Bull Signal Says Buy the URBN Dip

URBN recently met up with a historically bullish trendline

Deputy Editor
Nov 27, 2023 at 2:07 PM
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Urban Outfitters, Inc. (NASDAQ:URBN) recently suffered a post-earnings bear gap on the charts, putting it down 5.5% in November. This drop came after the stock came within a chip-shot of its Aug. 10, roughly two-year high of $37.82 in late-November.  The shares boast a 37.5% lead already in 2023, however, and they could come close to reclaiming their previous annual highs if history is any indicator. 

More specifically, Urban Outfitters stock just pulled back to within one standard deviation of its 160-day moving average, after a short stint above it. Over the past three years, there were four instances of URBN pulling back to its this trendline, and in 75% of these instances it resulted in an average one-month return of 5.6% for the stock, per Schaeffer's Senior Quantitative Analyst White. Based on its current perch at $32.84, another move of this magnitude would put Urban Outfitters stock at $34.68.

URBN November 222023

The equity is ripe for a short squeeze. Short interest is up 11.6% in the last month, and the shares sold short represent a hefty 9.5% of URBN's total available float, and nearly four days' worth of pent-up buying power, at the equity's average daily trading volume.   

Those wanting to bet on a bullish repeat of history for Urban Outfitters stock may want to consider a call-buying strategy, considering short-term options on the retail stock are pricing in remarkably low volatility expectations. This is per the security's Schaeffer's Volatility Index (SVI) is 31%, which stands in the 7th percentile of its annual range.

 

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