Signal Says Tenet Healthcare Stock Has Room to Run

THC options are attractively priced at the moment

by Patrick Martin

Published on Nov 27, 2019 at 12:20 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of Tenet Healthcare Corp (NYSE:THC) are up 2% to trade at $32.56 today, just a chip-shot off Monday's annual high of $32.89. There's reason to believe more highs are on the horizon, with the healthcare stock flashing a bullish signal for the final month of 2019. 

More specifically, THC's Monday high comes amid historically low implied volatility (IV) -- a combination that has been bullish for the stock in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other instances in the past five years when Tenet Healthcare stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th annual percentile or lower -- as it the case with THC's current SVI of 43%, in the 1st percentile of its 12-month range.

The data shows that one month after those two previous signals, THC was up 19.5%. From its current perch, another move of that magnitude would put the stock just under $39, territory not charted since August 2018. The equity is up 88% in 2019, and its three-month gain of 50% has been assisted by its ascending 10-day moving average. 

Daily Stock Chart THC

There's a lot of pessimism to be unwound, which could create tailwinds for the outperformer. For starters, 11 of the 14 brokerages covering THC rate it a "hold" or "strong sell." On top of that, the stock's consensus 12-month price target of $30.95 is a 4% discount to its current perch, so any price-target hikes could provide a short-term boost.

Short sellers remain in control, despite a 7.6% drop in short interest during the most recent reporting period. The 11.73 million shares sold short takes up 11.5% of THC's total available float, and almost nine days' worth of buying power, at the stock's average pace of trading. 


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