Market Overview

Seven Mid-Cap Basic Materials Stocks With Heavy Short Interest


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 (NYSE: AA) kicked 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 (NYSE: 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.

InterOil (NYSE: IOC): This energy stock has a short interest of nearly 25 percent, but has nonetheless seen shares rally more than 34 percent year-to-date. The increase could continue, particularly if short-sellers begin to cover their bets. The company has a market cap of $3.32 billion.

Interestingly, the stock has held up very well despite falling prices for crude oil, but InterOil has been unable to climb above the $70.00 level and hold it. InterOil may be a strong stock at the moment, but could be setting up for a breakdown after falling below $70.00 yet again.

McMoRan Exploration (NYSE: MMR): This stock has actually seen a short-squeeze over the last month, but McMoRan was 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 percent.

Nevertheless, even after Tuesday's big decline of almost 9 percent, McMoran is still up over 30 percent in the last month. A look at the chart, however, suggests that the correction in McMoran could continue as traders take profits. The big downward move has come on heavy volume and could accelerate in coming days if sentiment remains weak.

RPC Inc. (NYSE: RES): - RPC is also a strong stock, despite having a short interest above 22 percent. The company provides a range of specialized oilfield services and equipment to oil and gas companies engaged in the exploration, production and development of oil and gas properties.

In recent days, shares of RPC have broken out to multi-month highs, but the company is still down more than 2 percent in 2012. With a relative strength reading above 65 and new multi-month highs hit in recent days, however, RPC may be a good long idea if it can break above the $12.00 level. This could cause some short-covering and allow the stock to extend its recent rally.

Westlake Chemical (NYSE: WLK): This specialty chemicals company has a short interest of just below 25 percent. Despite the bearish sentiment from short-sellers, Westlake has risen over 5 percent over the last month, but remains more than 16 percent off of its high from the beginning of April. Year-to-date, however, the stock is up over 35 percent.

Western Refining (NYSE: WNR): Western continues to hurt short-sellers as shares have soared over 73 percent 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.

Despite a short interest above 25 percent, the bulls remain in control. After breaking out to new highs, however, Western shares fell over the past few days - closing Tuesday down over 4 percent from Friday's trading session.

United States Steel (NYSE: 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 percent, but have stabilized in recent weeks.

U.S. Steel has the highest short interest of all the stocks listed here, with a float above 28 percent. The name also remains weak with a Relative Strength Index (RSI) below 50. A break of the 20-day moving average to the downside in U.S. Steel could lead to more declines in the coming weeks.

Posted-In: Long Ideas Short Ideas Technicals Commodities Pre-Market Outlook After-Hours Center Markets Movers Best of Benzinga


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