בס״ד

Paint Your Wagon (XPEL)

Posted on June 14, 2021

We’re going straight for the jugular today, with a downside bet on the folks who coat, paint and spill filmy glazes all over your car, XPEL, Inc. (NASDAQ:XPEL).

There’s not a lot you need to know about these jalopy-stainers.

First up, the fundamentals are anything but convincing, even for a ‘growth’ stock – whatever that might mean in this environment (a security that rises in value too fast to be explained otherwise).

Consider –

  • P/E is 105.88 (a tad frightening),
  • While forward P/E is staked at 58.92 (oh, the horror…)
  • There’s no dividend on offer,
  • And Price to Book is a helium-filled 41.57.

The stock climbed 1156% since striking its Batflu bottom last March, with an outsize portion of the gain coming in just the last month, following a finger-licking earnings report.

Sorry… should have known better.

The company beat expectations handily, scoring $0.25 on analyst projections of just $0.18.

But it’s more in the technical realm that we now see cause for worry.

Below is the daily chart for the last six months.

Pay particular attention to RSI and MACD indicators at the bottom, both of which are now pointing to a rally that’s run out of steam –

  1. As mentioned, RSI registered an overbought condition last week and is now turning lower (in green), while
  2. MACD is also into its rollover phase.  Taken together, the two point to weaker buying momentum.
  3. We expect any price gain going forward to be minimal, particularly because of the rising wedge formation seen on the weekly chart (below).
  4. That puts next support at 80 for XPEL, at the rising short term moving average (in black).
  5. And finally, a single gap needs filling to 63 (in blue).

Here’s the weekly –

Technically, the weekly shows –

  1. A third overbought weekly RSI read on the year, coming just days ago (in green).  That always spells trouble.
  2. The aforementioned rising wedge (in red), is now narrowing at an extraordinary rate, indicating a break lower should come very shortly.  Rising wedges are always bearish.
  3. Price is also trending at an altitude that’s unsustainable – nine times higher than the long-term weekly MAs (in black).  A snap lower looks inevitable from this aspect, as well.
  4. A simple Fibonacci retracement calculation brings price down to 61, coinciding with the gap that needs filling (on the daily chart, above) and the rising 137 day moving average.

And it’s to that level, ultimately, that we expect XPEL to be expurgated.

So we’re trading her thus –

A Jew and His Money recommends you consider selling the XPEL October 15th 80/85 CALL spread* for a credit of $2.00 (16.80/14.80) and using the funds to purchase the XPEL October 15th 85/70 PUT spread** for a debit of $6.10 (9.60/3.50).  Total debit on the trade is $4.10.

[*Sell the 80 CALL and buy the 85 CALL.  **Buy the 85 PUT and sell the 70 PUT.]

Rationale: with the expectation that XPEL is about to turn lower, the trade affords us both time and cost advantages.

Specifically, four months and just $4.10 expended for a maximum potential profit of $10.90.

Maximum potential loss on the trade is $9.10 (difference between the CALL strikes plus the initial debit).

Breakeven arrives at $80.45.

Turn to Hashem – He and only He can save you!

With kind regards,

Hugh L. O’Haynew

 

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