Real Estate Stock Could Be Lifted By Short Squeeze

The equity is up an impressive 84% year-to-date

Jul 22, 2020 at 10:34 AM
facebook twitter linkedin


Real estate concern Redfin Corp (NASDAQ:RDFN) has enjoyed a steady rise on the charts -- up 84% year-to-date -- though it’s pulled back somewhat in the last week. However, that pullback has bounced off its ascending 40-day moving average, a level that coincides with its 100% year-over-year gain.

RDFN Chart July 17

Still, the majority of analysts are approaching RDFN with some skepticism, so a shift in analyst attention could be a boon for the equity. Of the 16 in coverage, eight sport a tepid “hold” rating, with one “sell” as well. Plus, the consensus 12-month price target of $31.69 is a significant 19% discount to current levels.

Meanwhile, the number of shares sold short represent 12.6% of the stock’s available float. At RDFN’s average daily trading volume, it would take over a week to buy back these positions, meaning a short squeeze could fuel additional gains.

The good news for options traders is that the security’s Schaeffer's Volatility Index (SVI) of 78% stands higher than 24% of all other readings from the past year – which implies near-term option traders are pricing in relatively low volatility expectations. Plus, RDFN’s Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 81 (out of 100), meaning the stock has tended to exceed option traders' volatility expectations during the past year, a good thing for option buyers.

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

Bernie's Best Stock Bets for Summer 2021

1608308875

 




 
Special Offers from Schaeffer's Trading Partners