Today I decided to take a closer look at the charts (for more information on Solarworld, click here)
Starting with the weekly chart (below) - first things that jump out are:
1. It's trending up, and has been since late Feb/early March this year.
2. It's trading above the 8 and 21 EMA which is bullish
3. 3 candles ago, a bullish (Doji) candle formed. It's bullish because it has a long tail, indicating selling pressure, but closed nearer its highs indicating that buyers won.
I've noted my observations on the graph below;
So, the weekly is telling me its bullish.
So now lets take a closer look at the daily chart and take into account other stuff like Support & Resistance;
General observations;
1. Its bullish and in a nicely formed uptrend
2. It pulls back nicely, and (in the main) respects the 8EMA (good buying opportunities)
3. Nothing on this graph indicates that this stock is due a major correction.
4. The 1,800 Level of Resistance became Support
5. The stock pushed through 2,000 at the 2nd or 3rd time of asking
6. 2,200 is potentially setting up to become a level of resistance
7. 2,400 is potential resistance
So, that's all well and good, but how to trade it? Well that depends if and when you got into the stock and what time frames you trade!
If I had planned to invest in the long term in Solarworld and the fundamentals are unchanged, then there is nothing technically to convince me to exit the position.
If I had hit a predetermined profit target, I would book some profits and move my stop to around 1,800 in order to protect my gains, and then let the remainder of my position run.
If I was looking to get invested in Solarworld for the first time (which I am now seriously considering), then I'd look for pullbacks to the 8EMA (likely to be around 2,050-2,100). I'd invest 2% (as always!), with my initial target around 2,400 and my stop around 1,800 - giving me a respectable Risk/Reward ratio of 1:1.4.
