LDK Solar (NYSE: LDK - option chain) stock is falling today after the company announced a weak forecast for Q2 revenue last Thursday after the close. Today's weakness in oil futures is also not helping LDK stock. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LDK.

This morning, LDK opened at $10.20. So far today the stock has hit a low of $9.66 and a high of $10.52. As of 12:15, LDK is trading at $9.87, down $1.04 (-9.5%). The chart for LDK looks bearish and S&P gives LDK a negative 2 STARS (out of 5) sell ranking.

Chinese solar firm LDK Solar (NYSE: LDK) reported earnings Wednesday, revealing that a massive writedown caused weaker-than-expected earnings. LDK reported a fourth-quarter loss of $1.25 per share, compared to a gain of 77 cents per share in the previous quarter and earnings of 44 cents per share in the same quarter last year.

The company's revenue increased more than twofold compared to last year, but the $426.6 million was 21.3% lower on a sequential basis. Analysts were expecting a loss of 84 cents per share on revenue of $422 million. The quarterly results took a hit of $216.7 million related to an inventory writedown.

LDK Solar (NYSE: LDK - option chain) stock is falling today after the company cut its fourth-quarter revenue forecast to $425 to $435 million, down from a previous estimate of $555 to $565 million. Analysts are looking for revenue of $540 million. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LDK.

This morning, LDK opened at $13.53. So far today the stock has hit a low of $13 and a high of $13.95. As of 12:05, LDK is trading at $13.29, down $1.55 (-10.4%). The chart for LDK looks neutral and S&P gives LDK a neutral 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $17.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think it will but still leverages nice returns. For this particular trade, we will make an 8.7% return in six weeks as long as LDK is below $17.50 at February expiration. LDK would have to rise by more than 31% before we would start to lose money. Learn more about this type of trade here.

LDK hasn't been above $17.50 at all in since early November and shown resistance around $15 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in LDK.

This post was written by Minyanville contributor Sean Udall.

JA Solar (NASDAQ: JASO) blew its quarter and lowered guidance, and now the group is under pressure.

I don't think I've ever written a positive word on JASO as they are in the middle tier, essentially a jobber for the solar space. The company make various feedstock products to the final product makers, while being dependent on the core technology and "root" feedstock polysilicon from the likes of LDK Solar (NYSE: LDK) and MEMC Electronics (NYSE: WFR). So it has a timing issue and margin compression issue. The company is facing lower final pricing of their products while having locked in longer term "commodity" pricing at higher prices. So its raw costs are not falling as fast as its own pricing.

The poly guys mentioned above and companies like Sun Power (NASDAQ: SPWRA), First Solar (NASDAQ: FSLR) and Suntech Power (NYSE: STP) don't face these pressures as intensely, though that may not matter much today. STP reports on the 20th this month and I think it will give a clearer picture of the space. Meanwhile SPWRA keeps closing significant deals and FSLR reported the best and has little if any of the funding concerns. So for the leaders, it's a question of how low do they go before the long term positives catch up. Meanwhile, a few of the smaller shops like JASO are in a race against the credit crunch because they need to be able to renegotiate some of their longer-term input costs.

LDK and WFR are still companies that I feel are uniquely positioned, as both have a partial oligopoly status as polysilicon suppliers. In the $15's and lower, it's getting to the point where I may again trade around my core position and look for that beta pop on any significant Naz bounce. Also, this stock could move 50% higher and still be exceedingly cheap on almost any value criteria.

This post was written by Minyanville contributor Sean Udall

Maybe the charts will take care of this decision for frustrated investors. Nothing ends selling and starts buying like a spiky MACD right cross.

And maybe the group move (lower) was just one massive liquidation trade and the biggest of the machines knew where the weakest hands were the most susceptible to letting shares go to meet redemptions.

I suspected this was the case in solar with companies like First Solar (NASDAQ: FSLR), SunPower (NASDAQ: SPWRA), LDK SolarLDK), MEMC Electronics (NYSE: WFR) and Suntech Power (NYSE: STP). The companies have no funding issues, big industrial projects, and are sold through for years.

I'm actually inclined to buy the strength as we have oil down, and a new month of us. We are also in an environment where little hard analysis from the analyst community has been fostered. Simply put, speculation of a macro condition (credit crunch), has been liberally applied to micro condition sets for an industry in an early growth phase. So basically a coin has been tossed in the air and the analyst community has mostly called a negative outcome. A few bullish holdouts exist but by and large this looks like a group think nightmare in every direction so far.

I still like most of the big guns and a couple smaller shops but I've always been cautious of names in need of funding and that is more critical now. Also, an Obama victory trade on the group might fade very hard just as the bailout passage was.

