This Wendy's Stock Signal Has Never Been Wrong

WEN calls can be had for a bargain, too

Assistant Editor
Sep 1, 2020 at 2:46 PM
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The shares of Wendy's Company (NASDAQ:WEN) are down 0.4% at $20.85 at last check, slipping further after struggling to break out over the $22 region for the past two weeks. However,  if past is precedent, there's a silver lining; WEN has pulled back to a historically bullish trendline that could help topple these ceilings in the coming months. 

Specifically, Wendy's stock just came within one standard deviation of its 200-day moving average, after spending months above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, three similar signals have occurred during the past three years. WEN enjoyed positive returns one month after each signal, averaging a 17.7% gain. A similar move from its current perch would put the equity above the $24 region, surpassing the stock's February 25 all-time high of $24.03. This area is also home to a familiar area of pressure, rejecting the stock's highest rallies multiple times. 

WEN Sept 1

Analysts were split on the security coming into day, with 12 of the 23 in coverage at a "strong buy," while the remaining 11 sit at a lukewarm "hold." Meanwhile, the 12-month consensus price target is just below stock's potential pop, at $24.08. This means a round of upgrades/price-target hikes could be in WEN's future as well, should the fast food stock indeed break out.

The options pits, despite limited absolute volume, are call-dominant. WEN sports a 10-day call/put volume ratio of 21.36 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 95% of annual readings, suggesting a healthier-than-usual appetite for calls recently. 

Speculating on WEN's next move with options could be a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 43% stands higher than just 14% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

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