I was just looking over the new data about short selling activity and noticed Solarfun Power Holdings Co., Ltd. (SOLF). According to data collected by our Quantified Analysis group, short interest increased 12% in the most recent release and 40% of the stock's float is now sold short.

This comes as the company recently posted better-than-expected earnings. Of course, a look to the chart to the right shows that short sellers have been steadily betting against the company for awhile now.

In some ways, this situation is similar to what I discussed yesterday on Canadian Solar Inc. (CSIQ). There we saw steadily increasing short interest and a pop on earnings - the same could be said here. In one regard the chart below shares a similarity in that we even have a pullback to support. However, the big difference is that shares of SOLF are still well off their all-time high.

Chart Courtesy of Thomson Financial

Earlier today we saw an article that mentioned solar stocks. One of the points made there was the many of the solar stocks are "highly speculative and volatile." That is a point I definitely agree with and I think that the increasing short interest only exacerbates the potential for volatility. The data above suggests there is group of sellers out there who are actively selling shares and providing pressure. That same group could become buyers, and aggressive ones, if we start to see a covering situation.