Bank Stock Set to Bounce From Historically Bullish Trendline

KEY has managed to add 12% over the past 52 weeks

Managing Editor
Sep 13, 2018 at 1:26 PM
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KeyCorp (NYSE:KEY) is down 2.9% at $20.12 in afternoon trading, the stock suffering a notable pullback after yesterday receiving a $1 price-target cut at Wedbush to $23. The stock has been struggling to maintain an consistent uptrend of late, but despite its technical underperformance, now may be the perfect time to jump onto KEY's next leg higher.

KeyCorp stock has been moving mostly sideways this calendar year, currently just pennies away from its year-to-date breakeven mark. However, between late March and late May the bank stock benefited from the support of its 320-day moving averages, and longer term, managed to gain 12% over the past 12 months after bouncing off the supportive 160-day trendline.

Daily Chart of KEY with 160 and 320MA

Digging deeper, KeyCorp stock is now within one standard deviation of its 160-day moving average. Over the past three years, there have been four prior instances of KEY 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 4.7%, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with 75% of those returns positive. A bounce of this magnitude would push KeyCorp shares back above $21.

Looking toward options data, KEY's  Schaeffer's put/call open interest ratio (SOIR) of 0.54 ranks in the 30th percentile of its annual range. This shows that short-term traders have rarely been more call-heavy toward the security in the past year. Further, the October 21 strike saw the largest increases in call open interest during the past two weeks, with more than 1,200 total contracts added.

Lastly, analyst sentiment has been extremely optimistic. Of the 18 firms covering the banking stock, 13 carry "buy" or "strong buy" recommendations. What's more, KeyCorp stock's average 12-month price target of $23.63 comes in at a 17.7% upside to current levels.

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