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Solarcity (SCTY) - Don't Catch a Falling Knife

Solarcity (SCTY) Daily Chart 11/10

(click to enlarge)

I am of the camp that believes in solar city. Many don't and have very good reasons to be bearish on SCTY. It has not provided one quarter of positive earnings yet. It's initial hype has capitulated, and where price is heading (down), is likely more reflective of its current intrinsic value. 

On the other hand, this is a fairly new company and I am not surprised to see the growing pains especially with oil prices at relatively low prices. It might be a while before the solar industry really gain critical mass, but I believe it will and solar city is positioned fairly well, but mostly on the residential side. 

I am not equipped to make a full scale argument for Solarcity fundamentals, which look ugly at least in the short to medium-term. Earnings missed forecast last week, missing the -$1.99 estimate and posting -$2.10 EPS instead. In the long-term I think at SCTY will start becoming a bargain if it falls below 20. 

For now however, as the saying goes "don't catch a falling knife". If price does fall below 20, then consolidates, I would consider a buy and hold strategy, fading in more if it slides further toward the 8-12 area. Again, instead of trying to get the best and lowest price, I would wait until price consolidates (trades sideways) for a period of time.