Call Buyers Should Consider This Software Stock

Short interest is high on ADSK, and puts have been popular

by Josh Selway

Published on Apr 30, 2018 at 10:33 AM
Updated on Jun 24, 2020 at 10:16 AM

Autodesk, Inc. (NASDAQ:ADSK) has made some big moves on the charts in recent months, both to the upside and the downside. The shares were last seen trading near $127, a roughly 10% retreat from their March 13 record high of $141.26. However, the software stock recently bounced from a noteworthy technical level, suggesting it could be poised for a short-term move to the upside.

Specifically, ADSK last week bottomed near the $121 mark. This region is home to an early March bull gap, and it contained a pullback in early April, as well. Not to mention, it represents a 50% Fibonacci retracement of the stock's rally from its year-to-date low to its year-to-date high.

But maybe most importantly, the 80-day moving average is currently docked at $121.80. This trendline has been an excellent "buy" signal in recent years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Following the last six pullbacks to this moving average, Autodesk has averaged a 21-day gain of 7.98%, and has been higher after each occurrence. A similar move this time around would put the equity just above the $137 level.

adsk stock today

Still, sentiment is mixed on the stock, despite its nearly 22% year-to-date advance. On the one hand, 15 of the 19 analysts in coverage say to buy the shares, and the average 12-month price target stands up at $148.25. But short interest keeps rising, up 34.1% in the last two reporting periods, and the 7 million shares now sold short is the most in almost a year.

Also, put buying has been more popular than call buying during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the 10-day put/call volume ratio of 1.46 across these exchanges ranks in the 86th annual percentile.

Bullish or bearish, it's still a great time to buy premium on Autodesk. This is based on the stock's Schaeffer's Volatility Index (SVI) of 28%, which is in the 14th percentile of its 12-month range -- hinting at low volatility expectations for near-term options.


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