Shares of Fifth Third Bancorp (NASDAQ:FITB) have been soaring on the charts, recently ascending with the help of their 40-day moving average. The banking concern has picked up almost 9% year-to-date — outperforming the broader S&P 500 Index — and recently touched a 10-year high of $34.09 on Feb. 27. What’s more, March and April tend to be the best two months of the year for financial stocks, with FITB gaining more than 2%, on average, both months, looking back 40 years. Against this backdrop, and considering Wall Street isn’t yet convinced of the stock’s strength, now is a good time to jump on the security’s longer-term uptrend.
Despite FITB’s technical strength, traders have been put-heavy in recent weeks. The top three open interest positions are situated at the March 30, 32, and 33 puts, with nearly 25,000 total contracts outstanding — which could provide an added layer of options-related support in the near term. Echoing this, the stock’s Schaeffer’s put/call open interest ratio (SOIR) of 2.17 ranks in the 90th annual percentile, which means that near-term put open interest outweighs call open interest by a much wider-than-normal margin. An unwinding of pessimism in the options pits could add fuel to FITB’s fire.
There is also plenty of room aboard the bullish bandwagon for analysts, as 18 out of the 20 brokerages covering FITB rate it a “hold” or worse. A round of upgrades could lure more buyers to the table.
Likewise, short interest has doubled in the past three months, and surged 40% in just the most recent reporting period. At FITB’s average pace of trading, it would take about a week to repurchase these pessimistic positions — plenty of fuel for a short squeeze.
Those wanting to bet on more upside for the financial concern should consider doing so with options, considering FITB stock’s Schaeffer’s Volatility Index (SVI) of 25% ranks in the 29th annual percentile. This suggests that relatively low volatility expectations are being priced into short-term contracts at the moment. Lastly, our recommended call has a leverage ratio of 6.3, and will hit its profit target on a 15.5% rise in the underlying equity.
Subscribers to Schaeffer’s Weekend Trader Series options recommendation service received this FITB commentary on Sunday night, along with a detailed options trade recommendation — including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
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