The solar stocks continue to rip higher. Many of these plays are up well over 100% in just the last month. This is a case of shorts being in a crowded trade. In this market, that almost always ends in disaster. Understand a crowded trade and avoid it in this market.
First, let’s talk about some of these moves today:
First Solar, Inc. (NASDAQ:FSLR) is trading at $54.45, +4.47 (8.94%). The 52 week low is $11.43
SolarCity Corp (NASDAQ:SCTY) is trading at $51.13, +6.13 (13.62%). The 52 week low is $9.20
JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is trading at $8.15, +2.54 (45.28%). The 52 week low is $2.91.
There are many other solars ripping higher today, but you get the point.
These mega moves are not because of great growth in the solar sector nor amazing earnings. This run is due to a massive short squeeze in an over crowded trade. When too many shorts pile into a stock, especially in this bull market, a short squeeze is sure to follow. Always be aware of how many investors are long or short in a stock. When it gets too out of balance, equilibrium must be restored. In the case of the solar stocks, massive short covering has created a mega spike.
The solar stocks will come back down to earth soon once the equilibrium is restored and there is a smaller short crowd.