RAD's 160-day moving average has helped launch the equity higher four times in the past
The shares of drugstore chain Rite Aid Corporation (NYSE: RAD) are sliding today, down 1.6% at $15.29 at last check, with recent pressure at the 10-day moving average keeping a tight lid on the equity. Traders might not want to give up on Rite Aid stock just yet, though. The stock just pulled back to a historically bullish trendline that could help it topple this ceiling.
Specifically, RAD just came within one standard deviation of its 160-day moving average, after several weeks above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. RAD enjoyed
positive returns one month after each signal, averaging an 18% gain. A similar move from its current perch would put RAD just above the $18 level, which has not been crossed since early July.
Regardless, analysts are hesitant toward the security, with all three in coverage carrying a tepid "hold" rating. Meanwhile, the stock's 12-month consensus target price of $10.17 is a whopping 33.6% discount to current levels, meaning price-target hikes could be on RAD's horizon.
A look at Rite Aid's options pits shows calls more than quadrupling puts, with 6,264 calls exchanged in the past 10 days, as opposed to 1,431 puts. It is possible some of this call buying could be shorts hedging against any unexpected upside risk, however. In the last reporting period, short interest rose 4%, and the 13.49 million shares sold short now account for a jaw-dropping 25.5% of the security's available float. In other words, it would take almost four days to cover these bearish bets at RAD's average pace of trading.