Calpine (found on the yahoo board)
I regularly write our Hot Stocks column, which features stocks from the top and bottom ends of the S&P 500 Index. Calpine (CPN: sentiment, chart, options) often shows up as a candidate, but we exclude stocks that trade below $5, making CPN a stock that I've never discussed.
CPN continues our theme of power generation, and Hoovers informs us that it generates 26,000 megawatts thanks to interests in natural-gas fired power plants in the U.S., Canada and Britain, and it owns 90 percent of the plants at the largest geothermal facility in the U.S. Over the long term, the stock has been in decline, and the weekly chart tells the sorry story, as first the eight level set in as resistance, and then the six level, and then four.
But the daily chart is very different, and it shows CPN gaining popularity recently, and gathering momentum. The story began in late April when the company released financial information to dispel rumors that had driven the price down. Less than a month later, CPN announced that it would sell some power and gas assets in an effort to cut debt by more than $3 billion by year end. Fitch Ratings placed CPN on its Ratings Watch Evolving list, a signal that its rating might soon be adjusted, one way or the other. The final news came on the last day of May, when the company agreed to sell a power plant in the U.K. for about $906 million, a further measure to pay down debt.
Sentiment for CPN is interesting. Zacks tracks 13 analysts who rate the stock. Six of them have it at a cautious "hold," and the remainder are pretty evenly split everywhere else, from "strong buy" to "strong hold." There's room for movement either way, and definitely a chance for those "holds" to make more of a stand.
The options crowd favors CPN puts, sending the equity's Schaeffer's put/call open interest ratio (SOIR) for the stock to 1.63 today, in the 96th percentile. This means that, during the past year, the speculative community has been more pessimistic only four percent of the time. The SOIR (shown in blue) has risen significantly since April.
This is encouraging. From a contrarian perspective, we like to see a stock that is rising despite pessimistic sentiment. If good news drives the stock higher, the pessimists are liable to change their minds at some point, and when they do, the stock price typically jumps even higher.
I've saved the most pulchritudinous part of the picture until last. The options players have sold CPN way short. The short-interest ratio is now 12.38 days to cover. If the short sellers tried to cover all their short positions, it would take them more than two weeks, at current trading volumes. Alternatively, if they tried to cover more quickly, it's easy to imagine which way the price would move. Of the shares available to trade, a massive 45.20 percent are shorted. This gives CPN a lot of energy.
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