The shares have averaged a one-month gain of more than 10% after signals
Bausch Health Companies Inc (NYSE:BHC) -- née Valeant Pharmaceuticals -- is schedule to report earnings before the open next Monday, May 6. Ahead of the event, BHC shares have pulled back to a key trendline, which could be a short-term buy signal, if recent history is any indicator.
The past year has been choppy for Bausch Health stock. Outside of a massive December plunge to the $17.20 level, BHC has spent most of the last 12 months bouncing between support in the $21-$22 area -- which represents a 20% year-to-date gain -- and resistance in the $26-$27 region. The security is at the lower end of that range now, but is back within one standard deviation of its 320-day moving average, after a few months above it.
Over the past three years, there have been four similar pullbacks to this trendline, after which BHC stock was higher by 10.32%, on average, a month later, per data from Schaeffer's Senior Quantitative Analyst Rocky White. At last check, the equity was trading at $22.88. Another 10.32% jump from current levels would put Bausch shares around $25.24.
It appears recent BHC options buyers are expecting another bounce off support. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than four calls for every put during the past two weeks. The resulting 10-day call/put volume ratio of 4.09 is higher than 78% of all other readings from the past year, pointing to a healthier-than-usual appetite for long calls over puts of late.
Echoing that, Bausch Health sports a Schaeffer's put/call open interest ratio (SOIR) of 0.37, indicating that call open interest more than doubles put open interest among options expiring within the next three months. This SOIR is lower than 97% of all other readings from the past 12 months, suggesting short-term options traders have rarely been more call-biased in the past year.
Options bulls have earnings history on their side, too. BHC shares moved higher after six of the last eight earnings reports, jumping 8.9% the session after earnings a year ago.