Software Stock Has Room To Run

The shares of Okta (OKTA) are up 2.9% to trade at $233.74 at last check, a fresh record high. With help from its 10-day moving average, OKTA now sports a 102.8% year-to-date lead. However, a historic bullish signal is flashing that may indicate even more upside for the stock.

More specifically, the stock’s recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been four other times in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer’s Volatility Index (SVI) sat in the 20th percentile of its annual range or lower – as is the case with OKTA’s current SVI of 49%, which sits in the 18th percentile of its 12-month range. Data shows the stock was higher a month later each time, averaging a return of 14%. From its current perch, a move of similar magnitude would put Okta stock above the $266 level, which is triple its March 16 low of $88.66.

Looking over at the brokerage bunch, there may be some bull notes on the horizon for the equity. OKTA’s 12-month consensus price target of $222.74 sits at a 4.5% discount to current levels, leaving plenty of room for price-target hikes that could push the security higher. On that note, of the 14 analysts in coverage, five still sport a “hold” rating on the stock.

Plenty of pessimism lingers in the options pits as well. Though calls are outnumbering puts on an overall basis, OKTA’s 50-day call/put volume ratio of 0.83 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is in the elevated 84th percentile of its annual range. In other words, long puts are being picked up at a faster-than-usual rate.

Lastly, short interest makes up 6.4% of the stock’s available float. More specifically, it would take nearly five days to buy back these shares at OKTA’s average pace of trading.

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