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Estee Lauder's Technical Strength Doesn't Sway Options Bears

EL's May-dated put volume balloons

by 4/5/2012 1:13 PM
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The Estee Lauder Companies Inc. (EL - 62.98) has been on the bearish radar today, as north of 4,100 puts have changed hands so far, reflecting 14 times the equity's expected intraday volume. Most popular has been the out-of-the-money May 60 strike, where nearly 3,600 of these puts have crossed -- the bulk of them at the ask price, pointing to buyer-fueled volume. This option currently carries open interest of just 230 contracts, signaling that new positions are being initiated here today. By purchasing these puts to open, traders are counting on the stock to decline beneath the $60 level by May expiration.

Echoing this negative skew toward the cosmetics maven is the fact that short interest on EL surged by 10.61% during the most recent reporting period. Even so, the equity's bearish bandwagon is far from crowded, as these shorted shares make up a modest 2.27% of the stock's available float.

However, this pessimistic sentiment toward EL apparently doesn't extend to Wall Street analysts. As reported by Zacks, the equity boasts nine "strong buys" and one "buy" endorsement, compared to five tepid "holds" and one "strong sell" recommendation.

On the technical front, EL has added approximately 31% on a year-over-year basis, and has bested the broader S&P 500 Index (SPX) by more than 5% during the past 40 sessions. A glance at the charts shows that the stock continues to trade above support at its 10-month moving average -- a trendline that has been breached only twice, on a monthly closing basis, since June 2009.

At last check, EL is up about 1% and is trading at $62.98.


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