Diamond Foods, Inc. (DMND - 25.34) this morning announced that it received a notice of noncompliance from the Nasdaq Stock Exchange for failing to file its fiscal second-quarter results on time. DMND said it intends to submit an updated plan to Nasdaq by April 16 in order to have the filing date extended to June 11. The San Francisco-based company has already received an extension to file its first-quarter report by this date. DMND has been battling accounting issues ever since its audit committee found that payments to walnut growers had been improperly recorded.
On the charts, DMND has spent most of the day wavering near breakeven. From a longer-term perspective, the shares are sitting on a 21.5% deficit for 2012, and a more than 51% drop during the past 52 weeks. In fact, the stock has lagged the broader S&P 500 Index (SPX) by nearly 28% over the past two months. At last check, DMND is looking up at its downtrending 32-day moving average, which has alternatively served as support and resistance over the past year.
The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.53 indicates that calls nearly double puts among options slated to expire within three months. This ratio ranks in the 6th percentile of its annual range, suggesting that short-term options players have rarely been more call-heavy during the past year.
However, there could be a less-than-bullish reason for this activity. Short interest on the equity rose 17.9% during the past month. These pessimistic positions now account for 58.7% of the security's available float. Oftentimes, short sellers will buy calls as hedges for their bearish bets -- and this could be what's occurring here.
Going forward, this glut of short interest could contribute to added volatility in DMND shares. Any negative news could prompt a new wave of shorting activity, potentially smacking the stock lower. On the other hand, any positive developments could spark a rush to cover among some of the weaker bearish hands.
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