Kohl's Stock Flashes Reliable Buy Signal Again

Implied volatilities are low on short-term KSS options

Managing Editor
Sep 6, 2018 at 2:40 PM
facebook twitter linkedin


Retail stock Kohl's Corporation (NYSE:KSS) has a been steady climber this summer, adding nearly 10% since this buy signal flashed back in mid-August. After nabbing a record high of $82.40 earlier today though, this signal is flashing again -- suggesting KSS shares could be headed even higher.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 34% ranks in the 11th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective.

What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, the three other times KSS has been trading within 2% of a new 52-week high while front-month volatilities have been this low resulted in an average one-month gain of 14.8%. Plus, all three of those returns were positive.

The optimism is certainly building on the the retailer, which is just two weeks removed from second-quarter earnings and revenue beats. And earlier this week, Goldman Sachs waxed optimistic on department stores and off-price retailers, initiating coverage on Kohl's stock with a "buy" rating and $91 price target.

Overall, KSS sports a 50% lead in 2018, and has now nearly doubled in the past 12 months. There is ample room for more analysts to revise their ratings, considering 11 of 18 brokerages maintain a "hold" or "strong sell" recommendation. Plus, the average 12-month price target of $82.06 sits right near current trading levels. A flurry of upgrades and/or price-target hikes could also create tailwinds for the stock. 

Short sellers have been heading for the exits since mid-June, and a continued surge could squeeze the remaining bearish bettors. The 25.63 million shares sold short represents almost 16% of the total available float, and at the security's average daily trading volume, it would take almost nine days to buy back those short positions.

Daily Stock Chart KSS

Celebrate 40 Years of Schaeffer's With 4 FREE Stock Picks!


 




 
Special Offers from Schaeffer's Trading Partners