Jo-Ann Stores Inc. (
JAS
) is slated to release its quarterly earnings report after the
close of trading today, with Wall Street expecting a profit of
$1.07 per share from the specialty crafts retailer. The figure
represents a solid improvement over the company's profit of 90
cents per share in the same quarter last year. Historically, Jo-Ann
Stores has been quite impressive from a fundamental perspective,
besting Wall Street's expectations in each of the prior four
reporting periods by an average of more than 237%.
Judging from JAS' sentiment indicators, however, it would seem that
investors have set their sights considerably higher for the
company's quarterly report. For instance, options traders on the
International Securities Exchange (ISE) and Chicago Board Options
Exchange (
CBOE
) have purchased more than 51 calls for every one put during the
prior two weeks. As a result, JAS' 10-day ISE/CBOE call/put volume
ratio of 51.40 rests at an annual peak, meaning that investors have
not bought to open calls at a faster rate than puts during the past
year.
Reaffirming the ISE and CBOE's data, JAS' Schaeffer's put/call
open interest ratio (SOIR) of 0.55 arrives at an annual low. In
other words, near-term options traders have not been more bullishly
aligned toward JAS during the past year, pointing toward an extreme
level of optimism among the speculative group.
Checking in with JAS' open interest configuration, we find that
options traders are focusing heavily on the December 45 and 50
strikes. Currently, 1,544 December 45 calls and 223 December 45
puts are open, while the December 50 call sports open interest of
417 contracts. JAS bulls should keep an eye on the December 50
strike, as call open interest at this contract could create a layer
of options-related resistance for the security.
That said, some of JAS' calls may have been purchased as hedges for
short positions. Currently, more than 10% of the stock's float is
sold short, creating ample fuel for a short-covering rally. What's
more, with the number of JAS share sold short dropping by more than
14% during the past month, it would seem that these bears are
growing increasingly wary of the stock's price action. A
continuation of this trend could increase buying pressure on the
equity, especially if JAS tops Wall Street's earnings expectations
once again.
Turning toward the brokerage bunch, we find that analysts have
joined options traders in the bulls' camp. According to
Zacks
, six of the seven analysts following JAS rate the shares a "buy"
or better, with nary a "sell" rating to be found. This bullish
configuration should be viewed with caution, as its creates the
potential for downgrades in the wake of a poorly received quarterly
earnings.
Technically speaking, JAS has earned its bullish following
honestly, with the shares soaring more than 30% since the start of
the year. What's more, the equity broke out above long-term
resistance in the $47.50-$48 region on Tuesday. This area could now
provide a springboard of support for JAS. Meanwhile, long-term
investors should take heart, as the stock also enjoys solid support
at its 10-week, 20-week, and 50-week moving averages.
