Lessons from Trina Solar (TSL)

The most notable move in your Global Bull Market Alert portfolio was the sudden collapse of Chinese small cap Trina Solar (TSL). You hit your stop of $54.50 on Thursday after Reuters reported that Germany is considering big cuts to its huge solar subsidy program.

In the end, you finished with a gain of 12.79% on the stock. You had booked gains of 65% and 118% on the options, just since Dec. 14.

The Trina Solar trade offers valuable lessons in how best to handle some of the more volatile picks in future Global Bull Market Alerts.

To summarize what happened:

1. You bought Trina Solar (TSL) and the March $50 call options on Dec. 14.
2. TSL moved quickly, and you took 65% profits on your options on Dec. 28. You’ll often see me recommending that you take some money off the table when your option profits hit these levels.
3. I sent you a Special Alert on Jan. 6, recommending that you take profits of 118% on the options as TSL continued to move sharply upward. Sharp moves in stocks inflate the value of options disproportionately and, more often than not, make it worthwhile to take profits.
4. You tightened your stop on TSL to $54.50 — giving this volatile pick some room to move, but also limiting your downside, in case the stock was hit by a global crisis or unexpected announcement. TSL was hit by just such an unexpected announcement last Thursday, and you were stopped out.

As I’ve noted, I intend to recommend more individual, volatile picks in the coming weeks. That means the potential for bigger, quicker profits. But it also means higher overall volatility, in comparison with exchange-traded funds (ETFs) like iShares MSCI Chile Investable Market Index (ECH) or the SPDR S&P Emerging Markets Small Cap ETF (EWX). The case of TSL offers you a good model of how to best handle these profitable, but volatile trades.

Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) fell back last week, along with the rest of the global markets. With the position near its stop price of $45.50, keep your eye on this position, which remains a HOLD.

Market Vectors Brazil (BRF) dropped back last week. With the prospects for Brazil in 2009 still strong, this leveraged bet on Latin America’s emerging economic giant — and my favorite long-term pick for 2010 — remains a BUY.

China Yuchai International Limited (CYD) fell as China’s markets sold off. But the more I dig into the stock itself, the more I like it. With preliminary reports indicating that both sales and earnings have exploded for CYD in November and December, the fair value for CYD is close to $30. That’s close to double its current levels. CYD remains a BUY.

The iShares MSCI Chile Investable Market Index (ECH) rose 1.1% to another high of $60.04 on Friday. Like the energizer bunny, it just keeps going and going. ECH remains a BUY. Tighten your stop to $55.50.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) pulled back last week, which was unsurprising given its high weighting in technology. Now technically oversold, Israel remains a BUY.

SPDR S&P Emerging Markets Small Cap ETF (EWX) briefly rallied to a record high over $50 last week, but could not hold that level. After several days of heading downward, this ETF is oversold and EWX is still a BUY.

India’s ICICI Bank (IBN) fell back again this week. I am not happy with this stock’s relative strength. I am keeping it at HOLD, but will be looking to exit it at an opportune moment. 

UltraShort Euro ProShares (EUO) ended the week flat, yet again. Because the momentum in this pick has fizzled, I am moving this bet against the euro to a temporary HOLD.

iPath DJ AIG Sugar TR Sub-Idx ETN (SGG) fell sharply on Monday last week, but resumed its uptrend toward the end of the week. I like the fact that this pick is uncorrelated to the rest of your portfolio. I don’t like the fact that it has become so volatile. I am moving SGG temporarily to a HOLD. Tighten your stop to $74.50.

Vimpel-Communications (VIP) shot past the $21.00 mark on Monday, before pulling back. There is good news coming out of Russia, as its fiscal deficit in 2009 came in nearly 27% less than previously expected. With Russia performing strongly in the first few weeks of the year, I am keeping this bet on Russian telecoms a BUY.

P.S. I’ve scheduled a special private meeting for my subscribers of Global Stock Investor and Global Bull Market Alert on Friday, Feb. 5, at this year’s MoneyShow in Orlando, where I’ll reveal special techniques and "tricks of the trade" that I use in investing. This is the kind of hands-on training that I can only offer you in person. I’ll also discuss my secret technique for choosing customized exit prices, as well as an easy-to-implement formula on how much of each pick to buy to maximize your returns. I’ll also discuss where I think the biggest returns for 2010 will be found. Please join me at the Orlando Money Show, Destin room, on Friday, Feb. 5, from 3:30 to 4:30 p.m. by registering here.

P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.