ETSY tends to rally after meeting up with a key intermediate-term moving average
Amazon (AMZN) may be the ever-growing monolith of the online retail space, but it's hardly the only stock in the sector that's worth your attention. With the busy holiday shopping season kicking off this week, the shares of online retail hub Etsy Inc (NASDAQ:ETSY) just sent up a reliably bullish signal on the charts.
Specifically, ETSY has had a lengthy stay above its 80-day moving average, and recently pulled back to within one standard deviation of this trendline. After previous such pullbacks to this support, Schaeffer's Senior Quantitative Analyst Rocky White found that the stock's average five-day return was 3.07%, with half the returns positive (based on six prior signals).
However, it's the 21-day returns for ETSY stock that are truly impressive. After pausing an uptrend to meet up with its 80-day moving average, the shares are higher 80% of the time 21 days later, with an average return of 5.86%. In other words, ETSY looks set to rally right into the Christmas holiday.
With the stock currently trading fractionally higher at $16.99, a gain of this magnitude would put ETSY just shy of $18 by this time next month.
Unwinding pessimism could help add some extra fuel to ETSY's latest bounce from its 80-day. Short interest dropped by 14.8% over the past two reporting periods, but still accounts for nearly 6% of the stock's float -- or approximately four times the equity's average daily trading volume. A continued rush to cover could be a boon going forward.
There's also room for analysts to upwardly revise their ratings on the stock. Currently, ETSY sports just two "buy" or better ratings from brokerage firms, compared to eight "holds" -- leaving ample opportunity for momentum-boosting upgrades.
And it's rarely been a better time to buy option premium on the shares. Trade-Alert pegs ETSY's 30-day at-the-money implied volatility of 33.4% in the 2nd percentile of its annual range, as short-term options have rarely priced in lower volatility expectations. This allows option buyers betting on another ETSY bounce to gain the greatest possible leverage from their contracts.