LDK Solar (NYSE: LDK - option chain) shares are falling today despite the company's announcement of an eight-year contract with Japan's Sumitomo Corp. to supply solar cell parts. Under the deal, LDK will supply about 750 megawatts of multicrystalline silicon wafers to Sumitomo. However, most solar stocks are dropping today as crude oil futures are lower again at $106, and almost dipped below $105 earlier this morning. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LDK.

This morning, LDK opened at $45.57. So far today the stock has hit a low of $41.70 and a high of $45.57. As of 12:20, LDK is trading at $43.20, down $2.78 (-6.0%). The chart for LDK looks neutral and S&P gives LDK a neutral 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $60 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in 6 weeks as long as LDK is below $60 at October expiration. LDK would have to rise by more than 38% before we would start to lose money. Learn more about this type of trade here.

BIG hasn't been above $35 at all inthe past year and has shown resistance around $34.90 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in LDK.

LDK Solar Co. (NYSE: LDK) American Depository Shares added 9.3% in today's trading. Only two weeks ago, on August 11, LDK reported second quarter results that beat any and all expectations. The shares then jumped from around $33.50 to about $40. Today, LDK shares closed at $50.06, the highest since December.

Two weeks ago, LDK raised its quarterly and 2008 forecast. Today, the Chinese maker of silicon wafers said 2009 deliveries may double. Sales next year will climb to $2.8 billion to $3 billion, the company said. Analysts estimated 2009 revenue of $2.42 billion, according to Bloomberg. LDK also announced that the company's wafer plant reached the milestone of 1.0 GW annualized capacity. For 2009, LDK predicts safer shipments between 1.45 GW to 1.55 GW.

Investors generally are pleased LDK is trying to control its raw material costs by building polysilicon plants. Yet, analyst consensus has been Hold with the average target price currently below the share price. With the recent announcements and current momentum, could we be in for a wave of upgrades, or at least estimate raising?

Something else to point out is the growing short interest. It now stands at 16.44 million, and it would take 11.2 days of average daily volume to cover it. If this goes on, shorts might get spooked.

Many factors in the market now, including soaring oil prices and global warming concerns, have boosted the solar stocks. LDK Solar has regained its favored status recently in this hot sector. Sometimes, that's all that's needed.

LDK Solar (NYSE: LDK) is recently trading at $40.25 in pre-open trading, above its close of $33.58. LDK reported Q2 revenue of $441.7 million, up 89.2% quarter-over-quarter. ThinkEquity says: "The shares of LDK offer significant upside, with its impending polysilicon production, which should lower the company's cost structure significantly." LDK August 35 straddle is priced at $3.95. LDK September call option implied volatility is at 74, puts are at 85; near its 26-week average according to Track Data. LDK puts are priced higher than calls because LDK is difficult to borrow.

Applied Materials (NASDAQ: AMAT) closed at $18.46 Monday. AMAT is scheduled to report Q3 EPS after the market close today. Kaufman Bros says: "We reiterate our Hold and $19 price target." AMAT August straddle 18 is priced at $1.10, September is at $1.90. AMAT September option implied volatility of 36 is near its 26-week average according to Track Data, suggesting non-directional movement after EPS.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

LDK Solar Co. (NYSE: LDK) American Depository Shares are jumping nearly 20% to $40.01, up from a close of $33.58, after the solar wafer manufacturer reported second-quarter results after the close.

LDK experienced some 200% sequential growth in net earnings to $149.5 million, or $1.29 per ADS. Even excluding the change in fair value of prepaid forward contracts, the company earned 82 cents a share, according to Reuters Estimates. That beat -- more like trounced -- analyst estimates of 40-42 cents a share. Revenues for the quarter were $441.7 million, up 345.9% year-over-year from $99.1 million, beating consensus of around $282 million.

The China-based multicrystalline solar wafer, solar cells and solar modules manufacturer said additional manufacturing capacity, which exceeded its own expectations, allowed the company to sell more solar wafers.

LDK didn't just beat estimates, it also raised guidance. It sees third-quarter revenue of $486-496 million vs. consensus of $307.05 million. It raised its 2008 revenue estimate from $1.08-1.18 billion to $1.65-1.75 billion. This is again far higher than analysts estimates of $1.15 billion.

LDK has been a hot stock in a hot sector. Its shares have enjoyed a wild ride in 2007 as concerns over soaring oil prices and global warming have boosted the sector, culminating in LDK recording a 52-week high of $76.75 in late September of '07. Since then, new concerns over Spanish government cutting subsidies sent solar stocks lower.

The effect of these lower subsidies on the sector and LDK remains to be seen as perhaps they could be offset by orders from other European countries. LDK, though, is also trying to control its raw material costs by building polysilicon plants, the progress of which has been "tremendous" according to the company.

