The shares have pulled back to their 10-month trendline
Around two weeks ago, we profiled the call activity surrounding Cronos Group Inc (NASDAQ:CRON). While the weed stock has struggled to break out since then, a longer-term trendline has emerged that suggests this recent pullback could present a unique buying opportunity, if past is precedent.
Cronos' recent sluggish price action has brought the stock within one standard deviation of its 10-month moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the three previous times CRON has tested support at this trendline after a lengthy stretch above it -- nine weeks in this latest signal -- the shares were up 40.6%, on average, a month out, with two of the three returns positive.
At last check, Cronos stock was up 1.7% to trade at $15.63, so a move higher of similar proportions a month out would put it near $22, its highest point since late March. Despite CRON's recent consolidation this summer, it still has seen pullbacks caught by the $14 level, and has added 50% in 2019.
A short squeeze could power additional gains and put the security's Feb. 4 all-time peak of $25.10 within sight. Short interest increased by 16% in the two most recent reporting periods to a record high 36.10 million shares. This accounts for a healthy 20% of CRON's total available float, and seven days' of pent-up buying power, at its average pace of trading.
Now might be the perfect time to speculate on Cronos' next move higher with options. Currently, the stock's Schaeffer's Volatility Index (SVI) of 55% stands higher than just 13% of all other readings from the past year. This suggests that short-term options are pricing in relatively low volatility expectations at the moment.
What's more, the equity has had a tendency to make bigger moves than what options were pricing in over the past year. The stock's Schaeffer's Volatility Scorecard (SVS) sits at 92 (out of 100), which means buying premium has been an attractive choice during the last 12 months.