PSTG Puts Popular After Downgrade

Raymond James highlighted three reasons to be cautious on PSTG before earnings next week

Flash drive storage specialist Pure Storage Inc (NYSE:PSTG) this morning saw its stock's rating at Raymond James cut to "market perform" from "outperform." The brokerage firm noted the slowdown in data center sales from business partner Nvidia (NVDA), on top of the weakness seen from storage rival NetApp (NTAP), and rising competition from Dell (DELL).

PSTG shares fell to $18.30 earlier, but were last seen at $19.16, down 0.8% on the day. The security has been feeling pressure from its 100-day moving average, which was a solid level of support in 2017 and 2018. This trendline also sits near a 38.2% Fibonacci retracement of the stock's decline from its September peak to December low.

There's been notable activity on Pure Storage's March 17.50 put today, and data suggests traders are selling to open the contract. By doing so, the traders would be looking to keep the premium collected, a goal achieved if the equity is trading above $17.50 at the close on March 15.

Interestingly, put buying that's been unusually popular in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), based on the 10-day put/call volume ratio of 1.82. This reading stands in the 91st annual percentile.

Wall Street firms overall have a favorable view of the flash solutions provider. The majority of brokerages recommend buying PSTG, and the average price target is $25.63. Looking ahead, the company is scheduled to report earnings after the close on Thursday, Feb. 28.