Retail Stock to Avoid this Holiday Season

Betting against JWN with options looks like the right move

Deputy Editor
Dec 13, 2023 at 12:07 PM
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Shares of department store retailer Nordstrom, Inc. (NYSE:JWN) were last seen 2.8% lower to trade at $16.22, ceding their year-to-date breakeven level amid news that sector peer Macy's (M) received a multi-billion dollar buyout bid. Despite bottoming out at a three-year low of $12.88 on Nov. 13, JWN has pared 25% off that valley and is up 8.2% this quarter. However, these gains have the stock rallying into a historically bearish trendline.

Per a study from Schaeffer's Senior Quantitative Analyst Rocky White, Nordstrom stock is now within one standard deviation of its 260-day moving average, after a lengthy period below here (defined as 80% of the time over the preceding two months, and at least eight of the previous 10 trading days).

There were seven similar 'signals' in the past three years. The equity was lower one month later 100% of the time after those signals, averaging an 18.3% drop in that timeframe. A similar move from its current perch would put JWN back near those multi-year lows.

JWN Chart December 132023

An unwinding of optimism in the options pits could provide headwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Nordstrom stock’s 10-day call/put volume ratio of 11.60 ranks in the 96th percentile of its annual range, showing a strong penchant for calls over the past 10 weeks. 

Now might be a good time to speculate on JWN's next move with options. The security's Schaeffer's Volatility Index (SVI) of 46% stands higher than just 14% of annual readings. In other words, options players are pricing in relatively low volatility expectations at the moment. Further, the security tends to outperform said volatility expectations, per its Schaeffer's Volatility Scorecard (SVS) tally of 79 out of 100.

 

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