Time to Hop on Hilton Stock

Shorts have been ramping up exposure to the hotel stock

by Emma Duncan

Published on Apr 11, 2019 at 2:00 PM

Hotel giant Hilton Worldwide Holdings Inc. (NYSE:HLT) is slightly higher in afternoon trading, last seen up 0.2% at $88.12, and just off a fresh record high of $88.69. The shares have been climbing since their late-December lows, ushered higher by their 40-day moving average. More recently, the stock bounced from the $82 level, home to a mid-February bull gap, and is now boasting a year-to-date gain of 23%. Below, we will take a look at data from Schaeffer's Senior Quantitative Analyst Rocky White, which suggests Hilton stock may be ready for another record-breaking surge.

Daily HLT with 40MA

Digging deeper, Hilton's short-term option premiums look relatively inexpensive at the moment. This is per the security's Schaeffer's Volatility Index (SVI) of 17%, which stands in the low 4th percentile of its annual range. In other words, near-term options are pricing in relatively low volatility expectations.

Since 2008, there have been three other times HLT shares were within 2% of a 52-week high and simultaneously sported an SVI in the bottom 20% of its annual range. After those signals, the stock was higher one month later 100% of the time, averaging a gain of 5.62%, according to data from White. Another surge of this size would put the shares at $93.07 -- a new record high.

Lastly, short interest ramped up almost 23% on HLT stock during the past two reporting periods, and now the 11.16 million shares sold short accounts for nearly 4% of the stock's total available float. At the security's average pace of daily trading, it would take shorts almost a full week to buy back their bearish bets. A capitulation from some of the weaker hands could spark bigger tailwinds for the equity.

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