Our Subscribers Just Got an Early Christmas Gift With Etsy Calls

ETSY is up over 57% in the last six months

Digital Content Manager
Dec 1, 2022 at 1:14 PM
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Subscribers to our Schaeffer's Weekend Trader Alert service just bagged a 107% profit with our recommended Etsy Inc (NASDAQ:ETSY) January 20, 2023 110-strike call in a little under two weeks. Below, we'll unpack the reasoning for initiating this long position on the retail stock just ahead of the holidays.

When we made our recommendation on Sunday, Nov. 20, ETSY was 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 were also lingering below to support the shares, which also broke above their year-to-date average volume-weighted average price (VWAP). Plus, the equity was trading at seven times is initial public offering (IPO) price of $112, while the -50% year-to-date region sat below as potential support in the event of a trend change. 

Further, analysts were leaning bearish on the stock, with 14 of the 27 firms in coverage carrying a "hold" or worse rating. A shift in the options pits was also long overdue, as 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) was rolling over from all-time high levels. We noted that rollovers above 1.0 have been bullish for the equity in the past. 

The stock continued to distance itself from the year-to-date breakeven level the Monday following our recommendation, with its 10-day moving average, specifically, stepping in to guide shares higher. While analysts held fast to their recommendations, the security's 50-day put/call volume ratio did continue to roll over, dropping down to 1.48. Today, ETSY is trading at its highest level since March, and boasts a six-month lead of 57%. 

etsy dec 1

 

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