Diamond Foods: Technical Titan

11/01/2013 7:00 am EST


Small-caps have performed of late. This storyline has been supported by the price action of the Russell 2000, which has notched a string of record highs in recent weeks, notes technician Karee Venema in Schaeffer's Investment Research.

One name within this sector that could offer up a potential contrarian play is Diamond Foods, Inc. (DMND).

The stock has been a technical titan, with the shares boasting a 68% year-to-date advance. Helping usher the stock higher has been its 20-week moving average.

This trendline applied pressure to DMND in late 2011 and throughout most of 2012, but seems to have switched to a more supportive role in recent months.

Sentiment surrounding the security tends toward the skeptical side, though. Among covering analysts, five maintain a tepid hold rating toward DMND, compared to one sole dissenter that's initiated a strong buy suggestion.

Plus, the consensus 12-month price target of $21.83 stands at a discount to the equity's current perch at $23.04.

The stock could be poised to encounter some analyst-induced tailwinds, should any of these disbelievers follow in the footsteps of BMO, which issued a bullish brokerage note toward DMND earlier this month.

Meanwhile, short interest accounts for roughly one-third of the security's available float, and it would take more than two weeks to cover these shorted shares at DMND's average pace of trading.

In other words, this ample amount of sideline cash could trigger a short-squeeze situation, should Diamond Foods continue with its positive price action.

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