Sanderson Farms Rising on Heavy Volume

Sanderson Farms SAFM has been a very active stock in recent trading sessions after the company reported its fiscal second-quarter earnings results on Tuesday morning. Despite a strong quarter, the stock sold off on the results as Morgan Stanley analysts and others advised profit taking in the name. It would appear, however, that investors are reconsidering the initial reaction to the earnings report, as the stock has retraced its losses from Tuesday. On Thursday, SAFM is moving strongly higher on heavy volume. At last check, SAFM was up 4% to $55.56 with volume running at more than 200% of the daily average. In the second-quarter, the company reported EPS of $1.04 versus Street estimates of $0.95. Revenues were $595.05 million versus consensus revenue estimates of $591.25 million. While Moran Stanley advised its clients to use the Q2 results as an exit point in the stock, Goldman Sachs reiterated its Buy rating on shares and offered some bullish commentary in the wake of Tuesday's report. A key level in the name could be at $55.87, which was where the stock opened on Tuesday before being sold off hard. If SAFM can re-take this level it could cause shorts-sellers to cover their bets on the realization that this week's initial downside momentum has totally reversed itself. SAFM has a short interest of over 11%, so the potential for upside from short covering is certainly a possibility.