CAVA Group Inc (NYSE:CAVA) has pulled back since its early-June rally, though the shares are still up 33.3% year to date. The equity is also testing support at its 126-day moving average (representing roughly half a year of trading), a trendline with historically bullish implications.
According to Schaeffer’s Senior Quantitative Analyst Rocky White, CAVA is trading within 0.75 times the 126-day moving average’s 20-day average true range (ATR), after spending at least 80% of the previous two weeks and 80% of the prior 42 trading sessions above that trendline. This setup has appeared three times over the last decade, after which the stock was higher one month later 100% of the time, averaging a large 24.6% gain. A similar move from the stock’s current perch at $78.26 would rise to $97.51.
Short covering could provide an added tailwind, as short interest represents 13.3% of the stock’s available float. It would take shorts nearly five days to buy back their bearish bets, at CAVA’s average pace of trading.
The options pits are pricing in relatively low volatility expectations, too, per CAVA’s Schaeffer’s Volatility Index (SVI) of 54%, which sits in the 17th percentile of its annual range. The stock’s Schaeffer’s Volatility Scorecard (SVS) of 88 out of 100 indicates it has consistently exceeded those expectations during the past year.