Overheated Solars

Posted by downtowntrader | 5/19/2010 11:39:00 PM View Comments

While I'm not convinced the markets have bottomed, the conditions are starting to become ripe for some short squeezes. Sometimes a short squeeze only lasts for an intraday spurt and other times it can last a few days. Although I don't often day trade, I will be more than happy to exit intraday if I can catch a quick move.
One group that may be setting up for a short squeeze opportunity is the solars. I think many of these stocks have had their backs broken and I don't think there are any in this sector that I would find attractive as intermediate term long plays right now, but I noticed that some of these stocks started rebounding ahead of the indexes today. These stocks have been beaten down the past few days and are really extended from their 20-day moving averages. Even though a stock can remain oversold for an extended period, the fact that these have been sold into oblivion, combined with how they rebounded early today has me thinking they could experience a retracement move back into prior support levels.

Trina Solar Limited (ADR) (Public, NYSE:TSL) is one solar that caught my eye today as it rebounded 2 points from its intraday low. Volume was very high on the reversal and this stock could easily bounce back to near $20 a share and still be "broken". One word of warning is that these types of trades are more advanced and traders need to understand that they are swimming upstream so to speak. While the opportunity exists for a quick move, risk needs to be controlled and more importantly traders can't get greedy and think they caught a bottom.

Yingli Green Energy Hold. Co. Ltd. (ADR) (Public, NYSE:YGE) is another Solar that has been hammered lately and started to rebound today. This is actually a stock I took today into the close on the possibility of an overnight gap or follow through in the morning. The initial target would be near $10 with an optimistic target near $11. Again, this is an aggressive play and by no means am I suggesting that YGE is bottoming.
Overall, the markets remain in a trading range and there really haven't been too many opportunities for my typical trading style. I've been patiently waiting for better opportunities and hopefully this is a good one.
Good Trading,


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