Though online marketplace Etsy (ETSY) took a nosedive on the charts after surging to a Nov. 26, all-time high of $307.75, the shares now seem to be bouncing off the $220 level. What’s more, there is reason to believe the security could make up for lost time and add to its 50.7% year-over-year lead, given the flashing bull signal that has preceded major rallies in the past.
Digging deeper, Etsy stock just pulled back to its 80-day moving average, after spending several months above this trendline. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, similar moves have occurred six times over the past three years, with the equity enjoying a positive one-month return 83% of the time, while averaging a whopping 19.3% pop. From its current perch of $247.35, a comparable move would put ETSY back above the $294 mark.
A short squeeze could keep winds blowing for Etsy stock. Though short interest is already falling, down 3.5% in the most recent reporting period, the 10.12 million shares sold short still make up 8.1% of the stock’s available float, or nearly one week’s worth of pent-up buying power.
The security could also benefit from a shift in the options pits. This is per ETSY’s Schaeffer’s put/call open interest ratio (SOIR) of 1.18, which ranks higher than 77% of readings from the last 12 months. In other words, short-term options traders have rarely been more put-biased.