Stock Alert and Holding Pattern: Esterline Technologies Corporation Stock Volatility Hits An Inflection Point

Esterline Technologies Corporation (NYSE:ESL) Stock Volatility Hits An Inflection Point

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Stock Alert and Holding Pattern
Before we cover the full analysis we make a quick alert here that Esterline Technologies Corporation (NYSE:ESL) has seen its stock price move at an inflection point level. We'll go through the details below -- but that's the lede -- the stock has been behaving, roughly speaking, 'normally.' If there was a post it note to summarize the stock movement in the last 30-days it would likely read "holding pattern." The HV20 is 28.02% verus the HV20 of the S&P 500 at 6.43%.

But don't confuse a holding pattern with low risk -- this is quite possibly an inflection point.

Another bit to this holding pattern, which we cover in the article, is that while the historical volatility may be an inflection point level, the real question that needs to be answered for option traders is not if the HV20 is high or low, but rather if the implied volatility that is priced for the next 30-days accuratley reflects what we're about to see in the stock for the next month.

To jump forward and examine if owning or shorting options has been a positive trade in Esterline Technologies Corporation, you can go here: Getting serious about option trading.

This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for Esterline Technologies Corporation (NYSE:ESL) . We examine the little used gem of daily stock volatility over a 20-day and 30-day trading period, as well as comparisons to the last year and the actual stock returns over the last three- and six-months and the S&P 500 and Nasdaq 100 indices.

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As a heads up, in the "Why This Matters" section at the end of this article on Esterline Technologies Corporation (NYSE:ESL) , we're going to take a step back and show really clearly that there is actually a lot less "luck" in successful option trading than most people are aware of. This idea of an "option trading expert" is vastly over complicated so those with the information advantage can continue to profit at the expense of the rest.

But before that, let's turn back to ESL. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.

ESL Recent Stock Volatility

Stock volatility using proprietary measures has hit an inflection point level. Let's take a deep dive into some institutional level volatility measures for Esterline Technologies Corporation (NYSE:ESL) .

Esterline Technologies Corporation Stock Performance
ESL is up +2.3% over the last three months and up +22.7% over the last six months. The stock price is up +32.7% over the last year. The current stock price is $87.85.

ESL Step 1: Stock Returns
The one-year stock return does not impact the volatility rating since we are looking at a shorter time horizon. However, the rating does examine the 3-month returns and the absolute difference between the 3-month and 6-month returns.

  The 3-month stock return of +2.3% is too small to impact the stock volatility rating for ESL.
  The noteworthy difference between the 3-month and 6-month stock returns has a meaningful impact on the stock volatility rating for ESL.

ESL Step 2: Daily Stock Volatility Level
The HV30® takes the stock's day to day historical volatility over the last 30-days and then annualizes it. The HV20 looks back over just 20-days -- a shorter time period. Here is the breakdown for Esterline Technologies Corporation (NYSE:ESL) and how the day-by-day stock historical volatilities have impacted the rating:

  The HV20 of 25.7% is low enough that it has a downward impact on ESL's volatility rating.

ESL Step 3: Esterline Technologies Corporation HV20 Compared to Indices
* The HV20 for ESL is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.

* The HV20 for ESL is substantially larger than that for the Aerospace & Defense ETF (XAR) which raises the volatility rating.

Here is summary data in tabular and chart format.

   S&P 500
   NASDAQ 100
           25.7%    6.43%    6.07%    13.4%

ESL Step 4: Daily Volatility Percentiles and Highs

We also examine the annual high of the HV30 in our rating.
  The 52 week high in HV30 for ESL is 51.5%, which is just high enough to have a small impact on the stock volatility rating.

Here is summary data in tabular and chart format.

HV30 High   
           25.7%    28.0%    51.5%

Final Stock Volatility Percentile Level: ESL
The final evolution of the volatility rating for Esterline Technologies Corporation is a comparison of the HV30 value relative to its past, which is neatly summarized in the percentile -- a scoring mechanism that goes from a low of 1 to a high of 100.

Esterline Technologies Corporation Realized Volatility Percentiles