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Solarfun Power Short Interest Balloons, Squeeze In Play

On the technical breakout scene this afternoon was Solarfun Power Holdings Co. (SOLF) which rose $1.25, or 8.37%, to $16.19 on volume of 9.1 million shares, more than double the three month average daily volume of 4.37 million shares. Today’s move coincides with an across the board “green day” in solar power stocks led by First Solar, which rose 6.72% to $303.98 on the back of crude oil prices that hit a new high of $127 a barrel, and Canadian Solar which surged 25% after a blow out earnings report. After testing 200 day moving average resistance at $15.34 twice this month, Solarfun shares finally broke out and closed above that level signaling that the next resistance in the April high of $17.36 should come into play in the near term. The bullish move can be attributed to a round of intense short covering. Anyone watching the bid side activity on a level two screen today could probably vouch for that claim. The short interest in Solarfun Power has ballooned in recent months. Since the end of January there were about 11.3 million shares short, but that has moved up to 15.2 million as of the last reported settlement date of April 30, just off its mid-April high of 16.4 million shares. At the end of 2007, there were just 2.8 million shares short. The shares represent a substantial portion of the 48.3 million shares outstanding and the publicly traded float of 43.5 million shares. It’s an understatement to say that the short supply of shares has added to the volatility of this solar name and fueled the momentum trade.

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