Why Mattel Stock's Latest Pullback May Be Short-Lived

MAT looks ripe for a short squeeze

Digital Content Manager
Apr 7, 2022 at 3:14 PM
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Toy maker Mattel Inc (NASDAQ:MAT) is up 0.2% to trade at $21.85 this afternoon. The security breached a floor at the $22 level yesterday, slipping below the 120-day moving average for the first time since early February, as it cooled off from a Feb. 17, five-year high of $25.71. Traders may not want to shun Mattel stock yet, though, as it has also just pulled back to historically bullish trendline that could send shares back up the charts.

Digging deeper, the equity recently came within one standard deviation of its 200-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, comparable moves have occurred four times over the last three years, with MAT enjoying a positive one-month return 75% of the time, while averaging an 5.3% rise. A similar move from its current perch would put the equity just shy of the $23 mark once again.

MAT 120 200 Day

What's more, the stock looks ripe for a short squeeze, which would push shares even higher. Short interest rose 9% over the last two reporting periods, and the 24.78 million shares sold short make up 7.1% of MAT's available float, or over one week's worth of pent-up buying power.

The options pits lean overwhelmingly optimistic towards the equity. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MAT's 50-day call/put volume ratio of 34.93 stands higher than 89% of readings from the past year. This means long calls have been getting picked up at much faster-than-usual clip.

These options traders are in luck, as Mattel stock sports attractively priced premiums. This is the equity's Schaeffer's Volatility Index (SVI) of 35%, which ranks in the low 19th percentile of its 12-month range. This means options traders are pricing in relatively low volatility expectations right now.
 

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