LDK Solar hikes revenue forecast, but stock's still struggling

Investors keen to hear the rest of LDK's third-quarter results should stay tuned for the company's earnings report, which is scheduled to hit Wall Street during the second half of November.

LDK gapped higher Tuesday morning in the wake of the news, up 10.5% at its intraday peak of $7.88. The stock has given up nearly 46% of its value in 2009, though, and so far it seems unable to tackle resistance at its 10-day and 20-day moving averages.

As a result of the equity's underperformance, traders have loaded up on bearish positions. During the past 10 days, speculators on the International Securities Exchange (ISE) have bought to open 3.78 puts for every call on LDK. This skeptically skewed ratio is fewer than three percentage points from an annual pessimistic peak.

Likewise, the current number of LDK shares sold short translates to roughly 6.1 times the stock's average daily trading volume, representing a hefty accumulation of sideline cash.

In other words, Tuesday's pop is likely the result of the weaker bearish hands being shaken out. With multiple layers of technical resistance still blocking LDK's path higher, the equity's surge is likely to be short-lived. In fact, the third-quarter preview is sapping the security's chances of gaining on a stronger-than-expected report, with traders already pricing in the upbeat revenue results.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.