Oil & Gas Stock Could Extend the Rally

AR is more than 200% higher in the last 12 months

Deputy Editor
Apr 7, 2022 at 12:54 PM
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The shares of oil & gas name Antero Resources Corporation (NYSE:AR) are down 2.4% to trade at $30.85 at last check, after yesterday hitting a nearly seven-year high of $32.62, with support from its 20-day moving average coming into play in early February. AR now boasts a 76.5% year-to-date lead and is up more than 200% in the last 12 months. Even better, there's reason to believe AR could continue to climb higher in the coming weeks. 

AR Chart April 7

Specifically, this recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for Antero Resources stock before. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times in the past five years when the stock 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 AR's SVI of 59%, which sits in the relatively low 17th percentile of its 12-month range.

White's data shows that one month after these signals, the security was higher, averaging an impressive 14.2% return for that time period. From its current perch, a move of similar magnitude would put Antero Resources stock just over $35 per share, an area the equity has not crossed since June 2015. 

A short squeeze could also keep the wind at AR's back. Short interest rose 14.2% in the last two reporting periods, and the 25.59 million shares sold short now accounts for 9.3% of the security's available float. 

An unwinding of pessimism in the options pits could send the shares higher still. the stock's Schaeffer's put/call open interest ratio (SOIR) sits in the elevated 97th percentile of its annual range. In other words, short-term options traders have rarely been more put-biased.

What's more, the equity's Schaeffer's Volatility Scorecard (SVS) sits at 89 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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