by Serge Berger | January 2, 2014 8:33 am
Hertz Global Holdings (HTZ), operator of car and equipment rental centers in the U.S. and Europe, rallied big on Tuesday in what was a technically significant move in both the near and multiyear time-frames. This now allows traders to better define target and risk levels in HTZ stock.
On Tuesday, Dec. 31, David Faber from CNBC reported via Twitter that the day’s rally in HTZ stock looks to be the works of an activist investor:
“@davidfaber Activist in $HTZ likely to be one of the big guys. Likely to argue for split of equip. leasing and higher leverage to fund big buyback.”
Later in the day, CNBC tweeted that Dan Loeb’s Third Point had initiated a position in the company of less than 5%.
After it was all set and done, HTZ stock rose more than 10% to fresh all-time highs on heavy volume, reaching $28.90 9intraday before closing at $28.62.
On Nov. 16, 2006, Hertz went public at $15 per share, which actually came in below its range of $16 to $18 per share. But by summer 2007, HTZ stock had rallied toward the $27 area, where it began to top out and succumb to the financial crisis.
In recent years, however, Hertz’s stock again rallied big in a technically constructive way, which in July of this year brought it back for a retest of the summer 2007 highs. But given the significance of this multiyear resistance level, HTZ stock rejected it and consolidated until November, where it again began to bounce strongly.
Tuesday’s rally thus simply continued the recent uptrend for HTZ stock, as it has now gained just about 16% during the past month. More important is that Tuesday’s move resulted in a major multiyear breakout, which could now bring more trend followers on board the long side of the stock.
The daily chart of HTZ stock looks equally impressive, as Tuesday’s move came on a nice up-gap at the open, which quickly hurdled past the previous year-to-date highs from July. In retrospect, the deck was cleared for the recent rally when in late November/early December the stock moved past its 50-, 100- and 200-day simple moving averages, which also resulted in a break past a tight multiweek resistance line; at the time, just around the $24 mark.
Also note the capitulation day by the bears that took place on Nov. 5 (blue arrow).
From here, while Hertz could be somewhat overbought in the immediate term, barring any nasty bearish reversal, HTZ stock looks to be on its way toward the $30 mark in coming weeks, which could serve as a first/next upside target.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities
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