Shares of Hertz Global Holdings (HTZ) have made a nice recovery off their recent low of $7 that formed as a double-bottom in February.
Friday’s high reached $10.67 but, more importantly, HTZ closed above its 50-day moving average. A near-term move to $12-$13 could come on continued short-covering, with the 100-day moving average at $13.50. Support for Hertz has moved up to $10-$10.25.
On the fundamental side, Hertz recently announced earnings of $0.05 a share on revenue of $2.41 billion. Analysts were looking $0.04 a share on revenue of $2.52 billion. This follows three previous quarters during which Hetz posted a $0.03 miss, a $0.05 beat and a $0.05 miss, respectively.
I’m hoping that Hertz has turned the corner with its cost-cutting and margin-improvement programs. The move from the 52-week high of $22.68 to a recent 52-week low of $6.95 in early February was an extreme selloff, and it was a little overdone.
To trade this bullish setup in Hertz, I recommend the following:
Buy to open the Hertz April 11 calls (HTZ160415C00011000) at current levels. The calls closed Friday at $0.65.
If Hertz can trade past $12.10, technically, by mid-April, these options could easily double. A test to $13 could lead to a monster triple-digit return. Again, support for Hertz resides around $10-$10.25. I do not have a stop loss in place, but HTZ shares closing below $9 would ruin the current momentum.
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