Signal Says Red-Hot Oil Stock Has Room to Run

The equity is on track for its eighth-straight win

Deputy Editor
May 12, 2021 at 2:22 PM
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Don't tell the shares of Antero Resources Corporation (NYSE:AR) there's a broad market selloff going on. AR is up 0.3% to trade at $11.51 at last check, earlier hitting a two-year high of $11.79 after seven-straight days of gains.  Plus, Northland Capital and BMO have chimed in with price-target hikes to $15 and $13, respectively. The equity bounced off a floor of support at the $9 level as well as its ascending 80-day moving average at the start of the month, and there's reason to believe it could continue its rally. 

AR 0512

More specifically, today's peak comes amid historically low implied volatility (IV), which has been a bullish combination for Antero stock in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been another two times in the past five years when the security was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) stood in the 20th percentile of its annual range or lower. This is now the case with HSY's SVI of 68%, which sits in the low ninth percentile of its 12-month range.

White's data shows that a month after these signals, the security was higher, averaging an impressive 20.7% return for that time period. From its current perch, a move of similar magnitude would put AR above $13, extending its two-year high. 

There is plenty of room for upgrades that could push the stock higher as well. Of the 10 analysts in coverage, five still carry a tepid "hold" rating. And despite the price-target hikes today, AR's consensus 12-month price target of $11.91 is a slim 3.5% premium from its current perch.

A short squeeze could also keep the wind at AR's back. Short interest fell by 3.7% in the most recent reporting period, yet the 28.37 million shares sold short accounts for a healthy 11.4% of AR's total available float. 

What's more, the equity's Schaeffer's Volatility Scorecard (SVS) sits at 82 out of a possible 100. This means Antero Resources stock has managed to exceed volatility expectations during the past year -- a boon for option buyers. 

 

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