KB Home stock's latest record comes amid historically low implied volatility
The shares of KB Home (NYSE:KBH) are down 4.4% at $38.70 this afternoon, brushing off the homebuilding company's better-than-expected fiscal third-quarter earnings and revenue -- announced yesterday after close. After the report, Keybanc downgraded the stock to "sector weight" from "overweight." However, no fewer than five analysts also raised their price target on KBH -- the highest from Credit Suisse to $48. Despite the dip today, more upside may be on the horizon for KB Home stock. The 60-day moving average has helped push the stock higher after its late-June pullback. Up 12.7% year-to-date,
That's because today's dip also comes just one day after KBH scored a fresh 13-year high of $40.86. Plus, the equity is experiencing historically low implied volatility (IV), which, combined with a record high on the charts, has been a bullish combination for the stock in the past.
According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other times in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower -- as was the case with yesterday's SVI of 57.4%, which sat in the 19th percentile of its 12-month range. The data shows the security was higher a month later both times, averaging a return of 5.9% for that time period.
From yesterday's record perch, a move of similar magnitude would put KBH above $43 and trading at its highest point since 2007. Also worth noting is KBH's 60-day moving average has helped push the stock higher after its late-June pullback.
What's more, the stock's
Schaeffer's Volatility Scorecard (SVS) sits high at 93 out of 100. This means KBH has tended to exceed option traders' volatility expectations during the past year -- a boon for option buyers.