Bulls Should Keep a Close Watch on This Shipping Outperformer

AMCR's 80-day moving average is a historically friendly trendline

Dec 31, 2020 at 1:18 PM
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Packaging name Amcor (NYSE:AMCR) is relatively new to the public trading world, just over a year off its mid-2019, June 11 debut, which marked its first close at $11.18. Since, the equity has seen a nosedive into the $6, followed by an impressive channel of higher highs -- more than doubling between mid-March and Christmas Eve this year. Now, with support from the $11.50 mark, AMCR sports a nine-month lead of 42.6%. Plus, if history is any indicator, Amcor stock may be getting ready to bounce even higher in the coming weeks.

More specifically, Amcor stock just came within one standard deviation of its 80-day moving average, after spending the past several months above the trendline, defined for this study as having traded north of the moving average 60% of the time in the past two months and in eight of the last 10 trading days. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. Even more impressive, each of those four times, AMCR enjoyed a positive return one month later, averaging a gain of 6.41%. From its current perch, a move of similar magnitude would put the security at $12.30 -- within a chip-shot of record-high territory.


Despite the equity’s stellar technical outperformance in 2020, analysts remain unconvinced. Specifically, heading into Wednesday’s trading, five of the seven brokerage firms covering AMCR sport a tepid "hold" or "sell" recommendation.

It’s worth noting that Amcor stock’s premiums are well-priced at the moment too, per the stock's Schaeffer's Volatility Index (SVI) of 32%, which stands higher than 4% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations on AMCR at the moment.

As always, I like to look at both sides of the trade before taking action, and one word of caution for prospective options traders is Amcor stock’s incredibly low Schaeffer's Volatility Scorecard (SVS) of just 16 out of 100. This scorecard is used to identify which underlying stock options have historically had underpriced or overpriced options. Low SVS readings indicate consistently realized lower volatility than its options have priced in -- pointing to the possibility of AMCR being a potential premium-selling candidate, rather than a premium-buying candidate.

Regardless, Amcor could continue to have plenty of growth opportunity, as evidenced by the contrarian backdrop, but will certainly remain a popular company as COVID-19 cases continue to surge and vaccine rollouts have only just begun in most countries. Come mid-2021, however, we could be writing a completely different stock analysis.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, December 27.


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