The shares of toymaker Mattel (MAT) have taken a breather since hitting a nearly four-year peak of $21.87 on March 16. The equity is in the midst of a three-day losing streak and is down 5% in the last seven days. The good news is that this most recent pullback has MAT trading near a trendline with historically bullish implications.
More specifically, Mattel stock just came within one standard deviation of its 40-day moving average, after spending a significant amount of time above this key trendline. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, five similar signals have occurred during the past three years. In 80% of those instances, the equity enjoyed a positive return one month later four times out of the last five, averaging a 3.5% gain. From its current perch of $19.80, a move of similar magnitude would put MAT at $20.49.
Daily chart of MAT since March 2020
The pullback should serve as an intriguing entry point for an overall successful stock the last 12 months. MAT is up 134% year-over-year, carving out a channel of higher highs that culminated in that March 16 peak. And despite the mid-March breather, the shares are still up 15% in 2021.
Premiums are reasonably priced at the moment, according to MAT’s Schaeffer’s Volatility Index (SVI) of 36%, which sits higher than just 1% of readings from the past year. This indicates options players are pricing in relatively low volatility expectations – a boon for premium buyers.
