Peruse Barchart’s Top 100 Stocks to Buy and you’ll come across the usual suspects, names like Super Micro Computer (SMCI), Carvana (CVNA) and MicroStrategy (MSTR). However, one name that has really caught speculators’ attention is discount deals marketplace Groupon (GRPN).
Prior to the rise of social media, Groupon appeared to be on top of the world. However, with various online networks gaining prominence, businesses enjoyed a direct means to reach out to their core customers. As a result, marketplaces like Groupon became far less relevant. In the past five years, GRPN stock lost more than 72% of equity value.
However, since the pandemic-fueled doldrums of 2020, the much-maligned enterprise enjoyed a few bouts of speculative fervor. As Barchart notes in its Top 100 list – which ranks securities by highest weighted alpha (or measure of how much a stock has changed in a one-year period) – GRPN stock has been on a tear. In the past 52 weeks, it’s up almost 202%.
Part of this bullish sentiment stems from pure speculation against the bears. According to Fintel, the short interest of GRPN stock clocks in at 15.58% of its float. Also, its short interest ratio is moderately elevated at 5.66 days to cover, meaning that’s how many sessions it would take for the bears to unwind their short positions based on average trading volume.
Still, with a more than three-fold move, many market gamblers may question if there’s still room to participate in GRPN stock. If you’re looking for a short-term swing trade, the answer appears to be a resounding “yes.” Here’s why.
Focusing on Options
As a market participant – whether as a long-term investor or day trader – it’s valuable to understand the sentiment of the big money. Barchart’s options flow screener (which focuses exclusively on big block transactions likely placed by institutions) offers its Premier members a major advantage.
By downloading the data, members can identify which derivative contracts feature the greatest magnitude of activity. In particular, the GRPN JUN 21 ’24 25.00 Call stood out as a potential upside target. From the time that the trade was placed until expiration there are 106 days for GRPN stock to become profitable relative to this contract.
As a possible downside target, the options flow screener picked up two contracts: the MAR 15 ’24 15.00 Put and the APR 19 ’24 17.00 Put. To be fair, it’s difficult to determine the exact motivation behind these trades. However, one possibility is that they represent a form of volatility insurance. Should GRPN stock suddenly fall, the put holders could theoretically protect their holdings.
Now, using Barchart’s interactive chart, Premier members armed with the options flow data can juxtapose these key levels to understand potential risk-and-reward zones.
Moreover, Premier members can also access Groupon stock’s unusual options activity screener. Essentially, this screener tracks the smart money transactions or the contracts that have attracted the most eyeballs among all investors (both retail and institutional).
Here, on the call side, the MAY 17 ’24 22.00 Call stands out as a possible upside target. On the other end of the spectrum, the APR 19 ’24 17.00 Put may represent a downside target or protection against volatility. Do note that this put contract is the same as the one found in the options flow screener.
Again, armed with this information, Barchart Premier members can juxtapose these price points as levels of interest. In this way, traders have a clearer picture of what the biggest and most sophisticated participants of GRPN stock may be thinking about.
Trader’s Cheat Sheet
An overlooked tool that investors – whether Barchart Premier members or visitors – should advantage more is the Trader’s Cheat Sheet. This nifty table lists out the key price points to monitor based on various sub-disciplines of technical analysis.
To be frank, it’s easy to suffer from paralysis from analysis. Therefore, investors should consider filtering for only the metrics they find useful. Personally, I enjoy using “Pivots” and “Standard Deviation” because they clearly identify support and resistance levels without getting muddled into excessive analytical noise.
Juxtaposing the “Pivot Point 1st Support Point” ($18.12) and “Pivot Point 1st Resistance Point” ($19.10) into the interactive chart allows traders to see that GRPN stock is trading within a defined horizontal pattern. This is critical because it tells us that GRPN is “trending” and thus we have greater confidence in placing our near-term wager.
Understanding the Pitch Count
Easily one of the most powerful tools in Barchart’s Premier arsenal is its Historical Data page. You can download detailed pricing data down to the minute – including premarket and afterhours sessions. This provides a magnitude of information that’s just not readily available in other investment resources.
Using Barchart’s pricing data, I was able to calculate that from cthe beginning of October last year, whenever GRPN stock’s opening price of a session comes in lower than the prior day’s closing price, there is a 63.83% chance that on that day, the closing price will end up higher than the opener.
Notably, in the past eight times when GRPN’s opening price started in the negative, five of those sessions saw a profit by day’s end or a 62.5% success rate. By understanding this “pitch count" (the proper term is conditional probability analysis), we can attack GRPN stock with greater confidence.
Trading GRPN Stock
On Thursday, GRPN stock closed at $18.61. Let’s assume that GRPN opened lower than $18.61 on Friday, meaning that there’s potentially a 63.83% chance that by Friday’s end, Groupon could come in higher. Let’s further assume you believe that shares will hit $19.
Based on this assumption, we can look at the GRPN MAR 15’ 24 19.00 Call. On Thursday, this contract closed at a premium of $2.22. Using Barchart’s convenient options calculator, we plug in our projected price in the “Underlying Price” box. Since we’re going to exit the trade before Friday’s close, the “DTE (days)” line will be 7.
In options calculators, you include the calendar days. Since the option market can be affected by events over the weekend, we include Saturday and Sunday and hence we input 7 as opposed to 5.
With this set of assumptions, the calculator provides us a theoretical contract value of $2.43 should GRPN stock reach $19 in the open market. That would give us a profit of almost 10% should the trade pan out as expected.
Of course, before you enter any trade, you want to understand the lay of the land. Barchart gives you the tools to do exactly that, making it an invaluable resource for serious market participants.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
