Endocyte, Inc. (NASDAQ:ECYT) stock is up 1% at $17.71 in afternoon trading -- and if past is prologue, the biopharmaceutical concern could be headed even higher soon. Below we will dig deeper into the security's technical performance, and learn why now may be the perfect time to bet on ECYT's next leg higher. 

ECYT has been in rally mode since touching its early February low of $2.81, so far adding 530%. The security touched a four-year high of $20.85 on Sept. 4, but has since pulled back to its 40-day moving average, which has been a "buy" signal in the past.

Endocyte stock is now within one standard deviation of its 40-day moving average. Over the past three years, there have been six prior instances of ECYT pulling back to this trendline after closing north of it at least 60% of the time during the previous two months and in eight of the last 10 trading days. Those prior pullbacks have resulted in an average one-month return of 14.85%, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with 80% of those returns positive. A bounce of this magnitude would push Endocyte shares back above $20, within a chip-shot of a fresh multi-year peak.

Short interest on ECYT fell 26.7% during the past two reporting periods, but still represents nearly 13% of the stock's total available float. At the biopharma concern's average daily trading volume, it would take shorts about a week to buy back the rest of their bearish bets -- plenty of fuel for a short squeeze.

Meanwhile, the stock's Schaeffer's Volatility Index (SVI) of 62% ranks in the 2nd percentile of its annual range, which indicates short-term options are cheap, from a volatility perspective. Plus, ECYT sports a Schaeffer's Volatility Scorecard (SVS) of 92 out of 100, which shows the stock has tended to make larger-than-expected moves on the charts compared to what the options market had priced in. In other words, now may be an opportune time to speculate with near-term Endocyte options.

While the Nasdaq and S&P 500 have been exploring record highs for some time now, the Dow Jones Industrial Average (DJI) was a bit slower to catch up. Specifically, the Dow on Thursday touched a new record high for the first time since Jan. 26 --  that's 164 trading sessions between all-time highs, marking the longest stretch since a string of 288 days that ended July 12, 2016. However, this could be a bullish signal for the blue-chip barometer, if past is prologue.

There have been just 14 other times where the Dow went at least 160 trading days between record peaks. The longest stretch ever was more than 6,300 sessions, starting during the Great Depression and ending in November 1954, per data from Schaeffer's Senior Quantitative Analyst Rocky White. The DJI fell more than 89% from peak to trough during that stretch, per the "drawdown since last high" column on the chart below. This time around, the index was down just 11.59% at its bottom.

After these relatively lengthy stretches between record highs, the Dow tends to outperform. One month later, the index was up nearly 1%, on average, and higher 71.4% of the time. That's compared to an average anytime one-month gain of just 0.68%, and a win rate of 60.3%, looking at DJI data since 1954 (the time of the first signal).

Six months and one year later, the index was also up by much more than usual. Specifically, the DJI was higher by 6.21% and 14.32%, on average, respectively, compared to anytime gains of 4.06% and 8.19%. Plus, the Dow was in the black 85.7% of the time at both post-signal checkpoints, compared to average anytime six-month and one-year win rates of 67.9% and 71.3%, respectively.

 

Garmin Ltd. (NASDAQ:GRMN) has enjoyed a steady climb up the charts over the past six months. Earlier today, the GPS maker nabbed a fresh 10-year high of $70.75, after receiving a price-target hike from Morgan Stanley to $77 from $60. The fun could be far from over, too, as history suggests GRMN shares could be headed even higher in the coming month.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 16% ranks in the 9th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective. What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, in the three other times GRMN was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of annual readings since 2008, the equity averaged a one-month gain of 4.64%. Plus, all three of those returns were positive.

As alluded to earlier, it's been an excellent year for Garmin stock, which boasts an 18% lead in 2018. Since late June, the shares have been carving out a channel of higher highs, with their 40-day moving average containing any pullbacks. More recently, the equity has been on fire, turning in only one negative performance in the past 10 days.

Short sellers have slowly been hitting the exits in the past year, and a continued capitulation of bearish bets could provide more tailwinds for the stock. The 10.35 million GRMN shares still sold short still represent nearly 10% of the equity's total available float, and more than eight days' worth of pent-up buying power, at the average pace of trading.

More bullish brokerage notes could keep the wind at GRMN's back, too. Currently, all five brokerages covering Garmin rate it a "hold" or worse, with not a single "buy" rating to be found. Furthermore, the average 12-month price target of $65.83 sits below the stock's current perch. 

