Piper Sandler downgraded SHAK to "neutral" from "overweight"
Shake Shack Inc (NYSE:SHAK) stock is down 3.1% to trade at $104 at last check, after Piper Sandler downgraded the fast food chain to "neutral" from "overweight," and cut its price objective to $114 from $121. Shares are pulling back from their highest level since May, but still sport a 40.2% year-to-date lead, with familiar support at the $102 region ready to contain any additional losses.
What's more, the equity's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination in the past. According to Schaeffer's Senior Quantitative Analyst Rocky White, there were two times in the past five years when the security was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower. This is now the case with SHAK's SVI of 34%, which sits in the low 18th percentile of its 12-month range.
White's data shows that just one month after these signals, Shake Shack stock was higher, averaging a 21.9% pop for that time period. From its current perch, a move of similar magnitude would put the security above $126 for the first time since February 2021.
An unwinding of pessimism could also boost SHAK. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 1.20 ranks higher than 90% of readings from the past 12 months.
Short sellers have been building their positions, too, with short interest up 5.1% in the past two reporting periods. The 4.38 million shares sold short now make up 11% of the stock's available float, or nearly one week's worth of pent-up buying power. This leaves SHAK ripe for a short squeeze.