URBN's recent pullback could be a buying opportunity, if past is prologue
Shares of retail concern Urban Outfitters, Inc (NASDAQ:URBN) notched an annual high of $38.06 on Tuesday, but have since pulled back to test their rising 40-day moving average ahead of earnings next week. If past is precedent, it could be time to bet on URBN's next leg higher, as previous retreats to this trendline have had bullish implications for the stock.
According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times in the past three years that Urban Outfitters stock has come within one standard deviation of its 40-day trendline, after a lengthy stretch above this moving average. Afterwards, URBN went on to average a five-day gain of 4.64%, and a one-month gain of 7.23%.
Urban Outfitters stock was last seen 1.1% higher at $35.68. Another 4.64% rally from current levels would put the shares around $37.33 in a week -- which encompasses the company's March 6 earnings report. Another 7.23% gain would have URBN around $38.26 -- in new-high territory -- in the next month.
The stock has moved higher after its last two earnings reports, and has swung 10.7%, on average, the day after its last eight turns in the earnings confessional. So a notable move on the charts could, in fact, be in the cards, if past is prologue.
Another earnings win could spark a slew of upgrades and price-target hikes, too. Twelve of 19 brokerage firms maintain "hold" or worse ratings, and the average 12-month price target of $34.62 represents a discount to URBN's current price.
In the options pits, however, traders have been leaning towards the bulls' camp in recent weeks, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing URBN with a 10-day call/put volume ratio of 0.93, ranking in the 72nd percentile of its annual range. This indicates a healthier-than-usual appetite for long calls over puts of late.
Likewise, Urban Outfitters' stock's Schaeffer's put/call open interest ratio (SOIR) of 0.67 ranks in just the 14th annual percentile. This low ranking suggests that short-term speculators have rarely been more call-skewed toward the stock during the past 12 months.