Bullish Bias Grows on Intuitive Surgical Stock Ahead of Seasonal Tailwinds

Intuitive Surgical call options have seen an uptick in popularity recently

Apr 2, 2019 at 10:03 AM
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Robotic surgery expert Intuitive Surgical, Inc. (NASDAQ:ISRG) has been a long-term gem on the charts, posting five straight yearly gains, including advances of 31.2%, 72.6% and 16.1% over just the past three years. Already in 2019, ISRG shares have added more than 20%, trading near record highs at yesterday's close of $575.54, and seasonal data shows that bulls may want to expect more upside in the months ahead. Analysts and options traders certainly are.

First of all, Raymond James weighed in on Monday by upping its price target to $630 from $600 on ISRG, and just this morning Deutsche Bank followed suit by beginning coverage with a "buy" endorsement and $630 price target. This is well into all-time-high territory for the equity, which peaked at $581.12 back in October. All but two of the 15 brokerages in coverage recommend buying the stock.

As for options activity, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have pushed Intuitive Surgical's 10-day call/put volume ratio to 2.24, showing call buying has more than doubled put buying in recent weeks. More telling still, this number ranks in the high 94th annual percentile, revealing such demand for long calls is highly unusual.

Interestingly, however, the largest increase in open interest during this two-week time frame occurred at the April 600 call, and most these positions were actually sold to open. In other words, these traders are betting on the $600 acting as a technical ceiling for the security over the next couple weeks. The rise in open interest at this contract, along with the recent surge in call buying, has left ISRG's Schaeffer's put/call open interest ratio (SOIR) at an annual low of 0.64.

Now finally getting to that seasonal data alluded to earlier, Schaeffer's Quantitative Analyst Chris Prybal notes that the stock has averaged an April gain of 5.5%, while also positing positive average returns for May, June, and July, with the latter month's average return coming in at an impressive 11.5%. Intuitive Surgical is trading up 0.6% at $579.20 so far this morning.


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