Oil Stock Sounds Historically Bullish Alarm

The $16 ceiling has halted any breakout attempts

Deputy Editor
Nov 24, 2020 at 3:20 PM
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Oil and gas concern EQT Corporation (EQT) has had a volatile run on the charts during the past several months, with two recent attempts to recapture its Aug. 10 annual high of $17.97 rejected by the $16 level. While this level is still keeping a tight lid on the shares, which are up 1.3% at $15.61 today, plenty of support is in place. Keeping some wind at the security’s back, EQT has just come within a chip-shot of a historically bullish trendline that could help EQT topple this recent ceiling.  

The trendline in question is EQT’s 160-day moving average. According to a study from Schaeffer’s Senior Quantitative Analyst Rocky White, the equity has seen two similar pullbacks to this level during the past three years. One month after both of these signals, EQT was higher, averaging an impressive 22.9% return. From its current perch, a similar move would put the equity at $19.18 – well past its mid-August peak.

EQTChart

An unwinding of pessimism in the options pits could also give the security a boost. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), EQT sports a 10-day put/call volume ratio of 1.04, which stands higher than all but 2% of readings from the past 12 months. This indicates that puts have been picked up at a much quicker-than-usual clip, leaving room for call traders to enter the ring.

That being said, now looks like an opportune time to get in on EQT’s next move with options. The equity’s Schaeffer’s Volatility Index (SVI) of 64% stands in the low 8th percentile of its annual range. This means options players are pricing in relatively low volatility expectations at the moment. What’s more, EQT’s Schaeffer’s Volatility Scorecard (SVS) ranks at 79 out of a possible 100, suggesting the stock tended to exceed these expectations during the past year – a boon for option buyers.

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