Key Breakout for Cal-Maine Foods (CALM)

12/29/2009 12:01 am EST


Nick Perry

Equity Options Trader, Schaeffer's Investment Research

Cal-Maine Foods, Inc. (CALM) hit a new annual high in today's trading as the stock shows a gain of 5%. The rally continues the uptrend in place for the last nine months and pushes the equity above a key level. Here is a look at the current sentiment profile.

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Cal-Maine Foods Inc.(CALM) reported that fiscal second quarter net income fell 41% on 3.8% lower sales. For the quarter that ended November 28, earnings were $16.1 million, or 67 cents a share, compared with $27.2 million, or $1.14 per share, in the year-earlier quarter. Sales slipped to $229.2 million from $238.3 million. Options players had high hopes heading into the earnings report, as the International Securities Exchange (ISE) reported nearly two calls purchased to open for every one put purchased to open during the past ten trading sessions.

The Schaeffer's Put/Call Open Interest Ratio (SOIR) has been declining in recent months, which suggests optimism has been building. However, the open interest configuration shows only a light build up of calls, so I wouldn't expect to see any near-term, options-related resistance. Analyst coverage is light and the opinion is mixed, so it doesn't appear that the push to new highs was highly anticipated by The Street.

Perhaps the most noteworthy indicator here is short interest. According to data collected by our quantified analysis department, 19% of the stock's float is sold short. The graph above shows that the total level of short interest has been declining, which would suggest that the shorts have been covering.

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Heavy levels of short interest can exacerbate volatility, so the breakout shown here is worth watching.

By Nick Perry of Schaeffer’s Trading Floor Blog

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