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Friday, January 17, 2020 4:07:20 PM
The Soup Stock for Options Bulls
By: Schaeffer's Investment Research | January 16, 2020
• Cambell Soup just pulled back to a bullish signal on the charts
• Options players could double their money with calls right now
During the past 12 months, packaged food manufacturer Campbell Soup Company (NYSE:CPB) has been on a climb higher. Year-over-year, the stock has added 36%, and it just came off a two-year high of $49.55 in early January. More upside could be in the soup stock's future, though, should history be any indication.
Specifically, CPB just pulled back to its 70-day moving average after a lengthy period above the trendline. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, the security has experienced five similar run-ins over the past three years. CPB saw positive returns 10 days after each of these signals, averaging a 4.66% pop. From its current perch of $47.88, a similar move would put Campbell at $50.11 -- just north of its two-year peak.
Despite its recent run up the charts, there's still plenty of room for upgrades on the stock. Right now, seven analysts consider CPB a "hold" or worse, while only two say "buy" or better. Plus, the consensus 12-month target price of $44.93 is a discount to current levels.
Shorts have had a firm grip on Campbell, too, which could further propel the stock, should some of these bearish bets begin to unwind. Currently, the 18.5 million shares sold short represent a solid 10.7% of the stock's available float, and would take over nine days to cover, at its average pace of trading.
That being said, options look like a good way to speculate on CPB's next move. Right now, Campbell's Schaeffer's Volatility Index (SVI) of 17% sits in the lowest percentile of its annual range. This mean options are pricing in incredibly low volatility expectations right now. What's more, White's modeling forecasts that an average bounce from the 70-day moving average could translate into an 110% return on a 10-day at-the-money call option on Cambell stock -- more than double the price to enter the trade.
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By: Schaeffer's Investment Research | January 16, 2020
• Cambell Soup just pulled back to a bullish signal on the charts
• Options players could double their money with calls right now
During the past 12 months, packaged food manufacturer Campbell Soup Company (NYSE:CPB) has been on a climb higher. Year-over-year, the stock has added 36%, and it just came off a two-year high of $49.55 in early January. More upside could be in the soup stock's future, though, should history be any indication.
Specifically, CPB just pulled back to its 70-day moving average after a lengthy period above the trendline. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, the security has experienced five similar run-ins over the past three years. CPB saw positive returns 10 days after each of these signals, averaging a 4.66% pop. From its current perch of $47.88, a similar move would put Campbell at $50.11 -- just north of its two-year peak.
Despite its recent run up the charts, there's still plenty of room for upgrades on the stock. Right now, seven analysts consider CPB a "hold" or worse, while only two say "buy" or better. Plus, the consensus 12-month target price of $44.93 is a discount to current levels.
Shorts have had a firm grip on Campbell, too, which could further propel the stock, should some of these bearish bets begin to unwind. Currently, the 18.5 million shares sold short represent a solid 10.7% of the stock's available float, and would take over nine days to cover, at its average pace of trading.
That being said, options look like a good way to speculate on CPB's next move. Right now, Campbell's Schaeffer's Volatility Index (SVI) of 17% sits in the lowest percentile of its annual range. This mean options are pricing in incredibly low volatility expectations right now. What's more, White's modeling forecasts that an average bounce from the 70-day moving average could translate into an 110% return on a 10-day at-the-money call option on Cambell stock -- more than double the price to enter the trade.
Read Full Story »»»
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