Allstate should make a bullish trend line break
Updated
Allstate is one of my top picks in terms of both value and sentiment. In terms of technicals, it's a classic potential trend line breakout play.
Value
After a significant selloff this year, Allstate is still trading near the bottom of its 3-year valuation range in P/E, P/S, and P/D terms. The company is financially healthy, with a 78/100 score for financial health from S&P Global. It pays a solid, but sustainable dividend; I estimate 2.37% dividend return in the next 12 months, assuming the dividend gets bumped up to 58 cents in the first quarter of next year. In the last 12 months, the dividend was only 16% of GAAP EPS, which is a very comfortable level. The PEG ratio of 2.77 is pretty good, and the PSG ratio of 0.25 is extremely good. (Admittedly, analyst coverage is a little thin, so we're not working with very many different estimates of future earnings and sales.) In fact, the only value metrics by which Allstate looks a little lackluster are its ESG score and earnings surprise history, both a little below the market average.
Sentiment
Sentiment on Allstate has been improving over the last month, with a large increase in the Equity Starmine Summary Score to its current rating of 9.7/10. Allstate got a hefty settlement from PG&E last month, so the news environment looks good. The put/call ratio on Allstate is bullish, but not strongly bullish, at 0.69. (A put/call ratio under 1 is bullish; a put/call ratio over 1 is bearish.)
Technicals
Technicals are somewhat negative for now, but given the improvement in analyst ratings, I expect that Allstate will soon make a bullish trend line cross. For a swing trade, I am setting my profit target in the 105-106 range. I will go ahead and buy ahead of the trend line cross, but another way to play this would be to wait for a confirmed cross to place a buy.
Value
After a significant selloff this year, Allstate is still trading near the bottom of its 3-year valuation range in P/E, P/S, and P/D terms. The company is financially healthy, with a 78/100 score for financial health from S&P Global. It pays a solid, but sustainable dividend; I estimate 2.37% dividend return in the next 12 months, assuming the dividend gets bumped up to 58 cents in the first quarter of next year. In the last 12 months, the dividend was only 16% of GAAP EPS, which is a very comfortable level. The PEG ratio of 2.77 is pretty good, and the PSG ratio of 0.25 is extremely good. (Admittedly, analyst coverage is a little thin, so we're not working with very many different estimates of future earnings and sales.) In fact, the only value metrics by which Allstate looks a little lackluster are its ESG score and earnings surprise history, both a little below the market average.
Sentiment
Sentiment on Allstate has been improving over the last month, with a large increase in the Equity Starmine Summary Score to its current rating of 9.7/10. Allstate got a hefty settlement from PG&E last month, so the news environment looks good. The put/call ratio on Allstate is bullish, but not strongly bullish, at 0.69. (A put/call ratio under 1 is bullish; a put/call ratio over 1 is bearish.)
Technicals
Technicals are somewhat negative for now, but given the improvement in analyst ratings, I expect that Allstate will soon make a bullish trend line cross. For a swing trade, I am setting my profit target in the 105-106 range. I will go ahead and buy ahead of the trend line cross, but another way to play this would be to wait for a confirmed cross to place a buy.
Note
I should add that I may not buy right away. I'm not a veteran trader of insurance stocks, so I don't really know how the stock will react to two tropical storms and a California wildfire. I'm gonna watch it early this week and see what it does, and maybe look at buying at 92.50 or even 86 if it gets that low.Note
AllState briefly violated the bottom of its triangle this morning. Also, the put/call ratio rather strongly deteriorated this morning. That supports a short-term bearish scenario due to the tropical storms and California wildfire. I am looking for one of two scenarios:Note
Allstate held the first support and made a bullish trend line cross today. It has pulled back to the trend line in sympathy with broader market weakness, but I do expect follow-through on this move in the coming weeks.Note
IAK insurance ETF also made a bullish trend line break:Note
The Allstate trade has been very successful so far. There's a strong resistance level here as we retest the highs from May and June. But we've been at the resistance for 9 days without any real rejection, so I think it's likely that we eventually break through. IMO the fundamentals on Allstate are still good and this remains a solid buy.
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