Since an impressive climb in late-December that culminated in an annual peak at the $24 level, the shares of Rite Aid Corporation (NYSE:RAD) have been in sell-off mode. While the $12 region has captured some of these losses, the shares can't seem to shake the pressure mounting at the $14 level, with RAD falling from this area after yesterday's announcement that its CEO Heyward Donigan was also named president of the company, effective Feb. 5. Another rebound could be on the horizon however, as RAD's recent pullback put it in line with a historically bullish trendline on the charts.
Specifically, Rite Aid just came within less than one standard deviation of its 40-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, RAD has experienced four similar signals within the past four years, and was higher one month later three times, averaging a gain of 22.1%. From its current perch at $13.26, a similar move would put RAD at $16.22, home to its highest close since its late-December peak.
An unwinding of shorts could push the security higher, too. Short interest has climbed 30.2% in the last two reporting periods and now represents a whopping 35.8% of the stock's available float. At RAD's average pace of trading, it would take nearly three days to buy back these bearish bets.
Similarly, the brokerage bunch is overwhelmingly pessimistic. Of the three in coverage, one analyst says "hold," while two call Rite Aid a "strong sell." Meanwhile, the 12-month consensus price target of $7.63 stands at a steep 42.6% discount to current levels, leaving the door open for a round of bull notes.