The security could also benefit from an unwinding of pessimism in the options pits. GRMN's Schaeffer's put/call open interest ratio (SOIR) of 0.97 ranks in the 100th percentile of its annual range. This shows that short-term traders have rarely been as put-skewed toward the security as they are now. 

ASNA has seen some improvement on the charts, breaking out in mid-May above the $2.00-$2.40 range that contained it months. The shares have more than doubled since touching the Oct. 16 bottom of $1.69, picking up roughly 80% year-to-date.

Digging into its earnings history, ASNA closed higher the day after reporting last quarter, surging 7.9%. Overall the shares have averaged a 10.8% move the day after earnings over the last two years, regardless of direction. This time around, the at-the-money October 4 straddle is pricing in an 18.4% move.

In the options pits, traders have been leaning bearish, as per the stock's 10-day put/call volume ratio of 3.48 International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, this lofty ratio ranks in the 88th percentile of its annual range, meaning puts have been bought over calls at a faster-than-usual clip.

Coincidentally, during this time frame, the aforementioned October 4 put has seen the highest increase in open interest. Over 1,600 contracts were added there, with data pointing to mostly buy-to-open activity.

Lastly, short interest on ASNA rose 2% in the most recent reporting period, and now accounts for 34% of the stock's total available float. At the retail concern's average pace of trading, it would take shorts over a month to buy back their bearish bets.

The Federal Open Market Committee (FOMC) will convene for its two-day policy meeting next week, with the central bank widely expected to lift interest rates. While banks generally benefit from higher rates, a pair of bank stocks have suffered in the short term after previous rate hikes. Here's why it may be time to short -- or hedge your position on -- Bank of America Corp (NYSE:BAC) and Goldman Sachs Group (NYSE:GS) stocks.

We've already outlined the best and worst stocks to own after a Fed meeting, but what about after a Fed rate hike? While this pair of healthcare stocks tends to rally after rate hikes, BAC and GS have been among the worst S&P 500 stocks to own a week after the central bank raises rates, looking back to 2015.

BAC has averaged the biggest one-week loss after a rate hike, at 3.09%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Further, Bank of America shares have been higher a week later just 14% of the time.

Since touching a post-financial crisis high of $33.05 on March 12, the bank stock went on to form what looks like an inverse "head and shoulders," with a "neckline" around $31-$31.50, and the "head" at the July trough of $27.63. Wall Street pros typically say to buy the shares once they make a definitive breakout back north of the neckline. However, even if the shares do break out, they'll have to contend with the aforementioned March highs. At last check, BAC is down 0.5% to trade at $31.03. Another post-rate hike slide of 3.09% would put the equity just above $30.

Goldman stock, meanwhile, has averaged a one-week loss of 2.39% after a rate hike, also ending higher just 14% of the time. The shares also peaked in mid-March, at $275.31, and have since formed a similar chart pattern, with a neckline around the $245 area. This level is also home to GS' 200-day moving average. In afternoon trading, the security is 0.7% lower at $235.67. A post-Fed pullback of 2.39% would place Goldman stock around $230.

In conclusion, while an upside breakout beyond the aforementioned necklines could have bullish implications for BAC and GS, short-term headwinds could be facing the bank stocks after a rate hike next week, if history is any indicator. The good news, though, is that near-term options on both stocks are attractively priced right now.

Bank of America sports a Schaeffer's Volatility Index (SVI) of 19%, and Goldman's SVI stands at 20%. Both SVIs are in the bottom 20% of their annual ranges, meaning short-term options are pricing in relatively low volatility expectations at the moment.

"With the SPX entering the week trading around last month's close, the late-August high around 2,915 serves as a potential short-term resistance point and the January 2018 closing high at 2,873 should continue to act as support... If the resistance and support levels discussed above are broken, I could see the SPX 2,850 half-century mark as another area of support. SPX 2,940 would likely act as short-term resistance, which is a round 10% above the 2017 close...

"...due to many of the options being sold to open, the current open interest configuration suggests a dull expiration week. At the very least, it is not a week in which options are likely to magnify major moves, as options that are sold to open typically dampen, rather than enhance, volatility. That said, if there is a catalyst that pushes the SPY through the call-heavy 291 and 295 strikes, the prospect of the call sellers closing their positions to manage losses would have bullish implications as floor traders unwind short positions associated with those calls."
-- Monday Morning Outlook, September 17, 2018

Despite President Donald Trump announcing tariffs on another $200 billion in Chinese goods, the S&P 500 Index (SPX - 2,929.67) rallied during September options expiration week. The tariff news was much anticipated, and the 10% rate that was announced was less than expected. Moreover, bulls got a little help as sellers of the SPDR S&P 500 ETF Trust (SPY - 291.99) 291-strike calls liquidated positions, likely adding to short covering as the SPY and SPX took out their respective all-time highs set in August. Although it was set up to be a dull week, it was anything but, as bulls enjoyed a lift of 0.8% in the SPX.

