Every day for the next two weeks, we're going to highlight one of Schaeffer's top 14 picks for 2021. Up next is a an entertainment stock ready to break out of a technical downtrend. To access the entirety of the 2021 report, click here.
Indoor gaming chain Dave & Buster’s Entertainment (NASDAQ:PLAY) has been on an impressive rise in the fourth quarter of 2020, so far recovering around half its losses from its late-March bottom near $4.60. Now, the equity is up 74% quarter-to-date, with a solid floor of support at the $24 level. However, longer-term the stock still has plenty of ground to cover before reaching its year-to-date breakeven mark, which indicates its previous technical downtrend could be breaking. With all this in mind, now looks like an opportune time for bulls to buy PLAY.
Meanwhile, there looks to have been some short covering of late, but short interest has added nearly 50% during the past six months, which, now accounts for 26.5% of the stock’s total available float. At the equity’s average pace of daily trading, it would take just two days for shorts to buy back their bearish bets.
Looking toward options, the stock's Schaeffer's put/call open interest ratio (SOIR) has been on the rise alongside PLAY shares, and now comes in at 1.44, which sits higher than 79% of readings from the past year. In plain words, short-term option traders have rarely been more put-biased, and an unwinding of this bearish attention could push the equity even higher. Lastly, the equity's SVS sits at 88 out of 100, indicating the stock has surpassed option traders' volatility expectations during the past year.
Chris Prybal is a Senior Market Strategist at Schaeffer's Investment Research. A lifelong student of the markets, he made his first trades before he even began attending the University of Cincinnati, where he studied finance and treasury management. Prybal's areas of expertise include option premium buying and selling, and his equity and market research have been cited by Barron's, MarketWatch, Forbes, Investopedia, and the Cincinnati Business Courier.