NEW YORK ( TheStreet) -- Any investor following the recent fortunes of stocks in the LED lighting sector hasn't been reading much good news about the industry or seen promising recent stock action in three prominent LED plays -- Veeco Instruments ( VECO), Cree ( CREE) and Aixtron ( AIXG). Short activity in all three stocks has increased in recent weeks as the news flow turned negative on the sector -- and in the case of Veeco specifically, shorts are owning the stock in Thursday trading, possibly as a result of the latest negative news item, a report from Digitimes that Chinese officials are concerned about overheating in the LED sector. Veeco shares are down roughly 5% on Thursday afternoon, yet trading volume was average for the LED stock. Analysts covering the stock say the light volume, but significant stock decline, is the classic sign of a stock that has not just come under short pressure, but come under short pressure at a time when the long bets have abandoned the stock. That's certainly been a problem for LED stocks in general, with few signals of long-term bullish trading and increasing short interest week after week. The latest short interest data from the Nasdaq details an increase in bearishness on the LED lighting stocks, with Cree bearishness being the most intensified. It's notable that for all three LED stocks, short interest is at its highest level in more than a year. The Nasdaq short interest data is two weeks trailing, so the short interest on Cree, Veeco and Aixtron released by the Nasdaq this week is as of Aug. 31. Cree short interest jumped from 11.5 million shares to more than 15 million shares in the two weeks ended Aug. 31. The 11.5 million short positions on Cree two weeks ago was the previous high for the past one year period, and so, the four million additional shorts added in the most recent two week Nasdaq period is notable. Veeco short interest increased by more than 2 million shares as of Aug. 31. The increase in short interest in Veeco shares has been steady, as had been the rise of the LED stocks until the recent crash. There was only short interest on 1.6 million Veeco shares in August 2009, and at the end of August 2010, short interest had climbed to just short of 13 million shares. Both Cree and Veeco short interest has increased considerably, even as average daily trading volume was significantly lower in both LED stocks in the most recent two week period.