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TheStreet Open House

Watch for a Big Short Squeeze in Cleantech Solutions

NEW YORK ( TheStreet) -- Following short squeezes at Vision China Media (VISN), Gulf Resources (GURE) and Daqo New Energy (DQ), shares of CleanTech Solutions (CLNT) may be setting up for a large short squeeze.

Those who have witnessed squeezes at companies such as Tesla (TSLA) and Taser (TASR) should be aware of the risks of getting caught short during a squeeze.

I have written before about CleanTech Solutions. In each case the prognosis was grim. Due to the problems I observed, I always presented CleanTech as an interesting short idea.

But recent developments have made shorting CleanTech a very dangerous proposition. CleanTech could be setting up for a substantial short squeeze. Past squeezes have seen CleanTech double or triple in a single day. With short interest rising and the potential for a strong earnings announcement, CleanTech could soon re-test its high for the year of around $11.

The stock has already risen by 25% since September with very few days showing any meaningful declines.

Several other China small caps have seen similar squeezes in the past two weeks. Vision China Media quickly ran from $2 to $15 without much reason. After a slight retreat, the stock closed at $12.28 Monday, up nearly 20%.

Gulf Resources nearly doubled in a single day last week and hit its highest level since 2011. The high short interest is what drove the sharpness of the short squeeze. The stock has retreated a bit, but is still up by more than 40% from a week ago.

DaQo new Energy saw some small positive news in the solar sector. But the reaction of the heavily shorted stock was far greater than deserved. The stock was at $8 in September and recently hit $43 before closing Monday at $37.96. Following this five-times rise it is still within 10% of its highs.

This is just a partial list. There have actually been quite a few more in the past two weeks. In many cases, the valuations have become considerable, with market caps of over $100 million. This leaves substantial room for a stock like CleanTech to run.

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