Signet Jewelers Breaks From History as Holiday Sales Slam Stock

Signet Jewelers Ltd. (SIG) is selling off on weak holiday sales data

Alex Eppstein
Jan 11, 2017 at 12:14 PM
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Signet Jewelers Ltd. (NYSE:SIG) is breaking from history. Typically the best stock to own in the first quarter, SIG is getting trounced at midday -- down 3.4% at $84.52. The shares are sinking after the company saw same-store sales fall 4.6% in the holiday season, and forecast a 2%- to 2.5%-drop in comparable-store sales for 2017.

While today's bearish gap is a punch to the gut of shareholders, it's probably being well-received within the options crowd. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 7.20 SIG puts for every call in the last two weeks -- albeit on relatively light volume. The corresponding put/call volume ratio rests just 8 percentage points from a 12-month peak.

Short sellers should be in good shape, too. Over 16% of SIG's float is sold short, which would take more than seven sessions to cover, at its average daily volumes. However, it appears some shorts missed the boat, as short interest plunged 24.2% over the past two reporting periods.

Technically speaking, SIG is at a critical juncture. The stock recently breached the 23.6% Fibonacci retracement of its January 2016 highs and September 2016 lows, suggesting more downside could be just around the corner.

sig weekly jan 11b

Perhaps Signet Jewelers Ltd.'s (NYSE:SIG) best hopes of a quick rebound rest on its 320-week moving average, which roughly corresponds with the round $80 level. The long-term trendline was supportive in late 2016 and, prior to that, in 2011. On the other hand, a breach of the moving average could portend a run to new multi-year lows.

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