The uptrend in retail stock Express (EXPR) from its first-quarter lows around the $6.50 level has been fairly impressive, with the shares guided higher by support at their rising 40-day moving average. The stock is now up about 66% from its Feb. 5 year-to-date closing low of $6.42, but — thanks in large part to a big bear gap in early January — EXPR has only recently cemented a foothold in positive year-to-date territory.
In fact, based on its 2017 year-end close of $10.15, EXPR is up only 4.7% on the year. But with strong support in place from the equity’s 40-day moving average, and a longer-term daily trendline recently sending up a bullish signal, it looks like the apparel retailer could be set for more short-term upside.
Specifically, EXPR recently pulled back to within one standard deviation of its 80-day moving average, after having spent the majority of the last two months trading above this trendline. Over the last three years, there have been four prior instances of EXPR pulling back to test its 80-day in this manner, according to Schaeffer’s Senior Quantitative Analyst Rocky White, and we have one-month returns for all but the most recent.
Following those three previous 80-day pullbacks, EXPR was trading higher one month later 67% of the time, with the equity’s average return arriving at a steep +21.65%. Based on the stock’s current price of $10.63, another rally of this magnitude would place the shares around $12.93 by this time next month — firmly in new-high territory.
A breakout by EXPR right now could rattle the shorts. Short interest on the stock rose by 20.8% during the most recent reporting period, and now accounts for a lofty 21.8% of the equity’s float. At EXPR’s average daily trading volume, it would take 5.2 days for all of these bearish bets to be repurchased.
There’s plenty of pessimism that could be unwound among options traders, too. The security’s Schaeffer’s put/call open interest ratio (SOIR) stands at 1.83, as puts nearly double calls among options set to expire within three months. This ratio registers in the 72nd annual percentile, confirming that puts are much more popular than calls among speculative players.
Plus, EXPR has garnered four “hold” ratings from analysts, compared to zero “buys.” This leaves ample room for upgrades if the stock experiences another one of its high-octane 80-day boosts.
And with no earnings expected from EXPR until late November, now is an ideal time to bet bullishly via the stock’s options. Schaeffer’s Volatility Index (SVI) checks in at 45%, in the 9th annual percentile — meaning short-term bets on the security have rarely priced in lower implied volatility expectations, which translates into lower premiums for option buyers.