Bargain Hunting After the 'Brexit' Storm

Infinera Corp. (NASDAQ:INFN), Palo Alto Networks Inc (NYSE:PANW), and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) are three of the most oversold stocks post-"Brexit"

Karee Venema
Jun 28, 2016 at 3:09 PM
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The shocking outcome of last week's "Brexit" referendum sent global stocks spiraling. However, this heightened fear may have created prime near-term buying opportunities among individual equities. Schaeffer's Quantitative Analyst Chris Prybal ran the numbers on some of the most oversold stocks with daily volumes of more than one million shares. Among those making the list were tech stocks Infinera Corp. (NASDAQ:INFN) and Palo Alto Networks Inc (NYSE:PANW), as well as cruise operator Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). What's more, INFN, PANW, and NCLH all have a low-ranking Schaeffer's Volatility Index (SVI) -- meaning their near-term options can be had a relative bargain.

Oversold stocks

INFN has shed 15% since last Thursday, and hit a fresh annual low of $10.11 yesterday. At last check, the stock was up 1.7% at $10.35, and while the equity's longer-term path has been lower -- down 43% year-to-date -- INFN could be ready to take a bigger bounce off the round $10 mark. In fact, its 14-day Relative Strength Index (RSI) closed Monday at 25 -- well in oversold territory -- suggesting a short-term rebound may have been in the cards. What's more, the last time INFN ricocheted near $10 was in October 2014, and the stock went on to rally roughly 176% over the next 10 months.

Now could be an affordable time to bet on INFN's near-term trajectory with options, too. The stock's SVI of 47% ranks lower than 89% of all comparable readings taken in the past year, meaning premium on Infinera Corp.'s short-term options is pricing in relatively low volatility expectations at the moment.

PANW shed 6.4% amid the broad market's two-day "Brexit"-related sell-off, bringing its 14-day RSI to 28. However, the shares found support near $115 -- an area that contained an early February pullback. This isn't to say the stock is without its own share of technical troubles, though, and year-over-year, PANW is off 31%, last seen at $118.60.

Nevertheless, it appears to be a prime time to strike on the equity's short-term options, given it's SVI of 44% ranks in the low 29th percentile of its annual range. What's more, Palo Alto Networks Inc's Schaeffer's Volatility Scorecard (SVS) of 76 indicates the options market has historically underpriced the stock's ability to make a big move on the chart over the past 12 months -- a potential boon to options buyers.

Travel stocks have taken it on the chin during the "Brexit"-induced backlash, and NCLH is no exception. The shares shed 13.4% between last Thursday's close and yesterday's settlement, sending its 14-day RSI to an extremely oversold 20. However, NCLH managed to find a foothold in the $37-$38 region -- which supported the stock's early February pullback -- and the shares are bouncing from this area today, up 0.2% at $38.30.

While NCLH options volume is relatively light on an absolute basis -- the stock's average daily volume is just 390 contracts -- those currently purchasing premium on near-term options are getting a pretty good deal, historically speaking. Norwegian Cruise Line Holdings Ltd's SVI of 39% ranks lower than 72% of all similar readings over the past 12 months, indicating the options market is currently pricing in relatively low volatility expectations.

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