Signal Says Coal Stock Has Room to Run

Peabody Energy Corp (NYSE:BTU) stock is down 2.5% at $25.06 at last glance, on track for its third loss in four days. On a closing basis, BTU has found a floor just above $25, and this most recent pullback has put the shares near a trendline with historically bullish implications. 

The stock has come within one standard deviation of its 200-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, BTU has pulled back to this trendline five times over the past three years. In each of those occurrences, Peabody Energy stock was higher one month later, averaging a 15.5% gain. A similar move would push the shares at $28.94, easily erasing its three-month deficit of 10%.

Short covering could also provide tailwinds for BTU. Short interest has dropped by 6.2% in the most recent reporting period, yet still accounts for 12.1% of the equity's available float, or nearly four days' worth of pent-up buying power. 

Now could be a good time to weigh in on the stock's next move with options. BTU is seeing attractively priced premiums at the moment, per its Schaeffer's Volatility Index (SVI) of 56%, which sits in the low 9th percentile of its annual range. 

It's also worth pointing out that the equity ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of 2 out of 100. In other words, the security has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate.