Previous option signals have preceded huge gains for the shares
Fortinet Inc (NASDAQ:FTNT) stock is exploring record highs today, after Cleveland Research upped its 2018 growth estimates on the cybersecurity concern to reflect favorable demand. What's more, now could be a prime opportunity to buy calls ahead of more big gains for FTNT stock, if recent history is any indicator.
Fortinet stock peaked at an all-time high of $92.21 today, and was last seen with a gain of 2.2% at $91.52. The security has more than doubled in 2018, with pullbacks contained by its 40-day moving average.
Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 29%. This SVI arrives in the 16th percentile of its annual range, indicating that speculative players have priced in lower volatility expectations just 16% of the time in the past year.
This combination of a high stock price and low SVI has had bullish implications for FTNT in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there have been four occasions where FTNT has been trading within 2% of its annual high while at the same time its SVI was in the 20th annual percentile or lower. Following those signals, the security was up 5.72% one month later, on average, and was higher a month later three times.
More upbeat analyst attention could certainly drive Fortinet shares to higher highs. Despite the equity's impressive ascent on the charts, two-thirds of covering analysts maintain tepid "hold" ratings. Likewise, the consensus 12-month price target of $76.59 represents a discount of more than 16% to FTNT's current price. A round of upgrades or price-target hikes could add fuel to the stock's fire.
In addition, a short squeeze could also propel FTNT to new heights. Short interest on the security grew 8.7% in the past two reporting periods, and now represents nearly a week's worth of pent-up buying demand, at the stock's average daily volume.