The clothing giant, Hennes & Mauritz (HMB SS), is one of the biggest gainers in Europe today. We pointed out the extreme pessimism surrounding the stock earlier in September and the possibility of shorts being wrong. Out of more than 31 analysts covering the stock only 3 had a buy rating at the time.
After earnings today the share price has been soaring, putting on a massive squeeze and making shorts sweat. Positive comments on gross margins and reducing inventory were the main takeaways making shorts run for the exit as the stock soared.
H&M shares are up 35% from recent lows. Note the stock is above the 200 day average but is overbought and heading right into the negative trend line that has been in place since the giant topped out in 2015. Chasing longs here is probably a late trade for the short term trader.
Adding to the move higher is probably shorts reminding themselves every now and then that the Chairman Stefan Persson has been mentioned various times as possibly planning a buyout of the company. This has repeatedly been denied.
Below chart shows the short interest (investors shorting the stock) of H&M. Hardly surprising, the huge increase of shorts occured in May this year, which was close to marking the lows for the share price. Painful is the word.
Source: charts by Bloomberg