Posted on September 30, 2021
Some things are just too outrageous to cope with.
Take the Batflu, for instance…
Another is the Avis Budget Group (NASDAQ:CAR), master of the vehicle rental sphere, whose stock is now due for an I-405 pile-up.
Get this –
So what’s driving the stock price?
Of late, it’s all short covering.
And there’s still a huge short position out there – over 20% of the float!
Which means a short bet on CAR could be a dangerous endeavor.
Unless we carefully craft the trade as a defined-risk proposition.
And so we shall.
But first, let’s have a look at the daily chart for the last six months –
Technically, we have a number of extraordinary phenomena at play…
Now the weekly –
Here, we see –
And it’s with all the foregoing in mind that we offer the following –
A Jew and His Gold recommends you consider selling the CAR November 19th 115/120 CALL spread* for a credit of $2.00 (13.40/11.40) and buying the CAR November 19th 105/95 PUT spread** for $3.00 (6.80/3.80). Total debit is a buck.
Rationale: we like the price of entry here, and the potential reward – pay a dollar, win back nine (maximum gain).
Maximum loss is $6.00 (difference between the CALL strikes plus the initial debit).
The likelihood of taking that loss is diminished by the steepness of the gains of late – the straight move higher of the last five sessions speaks to a buying spasm that appears now to be exhausted.
We could see new highs in another month or two – yes.
But the short term trend is far less likely to be northward.
G-tt in Himmel will decide.
Praise Him all through the day.
And many happy returns!