ARCH has a chance to trade back within striking distance of its all-time highs
Coal concern Arch Resources Inc (NYSE:ARCH) boasts a solid technical foundation, currently up 84% year-to-date and 185% year-over-year. The shares touched an all-time high of $175.49 on May 4, though they've pulled back over the last month, with a floor forming at the $150 level. There's no reason to fret, however, as this dip has ARCH trading near a historically bullish trendline that could push it back toward its aforementioned peak.
Specifically, Arch Resources stock just came within one standard deviation of its 70-day moving average, after spending considerable time above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, similar signals have occurred six times during the past three years, with ARCH averaging an 4.5% gain in half of the occurrences. A similar move from its current perch of $162.70 would put the equity above the $170 level.
Options traders have a penchant for bearish bets, and an unwinding of this pessimism could result in additional tailwind for ARCH. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 1.42, which stands in the 90th percentile of its annual range. In other words, options traders are picking up puts at a quicker-than-usual clip. The stock's Schaeffer's put/call open interest ratio (SOIR) of 2.49 echoes this, as it sits higher than 98% of readings from the past year. In other words, short-term options traders have rarely been more put-biased.
The good news for buyers is, Arch Resources stock tends to outperform options traders' volatility expectations. This is per the equity's Schaeffer's Volatility Scorecard (SVS) tally of 79 out of 100.
It's also worth noting that short sellers have hit the exits recently, with short interest down 11.3% in the last two reporting periods. However, the 4.54 million shares sold short make up a hefty 30% of the stock's available float -- nearly a week's worth of pent-up buying power. Should additional shorts jump ship, a short squeeze could add even more support on the charts.