TE Connectivity (TEL) manufactures sensor and connectivity technologies. The company is slated to report earnings in one week — on Wednesday, Jan. 23 — but ahead of the report, TEL shares are sending up a historically bearish signal.
After touching an annual low of $69.84 on Dec. 26, TEL stock went on a tear, rebounding more than 12%. Now, however, the equity is back within one standard deviation of its 80-day moving average, after a lengthy stretch below this trendline. In fact, the stock has toppled the trendline on a daily closing basis just once since August, back when TEL was trading around $95.
According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been five similar run-ups to the 80-day for TEL in the past three years. After those signals, the security averaged a one-month loss of 4.58%. A similar pullback from current levels — TEL was last seen trading around $78.48 — would put the shares around $74.88.
As far as earnings history, TEL stock has moved lower the session after its last three earnings reports, including a 3.5% drop on Oct. 31. Looking back eight quarters, the equity has averaged a one-day post-earnings move of 2.4%, per data from Trade-Alert.
Despite TE Connectivity’s struggles on and off the charts, though, analysts remain bullish. In fact, eight of 11 brokerage firms following TEL maintain “buy” or better opinions, and the other three offer up lukewarm “holds,” with not a single “sell” to be found. Meanwhile, the consensus 12-month price target of $94.53 represents expected upside of 20% to the stock’s current price, and stands in territory not charted in about five months. Should the equity once again retreat in the face of its 80-day moving average, particularly after an earnings disappointment, a round of analyst downgrades and price-target cuts could further weigh on TEL shares.
Speculators anticipating a pullback for the stock could consider the February 80 put option, which was last asked at $3.30. In order to profit, buyers of the put would need TEL to retreat beneath $76.70 (strike minus premium paid) by the close on Friday, Feb. 15, when the soon-to-be front-month options expire. However, keep in mind that with a potential volatility catalyst on the horizon ahead of earnings, short-term premiums are bound to be richer than usual right now.