Okta Stock Sends Up a Buy Signal

OKTA options are attractively priced, too

Managing Editor
Jun 25, 2018 at 12:12 PM
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Online security name Okta Inc (NASDAQ: OKTA) was red-hot earlier this month, but has recently cooled down. And although OKTA is currently down 5.2% to trade at $49.37, the stock's pullback could be a prime buying opportunity, if history is any guide. 

OKTA stock has now given back 12% in June, and is on track to post its worst month since December. Despite the recent struggles, the security has still nearly tripled its April 2017 initial public offering (IPO) price of $17. And the good news is that OKTA appears to be finding support around the $49 level, near a 23.6% Fibonacci retracement of the stock's rally from its July 2017 closing low to its June 2018 closing high.

This region also plays host to the shares' 40-day moving average, a trendline that has emerged as support in 2018. Per data from Schaeffer's Quantitative Analyst Rocky White, the other three times the security has pulled back to within one standard deviation of this trendline after a lengthy stay above it, OKTA has gone on to average a one-month gain of 8.31%, and was positive all three times.

OKTA Fib Level Chart

A short squeeze could also provide more fuel for an OKTA rally. Short interest fell in the most recent reporting period, yet the 5.84 million shares sold short still represents 15% of the stock's total available float, and almost four days' worth of pent-up buying power, at the equity's average daily volume.

Traders looking to speculate on the equity's short-term price action may want to do so via the stock's call options, which are attractively priced at the moment from a volatility perspective. OKTA sports a Schaeffer's Volatility Index (SVI) of 49%, which ranks in the 14th percentile of its annual range -- indicating front-month options have priced in lower volatility expectations only 14% of the time in the past year.

 

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