Bullish Trendline Could Help Humana Stock Extend Rally

Now could be the right time to bet on HUM's next move with options

Digital Content Manager
Mar 31, 2022 at 1:23 PM
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Humana Inc (NYSE:HUM) is up 1.2% to trade $443.75 at last check. The security has staged a massive comeback off its Jan 7, two-year low of $351.20, and though shares are now running into resistance at the $445 level, the stock has added 13.9% in the last six months. Plus, it looks like the equity could soon break through this ceiling to extend its rally even further, given Humana stock has just pulled back to a historically bullish trendline that has served as a springboard in the past.

Specifically, Humana stock recently came within one standard deviation of its 320-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, comparable moves have occurred four times in the past three years, with HUM enjoying a positive one-month return 75% of the time, while averaging an 5% jump. A similar move from its current perch would put the equity just shy of the $466 mark.

HUM 320 Day

The options pits lean overwhelmingly pessimistic towards the stock. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HUM's 10-day put/call volume ratio of 5.76 stands higher than 96% of readings from the past year. This indicates puts have been getting picked up at much faster-than-usual clip. Should some of this bearish sentiment start to unwind, the shares may climb higher still.

Now may be an ideal opportunity to bet on the stock's next move with options. This is per Humana stock's Schaeffer's Volatility Index (SVI) of 23%, which sits in the low 23rd percentile of its 12-month range. This means options traders are pricing in relatively low volatility expectations right now.
 
It's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) stands at an elevated 93 out of 100, meaning Humana stock has exceeded options traders' volatility expectations during the past year.
 




 
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