Buy the short-term dip on Kratos stock
Shares of Kratos Defense & Security Solutions Inc (NASDAQ:KTOS) are 1.2% higher to trade at $78.45 this afternoon, attempting to snap a five-day losing streak as Middle East tensions cause whiplash for the broader market. The equity has pulled back notably since topping a nearly 22-year high of $134 on Jan. 20, now clinging to the year-to-date breakeven level. However, a historic bullish signal is now flashing, indicating renewed support could be looming for KTOS.
Per Schaeffer's Senior Quantitative Analyst Rocky White, Kratos is now within 0.75 of the 200-day moving average's 20-day average true range (ATR), after remaining above it 80% of the time in the last two weeks and in 80% of the last 42 trading sessions. This signal has occurred 12 other times over the past 10 years, after which the security was higher one month later 75% of the time, with an average 9.1% surge. From its current perch, this lift would put the shares back at $85.55.
A short squeeze could also help, as 9.13 million shares are sold short, accounting for 5% of the security's total available float. At KTOS' average pace of daily trading, it would take short sellers over two days to buy back their bearish bets.
It's also worth noting Kratos Defense and Security stock sports a 14-day Relative Strength Index (RSI) reading of 31. This sits right on the cusp of "oversold" territory, indicating a short-term bounce may be in the cards.
Plus, the stock's Schaeffer's Volatility Scorecard (SVS) comes in at 84 (out of 100). In simpler words, shares have consistently realized higher volatility than its options have priced in over the past 12 months.