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Short Interest Update: Marvell Technology Group Ltd., Raytheon Company, and Canadian Solar Inc.

Taking a closer look at short interest changes for MRVL, RTN, and CSIQ

by 9/3/2013 11:38:22 AM
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Over the course of the past couple of weeks, a number of stocks have seen significant increases in short interest. From a contrarian standpoint, the three securities noted below -- all of which are technical outperformers -- could end up benefiting from this increase of pessimism on the Street.

Marvell Technology Group Ltd. (NASDAQ:MRVL) has been an outperformer in 2013, gaining nearly 71% year-to-date to trade at $12.40, and outpacing the broader S&P 500 Index (SPX) by close to 11 percentage points during the past three months. What's more, the shares tagged a new annual high of $13.51 on Aug. 14, thanks to a bullish brokerage note at B Riley. Meanwhile, the stock's recent pullback was contained by its 20-week moving average, which has acted as support since January.

However, there is still plenty of skepticism levied against the semiconductor name. Short interest surged by more than 56% during the most recent reporting period, bringing the number of shares sold short to nearly nine million. Should Marvell Technology Group Ltd. continue along its upward trajectory, it could spark a short-squeeze scenario. Meanwhile, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio sits at 4.52, indicating puts bought to open have more than quadrupled calls during the past two weeks. This ratio is perched at a 52-week acme, conveying traders have been snapping up puts over calls at an annual-high pace. An unwinding of these bearish bets could end up serving as a tailwind for MRVL down the road.

Raytheon Company (NYSE:RTN) has put forth a solid performance on the technical front, advancing roughly 32% so far this year to wink at $76.03 level, and besting the SPX by almost 15 percentage points during the most recent two-month time frame. The security also touched a fresh all-time peak of $77.93 on Aug. 26, despite receiving a downgrade at Stifel Nicolaus that morning. On the charts, the $75 area, which had eluded RTN since July 1999, recently emerged as a layer of support.

Nevertheless, the government tech firm remains caught in the bearish crosshairs. Over the past two weeks, RTN saw a more than 60% spike in short interest, as the bears continued to pile on. Should the stock continue to move higher, short-covering activity could ensue. There's also no shortage of pessimism among the brokerage bunch. Raytheon Company currently maintains just three "strong buy" endorsements, compared to 11 tepid "hold" suggestions. Additionally, the security's average 12-month price target of $74.59 reflects a discount to RTN's current price. This leaves plenty of room for a round of upgrades and/or price-target hikes, which could boost the shares even higher.

Canadian Solar Inc. (NASDAQ:CSIQ) has been knocking it out of the park from a technical perspective, soaring close to 286% in 2013, and more than quadrupling in value during the past 12 months to perch at $13.12. The stock cruised to a new multi-year high of $16.40 on Aug. 6, after the firm agreed to sell five solar-power plants to Concord Pacific's Concord Green Energy unit. Meanwhile, despite a recent (short-lived) downturn, the shares just finished a third consecutive month atop their 50-month moving average, which previously acted as a ceiling, as far back as the trendline could be measured.

Despite this technical prowess, there are still plenty of naysayers doubting CSIQ's prospects. Short interest jumped by 45.5% during the latest reporting period, and now these shorted shares make up a lofty 8% of the equity's available float. Should some of these skeptics hit the exits in light of the stock's outperformance on the charts, it could trigger a future short-covering rally. Elsewhere, traders seem to have a preference for the equity's short-term puts lately. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.54 ranks in the 81st percentile of its annual range, confirming near-term speculators have been more put-heavy toward Canadian Solar Inc. just 19% of the time during the past year. This bevy of put open interest -- particularly within the front-month series -- could end up translating into options-related support over the next few weeks.


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