BY Dennis Hobein:

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies.  The reports are linked to the stock symbols in the article below.

 Performance - Click Here

(La Jolla, CA)  With many solar stocks putting in sizeable gains yesterday, we thought it would be a good time to check in on a few names to see what events are driving the stock action, while also looking for any potential trade set-ups. The sector as a whole has been a laggard since mid-June, with the Market Vectors Solar Energy ETF (NYSE: KWT) down 19% since June 11^th, compared to a +19% move for the Diamonds Trust ETF (NYSE: DIA) -- which corresponds to the performance of the Dow Jones Industrial Average. Clearly, sentiment isn’t overly bullish on solar stocks right now due to softer demand and declining prices in solar panels, but with much of the bad news already priced in, this may be a good time to take a closer at the sector. Below, we highlight a few of the more heavily traded solar stocks.

First Solar Shares Moving Off Of Support Level

On October 28^th, First Solar (Nasdaq: FSLR) reported third quarter results that came in light on the top-line, but better-than-expected on an earnings basis. It also issued in-line revenue guidance of $1.97-$2.02 billion. The weak sales number was a disappointment for shareholders, mostly because its peer, SunPower (Nasdaq: SPWRA), commented only a week earlier that customers in Germany were rushing to stock up on solar products before German tariffs subsided in 2010. FSLR also has been implementing a rebate program to boost sales, which, obviously is a headwind to margins. Following third quarter results, the Street was not kind to FSLR, as several firms either downgraded the stock or cut their target price on the shares. The stock sold-off sharply the next day, off by nearly 17% to $126.47. However, the stock has found support around the $120 level, and moved higher by more than $5/share yesterday. For more details and a specific trading plan on FSLR, please check out our free trading report on the stock by clicking here.

SunPower Looks Vulnerable Following Accounting Issues

After the market close last night, SPWR issued a troubling press release in which it stated that, after an internal accounting review of its Philippine operations, it discovered several erroneous entries related to its cost of goods calculations in the periods from 1Q09 to 3Q09. The most damaging effect is that it appears as if gross margins may have been overstated by as much as 800 basis points in the second quarter. This worrisome news follows a disappointing third quarter in which gross margins took a significant hit, showing an unwelcomed (and surprising) year-over-year drop to 20.7%. This illustrates the pricing pressures that have dogged the company over the past year. In terms of its stock action, shares of SPWRA have been stuck in neutral this year, trading in a $25-$32.50 range for most of 2009. For those interested in entering a SPWRA trade, we suggest reviewing our free trading report on the stock. As a reminder, we always offer risk control tools at Stock Traders Daily.

Canadian Solar May Be Best Long Out Of Group

Before the market opened this morning, Canadian Solar (Nasdaq: CSIQ) reported very strong third quarter results that easily topped analysts’ top and bottom line estimates. Interestingly – and contradictory to competitors – the company said that it is seeing demand in all of its key markets, including Germany, U.S., Japan, and China. Therefore, the company is going to increase its solar module production capacity. Also, unlike SPWRA, its gross margins increased from 3Q08 to 16.3%, although it dipped from 2Q09 levels. The stock also presents an interesting trade set-up. After trading in a $15-$20 range for the past few months, shares look ready to break through the upper end of that level to push to new 52-week highs. In our free trading report, we provide a much more detailed strategy for trading this stock.