Q2 STOCKS TO BUY

3 Stocks That Could Burn Short Sellers

B/E Aerospace Inc (NASDAQ:BEAV), Duke Energy Corp (NYSE:DUK), and Monster Beverage Corporation (NASDAQ:MNST) are among the stocks that have seen huge increases in short interest this year

Apr 1, 2016 at 2:30 PM
facebook X logo linkedin


Here at Schaeffer's, we pay a lot of attention to short interest. It's one of the key sentiment indicators that lends itself to our contrarian options trading philosophy. Recently, Schaeffer's Quantitative Analyst Chris Prybal took a look at the stocks that have seen the biggest increases in short interest this year. Among the names he discovered -- which we'll examine below -- are B/E Aerospace Inc (NASDAQ:BEAV), Duke Energy Corp (NYSE:DUK), and Monster Beverage Corporation (NASDAQ:MNST).

Short interest on BEAV has rocketed 181% year-to-date to nearly 7 million shares. More significantly, this is the second-highest reading since mid-2007, and it would take almost one week for short sellers to cover these positions, at the aerospace stock's average daily volume.

Based on what we're seeing in the options pits, some of these shorts may be hedging to the upside. BEAV's 50-day call/put volume ratio of 6.37 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) outstrips nearly three-quarters of all readings from the past year.

Potentially supporting that protective strategy is B/E Aerospace Inc's strength on the charts. At $46.30, the stock has rallied more than 9% year-to-date. However, if the shares continue to power higher, the unhedged shorts may be forced to unwind their bets -- resulting in a fresh wave of buying power.

It's a similar set-up for DUK. The energy stock's short interest has spiked 154% in 2016, despite the shares gaining 13% year-to-date to trade at $80.64. What's more, DUK touched an annual high of $81.21 earlier today. If the shares can keep hitting higher highs, a mass exodus of shorts could spell tailwinds.

Short-term options traders, meanwhile, have gravitated toward Duke Energy Corp calls. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.58 rests below all but 6% of readings taken in the last 12 months.

Finally, beverage issue MNST has watched short interest explode 114% year-to-date to 5.5 million shares -- an amount that would take about a week to cover, at the stock's average trading volume. Options traders have been betting bearishly, too. MNST's 10-day ISE/CBOE/PHLX put/call volume ratio of 2.74 ranks in the high 94th percentile of its annual range. By contrast, the brokerage crowd remains upbeat.

Technically speaking, Monster Beverage Corporation has been consolidating in the $130-$135 zone for the past month, and currently sits at $134.46. The stock bottomed at an annual low of $113.08 in early February, but took a quick bounce off its 100-week moving average. More recently, MNST has taken back its perch atop the 10-week trendline.

 
 

“Buy This Stock Now!” - Expert Who Called 11x On TSLA

He called a rare 11x on Tesla…

But now, thanks to Elon & Trump’s new alliance…

He says there’s a new opportunity that could be 1,000x BIGGER than Tesla – and it could completely revolutionize a $23 Trillion market.

It’s trading for less than $5 per share right now…

But it won’t be under the radar for long.

Discover The 1,000x Bigger Elon Opportunity Here

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

👀Learn How Dividends Create Passive Income for Life
Receive $200 Off Motley Fool Epic. The Motley Fool Epic $299 discounted offer is based on $499/year list price. Introductory promotion for new members only. Take control of your money and your portfolio with Motley Fool Epic.

💵New Income System Could Pay You $4,243 Monthly
You could collect an average of $4,243 per month starting as early as next week with a new payout system for income investors. New registrations are being accepted for investors who want to be in a position to start with their first payout next week.

🚀Easy 92% Crypto Dividends (No Coins Required)
COIN stock doesn't pay a dividend... But there's actually a new way to collect a massive dividend that's indirectly based on the stock and offers a terrific monthly income (currently yielding nearly 92% on a forward basis).

🤝Free Advisor Match with Wiseradvisor.com
Don't leave your retirement to chance! Get matched with a trusted financial expert for FREE and make the most of your tax refund. Get started now.

⚠️Dennis Quaid's #1 Warning for Americans
Here's the thing: life doesn't come with guarantees. The economy shifts, markets stumble, and years of hard work could slip through your fingers like sand. But it doesn't have to be that way for you. So request a free copy of this Gold & Silver Guide that will arrive right to your doorstep when you act now.

 

 
 

Follow us on X, Follow us on Twitter