Bet On This Blue Chip Stock's Recovery

DOW could benefit from a shift in sentiment among analysts

Deputy Editor
Jun 13, 2022 at 12:58 PM
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Wall Street is brutally selling off today, as traders come to terms with the possibility of a recession to come. Blue-chip chemical company Dow Inc (NYSE:DOW) is no exception to today's profit taking, with the shares last seen down 3.7% at $59.57 and on their way to a fourth-straight loss. DOW is off 12.2% in the last month, though is clinging to a 4.8% year-to-date lead. If history is any indicator, however, the equity could reclaim some recent losses in the coming month.

Dow stock just landed on a study from Schaeffer's Senior Quantitative Analyst Rocky White after pulling back to its 200-day moving average. Per White's study, the equity has seen one similar pullback over the past three years. Despite the limited sample size, the equity flashed a 5.5% return in the following month. This would put the blue-chip stock back on track to cut its recently monthly loss nearly in half.  

DOW Chart June 13

A shift in the options pits could also put wind at the stock's back, as traders have moved in favor of bearish bets in recent weeks. DOW's Schaeffer's put/call open interest ratio (SOIR) of 1.18 stands higher than all other readings from the past year -- indicating short-term options traders have never been more put-biased than they are at the moment. What's more, the stock's 10-day put/call volume ratio of 1.27 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 91% of readings from the past year.

A round of upgrades could give DOW a boost as well. Of the 14 analysts in coverage, 11 say "hold" or worse, compared to three "strong buy" ratings. Meanwhile, the 12-month consensus price target of $73.05 is a 23.2% premium to current levels. 

 

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