This memory maker is seeing an unusual amount of short positions against it, but it continues to rally, which means there's a good chance the shorts will soon capitulate and the stock will really jump, observes Bernie Schaeffer of Schaeffer's Investment Research.
I initiated a long position in Seagate Technology (STX). Price action on the equity has been very strong, with the equity up 103% year-to-date and 214% over the past 52 weeks.
Our stock picks are based on a strategy known as "expectational analysis," which combines fundamental, technical, and contrarian sentiment metrics.
STX surpassed the $32 level in early August, and has traded above this level since that time. This level, which acted as previous resistance in May, could now provide support going forward.
On the sentiment front, over 7% of the stock’s float is sold short despite its strong year-to-date and year-over-year performance. A total of 20 analysts cover the equity, and only seven have it currently rated as a buy. This leaves room for further upgrades, which could help drive the shares even higher.
Finally, in regards to option activity, the Schaeffers put/call open interest ratio (SOIR) currently stands at 1.34. This bias of puts versus calls is in the 97th percentile of all SOIR ratios in the past 52 weeks.
This unusually high put/call ratio has the potential for an unwinding of these bearish bets, which could then act as a tailwind for STX.