Options Bears Board Boeing Supplier After 737 Production Cut

Allegheny Technologies stock earlier was near the bottom of the NYSE

by Patrick Martin

Published on Apr 8, 2019 at 2:20 PM
Updated on Apr 8, 2019 at 2:21 PM

The shares of Boeing (BA) supplier Allegheny Technologies Incorporated (NYSE:ATI) are down 2.6% to trade at $26.75 today, and earlier ATI was one of the worst stocks on the New York Stock Exchange (NYSE), after Boeing's decision to cut production of its 737 aircraft. In response to the news, ATI's normally barren options activity has sprung to life.

More specifically, 410 ATI put options have changed hands today -- six times the expected intraday amount and nearly six times the number of calls traded. The April 25 put is the most active, and buy-to-open activity has been detected. It seems options traders are banking on the Boeing supplier to continue to struggle in the coming weeks, and ultimately retreat beneath $25 by the time options expire on Thursday, April 18.

On the charts, Allegheny Technologies stock was rejected by the $29.50-$30 area in late February -- a region that's acted as resistance since early 2018. Since plummeting in early March in the wake of the latest 737 Max 8 crash, ATI has churned between the $25 and $27.50 levels, but still boast a solid 23% lead in 2019. 

ATI stock chart april 8

Despite the stock's recent struggles, analysts remain optimistic. Of the 10 brokerages covering the security, 80% rate it a "strong buy," with zero "sells" on the books. Plus, its consensus 12-month price target of $34.73 is a roughly 30% premium to its current perch. Should ATI continue to struggle, a round of downgrades or price-target cuts could weigh on the shares.

On the other hand, several short sellers are likely cheering the 737-related downturn. Short interest grew 13.3% in the past two reporting periods, and now accounts for a healthy 16.2% of ATI's total available float.


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