3 Solar Stocks Burning Short Sellers

Solar stocks are on the rise today, but not all traders are likely to be thrilled

by Kirra Fedyszyn

Published on May 23, 2016 at 3:46 PM
Updated on May 23, 2016 at 3:47 PM

Solar stocks are on the rise today, following better-than-expected first-quarter earnings from ReneSola Ltd. (ADR) (NYSE:SOL). As SOL and several of its sector peers including SunPower Corporation (NASDAQ:SPWR) and Canadian Solar Inc. (NASDAQ:CSIQ) make their way higher on the charts, bears could be feeling the heat -- considering short interest has been running high on SOL, SPWR, and CSIQ ahead of today's rally.

SOL has soared 14.9% to $1.41, and pared its year-to-date loss to 17%. But with today's positive price action, SOL is has run headlong into its overhead 120-day moving average -- a trendline has served as resistance since late March.

The only analyst following SOL currently rates the stock a lukewarm "hold," and while options volume has been light, short sellers have been bearing down on the equity. In fact, short interest rose by 10% during the two most recent reporting periods. And at SOL's average pace of trading, it would take more than six sessions to buy back all the shorted shares.

SPWR is up 4.3% at $16.60 today, recovering from last week's dismal price action -- which included Friday's three-year low of $15.15. Longer term, the stock has given up nearly 45% year-over-year -- a move exacerbated by the company's wider-than-predicted quarterly loss earlier this month.

Short sellers, meanwhile, have been cashing in their winning bets amid SPWR's downfall. Specifically, short interest dropped 8.8% during the most recent two-week reporting periods. However, these bearish bets are still elevated, accounting for more than one-fifth of SunPower Corporation's available float.

CSIQ is also getting a lift, last seen 2.9% higher at $18.59, after the company reported this morning that it has completed refinancing on four solar power plants in the U.K. But the shares are off 35.8% year-to-date, and have been stuck beneath their 60-day moving average for most of 2016.

Meanwhile, although short interest declined almost 4% on Canadian Solar Inc. in the most recent reporting period, it still represents 11.2% of the stock's available float. Analysts, however, remain optimistic, with all eight brokerages maintaining a "strong buy" recommendation. Should CSIQ resume its longer-term downtrend, a round of downgrades could apply pressure to the shares -- and please the shorts.

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