Pharma Stock Could Be Headed Towards Fresh Record Highs

MNTA is not slowing down, a historical signal says

Digital Content Manager
Sep 24, 2020 at 3:08 PM
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The shares of Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) are up 0.1% to trade at $52.34 at last check, after a massive bull gap in August boosted the security to an all-time-high of $52.45 on Sept. 22. And while the equity is already enjoying an impressive 280.1% year-over-year lead, with fresh support from the 20-day moving average and a historic bull signal now flashing, more upside may be on the horizon.

Specifically, the stock's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for MNTA in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have only been two other times in the past five years when the stock was trading within 2% of a 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower -- as is the case with the MNTA's current SVI of 18.2%, which sits slightly above the 8th percentile of its 12-month range. The data shows the security was higher a month later, averaging a return of 5.4% for that time period. From its current perch, a move of similar magnitude would put MNTA just above the $55 mark, at yet another record peak.

MNTA 2

Analysts are still skeptical of Momenta Pharmaceuticals stock, with seven of the nine in coverage carrying a tepid "hold" rating, and only the remaining two sporting a "strong buy." Meanwhile, the stock's 12-month consensus target price of $35.81 is barely a premium to its current perch. In simpler terms, there remains plenty of room for upgrades as well as price-target hikes on MNTA in the coming weeks. 

The options pits are already leaning more bullish, on the other hand. In the last 50 days, 24,455 calls have been exchanged, compared to 10,834 puts. Echoing this is MNTA's Schaeffer's put/call open interest ratio (SOIR), which stands higher than just 26% of readings from the past year. This implies short-term option traders have rarely been more call-biased.


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