United Technologies Stock Tests Key Moving Average Ahead of Bullish Month

UTX has struggled in the second half of 2017

Josh Selway
Nov 29, 2017 at 3:33 PM
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For the first half of 2017, Dow stock United Technologies Corporation (NYSE:UTX) was flying high thanks to strong support from the 50-day moving average, finally hitting a record high of $124.79 in July. Since then, though, it's been a rocky ride for shareholders, as the 50-day actually turned to resistance and eventually the equity traded as low as $109 in September. Now, UTX stock is testing the 50-day once again, last seen trading at $118.05.

utx stock

However, the security is now entering a historically bullish time of year. According to Schaeffer's Senior Quantitative Analyst Rocky White, United Technologies stock has closed December higher in nine of the past 10 years. On average, the shares have picked up 2.7% for the month.

Options traders, meanwhile, are seemingly not expecting another upside move this time around. For instance, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.40, showing put open interest outweighs call open interest among options expiring within three months. This reading also ranks in the top quartile of its annual range, so this type of put-skew is unusual.

But even call traders have shown bearish intent. Peak open interest for UTX resides at the January 2018 125-strike call, yet data from the major options exchanges shows mostly sell-to-open activity here. As such, these traders are betting on the equity holding below $125 in the weeks ahead.

Analysts are also bearishly skewed. There are 12 brokerage firms covering the shares, and just four of them say UTX is a "buy." There's heavy short interest, too, evidenced by United Technologies' short-interest ratio of 4.70. Given all this negativity, the stock has some of the makings of a bullish trade for contrarians.

Bullish or bearish, it's a good time to buy short-term options, according to UTX's Schaeffer's Volatility Index (SVI) of 13%, which ranks in just the 16th annual percentile. In other words, volatility expectations for near-term options are very muted at the moment.

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