Stock seeks support, put volume jumps
- AX fell to former breakout level on Monday
- Put volume high as shares tested support
- Stock fell more than 4% intraday
Sometimes market action can be more than the sum of its parts.
For example, Monday’s higher-than-average put volume in regional bank Axos Financial (AX) may not have seemed particularly interesting to many traders. AX appeared on LiveAction scans for unusual put volume and high put-call ratios, with traders appearing to establish sizable new positions in three September contracts—the $65 puts (3,200 contracts), $60 puts (1,000), and $45 puts (1,000):
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest directly in an index.)
Yes, this activity gave AX the morning’s seventh-highest relative put volume (among stocks trading above $10), and the fourth-highest put call ratio, but there were other stocks with higher profiles and bigger options totals.
What distinguished AX was what its stock was doing: falling more than 4% in early trading on a relatively quiet day for the broad market, and pressuring a well-defined support level:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest directly in an index.)
Back in July, AX broke out above its May highs on the way to its July 31 record high, which also happened to be the same day the company released earnings (after the bell). Over the next five days shares tumbled as much as 19.6%—back to the former breakout level by August 5—before stabilizing for a few days. Current levels also coincide with the 50% retracement level of the June-July rally.
The fact that AX experienced higher-than-average put volume while pressuring an obvious technical level (for the second time in a week) may have caught the eye of momentum traders in a way either development on its own wouldn’t have. The stock is at a possible inflection point. Bulls may get the bounce once again. But if traders don’t support the stock the way they did when it first tested this level a week ago, it may encourage bears, some of whom may have been buying puts yesterday.
Today’ earnings include: Home Depot (HD), XP (XP).
Today’s numbers include (all times ET): Producer Price Index (8:30 a.m.).
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