A historically bullish combination is flashing for Peabody Energy stock
Peabody Energy Corporation (NYSE:BTU) is down 1% at $30.99 before the session's open, and set to open just below its Nov. 30, roughly seven-month high of $32.89. The shares are outperforming the SPDR S&P 500 ETF Trust (SPY) on a year-over-year basis, with BTU up 212% versus the SPY's 10.9% deficit in the same timeframe. What's more, there is plenty of reason to believe Peabody Energy stock's rally could soon resume.
Digging deeper, BTU's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for Peabody Energy stock before. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, six other signals occurred in the last 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 currently the case with Peabody Energy stock's SVI of 68%, which stands in the lowest percentile of its 12-month range.
White's data shows that one month after these signals, the security was higher 67% of the time, averaging an impressive 11.3% return for that period. From its current perch, a move of similar magnitude would place Peabody Energy stock just shy of $34.50, or well above its April three-year peak.
A short squeeze could also keep the winds blowing for BTU. Short interest rose 11.9% in the last two reporting periods, and the 17.94 million shares sold short now make up for 12.6% of the security's available float.
An unwinding of options traders' pessimism could also have bullish implications. Despite Peabody Energy stock's impressive technical setup, BTU's 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 95th percentile of its annual range, implying a healthier-than-usual appetite for puts of late.