Can Crocs Continue Its Quest for New Highs?

The stock's fans will note that CROX's slip today has so far been contained by tentative support at its 10-day moving average. From a longer-term perspective, the shares have enjoyed the unflagging support of their 10-week trendline since late December 2009; in the intervening months, CROX hasn't endured a single weekly close below this moving average.

However, it would also be fair to observe that the stock hasn't finished a single week above $8 per share since July 2008. This region has capped CROX's rally attempts consistently, despite multiple challenges during the previous six months.

Plus, beyond the troublesome $8 level is the psychologically critical $10 neighborhood. Since the stock has been languishing in single-digit territory for nearly two years, this round-number level could prove a troublesome hurdle to overcome.

While there are certainly some serious obstacles looming overhead, CROX doesn't quite seem poised to plunge. In addition to the aforementioned layers of technical support, there's also a healthy amount of pessimism priced into the stock. When expectations are already running low, there's a relatively lower chance for staggering sell-offs.

As evidence of this skepticism, short interest accounts for a robust 10.5% of the security's float. Option traders are also leaning bearish, with CROX's 10-day International Securities Exchange (ISE) put/call volume ratio of 0.39 ranking higher than 81.4% of other such readings taken during the past year. This elevated percentile rank reveals that speculators have rarely bought to open puts over calls at a faster pace.

This healthy amount of pessimism suggests that additional downside could be relatively limited, but that's hardly a ringing bullish endorsement. With CROX pinned between support and resistance on the charts, the stock needs to find a way to impress the skeptics before it can find the momentum to move higher. For a company that's struggling to return to profitability, that could be a pretty tall order.

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.