First Solar, Inc. (FSLR) stock is sticking like glue to fourth quarter highs despite a series of bear raids intended to drop the Tempe, Arizona-based solar giant into an intermediate decline. This unusual strength suggests that the stock will head much higher in the first quarter of 2018, perhaps adding another 25% to dramatic gains posted since it bottomed out in April at a four-year low. As a result, market players should watch resistance at $62.50 for a breakout that sets off profitable buying signals.

The company raised 2018 earnings per share estimates above expectations in a Dec. 5 Analyst Day meeting, forcing many short sellers to cover positions. The bullish metrics eased newly bearish sentiment following passage of the Senate's tax reform bill, which limits alternative energy credit provisions. On the flip side, a recent ruling on solar panel dumping by the the U.S. International Trade Commission (ITC) should underpin profits at the largest U.S. panel manufacturer starting in the first quarter of 2018. (See also: First Solar and SunPower: Effects of Solar Panel Tariffs.)

FSLR Long-Term Chart (2006 – 2017)

 

The company came public on the Nasdaq exchange in November 2006, opening at $24.50 and taking off in a powerful uptrend that reached $283 at the end of 2007. The stock's value was nearly cut in half in the next 30 days, dumping to $143 ahead of an equally vigorous recovery wave that posted an all-time high at $317 in May 2008. A modest pullback accelerated during the economic collapse, dropping the stock through the prior low and into a 52-week low in the mid-$80s.

It bounced back above $200 in May 2009, stalling at the 50% sell-off retracement level while marking the highest high in the past eight years. A slow-motion decline followed, posting a series of lower highs and lower lows into a dramatic 2011 breakdown through the 2008 bear market low. The subsequent decline crushed remaining shareholders in a vertical impulse that reached an all-time low at $11.43 in June 2012.

A sturdy bounce into 2014 ended in the mid-$70s, marking major resistance that remains in force more than three years later. The stock then eased into a trading range, with support at $40 holding into a 2015 breakdown that ended at a higher low in the mid-$20s in April 2017. Committed buyers entered in force a few weeks later, generating a new uptrend that mounted broken range support in July. It stalled just above $60 in November and has spent the past five weeks consolidating impressive annual gains in a narrow range price pattern. (For more, see: The History of First Solar.)

FSLR Short-Term Chart (2016 – 2017)

 

A Fibonacci grid stretched across the 2016 into 2017 decline organizes two-sided price action, with the rally since April stair-stepping through harmonic resistance levels into the .786 retracement in the low $60s. Many bounces end at this critical level, while breakouts can be dramatic, generating momentum-fueled advances that complete V-shaped patterns. The 2016 high in the mid-$70s could be reached quickly if the bullish scenario plays out, offering sizable profits as long as exits are taken promptly.

On-balance volume (OBV) lifted to an all-time high at the start of 2016 and rolled into a distribution wave that ended at the same time the stock posted the deep April 2017 low. Healthy accumulation since that time has nearly reached the prior high, generating a bullish divergence, predicting that price will play catch up in the coming weeks. This bodes well for a breakout above harmonic resistance in the low $60s and a rapid ascent into the mid-$70s. (See also: First Solar Tops Q3 Earnings, Raises '17 EPS Outlook.)

The Bottom Line

First Solar is holding close to fourth quarter highs while the Nasdaq-100​ sells off, signaling resiliency that should translate into higher prices. A breakout above horizontal resistance at $62.50 could set this rally wave into motion, targeting six-year resistance in the mid-$70s. (For additional reading, check out: Top 3 Solar Stocks as of December 2017.)

<Disclosure: Thee author held no positions in the aforementioned securities at the time of publication.>

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