First Solar (FSLR)

In last week's edition of Trading Tools, Meritage Homes (MTH - Snapshot Report) was discussed, as it appeared on the Zacks Put/Call Ratio Greater than 1.0 filter. Today, however, utilizing the Zacks Unusually High Options Volume screener, I found another equity that caught my eye: Arizona-based First Solar Inc. (FSLR - Analyst Report) .

The Unusually High Option Volume Filter

The filter is somewhat self-explanatory. It looks for stocks with single-day option volume in excess of their average volume over the last month. Why is this important? Simply put, this filter allows us to read how options players feel about a certain stock, and sometimes unusually heavy option activity can be the sign of an event (like earnings or merger-and-acquisition news, for instance) or, occasionally, a reversal of sentiment in the options pits.

Call Volume Nearly Triples Daily Average

As mentioned above, FSLR was brought to my attention due to the screener, which revealed the stock's notable call activity. More specifically, the filter indicated that the solar sultan saw 15,653 calls cross the tape last Thursday – nearly 3 times the security's average daily call volume. In fact, during the past 10 days on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), calls have been added at a faster pace than their put counterparts, as noted by the stock's ISE/CBOE 10-day call/put ratio of 1.37.

Digging further into the options data, however, we find that despite Thursday's surge in call activity, short-term options speculators are relatively bearish toward FSLR. The stock's Schaeffer's put/call open interest ratio (SOIR) – measuring options slated to expire within 3 months – currently stands at 1.28, in the 74th annual percentile. In other words, near-term option traders have been more skeptical of FSLR only about a quarter of the time during the past year.

Breaching Technical Support

Taking a look at FSLR from a technical standpoint, it seems that the stock could be facing a crucial crossroads. After falling beneath intermediate-term support from the 240 level, as well as its 32-week moving average, the equity has fallen about 3% during the past week. Currently flirting with the $233.50 level, the security is now attempting to find support at its inclining 50-week trendline. A fall beneath this moving average would be the first for the stock.

The catalyst for the tick lower? Possibly a bearish brokerage note from a major firm, which said that slowing solar-cell demand in the U.S., Germany, and Italy could retard the sector's first-half 2009 demand.

Word on the Street

How do others in the brokerage bunch regard FSLR? According to Zacks, the majority of ranking analysts are in the bullpen, with 16 out of 22 brokers deeming the solar czar a "buy" or better.

The Bottom Line

FSLR investors should keep an eye on the 240 region, as this neighborhood played the part of support since early April. Should FSLR fail to reclaim this area, look to the stock's 50-week moving average as a potential form of support. However, a weekly close beneath this trendline could signal weakness in the shares – which could motivate the bulls to reevaluate their positions. An unwinding of optimism – whether in the options arena or via downgrades and/or price-target cuts – could act as potential catalysts to the downside.