Previous pullbacks to CPE's 40-day moving average have preceded rallies
Oil prices are on the rise today, with June-dated crude futures up 0.1% at $71.61 per barrel at last check. Energy stock Callon Petroleum Company (NYSE:CPE) is higher, too, gaining 4% to trade at $14.17.
This positive price action echoes the stock's longer-term trend, with CPE adding 16% in 2018. More recently, the stock pulled back to its 40-day moving average after hitting an annual high of $14.65. This could have bullish implications for the stock based on previous signals, and now may be the time to buy the CPE dip.
Over the past three years, there have been six occasions where CPE has come within one standard deviation of its 40-day moving average after an extended stint above this trendline, according to Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the security was higher 83% of the time, averaging a return of 9.35%.
Should Callon Petroleum stock -- which flashed a different buy signal just last week -- continue to rally, an extended short squeeze could help keep the wind at the equity's back. Short interest fell by 3% in the most recent reporting period, yet the 40.09 million shares still sold short represent nearly 20% of CPE's total available float -- or 9.8 times the average daily pace of trading.
And those wanting to bet on more upside for the oil stock may want to consider options. Specifically, CPE's 30-day at-the-money implied volatility of 40.6% ranks in the 10th percentile of its annual range. In other words, the equity's short-term options are relatively cheap at the moment, from a volatility perspective.