History Suggests Retail Stock Has Room to Run

The equity is already up over 108% this year

Digital Content Manager
Dec 22, 2020 at 12:10 PM
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The shares of L Brands Inc (NYSE:LB) are down 1.8% at $37.98 at last check. And while the retail giant -- and parent of brands such as Victoria's Secret and Bath & Body Works -- is cooling off from its Dec. 9, two-year high of $42.17, it sports an impressive 108.8% year-to-date lead. Better yet, the security's most recent pullback has it near a historically bullish trendline, which could propel LB even higher in the coming weeks.

More specifically, L Brands stock just came within one standard deviation of its 40-day moving average, after spending the past several months above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. Three of those four times, LB enjoyed a positive return a month later, averaging a gain of 11.2%. From its current perch, a move of similar magnitude would put the security at $42.23 -- another fresh two-year high. 

LB 40 Day

Analysts are evenly split toward L Brands stock, with nine of the 18 in coverage carrying a tepid "hold" or worse rating, and nine a "strong buy." This leaves plenty of room for upgrades moving forward, which could push the security higher.

The options pits already lean more optimistic, with calls popular. This is per the security's 10-day call/put volume ratio of 6.67 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 88% of readings from the past year. In simpler terms, calls are being picked up at a quicker-than-usual pace.

Now seems like an ideal time to weigh in on LB's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 56% sits in the extremely low 6th percentile of its annual range. In other words, the stock sports attractively priced premiums at the moment. 

 

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