True Religion Could Get Updraft From Short Covering

After gaining nearly 15% on a heavy volume day Wednesday, following an upgrade by Sterne Agee, True Religion (TRLG) closed up 6% Thursday and up another 6% Friday on high volume days.

With 46% of the float short as last reported, it appears that a short squeeze may have been triggered, with shares breaking out of the range they have been bound in, closing well above their 200 day moving average, a metric they’ve closed a trading-day over only 12 times since mid-November of last year. With such a high percentage of the float currently short, shares could appreciate rapidly if traders whom are short True Religion start to feel the need to cover their positions quickly.

In addition to the aforementioned upgrade from Sterne Agee, True Religion has also been the beneficiary of some extra press, from both CNBC and the tabloid’s most recent victim, Alex Rodriguez, as he was wearing a pair of True Religion jeans in the recently highlighted photos.

They also presented at Friedman, Billings, Ramsey & Co. 2007 Growth Conference yesterday, and will be making a similar presentation at the Piper Jaffray 27th Annual Consumer Conference, in taking steps to improve their visibility and sustainability as a company in the eye’s of Wall Street.

True Religion has made strides in their business in recent months as well, further building out their retail initiative with True Religion branded store openings in Northern Texas, Southern California, New Jersey, Chicago and New York in the past two months, which should add revenue and expand margins quickly after coming online.

The company also recently announced signing a licensing deal with a leading high-end handbag designer and distributor, to create and sell True Religion branded handbags, with a line of bags debuting at a fashion show in August of this year. This deal adds to a number of licensing deals that True Religion has signed, which have yet to roll out. As products from these deals begin to come on line in the approaching half of 07 and early 08, both the top and the bottom lines will benefit. The company continues to execute their business plan nicely and looks to be positioning themselves for long term, sustainable growth and brand durability.

Disclosure: Joseph Urgo has a long position in True Religion Apparel.

TRLG 1-yr. chart:

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