Golf Stock Lands in the Rough After Downgrade

Chart support for ELY is in place, though

Assistant Editor
Dec 21, 2020 at 10:20 AM
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The shares of Callaway Golf Company (NYSE:ELY) are in the rough just off the green this morning -- down 3.5% at $23.88 at last check -- after Compass Point downgraded the stock to "neutral" from "buy." The firmed also upped its price target 50 cents to $24, noting "tremendous momentum," but also a preference for a better entry point. 

On Friday, ELY hit a new record high of $24.84. Still up 12.7% year-to-date, today's pullback has so far been contained by its 10-day moving average. If you're looking for an explainer for today's dip, Callaway stock's 14-day Relative Strength Index (RSI) sat at 78 last night --firmly in "overbought" territory -- which means a short-term breather may have already been in the yardage book.

Meanwhile, short interest has been building. The 16.73 million shares sold short account for 19.3% of the stock's available float, or seven days to cover at ELY's average pace of trading. In other words, Callaway Golf stock could see tailwinds as these bearish bets begin to unwind. 

Lastly, now could be a good time to speculate on ELY's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 47% stands higher than just 8% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

 

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