Trina Solar (TSL) is probably one of my most talked about stocks on this site. For the past year it has been my favorite swing trade stock since it tends to follow a pretty solid pattern. Plus, I believe we’ll be seeing an uptick in solar power demand in the near future, and I like TSL and CSIQ specifically as long term solar buys. This means I’m never very worried when I’m in a long TSL position, even if it’s trading down.

As is often the case, I have been long TSL for the past few months. TSL was set to report second quarter earnings this morning, and the stock had been trending upwards for the past week leading up to the results. While normally this is a good thing, I had been seeing rumblings among traders (oh, how I love StockTwits and Estimize) that earnings would be a miss due to rising prices for parts that TSL uses. Plus, the run up before earnings meant that there was less room for upside growth if earnings did go well.

TSL's performance the past few days
TSL’s performance the past few days

I was pretty confident that the stock would go down after earnings, so I figured I would take my money and run while the stock was still up. Yesterday I sold all of my shares of TSL at $13.40 a share, for a small but decent return.

But, it’s always better to profit than just avoid a loss, so I figured I would capitalize on the potential fall today. Shortly after I sold my shares yesterday, I sold short 750 shares at $13.30 each (essentially sold at $13.30 and agreed to buy them back later at a hopefully lower price).

Sure enough, TSL earnings were off and the stock is down over 8% today. Revenues came in at $519.4 million, an increase of 16.8% over the previous quarter, but lower than revenue estimates. Plus, profits were down because of a higher cost of goods sold.

By the way, none of these earnings results change my position as bullish on TSL long term. Even though revenues were lower than expected, they still showed significant growth over the prior quarter and the past year at 18%. In a growing company I focus more on revenue growth (anticipated to be both for the company and the solar market) than anything else.

But for now I am quite the happy camper that TSL is trading down. Given my short position I was more conservative than I am with a long (with a long position your loss is capped at how much you bought the stock for; with a short the loss potential is unlimited), and so I “bought to cover” my short shares at $12.45. This left me with a 6.4% profit – not too shabby for a day’s work!


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