Dell Technologies Poised for Year-End Rebound Following December Dip
Dell Technologies (DELL), a prominent player in the computer hardware industry, has experienced a remarkable 55% surge in its stock value throughout 2024. However, December has witnessed a 7% decline, raising concerns among investors. Historical trends, specifically the stock’s performance relative to its 260-day moving average, suggest a potential year-end rebound. This moving average, representing a 52-week or approximately one-year trend analysis, has served as a reliable indicator of DELL’s price movements in recent years. According to Schaeffer’s Senior Quantitative Analyst Rocky White, DELL has twice encountered this trendline in the past three years, exhibiting a consistent pattern of subsequent recovery.
White’s analysis focuses on instances where DELL’s stock traded above the 260-day moving average for 80% of the preceding two months and closed higher than the trendline in eight out of the ten sessions leading up to its approach. In both prior occurrences of this scenario, DELL’s shares rallied within one month, achieving an average gain of 13.9%. Applying this historical pattern to the current stock price of $118.66 suggests a potential recovery of the 14.3% gap experienced over the past 30 days. This analysis provides a compelling argument for a near-term rebound in DELL’s stock price, supported by its historical performance relative to the 260-day moving average.
Several technical indicators further bolster the case for a Dell rebound. The stock’s 14-day relative strength index (RSI) currently sits at 25, bordering on "oversold" territory. This suggests that the recent selling pressure may be overextended, creating an opportunity for a price correction. Moreover, options traders have displayed a bearish sentiment towards DELL, evident in the elevated put/call volume ratio on major options exchanges. This ratio, which compares the volume of put options (bets on price decline) to call options (bets on price increase), currently resides in the 96th percentile of its annual range. The high put/call ratio reflects a pessimistic outlook among options traders, which can often be a contrarian indicator, suggesting a potential reversal in sentiment and a subsequent price increase.
Adding to the evidence of bearish sentiment, Dell’s Schaeffer’s put/call open interest ratio (SOIR) stands in the 70th percentile of its 12-month range. This metric measures the ratio of outstanding put options to call options, reflecting the overall positioning of options traders. The elevated SOIR indicates a significant bearish bias, potentially creating a scenario where an unwinding of these positions could drive upward momentum for DELL’s stock. Should bearish traders begin to close their put positions or shift towards a more bullish outlook, the resulting buying pressure could contribute to a price surge.
Despite the recent price dip and prevailing bearish sentiment, Dell Technologies boasts a strong Schaeffer’s Volatility Scorecard (SVS) rating of 85 out of 100. This metric indicates a historical tendency for the stock to outperform volatility expectations, which is a positive sign for options traders and investors. A high SVS suggests that DELL’s price movements are often more pronounced than predicted by volatility models, offering potential opportunities for gains. This characteristic, combined with the other technical indicators, paints a picture of a stock poised for a rebound.
In conclusion, while Dell Technologies has experienced a temporary setback in December, a confluence of factors points towards a potential year-end recovery. The historical pattern of rebounding from the 260-day moving average, combined with the oversold RSI, bearish options sentiment, and high SVS score, presents a compelling case for a near-term price appreciation. These indicators suggest that the current market pessimism may be overdone, and that DELL is well-positioned to regain lost ground in the coming weeks. While market conditions are always subject to change, the available evidence strongly suggests a bullish outlook for Dell Technologies as the year draws to a close. The combination of technical indicators and historical trends provides a compelling narrative for investors anticipating a return to upward momentum for the tech giant.
