This morning, UBS upgraded Thornburg Mortgage Asset Corporation from neutral to buy, noting that the worst seems to be over for the beleaguered mortgage lender and that recent book value impairments should not prove an insurmountable obstacle as TMA tries to bounce back from recent market turmoil. UBS also stated that there's little to no bankruptcy risk, and that the company is well-positioned to benefit from future Federal Reserve rate cuts.

However, UBS lowered its price target for TMA from $27 to a more realistic $18. The equity traded around 27 as recently as July 23, but suffered a precipitous drop throughout the first half of August that sent the stock as low as 7.49. A daily chart reveals that that TMA is trading atop its 10-day and 20-day moving averages for the third day in a row, after plunging below these trendlines for 1 month prior. At last check, the equity had gained about 7% in today's session.

The stock could be reaping the benefits of a short-covering rally, as today's upgrade may have spooked some bears into exiting their short positions. At the stock's average daily volume, it would take nearly a week's worth of trading days for all the existing short positions on TMA to be repurchased. Additionally, there's room for future upgrades to apply more upward pressure to the stock Zacks reports that the stock has 4 hold and 4 sell ratings, compared to just 1 buy.