The Online Retail Stock That Could Burn Options Bears stock tends to fare well after pulling back to its 200-day moving average

Nov 2, 2017 at 11:31 AM
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Shares of Chinese online retailer Inc (NASDAQ:JD) have surged on the charts this year, tacking on roughly 50%. Since touching an all-time high of $48.99 on Aug. 8, the e-commerce stock has gradually pulled back to its current perch at $38.26. Nevertheless, this retreat could signal a buying opportunity, as JD stock nears a key trendline with historically bullish implications.

JD stock is trading less than one standard deviation above its 200-day moving average, which is docked at $37.54, after a lengthy stay above it. According to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, the last three meet-ups with this trendline resulted in positive one-month returns 100% of the time, with an average gain of 6.21%. A rally of this nature would send JD shares back above their 50-day moving average to the $40 neighborhood.

jd stock daily price chart nov 2

Options Players Up The Bearish Ante

In light of the security's recent price action, options traders have been growing increasingly bearish toward the online retailer. JD stock sports a 10-day put/call volume ratio of 0.45 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- good enough to rank in the 85th annual percentile. In other words, puts have been bought to open relative to calls at a faster-than-usual clip.

Short interest on JD also shot up 26.8% during the most recent reporting period to 37.11 million shares -- its highest level since early February. Should shares stage another sharp rally from their 200-day trendline, an unwinding of some of these bearish bets could create tailwinds for the equity.


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