Gym giant Planet Fitness (PLNT) is scheduled to report third-quarter earnings after the close tomorrow, Nov. 7. Ahead of the event, the equity just flashed a historically bullish technical signal, suggesting now may be the time to get in on the stock’s next leg higher.
The second half of the year has been abysmal so far for PLNT shares. Since touching an all-time high of $81.90 in mid-June, the equity has surrendered roughly 25%. The stock has seemingly found support in the $57-$60 area, which is home to a 10% year-to-date gain for PLNT.
Further, the shares are back within one standard deviation of their 80-week moving average, after a lengthy stretch above the trendline. While there have been just two similar pullback signals for PLNT during its lifetime, the equity went on to average a one-month gain of 9.1%, and was higher a month later both times. Three months out, PLNT was up a whopping 19.5%, and also in the black both times.
It certainly appears recent options buyers are expecting a bounce for PLNT. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than three Planet Fitness calls for every put during the past two weeks. By purchasing calls to open, the buyers expect PLNT shares to move north of the option’s strike by the contract’s expiration date.
Currently, the November 72.50 call is home to peak open interest among all series, with nearly 6,000 contracts outstanding. Traders who purchased the calls to open think PLNT will rally above $72.50 by the close on Friday, Nov. 15, when the front-month options expire. If the aforementioned technical signal once again comes to fruition, another 19.5% surge would put the equity around $73.28.