Canadian Solar Inc. (CSIQ) Sparks a Short-Squeeze Rally

05/27/2009 12:01 am EST

Focus: STOCKS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Canadian Solar Inc. (CSIQ) is up more than 10% on the heels of its latest quarterly report. The solar issue confessed to a first quarter loss of just 13 cents per share, compared to analysts' expectations for a loss of 25 cents per share.

CSIQ SOIRWhile the narrower-than-expected loss might seem like cause for celebration, CSIQ's forecast wasn't exactly sunny. The company slashed its full-year shipments and warned that 2009 revenue will be lower than previously forecast as a result.

The equity plunged 12% right out of the gate on the morning of this downbeat forecast, and the drop was likely more than sufficient to prompt a wave of short covering activity. Short sellers have amassed a sizable bearish position on CSIQ, with nearly 11% of its float dedicated to short interest.

Tuesday's (May 26) breakneck rally has no doubt caught skeptical options players off guard, too. CSIQ's Schaeffer's put/call open interest ratio (SOIR) arrived today at 0.63—just 20 percentage points from an annual pessimistic peak, and its highest level in months.

By Elizabeth Harrow of Schaeffer’s Trading Floor Blog

 

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