The shares could be poised to break out of consolidation mode
The shares of animal drug maker Zoetis Inc (NYSE:ZTS) have taken a breather since touching a record high of $96.57 in early November. However, the outperforming equity could be ready to launch its next leg higher, with ZTS shares flashing historical buy signals.
Specifically, Zoetis stock is back within one standard deviation of both its 160-day and 200-day moving averages, after lengthy stretches north of these trendlines. In the past three years, there have been six similar pullbacks to the 160-day, after which ZTS was higher one month later 100% of the time, boasting an average gain of 7.36%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. There have been four similar retreats to the 200-day, after which ZTS was up an average of 7.55% a month later, and higher 100% of the time.
On the charts, the pharma concern has been in rally mode since early 2016, more than doubling in that time frame. More recently, ZTS has spent the past few months consolidating atop the $88 level, with the aforementioned trendlines now ascending into this neighborhood. At last check, the equity is down 1.3% on the day, trading at $89.23. Another 7.55% rally from current levels would put the shares just under $96.
While Zoetis options volume tends to run light, on an absolute basis, speculators have shown a growing affinity for bearish bets lately. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.14 is in the 85th percentile of its annual range. This suggests options buyers have picked up ZTS puts over calls at an accelerated clip in the past two weeks. An unwinding of this pessimism on another rally off trendline support could bode well for the shares.