Etsy (ETSY) has nearly matched the S&P 500 over the past year. The S&P 500 is up 15%, ETSY up 11.5%. Both beat consumer discretionary as a group; the sector fund XLY is down 7.4% over the same stretch.
ETSY sells handcrafted, hard to find items you cannot buy from a mass producer. The closest peer is eBay (EBAY), which resells used and other goods and is up 26%. ETSY sits in the middle of the e-commerce group, ahead of Amazon (AMZN) and MercadoLibre (MELI), the Latin American e-commerce name.
Key price levels
The 52-week high hit 87.97. Wait - the stock now trades in the 70s, so read that as the recent high near 87.97 on the chart's scale. A strong rally has since broken down. Price ranged between highs near 78 and a floor near 78... the range ran about $10 wide, with price bouncing repeatedly between highs and a floor.
The main pattern now is a downward sloping channel drawn between two lines. Projecting the lower trend line, price stopped at old highs near 70.7, which have turned into support. It is unclear whether price will fall further and break through them. Another relative low sits near 66. To the upside, 76.50 was a relative high on the way back toward the old range floor near 78.
Moving averages and momentum
The moving averages are weakening and turning down. Price fell fast below three exponential moving averages - the 5-day, 21-day, and 63-day. The 5-day sits at 73.32 as of yesterday's close. All these EMAs are converging near 65 on the downside.
RSI has dropped faster, shifting from a gentle downward slope to a sharper decline, now reading 37. That stays above the 50 midline but leans bearish.
The volume profile shows a heavy volume node between 70 and 75. Volume picks up again near 80 on the upside and near 65 on the downside.
Seasonality
The holiday shopping season is approaching, which tends to lift ETSY sales - a point that supports the bullish case.
The example trade
The idea is bullish, based on the analyst upgrade. For the October 16th monthly expiration - the next monthly after today, 28 days out - the expected move is plus or minus about 10%.
The trade: buy the October 16th 72.5 / 77.5 call vertical for a $2 debit. Max loss is $200 (the debit paid); max profit is $300. That gives a risk-to-reward near 2 to 3. Break even is 74.50, which is 2.6% to the upside, well inside the 10% expected move.
If the stock goes against the position and the trade is held as is, the loss caps at $200. The 28 days to expiration give some room to manage the trade.
