Thursday, February 5, 2015

DDD Technical Analysis and Short Interest Analysis

DDD with heavy short interest
Click on Chart to Enlarge

This chart is a daily chart of DDD.  I bought a May 29 strike call on it yesterday.

The technical position of the stock is compelling for a rally here in my opinion.  Price has under cut a low from March 2013 (not visible on this chart) and reversed higher here.  Stochastics is showing a weekly and daily bullish divergence on the low Tuesday in conjunction with a very high volume gap down and under cut of the January lows only to reverse and close in the upper end of the range and above the January lows.  This has the appearance of a failed break of support which often provides a high quality long entry.

There is money flow index bullish divergence on the recent leg down, indicating that the downtrend is running out of steam.

The stock is heavily shorted with 33% of the float short as of 1/15/15.  The short interest ratio is 12.5 which is rather high and indicates plenty of short covering potential on a rally.  While I don't have detailed data on the underlying short squeeze trigger price, I am estimating that a rise to the $35-38 level will likely cause some short covering based on the short interest increase from October to December.

Another factor here is that earnings comes out 2/26/15 before the market opens.  Given the oversold technical position of the stock with bullish divergence, I would give better than even odds to a bullish response during this earnings period.


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