Plenty of Reasons to Avoid This E-Tail Stock

ETSY has run up to a historically bearish trendline

Managing Editor
Jan 14, 2020 at 12:56 PM
facebook X logo linkedin


Small business retail platform Etsy Inc (NASDAQ:ETSY) has started off 2020 red-hot, already posting a nearly 10% gain. It's more of the same today, with ETSY up 1% to trade at $48.97, on track for its highest close since a late-October. However, this rally has sent the stock running head-first into a historically bearish trendline. 

More specifically, Etsy stock is trading within one standard deviation of its overhead 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, three similar run-ups to this trendline have occurred in the last three years. One month after these signals, ETSY was lower by an average of 9.2%, with all three returns negative.

Daily Stock Chart ETSY

A drop of similar magnitude would mean nearly all of the stock's 9.3% gain in 2020 would be erased next month. That 80-day trendline roughly sits just below the round $50 level too, an added layer of resistance considering it's home to the stock's post bear gap levels from a late-October earnings miss. And if that's not enough, ETSY's 14-Day Relative Strength Index (RSI) currently sits at 70, firmly in overbought territory -- indicating a pullback may be soon in the cards.

There's ample amount of optimism to be unwound. The majority of analysts rate the security a "buy" or better, with only one "sell" on the books. And among options traders there's a big appetite for calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ETSY's 10-day call/put volume ratio is perched at 5.65 and ranks in the 79th percentile of its annual range. However, considering 12.6% of the equity's total available float is sold short, its possible some of these calls could be shorts hedging against any upside risk.

That being said, options can be had for a bargain right now. Etsy's Schaeffer's Volatility Index (SVI) of 38% sits in the low 7th percentile of its annual range. This means options traders are pricing in extremely low volatility expectations right now.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI