Trina Solar Limited: Breakout with TSL Calls on the Long Weekend

It is mid-week already and it is gonna be a very short week indeed as we have Thanksgiving tomorrow, Black Friday afterwards and we are in the weekend. Nonetheless, options traders can still add some dry logs to the trading fire as we examine the options of Trina Solar Limited (NYSE:TSL) today. Trina Solar Limited is small cap in the alternative energy industry where it has a market capitalization of $960.97M.

The company is an integrated solar-power products manufacturer based in China with a global distribution network covering Europe, North America and Asia. The Company produces standard monocrystalline photovoltaic (PV) modules ranging from 165 Watts to 185 Watts in power output and multicrystalline PV modules ranging from 215 Watts to 240 Watts in power output. Trina sells and markets its products worldwide, including in a number of European countries, such as Germany, Spain and Italy.

Why I am Attracted to Trina Solar Limited Today

TSL Chart

The chart above shows how the shares of Trina Solar have traded within the last one year. You will notice that shares of Trina Solar have spent more time in the bearish zone than in the bullish zone for much of this year. In fact, the stock’s current trading price of $10.79 marks a mere 24.45% premium over the 52-week low trading price of $8.67. However, the $10.79 trading price marks an incredible 73.95% discount to the stock’s 52-week high of $18.77.

Nonetheless, it appears that shares of Trina Solar are now gearing up for another uptrend out of the bear woods. You will observe that the stock seems to have been channeling around the key level of $11 (Blue) since October. $11 is a key level for the shares of Trina Solar because it was an important support level for the stock from June through August (Green). Interestingly, shares of Trina Solar have climbed up twice to that $11 resistance level in November (Red) and a breakout above the $11 key level should reward options traders nicely.

Why A Breakout Above 11 is Possible

The first reason that attests to the possibility of a breakout above $11 for Trina Solar is the technical indicators of the stock. Starting with the RSI, shares of Trina Solar currently sport an RSI on 54.35 after the stock’s RSI has been rising steadily since the start of this month. The rising RSI suggest that the buying action on the stock is still strong and the fact that the RSI is still 28.79% away from reaching the “Overbought” level at 70 suggests that the stock has some upside potential ahead.

Going on to the Moving Averages, the 50 and 200-day moving averages of Trina Solar suggests that the stock has upside potential ahead. Shares of Trina Solar currently trade with a 50-day moving average of $10.90 and a 200-day moving average of 12.41. Hence, we can easily calculate that the stock is trading at a 1.01% discount to its 50-day moving average and at a 15.01% discount to the 200-day moving average.

How to Trade TSL Options

From the foregoing, it is obvious that the possibility of seeing shares of Trina Solar breaking out above the $11 key level is higher than the probability of seeing a breakdown under that level. Hence, it is smart to buy TSL calls and I recommend buying the TSL Mar 2015 11.000 call (TSL150320C00011000) at an asking price of $1.26 per share.

 

— Daily Option Alerts

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