More Skepticism for Travelers Stock as RBC Cuts Rating

Outside of bearish analysts, put buyers and short sellers have taken action on TRV

Dec 11, 2018 at 9:40 AM
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Travelers Companies Inc (NYSE:TRV) is trading up 0.9% this morning at $124.18, trying to overcome a bear note out of RBC. The brokerage firm downgraded the insurance giant to "sector perform" from "outperform" and dropped its price target to $133 from $143. Citing the California wildfires and Hurricane Michael, RBC lowered its fourth-quarter earnings-per-share estimates for TRV, and is expecting weak pricing and a slowing economy to act as headwinds going forward.

All the same, RBC's price target is a premium to the equity's Monday close of $123, as the blue chip has continued to struggle on the charts. It touched an annual low of of $119.74 back in late October, and breakout attempts have been thwarted by the 200-day moving average since late August. In fact, TRV has essentially been in a series of lower highs since peaking near $150 back in February.

These technical struggles have prompted even more skeptics to take action. Most notably, there's been unusual put buying on Travelers during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where the put/call volume ratio for that period stands at 6.20 -- high enough to rank in the 94th annual percentile. Said simply, many have been speculating on the stock moving lower.

Short interest has also been picking up. In the last reporting period, short interest on the security increased by 13.1%, though it still represents just 1.4% of the overall float. Considering this latter number, there's theoretically plenty of room for more short sellers to roll in, which would just add more pressure to TRV on the charts.

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