Dow stock could recoup recent losses, if history is any indicator
Wall Street is selling off sharply today as traders accept the possibility of recession come. Top notch chemical company Dow Inc (NYSE:DOW) was no exception to today’s profit taking, with the stock last down 3.7% at $59.57 and on course for a fourth straight loss. The DOW lost 12.2% last month, but clings to a 4.8% advance year-to-date. If history is any indicator, however, stocks could recoup some recent losses in the month ahead.
Dow stock just landed on a study by Schaeffer senior quantitative analyst Rocky White after rebounding to its 200-day moving average. According to White’s study, equity has experienced a similar decline over the past three years. Despite the limited sample size, stocks returned 5.5% the following month. That would put the blue-chip stock back on track to almost halve its recent monthly loss.
A change in the options pits could also give the stock some wind, as traders have opted for bearish bets in recent weeks. DOW’s Schaeffer put/call open interest ratio (SOIR) of 1.18 is higher than all other readings over the past year, indicating that short-term options traders have never been as biased as they are now. Additionally, the 10-day buy/sell volume ratio of 1.27 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) is over 91% of readings from last year.
A series of upgrades could also give DOW a boost. Of the 14 analysts covered, 11 say “hold” or worse, against three ratings “strong buy”. Meanwhile, the 12-month consensus price target of $73.05 represents a 23.2% premium to current levels.