Thursday, December 20, 2007

Gap City: LDK

I’m reasonably sure that whatever I write here will be obsolete in the ten minutes that it takes me to post it, but I feel compelled to comment about LDK Solar (LDK) anyway.

For those who do not follow LDK, this is the Chinese solar company that was the subject of accounting fraud allegations by a former controller that helped to knock the stock down from the mid-70s to the mid-20s over the course of a month or so. On Monday, LDK reported that the Audit Committee of the Board of Directors had finished their review of the matter and concluded that there had been no wrongdoing. Things were looking up until LDK reported quarterly results after the close yesterday. The numbers were generally in line, but concerns about margins and the absence of raised guidance has put pressure on this stock this morning, which traded down as much as 27% earlier in the session.

While the story is interesting, the chart may raise even more eyebrows, as it is littered with gaps and the tombstones of overzealous traders. If you are thinking about playing solar roulette, consider that directional plays are extremely dangerous. One way to make to potentially make some money off of the faddish momentum and wild gyrations is to sell volatility below support and above resistance, so you can get paid while you watch the fun. Even if you don’t play this stock, the entertainment value alone makes it worth keeping an eye on.

On a related note, is it only me, or does anyone else who trades Chinese solar counterpart JA Solar Holdings (JASO) think of a hockey mask every time they look at the ticker? Given the volatility in that stock, somehow it seems an appropriate image…

Finally, anyone interested in rolling the dice in the solar sector, Chinese and otherwise, should start their research with the excellent solar stock comparison table at China Analyst.

2 comments:

Anonymous said...

The company(LDK) makes very shady claims about its "special process" for turning junk into jewels...I think people have finally realized this is just a new version of the age old game where scamsters claim to have an edge they really don't. Two years ago LDK was a maker of industrial safety boots, and then all of a sudden they somehow revolutioned solar wafer technology that other well respected global companies had been spending their entire corporate lives on for decades? Aah...o.k.

Anonymous said...

@anonymous

Can you base your negativity on facts or only assertions. 4 years ago Apple was selling computers and all of a sudden they revolutionized they way the world listens to music - lol

Peter

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics