Fresh Highs in the Fold for Gambling Stock, Says Bull Signal

PENN options are affordable at the moment, too

Deputy Editor
Feb 24, 2021 at 12:38 PM
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As sports gambling stocks continue to benefit from a paradigm shift, it's no surprise that the shares of Penn National Gaming, Inc (NASDAQ:PENN) boast a massive year-over-year lead of 261.6%. PENN should also benefit from a new partnership with Rivers Casino & Resort, a New York casino that -- assuming regulatory and legislative blocks are hurdled -- will give the company access to the state's lucrative market. The security has already tacked on 35.3% in 2021, and is recently removed from a Feb. 5, all-time high of $129. Even better, there is a bull signal flashing for PENN, suggesting another surge higher may be in the cards.

Specifically, the equity just came within one standard deviation of its 40-day moving average, after spending the majority of the past four months far above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. Penn National Gaming stock enjoyed positive returns one month after 67% of these signals, averaging a notable gain of 23.4%. A similar move from its current perch of $116.75, would propel the security to another record high of just over $144.

PENN Chart February 24

On the analyst front, earlier this week J.P. Morgan Securities hit PENN with a bull note in the form of a price-target hike to $142 from $134. The brokerage bunch, meanwhile, wasn't as sure coming into today, leaving plenty of room for additional upgrades/or price-target hikes. The 14 in coverage were evenly split, with seven calling the equity a "strong buy," versus seven that rated the equity a "hold" or worse, while the 12-month consensus target price of $110.92 is a 5.5% discount to current levels.

Options traders, however, are piling aboard the bullish bandwagon. This is per Penn National Gaming stock's 50-day call/put volume ratio of 2.48 International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 80% of readings from the past year. This means this heavy penchant for bullish bets is unusual.

Options look like a good way to go when weighing in on the gambling stock. The security's Schaeffer's Volatility Index (SVI) of 76% stands in the 6th percentile of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. Further, the equity's Schaeffer's Volatility Scorecard (SVS) sits at the highest possible 100 This means the stock has greatly exceeded option traders' volatility expectations during the past year -- a boon for options buyers.


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