In the wake of the massive oil spill in the Gulf of Mexico, ATP Oil & Gas (NASDAQ: ATPG, Stock Forum) shares became a pariah, with investors bailing on the security left and right. However, by early June, the stock put in a bottom near the $8 level, and ATPG reversed course. In fact, the shares have soared nearly 98% during this time frame. What's more, the stock has bested the S&P 500 Index (SPX) by more than 51% on a relative-strength basis during the prior 60 trading days.
Throughout this rally, the security enjoyed the intermittent support of its 10-day and 20-day moving averages. Recently, however, the stock broke out above formerly staunch resistance at the $14.50 level. This region was also home to the stock's 160-day moving average. With these technical hurdles now in the rearview mirror, ATPG appears poised for a steady run higher.
Despite the equity's rebound, investors have been slow to ditch their post-disaster pessimism. For instance, ATPG's Schaeffer's put/call open interest ratio (SOIR) of 1.17 indicates that puts outnumber calls among near-term options. This ratio also ranks in the 99th percentile of its annual range. In other words, short-term options traders have been more bearishly aligned only 1% of the time in the prior 52 weeks.
Checking in with the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), we find that sentiment may be on the verge of shifting toward ATPG. During the prior two weeks, nearly four calls have been bought to open for every one put purchased. The resulting 10-day ISE/CBOE call/put volume ratio of 3.89 ranks in the 71st percentile of its annual range.
That said, some of this call buying could be related to the wealth of short interest currently levied against ATPG. Despite a 7.7% decline during the past month, a whopping 52.5% of the stock's float remains sold short. Short sellers typically buy calls in order to hedge their bearish bets, allowing them to limit losses. However, with more than half of ATPG's float sold short, there could still be ample fuel for a short-covering rally, even if some of the bears are covering their bases.
Finally, ATPG could benefit from some positive attention out of the brokerage bunch. According to Zacks, six of the eight analysts following the shares rate them a "hold" or worse. Any upgrades following the stock's recent breakout could provide an additional tailwind for the equity.
Disclosure: Joseph Hargett has no financial interest in any of the equities or products mentioned in this column.