Top Stock Picks for Summer 2021: Chegg (CHGG)

Short-term CHGG options are attractively priced right now

Managing Editor
May 20, 2021 at 1:18 PM
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We don't buy the "sell in May and go away" song and dance and we are here for spotting opportunities that others don't see, so stay tuned as we highlight Bernie Schaeffer and his trading team's top stock picks to buy in May and hold through the summer months! To access the entirety of Schaeffer's Top Summer 2021 Stock Picks report, click here.

Education technology platform Chegg Inc (NYSE:CHGG) has regained major support at the $90 mark, after a double-dip fake-out. Now breaking out of a large bullish wedge formation, CHGG also has a dual layer of support at its 200-day moving average, as well as the $10 billion market-cap level. What’s more, shares reconquered the ascending 20-day moving average earlier in April, a trendline that has been significant in previous rallies. Now, Chegg stock is taking aim at its 80-day moving average, a move that has historically produced massive gains. There's also seasonality to consider – the security has been positive over the last seven summers, averaging a sizable return of 37.1.%.  

CHEGG stock chart, CHGG stock price, CHEGG stock, CHGG stock

Short sellers have been in covering mode, yet a healthy 10.4% of CHGG's total available float is sold short. This means a continued short squeeze could keep the wind at the equity's back.

Short-term options are attractively priced right now, from a historical volatility perspective. This is according to the security's Schaeffer's Volatility Index (SVI) of 58%, which sits in the 27th percentile of its annual range. In other words, muted volatility expectations are being priced into short-term contracts. What's more, CHGG's Schaeffer's Volatility Scorecard (SVS) ranks at 91 out of a possible 100, implying the stock has tended to exceed these volatility expectations in the past year -- a boon for option buyers.

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