The best stock to own after a Fed rate hike also boasts attractively priced options
The shares of power provider NRG Energy Inc (NYSE:NRG) have pulled back since notching a two-year high of $29.78 about a month ago. However, if history is any indicator, bulls may want to buy the NRG stock dip -- or scoop up short-term calls, which are a relative bargain right now -- with the security sending up two "buy" signals recently.
Signal 1: Pullbacks to 40-Day Have Been Buying Opportunities
NRG recently came within one standard deviation of its 40-day moving average, after a lengthy stretch north of this trendline. According to Schaeffer's Senior Quantitative Analyst Rocky White, similar pullbacks to this trendline have marked buying opportunities. After the past seven dips of this kind, NRG stock was higher one month later 67% of the time, averaging a healthy gain of 5.53%.
At last check, NRG Energy shares were down 1.6% to trade at $27.69. Still, the equity has more than doubled in the past year, and has surged more than 31% since gapping higher in mid-July on plans to sell assets. Another 5.53% rally from current levels would place NRG stock around $29.22 -- back within a chip-shot of new highs.
Signal 2: The Best Stock to Buy After a Rate Hike
Meanwhile, NRG has been the best stock to own a month after Fed rate hikes -- which the central bank did again last night. The security has been higher one month after each of the past four rate hikes since 2015 -- and is only one of three stocks to boast a 100% win rate.
Further, the equity has averaged a stellar one-month gain of 17.07%! That's hands-down the highest average return of all SPX stocks, with the next best coming in at 4.86%. From current levels, another 17.07% rally would place NRG around $32.42 -- territory not charted since late 2014.
More Reasons to Watch NRG Stock
Despite NRG Energy stock's rapid rise over the past year, short interest still represents nearly a week's worth of pent-up buying demand, at the equity's average daily trading volume. Should the stock resume its quest for new highs, a short squeeze could add fuel to the fire.
Plus, now is an opportune time for short-term options traders to speculate on NRG. The stock's Schaeffer's Volatility Index (SVI) of 37% is higher than just 20% of all other readings from the past year, pointing to relatively muted volatility expectations in the options pits.