Shares of trendy clothier Aeropostale (ARO: sentiment, chart, options) are defying gravity today. Despite an average decline of nearly 2% across the board for the major market indices, ARO has gained more than 5% in early trading. In fact, the equity is among the top 5 outperforming securities on the Big Board so far today.
Save for the company's exceedingly better than expected December sales figures, there is a distinct lack of headline news for ARO this morning. As you may remember, on Jan. 8, Aeropostale reported a 12% jump in same-store sales for December. The figures blew past analysts' expectations for a decline of 4.2% for the month.
Technically Speaking
The shares are off slightly since the release of December's sales figures, but ARO has refused to break out of its short-term uptrend. Since the beginning of December, the equity has rallied more than 53%, with intermittent support at its 10-day and 20-day moving averages providing ballast for the uptrend. What's more, ARO appears to be establishing support in the 18.50-19 region. The 18.50 level has acted as resistance in recent weeks, while the 19 level appears to be firming as an area of short-term support.
Sentiment is mixed for ARO. In the options pits, traders are betting on an extended run higher in the shares, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.63 ranks below 69% of all those taken during the past year. Additionally, data from the International Securities Exchange and the Chicago Board Options Exchange's 10-day call/put ratio reveals that about 5.5 calls have been bought to open for every 1 put purchased during the past 2 weeks of trading. This ratio also ranks above 94% of all such readings taken in the prior 12 months, signaling an increasing appetite for bullish bets among speculative options traders.
Wall Street analysts are not convinced of the equity's potential, however. Currently, 11 of the 17 brokerage firms following ARO rate the shares a "hold," according to Zacks. Any upgrades from this bunch of holdouts could provide additional buying pressure for the security.
Finally, short sellers have loaded up on bearish ARO bets. As of the most recent reporting period, more than 15.5% of the stock's float was sold short. That said, this figure has declined by 14% during the past 2 weeks. Should this short-covering trend continue, it could provide an influx of buying strength for ARO, helping the stock to weather the current storm on Wall Street.
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