Don't Bet on a Breakout for Weight Watchers

The equity just a fresh hit two-year low on May 31

Digital Content Manager
Jun 5, 2019 at 11:19 AM
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The diet and weight loss concern Weight Watchers International Inc (NASDAQ:WW) has taken a beating on the charts recently. Since a post-earnings bear gap in late-February had the shares plummeting beneath the $25 level for the first time in two years, the shares have made several attempts at a rebound -- the most successful of which was thwarted by its 80-day moving average. While the shares have managed an 8% rally for the month so far, bouncing off their May 31 two-year low of $16.71, WW just ran into a historically bearish trendline that could mean even more downside.

Specifically, the equity just came within one standard deviation of its 40-day moving average -- a signal that's flashed five other times during the past three years, according to data from Senior Quantitative Analyst Rocky White. The stock was lower one month later after 60% of these signals, averaging an 8.3% loss. From its current perch at $18.71, a similar move would put WW just above last month's lows, at $17.16. 

WW Jun 5

Considering Weight Watcher's stock is down over 50% this year, it's surprising that options bulls are still favoring the Oprah-endorsed equity. WW sports a 50-day call/put volume ratio of 3.02 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 94th percentile of its annual range, hinting at a healthier-than-usual appetite for calls over puts of late. 

Echoing this, WW's Schaeffer's put/call open interest ratio (SOIR) of 0.38 sits in just the 3rd percentile of its annual range. This suggests that short-term option players have rarely been more call-heavy during the past year. 

 

 

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