As a leading manufacturer of solar panels, First Solar (NASDAQ:FSLR) is perfectly aligned with modern sensibilities regarding resource generation and deployment. However, strong narratives alone can only do so much. At the end of the day, investors must convince themselves whether exposure to FSLR stock is worth the capital expenditure or not.
Subsequently, it’s this demand profile — not anyone’s opinion about the business — which represents the core driver of First Solar’s market valuation. If people aren’t willing to take a shot on the company, it doesn’t matter what anyone thinks about the entity’s forward potential. That’s what separates the quantitative approach from the traditional methodologies of fundamental and technical analysis.
Now, what make quant-level analytics such a rarefied field is its mathematical specialization. In prior paradigms, quantitative research was only available to an elite few. Now, with the advancement and scale of technology, practically anyone can utilize the strategies deployed by quants for extracting alpha.
For me, the biggest difference maker stems from probabilistic analysis. By framing price action as discrete events rather than scalar expressions, investors can categorize, quantify and project future price movements — with reasonably solid accuracy.
For instance, in the past 10 weeks, FSLR stock printed a “3-7” sequence: three weeks of upside interspersed with seven weeks of downside, with a net negative trajectory across the period. What makes this sequence stand out is that in 61.4% of the times it flashed, FSLR returned a positive performance in the subsequent week.
What’s more, the median one-week return under the positive pathway is 5.33%, whereas the median loss under the negative pathway is 4.03%. Therefore, even the risk-reward profile on the payout side is asymmetrically favorable to bullish speculators.
Primarily, the significance of the 3-7 sequence isn’t just about the higher probability in the responding week. It’s that the odds also represent a significant departure from the normal cadence of FSLR stock.
On any given moment, the chances that a long position held for a one-week period would be profitable is only 50.15% for First Solar. That’s barely an edge for the bulls. As such, if presented with an opportunity to acquire FSLR stock, much caution would be required.
However, from a quantitative perspective, it’s all about probabilistic context. For a straight wager under normal market conditions, I may be more comfortable with a hedged bet. However, if the 3-7 sequence has flashed, I’d be much more willing to take an aggressive bet. In fact, the math incentivizes me to do so.
That’s another reason why I don’t particularly care for disseminating market opinions about this stock or that stock. Frankly, such discussions are useless because they don’t provide any empirical edge — just vibes.
Moving forward, over the next 10 weeks, FSLR stock may gradually level off around the $134 level, with some turbulence projected for the middle weeks. On the other hand, should the bears gain control of the market, the equity could see a gradual deflation toward $122.
While First Solar isn’t for the faint of heart, it could be intriguing for those seeking a contrarian idea.
