An Unwinding of Pessimism Could Send Nucor Stock Surging

The shares of Nucor Corporation (NYSE:NUE) are consolidating at the 40-day moving average, a trendline that has had historically bullish implications for the stock in the past. With this in mind, NUE looks poised to add to its roughly 115% year-over-year gain.

 

 
Short interest has risen 189% over the past year, and 86% over the past five months. Despite this, NUE has continued to move higher, and potential short covering could provide tailwinds. Plus, Nucor stock is due for a round of bull notes. Of the 14 analysts in coverage, 11 carry a tepid "hold" rating, while the 12-month consensus price target of $115.09 is in line with current levels.
 
An unwinding of pessimism in the options pits could give Nucor stock a boost, too. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.05 stands higher than all other readings from the past year, meaning short-term options traders have rarely been more put-biased. Echoing this, the stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 96th percentile of its annual range.
 
Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a 93 out of 100, meaning NUE has exceeded option traders' volatility expectations during the past year. Our recommended call has a leverage ratio of 5.8, and will double in a 17.4% rise in the underlying equity.