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Today I am recommending a bearish trade on Goodyear Tire & Rubber Company (NASDAQ:GT).
GT develops, manufactures, distributes and sells tires and related products across North, Central and South America. It also provides services related to its products and exports tires to other markets.
Though GT is considered a domestic manufacturer, the company does operate factories in China, and the stock has been hit by the ongoing trade war between that country and the United States.
Goodyear also missed its earnings per share (EPS) and sales goals in the latest quarter. The company reported adjusted EPS of $0.68 versus the $0.75 expectation, while sales of $3.928 billion fell short of the estimate for a reading of $3.932 billion.
An analyst for Morgan Stanley subsequently reduced their price target for the shares from $23 to $22.
If we look at a daily chart for GT, we see that the company’s 200-day and 50-day moving averages are trending consistently downward. While the stock bounced back up after its poor earnings report, it looks like it may turn to the downside to test new lows.
GT is slightly higher this morning amid a weak overall tape, which should reduce the cost of this downside play. If and when GT turns to the downside, these puts should return a great profit.
Buy to open the Goodyear Tire & Rubber (GT) Jan (2019) 21 Puts (GT190118P00021000) at $0.75 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.