Shares of Fastenal Co. (NASDAQ:FAST) have been one of the better performers over the last three months as this building materials company has benefited from the improvements in the housing market. The company manufactures fasteners (as if you couldn’t have figured that out from the name) used for manufacturing, building and machinery.
FAST shares are up more than double the S&P 500 returns over the last three months as the data surrounding the housing market continues to improve. The last few weeks have seen the stock drop more than six percent as some traders have taken the opportunity to take some profits off of the table as the market appears toppy.
Click to Enlarge Recent selling pressure knocked the shares down to the first test of the their 50-day moving average since January. The last test of this trendline in January successfully supported shares ahead of a 14% rally to its recent highs.
Investor sentiment towards FAST shares has been negative, especially given the company’s fundamental showing. Short sellers have bid the short interest ratio for FAST shares up to 11.1, the highest reading in more than a year. Typically, a high short interest ratio indicates a higher probability that a short squeeze rally is ready to drive prices higher.
We love the recent bounce from FAST’s 50-day moving average as a signal to buy the shares before the next pop higher. Short-term traders should watch the stock around its 20-day moving average as a move above this trendline will likely get the shorts running. Eye a target price of $55 over the short-run with support at the $49.75 and $48.50 marks.
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