A number of stocks saw notable jumps in short interest during the past two weeks. However, increased skepticism can sometimes serve as a contrarian tailwind, particularly when the securities are technical standouts. Highlighted below are three equities that fit this scenario, and could be poised for further gains.
Stanley Black & Decker, Inc. (NYSE:SWK) has put forth a solid performance on the technical front, advancing 24% so far this year, and outpacing the broader S&P 500 Index (SPX) by over 10 percentage points during the past three months. What's more, the shares tagged a new record high of $92.36 right out of the gate this morning, and are presently trading at $91.70. Additionally, the security's late August/early September pullback was contained by its 40-day moving average, which has served as a floor since July 8.
Nevertheless, pessimism abounds on the diversified products giant. Short interest spiked by north of 47% during the most recent reporting period, and now accounts for a healthy 4% of SWK's available float. It would take a week to buy back these shorted shares, at the stock's average daily trading volume. In other words, Stanley Black & Decker, Inc. could end up benefiting from future short-covering activity. Also of note, the security sports a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 4.25, confirming puts bought to open have more than quadrupled calls over the last two weeks. This ratio is just 3 percentage points shy of a 12-month peak, meaning traders have been snapping up puts over calls at a near-annual-high pace. An unwinding of these bearish bets could end up propelling the shares even higher down the road.
DISH Network Corp (NASDAQ:DISH) has notched notable gains on the charts, climbing nearly 32% in 2013, and roughly 53% during the past year. In fact, the shares surged to a decade-plus high of $49.44 on Sept. 5. Meanwhile, the pay-TV provider -- which many speculate is looking to enter the wireless services business --continues to trade atop its 10-week moving average, which has served primarily as support since July 2012.
Even so, DISH continues to show up on the bearish radar. During the course of the last two weeks, short interest surged by more than 35%, and by close to 56% over the past month. These pessimistic plays account for 4.6% of the equity's float -- or the equivalent of more than five sessions' worth of pent-up buying pressure, at DISH's average pace of trading. Should the stock continue to trek northward, a mass exodus by the skeptics could amplify its upward momentum. Elsewhere, the majority of covering analysts seem wary of DISH Network Corp. The security maintains just five "strong buy" endorsements, versus nine "holds" and two "sell" or worse suggestions. Furthermore, the equity's average 12-month price target of $48.67 reflects expected upside of just 1.5% to DISH's current perch at $47.96. This leaves the door wide open for a round of upgrades and/or price-target hikes, which could add more fuel to the security's tank.
Delta Air Lines, Inc. (NYSE:DAL) has also displayed its technical chops lately, as the stock has nearly doubled in value year-to-date to perch at $23.40, and has bested the SPX by over 18 percentage points during the most recent three-month time frame. The shares gapped higher on Sept. 9 and 10, following news that the airliner would be joining the SPX, replacing BMC Software, Inc. (NASDAQ:BMC). The equity went on to touch a multi-year high of $23.71 several days later, thanks to a pair of bullish brokerage notes from J.P. Morgan Securities and Imperial Capital. Also of note, DAL's four-week downturn in mid-August was cushioned by its 20-week moving average, which has acted as support since October 2012.
Nevertheless, there are still plenty of doubters in the trading arena. Short interest increased by more than 26% over the latest reporting period, bringing the number of shares sold short to 18.6 million. This ample amount of available sideline cash is more than enough to trigger a short-squeeze scenario, should Delta Air Lines, Inc. continue to cruise up the charts. Meanwhile, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.89 registers in the 96th percentile of its annual range, signaling near-term speculators have rarely been more put-focused toward DAL during the last 12 months. This heavy accumulation of open interest -- particularly within the October series of puts -- could end up translating into options-related support over the next several weeks.
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