Avago Technologies Ltd (AVGO), CIGNA Corporation (CI), and Newmont Mining Corp (NEM) saw sharp increases in short interest in June
One of the key aspects of contrarian trading is sentiment analysis. That is, judging the Street's feelings on a stock. One primary bullish indicator for this is short interest. In other words, a trader can identify a stock with strong technicals, but heavy short interest -- a situation that may induce a short-covering rally, as bears are forced to buy back their losing bets. With this premise in mind, Schaeffer's Senior Quantitative Analyst Rocky White sent over 50 stocks that have seen massive increases in short interest during the most recent reporting period. Three notable names from the list are semiconductor concern Avago Technologies Ltd (NASDAQ:AVGO), health insurance firm CIGNA Corporation (NYSE:CI), and commodity concern Newmont Mining Corp (NYSE:NEM).
AVGO has been trending higher for nearly two years now, with the shares touching an all-time high of $150.50 on June 1. Over the past 12 months, in fact, the stock has nearly doubled in value. Today, the equity is feeling the heat from sector peer Micron Technology, Inc. (NASDAQ:MU) -- down 2.1% at $136.36 -- but appears to have found support from its 40-day moving average, a level that contained a number of AVGO's pullbacks since last October.
Despite these strong technical figures, short interest exploded on AVGO during the most recent two-week reporting period, jumping 399%. It would now take three days to cover all of the stock's shorted shares. What's impressive is the security's ability to remain in all-time-high territory amid this monstrous selling pressure.
Earlier today, CI touched an all-time high of $170.68, but has since cooled off, trading 1.7% lower at $166.92. Over the past 12 months, though, the shares are up 82%, and got a boost yesterday from the Supreme Court's "Obamacare" decision.
These gains haven't impressed all traders, with short interest increasing almost 49% during the most recent reporting period. These bears may be on to something, too, because according to the data, CI is overbought. That is, the stock's 14-day Relative Strength Index (RSI) stands at a whopping 84. In other words, a near-term pullback may have been in the cards.
Lastly, there's
NEM, which has had an up-and-down year on the charts. Still, the shares stand 26% above their year-to-date breakeven mark at $23.83. Regardless, it remains a favorite among the short-selling community. During the most recent reporting period, short interest rose 76.1%. However, going on NEM's average daily volumes, it would still only take bears under two sessions to buy back their bets.
The skepticism has been high in the options pits, as well. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NEM's 50-day put/call volume ratio of 1.00 ranks in the 96th percentile of its annual range. In other words,
puts have been bought to open over calls with more rapidity just 4% of the time within the past year.
The next short interest report will come out next week. It'll be interesting to see if short sellers hang around, or if Avago Technologies Ltd (NASDAQ:AVGO), CIGNA Corporation (NYSE:CI), and Newmont Mining Corp (NYSE:NEM) can benefit from their quick exit.