Nordstrom Stock in the Spotlight on Joint Venture

Nordstrom will sell several clothing brands owned by Asos

Deputy Editor
Jul 12, 2021 at 10:54 AM
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Nordstrom Inc (NYSE:JWN) is in the spotlight today, after the retailer announced a collaboration with British fashion brand Asos. Nordstrom has acquired a minority stake in four of Asos' fashion brands -- which appeal to the younger generation of consumers -- and will sell them in stores and online. At last check, JWN is up 0.6% to trade at $36.21.

Nordstrom stock has struggled to rally since its late-May bear gap. The flat 100-day moving average at the $37 level has provided a stiff ceiling in recent weeks, and still looms overhead. Year-to-date, the equity is up 17.1%. 

A short squeeze could help the shares topple this ceiling. Short interest has risen 32.3% during the two most recent reporting periods, now making up 15.9% of the stock's available float. It would take over a week to buy back these bearish bets, at JWN's average pace of trading. 

Given its sizable gains this year, a shift from the brokerage bunch could also provide tailwinds, considering analysts are mostly bearish on Nordstrom stock. Of the 12 analysts in coverage, 10 carry a "hold" or worse rating. Plus, the 12-month consensus price target of $35.12 is a 3.8% discount to current levels.

The options pits, however, have been more optimistic than usual. This is per JWN's 10-day call/put volume ratio of 6.52 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 92% of readings from the past year, indicating calls being picked up at a much faster-than-usual rate. Given the amount of short interest tied up into the stock, its possible those short sellers are using calls as an options hedges to protect against any additional upside risk.

Lastly, the stock's Schaeffer's Volatility Index (SVI) of 54% stands higher than 16% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations at the moment. 

 

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