Little Known Energy Stock for Bulls to Target

A historically bullish signal could be the key to more annual highs

Digital Content Manager
May 5, 2022 at 11:27 AM
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One energy stock that doesn't get much attention but could make a decent addition to bulls' portfolios is PBF Energy Inc (NYSE:PBF). The stock has quietly chugged higher for the better part of the year, adding over 125.2% in 2022, and 90% in the past 12 months. Plus, earlier today, the security hit a two-year high of $32.41. And while it's pulled back slightly since this morning, last seen down 1.4% $31.35, there's evidence showing this rally may not be over just yet. 

pbf may 5

This is because PBF Energy stock's recent peak comes amid historically low implied volatility (IV), which marks a historically bullish combination for the equity. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been six other 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 the case with PBF, which sports an SVI of 75% that stands lower than all but 10% of readings from the past year. 

What's more, PBF was higher one month after 83% of these signals, and averaged a 7.5% return during this time period. From where it currently sits, a similar move would place the stock at a new two-year high of $33.70. 

An unwinding of pessimism in the options pits could put additional wind at the stock's back. Despite its recent highs, PBF's Schaeffer's put/call open interest ratio (SOIR) of 1.02 sits higher than 89% of readings from the past year. In other words, short-term options traders have rarely been more put-biased. 

Now might be the perfect time for options players to speculate on the stock's next move higher. As we mentioned before, PBF's SVI sits in the very low 10% annual percentile. Plus, its Schaeffer's Volatility Scorecard (SVS) sits at 95 out of a possible 100. This means that not only are options traders pricing in relatively low volatility expectations at the moment, the equity has tended to exceed said expectations -- a good thing for buyers. 

 

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