TJX put buying has picked up recently
Retail stock TJX Companies Inc (NYSE:TJX) has pulled back dramatically in recent weeks, falling from around $56 to its current perch at $46.93, partly due to a negative earnings reaction last week. In fact, the stock is down more than 14% in November, pacing for its worst month in 10 years. However, brokerage firm Argus sees the pullback as a buying opportunity, upgrading TJX shares to "buy" while setting a $55 price target. The analyst in coverage cited the company's "excellent financial strength" and added that shoppers like the ability to purchase designer label merchandise at TJX stores for reasonable prices.
From a technical standpoint, there may be evidence that this bullish call makes sense. For example, the equity recently found a notable bottom near the $45 level, which is roughly a 20% discount to its September all-time high above $56, and represents a 20% year-to-date gain. This price point also sits between a 50% and 61.8% Fibonacci retracement of the security's 52-week low to 52-week high. For good measure, it could also be pointed out that the rising 320-day moving average sits just below this region, as well, suggesting additional support is on the way.
While the majority of other analysts already have bullish recommendations on TJX Companies, options traders have recently taken a more bearish stance. That is, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 0.92. While this still shows call buying has had the edge over put buying on an absolute basis, the reading ranks in the 75th annual percentile, showing bearish bets have been more popular than normal.
But shifting back to the call side of the aisle, the top two open interest positions on TJX are the December 50 and January 2019 57.50-strike calls. Data from the major exchanges shows buy-to-open activity at both contracts, so a number of bulls are betting on the shares reversing course in the coming weeks and moving higher on the charts.
Regardless how you're trading, premiums for near-term contracts are relatively rich at the moment. More specifically, the 30-day at-the-money implied volatility has moved up to 26.6%, ranking in the 89th annual percentile, showing heightened volatility expectations around the retailer.