Transportation Stock Could Have More Room to Run

It could be a good time to speculate on UNP with short-term options

Sep 5, 2019 at 2:43 PM
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Union Pacific Corporation (NYSE:UNP) just popped up in a study from our Senior Quantitative Analyst Rocky White, showing that the stock has historically posted huge returns after pulling back to the 320-day moving average. Going by the numbers, UNP shares have been higher one month out following the last three encounters with the trendline, with an average one-month gain of 14.2%.

unp stock sept 5

UNP is 3.8% higher today at $166.20, benefiting from broad-market tailwinds, as it tries to break north from a recent series of lower lows following its Aug. 1 peak of $180.54. Another move from the 320-day moving average near the historical return detailed above would have the stock well above this high, closer to the $190 area.

Short-term options traders do not appear to be positioned for an upside move. Our Schaeffer's front-month gamma-weighted put/call open interest ratio (SOIR) stands at 1.20, showing put open interest outweighs call open interest for near-the-money contracts in the September series. Peak open interest overall is actually up at the September 175 call.

Staying with our internal options trading indicators, it would also seem to be a good time to target short-term contracts. This is according to Union Pacific's Schaeffer's Volatility Index (SVI) of 25%, which ranks in the 38th annual percentile, revealing relatively fair volatility expectations priced into near-term contracts at the moment.

Finally, it's worth noting that there's plenty of bearish attention lingering in the analyst community, so there's fuel there for upgrades should a rally actually ensue. As it stands now, eight of the 18 covering brokerage firms rate UNP stock a "hold" or "strong sell."

 

 

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