Red-Hot Crocs Flashes Reliable Bull Signal

Short-term CROX options are a bargain right now, too

by Patrick Martin

Published on Dec 5, 2018 at 3:00 PM
Updated on Dec 5, 2018 at 3:00 PM

Crocs, Inc. (NASDAQ:CROX) started December off strong, nabbing a seven-year high of $29.80 yesterday. The good times could keep rolling for the shoe retailer, as history suggests CROX shares could be headed even higher in the coming month.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 49% ranks in the 15th 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 five other times CROX was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range since 2008, the equity averaged a one-month gain of 8.1%, and was positive all five times.

A move of similar magnitude this time around would have the stock at fresh multi-year highs, and testing the $30 level, based on its Tuesday close at $27.30. Overall, CROX has more than doubled in 2018, with pullbacks contained by its 100-day moving average. Thanks to an earnings-induced bull gap in early November, the equity turned in its best month since August 2009. 

Daily Stock Chart CROX

A short squeeze could keep the wind at CROX's back. Short interest fell by 11.6% in the most recent reporting period to 7.67 million shares, the lowest since June 1. Yet this still represents nearly 12% of the stock's total available float, and more than six days of pent-up buying power, at its average pace of trading.

The retail stock is also starved for analyst attention. Currently only four brokerages cover CROX, three of which rate it a tepid "hold." What's more, the security's consensus 12-month price target of $28.80 is a slim 5.5% premium to current trading levels. Tailwinds could also come come as a result of overdue upgrades and/or price-target hikes. 

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