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Since my previous, positive, mention of Western Refining Inc (NYSE:WNR) in a piece entitled Updating My Outlook For Western Refining, published December 20, 2012, shares are up just more than 4%. However, at one point, WNR shares had surged more than 30% following my previous mention.

WNR ChartWNR data by YCharts

Brent/WTI Spread

The spread between Brent oil and WTI oil has narrowed considerably. As shown by the chart below, the spread has narrowed 55% since December 20. In a previous piece, I discussed the reasons why the widening of the Brent/WTI spread was bullish for WNR and other refiners such as Tesoro (NYSE:TSO) and Valero (NYSE:VLO). The recent narrowing of the spread is unquestionably negative for refiners.

WNR ChartWNR data by YCharts

Momentum

In addition to the Brent/WTI spread, another reason why I was bullish on WNR was momentum. At the time of my previous articles, WNR was just breaking out of a multi-month trading range. Now, WNR is in a well defined downtrend which looks like it will continue. Simply put, momentum is no longer a friend of WNR longs.

Insider Selling

Recently, during the month of March in particular, insiders have been actively selling WNR. In fact, over the past 6 months insiders have sold more than 2.5 million shares while insider purchases total just 1,000 shares. This is certainly a negative as insiders tend to know more about the future prospects for a company than the average investor.

Short Interest

Short interest continues to remain high in WNR. As of April 15, when short interest was last recorded, more than 16 million shares or 29% of the float was sold short. In the past, I have argued that the high short interest is a positive as it makes a short squeeze possible. Of course, that still remains the case but in order for a short squeeze to occur a positive catalyst is needed. The narrowing of the Brent/WTI spread makes it less likely that a short squeeze will occur anytime soon.

Conclusion

In my opinion, the bullish trade in WNR is over for now. The narrowing of the Brent/WTI spread, insider selling, and loss of momentum are all reasons why I am no longer bullish on WNR. That being said, I would not sell the stock short because it is already so heavily shorted. I would consider positively revising my outlook for WNR if the Brent/WTI spread widens from here.

Source: Western Refining Inc: Why I'm Not Bullish