Today’s chart is of Navistar (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 Am Looking At:
- Strong outperformer, up more than 58 percent year-to-date
- Month-long consolidation phase (Cup with Handle formation?) outperforming the S&P 500 Index
- Earnings release on this Wednesday, September 4th, before the market opens, could be the catalyst to break shares out of consolidation phase
- Average historical earnings move is 9.9 percent 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
- 10-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 percent 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
- 6 out of 11 analysts rate the shares a “hold” or worse, possible future upgrades after a possible positive earnings release
Strategy: Aggressive trade: buying a call ahead of next week’s earnings in anticipation of breakout after release. Target = round-number $40 level.