Software Stock Running Into Several Pressure Levels

BILL could see an unwinding of analyst optimism

Subscribers to Schaeffer’s Weekend Trader options recommendation service received this BILL commentary on Sunday night, along with a detailed options trade recommendation — including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Software stock Bill Holdings Inc (NYSE:BILL) is trading below a trendline connecting higher lows since February, and earlier this month retested the level at which the breakdown of this trendline occurred. The equity also consolidated into its down-sloping 50-day moving average that is situated just below $67.90 — half of its 52-week high. Adding to this weak technical setup, BILL gapped lower after the company’s February earnings report and is now trading below $66, or triple its initial public offering (IPO).

 

An unwinding of analysts’ optimism could pressure Bill stock lower. Of the 24 covering brokerages, 14 still rate the stock a “buy” or better despite double-digit deficits on both a year-to-date and year-over-year basis. What’s more, short interest has fallen 40% this year to a multi-year low. Despite the covering, the stock moved lower, flashing another sign of underlying weakness in the shares.

Call buyers have also been more bullish over the last two weeks, and a change in tune could provide additional headwinds. Our recommended July put has a leverage ratio of 3.1, and will double in a 25.4% fall in the underlying shares.

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