Defense stocks may have cooled off in March, but it may be time to buy the dip
Howmet Aerospace Inc (NYSE:HMW) is down 0.8% to trade at $248.08, headed for its fourth loss in five sessions. HMW tapped a record high of $267.31 on March 2, but is nursing an overall monthly deficit of over 5%. It might be time to buy the dip though, with the stock flashing a historic bull signal, per data from Schaeffer’s Senior Quantitative Analyst Rocky White.
HWM’s buy-to-open put/call ratio just hit the 90th percentile and crossed over 1.0. Per White, in the last three years that’s occurred five other times for the aerospace name. The stock has averaged a 10-day return of 2.8% with a 60% success rate, and a 7.1% return 21 days later with an 80% success rate. From its current perch, jumps of this magnitude would put shares above $254 and $265, respectively — the latter within a chip-shot of record territory.
Put traders have dominated the options pits of late. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HIMS’s 10-day call/put volume ratio of 1.61 ranks higher than 91% readings from the last 12 months. Should this bearish sentiment begin to unwind, it could trigger tailwinds for the shares.
Things are looking up for premium sellers, too. This is per the stock’s Schaeffer’s Volatility Scorecard (SVS) of 17 out of 100, which indicates HWM has consistently realized lower volatility than its options have priced in.