WFR stock has been included in the Barclays’ Top 30 Stock Picks for 2011, while WFR shares are trading close to 61.8% Fibonacci Retracement at $11. The stock pick is in fourth place and recommended as a strong buy stock pick with a target price of $16 for a potential 46% return. Meanwhile JA Solar, the MEMC Electronic Materials’ (WFR) solar module supplier, has announced plans for production increase by 30% next year. Although the WFR stock was the second worst semiconductor equipment stock of 2010, technical analysis along with favorite stock news make WFR a recommended buy stock pick.
WFR stock price has almost touched $9.00 this summer, which has been the year’s low. Since then the stock has entered an uptrend that topped in November hitting $13.80. The retracement that followed broke the trend line and nowadays the stock has found support at $11 price mark. Connecting the lowest point with the highest one of the recent uptrend we can easily point out the 38.2% and %61.8 major Fibonacci retracement levels. Buying the WFR stock now and taking the ATR indicator into consideration for setting a stop loss at $10.70 or a bit lower, sounds reasonable if we are going to trust Barclays’ pick and technical analysis. The investment’s risk is about 30 to 40 cents per share, while the profits can be more than rewarding in case Barclays’ prediction is verified. Taking the first profit at $11.50 and moving the stop loss for the remaining shares higher at that time securing a profitable trade will remove the psychological pressure. Traders will only need to keep an eye on the trade the following weeks to monitor their long position and pick exit points at the $13.80 high, probably letting 10-20% of the initial position run, should the price indeed climb up to the $16 target.
There is only one worrying element of technical analysis in the daily graph and that is the long term downtrend starting from April’s high at $17.00. If you connect that high with the low at $9.00, you will find out that the 61.8% Fibonacci retracement of the downtrend is close to $14.00. That means we might be trading a short term uptrend inside a longer term downtrend. However if that is indeed the case, taking profits at $11.50 would keep us away from falling in love with WFR stock.