprisingly) to ReneSola had great quarters, beating estimates, increasing guidance, improving margins, and initially making gains in their stock price. The chart seems to say the same about SOL's announcement coming on Monday, but the market just doesn't seem to have valued SOL appropriately yet when compared to its peers.

     

    KP, do you agree and do you consider this sell off just another blip on the radar? Scary thought is a print of $4.25 is a double bottom and $4.00 breaks that double bottom (bearish). It is close, but do you see it getting there? Thanks!
    19 Nov 2013, 08:57 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » KC, Based on premarket price action, looks like the stock will break its first double bottom...however, now, the more important area to watch is whether its Bullish Support line will hold...imho, I believe that it will...we shall see...kp
    5 Dec 2013, 08:56 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Hi KP,
    I agree with your long term price target but what about short term direction? The concern is option price will drop more than 50% if stock price continues to drop. Worst case would be options become worthless & expire. I hold $5 calls for apr2014. Other than pnf other technical indicators are pointing south :-(.
    19 Nov 2013, 09:52 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » Hello IB, Short term, your options will take a bath, however, longer term (April), your $5 options should be ok...one way you may mitigate your pain is to increase your position in these very same options once the stock price has consolidated...then, when the stock price starts its upward move, the profits from your newer purchase will offset the losses from the previous buy...all in my humble opinion...kp
    5 Dec 2013, 08:53 AM Reply Like
  • darween
    , contributor
    Comments (20) | Send Message
     
    Kp thanks for what you do. Just these last picks have been great. Just wondering if you have a target for gale? My options have done very well. Also where can I send a giordanos pie your way. Thanks
    22 Nov 2013, 02:15 PM Reply Like
  • Amouna
    , contributor
    Comments (1379) | Send Message
     
    Kp thanks for the article on SOL. It is a tremendously growing company that I find relatively well managed, and with the general bullishness on the solar sector, it is only a matter of time before it rallies...
    26 Nov 2013, 07:26 AM Reply Like
  • Andy Zelenak
    , contributor
    Comments (281) | Send Message
     
    I suppose a good strategy is to buy more SOL now, but sell ASAP if it crosses below $4?
    26 Nov 2013, 10:52 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    I agree with you Andy. Looks like $4 has a strong support & it bounced back quickly.
    26 Nov 2013, 12:54 PM Reply Like
  • Andy Zelenak
    , contributor
    Comments (281) | Send Message
     
    I'm talking PnF charts, IB. The pattern of higher lows was broken, but at least there wasn't a double bottom breakdown.
    27 Nov 2013, 11:24 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Andy, looks like we are close to finishing the handle part of cup & handle pattern as suggested by our Guru KP on monthly candle chart. I would still hold it even if it retests $4 range.
    27 Nov 2013, 02:40 PM Reply Like
  • Options2Wealth
    , contributor
    Comments (95) | Send Message
     
    Author’s reply » Looks like SOL earnings, or lack thereof, will result in the breakdown of its PnF chart pattern...The question is, will its Bullish Support Line hold...Longer term, the company made a good move by closing down their money losing plant and took a charge against earnings...However, short-term, this will affect their share price...let's see where the stock closes today...It sure is a bummer...I guess we can't win 'em all...kp
    5 Dec 2013, 08:48 AM Reply Like
  • Andy Zelenak
    , contributor
    Comments (281) | Send Message
     
    That would have been a great e/r except for the $200M write down on the poly factory. There's no point in selling now... Might as well buy more as KP said above.

     

    Anybody know why it costs$200M to shut down a factory? I suppose it's an accounting thing
    5 Dec 2013, 09:16 AM Reply Like
  • Andy Zelenak
    , contributor
    Comments (281) | Send Message
     
    Unfortunately most people will see the 40% loss and panic sell
    5 Dec 2013, 09:24 AM Reply Like
  • kccase3
    , contributor
    Comments (35) | Send Message
     
    Hi Andy, when the company decides to cease operations on the factory, it essentially has to be "written off" (or removed) of the balance sheet. In accounting speak, this means you have to remove the Net Value of the Plant that will be shut down from the company's balance sheet (credit PPE, simplistically) and take that same amount as an expense to the Income Statement (debit Impairment expense). Normally, the cost of the plant would continue to be depreciated over its remaining useful life as depreciation expense, but since it will no longer be used, the remaining un-depreciated cost (net ppe value) has to all be expensed at once. Sorry if this got too nerdy but I tried to simplify it the best I could. Man, I did not see this coming though and can't believe the timing and what it did to the stock price. Huge bummer.
    5 Dec 2013, 01:10 PM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Will there be other write offs in coming quarters? If not then other numbers are good & improving. Just need to find the bottom. It is right at the support line. hope it recovers otherwise more sell off :-(
    5 Dec 2013, 04:34 PM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    hope it bounces back like SUNE did earlier after ~30% sell off.
    5 Dec 2013, 09:12 AM Reply Like
  • invest.beginner
    , contributor
    Comments (85) | Send Message
     
    Hi KP,
    The earnings report, is it really that bad? Or the stock is trading on technicals ONLY & we just wait for it to consolidate?
    6 Dec 2013, 01:54 PM Reply Like
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