The shares of Callaway Golf (ELY) gapped higher on June 13, after activist investor Jana Partners reported a stake, calling the equity undervalued. While ELY has pared some of those gains, the stock’s pop just triggered a historically bearish alarm.
Specifically, the stock is back within one standard deviation of its 80-week moving average, after a lengthy stretch below the trendline. Over the past 15 years, ELY has experienced 13 similar run-ups to this moving average, per Schaeffer’s Senior Quantitative Analyst Rocky White. One month later, the security was down an average of 5.39%, and was positive just 54% of the time.
In addition, ELY is trading back below the $17.50 area. This region stifled rally attempts on several occasions earlier this year — including a Tiger Woods-induced pop in April — and could continue to serve as a technical ceiling for the shares.
Despite ELY’s struggles to sustain a move north of $17.50, analysts remain enamored of the stock. In fact, two-thirds of covering brokerage firms maintain “strong buy” opinions, with the other four doling out lukewarm “hold” ratings, and not a “sell” in sight. Meanwhile, the consensus 12-month price target of $22.45 represents a premium of nearly 29% to ELY’s current price. Should the shares once again backpedal in the face of multi-layered resistance, a round of downgrades and price-target cuts could weigh on ELY.
Likewise, near-term options traders are more call-heavy than usual. The stock’s Schaeffer’s put/call open interest ratio (SOIR) of 0.20 indicates that call open interest quintuples put open interest among options expiring within three months. This ratio registers in the 10th percentile of its annual range, suggesting short-term traders have rarely been more call-biased in the past year. In the July and August series of options, the overhead 18 strike is home to peak call open interest, and could act as an added layer of options-related resistance in the short term.