What We're Trading: Red Flags Abound on Well-Loved Medtronic PLC (MDT)

We think MDT shares are ready for a sharp move lower, so it may be time to purchase put options

Dec 28, 2016 at 8:16 AM
facebook X logo linkedin

Medtronic PLC (NYSE:MDT) stock is down more than 6% year-to-date, and is nearing its annual low touched in early February. Not to mention, shares of the medical technology specialist dropped nearly 9% on Nov. 22, following lackluster quarterly sales and a reduction to the company's 2017 earnings forecast.




Despite the technical and fundamental red flags, MDT is well-loved on the Street. Sixteen of 22 analysts have doled out "buy" or better recommendations, leaving the door wide open for downgrades. Elsewhere, short interest has plunged of late, leaving just 0.8% of the stock's float sold short. A resumption in short selling could add to the headwinds.

Meanwhile, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.59 calls for every put during the last 20 sessions. An unwinding of this optimism could exacerbate MDT's struggles.

Speaking of options, short-term premium can be had on the relative cheap at the moment. Specifically, MDT's Schaeffer's Volatility Index (SVI) of 17% sits beneath 65% of all comparable readings from the past year. And, last but not least, our recommended put option boasts a leverage ratio of negative 13.5, meaning it will double in value on just a 6.4% decline in the stock.

Subscribers to Schaeffer's Weekend Series service received this MDT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Series is one of our most popular trading services.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI