בס״ד

When the G-d of Israel Strikes the Construction Industry (MTZ)

Posted on May 24, 2021

You don’t want to be too close…

That said, we’re looking at an infrastructure trade today, and targeting a company that contracts primarily with utilities.

The outfit is Florida based MasTec Inc. (NYSE:MTZ), installers of cable, piping and power lines above and below ground across the United States.

The company announced earnings just two weeks ago, beating street estimates and pushing the stock higher by better than five percent in the ensuing session.

But two weeks later, there’s been no improvement in price, even with management’s strong guidance.

Which goes to show… sometimes the bartender gets it wrong.

We’ve a strong belief that MTZ has now pickled, and that both fundamentally and (especially) technically she’s got little to commend her.

Consider –

  • Her one year trailing P/E is 24.15,
  • Dividend Yield is NADA,
  • Price to Book is a corpulent 4.03, and
  • Earnings per share this year (despite the most recent beat) are still down 15.30 percent.

MasTec is not a growth company, friends, and it’s not irrational to question whether she’s about to capsize and sink to the bottom of the Cay Sal Bank.

Guy could fly.

Anyway, from the shores of Cuba we now turn to the charts to get a finer read on MTZ’s health status.

And as you’ll see, both the daily and weekly charts are pointing to a coming decline.

Here’s the daily for the last half year.  We urge you to pay special attention to RSI readings both here and on the weekly paste-up.

Daily –

Technically –

  1. The overbought RSI read is bearish (in green).
  2. As is last Thursday’s MACD crossover (also in green).
  3. Price has diverged strongly from both RSI and MACD for weeks (in black, at bottom).
  4. Price is also moving in a narrowing range, forming a bearish rising wedge pattern (in red).  The formation is complete upon a break below the lower trendline.  It hasn’t occurred yet, and in that, we’re still early.
  5. A bearish engulfing candle pattern was lit at the top last Tuesday (enlarged, in black), a strong sign of a reversal.
  6. And we have a gap to fill to 70 (in blue).
  7. The moving averages should act as support during the pending down-move; they arrive at 110, 85 and 60 (in purple).

Not a great picture, all told.

Now look at the weekly –

Here, we also have problems.

  1. As mentioned, last week saw a third weekly RSI overbought indication (to coincide with the daily), a sure enough SELL signal in itself.
  2. We also see simple Fibonacci retracement calculations that would bring price to rest at either 85 or 60, both of which align perfectly with moving average support on the daily chart.

The die is cast for MTZ, in our humble opinion.

And we’re playing it as follows –

A Jew and His Money recommends you consider setting the MTZ July 16th 125 synthetic short for a debit of $9.10 (12.30/3.20)**.  Set a STOP buy on the shares at 125.

[**Sell the CALL and buy the PUT.]

Rationale: with a decline expected in short order, we like the trade for several reasons.

First, breakeven arrives at $115.90, and with the shares currently trading at $116.02, we’ve got literally pennies to drop before we hit that mark.

Thereafter, it’s all gravy.

A decline to the 85/90 range is our target, though we’d be happy to close on any appreciable widening between PUT and CALL values.

Maximum gain is unlimited.

Maximum loss (with proper STOPs in place) is limited to our initial debit.  That’s a worst case scenario – in which MTZ takes off higher and closes above 125 at expiration.  We see that as a remote possibility at present.  It would require the stock to make new highs in a very unfavorable environment, and hold her gains after an already exaggerated 450% climb off the Batflu bottom.

That said, be sure to keep an open STOP order at 125.  Should the STOP buy be triggered, replace it with a STOP sell order at 125.  Should that be activated, reset the STOP buy at 125.  And so on.

In that manner, we keep the trade square.

May we see the coming of the righteous redeemer b’karov byameinu, and may our enemies perish al pi hanevi’im.

With kind regards,

Hugh L. O’Haynew

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