Commodities stocks BHP Billiton Limited (NYSE:BHP) and Teck Resources Ltd (NYSE:TECK) are trading higher today, thanks to mining sector tailwinds. What’s more, both stocks recently bounced off key trendlines that have had bullish implications in the past. If history repeats itself, BHP and TECK stocks could be screaming “buy” right now.
BHP Could Hit New Highs, If History Repeats
At last check, BHP was trading up 3% at $42.30. According to Schaeffer’s Senior Quantitative Analyst Rocky White, BHP stock is now trading within one standard deviation of its 80-day moving average after a lengthy stint above this trendline. Following the last seven pullbacks to this moving average, BHP was up 9.6%, on average, one month later, and was higher 83% of the time. A similar 9.6% rally would place BHP Billiton stock around $46.36 — in territory not charted in two years.
Should BHP stock continue its ascent, plenty of shorts could get squeezed. Currently, short interest represents nearly six days’ worth of pent-up buying demand, at the equity’s average daily trading volume. Meanwhile, upgrades could ensue, with just four of the 11 analysts following BHP Billiton doling out a “buy” or better endorsement.
TECK Stock Could Test 2017 Highs
Teck Resources stock was last seen 0.4% higher at $22.94. According to White, TECK stock is now trading within one standard deviation of both its 80-day and 160-day moving averages, following lengthy stints above the trendlines.
After the last two pullbacks to the 160-day, Teck shares were up an average of 6.25%, and were higher both times.Taking a look at the last two pullbacks to the 80-day, meanwhile, TECK was up 11.2%, on average, one month later, and was higher 100% of the time. A similar 11.2% rally would jump Teck Resources stock around $25.51 — right in the vicinity of its highs over the past year.
Teck is set to report third-quarter earnings on Oct. 26, which will have an impact on the stock’s trajectory. Ahead of earnings, short-term options players are more call-heavy than usual. TECK’s Schaeffer’s put/call open interest ratio (SOIR) of 0.63 ranks in only the 11th percentile of its annual range, suggesting near-term options traders have rarely been more call-biased during the past 12 months.
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