A sharp drop in short interest collides with a spike in put/call ratio. The options market is sending a note of caution just as bears were packing up.
SQM has seen short sellers exit rapidly. Shares short fell roughly 27% over the past week to 1.13 million. That is a decisive exit from bearish positioning.
But the options market tells a different story. The put/call ratio hit 0.3175 on May 15 — 2.16 standard deviations above its 20-day mean of 0.247. The stock fell 2.9% on the day. Over the past week, SQM is down 7.8%.
The divergence is worth noting. Short sellers are covering. Options traders are buying puts. These two groups are pointing in opposite directions.
Short interest sits at levels where the lending market is essentially irrelevant to the bear thesis. Availability is extremely loose — the borrow market is wide open for anyone who wants to initiate a new short position. Cost to borrow stands at 0.71%, up 26% over the past week but still firmly in cheap-to-borrow territory. A month ago it was nearly 1% — so the trend over 30 days is actually downward.
The ORTEX short score has also declined sharply. It stood at 32.9 on May 8. By May 14 it had dropped to 27.4. That move reflects the covering activity, not a new wave of bearish pressure.
SQM reports on May 27. That is nine days away. The recent earnings history is not encouraging for bulls: the last four prints all saw negative 1-day moves, with the worst being a 9.8% drop.
The mean analyst price target sits at $78.97 — below the current price of $84.26. B of A Securities maintains an Underperform rating with a $53 target. Scotiabank is more constructive at Sector Outperform with a $100 target. The bull-bear divide is wide.
BlackRock added 2.66 million shares as of end-April. Van Eck Associates added 804,000. Both are meaningful builds, suggesting some institutional conviction on the long side heading into earnings.
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