Price being the ultimate arbiter, the recent swing higher in Upwork (UPWK) above an important technical benchmark could be exactly what the freelancer marketplace needs to restore credibility. Yes, UPWK stock is currently rated as a 56% Sell, due to disappointing performances over long-term frameworks. It takes time for the math to average back into positive territory.
Why mention this last point? Like a struggling baseball player getting his batting average back up to a respectable level, fans don’t necessarily see the improvements in aggregate statistics. However, over time, the improved average level will be conspicuous. It’s at that point where the “stock” of the player reflects the current performance.
Of course, if a team was interested in acquiring said player’s signature on a contract, the payout would be more expensive. If a financially strapped organization wanted a substantive pickup, it would need to acquire such a player before the league recognizes his true value. That means seeing the potential in the player while he’s batting below .200 (which for non-baseball fans is bad).
That’s really the opportunity behind UPWK stock. On a year-to-date basis, shares fell more than 20%. They’re also well below the peak prices seen during October 2021. However, recent momentum suggests that Upwork could be due for a sustained breakout.
Unusual Options Activity Highlights Prospect for UPWK Stock
Following the close of the July 19 session, UPWK stock represented one of the highlights in Barchart’s unusual stock options volume screener. This readout provides a list of the main derivatives that have printed unusually high (or low) volume relative to established norms. Theoretically, the screener gives retail investors visibility into what the smart money may be doing with its funds.
For UPWK stock, total options volume hit 4,579 contracts versus an open interest reading of 60,229. Further, Friday’s volume represented a 251.69% bump from its trailing one-month average metric. Breaking down the details, call volume pinged at 4,321 contracts versus put volume of only 258.
On paper, UPWK stock appears to be a decisively bullish opportunity. After all, call options provide holders with the right but not the obligation to buy the underlying security at the established strike price. However, it’s also important to note that for every call bought, the same call is sold. It’s the same principle for put options.
Therefore, examining the options flow screener is helpful. This interface only lists big block transactions likely placed by institutional investors. It ignores the white noise created by the handful of options bought by individual traders and only focuses on major transactions.
Sure enough, Barchart reveals that the net trade sentiment during the July 19 session was $77,400 favoring the bulls. Summing up the premiums for bullish sentiment options (bought calls, sold puts) came out to $103,100. On the other end of the equation, bearish sentiment options (sold calls, bought puts) came out to $-25,700.
The optimism in the options market reflects that of the open market. On the July 12 session, UPWK stock broke decisively above the resistance level set at $11.20. Granted, the security has been volatile following the July 16 session. However, the positive price action on Friday was crucial for arresting bearish momentum.
So long as the bulls can stay above the $11.20 level throughout the current technology sector rout, they may start looking at the next target. Logically, that would be the $12 level. This point reflects a psychologically important milestone and the level also coincides with a support line turned resistance.
Fundamentals Support the Bullish Case for Upwork
Beyond the options sentiment and the technical dynamics, another fundamental catalyst could bode well for Upwork stock: the latest read from the labor market.
According to the AP, U.S. filings for unemployment benefits ticked up again last week. Specifically, jobless claims for the week ending July 13 increased by 20,000 to 243,000. That’s above the 223,000 claims from the prior week. Further, it’s the eighth straight week of claims that landed above the 220,000 mark.
To be fair, the level of jobless claims remains healthy. However, the lift suggests that the labor market might not be as robust as it once was. And that sets the stage for employers to be a tad more draconian when it comes to workplace policies, especially the contentious work-from-home issue.
Should the matter come to a head, it’s possible that more worker bees will choose the gig economy route; that is, become independent contractors. If so, that may bolster sentiment for UPWK stock, perhaps sending it to $12 and beyond.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
