Molina Eyes 7th Straight Gain – And the Rally Could Have Legs

While the rest of the stock market slips amid escalating trade tensions, Molina Healthcare (MOH) shares are pacing for a seventh straight gain. In fact, MOH is within striking distance of Monday’s record high of $105.76, which stemmed from the Trump administration’s decision to suspend some Obamacare payments. At last check, Molina stock was up 1.2% to trade at $105.60 — and a recent options signal could point to more upside ahead.

MOH shares have surged more than 50% in the past year, with pullbacks contained by their 40-day and 200-day moving averages. Although the stock is flirting with all-time highs, its short-term options remain attractively priced. Specifically, MOH’s Schaeffer’s Volatility Index (SVI) of 27.9% is in just the third percentile of its annual range.

Since 2008, there have been just two other times at which Molina stock was near an annual high and had an SVI in the bottom 20% of its 12-month range, per data from Schaeffer’s Senior Quantitative Analyst Rocky White. After those instances, MOH was higher one month later both times, averaging a gain of 9.76%. A similar pop from current levels would put the equity just shy of $116.

Despite MOH’s outperformance, more than half the analysts covering the stock maintain chilly “hold” or “sell” ratings. Likewise, short interest represents nearly 16% of the stock’s total available float, or about seven sessions’ worth of pent-up buying demand, at the equity’s average trading volume. A round of overdue analyst upgrades or a short squeeze could add fuel to the insurer’s fire.

Traders expecting more short-term upside for MOH could consider the August 95 call, which was last asked at $12.50. Buyers of the call will profit the higher the underlying shares rally north of $107.50 (strike plus premium paid) by options expiration on Friday, Aug. 17. From current levels, that breakeven is just 1.8% away.