If you have been reading what I write here for the last few years, you will know one thing about me if nothing else…I love a contrarian trade. Given that, it should come as no surprise that I look at stocks like CSIQ and FSLR in the solar power sector and see them as a sell even though that goes completely against conventional wisdom.
That contrarian bent comes from my background in interbank forex, where less publicized and less dramatic versions of the now famous GameStop (GME) squeeze were an everyday occurrence. We were always on the lookout for a situation where positions were lopsided, knowing that if everyone else were already short, aggressive buying would have an exaggerated effect. There would be fewer offers in the market as the players had already sold and if you could start to generate some upward momentum, those that were “short and caught” would be forced to cut their positions, adding a whole new army of buyers.
After a crazy couple of weeks in stocks like GME, BB, and AMC, most people are now all too aware of that trading technique and know exactly what a short squeeze is. What many don’t really get, though, is that the same thing can happen when everyone is long, only in the opposite direction, and that is what I see now when I look at solar stocks.
The 1-Year charts for CSIQ (top) and FSLR (bottom) look remarkably similar. Both have seen great gains as the expectation of a Biden win in last year’s…