WTW stock has pulled back to a trendline that has served as notable support in the past
Weight Watchers International, Inc. (NYSE:WTW) has been on quite a run since bottoming at an annual low of $9.37 in mid-September, with the shares up 61% to trade at $15.08. However, this only tells part of the story, considering WTW stock surged 27.5% on March 1, following a well-received earnings report, topping out at a 52-week peak of $19.86. Since then, Weight Watchers stock has pulled back, but found a firm foothold atop its rising 40-day moving average. This trendline has served as a springboard for
WTW stock in the past, and another big bounce could spark a short-squeeze situation.
Specifically, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been six other times that WTW has pulled back to its 40-day moving average in the last three years. While it's been a coin toss as to whether the shares are positive in the subsequent 21-day period, the stock has averaged a whopping 21-day post-signal return of 24.6%.
Plus, there's ample sideline cash available to fuel a short-covering rally. While short interest declined 3% in the two most recent reporting periods, it still accounts for almost two-thirds of WTW's available float! At the stock's average pace of trading, it would take nearly two weeks to cover all of these bearish bets. A continued capitulation from short sellers could translate into a fresh burst of buying power for WTW stock.
Additionally, just three analysts currently cover the shares -- two that maintain a "strong buy" rating, and one that believes WTW stock to be a "strong sell." More upbeat analyst initiations could draw a fresh wave of buyers to Weight Watchers International, Inc.'s (NYSE:WTW) table.
Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.