Bernie Schaeffer has been a industry-leading expert in options and trading since 1981; in the "Master portfolio" at Schaeffer's Investment Research, he highlights a trio of new ideas.
I initiated a long position in Darden Restaurants, Inc. (DRI). The stock is off to a hot start this year, with the shares over 10% higher in a little over a month.
This rally coincides with a technical breakout above a key trendline formed from the September, 2018 highs, and could be signaling continued upside in the equity. Despite this strength, short interest remains elevated. After peaking in mid-December, short interest has declined by nearly 20%.
This indicates that bears have been covering, but over 5% of the float remains sold short. This pent-up buying power could potentially lead to strong rallies down the road.
I initiated a long position in Zendesk, Inc. (ZEN). The stock has been on fire as of late, as the equity is up over 30% year-to-date and almost 100% year-over year. In fact, the equity recently made a new all-time high, and is showing no signs of stopping.
Last week, ZEN responded favorably to its quarterly earnings report, and in the process took out the $72 level, which was former resistance.
This could act as support going forward. Lastly, short interest on ZEN is currently retreating after making a fresh all-time high in January. A continued exodus by bears could add to the buying pressure recently seen in the shares.
I initiated a long position in Foot Locker, Inc. (FL); the shares have been strong, with the equity up 26% year-over-year and currently trading near 52-week highs. The company is expected to report earnings on 3/1, and option open interest is currently very light.
This creates the potential for a strong post-earnings move. Despite its strength, sentiment toward FL remains skeptical. Currently, 9% of the equity's float is sold short. This creates the potential for future short-covering rallies. Lastly, some analysts have yet to take a bullish stance toward the company.
Currently, 9 of the 23 analysts covering the stock have it rated a "hold," or worse. This creates the potential for future upgrades, which could act as a tailwind going forward.