$SPX 2,940.98 is 10% above 2017 close and next area of potential resistance ahead of #Fed meeting next week $SPY

— Todd Salamone (@toddsalamone) September 21, 2018

So now what? From a technical perspective, the SPX comes into the last week of the quarter trading near a potential resistance level that I mentioned last week in the 2,940 area. This level represents the site of a round 10% 2018 gain, which might inspire some profit taking. It is also near the top of a channel that connects higher highs and higher lows since April. Currently, the top of the channel is around the 2,950 half-century mark, but it is rising, implying the top of this channel will move higher with the passage of time.

As the SPX and SPY made new highs last week, so too did the Dow Jones Industrial Average (DJI - 26,743.50). The Dow not only traded in new-high territory, but distanced itself from the 26,000 millennium mark, after hitting a speed bump here in late August and at the beginning of this month.

But not all equity benchmarks are overtaking psychological round-number levels. The Russell 2000 Index (RUT - 1,712.32) did not hit a new all-time high last week and instead probed the round 1,700 area for the second time in as many weeks. While the index remains above 1,700, it has not been able to make a significant move above it since first touching this level in June. Meanwhile, the Nasdaq Composite (IXIC - 7,986.96) continued to dance around the 8,000 millennium mark last week, which has been the case since late August.

In short, potential resistance on the SPX is not far above current levels, and other benchmarks are struggling to take out key round numbers. Moreover, the SPY and SPX enter this week with their 14-day Relative Strength Index (RSI) readings very near overbought territory -- which has been the case on multiple occasions since May, but only resulted in limited downside movements, at worst.

"Companies typically don't repurchase their own shares in the month before reporting quarterly results due to regulations, and with the third quarter coming to an end, 86% of the S&P 500 will be restricted by Oct. 5, according to Goldman Sachs analysts led by David Kostin."
-- The Wall Street Journal, September 18, 2018

The current overbought condition occurs simultaneous with a blackout period for share buybacks and a Federal Open Market Committee (FOMC) meeting scheduled for this week. Fed funds futures traders, per the CME Group website, anticipate about a 94% probability of a rate hike. Prior to the mid-June FOMC meeting, the SPY was similarly overbought, the Fed raised rates, and the SPY drifted lower into the end of the month, before rallying back to its pre-Fed closing levels by mid-July.

In fact, during the current tightening cycle, one-month SPY returns following a Fed rate hike have significantly trailed one-month returns following a Fed pause. Per the table below, when the Fed has raised rates, the average SPY return one month later is a loss of 1.15% with the chance of the SPY being higher one month later slightly higher than a coin flip. In comparison, following the 22 occasions where the Fed held rates steady, the SPY was positive one month later 77% of the time, averaging a return of 1.48%.

With a Fed rate hike on deck, share buybacks on SPX components expected to slow, the SPX itself overbought with potential resistance just overhead, midterm election uncertainty likely to be a growing story in the weeks ahead, and a lot of short covering on SPX components occurring since early July (see chart below), prepare for a growing likelihood of choppy trading if the FOMC indeed raises rates as Fed funds futures traders expect.

Continue reading:

• Indicator of the Week: Stocks to Buy and Sell Before the Fourth Quarter
• The Week Ahead: September Ends with Fed Meeting, GDP Data

Nike Inc (NYSE:NKE) is scheduled to report fiscal first-quarter earnings after the market closes tomorrow, Sept. 25. The retail shares have been volatile in recent months, per NKE's 60-day historical volatility of 27.8% -- in the 78th annual percentile -- and options traders are pricing in a bigger-than-usual post-earnings swing for Wednesday's trading.

At last check, Trade-Alert pegged the implied daily earnings move for NKE at 8.6% -- well above the 4.8% next-day move the stock has averaged over the last two years. It's been a mixed bag as to whether the reactions have been positive or negative, though Nike shares swung 11% higher the day after the retailer's June report. What's more, this post-earnings performance and an 11% surge in June 2017 are the only two times in the last eight quarters the stock has met or exceeded the percentage move the options market is currently pricing in for the stock.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) suggests NKE options traders are bracing for another big move to the upside. Specifically, speculators have bought to open 25,272 calls in the last 10 days, compared to 12,700 puts. The resultant call/put volume ratio of 1.99 ranks in the 76th annual percentile, meaning the rate of call buying relative to put buying has been quicker than usual.

