Match Shorts Could Be Running for Cover This Month

Short interest data is out for the reporting period ended April 1, and one thing is clear: Match Group (MTCH) still has plenty of skeptics rooting against it. Short interest on the stock ramped up by 2.5% during the second half of March, bringing the net increase to 5.1% over the course of the month. Now, short interest represents no less than 59% of MTCH’s float. At the stock’s average daily volume, it would take more than 15 days — or three full weeks’ worth of trading — for all of these bearish bets to be covered.

And given the way these short bets on MTCH have played out so far, bears could be looking to hit the exits sooner rather than later. Schaeffer’s Senior Quantitative Analyst Rocky White estimates that most traders entered their MTCH shorts with the stock trading around $29.80. With the shares currently hovering just north of $44, these short sellers are now down by almost 50% — the type of paper loss that could prompt some skeptics to run for cover.

From a technical standpoint, meanwhile, MTCH is in the process of bouncing from a test of support at its 40-day moving average — a trendline that has been rock-solid at containing the equity’s pullbacks since last July.

In fact, looking back at the stock’s performance following the last five comparable pullbacks to this trendline, the shares have averaged an impressive 21-day return of 11.82% after a signal, according to White. The possibility of a prolonged, large-scale short-covering event tips the scales heavily in favor of another high-velocity rally after this latest 40-day test.

Plus, with Tinder’s parent company not expected to report quarterly earnings until the first week of May, front-month options on the equity are remarkably cheap at the moment. Specifically, Schaeffer’s Volatility Index (SVI) stands at 46%, in the 29th percentile of its annual range — meaning front-month options have priced in lower volatility expectations only 29% of the time in the past year. This effectively lowers entry costs and maximizes leverage on short-term MTCH call trades.