Healthcare Stock Paints Intriguing Technical Picture

EW just pulled back to a historically bullish trendline on the charts, too

Deputy Editor
Jun 3, 2020 at 1:34 PM
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Last week, we looked at a list of the best performing S&P 500 stocks in June, going back 10 years, courtesy of Schaeffer's Quantitative Analyst Chris Prybal. Today, we'll be breaking down another name on the list, medical supply manufacturer Edwards Lifesciences Corp (NYSE:EW), which is also flashing a historically bullish technical signal on the charts. 

During the last decade, EW averaged a 6.4% one-month return in June, with nine out of 10 returns positive. This is good for second-best overall and the second-best healthcare stock out of the eight that also made their way onto the list. 

This isn't the only historically significant data that could work in EW's favor. The equity just came within one standard deviation of its 40-day moving average, according to a study from Schaeffer's Quantitative Analyst Chris Prybal. This study shows four similar moves occurring in the last three years. EW was higher one month after three of these four signals and averaged a one-month return of nearly 4%. A similar move, from the stock's current perch at $74.32, would put it just below the $78 -- a region the stock hasn't closed north of since late-February. 

A closer look shows EW staging an impressive bounce off its mid-March bottom, up over 44.3% since its March 23 annual low of $52.41. While the security has petered off just below the $76 level, which coincides with the security's year-to-date breakeven, in recent months, several extra layers of resistance, including the 320-day moving average have come into play. Year-over-year the stock boasts a 28% gain. 

Options bulls are already on board. In the past two weeks, 3.18 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 94% of all other readings from the past year, too, suggesting a much healthier appetite for long calls of late. 

That being said, for those wanting to speculate on EW's next move, options look like a prudent play. The equity's Schaeffer's Volatility Index (SVI) of 32% stands in the 15th percentile of its annual range. This means the options market is pricing in relatively low volatility expectations at the moment. 

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