Is More Upside Ahead for Canadian Solar Inc. (CSIQ)?

Canadian Solar Inc. is soaring today amid some well-received M&A news

by Karee Venema

Published on Feb 3, 2015 at 10:38 AM
Updated on Jun 24, 2020 at 10:16 AM

Solar stocks had a huge day on Monday, and Canadian Solar Inc. (NASDAQ:CSIQ) was no exception. The equity is extending this momentum today -- up 20.5% at $25.70 -- following news the company is purchasing San Francisco-based alternative energy issue Recurrent Energy from Sharp for about $265 million in cash. Options traders are responding in kind, scooping up calls at a rate 12 times the average intraday pace.

One of CSIQ's most active options is the weekly 2/6 25-strike call, which is being bought to open as speculators gamble on additional gains through week's end -- when the series expires. Thanks to today's surge, delta on the call has jumped to 0.63 from 0.035 at last night's close, indicating a greater probability of an in-the-money finish.

From a wider sentiment perspective, bearish traders have been targeting CSIQ of late. For starters, the stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.69 ranks in the 96th annual percentile, meaning puts have been bought to open over calls at a near-annual-high clip. Plus, short interest surged 11.1% over the past two reporting periods, and now accounts for 14.4% of the stock's available float.

This pessimistic positioning isn't too surprising, given the equity's longer-term technical trajectory. In fact, heading into the week, CSIQ had lost half its value since hitting its most recent high of $41.12 in early September. Should the shares extend their recent rally, though, a capitulation from some of the weaker bearish hands could help propel Canadian Solar Inc. (NASDAQ:CSIQ) higher.


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