First Solar Traders Buy The Rumor, Sell The News

First Solar, Inc. FSLR stock jumped 5.4 percent Sept. 22 to a new 52-week high of $53.00 after a positive ruling from the U.S. International Trade Commission. The ruling left the door open for President Donald Trump to potentially restrict solar imports, a move that would likely support domestic solar prices.

However, despite the positive initial market reaction, First Solar stock plummeted 8.8 percent Monday and is down another 1.0 percent in Tuesday trading as well. On the surface, it appears as if the Trade Commission ruling was a case of “buy the rumor, sell the news” for First Solar traders.

Traders have known about the FTC case filed by bankrupt solar company Suniva since April. From the date the complaint was filed to last Friday’s close, First Solar stock nearly doubled in the span of only five months, up 86.6 percent.

Traders were buying the rumor that a favorable FTC ruling could provide a shot in the arm for the domestic solar industry. Once that ruling came, traders took the opportunity to cash out on their gains at 52-week highs and sell the good news. The initial price surge is often the catalyst that entices “buy the rumor” buyers to sell. Once the news is out, the catalyst is gone and these traders move on to their next idea.

The post-ruling sell-off now has First Solar testing the $46 support level that has been in place since late July. If the stock continues with its bearish momentum and breaks below $46, it might not find support until it reached the $39 to $40 levels, which served as resistance In February and May.

On the other hand, a bounce back above $53 could mean a continuation of the uptrend that has been in place since the stock bottomed in April.

Related Link: Solar Stocks Move As US Trade Commission Finds Harm To US Producers From Imports Of Solar Panels