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Campbell Soup Company (NYSE:CPB) has displayed some technical fortitude in 2013, gaining more than 31% so far this year, and outperforming the broader S&P 500 Index (SPX) on a relative-strength basis over the past two months. Although the shares experienced a pullback in June after tagging a decade-plus high of $48.83 on May 20, the downturn was cushioned by their 20-week moving average, which has acted primarily as support since late June 2012. However, there are still a number of naysayers on Wall Street, which could amplify the stock's upward momentum over the next few months.
Jumping right in, sentiment has grown increasingly pessimistic toward CPB in the options pits lately. Speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly two puts for every call during the past two weeks. The resultant 10-day put/call volume ratio of 1.83 -- up from a reading of 0.35 on July 22 (the day following July expiration) -- ranks in the 66th annual percentile, signaling traders have been scooping up puts over calls at a faster-than-usual pace.
In similar fashion, Schaeffer's put/call open interest ratio (SOIR) for CPB stands at 1.50, indicating puts outnumber calls among options with a shelf-life of three months or less. This ratio is just 4 percentage points from a 52-week acme, conveying near-term traders have rarely been more put-heavy toward the stock during the past year. An unwinding of these put positions could end up serving as a contrarian tailwind, should the security continue to show its technical chops.
Meanwhile, although short interest on the soup conglomerate dropped by 9.4% during the past two reporting periods, these bearish bets still account for 7.7% of the equity's float, with more than 12 million shares currently sold short. In fact, it would take more than 13 sessions to buy back these shorted shares, at CPB's average pace of trading. In other words, an exodus by the lingering shorts could trigger a short-squeeze situation down the road.
Elsewhere, the prevailing attitude among the analyst crowd is lukewarm at best. Only one brokerage firm has bestowed a "strong buy" endorsement upon the equity, versus 10 "holds" and three "sell" or worse recommendations. Additionally, the stock's consensus 12-month price target of $45.75 denotes a slight discount to CPB's present perch at $45.90. This leaves plenty of room for a round of upgrades and/or price-target hikes, which could add more fuel to the security's tank.
Traders wanting to roll the dice on extended upside for Campbell Soup Company (NYSE:CPB) may wish to purchase the stock's in-the-money November 41-strike calls, which sport an ask price of $5.30. However, those options players wanting to err on the side of caution -- in light of the company's turn in the earnings confessional on Aug. 29, or the ongoing negotiations to sell its European businesses to CVC Capital Partners Ltd. -- may want to construct a bull call spread by simultaneously selling the November 50-strike calls, which are bid at $0.25.