Solar Stocks Shares Jumped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar stocks are exploding higher today. Top manufacturers are rising out of the ashes after terrible performance in 2011. Shares of SunPower (NAS: SPWR) are up 13%, Trina Solar (NYS: TSL) is up 25%, Suntech Power (NYS: STP) has risen 11%, and Yingli Green Energy (NYS: YGE) is up 19% today. Even thin film manufacturer Energy Conversion Devices (NAS: ENER) is back from the dead, climbing 17%.

So what: There are a few dynamics going on today, all built on hope for solid quarterly earnings over the next month. Bullish investors are moving in as reports out of China, Europe, and the U.S. show strong demand for solar modules. This is also forcing short-sellers to quickly exit their positions, pushing stocks even higher. Volumes are well over their three-month averages across the board, with Yingli Green Energy already at five times its average volume.

Now what: We've been covering the positive news in solar stocks for weeks; hopefully, if you were interested in getting in, you bought before today's rally. I'm not sure how long this rally is sustainable in the short term, given the volatility we've seen from solar stocks and the fact that earnings haven't started coming out yet. I've made very long bets myself, even calling SunPower my top energy stock for 2012.

If you want to get into solar stocks, then a short squeeze day like today probably isn't the best buying opportunity. Keep an eye on the high-quality companies like SunPower, Trina Solar, and Yingli Green Energy -- when they dip over the next few days, scoop them up before earnings are released. I think it's going to be a strong earnings season and think these stocks could rally further as 2012 rolls along.

Interested in more info on solar stock? Add it to your watchlist.

At the time this article was published Fool contributor Travis Hoium owns shares of SunPower and manages an account that owns shares of SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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