Crocs Stock Rally Could Have Legs

Short-term CROX options are attractively priced to boot

Managing Editor
Jun 12, 2018 at 12:17 PM
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Retail stocks have been a strong performers recently. One name in particular that's been participating in the sector-wide surge is Crocs, Inc. (NASDAQ:CROX), which touched a six-year high of $19.54 earlier today. The stock could have even more room to run, as CROX just threw up a reliable bullish signal.

Looking closer at the charts, CROX stock has nearly tripled in the past year, and boasts a 53% lead in 2018. The shares have been guided higher by their 60-day moving average, a trendline that contained recent pullbacks in early March and May.  

Meanwhile, with earnings not due until August, front-month implied volatilities are tame at the moment. The stock's Schaeffer's Volatility Index (SVI) of 38% ranks in the 5th annual percentile, meaning short-term options are pricing in low volatility expectations at the moment.

According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been three other times since 2008 that Crocs stock was trading within 2% of its 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range. This resulted in an average one-month gain of 6.38%, with all three returns positive. A move of similar magnitude would put the equity above the $20 level for the first time since mid-2012.

Daily Stock Chart CROX

A round of upgrades and/or price-target hikes could push the shoe name even higher. Of the six brokerages covering CROX, five rate it a "hold" or "strong sell." In addition, its consensus 12-month price target of $15.17 sits well below the stock's current perch of $19.29.

A shift in sentiment among options traders could create tailwinds for CROX, too. The security's Schaeffer's put/call open interest ratio (SOIR) of 3.82 ranks higher than 98% of all comparable readings taken in the past year. In other words, options traders are more put-heavy than usual among contracts set to expire in three months or less.

 

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