Signal Says Buy the Dip on Huntsman Stock

The equity has been higher one month after each signal in recent years

Digital Content Manager
Mar 19, 2019 at 1:12 PM
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Chemical manufacturer Huntsman Corporation (NYSE:HUN) has been the recipient of analyst attention of late, with RBC cutting its price target to $27 from $28 overnight after the company updated its outlook for the first quarter. As such, the stock is down 0.5% at $22.35 -- pacing toward a fourth straight loss. However, the security has now pulled back to a trendline that, if past is precedent, could propel the security up the charts.

Looking closer, HUN stock hit a five-month peak at $25.45 on March 1 -- a solid 44.8% gain off its two-year low of $17.58 in late December. The recent pullback from here has the equity within one standard deviation of its 60-day moving average, and according to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times in the past couple years the security has tested support here.

Following those previous signals, HUN stock was higher one month later every time, averaging a whopping 10.3% gain. From where the security is currently sitting, a similar move would put the stock back near $25.

HUN Chart March 19

There's plenty of room for less-than-enthusiastic analysts to change their tune, should HUN resume its climb. There are currently five "strong buy" or "buy" ratings on the table, compared to four tepid "holds," and one "strong sell." Plus, the consensus 12-month price target of $28.75 is a 29% premium to current levels. 

Short sellers have been ramping up their bearish activity, too. Short interest rose 37.2% in the past two reporting periods. The 7.41 million shares sold short represents a slim 3.4% of the stock's available float, and would take just about three days to cover, at HUN's average daily trading volume. 

That being said, those wanting to speculate on Huntsman stock's short-term trajectory may consider using options. The equity's Schaeffer's Volatility Index (SVI) of 30% sits in the relatively low 17th percentile of its annual range. This implies that near-term options are attractively priced at the moment, from a volatility perspective. 

 

 

 

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