The shares of Hawaii-based Hoku Scientific are up nearly 40% after the company signed a $306-million contract with Solarfun Power Hong Kong to deliver polysilicon over an 8-year period. The contract commences in mid-2009.

Hoku is currently engaged in the construction of a polysilicon plant in Idaho that will produce about 2,500 metric tons of polysilicon a year, though the completion of the project is dependent upon securing an additional $100 million in funding. Cowen & Co. analyst Rob Stone noted that this new contract, along with similar agreements with Suntech Power (STP) and Sanyo Electric, suggests that customers view the Hoku plant as a credible source of future polysilicon supply, and that signing additional deals may also help get the debt financing package finalized, by signaling strong customer interest in the future output.

Today's pop higher has sent HOKU through its recently resistant 10-day and 20-day moving averages, though the rally met a quick demise after breaching resistance from the stock's 10-week trendline. Short sellers could be helping to fuel HOKU's gains; currently, more than 32% of the stock's available float has been sold short.