PSTG is ripe for a short squeeze, too
The shares of Pure Storage Inc (NYSE:PSTG) are up 5.7% to trade at $17.29 this morning -- one of the best stocks on the New York Stock Exchange (NYSE) -- after yet another bullish brokerage note. This time, Goldman Sachs upgraded the flash drive storage specialist to "buy" from "neutral," while boosting its price target to $21 from $18. The analyst in coverage believes that thanks to an array of new products, Pure Storage will continue to gain a foothold in the data market.
Today' gains help PSTG distance itself from its year-to-date breakeven level. The shares bottomed at $12.67 back on Aug. 5, and the subsequent bounce from there was swiftly rejected by their 160-day moving average last month. Shorter-term, the stock has taken out its 30-day moving average, which along with the $17 level has served as a ceiling in October.
An exodus of short sellers could fuel another charge at its 160-day trendline. Short interest increased by 9.6% in the two most recent reporting periods to 19.60 million shares, the most in over three years. This accounts for a healthy 9.3% of PSTG's total available float, and almost a week's worth of buying power, at its average pace of trading.
Over in the options pits, calls reign supreme. In the last 10 days, 12,884 calls were bought to open at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 233 puts. Given the amount of short interest tied up into the security, it's possible some of these calls could be shorts seeking an options hedge against any additional upside.
Plus, the equity's Schaeffer's Volatility Scorecard (SVS) of 86 (out of 100) shows Data Storage stock's strong tendency to make bigger-than-expected moves during the past year, relative to what the options market was pricing in.