Call volume is accelerated again today, with roughly 17,000 contracts traded so far -- more than double what's typically seen at this point. Speculators may be buying to open weekly 9/28 86-strike calls for a volume-weighted average price of $1.68, which would make breakeven at this Friday's close $87.68 (strike plus premium paid).

However, the weekly 9/28 84.50-strike and 90-strike calls are most active, and it looks like traders may be selling to open these options. If this is the case, the call writers are either setting short-term ceilings for NKE stock, or anticipating a post-earnings volatility crush. The at-the-money implied volatility (IV) term structure on weekly 9/28 Nike options is 66.25%, compared to 30.85% for the standard October series.

Looking at the charts, Nike shares were last seen trading down 1.1% at $84.59, as broad-market headwinds offset a price-target hike to $96 from $90 at Stifel. The Dow stock has put in a strong performance over the long term, though, up 35.1% year-to-date. Plus, NKE quickly shook off a negative reaction to the company's use of controversial NFL quarterback Colin Kaepernick in its latest ad campaign, and topped out a record high of $86.04 last Friday, Sept. 21.

Johnson Controls Inc (NYSE:JCI) is struggling today, down 1.3% to trade at $36.48. After breaking through the $40 region back in late August, the stock pulled back sharply. However, a rebound could be on the horizon if history is any guide, with the stock now trading near two trendlines with historically bullish implications.

More specifically, Johnson Controls stock is now within one standard deviation of its 80-day moving average. Over the past three years, there have been four other instances of JCI pulling back to this trendline after trading above it at least 60% of the time over the previous two months. Those prior signals resulted in an average one-month return of 8.06%, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with all four of the returns positive.

A similar trend has occurred with the security's 200-day moving average. In this instance, there have been three other times since 2015 the stock has pulled back to this trendline after a lengthy stretch above it, according to White. Those occurrences yielded an average one-month return of 5.61%, with two of the three returns positive. Rallies of similar magnitude off of either trendline would put JCI back above its year-to-date breakeven level, which roughly coincides with a 61.8% Fibonacci retracement of the stock's sharp decline from late January through April.

Another big bounce could encourage short sellers to throw in the towel. Short interest surged 6.8% in the latest reporting period to 29.71 million shares, and would take nearly a week to cover at the average pace of trading.

A round of bullish brokerage notes could create tailwinds for JCI stock, too. While 12 of 15 brokerages maintain a "hold" or worse recommendation, the average 12-month price target of $40.07 is a slim 9.9% premium to current trading levels.

Those who want to bet on a repeat of history for JCI stock may want to do so with options. The stock has a Schaeffer's Volatility Index (SVI) of 19%, which ranks in just the 9th annual percentile. This reveals the security's short-term options are pricing in unusually low volatility expectations at the moment, a boon to potential premium buyers.

Wendy's Company (NASDAQ:WEN) is up 1.4% to trade at $17.57 today, thanks to a bull note from BTIG, after the firm initiated coverage on the fast food name with a "buy" rating and $20 price target. This is a welcome sign for WEN stock, which had been trending lower in recent weeks. An extended rebound could be imminent though if history is any guide, with the stock now trading near two trendlines with historically bullish implications.

More specifically, Wendy's stock is now within one standard deviation of its 160-day moving average. Over the past three years, there have been eight other instances of WEN pulling back to this trendline after trading above it at least 60% of the time over the previous two months. Those prior signals resulted in an average one-month return of 4.09%, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with 75% of the returns positive.

A similar trend has occurred with the security's 200-day moving average. In this instance, there have been six other times since 2015 the stock has pulled back to this trendline after a lengthy stretch above it, according to White. Those occurrences yielded an average one-month return of 3.42%, with 67% of the returns positive. Rallies of similar magnitude off of either trendline would put Wendy's stock back near its Aug. 20 11-year high of $18.68. 

Another big bounce could also be fueled by a short squeeze. Short interest fell 3.5% in the last two reporting periods to 17.74 million shares, but that still represents nearly 10% of WEN's total available float, and more than seven days of pent-up buying power, at its average pace of trading. 

The fast food icon could also benefit from an unwinding of pessimism in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 5.02. Not only does this show that long puts have outnumbered calls by a five-to-one ratio, but it ranks in the 94th percentile of its annual range, indicating the rate of put buying relative to call buying is quite unusual.

