HRL's has bounced off of its 320-day moving average six times before
The shares of Hormel Foods Corp (NYSE:HRL) are down 0.5% at $46.98 today, after receiving a price-target cut from JP Morgan to $44 from $45, as well as a price-target hike from Piper Sandler to $48 from $47. And while the security has cooled off from its early-November rally in which shares flirted with an Aug. 24 all-time-high of $52.94, traders shouldn't look away just yet. This pullback has HRL near a historically bullish trendline, which could send the equity higher in the coming weeks.
Specifically, Hormel Foods stock just came within one standard deviation of its 320-day moving average, after spending several months above this trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, six other similar signals have occurred during the past three years. One month later, HRL enjoyed a 3.5% gain, with all six returns positive. From its current perch, a move of similar magnitude would put the security above the $48 mark -- back near that record high.
Analysts were plenty pessimistic toward the equity coming into today, leaving plenty of room for upgrades and additional price-target hikes going forward. Of the nine in coverage, eight carried a tepid "hold" or worse rating. Plus, the stock's 12-month consensus target of $46.22 is a still a 1.7% discount to current levels.
Shorts are already hitting the exits, though there is still plenty of pessimism left to be unwound. Short interest dropped 2.7% in the last two reporting periods, and the 24.76 million shares sold short account for a substantial 8.8% of the stock's available float, or over three week's worth of pent-up buying power.
A sentiment shift in the options pits could also help keep the wind at the equity's back. This is per HRL's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 76% of readings from the past year. In simpler terms, puts are being picked up at a quicker-than-usual clip.
Now looks like the perfect time to take advantage of HRL'S next move with options. The equity's Schaeffer's Volatility Index (SVI) of 22% sits in the extremely low 7th percentile of its annual range. This means the stock is sporting attractively priced premiums at the moment.