Don't Sweat This Software Stock's Pullback

CTXS options are attractively priced at the moment, too

Managing Editor
Jan 25, 2019 at 11:16 AM
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Citrix Systems, Inc (NASDAQ:CTXS) gapped lower yesterday, Thursday, Jan. 24, in the wake of a subpar quarterly report. This triggered three price-target cuts to the software name, including to $110 from $115 at Wedbush. However, it's not all bad news: that drop has put CTXS in touch with a trendline with historically bullish implications. 

Specifically, CTXS' bear gap yesterday put the stock within one standard deviation of its 320-day moving average, following a lengthy stretch north of this trendline. Over the past three years, per Schaeffer's Senior Quantitative Analyst Rocky White, the three other times this trendline was encountered, CTXS was higher one month later all three times, with an average gain of 4.3%.

At last check, Citrix Systems stock was down 0.8% to trade at $101.28. A 4.3% rally from its current perch would have the equity trading near the $106 mark -- or right around its 80-day moving average. Prior to this week's drop, CTXS had logged four straight weekly wins.

Daily Stock Chart CTXS

In the options pits, puts reign in popularity. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 3,489 puts in the last 10 sessions, compared to just 550 calls. The resultant put/call volume ratio of 6.34 ranks 5 percentage points from an annual high, meaning puts have been bought to open over calls at a quicker-than-usual clip.

The good news for options traders is a post-earnings drop in volatility expectations makes this a strong time to target the tech name. Data does suggest it would be a good time to speculate on the security with options, based on the Schaeffer's Volatility Index (SVI) of 21%, which ranks in the 15th annual percentile, hinting at low volatility expectations at the moment.

 

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