Get Ready for GoDaddy Stock's Next Leg Higher

GDDY is trading within one standard deviation of its 40-day moving average

Managing Editor
Sep 7, 2018 at 12:56 PM
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Shares of GoDaddy Inc. (NYSE:GDDY) are up 2% at $81.02 in afternoon trading, continuing their long-term uptrend. GoDaddy stock has been climbing the charts since its April 2015 public trading debut, ushered higher by its 40-day moving average. After notching a record peak of $82.05 this past Tuesday, Sept. 4, GDDY pulled back near this key trendline -- suggesting now may be the time to bet on the security's next leg higher.

Daily Chart of GDDY with 40MA

Specifically, GoDaddy stock is now within one standard deviation of its 40-day moving average. Over the past three years, there have been 13 prior instances of GDDY pulling back to this trendline after closing north of it at least 60% of the time during the previous two months and in eight of the last 10 trading days. Those prior pullbacks have resulted in an average one-month return of 6.43% for GDDY, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with 85% of those returns positive.

There's plenty of skepticism to be unwound, too. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the equity with a 50-day put/call volume ratio of 1.35, which ranks in the 76th percentile of its annual range. This means that puts have been bought to open over calls at a quicker-than-usual clip during the past 10 weeks.

Plus, short interest rose 7% during the most recent reporting period on GDDY, and now represents 5% of the stock's total available float. At the equity's average daily trading volume, it would take almost three days for shorts to cover these bets. A capitulation from some of the weaker bearish hands both in and out of the options arena could create tailwinds for the shares.

Bulls may want to consider using options to bet on near-term upside for GoDaddy stock. This is based on the security's Schaeffer's Volatility Index (SVI) of 27%, which sits just 18 percentage points from an annual bottom indicating low volatility expectations are being priced into short-term contracts.

 

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