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Scoop Up AABA Stock, Says Signal

Lillian Currens

Former Yahoo! Inc. name Altaba Inc (NASDAQ:AABA) has enjoyed some serious upward movement in 2019. The stock is up 31.1% year-to-date, and just came off its best quarter since 2013. The internet concern is expected to report quarterly earnings soon (though it doesn't appear an official date has been announced), and while AABA has run into recent pressure, it just flashed a historically bullish technical signal on the charts. 

Drilling down, the equity just came within one standard deviation of its 40-day moving average, after a lengthy period above the trendline. In the past three years, this signal has flashed nine other times, per data from Schaeffer's Senior Quantitative Analyst Rocky White. AABA was higher one month later 88% of the time, averaging a 5.72% gain. From its current perch at $76.09, a similar move would put Altaba right atop the $80 level -- and back within striking distance last year's 18-year highs. 

AABA Chart Apr 25

Despite its outperformance on the charts, options traders have been piling on bearish bets of late. AABA sports a 50-day put/call volume ratio of 1.29 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the lofty 93rd percentile of its annual range, suggesting a much healthier-than-usual appetite for purchased puts over calls in the past 10 weeks.

While short sellers are starting to hit the exits -- short interest fell 5.4% in the last reporting period -- there's still plenty of room for a short squeeze to propel AABA even higher. The 34.96 million shares sold short represent a healthy 4.9% of the stock's available float. At the equity's average trading volume, it would take over a week for short sellers to buy back these bearish bets.