Bears Cheer Avon Products, Inc. (AVP) Dive

Avon Products, Inc. (AVP) dropped big after announcing layoffs and a change of location for the company's headquarters

Mar 15, 2016 at 2:50 PM
facebook X logo linkedin

Cosmetics manufacturer Avon Products, Inc. (NYSE:AVP) is sinking 8.1% to trade at $4.03, after announcing it will cut 2,500 jobs while moving its headquarters from New York City to the U.K. -- though the company insists the move is not for tax purposes. AVP completed the sale of its North American business to private investment firm Cerberus Capital Management on March 1. But as the shares dip today, a crowd of already-bearish investors is likely to be cheering.

After hitting a record low of $2.21 in late January, AVP staged a rebound, nearly doubling by Monday's close. However, the shares ran into a speed bump in the form of their 200-day moving average -- a trendline they haven't toppled since October 2013 -- which has descended into the $4.50 region. What's more, this neighborhood has stifled AVP's previous recovery attempts since September.


It's little wonder, therefore, that two-third of analysts already rate AVP a "hold" or "strong sell." And while short sellers have backed off by 28.2% during the last month, these bearish bets still account for more than 9% of the equity's available float. At AVP's average pace of trading, it would take over a week to buy back all the shorted shares. Of course, today's big drop has put these bears on pause as the stock is now of the short-sale restricted list.

And while option volume is relatively light, on an absolute basis, recent speculators have been more pessimistic than usual. The security's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OM XPHLX (PHLX) sits lower than 74% of the past year's readings, at 1.59.

Moreover, AVP has a Schaeffer's put/call open interest ratio (SOIR) of 4.21 -- in the 79th annual percentile, indicating that short-term traders favor Avon Products, Inc. (NYSE:AVP) puts over calls by a wider-than-usual margin. Plus, the April 4 put is hands-down the most popular of any series, with open interest of more than 65,000 contracts -- nearly eight times the next most-popular strike. Buyers of these puts are hoping AVP extends today's downtrend and breaches $4 by the close on Friday, April 15, when the soon-to-be front-month contracts expire.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI