China Stock Flashing "Buy" Signal

ZTO options are affordably priced at the moment

Assistant Editor
Jul 6, 2020 at 9:58 AM
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The shares of China-based shipping specialist ZTO Express (Cayman) Inc (NYSE:ZTO) are up 1.5% at $38.06, and earlier hit a record high of $38.92 out of the gate. While ZTO gained 1.4% to close out last week, it initially slumped to the $35 level, which aligns with a historically bullish signal that indicates today's record highs could be just the beginning.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, ZTO has come within one standard deviation of that trendline five other times in the past three years. Furthermore, one month later the equity was higher 80% of the time, averaging a gain of 9.6%. A similar jump from ZTO's current perch would put the equity above the $40 level.

ZTO Chart 2 July 6

The chart above shows that ZTO has had a stellar year so far. The shares have tacked on on 92.8% year-over-year, and outperformed the broader S&P 500 Index (SPX) by nearly 20% in the last 60 days. It's no surprise then that there's a respectable amount of optimism among the brokerage bunch. Two-thirds of the brokerages in coverage dole out "buy" or better ratings, with zero "sells" on the books. However, the consensus 12-month price target of $34.78 is a 7.3% discount to current levels, implying there could be price-target hikes on the way should ZTO keep climbing.

Rounding things out, ZTO'S Schaeffer's put/call open interest ratio (SOIR) of 0.53 sits in just the 12th percentile of its annual range, suggesting short-term option players have rarely been more call-heavy during the past 12 months. Additionally, the security's Schaeffer's Volatility Index (SVI) of 42% stands higher than 20% of all other readings from the past year, implying that near-term option traders are pricing in relatively low volatility expectations. 

 

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