Tornado Devastates Canadian Solar Inc (CSIQ) Stock, Option Bulls

Option bulls may start to lose faith in Canadian Solar Inc. (CSIQ), with the stock down big

by Alex Eppstein

Published on Jun 24, 2016 at 2:39 PM
Updated on Jun 24, 2020 at 10:16 AM

Like most of the stock market, the solar sector is getting punished by the U.K. "Brexit" blindside. Leading the way lower is Canadian Solar Inc. (NASDAQ:CSIQ) -- down 10.3% at $14.59 -- and on the short-sale restricted list -- after a tornado severely damaged one of the firm's solar cell manufacturing plants in China. Suffice it to say, bullish options traders and brokerage firms may be forced to rethink things in light of the downside gap.

During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CSIQ has racked up a call/put volume ratio of 3.69 -- in the bullishly skewed 70th annual percentile. While some of the calls may have been purchased by short sellers looking to hedge -- after all, short interest jumped 39% in the last two reporting periods, and accounts for 15.3% of the stock's float -- "vanilla" bulls are likely hurting.

The call-focus is echoed among short-term options traders, too. Specifically, CSIQ's Schaeffer's put/call open interest ratio (SOIR) of 0.39 rests below 87% of all readings recorded in the prior year. Long story short, a capitulation among upbeat options players could exacerbate the solar stock's losses.

Future downgrades remain a distinct possibility, too, as each of the eight analysts tracking CSIQ have doled out a "strong buy" endorsement. In fact, the tide may already be starting to turn, considering Cowen cut its price target to $25.50 from $28.50 earlier.

If the brokerage crowd decides to change its tune, Canadian Solar Inc. (NASDAQ:CSIQ) could give up even more ground on the charts. Already this year, the solar stock has surrendered roughly half of its value, and is now just a stone's throw from its late-August annual low of $14.16.

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