Today’s chart is of Navistar
(NYSE:NAV), which manufactures and sells commercial and military trucks, buses, diesel engines, and recreational vehicles, as well as provides service parts for trucks and trailers worldwide.
What I'm Looking At:
Strong outperformer, up more than 58% year-to-date.
Month-long consolidation phase (cup-with-handle formation?) outperforming the S&P 500 Index (INDEXSP:INX).
Earnings release on Wednesday, September 4, before the market opens, could be the catalyst to break shares out of consolidation phase.
Average historical earnings move is 9.9% according to Trade-Alert.com.
The 10-day buy-to-open put/call ratio is reading 1.86, indicating that option players are purchasing nearly twice as many puts than calls.
Ten-day put/call ratio ranks in the 80th percentile of all readings taken during the past year, an indication of pessimism.
Short interest is high, nearly 20% of the float.
Short positions may be underwater as a big chunk was placed at lower prices.
Short interest ratio is 13, indicating it could take 13 days to cover based on NAV’s average daily volume.
Six out of 11 analysts rate the shares a “hold” or worse, possible future upgrades after a possible positive earnings release.
On aggressive trade would be buying a call ahead of next week’s earnings in anticipation of breakout after release. Target = round-number $40 level.
This article by Tony Venosa, CMT, was originally published on Schaeffer's Investment Research.
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No positions in stocks mentioned.