E-Commerce Stock Looks Like a Winning Pre-Holiday Buy

A confluence of rising moving averages could act as support

Nov 22, 2022 at 11:19 AM

ETSY

E-commerce name Etsy Inc (NASDAQ: ETSY) is breaking out in a cup and handle pattern, and retested its breakout to close out the week as it pushed above its year-to-date breakeven level. A confluence of rising moving averages linger below to support the shares, which also broke above their year-to-date average volume-weighted average price (VWAP). Plus, the equity is trading at seven times is initial public offering (IPO) price of $112, while the -50% year-to-date region could at as support in the event of a trend change.

Analysts lean mostly bearish on Etsy stock, meaning the security could benefit from a shift in sentiment. Of the 27 firms in coverage, 14 still carry a tepid "hold" or worse rating. Plus, shorts are in covering mode, and short interest makes up 9.9% of ETSY’s available float.

Additional tailwinds could come from a shift in the options pits. This is per the stock’s 50-day put/call volume ratio of 1.53 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which is rolling over from all-time-high levels. Rollovers above 1.0 have previously been bullish for the equity.

It's also worth noting the ETSY’s Schaeffer's Volatility Scorecard (SVS) stands at an elevated 83 out of 100. This means the equity has exceeded options traders' volatility expectations during the past year. Our recommended January 2023 call has a leverage ratio of 4.9, and will double in value on a 21.8% pop in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ETSY 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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