Bull Signal Flashing for Moderna Stock Ahead of Earnings

Moderna will report earnings before the open tomorrow

Jake Scott
Aug 4, 2020 at 2:59 PM
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Moderna Inc (NASDAQ:MRNA) stock is down 1.5% to trade at $76.84, ahead of the firm's second-quarter earnings report, due out before the open tomorrow, Aug. 5. In fact, the biotech has been in cool-down mode since a successful study of its potential COVID-19 vaccine sent it skyrocketing toward a record high of $95.21. While the equity has been struggling to retake its 10-day moving average during the past couple weeks, it just pulled back to a historically bullish trendline that could send the shares of Moderna back toward its July peak. 

More specifically, Moderna just came within one standard deviation of its 40-day moving average after a lengthy stretch above the trendline. For the purpose of this study, Schaeffer's Senior Quantitative Analyst Rocky White defines that as the equity trading above the moving average for 60% of the time over the past two months, and closing north of the trendline in eight of the last 10 sessions.

According to White's data, two similar signals have occurred during the past three years. MRNA was higher one month later after each signal, averaging a one-month return of 23.9%. A similar move from the security's current perch would put Moderna stock right in line with its mid-July peak. 

MRNA Chart August 4

Despite its impressive 294.9% year-to-date lead, there's plenty of pent-up pessimism in Moderna's options pits. The stock sports a 10-day put/call volume ratio of 0.62 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than all but 2% of readings from the past year. This implies a much healthier appetite for long puts of late. Furthermore, MRNA's Schaeffer's put/call open interest ratio (SOIR) stands higher than 94% of readings in the same time span, implying short-term options traders have been more put-biased than usual. 

And while short interest in dropping, down 14.1% in the last reporting period, the 24.71 million shares sold short still make up a healthy 8% of MRNA's available float. Should these bears continue to hit exits, an unwinding of pessimism could put even more wind at the equity's back.

Lastly, a look at Moderna's history of post-earnings reactions since going public shows that half of its next-day sessions were higher, including a massive 22.7% jump last February. The security averaged a post-earnings swing of 8% during these last six quarters, regardless of direction. This time around, the options market is pricing in a much bigger move of 11.2%. 


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