Bull Signal Says THC Could Go Higher

THC sports an impressive 24.9% year-to-date lead

Assistant Editor
Feb 4, 2021 at 1:20 PM
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The shares of Tenet Healthcare Corp (NYSE:THC) are cooling off, two sessions removed from a five-year peak of $51.97. With support from its 20-day moving average, the healthcare services company boasts a respectable 24.9% year-to-date lead. And things could be looking up for the equity, due to a historically bullish signal flashing on the charts.

Specifically, Tenet Healthcare 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 been two other times in the past five years when THC 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 is the case with the security's current SVI of 75%, which sits in the 18th percentile of its 12-month range.

White's data shows that a month after these signals, the security was higher both times, averaging a respectable 14.5% gain for that period. From its current perch of $49.90, a similar move would put Tenet Healthcare stock above the $57 mark -- territory the equity has failed to explore since July 2015.  

More gains could come from a shift of sentiment in the options pits. THC’s Schaeffer's put/call open interest ratio (SOIR) ratio of 1.80 stands higher than 80% of readings from the past 12 months, indicating short-term option traders have rarely been more put-biased.

Though shorts are starting to jump ship, with short interest down 12.6% during the last two reporting periods, the 4.94 million shares sold short still account for a healthy 4.8% of the stock's available float, or over four days' worth of pent-up buying power.

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