Rebounding Retail Stock Could Extend Rally

DKS is up 40% in just the last three months

Deputy Editor
Jan 2, 2024 at 2:47 PM
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Dick's Sporting Goods Inc (NYSE:DKS) stock is trading flat today, down just 0.1% at $146.80, despite a price-target hike from D.A. Davidson to $183 from $166. Up 40.9% in just the last three months, with support from its 20-day moving average, the retail stock has almost fully recovered its mid-August 24.2% plummet. 

DKS Jan2

The stock's rebound could still have legs, too, as its recent highs come amid historically low implied volatility (IV), which has been a bullish combination in the past. Per Schaeffer's Quantitative Analyst Rocky White, there were five other signals over the past five years when DKS 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 the stock's current SVI of 27%, which stands in the low 9th percentile of annual readings. The shares were higher one month later 80% of the time after each of these signals, averaging an 8.4% rise. From its current level, a move of similar magnitude would place the stock above $159, representing new record highs. 

Plus, short interest represents 12% of the equity's available float, leaving plenty of pent-up buying power. It would take shorts nearly five days to cover their bearish bets, at DKS' average pace of daily trading. 

 

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