Healthcare stock Dentsply Sirona Inc. (NASDAQ:XRAY) has spent the past two months trading in a tight range between the $50 and $54 levels. Smack in the middle of this recent consolidation is a trendline that could have bearish implications in the coming weeks, if past is precedent.
More specifically, XRAY is staring right up at resistance at its 40-day moving average, after a lengthy stretch below it. There have been four similar encounters with this moving average in the last three years, after which XRAY stock was lower two weeks later by 5.5%, on average, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with three of the four returns negative.
What's more, implied volatilities on the equity are at low levels. The equity's Schaeffer's Volatility Index (SVI) of 22% registers in the 7th percentile of its annual range, a few notches below its two-year average SVI of 30%. With the stock resting on a historically bearish trendline, and short-term options unusually cheap at the moment, White's modeling shows that an at-the-money XRAY put option could potentially return 139% over the next 10 days. In other words, prospective put buyers could more than double their money on an expected 5.5% drop in the shares.
At last check, Dentsply Sirona stock was down 0.8% to trade at $51.33. A move lower of similar magnitude would put XRAY around $48.70, breaching short-term support established at the round $50 level. For context, the shares haven't closed below the $50 level since late April.
Should the equity drift lower, a shift in analyst attention could put more pressure on. Of the 11 brokerages covering XRAY, six rate it a "strong buy," with zero "sells" on the books. Plus, the security's consensus 12-month price target of $59.29 is a 15.2% premium from its current perch, and sits below its June 24 annual high of $59.40.