Boston Scientific Put Volume Peaks as Stock Spirals – Schaeffers Research

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Medical device maker Boston Scientific Corporation (NYSE:BSX) is in hot water today, after the U.S. Food and Drug Administration (FDA) ordered the company to halt the sale and distribution of its transvaginal surgical mesh implants, questioning the safety of the product. The FDA is giving Boston Scientific 10 days to formulate a formal plan to withdraw the product from the market.

Looking at the charts, another FDA-related bear gap on March 18 had the stock plummeting from its 14-year high of $41 earlier that month, and downward pressure from its 20-day moving average kept a tight cap on any subsequent rallies. Today, the security is down 4% at $36.27 — trading beneath its 200-day trendline for the first time since early January. 

The dramatic dip has options bears swarming the equity. Nearly 20,000 put contracts have crossed the tape today — 21 times the average intraday volume, and a new annual high. The April 37 put is the most popular, and it looks like new positions are being purchased here for a volume-weighted average price of $0.60, making breakeven for the put buyers $36.40 (strike less premium paid). 

An unwinding of optimistic positions could add even more headwinds for the stock. BSX sports a 50-day call/put volume ratio of 10.85 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 88th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual pace.

Boston Scientific could fall prey to a slew of analysts’ downgrades, too. The stock is incredibly popular among the brokerage bunch, currently sporting 17 “strong buy” ratings, and one “hold.” Plus, the consensus 12-month target price of $44.35 sits in territory not charted since June 2004. A round of bear notes could pressure the shares even lower.

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