Signal Says Drug Stock Not Done Climbing

Short-term IMMU options are attractively priced at the moment

by Patrick Martin

Published on Dec 10, 2019 at 2:30 PM
Updated on Dec 10, 2019 at 2:30 PM

It's been a hot start to December for Immunomedics, Inc. (NASDAQ:IMMU). The pharmaceutical stock is up 11.5% already this month, and earlier today nabbed a fresh annual high of $21.49. Heading into the new year, IMMU shows no signs of slowing down, especially after flashing a reliable "buy" signal.

More specifically, the stock's new high today 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 seven other instances in the past five years when IMMU 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 is the case with the equity's current SVI of 60%, in the 11th percentile of its 12-month range.

The data shows that one month after those seven previous signals, Immunomedics stock was up 9.9%, on average. From its current perch at $20.59, another move of that magnitude would put the stock back near the $23 level, territory not charted since November 2018. While the 30-day trendline caught a recent pullback, the $12 level has provided a stable floor, and the most recent bounce off here in October has the shares up 57.6% this quarter.

Daily Stock Chart IMMU

A short squeeze could fuel additional tailwinds. There was a 9% drop in short interest during the two most recent reporting periods. The 28.83 million shares still sold short account for almost 16% of IMMU's total available float, and 13 days' worth of buying power, at the stock's average pace of trading.

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