Will This Trendline Unlock Outsized Gains for FireEye Inc (FEYE)?

FireEye Inc (FEYE) could take a bounce from its 40-day moving average

by Alex Eppstein

Published on Apr 14, 2016 at 2:38 PM
Updated on Jun 24, 2020 at 10:16 AM

FireEye Inc (NASDAQ:FEYE) has been consolidating around $18 for nearly two months, and was last seen hovering near breakeven at $18.30. However, the cybersecurity stock's 40-day moving average has recently caught up to the shares, signaling a potential bullish move may be on the horizon -- and perhaps explaining why short-term options traders have been so call-focused toward FEYE.

The last time FEYE breached the 40-day trendline was in mid-February. Looking out 21 trading days, the cybersecurity stock advanced nearly 2%, which could be a good omen going forward. Potentially reinforcing this technical support, heavy levels of put open interest are found at the underfoot April 17 and 18 strikes, as well as the weekly 4/22 18 strike.

As alluded to, short-term options traders have preferred FEYE calls over puts. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) is 0.36, with calls nearly tripling puts among options with a shelf-life of three months or less. On top of that, this SOIR ranks just 19 percentage points from an annual low, signaling a historically elevated call bias.

That said, not everyone's sold on FEYE. Over half of the analysts tracking the stock rate it a lukewarm "hold." What's more, 11% of its float is sold short, which represents nearly a week's worth of pent-up buying power, at the cybersecurity stock's typical daily trading levels. From a contrarian perspective, if FireEye Inc (NASDAQ:FEYE) bounces from its 40-day moving average, a capitulation among the bears could spark an outsized rally.

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