C3.ai Stock Nears Key Trendline Ahead of Earnings

At last glance, C3.ai Inc (NYSE:AI) stock is down 6.3% to trade at $28.87 ahead of the company’s fiscal third-quarter earnings report, set for release after the market close Wednesday, Feb. 26. The equity has struggled over the past three months, shedding 17.5%, and is now down 16.1% year-to-date. However, AI is trading near a historically bullish trendline that could support a rebound in the coming month.

C3.ai stock is currently testing its 126-day moving average, a trendline that has historically sparked bullish returns. According to Schaeffer’s Senior Quantitative Analyst Rocky White, AI has come within striking distance of this moving average after spending a prolonged period above it—defined as 80% of the past two months and eight of the last 10 trading days—four times in the past three years.

Following half of these previous signals, AI was higher one month later, averaging an 8.6% gain. A similar move from its current level would put the stock just above $31.

AI has delivered mixed post-earnings performances, though it notably gained 24.5% and 19.4% after earnings last February and May, respectively. Over the past two years, the stock has averaged a post-earnings move of 15.3%, regardless of direction. This time around, options traders are pricing in a slightly higher-than-expected swing of 18.1%.

Meanwhile, sentiment in the options pits suggests the potential for a shift. AI’s 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 86th percentile of annual readings, indicating elevated levels of pessimism. If traders unwind these bearish bets, it could provide tailwinds for the stock. 

Analyst coverage remains cautious, with 10 of 14 brokerages rating AI a "hold" or worse. If the stock bounces off its technical support level and posts a strong earnings reaction, it could prompt some analysts to reassess their stance, potentially fueling additional upside.