Adding LDK Solar as a "You Forgot about Me" Play

I've increased my exposure to LDK Solar (LDK) as it is in exactly the same technical position Trina Solar (TSL) was Tuesday night.... below the 50 day moving average but in a more risk loving market, prone to be taken up with the crowd. It was"only" up 7% on Wednesday - so it's been forgotten in the monster rally in the group. Now the danger is the solar rally is getting long in the tooth and some of the major tier 1 names now face serious long term resistance, but these secondary plays could have some pull to them.

I own these 2 names because they are "value" plays that been beaten to death. They are both dirt cheap relative to most of the sector. If we get continued good mood, LDK Solar (LDK) could take off ... but we'd want to see a move over $31 to feel confidant. So I am going to begin to add some exposure to this small stake and then see how the sector reacts. I've added in the $29s and taken the exposure back up to 1.2%. A move above $31, and I'll add in size. (technically the correct action is to actually short LDK here as it approached $31, with a stop loss over $31.50 or so, but when animal spirits enter solar land, technicians get destroyed)

Unfortunately these 2 stocks always move towards the end of the solar sector rallies, so they only partake in the last part of the move, and then fully partake in the selloffs. So as each day goes by, this sector move gets a bit long in the tooth and more risk arises for the near term - but again, both stocks are the "value" names in the sector in my opinion so even 10-20% higher would be "cheap". I also have an eye on returning to JA Solar (JASO) as well, but frankly the value proposition in Trina Solar (TSL) is simply the best in the group so I'm sticking with her for now instead of branching out.

Disclosure: Long LDK Solar, Trina Solar in fund; long Trina Solar in personal account

Comments

[alalada]

WHAT a GUY! Trader Mark hits the mark. I enjoy seeing your viewpoint. Alot of work done for me!!! Keep it up !!!

[Thomas888]

You either want to invest in the solar sector for the long term potential or your just tradeing them in the short term for short term profits not really investing in the companies.Buying them on a dip and then selling them on the rallys up.What will you do if they keepgoing up? Your just renting the stock from the long term investors that are buying them and holding them.

[TraderMark]

Yes, I am renting until a long term trend is established.

Buy and hold has not worked since last summer, except for a short time of Kool Aid in fall 2007 (Sept/Oct). It's been a traders market since.

I took quite a bit of LDK off the table this AM. And probably will look to add it back near $30. The volatility is extreme so not to use it to your advantage is like tying a hand behind your back.