Time to Bet On This Tobacco Stock's Next Leg Lower

Analysts remain extremely bullish on Altria Group stock

Dec 5, 2017 at 10:50 AM
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Tobacco giant Altria Group, Inc. (NYSE:MO) has been trying to gain ground since its huge bear gap from July, but the shares are now facing a formidable technical hurdle. Not only does the stock seem to be stalling right near its year-to-date breakeven level, but just overhead are the 160- and 200-day moving averages, which look ready to block any rally attempts. Already a major underperformer in 2017, it appears to be a good time to bet on Altria Group’s next leg lower.

WKALT MO Dec 1

 

Even though it’s been months since the stock’s historic bear gap, and despite the fact it’s done little on the charts since, analysts remain extremely bullish on the equity. In fact, the majority of brokerage firms still say it’s a “buy” or “strong buy.” In other words, MO seems long overdue for a round of downgrades, which would put pressure on the shares.

Elsewhere, short interest has for the most part been increasing since May. Considering these bears are in a profitable position, there doesn’t seem much reason to suggest short covering will occur, and we could even see short sellers add to their positions going forward. This will make it difficult for MO stock to gain traction on the charts.

Finally, our recommended put has a leverage ratio of negative 7.06, and will double in value with a 13.7% decline in the underlying security.

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

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