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Oversold Stock of the Day: Palomar Holdings (PLMR)

Oversold Stock of the Day: Palomar Holdings (PLMR)

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  • Palomar Holdings (PLMR) is a specialty property insurance company focusing on earthquake, Hawaiian hurricane, flood, and other types of insurance. Its shares have heavily declined in recent weeks, leading to oversold conditions in shares.

    Shares have shed nearly 25 percent in the past six sessions, following the company’s earnings. The firm reported a $15 million loss, or about $0.62 per share, far larger than expected. It also overshadowed an announcement to increase its stake in Hawaiian hurricane policies.

    As a result of this earnings-driven drop, shares have gotten hammered, dropping below their 50- and 200-day moving averages. The stock’s relative strength index, or RSI, also hit 28.

    With shares now looking oversold following a multi-day drop, shares look due for a rebound.

    Action to take: Shares will likely take some time to recover, and may still take a few trading sessions to find their absolute bottom on the recent trend. Given the drop, the April 2021 $85 calls look like a reasonable rebound trade.

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  • The strike price is about midway between the current share price near $70 and the prior high in the $100 range. Trading at about $4.75 based on the bid/ask spread, the option is poised to move substantially higher. Should shares rebound to $100 before expiration, the option would be worth $15, or more than triple the current price.

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