Multiple Support Levels in Place for Cal-Maine Foods Stock

A short squeeze could still push the shares higher, too

Aug 9, 2022 at 12:13 PM

CALM

In February, the shares of Cal-Maine Foods (NASDAQ:CALM) staged a breakout above a trendline connecting multiple lower highs since 2015. Then in late June, the stock broke out above a trendline connecting lower highs since its April 2022 peak. Plus, CALM saw a recent pullback to the 80-day moving average. This is also in the vicinity of its recent post-earnings close, which preceded a March bull gap, and could provide an attractive entry point for call buyers, as it represents roughly 50% above its 2020 and 2021 monthly closing lows.

Short interest, meanwhile, is high. And though shorts started covering in late May, there's still room for a short squeeze. The 4.52 million shares sold short make up 12% of the stock's available float, and would take over six days to buy back, at CALM's average daily pace of trading.

Analyst coverage is limited, but that doesn't mean there isn't additional room for bull notes. Of the four in coverage, just two call CALM a "buy" or better.

Finally, our recommended call option has a leverage ratio of 6.8 and will double in a 17.2% rise in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this CALM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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