Cloud Stock Ready to Soar After Buy Signal Flashes

NTNX recently met up with a historically bullish trendline

Managing Editor
Sep 11, 2018 at 11:52 AM
facebook twitter linkedin


Nutanix Inc (NASDAQ:NTNX) is climbing today, up 1.6% to trade at $52.52, after the cloud concern scored a $20 million deal with the U.S. Department of Defense -- the largest in the company's history. Prior to today's rally, NTNX had been pulling back sharply from its late-August highs above $63. However, the stock could now be poised for another leg higher in its longer-term uptrend, if history is any guide.

More specifically, Nutanix stock is fresh off a pullback to within one standard deviation of its 160-day moving average, after a lengthy stretch trading above this trendline. There has been just one other instance of NTNX pulling back to its 160-day trendline after trading north of it at least 60% of the time over the previous two months. This prior signal resulted in a one-week pop of 5.57%, and a one-month return of 23.88%, per Schaeffer's Senior Quantitative Analyst Rocky White.

A move of similar proportion this time around would put Nutanix stock north of $65 one month from now -- a fresh record high. Of course, that's an extremely small sample size of previous 160-day pullbacks to go on, but there's more reasons to believe NTNX's latest trendline bounce has legs to run higher.

Daily Stock Chart NTNX

Short interest has been on the rise, up nearly 15% in the most recent reporting period. These bearish bets now represent a healthy 5.76% of NTNX's total available float, and nearly five times the stock's average daily trading volume. A short squeeze could shake some of the weaker bearish hands loose, providing tailwinds for the equity.

For anyone considering speculating on a NTNX bounce with call options, now is a good time to do so. The stock has a Schaeffer's Volatility Index (SVI) of 48%, which ranks in just the 15th annual percentile. This reveals that unusually low volatility expectations are being priced into front-month options for the software stock.

In fact, the equity's 30-day at-the-money implied volatility of 50.2% registers in the 37th annual percentile, per Trade-Alert. That's a fairly slim premium over the current 30-day historical volatility of 48.9% for Nutanix stock -- a metric that arrives in the 64th percentile of its own 52-week range.

Grab Your FREE 5 Rules for Trading Stock Trends Report

1606854690

 




 
Special Offers from Schaeffer's Trading Partners