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The latest short interest data are out for the two weeks ending May 13, 2010 (see a list of solar short interest at NASDAQ.com). There are three main changes from my review of the health of solar companies and short interest in solar stocks in “Solar’s Debt-to-Equity Ratios Remain OK Despite Disappointing Earnings.”

Short interest in First Solar (FSLR) has reached new highs along with Energy Conversion Devices (ENER). Ja Solar Holdings (JASO) experienced a large drop in short interest that continues a sharp decline from a tremendous peak in January. In the previous charts, I plotted relative short interest to make it easier to see the changes over time across multiple stocks. In the chart below, I plot the actual shares since there are only three stocks (click to enlarge images):

Short interest in FSLR and ENER have reached new highs while JASO continues to drop sharply from its highs

Short interest in FSLR and ENER have reached new highs while JASO continues to drop sharply from its highs

Source: NASDAQ.com

The building pressure on FSLR has likely helped push the stock to ten-month lows. For example, on Wednesday, hedge fund manager James Chanos was quoted at the Ira Sohn Investment Conference touting First Solar as a short; Chanos has consistently pounded this theme on several media outlets for quite some time now. While the short-term downtrend remains steep, (post-Chanos) trading on Thursday and Friday suggest some kind of bounce may finally be sustained – at least into overhead resistance levels. A “hammer” pattern, where buyers lifted FSLR well off the lows, was followed by heavy and consistent buying the next day. FSLR continues to look attractive at these levels (now for short-term swing traders as well as longer-term investors).

Given that shorts are 36% of the float, it will only take a small positive catalyst to get the stock lifting to ever higher prices.

Buyers attempt to nail a bottom for First Solar

Buyers attempt to nail a bottom for First Solar

Chart created using Telechart

Be careful out there!

Full disclosure: long FSLR and JASO

Source: First Solar Remains a Buy Even as Short Interest Reaches New Highs