The shares of consumer lending concern Ally Financial (ALLY) have soared on the charts over the last year, culminating in a March 18 all-time high of $47.30. The security is now up nearly 200% year-over-year, and has already tacked on 28.3% in 2021. And though the stock has pulled back in the last few sessions, this most recent dip has ALLY trading near a historically bullish trendline that could send the equity surging past its aforementioned highs.
More specifically, Ally Financial stock just came within one standard deviation of its 40-day moving average, after spending a significant amount of time above this key trendline. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, nine similar signals have occurred during the past three years. In 89% of those instances, the equity enjoyed a positive return one month later, averaging a 10% gain. From its current perch of $45.77, a move of similar magnitude would put ALLY at $50.35.
Daily chart of ALLY since March 2020
A short squeeze could fuel additional gains for the stock. Short interest is up a staggering 74.3% over the last two reporting periods, and the 14.79 million shares sold short account for 4% of the stock’s available float, or over three days’ worth of pent-up buying power.
Premiums are reasonably priced at the moment, according to ALLY’s Schaeffer’s Volatility Index (SVI) of 38%, which sits higher than just 2% of readings from the past year. This indicates options players are pricing in relatively low volatility expectations – a boon for premium buyers.
