Friday, April 4, 2008

Chinese Solar Stocks on the Rise

Two areas that have been rife with speculative frenzy – both bullish and bearish – over the past year or so have been China and solar stocks. Not surprisingly, the space where the two intersect, Chinese solar stocks, has been one of the most volatile segments of the market.

I have elected not to show the long-term chart of these stocks, which looks a lot like a higher beta version of the chart of the FXI. Instead, the chart below compares the year-to-date performance of the most significant players in the Chinese solar space that are traded on US exchanges: JASO; STP; LDK; YGE; TSL; SOLF; and CSUN. I left JASO as the anchor and show the volume in this stock at the bottom of the chart because JASO is the biggest gainer of the year so far and the chart shows that after the March 10th bottom, strong volume flowed into the stock over the next three days, marking the beginning of the current leg up.

Given their high profile and speculative history, Chinese solar stocks can be an excellent speculative barometer, not only for China and the solar sector, but for the markets as a whole. More importantly, where there is strong speculative activity, particularly coming off of a sharp bear move, there is increased confidence in the markets and a high degree of perceived opportunity.

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