More Upside Could Be Ahead for This Healthcare Name

Near-term premiums on DaVita stock look attractive

Feb 25, 2020 at 2:44 PM
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Healthcare stock DaVita Inc (NYSE:DVA) has recently pulled back after hitting record highs and reporting strong quarterly results. On a longer-term basis, the shares seem to have broken out of a series of lower highs in place since 2015, hinting that more upside is possible going forward. There’s plenty of bearish bias that could unwind around DVA, too, meaning there’s still plenty of fuel in the tank from a contrarian perspective.

DVA WT feb 21

For starters, the majority of analysts still have tepid “hold” ratings on DVA, leaving the door open for bullish attention, especially given the stock’s recent push to fresh highs and strong showing in the earnings confessional. A round of upgrades could bring more buyers to DaVita’s table.

What’s more, DVA has a short-interest ratio of 5.00, showing a week’s worth of buying power is in the hands of short sellers, based on average trading volumes. Short interest dropped 12.1% in the last reporting period, however, so short-covering tailwinds could also help the shares keep rising.

Near-term premiums look attractive at the moment, based on the Schaeffer’s Volatility Index (SVI) of 24%, ranking in the 7th annual percentile. Our recommended call has a leverage ratio of 6.2, and will double in value on a 16% gain in the underlying security.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this DVA 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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