Short Sellers Cheer Wayfair Stock Sell-Off

Wayfair shares could be due for bearish analyst attention

Nov 2, 2017 at 3:00 PM
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Wayfair Inc (NYSE:W) is down 19.9% today at $59.60, landing on the short-sale restricted list following this morning's larger-than-expected third-quarter loss. While the shares still sport a 12-month gain of 87%, short sellers -- including Citron Research -- have to be pleased with today's price action. Below, we'll take a closer look at W stock and its precarious place on the charts.

But first, it's worth diving into Wayfair's short interest. The number of shares controlled by these bears is actually much lower than the April peak, but short interest accounts for more than one-fifth the equity's float. That's including a 20.3% increase in the last reporting period alone. Going by average daily volumes, it'd take shorts more than six sessions to cover their positions.

Options traders were showing bearish tendencies before the quarterly event, as well. Specifically, the weekly 11/3 55-, 57.50-, and 67.50-strike puts all saw notable increases in open interest during the past 10 days, and so did the February 60-strike put. In fact, put open interest now stands at an annual high.

Turning back to the charts, W shares are now sitting in an interesting spot. First of all, they just fell below the 200-day moving average for the first time since March, while also breaching the round $60 level. At this level, the security is hovering near the site of its May bull gap, and stands between a 38.2% and 50% Fibonacci retracement of its 52-week low to its 52-week high.

Wayfair

An extended move south could be a real possibility if analysts begin to rethink their bullish positions amid the stock's struggles. Currently, 10 of 17 brokerage firms say Wayfair is a "buy" or "strong buy." Plus, the shares' average 12-month price target stands all the way up at $83.58. As such, downgrades and/or price-target cuts appear likely.

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