Bull Signal Might Spark New Highs for this Energy Stock

Short-term options traders have been piling on with put contracts recently

by Lillian Currens

Published on Jun 11, 2019 at 1:09 PM

Since suffering a massive bear gap shortly after hitting its all-time high in early May, the shares of Vistra Energy Corp (NYSE:VST) have been trading in a channel of lower lows, with several attempts at a bounce capped by the equity's 20-day moving average. VST is trying its hand at another comeback today, though, up 1.2% at $24.39, testing resistance at the aforementioned 20-day. What's more, the equity just pulled back to a bullish signal on the charts, which could add fuel to VST's rally, if history in any indicator. 

Specifically, Vistra just came within one standard deviation of its 320-day moving average after a lengthy period above the trendline. While this signal has only flashed two times before, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, VST was higher one month later after both signals, averaging a 15% return. From where it currently sits, a similar move would mean fresh highs for the security, right atop the $28 region. 

VST Chart Jun 11

Analysts are already keen on the electric utility name, with four of the five following VST issuing a "strong buy" rating. Plus, the 12-month consensus target price sits in uncharted territory at $33.25. 

Options traders, on the other hand, haven't shared this optimistic outlook. Currently Vistra sports a 50-day put/call volume ratio of 0.75 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 76th percentile of its annual range, which suggests a healthier appetite for bearish bets of late. 

Looking more broadly, VST's Schaeffer's put/call open interest ratio (SOIR) of 1.21 sits in the 95th percentile of its annual range, suggesting short-term options players have rarely been more put-heavy in the past 12 months. It looks like most open interest has centered around the June 25 strike put, with data from major exchanges confirming some heavy buy-to-open activity here in the last two days of April, specifically. 

That being said, options are incredibly cheap right now. The equity's Schaeffer's Volatility Index (SVI) of 27% stands higher than only 3% of all other readings from the past year. With near-term option traders pricing in relatively low volatility expectations, now might be the time to bet on Vistra's next leg higher. 


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