בס״ד

Thanks, I’ll Take The Stairs… (OTIS)

Posted on August 2, 2021

Since you were a kid you’ve been enduring the fear, the potential scarring, the trauma that accompanies every journey down an elevator shaft.

Will the doors close on me?

Once they close, will they ever open?

And what if they open BETWEEN floors?

And what if the cable breaks?

Will I have to jump at the last instant to save my life – to time it perfectly, or end up squashed like a bug?

And what if the lights go out?

And what if it’s overcrowded?

Claustrophobia.

What if it gets so hot in there because there’s no electricity?

And what if I’m next to him!?

Today, dear friends, we face the fear.

And with G-d’s help, we take our revenge.

Our target this week is OTIS Corp. (NYSE:OTIS), makers of elevators and their slightly less murderous cousins – escalators.

Fundamentally, the company is blighted with growth problems, yet the stock has still risen like the lift in the Shanghai Tower.

Take note –

  • P/E is 33.77 (from a legacy industrial, mind you – this is not TESLA),
  • Dividend Yield is 1.07%,
  • Price to Book is non-existent,
  • Earnings per share fell 13.90% this year, and
  • Since last week’s positive earnings and guidance numbers, the stock has struggled to advance.

After a 35% climb over the last six months, it appears we now have a ‘sell the news’ event.

Take a look at the daily –

Technicals are as follows –

  1. A five month trend channel (in red) has twice been punctured on the upside after reasonably strong earnings (in blue).  It’s safe to expect sideways to lower action at this point as result.
  2. Volume has been trailing during the latest rise (in black), all the more reason to suspect a lack of commitment on the bulls’ part.
  3. And finally, RSI is high – though not overbought – a development that should make the bulls wary to expand current positions.

Now the weekly –

 

  1. We start with RSI and an overbought weekly condition that has persisted for three months and will therefore shortly end in tragedy – as happens with all such excesses (in green).
  2. We have a seventeen month rising trend channel (in red) that’s now bumping up against its upper edge (red arrow), and will therefore likely turn lower on that same account.
  3. A gap that requires filling at 72 (in blue) and a simple Fibonacci retracement calculation at 70 (in purple) provide downside targets for the coming decline.

And that’s what’s informing today’s trade –

A Jew and His Money recommends you consider selling the OTIS December 17th 85/90 CALL spread* for  credit of $2.50 (7.50/5.00) and buying the OTIS December 17th 85/75 PUT spread** for the same $2.50 (3.60/1.10).  Net zero premium is the result.

[*Sell the 85 CALL and by the 90 CALL. **Buy the 85 PUT and sell the 75 PUT.]

Rationale: for no cost to enter the trade, we garner the chance to pocket $10.00 (maximum gain), and risk losing just $5.00 (max loss).

Our breakeven arrives at 85 exactly (current price $89.55).

If the doors open at the right floor, you’ve only the G-d of Israel to thank.

With kind regards,

Hugh L. O’Haynew

 

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