Short Interest Report: Assured Guaranty Approaches New-Low Territory

Despite a dreary technical performance, optimism surrounds Assured Guaranty (AGO)

by Andrea Kramer (akramer@sir-inc.com) 7/15/2008 3:19 PM


Continuing my series utilizing the filters on SchaeffersResearch.com, I'm checking out some struggling stocks with heavy short interest - coupled with excessive optimism on the Street - as these bearish bets can often place additional selling pressure on already-downtrending equities. Taking a look at the stock screener's results, one equity seemed to stick out: insurance company Assured Guaranty (AGO: View sentiment for AGOsentiment, chart, options) .

To see how I utilized this filter, check out a recent edition of Short Interest Report.

Mortgage Market Misery

Before we delve into the short-interest data, let's take a look at how the financial firm is faring on the charts. Along with its sector peers, the shares of AGO have suffered of late, underperforming the S&P 500 Index (SPX) by more than 35% during the past 60 trading days. The stock has journeyed about 44% into the red year-to-date, and is currently trading beneath short-term resistance from its 10-day moving average near $14.60 – less than 2 points above its all-time low obtained in November 2007.

DAILY CHART OF BIDU SINCE JANURY 2008 WITH 20-DAY MOVING AVERAGE

Skepticism Swells Among Short Sellers

Now, turning back to what peaked my interest to begin with... Short interest on AGO has been steadily accumulating since late 2007, indicating short sellers are becoming increasingly pessimistic toward the security. In fact, these bearish bets jumped more than 50% higher during the past month, and now account for nearly 16 million shares – or roughly 28% of the stock's total available float. Should these skeptics choose to add to their winning positions, a continued increase in short interest could pressure the equity even further into negative territory.

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