Suntech Power Holdings Co. (NYSE: STP), which saw its stock surge some 150% in 2007, didn't have such a good 2008 so far with its stock plunging about 44% year-to-date. But since setting a 52-week low of $28.19 on March 22, the stock has rebounded nicely, up over 55%. Roller coaster or what?!

Well, today, the maker of photovoltaic cells and modules said first-quarter earnings more than doubled on 76% higher revenue. Earnings reached $55.8 million, or 33 cents an American depositary share, beating analysts estimates of 28 cents. Revenue reached $434.5 million. Gross margins also expanded nicely and Suntech reiterated revenue estimates for 2008.

Early in the morning, STP shares jumped over 7% in premarket trading in response to the report but have not kept this up. Shares are now trading at $45.73, down over 1%, probably declining with the rest of the sector following Goldman Sachs's downgrade of Solarfun (NASDAQ: SOLF) to Sell from Neutral. SOLF shares are down over 18% taking LDK Solar (NYSE: LDK), Trina Solar (NYSE: TSL) and Canadian Solar (NASDAQ: CSIQ) down with it -- 5%, 8% and 13% respectively, to name but a few.

Prior to LDK Solar (NASDAQ: LDK)'s earnings report, I told investors to stay away from the stock because I thought it was highly susceptible to a momentum stock breakdown. Although I made one factual error in the post (I said there was a 12:1 long/short ratio while the real number is around 5:1 because of the CEO's restricted shares), this call turned out to be spot-on and the stock got hammered after several company statements and warnings during the conference call.

But I think now could be an interesting time to become involved in LDK for a short-term trade.

First off, the stock is again-lagging other solar stocks on the market. For example, Solarfun Power (NASDAQ: SOLF) is up 35% in the last five days and First Solar (NASDAQ: FSLR) is up 12%. Comparably, LDK is down about 30% since the day the company reported earnings. Considering this, I think the stock is ripe for a bounce-back trade.

LDK Solar (NYSE: LDK) reported Q3 EPS of 37 cents, meeting expectation.

LDK Q3 revenue rose 60% quarter over quarter to $158.7 million.

CIBC says: "We would look to become more aggressive on the shares at around high $40s/low $50s level, once the valuation premium dissipated."

LDK January option implied volatility of 133 and March of 107 is above its 23-week average of 103 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

I often find myself in agreement with my friend Tim Sykes. When I'm looking to make a trade, I often look at the chart and attempt to gauge the sentiment, just as he does. However, when I saw Sykes proclaim that LDK Solar (NYSE: LDK) had "further upside," I had to give the opposite view.

I'm not going to try and concoct an argument against solar stocks. In fact, I'm sure solar technology will do huge things for the American energy crisis in years to come, but I know one thing after watching the market for several years -- any sector or stock that gains a stubborn, cult-like following is probably going to end up suffering at some point in the future. The most cult-like stocks, in my opinion, are momentum stocks.

Don't get me wrong, I play momentum stocks. However, I admit I'm just playing the greater fool game when I'm trading these stocks. In other words, I admit I'm just trying to be another person trying to pull money out of the market by buying an irrationally-priced asset and hoping to sell it at an even more irrational price. The problem comes when investors and traders come along and try to justify the valuation the stock is currently receiving. I've learned a lesson I'd like to share with momentum traders: don't try to rationalize your buys by claiming the stock is 'undervalued' and looks long term, especially if that is way different from your normal decision making process that takes advantage of certain strengths you have cultivated over time.

On Monday, LDK Solar (NYSE: LDK) surged 20% to $68.18 on news that an investigation into the company's accounting came up clean, but like Rodney Dangerfield, the stock can't get no respect. Not one but two analysts kept their "Sell" ratings, both concerned with the company's dipping margins.

Maybe they're right, but it's funny that these analysts have held onto their bearish positions even as the stock has surged from $30 to $68 in less than a month (shows you what analysts know)! Analysts like their cushy jobs, so they can't go out on a limb and say something like, "Wait a minute, this latest surge really just makes up for the crash that was caused by investigation concerns. Now that that's cleared up, maybe this one's got more in the tank -- especially considering that while LDK was tied down all throughout October, November and the first half of December, other solar plays like First Solar (NASDAQ: FSLR), Evergreen Solar (NASDAQ: ESLR), Suntech Power (NYSE: STP), Sunpower (NASDAQ: SPWR) and Solarfun (NASDAQ: SOLF) have all doubled and more."

LDK Solar (NYSE: LDK) was trading at $72.80 in early trading, above its close of $56.84 Friday.

LDK's audit found no material errors in its silicon inventory. LDK said the company has correctly reported its inventories. LDK will report Q3 EPS on December 19th. LDK January option implied volatility of 144 and March of 123 is above its 22-week average of 101 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com