Tuesday, March 27, 2012

Coal: "Is Peabody Energy Poised for a Contrarian Backlash?" (BTU)

The stock is down another 1.25% at $30.02.
From Schaeffer's Investment Research:
In the latest installment of Monday Morning Outlook Senior Quantitative Analyst Rocky White detailed a few indicators that we here at Schaeffer's Investment Research keep in mind when quantifying sentiment toward a particular stock and/or index. Similar to semiconductor stock Cree (CREE), Rocky tapped Peabody Energy Corporation (BTU - 29.97) as a potential short play for the contrarian speculator.

Technically speaking, BTU has had a rough time on the charts, lopping off more than 8.8% in 2012, and pulling back about 58.4% over the past 52 weeks. In fact, the stock has lagged the broader S&P 500 Index (SPX) by 21.3% during the past two months. BTU is currently off more than 0.7%, faltering below the $35 level, as well as its 10-week and 20-week moving averages -- which have guided the shares lower since mid-April 2011.

Despite this poor price action, it appears that relatively few traders are wagering on BTU to prolong its slide. Short interest decreased roughly 13% over the past month. These bearish bets now account for just 3% of the equity's float, pointing to a rather meager supply of sideline cash.

Meanwhile, there is an overwhelming preference for calls in the options arena. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 4.59 calls for every put. This ratio arrives in the 90th percentile of its annual range, signaling that traders on these exchanges have purchased bullish bets over bearish at an accelerated clip during the past couple of weeks....MORE