History Says Buy Calls on This Biopharma Stock

IMMU stock could surge in the next month, if the latest options signal is correct

Aug 31, 2018 at 1:28 PM
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Shares of Immunomedics, Inc. (NASDAQ:IMMU) are up 2.1% to trade at $26.55, and are pacing for a sixth straight day of gains -- their longest win streak since early June. In fact, IMMU stock has added more than 19% so far this week, and is set for its best week of 2018, as the shares extend last week's post-earnings momentum. What's more, now could be a prime time to buy call options the biopharma concern, which is knocking on the door of new highs.

Immunomedics stock has advanced more than 110% in the past year, with several pullbacks contained by its 120-day moving average.The equity is now testing a familiar ceiling in the $26-$28 neighborhood, which has contained several rally attempts in 2018.

IMMU stock chart aug 31

In light of a post-earnings volatility crush, unusually low volatility expectations are being priced into near-term IMMU options. This is based on its Schaeffer's Volatility Index (SVI) of 51%, which sits in the low 4th percentile of its annual range. In simpler terms, short-term Immunomedics options are attractively priced right now.

The last six times IMMU has traded within 2% of its 52-week high while sporting an SVI in the bottom 20% of its annual range, it produced a positive one-month return 83% of the time, averaging a gain of 14.8%, per Schaeffer's Senior Quantitative Analyst Rocky White. A similar rally from current levels would place the biopharma stock north of $30 -- territory not charted since the shares were exploring all-time highs in March 2000.

There's plenty of sideline cash to fuel additional upside for the stock, too. Short interest represents more than 16% of IMMU's total available float, and would take more than three weeks to buy back, at the equity's average trading volume.

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