Technical Support Could Keep HP Afloat

Sentiment surrounding Hemerich & Payne is still mixed

Deputy Editor
Jun 22, 2020 at 1:45 PM
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Oil and gas drilling specialist Helmerich & Payne, Inc (NYSE:HP) is just one of many stocks that have fallen victim to the sector selloff sparked by a dramatic slowdown in demand over the past few months. While the stock managed to break out past the $20 level in late-May it wound up losing steam just below the 120-day moving average. Though this trendline still looms overhead, putting HP at a 53.2% year-to-date deficit, not all hope is lost. The aforementioned $20 mark has since transformed into a solid layer of support, while a historically bullish trendline the security just pulled back to could also keep some wind at HP's back. 

A study from Schaeffer's Senior Quantitative Analyst Rocky White shows HP coming within one standard deviation of its 40-day moving average. White's data also shows one similar move in the last three years, with 3.4% higher one month later. A similar move, from its current perch at $21.61, would put HP at $22.34. 

Short sellers have been piling on the stock of late. Short interest rose 12.4% in the last reporting period, and now represents 7.4% of HP's available float. This could propel the equity higher, should some of these bearish bets begin to unwind.

Similarly, HP's 50-day put/call volume ratio of 0.52 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 72% of readings from the past year. This suggests options traders have had unusually bearish appetites of late. 

That being said, options are quite cheap right now. Helmerich & Payne's Schaeffer's Volatility Index (SVI) of 82% sits in the 26th percentile of its annual range, meaning options players have been pricing in relatively low volatility expectations at the moment. 

On the other hand, most analysts are already on board with HP. Ten call it a "buy" or better, compared to seven saying "hold" or worse. There's still room for price target hikes, however. The consensus 12-month price target of $19.48 is an 8.8% discount to current levels. 


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