Underperforming Invesco Ltd. (IVZ) Vulnerable to Bearish Backlash

Invesco Ltd. (NYSE:IVZ) technical troubles have gone seemingly unnoticed on Wall Street

by Research Dept.

Published on Jan 31, 2017 at 11:05 AM

Despite a slight earnings beat last week, financial stock Invesco Ltd. (NYSE:IVZ) is starting to break lower after struggling in the $30-$32 area. Year-over-year, the shares have been unimpressive, too, gaining just over 3% -- compared to the broader S&P 500 Index (SPX), flirting with a 21% annual advance.

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This technical weakness leaves IVZ vulnerable to downgrades, as eight of 11 analysts rate it a "buy" or better -- without a single "sell" opinion to be found. Not to mention, if bullish options traders hit the exits, it could create more pressure. At present, the stock boasts a Schaeffer's put/call open interest ratio (SOIR) of 0.21, in the low 31st annual percentile -- with calls roughly quintupling puts in the front three-months' series.

On top of that, it appears short sellers are beginning to re-exert themselves. Short interest popped 7.2% in the most recent reporting period. However, with just 1.5% of IVZ's float sold short, an additional round of short selling could exacerbate headwinds.

For speculators, it's a solid time to pick up premium on the shares, as their Schaeffer's Volatility Index (SVI) of 25% sits below 86% of all readings from the past year. Additionally, the leverage ratio of negative 7.4 on our recommended put option indicates it will double in value on an 11.6% drop in the underlying.

Subscribers to Schaeffer's Weekend Series service received this IVZ 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.

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