2 Red-Hot Blue-Chips Flashing "Buy" Signals

UTX and TRV both nabbed fresh highs earlier today

by Patrick Martin

Published on May 1, 2019 at 11:52 AM

Blue-chip United Technologies Corporation (NYSE:UTX) is moving higher, earlier touching a fresh record high of $144.40. And with a historical bull signal now flashing, there's reason to believe UTX has even more room to run. 

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 17% ranks in the 9th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective.

Per data from Schaeffer's Senior Quantitative Analyst Rocky White, the three other times since 2008 that UTX was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity posted a one-month gain of 5.86%, and was positive all three times. With the shares on their way to a fifth-straight win and up 0.3% at $142.66, at last check, a similar jump would put the equity above $151 -- in new record-high territory by this time next month.

Longer term, UTX has turned in only three weekly losses in 2019, with its mid-March pullback contained by the 40-day moving average. Since a Dec. 26 bottom just above $100, the equity has added 42%. 

Daily Stock Chart UTX

What's more, the stock had been an attractive target for premium buyers over the last 12 months, according to its Schaeffer's Volatility Scorecard (SVS) of 89 (out of a possible 100) -- which meant the shares had consistently realized greater volatility than what UTX option premiums had priced in.

Another red-hot blue-chip in focus is Travelers Companies Inc (NYSE:TRV), which nabbed an annual high of its own earlier today, climbing as high as $144.18. And, it just so happens the insurance giant is flashing a similar bullish signal as its blue-chip peer. 

Diving in, Travelers stock's SVI of 17% ranks in the 9th percentile of its annual range. According to White, the four other times since 2008 that TRV was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity posted a one-month gain of 4%, and was positive 75% of the time.

At last check, TRV was trading at $143.68, so a similar jump would put the equity in new record-high territory near $150 by this time next month, just below its February 2018 all-time high of $150.48. In a similar vein as UTX, Travelers stock has added 29% since its Dec. 26 bottom near $111, is heading toward seventh straight win, and has relied on support from its ascending 20-day moving average.

Daily Stock Chart TRV

In the options pits, TRV's Schaeffer’s put/call open interest ratio (SOIR) of 1.45 sits in the 85th percentile of its annual range, showing a rare put-skew among near-term traders. As such, an unwinding of all these bearish positions could fuel upside for the equity.


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