This solar stock is about to surge 15 percent — here’s how to play it: Trader

First Solar is about to see some sunny days ahead, says one trader, who is attempting to triple his money by betting on the stock.

While the solar energy company saw a plunge in early November, after reporting a huge drop in revenue and slashing guidance, the stock has staged a bit of a comeback since then. And Andrew Keene of AlphaShark believes that a big rally is in the cards based on a previous trend.

The daily chart of First Solar shows that its 20-day moving average recently crossed above its 50-day moving average, which Keene considers a significant sign based on what happened to First Solar in October. The 20-day moving average had crossed the 50-day moving average then as well, and shares of First Solar rallied about $5 after the move.

The crossing of the daily moving averages and First Solar's 4 percent rally this week lead Keene to believe that the company's shares are starting to mirror the rally in October. That, and the stock seems to be performing well despite Thursday's market dip.

"With the market and the S&P selling off today very hard, we see First Solar holding up today very strong against a weak market," Keene said Thursday on CNBC's "Trading Nation." "I think First Solar is going up to $40 by March."


This means that Keene believes First Solar could rally another 15 percent. As a result, he wants to buy the March 37.5-strike calls and sell the March 40-strike calls for 70 cents total per share. In order to make money on the trade, First Solar would have to close above the break-even point of $38.20 on March 17.

If First Solar closes above $40 on March 17, the trade would net him $2.50 per share, more than tripling the money he committed to the trade. On the other hand, if it remains below $37.50, that entire amount spent would be lost.

Unfortunately, not everyone is as bullish as Keene. Research analysts' most common rating is a hold, and the median target price is $33.38, implying that Wall Street thinks the stock is overvalued.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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