Playing With Fire And Canadian Solar (CSIQ)

Posted by barkand on October 21, 2011 under Bollinger bands, Support / Resistance | Be the First to Comment

People love trading low-priced, high volume names like Canadian Solar (CSIQ).

Judging by how the chart looks, we imagine that many have been burned from trading this one. Down 70% since the end of June, the shares now fetch $3.20. And there was barely any sunlight. CSIQ skidded along its declining lower Bollinger band six different times. Only once did it manage to briefly break above its 20-day moving average. Even that did not last long, as it was quickly hammered back down.

But it is possible – possible — that  the long winter is over. The stock has recently found support at $3 and could be forming a bottom within the Bollinger bands – a bullish development. After the previous bottom (that would be number 6 on the chart below) there was unusually strong volume taking the price back up to $4. We noticed also, however, that the shares have been meeting stiff resistance at $4. Adding it all up, we feel that CSIQ has potential to reverse here. Or, worst case, it could go through a period of ping-ponging between $3 and $4 for a while. That doesn’t sound like much, but in percentage terms it could add up to big profits.