Shorts Rush to Cover After Solid 3Q from Finish Line

The results easily surpassed analysts' predictions, which called for a third-quarter loss of 9 cents per share on $234 million in revenue. In fact, today's upbeat report snaps a year-long streak of quarterly losses for Finish Line.

"In the third quarter, we effectively controlled expenses, managed inventories and improved store execution," said CEO Glenn Lyon in a statement accompanying the release.

However, Chief Financial Officer Ed Wilhelm warned that less-than-robust traffic trends are still a concern. Third-quarter traffic fell in the mid-single digits, with no notable improvement during the current quarter. "As a result," said Wilhelm, "we are still cautious about our view of the consumer."

Following the report, FINL rocketed to a gain of nearly 10% right out of the gate. The shares gapped above short-term pressure in the $10 region, which could potentially emerge as a new-found level of support. Additionally, the stock is now set to finish the week above its 10-week and 20-week moving averages for the first time since Nov. 6.

Wednesday's healthy gains are likely being fueled by short covering. Short interest accounts for a substantial 5.2% of FINL's float, representing about five days' worth of pent-up buying pressure (at the stock's average daily trading volume).

Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.