Today's column includes a lucrative new contract for A-Power Energy Generation Systems, Ltd. (APWR), a bullish brokerage note for Canadian Solar Inc. (CSIQ), September sales figures from Rite Aid Corporation (RAD), and a reverse stock split for YRC Worldwide Inc. (YRCW). Each day, Early Edge focuses on the hot stocks in the news and gives you a unique insight into each stock's sentiment backdrop. Our time-tested contrarian approach centers on options, and gives you the trading tools to approach the day with a much-needed edge over the investing herd.
A-Power Energy Generation Systems, Ltd.
A-Power Energy Generation Systems, Ltd. (APWR) announced late Wednesday that it won a $279 million contract with Baishan Long Run Water Conservancy Development Co. Ltd. The project is divided into three phases, each of which is expected to last 24 months. APWR will recognize revenue from the contract over this six-year period on a percentage of completion basis.
In a statement, APWR CEO Jinxiang Lu expressed enthusiasm over the new contract. He added that the multi-year project "provides us with improved sales visibility heading into the second half of our fiscal year and beyond."
APWR has surged nearly 10% in electronic trading, with the stock set to erase a portion of its 58.6% year-to-date deficit. Now, it looks like the equity will have a fighting chance to notch a Friday finish above stubborn resistance at its 10-week and 20-week moving averages. These two trendlines haven't been surmounted on a weekly closing basis since Jan. 8.
Despite the stock's lackluster performance, calls dominate APWR's option activity. The security's Schaeffer's put/call open interest ratio (SOIR) is resting at an annual nadir of 0.33, with calls tripling puts among options set to expire within three months. However, with a noteworthy 15.7% of the stock's float sold short, it's possible that some of those near-term calls were purchased as hedges.
Canadian Solar Inc.
Canadian Solar Inc. (CSIQ) won a bullish endorsement from Jefferies today, as the brokerage firm adjusted its ratings on a slew of solar stocks. CSIQ was upped to "buy" from "hold," and analyst Jesse Pichel also hiked the stock's price target to $17 from $12.
"We believe CSIQ will have higher than previously expected [average selling prices] through 2011 and the company will benefit from cost savings by sourcing more cell components internally," wrote Pichel in a note to clients.
CSIQ is up almost 4% ahead of the open, and the shares are now poised to test resistance in the $15 region. The stock hasn't closed a session above this area since mid-May.
Interestingly enough, CSIQ's October 15 strike is home to peak call open interest of 4,514 contracts. Unless the shares can establish a foothold above this popular strike soon, this heavy accumulation of calls could exert options-related resistance as expiration approaches.
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