This Healthcare Stock Looks To Vault Up The Charts

CNC stock recently pulled back to a key technical level

Oct 31, 2017 at 10:00 AM
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Healthcare stock Centene Corp (NYSE:CNC) has been charting a path higher over the last 12 months, up more than 49%. After hitting a record high of $98.72 in mid-September, the stock pulled back to its 80-day moving average. This trendline has had historic implications in the past, suggesting it could be a prime time to bet on the stock's next leg higher.

cnc daily chart

 

The stock's longer-term surge has coincided with a sharp rise in short interest -- which speaks volumes to its underlying strength. Since mid-December, specifically, these bearish bets have more than doubled to 5.70 million contracts -- the most since last November. A capitulation from some of the weaker bearish hands could help fuel CNC's fire.

The equity could find some help in the options arena, too. CNC's Schaeffer's put/call open interest ratio (SOIR) of 2.35 ranks higher than 98% of comparable readings taken in the past year -- meaning short-term speculators have rarely been as put-skewed toward the equity as they are now. While a high SOIR for CNC has historically been consistent with strong returns, hefty put open interest at the underfoot 90 strike could create a near-term floor, as the hedges related to these bets unwind.

Low expectations are being priced into the stock's near-term options, too, per its Schaeffer's Volatility Index (SVI) of 31% -- in the 32nd annual percentile -- a potential boon to premium buyers.

Subscribers to Schaeffer's Weekend Trader Alert options recommendation service received this CNC commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

 

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