Call Traders Circle Conagra Stock Before Earnings

Call traders seem confident in the security's strength

Deputy Editor
Sep 29, 2021 at 1:15 PM
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The shares of Conagra Brands Inc (NYSE:CAG) are popping this afternoon, last seen up 3.5% at $34.78. Investors are gearing up for the packaged food producer's fiscal first-quarter earnings report, due out before the open on Thursday, October 7. Below, we'll dig into Conagra stock's technical setup ahead of the event, and what investors might be able to expect after its report.

Conagra stock has a history of mostly positive post-earnings reactions during the past two years, though its failed to notch a next-day pop of more than 1% since June 2020. In fact, in the last 12 months, the equity slipped more than 5% twice after earnings, while rising 0.4% and 0.2% in October and April, respectively. CAG has averaged a next-day return of 4.9% regardless of direction, which is slightly lower than the 5.4% move options traders are pricing in for this time next week.

Call traders have been confident ahead of the event. Conagra stock's normally quiet options pits have seen 3,707 calls cross the tape so far today, which is four times the typical amount. Most popular is the October 36 call, followed by the weekly 10/1 35-strike call, indicating these traders see the security moving higher before and after earnings.

That bullish sentiment lines up with the equity's 10-day call/put volume ratio of 3.92 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 85% of readings from the past year, suggesting a penchant for calls of late.

Analysts, meanwhile, aren't putting much faith in CAG right now. The stock sports just two "strong buy" brokerage ratings from the eight in coverage. Short sellers have been piling on ahead of Conagra's earnings. Short interest rose 27.6% in the last two reporting periods, and now represents almost a week's worth of pent-up buying power, at the stock's average pace of daily trading.

The stock's performance on the charts of late has been shaky. Though its now trading well above the 40-day moving average, the trendline aided in guiding the equity lower and away from its June annual highs. While CAG is pacing for its first monthly win in four, the security sits just below its year-to-date and year-over-year breakeven levels.

CAG Chart September 29


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