Sports dealer Dick’s Sporting Goods Inc (NYSE: DKS) it recovered spectacularly from its May 25 annual low of $ 63.45 and added more than 37% over the past three months. Today, the stock was last seen down 2% to trade at $ 106.28, dragging it down 7% year-to-date. However, this pullback has put DKS at an impressive distance from a historically bullish trendline that could once again see the stock compete with its 2022 breakeven point.
Notably, in the past three years, there have been six more occasions when DKS was within one standard deviation of its 40-day moving average after a long time above it, according to Rocky White, a senior quantitative analyst at Schaeffer. A month after testing this trend line, the stock was half the time higher and showed an average return of 6.4%.
In the event of a rally in Dick’s stock, a short squeeze may be in play. Short interest fell 6.5% in the two most recent reporting periods, yet the 13.84 million shares still represent 26.2% of the total free float and eight days of pent-up purchasing power.
Meanwhile, options traders are exceptionally put-oriented, based on DKS’s 10-day put / call volume ratio of 1.90 on the International Securities Exchange (ISE), the Chicago Board Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX), which ranks in the 92nd percentile of its annual range. In other words, DKS option buyers have initiated bearish-versus-bullish bets at a faster-than-usual pace over the past two weeks, and an easing of this pessimism could have further bullish implications.
Short-term options on retail stocks are also relatively cheap. Notably, its Schaeffer’s Volatility Index (SVI) of 48% ranks in the 19th percentile of its annual range.