The coffee chain stock's latest peak comes amid historically low implied volatility
The shares of Dunkin Brands Group Inc (NASDAQ:DNKN) are trading mostly sideways at $106.23 this afternoon, just shy of its Nov. 18, all-time-high of $106.30. And while the coffee chain stock already sports a 41.8% lead year-over-year -- with support from the 20-day moving average over the last several months -- a historic bullish signal now flashing on the charts could indicate even more upside for DNKN in the coming weeks.
Specifically, the stock's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have only been three other times in the past five years when DNKN 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 security's current SVI of 21.6%, which sits just above the 13th percentile of its 12-month range.
Data shows that, 67% of those times, DNKN was higher a month later, averaging a 11.8% return for that time period. From its current perch, a move of similar magnitude would put Dunkin Brands stock just above $118, at yet another record high.
Analysts are hesitant toward the security, with 14 of the 16 in coverage sporting a tepid "hold" rating, and the remaining two carrying a "strong buy." Meanwhile, the 12-month consensus target price of $101.9 is a 4.8% discount to current levels. This leaves plenty of room for upgrades and/or price-target hikes moving forward, which could push the security even higher.
The options pits already lean more bullish, with calls popular. This is per the equity's 10-day call/put volume ratio of 8.29 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 82% of readings from the past year. In simpler terms, calls are being picked up at a quicker-than-usual clip.
Lastly, the equity's Schaeffer's Volatility Scorecard (SVS) ranks extremely high at 94 out of 100, meaning DNKN has tended to exceed these expectations during the past year -- a boon for options buyers.