Historic Bear Note Flashing for Robotics Stock

Recent negative price action has attracted short sellers in droves

Digital Content Manager
Sep 3, 2019 at 3:02 PM
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Electrical equipment manufacturer ABB Ltd (NYSE:ABB) is down 1.7% at $18.69 at last check. Looking back, ABB attempted a rebound off its three-year low of $17.71, before running out of steam on Friday just below a familiar area of pressure at its 100-day moving average. The stock just ran up to another trendline that could push it even lower too, if history is any indicator.

Specifically, ABB just came within one standard deviation of its 200-day moving average. According to data from Schaeffer's Senior Quanitative Analyst Rocky White, this signal has flashed five times before in the past three years. What's more, the stock was lower one month later each time, averaging a 7.4% loss. From where ABB is currently perched, a similar move would have the equity trading south of last month's lows, at $17.31. 

ABB Sept 3

More negative price action could have short sellers cheering. In the past reporting period short interest has shot up 56.4%. There's plenty of room on the bearish bandwagon, however, as the 5.25 million shares sold short represent less than 1% of the stock's available float, or two days of trading at ABB's average clip. 

Options traders are singing a different tune, with over 13 calls bought for every put on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the last 10 weeks. The resulting ratio sits in the 71st percentile of its annual range, too, suggesting a healthier appetite for bullish bets in recent weeks. Should the stock continue to slide, however, an unwinding of bullish bets could create even more pressure for ABB on the charts. 

Considering this, now might be a good time to speculate on ABB's next move with options. The security's Schaeffer's Volatility Index (SVI) of 19% is in the relatively low 24th percentile of its annual range. This means that options are relatively cheap right now, based on short-term premiums.

 

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