History Says to Buy the Dip on Outperforming Crocs Stock

CROX may also be due for a round of analyst upgrades

Managing Editor
Sep 5, 2018 at 3:00 PM
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Shares of Crocs, Inc. (NASDAQ:CROX) are down 1.8% at $20.41 in late-afternoon trading amid broad-market headwinds. However, the footwear manufacturer is well into its long-term uptrend, and per data from Schaeffer's Senior Quantitative Analyst Rocky White, now may be the perfect time to bet on Crocs stock's next leg higher with options. 

CROX has been marching higher since dipping below $6 back in May 2017, thanks to steady support at its rising 100-day moving average -- a trendline that's contained several pullbacks this calendar year. Plus, the stock touched a fresh six-year high of $21.24 just last Friday, Aug. 31, and has picked up 128% over the past 12 months.

Daily Chart of CROX Since September with 100MA 

Digging deeper, Crocs stock's short-term options are attractively priced right now. CROX's Schaeffer's Volatility Index (SVI) of 41% is in just the 9th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations.

Per White, there have been four other times since 2008 CROX stock was trading near new highs when its SVI was simultaneously perched in the lower 20th percentile of its 12-month range. After these signals, the shares were higher 100% of the time one month later, and up an average of 7.8%.

A shift in sentiment among options traders could create tailwinds for CROX, too. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows CROX with a 10-day put/call volume ratio of 2.55, ranking in the 96th percentile of its annual range, meaning puts have been bought to open over calls at a quicker-than-usual clip. 

Plus, Crocs stock's Schaeffer's put/call open interest ratio (SOIR) of 2.14 ranks in the 88th percentile of its annual range. This indicates that short-term traders have rarely been more put-heavy toward the security in the past year.

Lastly, the outperforming equity may be overdue for upgrades, which could draw more buyers to the table. Of the six brokerages covering CROX, just one maintains a "buy" rating.

 

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