The shares of chemical company DuPont de Nemours (DD) have been cooling off recently, pulling back after the stock notched a Jan. 22 two-year peak of $87.27 – its highest level since October of 2018. Still, the equity is poised to log its fourth-consecutive daily win, and has added nearly 102% year-over-year. Even better, this most recent pullback has the stock trading near a trendline with historically bullish implications.
More specifically, DuPont de Nemours stock just came within one standard deviation of its 80-day moving average, after spending a considerable amount of time above this trendline. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, three similar signals have occurred during the past three years. In every one of those instances, the equity enjoyed a positive return one month later, averaging a 9.2% gain. From its current perch of $76.59, a move of similar magnitude would put DD at $83.64.
Chart of DD Since September 2020 with 80-Day Moving Average
A shift in the options pits could put some wind at the equity’s back, as puts have been immensely popular over the last 10 weeks. This is according to DD’s 50-day put/call volume ratio of 2.38 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 94% of readings from the past year. In other words, puts are being picked up at a faster-than-usual pace. However, the security’s Schaeffer’s put/call open interest ratio (SOIR) of 0.57 sits in the low 6th percentile of its annual range, meaning short-term option traders have rarely been more call-biased.
Lastly, Premiums on DD are reasonably priced at the moment, per the stock’s Schaeffer’s Volatility Index (SVI) of 38%, which sits in the 13th percentile of readings from the past year. This indicates options players are pricing in relatively low volatility expectations right now.
