Long-Term Resistance Could Bring UNIT Down a Peg

Now looks like an opportune time to speculate of UNIT's next move with options

Digital Content Manager
Jul 8, 2020 at 2:58 PM
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A longer-term look at real estate investment trust (REIT) Uniti Group Inc (NASDAQ:UNIT) paints a fairly dismal picture. The security breached a former floor at the $15 mark back in February 19 and has yet to even come close to closing that gap, while overhead pressure at the 320-day has also made its presence known. Though the last few months of trading have managed to turn this ceiling into support, another long-term trendline looms up ahead that could have UNIT contending with its 320-day once more. 

To be more specific, UNIT just came within one standard deviation of its 20-month moving average after a lengthy period below here. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, two similar run-ups have occurred since this trendline formed in 2016. The equity was lower both times, averaging a drop of 12.4% four weeks out, and an even steeper 38.7% loss three months out. At its current perch of $9.28, a similar move could send UNIT all the way below $6 -- home to its late-March and early April lows. 

An unwinding of optimism could push Uniti stock lower as well. Currently, two of the four analysts covering the security still consider it a "buy" or better. Plus, UNIT sports a 10-day call/put volume ratio of 71.83 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading sits in the 96th percentile of its annual range, suggesting options players have rarely been more bullish.

For those wanting to get in on UNIT's next move with options, now looks like an opportune time to do so. The real estate name's Schaeffer's Volatility Index (SVI) of 58% sits higher than just 3% of readings from the past year, which means these traders are pricing in relatively low volatility expectations at the moment.

 

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