Some may argue that it's love that makes the world go round. On Wall Street, many would argue that it's actually money. However, there is also a very strong argument to be made that coffee is the life blood that actually keeps the world spinning on its axis. If you're in doubt, look around at the number of coffee shops dotting nearly every street corner, or even the mug sitting next to you on your desk. Coffee gets the world up and moving every morning.
The nation's caffeine obsession could also provide some get-up-and-go for your portfolio, especially where Peet's Coffee & Tea Inc. (NASDAQ: PEET, Stock Forum) is concerned. Peet's owns and operates about 190 coffee shops in California and half a dozen other states, according to Hoover's, offering java lovers more than 20 types of whole bean and fresh ground coffee, including about 15 blends. Its teas run the spectrum from India black to herbal blends. In addition to its retail operation, Peet's sells coffee through retail grocery chains such as Safeway and Whole Foods, and through its own online mail order operations.
Technically speaking, the security remains in a long-term uptrend from its March 2009 low of $19.29, gaining more than 68% along the way. The shares have enjoyed the loose support of their 20-week moving average during this time frame. What's more, the equity also has additional support in the form of its ascending 10-month moving average – a trend-line the stock has not finished a month below since April 2009.
This technical strength has been met with growing skepticism from options players. The Schaeffer's put/call open interest ratio (SOIR) comes in at 1.36, as put open interest outnumbers call open interest among options slated to expire in less than three months. The ratio is also higher than 96% of all those taken during the past year, indicating that short-term options players have been more pessimistically aligned toward the shares only 4% of the time during the past 12 months.
However, this negativity appears to be in the process of unwinding. Specifically, data from the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) indicate that nearly five calls have been bought to open for every put purchased during the prior two weeks. A continued unwinding of negativity in the options pits could provide a tailwind for the security.
Short sellers, meanwhile, have amassed a sizable position against PEET. During the most recent reporting period, the number of PEET shares sold short jumped to 1.66 million shares, or roughly 9.5% of the stock's total float. Furthermore, this accumulation of pessimistic positions is 11 times the stock's average daily trading volume. If PEET continues its uptrend along technical support, these bears could be forced into buying back their losing positions, thus creating a potential short-covering rally.
Disclosure: Joseph Hargett has no financial interest in any of the equities or products mentioned in this column.
Copyright 2010 Stockhouse
