Shares of Encore Wire Corporation (WIRE: sentiment, chart, options) are slipping this afternoon after Sterne Agee cut the stock from "hold" to "sell." I did some digging through the Intrawebs, but was unable to find a rationale for the downgrade (I have a personal interest in the matter, since WIRE is the latest addition to my Undiscovered Gems portfolio). In light of the equity's 53% year-to-date rally, the old chestnut of "valuation concerns" may apply here. Sterne Agee has an $18 price target on WIRE, which closed yesterday at $24.41.

Given WIRE's recently meteoric price action, today's decline hasn't pushed the equity through too many support levels. An earlier breach of the 10-day moving average was quickly corrected, and WIRE is now poised atop this trendline once again. Even if the equity fills in its bull gap from late April, this drop would leave it perched conveniently atop its rising 10-week moving average.

Despite the bearish brokerage note, WIRE still looks like a force to be reckoned with. You can't argue with the equity's recent trend higher, and yet overwhelming amounts of negativity remain. I'm not just looking at Sterne Agee here; option traders are also betting against the stock's rally. WIRE's Schaeffer's put/call open interest ratio has ballooned up to 2.04, marking a new pessimistic peak for the indicator. If the shares continue to gain, we could see an unwinding of this bearish sentiment.