Buy the Dip on this E-Tailer Stock

A bullish signal flashing for ETSY has never been wrong

Patrick Martin
Aug 28, 2020 at 3:02 PM
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Earlier this month, we profiled Etsy Inc (NASDAQ:ETSY) ahead of its corporate report. While the shares scored a record high of $141.41 less than five days after earnings, the last week has been rough on ETSY, which at last check was 2.7% lower at $119.04. Nevertheless, this 8.7% pullback week-to-date has brought the e-tail stock back to its 40-day moving average, a trendline with historically bullish implications. 

Daily Stock Chart ETSY

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, Etsy  shares have pulled back to this moving average four times in the last three years. One month after the signal, they have averaged a gain of 12.1%, and have been positive 75% of the time. This is the same trendline referenced last month, that caught pullbacks in June and July .

There's plenty of buying power on the sidelines to help fuel the stock's fire, too. Short interest increased by 13.8% in the most recent reporting period to 7.83 million shares, and accounts for a healthy 6.7% of ETSY's total available float.

It's also an attractive time to purchase premium on ETSY options, with the stock's Schaeffer's Volatility Index (SVI) of 54% perched in the relatively tame 18th annual percentile.Additionally, the security's Schaeffer's Volatility Scorecard (SVS) is lofty, sitting at a whopping 98 out of 100, which means Etsy stock has tended to exceed option traders' volatility expectations during the past year, a boon for option buyers.

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