JC Penney Short Sellers Are Changing Their Minds

Speaking to Benzinga, Karl Loomes, a market analyst at SunGard's Astec Analytics commented on the declining short interest in J C Penney Company Inc JCP.

Loomes said that the SEC lending figures for JC Penney shows that borrowing volumes have been falling "steadily and consistently" since early February and is now down about 22 percent. He said that shares of JC Penney have been climbing over the same period, but have done so with "large peaks and troughs" with fairly large range and volatility.

"This level of reduction in borrowing is a classic signal we see when short sellers are covering positions and either expecting prices to gain ground, or at least not willing to bet they will be falling any time soon," Loomes said. "The fact that the borrowing reductions were consistent despite a very inconsistent move in the share price, probably hints more at their uncertainty and caution, seemingly expecting risk to lie more with the upside.

Shares traded recently at $9.14, up 2.6 percent.