There's potential for a sizable short-covering rally
Every day for the next two weeks, we're going to highlight one of Schaeffer's top 14 picks for 2021. Up today is an oft-overlooked software stock with long-term support in place. To access the entirety of the 2021 report, click here.
Like most of Wall Street, software concern Everbridge Inc (NASDAQ:EVBG) had a volatile 2020, but in recent months has been on a steady trend higher. The equity recently found support at the 52- and 80-week moving averages, a similar bullish trend of support the shares experienced in October and November of 2019. Even further, a large triangle pattern has formed for the shares and is breaking above all daily moving averages, making now a perfect entry point for bulls.
Looking towards the options pits, puts seem to be a favorite of both short- and long-term traders. Specifically, EVBG sports a 50-day put/call volume ratio at the ISE/CBOE/PHLX that ranks in the 91st percentile of its annual range, indicating a much healthier-than-usual appetite for long puts of late. Echoing this, short-term players have rarely been more put-heavy, as the stock’s SOIR sits in the 85th percentile of all other readings from the past 12 months. An unwinding of this bearish attention could send the tech name surging.
Lastly, short interest has been rallying throughout much of the year, despite the stock’s volatile run. With the security’s available float coming in at 14%, this could trigger a massive short-covering rally, should short interest roll over.
Matthew Timpane, CMT, is a senior market strategist at Schaeffer's Investment Research. With over a decade of experience in investing, he has a knack for finding unique opportunistic risk vs. reward propositions. His areas of expertise include managing multi-strategy portfolios, trend-following, inter-market analysis, and trade execution efficiency. He has helped tens of thousands of traders navigate the world of options trading through live events such as Benzinga Boot Camps, MoneyShow events, and a number of popular trading podcasts. Mr. Timpane earned his B.S. in business from the University of Wisconsin.