Seven Heavily Shorted Mid-Cap Basic Materials Stocks

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Economic fears are running high in the global markets, and the most efficient means of trading economic sentiment with individual stocks may be the highly-cyclical basic materials sector. Alcoa
AAkicked off
earnings season on Monday after the closing bell and the price action in that stock may be telling. Shares of the company gapped higher at the open, but fell throughout Tuesday's trading session to close down over 4 percent. The entire basic materials sector performed poorly on the day, notching a loss of 3.45 percent. Below, Benzinga highlights the seven mid-cap basic materials stocks with the highest short interest. There are a couple of ways that traders could look at this information. Those wishing to express a bullish outlook on the global economy could go long these names in expectation of a short-squeeze. Conversely, some of these stocks may still be good short plays for bearish traders - savvy investors may be shorting these names in expectation of falling prices.
Eldorado Gold EGO:
This stock has a short interest above 25 percent and remains in a downtrend despite relatively stable prices in physical gold. Shares fell sharply on Tuesday to close down over 5 percent, compared to a loss of 1.37 percent in gold futures. Year-to-date, Eldorado Gold is down more than 16 percent and remains in a near-term downtrend. The company has a market cap of a little over $8 billion and yields 1.57 percent at current levels.
InterOil IOC:
This energy stock has a short interest of nearly 25 percent, but has been in an uptrend. Year-to-date, shares have rallied more than 23%. This trend could continue, particularly if short-sellers begin to cover their bets. Interestingly, the stock has held up very well despite falling prices for crude oil, but IOC has been unable to climb above the $70.00 level and hold it. At current levels, InterOil has a market cap of $3.30 billion. Right now, IOC remains a strong stock, but it could be setting up for a breakdown after falling below $70.00 yet again.
McMoran Exploration MMR
- This stock has actually seen a short-squeeze over the last month, but MMR has been crushed on Tuesday. Shares began jumping in late June, and for a period of time, this was one of the strongest stocks in the market despite having a short interest above 24%. Nevertheless, even after Tuesday's big decline, MMR is still up more than 30% over the last month. A look at the chart, however, suggests that the correction in MMR could continue as it looks like traders are taking profits in the name. The big down move has come on heavy volume and could accelerate in coming days if sentiment remains weak.
RPC Inc. RES
- This is also a very strong stock, despite having a short interest above 22%. The company provides a range of specialized oilfield services and equipment to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties. In recent days, shares have broken out to multi-month highs, but RES is still down a little more than 2% in 2012. With a relative strength reading above 65 and new multi-month highs being hit in recent days, however, RES may be a good long idea if it can break above the $12.00 level. This could cause some short-covering in the name and allow it to extend its recent rally.
Westlake Chemical WLK
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- This specialty chemicals company has a short interest of just below 25%. Despite the bearish sentiment of short-sellers in the name, WLK has added almost 5% over the last month, but remains off of its best levels hit at the beginning of April. Year-to-date, however, the stock is still up more than 34%.
Western Refining WNR
- This stock has likely hurt the short-sellers that continue to bet against it. Shares have soared more than 72% in 2012 and are sitting near new 52-week highs. The company is an independent crude oil refiner and marketer of refined products and also operates service stations and convenience stores. With a short interest of above 25%, there are clearly a contingent of bears in the stock, but the bulls remain in control. After breaking out to new highs, however, WNR shares have been falling over the last couple of days.
United States Steel X
- This steel stock has been weak in 2012 and a likely profit center for short-sellers. Year-to-date, shares have lost almost 24%, but have stabilized in recent weeks. Of all the stocks listed here, X has the highest short interest, above 28%. The name also remains weak with a RSI below 50. A break of the 20-day moving average to the downside in X could lead to more declines in the coming weeks.
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