Don't Bet on a Finisar Stock Comeback

Put players have seemingly been taking the right approach on Finisar stock

Jul 2, 2018 at 2:37 PM
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When Finisar Corporation (NASDAQ:FNSR) fell after earnings a few weeks back, we called out long-term resistance at the 30-week moving average. But looking at a daily chart now, technical traders should note the stock's 160-day moving average, based on data from Schaeffer's Senior Quantitative Analyst Rocky White. White points out that FNSR has had meet-ups with the 160-day similar to the current setup six times since 2008, and the equity has never been higher a month later. On average, the shares have shed 12.9% after running into the trendline.

finisar stock today

The equity was last seen trading around $18.24, so a similar pullback this time around would put it at $15.89. Finisar struck a two-year low of $14.25 back on April 4, and has shed 30% year-over-year. Further illuminating this technical weakness is the fact that FNSR has failed to take advantage of a 10% decline in short interest over the past two reporting periods.

Despite all this, analysts remain mostly upbeat. There are 11 brokerage firms in coverage on the stock, and six say to buy it. Meanwhile, the average 12-month price target of $21.18 represents a more than 16% premium to current levels. As such, future downgrades and/or price-target cuts seem like a real threat.

A number of options traders have already gotten a jump on Finisar, based on its 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). At 4.86, this reading comes in at an annual high, showing put buying has been much more popular than normal recently.


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