Signal Says This Tech Stock Could Stay Hot

NCR has outperformed in May when other tech stocks have struggled

Managing Editor
May 23, 2019 at 12:06 PM
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Most tech stocks have struggled in May, but NCR Corporation (NYSE:NCR) is a little more than two weeks removed from an annual high of $33. While the shares are down 1.5% to trade at $31.26 today, a rebound could be imminent if this bullish signal is any indicator. 

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 32% ranks in the 15th 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 two other times since 2008 that NCR 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 averaged a one-month gain of 10.38%.

From its current perch, a similar jump would put the equity above $34 for the first time since a March 2018. Year-over-year, NCR is clinging to its breakeven point, but has added 34% in 2019. 

Daily Stock Chart NCR

Short sellers have been hitting the exits, and a continued exodus could create tailwinds. Short interest fell 6.9% in the two most recent reporting periods, to 7.72 million shares, the lowest amount since July 2018. However, this still represents a healthy 6.5% of NCR's total available float, and nearly 13 days' worth of pent-up buying power, at its average pace of trading.

Plus, in the options pits, puts have reigned in popularity, despite light absolute volume. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1,258 NCR puts were bought to open in the past two weeks, compared to just 511 calls. The resultant put/call volume ratio of 2.46 ranks in the elevated 89th percentile of its annual range, pointing to a healthier-than-usual appetite for long puts lately. An unwinding of these bearish bets could support the tech stock in the short term.

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