Alerting To Solar Stock Action: How To Make Money
Nicholas Santiago | Nov 12, 2012 11:44PM ET
Solar stocks surged Monday in an otherwise quiet market. Yesterday was Veterans Day and the bond market was closed. This always means that the stock market will see less action. The S&P 500 traded at 1,377.42, -2.43 -0.18%.
While generally the stock market saw less action, solar stocks jumped, especially Chinese solar stocks. Solar has been a very dead area over the last year, with most trading at new 52-week or all time lows. First Solar, Inc. (FSLR) has been the only stock in the last few months to move up, following decent earnings and a few major contract announcements.
Things shifted yesterday. Not only did First Solar moving higher, but some Chinese solar companies surged. LDK Solar Co., Ltd (ADR) (LDK) is trading at $1.05, +0.15 (16.67%) and Suntech Power Holdings Co., Ltd. (ADR) (STP) is trading at $1.01, +0.10 (11.50%). Other Chinese solar stocks are sure to wake up and make some major moves. These moves in LDK and STP may just be the beginning if shorts start to cover.
So why are the Chinese solar stocks suddenly waking up? It has to do with a few different factors. First, China is increasing stimulus to offset the lack of demand in their economy from Europe. As they ease and pump money into China, the economy will pick up for all companies. Next and possibly the most important is the short ratio versus price valuation. Chinese solar stocks are priced at levels that insinuate bankruptcy. While some may go that way, there is no way all will. In addition, shorts are overloaded on the negative side. Anytime a trade gets too crowded, the stock will move in the opposite way.
Chinese solar players like Trina Solar Limited (ADR) (TSL), Yingli Green Energy Hold. Co. Ltd. (ADR) (YGE), ReneSola Ltd. (ADR) (SOL) and JA Solar Holdings Co., Ltd. (ADR) (JASO) are all possible big movers in the coming months. They are priced at levels that make them intriquing speculation plays with over 100% upside in my opinion.
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