RCAT hit a record high a little over a month ago
Defense stock Red Cat Holdings Inc (NASDAQ:RCAT) has pulled back from its Oct. 9 record high of $16.70, last seen down 4% to trade at $8.79 today. For those looking to buy in on the dip, however, a short-term bounce could be on the way.
Per Schaeffer's Senior Quantitative Analyst Rocky White, the equity is now within 0.75 of the 260-day moving average's 20-day average true range (ATR) after remaining above it 80% of the time during the last two weeks and 80% of the last 42 trading sessions. This signal has occurred three other times over the past 10 years, after which the stock was higher one month later 100% of the time with an average 29.7% gain.
Short covering could give RCAT a lift as well. Short interest represents a hefty 17.2% of the stock's available float, or nearly two days' worth of pent-up buying power.
A premium-selling strategy could be the move going forward, as Red Cat stock's Schaeffer's Volatility Scorecard (SVS) checks in at 15 out of 100. This means the security has consistently realized lower volatility than its options have priced in.