CAR Dropped Below Old Resistance at $26

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This morning I am recommending a bearish trade on Avis Budget Group, Inc. (NYSE:CAR), a company that provides rental cars under the Avis, Budget and Zipcar brands.

Liquidity is returning to the market, and it has created an emphasis to the upside. But there are still some major concerns. The government shutdown, which is now the longest on record, is starting to create some problems. “Brexit” negotiations have really gone nowhere and, of course, the trade war with China keeps intensifying.

All of these factors represent uncertainties for traders and investors, and there is nothing the market likes less than uncertainty. That uncertainty, along with some resistance may keep CAR down.

Consumer Confidence

Equities and commodities are moving higher, but the concerns I mentioned above are very real. The longer the government shutdown continues, the more likely it is that consumer confidence and consumer spending could suffer.

Less confident consumers are less likely to travel, and that means they are less likely to rent cars.

CAR also owns international brands, and while the U.S. economy is doing well, the rest of the world is struggling.

As I’ve said many times before, there is a “debt bomb” looming above markets and economies all over the world. Debt-to-GDP ratios are off the charts across the world, and eventually that is going to bite and act as a depressant for the market.

Resistance at $26

If we look at a daily chart of CAR, we see that it crossed above the $26 resistance level earlier this week. But CAR has since dropped back to around the $25 level, and it may struggle to get back above its old resistance.

Daily Chart of Avis Budget Group, Inc. (CAR) — Chart Source: TradingView

 

Like with the Knight-Swift Transportation Holdings Inc. (NYSE:KNX) trade last week, traders may have gotten trapped above that $26 level now that CAR is on its way back down. With a bearish play on CAR, we can take advantage of the rejection above $26. For that reason, I recommend buying puts on CAR.

Buy to open the Avis Budget Group, Inc. (CAR) March 15th $24 Puts (CAR190315P00024000) at $1.45 or lower.

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