This Bull Signal Has Never Failed Lemonade Stock

Lemonade Inc (NYSE:LMND) stock is down 1.2% to trade at $49.89 at last glance, on track for its fourth-straight loss after yesterday recording its worst single-day percentage drop since April. Though the insurance company last week announced narrower-than-expected losses for the fourth quarter thanks to strong underwriting, the stock shedding 11.9%% and hitting its lowest level since October. This pullback has a silver lining, however, as LMND is now testing a trendline with historically bullish implications.

Per Schaeffer's Senior Quantitative Analyst Rocky White, Lemonade stock is now within 0.75 of the 260-day moving average's 20-day average true range (ATR), after remaining above it 80% of the time in the last two weeks and in 80% of the last 42 trading sessions.

This signal has occurred four other times in the past 10 years, after which the security was higher one month later each time, with an average 6.9% gain. From its current perch, a move of similar magnitude would place Lemonade stock back above $53. 

Options traders have been more bullish than usual, for a stock that's in the midst of four-straight weekly losses and 50% off its four-year peak of $99.99 on Jan. 21. The security's 50-day call/put volume ratio of 6.40 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than all readings from the last 12 months.

Short interest down is 8% in the last two reporting periods, yet the 11.96 million shares sold short still make up 18.8% of the LMND's total available float. An unwinding of pessimism could drive additional tailwinds.

Options look affordably priced, too. This is per the security's Schaeffer's Volatility Index (SVI) 82% that sits in the low 26th percentile of annual readings, indicating traders are pricing in low volatility expectations,