Casino concern International Game Technology (IGT) has rebounded roughly 18% since touching a two-year low of $13.33 on Dec. 24. However, zooming out on the charts, it looks like this could be another “dead cat bounce” for IGT, with the stock sending up a historically bearish signal. As such, now could be an opportune time to roll the dice on the equity’s next leg lower.
IGT has been in a channel of lower highs and lows since peaking at $31 in May. The shares are now trading right around half that high, which could translate into a layer of resistance. Furthermore, IGT recently came within one standard deviation of its 80-day moving average, after a lengthy stretch below this trendline.
According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been five technical signals of this kind over the past three years, after which IGT was lower one month later most of the time, averaging a loss of 10.74%. From the stock’s current perch at $15.73, another 10.74% loss would leave the security around $13.15 — back around that Christmas Eve low.
Despite IGT’s long-term downtrend, analysts remain enamored. In fact, all seven brokerage firms following IGT deem it worthy of a “strong buy” opinion. Plus, the consensus 12-month price target of $24.06 represents expected upside of more than 50% from the casino stock’s current perch. Should the shares once again retreat in the face of resistance, a round of overdue analyst downgrades and price-target hacks could exacerbate selling pressure on the stock.
Traders looking for IGT to retreat could consider short-term put options. The equity’s March 16 put was last asked at $1.55, meaning buyers would begin to profit if the shares breached $14.45 (strike minus premium paid) by the close on Friday, March 15, when the options expire. Even shorter-term traders could consider the February 16 put, which was last asked at $0.85, due to having less time value than its March counterpart. Buyers of the front-month puts would need IGT to breach $15.15 by the close on Friday, Feb. 15.