• 3 Stocks Making All-Time Highs With Bearish Sentiment

    by  • May 1, 2013 6:00 am • Breaking News, Broad Market Analysis, Charts to Watch, Quick Hits • 0 Comments

    On April 3rd, 2013,  I blogged about 3 Under loved Equities making All-Time Highs. A link to the blog post can be found here.

    At that time, I focused on (TSLA) Tesla Motors, (CL) Colgate-Palmolive, and (NKE) Nike due to their technical strength amidst negative sentiment.

    Since that posting, TSLA is up 33%, CL is flat, and NKE has advanced by 7.5%, in a little less than a month.

    As our subscribers and readers know, we love to focus on equities with positive price action and negative sentiment. This combination often leads to outsized gains as the Bears finally capitulate and cover their wagers, which propels the equity higher.

    For starters, lofty levels of short interest on outperforming stocks allow the possibility for a short-covering rally. Moreover, high levels of pessimism from the brokerage bunch leaves the door wide open for a round of upgrades and/or price-target hikes. Additionally, heavy accumulations of near-term put open interest could give these equities a lift, as the bearish bets unwind.

    Based off of this premise, I will now focus on three additional stocks that I feel have the potential to make large moves in the months ahead.


    ASML – ASML Holdings (Originally Advanced Semiconductor Materials Lithography)

    ASML is a provider of advanced technology systems for the semiconductor industry. It offers an integrated portfolio of lithography systems mainly for manufacturing complex integrated circuits (semiconductors, ICs or chips).

    • At ASML’s average daily volume, it would take eight days of trading to cover or buyback all of the shares currently shorted
    • Short Interest has risen 372% in the past six months with the majority of this increase tied to the acquisition of Cymer in mid October, 2012
    • Large accumulation of Put Open Interest in front three months, as the Schaeffer’s Open Interest ratio is 3.59 implying that there are 3.59 Puts outstanding for every 1 Call
    • Per ISE/CBOE/PHLX option data, over the past ten days, 11.63 Puts have been purchased for every 1 Call




    KMB – Kimberly Clark Corporation

    Kimberly Clark is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers using advanced technologies in fibers, nonwovens and absorbency.

    • Per Zacks’, 10 of the 14 analysts who rate KMB, or 71%, rate it a Hold or Strong Sell (Despite strength…)
    • Possibility of price target revisions higher as the target price is 101.47 with KMB at 103.06
    • In the May/June/July series of options, there are 4.3 puts per every One call, a multi-year extreme
    • Per ISE/CBOE/PHLX option data, over the past fifty days, 6.17 Puts have been purchased for every 1 Call
    • Short Interest is up 20% in the past month




    STX – Seagate Technology

    Seagate is the provider of electronic data storage products. The Company’s principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs.

    • 17 of the 20 analysts who cover STX rate it a Hold, Sell, or Strong Sell (Forget about the All-Time Highs…)
    • Possibility of price target revisions higher as the target price is 34.88 with STX at 36.41
    • Short Interest as a percentage of float continues to be high at 9.33%, it would take about six days of buying at the average daily volume to cover these bearish wagers
    • Put Implied Volatilities relative to calls are at an extreme reflecting increased demand to hedge shares



    These candidates have the necessary conditions for (continued) out-performance in the months ahead, based upon the contrarian approach that continued strength can cause negative sentiment to evolve into positive price action. I’d also feel more confident owning a name that others shun, especially with strong price action in comparison to a name that everybody already loves.


    Chris Prybal is a Quantitative Analyst who contributes fundamental, technical, and sentiment research as well as analysis to SchaeffersResearch.com. Chris holds a Bachelor’s degree in Finance from the University of Cincinnati and his research has been quoted on Bloomberg TV, CNBC, Barron’s and Forbes Magazine. Chris has analyzed and traded derivatives for over 15 years in addition to his research prowess. Chris can be followed on Twitter @ChrisPrybal


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