Time to Bet Bullishly on T-Mobile US Inc (TMUS)?

If history is any indicator, T-Mobile US Inc (TMUS) could take a sharp bounce off its 320-day moving average

by Alex Eppstein

Published on Mar 17, 2016 at 3:00 PM
Updated on Jun 24, 2020 at 10:16 AM

Now may be the time to bet bullishly on T-Mobile US Inc (NASDAQ:TMUS) if you're an options trader. The telecom stock recently pulled back to its 320-day moving average, which has historically led to short-term gains -- though it's down 0.3% today at $37.05.

Looking back three years, TMUS has hit its 320-day trendline three times. In the subsequent five sessions after touching this trendline, the stock has been higher each time, with a typical gain of 4.3%. Going out to 21 trading days, the shares have been positive two-thirds of the time, for an average return of 5.5%.

Some options traders may be betting on a bounce today amid reports TMUS will allow users to stream YouTube without using their data plans. Specifically, buy-to-open activity is apparently taking place at the weekly 4/22 39-strike call, as speculators wager on a move north of $39 for the stock by the close on Friday, April 22, when the weekly series expires.

Longer term, however, option bears have been busier than usual. TMUS' 50-day put/call volume ratio of 0.83 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks near the top quartile of its annual range. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.87 sits 10 percentage points from a 12-month high. If the shares bounce from the aforementioned trendline, a capitulation among these skeptics could result in tailwinds.

An unwinding of short positions could also add fuel to the fire. Short interest rose 4.1% during the last reporting period to 17.3 million shares -- or 6.2% of T-Mobile US Inc's (NASDAQ:TMUS) float. It would take several days to buy back these bearish bets, at TMUS' average daily volumes, so there's buying power available to support a rally.

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