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.84 ranks in the 95th percentile of its annual range. This shows that short-term traders have rarely been less call heavy during the past year.

Those who want to bet on rally may want to do so with options. The stock has a Schaeffer's Volatility Index (SVI) of 22%, which ranks in just the 5th annual percentile. This reveals the security's short-term options are pricing in unusually low volatility expectations at the moment, a boon to potential premium buyers.

Shares of Campbell Soup Company (NYSE:CPB) are moving lower in afternoon trading, last seen down 0.5% at $39.62. Below we will take a look at how CPB has been faring on the charts, and dive into why now looks to be an ideal time to bet on the stock's next leg lower, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

CPB has been in a downward spiral since its early December peak, notably suffering a huge bear gap in May. While the shares managed to recover those losses, the $42-$44 region has capped breakout attempts, alongside the 160-day moving average. Overall, Campbell Soup stock has shed 17% year-to-date.

Meanwhile, the shares are now within one standard deviation of their 160-day moving average, after a lengthy stretch below this trendline. There have been seven similar signals of this kind in the past three years, after which CPB went on to average a one-month loss of 3.15%, per White. Another dip of this magnitude would put the shares back near $38.38.

In the options pits, however, traders have been leaning bullish in recent weeks. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows a 10-day call/put volume ratio of 3.22, ranking in the 80th annual percentile. This indicates that calls have been bought over puts at a faster-than-usual clip..

Echoing this is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.26, which ranks in the bottom percentile of its annual range. This means short-term traders have rarely been more call-heavy on CPB in the past year.

Finally, short interest fell 12.5% during the past two reporting periods, but still represents nearly 19% of the stock's total available float. At the packaged food concern's average daily trading volume, it would take shorts over a week to buy back the rest of their bearish bets.

Lowe's Companies, Inc. (NYSE:LOW) has really broken out in the past month. At last check, the home improvement stock was up 0.3% to trade at $115.10, but earlier came within a chip-shot of its Sept. 21 record high of $117.35. That mark could soon be toppled, as history suggests LOW shares could be headed even higher in the coming months.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 18% ranks in the 9th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective. What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, the two other times LOW was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of annual readings since 2008, the equity averaged a one-month gain of 5.58%, and was positive both times.

In addition, LOW is also one of the best stocks to own in the fourth quarter, according to Schaeffer's Senior Quantitative Analyst Rocky White. Going back 10 years, LOW stock has gained 3.86%, on average in the fourth quarter, with a win rate of 80%. 

On the charts, Lowe's stock already boasts a 24% lead in 2018, and recently gapped higher in late August following an upbeat quarterly report. Since then, the shares have been ushered higher by their ascending 10-day moving average.

Lastly, the security has been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 95 out of 100, which shows Lowe's has tended to make much bigger moves on the charts compared to what the options market was expecting.

Telecommunications concern AT&T Inc. (NYSE:T) is slightly lower in late-afternoon trading, last seen down 0.2% at $33.86. AT&T stock has already been a notable underperformer throughout 2018, but the stock's recent rally up to a key trendline with bearish implications could create an ideal entry point to bet on the equity's next leg lower. 

Specifically, T has shed 13% since the start of the year, with that decline punctuated by an April 26 post-earnings bear gap. T's post-gap rally attempt was rejected in mid-June near $34 -- site of its pre-gap lows in March and April -- and the shares went on to tag a six-year intraday low of $30.13 by late July. Now, the shares are once again trading just below that $34 mark, as well as their 200-day moving average.

Digging deeper, the shares are now within one standard deviation of their 200-day moving average, after a lengthy stretch below this trendline. There have been eight similar signals of this kind in the past three years, after which T went on to average a one-month loss of 3.11%, with 75% of those returns negative, per Schaeffer's Senior Quantitative Analyst Rocky White. Another dip of this magnitude would put the shares back near $32.80 by this time next month.

In the options pits, traders have been bullish, per T's 10-day call/put volume ratio of 2.51, which ranks in the 72nd annual percentile. This lofty ranking indicates that calls have been purchased over puts at a faster-than-usual pace during the last two weeks.

What's more, AT&T stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.51, which ranks below 100% of other such readings from the past year. This means that short-term options traders are unusually call-skewed at the moment.

With plenty of optimism that could unwind to push the stock lower, and firm technical resistance in place, it looks like an ideal time to bet bearishly on T with put options -- which are currently cheap, from a volatility standpoint. The stock's Schaeffer's Volatility Index (SVI) stands at 17%, in the 21st annual percentile, which means short-term options are pricing in fairly mild implied volatility premiums.