Coal Mining Stock May Be Fated for Sizable Drop

Short interest makes up 12.8% of BTU's available float

Digital Content Manager
Jul 10, 2023 at 2:54 PM
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Peabody Energy Corp (NYSE:BTU) is pulling back today, last seen down 0.7% to trade at $21.69. The security is 17.8% lower in 2023, after pulling back to the $17 region back in late May -- its lowest level this year. While the stock bounced off those lows, additional headwinds could be imminent, given its current proximity to a trendline with historically bearish implications.

Specifically, the coal mining stock is trading within one standard deviation of its 80-day moving average, per Schaeffer's Senior Quantitative Analyst Rocky White. The security saw five similar signals over the past three years and was negative one month later 60% of the time, averaging a 9.1% drop. A comparable move would place BTU back below $20. 

BTU 80 Day

Short sellers appear privy to the secret. The 18.51 million shares sold short account for 12.8% of Peabody Energy stock's available float, or more than one week's worth of pent-up buying power.

While calls still outpace puts in the options pits, BTU's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQOMX PHLX (PHLX) sits higher than 98% of readings from the past year. This suggests puts are much more popular than usual. 

Options are affordable at the moment, making this an ideal opportunity to bet on BTU's next move lower. This is per its Schaeffer's Volatility Index (SVI) reading of 37%, which ranks in the 3rd percentile of its 12-month range. 

 

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