Investors seeking a speculative opportunity in the market may want to turn their attention to Seabridge Gold (SA). A high-risk, high-reward enterprise, Seabridge focuses on the acquisition and exploration of gold properties in North America. Although the company doesn’t generate any revenue, SA stock saw significant interest on Friday due to encouraging developments in the monetary policy front. Additionally, options traders appear to be taking long-side bets on the equity.
According to an AP report published on July 26, the Federal Reserve’s preferred measure of inflation remained low through June. This dynamic supports the thesis that price pressures are steadily fading. More importantly, the framework sets the stage for the central bank to start cutting the benchmark interest rate. That might happen as soon as September, thus invigorating broader sentiment.
Per the news article, “[p]rices rose just 0.1% from May to June, the Commerce Department said Friday, up from the previous month's unchanged reading. Compared with a year earlier, inflation declined to 2.5% from 2.6%.”
Overall, it appears that the worst run of inflation in the past four decades may be approaching an end. Further, Fed Chair Jerome Powell remarked that the disinflationary trend lifted his confidence that the scourge of rising prices has become more manageable.
As the AP mentioned, lower rates combined with disinflationary dynamics may influence the contentious political race between Vice President Kamala Harris and former President Donald Trump. With the labor market still chugging along nicely, voters may be unwilling to rock the boat.
In addition, lower rates typically translate to greater business activity and a higher velocity of money. That’s hugely positive for an asset like SA stock.
Unusual Options Volume Bolsters Confidence in SA Stock
Thanks to the fundamental catalyst of a possible rate cut over the horizon, SA stock ranked among the top highlights in Barchart’s unusual stock options volume screener. This data interface lists out the derivatives that have witnessed aberrantly high (or low) volume relative to prior averages. By understanding where the smart money may be putting its funds, retail investors can potentially make more informed decisions.
Following the ringing of the closing bell on July 26, SA stock options saw total volume hit 7,273 contracts against an open interest reading of 54,287. This figure represented a lift of 296.78% from the trailing one-month average volume. Further, call volume reached 6,464 contracts against put volume of only 809 contracts.
On paper, this pairing yielded a put/call volume ratio of 0.13, which is seemingly bullish; basically, more traders are transacting call options, which give holders the right (but not the obligation) to buy the underlying security at the listed strike price. However, it’s also important to note that for every option bought, that same derivative is sold.
To get a better understanding of high-level sentiment, investors may review Barchart’s options flow screener, which focuses exclusively on big block transactions likely placed by institutional or professional investors. Here, we find that the net trade sentiment stands at $67,400, favoring the bulls.
Overall, the premiums of bullish sentiment options (bought calls, sold puts) totaled $128,200. On the other end, the aggregate of bearish sentiment options (bought puts, sold calls) reached $-60,800. Considering the low volumes seen in the options chain for SA stock, a net trade sentiment of over $67,000 suggests robust optimism.
That’s all the more telling because Seabridge again doesn’t generate revenue. Yet even without this critical financial component, the bulls believe strongly in SA stock.
J-Hook Indicator Puts Spotlight on Seabridge Gold
Despite the lack of sales, there’s another factor besides the bullish options activity that may instill confidence in SA stock: the signaling of the J-Hook Pattern.
Listed among the top Barchart Screeners, the J-Hook alerts traders to potential bullish opportunities. Essentially, the underlying pattern is a sinusoidal price action featuring two distinct sets of up-down cycles. On the final movement, the asset in question may be poised to jump decisively to new heights.
Now, what makes the J-Hook different from other technical analysis patterns is the quantification. In order to be deemed a genuine J-Hook opportunity, the asset must meet nine criteria. If it doesn’t, it’s not a J-Hook. Such a rigorous vetting process weeds out a bunch of white noise that could be prevalent in other “singular” technical indicators.
With the formation of the J-Hook combined with the movement of SA stock within a rising trend channel, it appears that $17 could be the next near-term target for the bulls. Should that be achieved, $18 wouldn’t be out of the question. As the Fed inches closer to a rate cut, Seabridge Gold deserves to be on your watch list.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
