Lyft Stock’s Pullback May Not Be As Bad as It Sounds

Lyft’s recent slide has investors on edge, but a closer examination of the numbers reveals a trendline that’s historically bullish. According to Rocky White, Schaeffer’s Senior Quantitative Analyst, the company’s current price is near its 126-day moving average.

The moving average is a way to smooth out short-term market fluctuations, giving traders a better sense of the stock’s underlying trend. In Lyft’s case, the pullback has it hovering around $14.85, just 0.75 away from its 20-day Average True Range (ATR). This level has historically preceded significant gains.

In five of the last ten years, Lyft stock was within this same range and subsequently rose by an average of 9.4% one month later. Given its current price, such a surge would put LYFT back above $16.

The trendline is supported by market sentiment, with traders piling on puts at a higher-than-normal rate. The 10-day put/call volume ratio at ISE, CBOE, and PHLX stands higher than 76% of all other readings from the past year. This suggests that bearish sentiment is beginning to unwind.

The Schaeffer’s put/call open interest ratio (SOIR) also indicates a shift in market sentiment. It ranks higher than all other readings from the past 12 months, which could signal that investors are becoming more optimistic about Lyft’s prospects.

Options prices themselves offer another perspective. The Schaeffer’s Volatility Index (SVI) stands at a relatively low 51%, implying that near-term option traders are pricing in relatively low volatility expectations. This could be seen as an attractive buying opportunity, but only if investors are willing to take on some risk.

While the trendline is encouraging, there are still reasons to be cautious about Lyft’s prospects. The company’s year-to-date deficit stands at a significant 23.3%, and put traders may be circling due to fundamental issues rather than just market sentiment.

Lyft’s struggles are not unique; its rival Uber has faced similar challenges in recent years. However, the trendline is less about predicting a specific outcome than it is about understanding the broader context. Will LYFT follow in Uber’s footsteps or carve out its own path? Only time will tell.

The Schaeffer’s Volatility Index (SVI) suggests that near-term traders are pricing in relatively low volatility expectations. This could be seen as an attractive buying opportunity, but only if investors are willing to take on some risk.

As the market continues to digest Lyft’s trendline, one question remains: what’s next? Will LYFT’s shares bounce back above $16 or will its fundamental issues finally catch up with it? Only time will tell.