On Friday, I bought shares of solar cell maker Solarfun (NASDAQ: SOLF) not because I think solar is a great business these days -- I do -- but because the company's stock showed exceptional strength on Friday, closing at a new high. And it did this smack in the face of short sellers who are betting on lower stock prices and, perhaps more importantly, after consolidating nicely over the past few weeks.

At Friday's closing price of $28.76, the stock is still $3 off its all-time intraday high of $31.80, but this strong close tells me there's the potential for further upside, no matter how many people refuse to believe it. Strong earnings/guidance, a new big time investor, and this sector's new-found popularity (as I noted in this article) and a whole lot of hype have helped this stock double from the low teens in November (along with other surging solar plays like Canadian Solar (NASDAQ: CSIQ), First Solar (NASDAQ: FSLR) and JA Solar (NASDAQ: JASO).

The majority of market commentators advise investors to stay away because the price surges are mania-esque, valuations can be argued as stretched, the solar industry has capacity issues, and most importantly, they don't want to risk losing their jobs or getting sued after some beginner investor loses his or her life savings by thinking these stocks could triple again within a month. I agree; while this sector is certainly not for everyone, I've made millions playing these volatile stocks. So take it from someone who's seen this thousands of times before; while there's upside, stocks that move this quickly on speculative news can also come crashing down even quicker -- as investors in LDK Solar (NYSE: LDK) learned the hard way -- if and when the pendulum reverses.

Continue reading Solarfun (SOLF): Fun, but not for everyone

Solarfun (SOLF): Fun, but not for everyone originally appeared on BloggingStocks on Sun, 23 Dec 2007 09:40:00 EST. Please see our terms for use of feeds.