Contrarian Shopping Among Retailers

12/06/2013 8:00 am EST


A number of securities saw notable increases in short interest during the most recent reporting period, including two retailers that have been technical standouts and could ultimately benefit from this growing skepticism, observes Terri Stridsberg, contributing analyst with Schaeffer Investment Research.

Men's Wearhouse (MW) has been an outperformer, boasting a year-to-date advance of about 65% to trade at $51.41.

In fact, the security reached its own multi-year peak of $52.72 just last week, after the specialty retailer made a bid for rival Jos. A. Bank Clothiers (JOSB).

Nevertheless, MW saw a 37.1% surge in short interest during the first half of November, and now these shorted shares make up a healthy 7.3% of the security's float.

In other words, should the stock remain northbound, it could end up benefiting from a wave of short-covering activity.

The TJX Companies (TJX) has gained around 49% so far this year, to wink at the $63.28 level, while also tagging a record high of $64.09 on November 21, thanks to a well-received quarterly earnings report.

Nevertheless, short interest rose by 39.3% during the latest reporting period, bringing the number of shares sold short to 9.4 million—the most since early April.

If the stock continues along its upward trajectory, it could spark a mass exodus by the bears, which may add even more fuel to TJX's technical tank.

Bearish sentiment toward the discount retailer is also prevalent in the options pits; speculators have been scooping up puts over calls at a faster-than-usual clip lately.

Similarly, TJX's Schaeffer's put/call open interest ratio shows puts outweighing calls among options with a shelf-life of three months or less.

This accumulation of open interest—particularly at the out-of-the-money December 62.50 strike—could end up serving as options-related support over the next few weeks.

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