What's in Store for Freeport: A Technical and Fundamental Overview
Before we start analyzing different copper miners’ short positions (SPXS), let’s get familiar with a few key terms. “Short interest” refers to the number of shares that have been short sold. Exchanges release the short interest on a fortnightly basis.
Short interest ratio
From the short interest, we derive the short-interest ratio, which is short interest divided by average daily traded volume. The short-interest ratio and the short-interest-to-market-capitalization ratio basically standardize short interest. It’s natural that more liquid and large companies can have high absolute short interest. Therefore, we standardize short interest to market capitalization or to trading volumes.
Based on the latest release from the exchanges, as of April 29, Southern Copper (SCCO) has the highest short interest ratio in our universe of stocks as can be seen in the graph above. Meanwhile, the short interest ratio for Freeport-McMoRan (FCX) and Teck Resources (TCK) has fallen steeply over the last couple of months. As of the latest update, FCX and TCK had a short interest ratio of 2.3 and 3.5, respectively. Teck Resources’ short interest ratio has fallen massively after hitting a high of 11.4 on February 12.
BHP Billiton (BHP) and Rio Tinto (RIO) have short interest ratios of 3.0 and 2.4, respectively. Both these companies have seen their short interest ratio fall over the last two months.
Note that the short interest expresses the general market mood with regard to a particular security. However, a high short interest ratio can also trigger a short squeeze if positive news hits the markets.
Let’s now see how markets are currently valuing different miners.
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