Mining stock flashing bull signal, cheap options
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Last week, we checked in on a mining stock flashing a bullish signal. And while gold prices have lost some of their luster this week, there's another mining stock flashing a similar signal that's worth looking in to. Data from Schaeffer's Senior Quantitative Analyst Rocky White suggests Alamos Gold Inc (NYSE:AGI) could see more tailwinds in the months ahead.
Alamos Gold stock scored a three-year high of $8.76 back on April 30. This new peak comes amid historically low implied volatility (IV) -- a combination that has been bullish for the stock in the past. According to White's modeling, there was one other instance in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th annual percentile or lower -- as is the case with AGI's current SVI of 72%, which sits in the 18th percentile of its 12-month range.
The data shows that one month after that signal, the mining stock was up 12%. From its current perch at $8.60, that means another move of similar magnitude would put the stock around $9.63, territory not seen since July 2016. AGI has more than doubled off its March 16 lows of $3.35, with pullbacks contained by its 20-day moving average.
In the options pits, calls rule the roost amid limited absolute volume. In the last 10 days, 1,356 calls have been bought at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 40 puts.
By Patrick Martin, Managing Editor at Schaeffer’s Investment Research