October Stock Talk II

Earlier today I touched on the alternative energy sector and solar power with a look into potential climactic selling on LDK Solar Co., Ltd. (LDK). Another stock from the solar area to note is First Solar, Inc. (FSLR), which is breaking out to another new high today.

In a post at the end of August I noted that First Solar, along with Echelon Corporation (ELON), was a heavily shorted stock. I just looked at the most recent data and that is still the case, with nearly 20% of the stock's float sold short.

That high level of short interest may help to explain some of the volatility. As the daily chart below shows, the stock has demonstrated a definite ability to move. As it stands now, the shares are breaking out of a consolidation phase that has 120 as the upper boundary.

In terms of the Street, it seems that analysts have yet to really embrace the stock. According to Zacks, only 3 of 6 analysts rank the stock with a "buy" rating. As was the case with LDK Solar, I think that this offers the opportunity for analysts to "find" the stock.

One last point to note is that the open interest configuration shows that call speculators don't seem too enthusiastic as the stock doesn't have much in the way of overhead open interest. I tend to view light overhead calls as a sign that expectations are still subdued.

• The Chinese economy's growth rate has averaged 9% since the early 1980s
• 40% of China's output goes to exports, so there's no crippling foreign debt
• China's savings rate is over 35% compared with America's 2%
• Thanks to $60 billion a year in direct foreign investment, combined with a trade surplus, China's foreign currency reserves are now more than $1 trillion
• China's fixed assets -- ports, bridges, roads -- double every two and a half years.