Large dark pool trades were detected in DXC stock on September 10, 2019.

Dark pool trades detected in DXC stock on September 10, 2019.

The bullish options flow in DXC stock looks like front-running of the dark pool orders. Notice the spot price where call buying keeps coming in as the stock price rises:

Bullish options flow in DXC stock on September 10, 2019.

The daily chart suggests an institutional traders is bottom feeding in the stock over dark pools.

DXC Technology stock has suffered a severe sell-off but buyers may be stepping in using dark pools to mask their orders.

The implied volatility in DXC call options are ripping higher:

The revenue growth of DXC Technology has been fantastic over the last few years. The annual sales growth over the last 5 years is 9.8%.

DXC stock has a market cap of $9.4 billion. The company did $20.7 billion in sales last year. That’s an incredible P/S ratio of 0.46! The stock trades with a P/E of 9.1 and a Forward P/E of 4.1. The stock is so cheap because DXC’s guidance cut overshadowed better-than-expected first-quarter results, prompting investors to punish the stock. But once again, investors overreacted and now we are seeing signs of some big investors bottom feeding in the stock using dark pools to hide their orders.

We are adding DXC stock to the long-term buy and hold GST portfolio. Yes, the company’s sales are slowing down but on August 21, 2019, DXC Technology announced the acquisition of Syscom, a ServiceNow (NOW) partner, to extend the reach and scale of its security operations and service management capabilities. The acquisition of Syscom extends DXC’s expertise as a global ServiceNow solutions provider. Syscom, founded in 1987, is an independent provider of service management and security consulting and solutions in Norway. The acquisition expands DXC’s presence in Norway. The addition of Syscom is the company’s third recent acquisition of digital service management capabilities in the region, following the acquisitions of Logicalis SMC in the Netherlands and BusinessNow in Denmark.

“The acquisition of Syscom greatly enhances DXC’s capabilities within service management and security operations in Norway,” said Joergen Jakobsen, vice president, Northern Europe, DXC Technology. “The addition represents another significant investment for DXC in the Nordics. In Syscom, DXC gains a strong, skilled workforce and a solid customer base – which will further extend DXC’s position as a leading IT-service provider in the Nordics.”

“We have grown Syscom with strategic and dedicated focus on driving customer innovation through service management and security operations skills, management consulting capabilities, talent development and automation,” said Pål Nome, CEO, Syscom. “In joining DXC Technology, our focus and foundation becomes even stronger, while getting global presence and profound product development and innovation. We believe that we have provided the best possible future for both our customers and employees.”

The gambit is that the market overreacted on the lower forward guidance creating a temporary deal of the year in DXC Technology stock.

Disclosure: We do not hold any position in DXC stock.