Shares of Ionis Pharmaceuticals (IONS) gapped lower in mid-April, after partner Roche pushed back a timeline for the release of data on the duo’s Huntington disease drug. Since then, IONS stock has stair-stepped even lower on the charts, but now could be an opportune time to speculate on a short-term rebound, if recent history is any indicator.
Since touching an all-time high of $86.58 on April 8, IONS has given up roughly 25% to trade in the $65 area. This region also represents a 20% year-to-date gain for the pharmaceutical concern. Perhaps most notably, though, IONS is now within one standard deviation of its 160-day moving average, after a lengthy stretch of time above this trendline (it hasn’t been breached on a daily closing basis since October).
Over the past three years, IONS has made similar pullbacks to this trendline six other times, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White. Two weeks later, the shares were higher all but once, averaging a gain of 7.81%. Three weeks out, IONS was up 9.9%, on average, and higher 67% of the time. From the stock’s current perch of $65.13, a similar surge would put it around $71.57.
Should IONS once again bounce off familiar trendline support, several short sellers could be caught off-guard. Short interest on the stock surged 26.6% during just the most recent reporting period. These bearish bets now account for more than 10% of the equity’s total available float, representing about two weeks’ worth of pent-up buying demand, at IONS’ average pace of trading.
Investors looking to speculate on IONS’ near-term trajectory should consider doing so with options, which are attractively priced right now, from a historical volatility vantage point. The security’s Schaeffer’s Volatility Index (SVI) of 43% is higher than just 18% of all other readings from the past year, indicating that short-term options are pricing in relatively modest volatility expectations right now.
The June 63 call was last asked at $4.30, for instance. Buyers of the call would begin to profit if IONS shares topped $67.30 (strike plus premium paid) by the close on Friday, June 21, when front-month options expire. That’s just a 3.3% uptick in Ionis shares, from current levels, with around three weeks for the position to play out. Should IONS fall beneath $63, however, the buyer’s risk is limited to the initial $4.30 paid at initiation