The shares of CVS Health Corp (NYSE:CVS) are struggling to recover from the bear gap they suffered late last week, with pressure at the $66 region thwarting several attempts. While the stock is now consolidating just below here, its 320-day is providing solid support. Plus, this pullback has brought CVS within a historically bullish trendline, indicating the stock could be due for a short-term surge.
According to data from Schaeffer's Senior Quantitative Analyst Rocky White, CVS just came within one standard deviation of its 40-day moving average. Within the past three years, four similar signals have occurred, with the equity higher one month later each time, averaging a 21-day gain of 8.66%. At CVS's current perch of $64.05, a similar move would put it at $69.60, closing the aforementioned early June bear gap.
Calls haven't been more popular in the past 12 months. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CVS sports a 50-day call/put volume ratio of 3.89, which sits higher than all other readings from the last year. Plus, the stock's a Schaeffer's open interest ratio (SOIR) of 0.58 sits in the low 16th percentile of its annual range, echoing this call-bias.
Some of this bullish behavior could be short sellers hedging against any upside risk, however. In the last two reporting periods, short interest rose 35.1% to 1.90 million shares.
No matter the stance, options look like a prudent play when weighing CVS's next move. The stock's Schaeffer's Volatility Index (SVI) of 35% stands higher than just 18% of all other annual readings. This means that options players are pricing in relatively low volatility expectations at the moment.