Short recommendation First Solar (NSDQ: FSLR) touched our stop at $145 yesterday. The loss on this recommendation is just over 10 percent based on our entry price of $131.38.

Shares of First Solar (NSDQ: FSLR) rallied yesterday after Credit Suisse (NYSE: CS) analyst Satya Kumar boosted his target price on the stock to $160 from $150. Kumar is just one of several Wall Street analysts that have either boosted their buy targets or reiterated their recommendations over the past few weeks; these calls have pulled the stock out of the funk it was in after management provided weak guidance in August.

Bullish analysts cite the First Solar’s ability to win utility-scale solar power projects such as the 230-megawatt Antelope Valley facility in California that was approved earlier this week.

The bulls argue that US utilities will ramp up solar-power installations, offsetting weakness stemming from Germany and Spain’s decisions to reduce subsidies. The analysts note that First Solar’s technology is cheaper on a per-watt basis, putting the firm in pole position to benefit from a build-out among US power utilities.

There are serious problems with this outlook. With European countries cutting subsidies, expect a glut of excess solar cells to pressure selling prices and margins in 2011. It will also take some time for First Solar’s US business to ramp up and produce margins in-line with what the company has traditionally enjoyed Germany and other key markets. That leaves the door open for earnings to disappoint early into early 2011.

And the economics of solar power aren’t appealing, especially with natural gas prices likely to remain low in the intermediate term.

Strength in the broader market is the biggest factor behind First Solar’s rebound. Stocks have rallied for a number of reasons, including solid second-quarter earnings from S&P 500 companies, an improvement in August economic data and growing speculation that the tax cuts implemented by George W. Bush will be extended. More broadly, the market often trades sideways in advance of midterm elections but rallies once investors become comfortable with results at the polls.

Our US economic forecast calls for a halting recovery, but we don’t anticipate a double-dip recession; the S&P 500 should have upside from its current ceiling of 1,130 to 1,150. Broader market strength should bolster shares of First Solar despite the company’s weak fundamentals of the company. We’re officially stopped out of the recommended position in First Solar.

The year-end rally will benefit Stocks on the Run our positions in Teekay Tankers (NYSE: TNK), Vale (NSDQ: VALE), US Airways (NYSE: LCC) and PennWest Energy (NYSE: PWE).

Subscribers to Stocks on the Run’s sister publication The Energy Strategist should note that First Solar is still recommended as a short in that advisory.

In addition to my favorite energy plays, The Energy Stategist includes a handful of short recommendations that act as hedges during when the group suffers a correction.