Beware the Newell Brands Stock Bounce

NWL stock tends to struggle after Fed rate hikes

Jun 11, 2018 at 12:48 PM
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The shares of Newell Brands Inc (NYSE:NWL) are higher today, after the Sharpie maker expanded its stock buyback program by $2.5 billion. However, NWL stock tends to struggle after the Federal Open Market Committee (FOMC) raises interest rates -- which it's widely expected to do on Wednesday. If recent history is any indicator, you should think twice before buying the NWL bounce.

NWL stock started the month of June by touching a five-year low of $22.60, and since gapping lower in January on lowered guidance and plans to sell assets, has embarked on a series of lower highs. The security's descending 80-day and 100-day moving averages have stifled the equity's rebound attempts in 2018, and were last seen overhead in the $26-$27 region. At last check, Newell Brands stock was up 2.6% at $25.32.

NWL stock chart June 11

As alluded to earlier, though, NWL stock's gains could be short-lived, if past is prologue. Since 2015, Newell shares have been higher a week after Fed rate hikes 0% of the time, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, putting them among the worst stocks to own after a rate hike. Further, the stock averages a one-week loss of 3.06% after rate hikes.

Traders looking to speculate on NWL's short-term trajectory can scoop up options at a relative bargain, though. The security's Schaeffer's Volatility Index (SVI) of 30% is higher than just 20% of all other readings from the past year, suggesting NWL's near-term options are pricing in relatively low volatility expectations.

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