Casey’s General Store (NASDAQ:CASY) stock is stuck in a trading range but this presents opportunities. It recently reported quarterly results and the reaction to CASY stock has so far been sub-optimal. But CASY is falling into support, so it’s time to evaluate owning the shares for the mid and long term.
CASY is lagging the sector as it is down 1% year-to-date, whereas the SPDR S&P Retail ETF (NYSEARCA:XRT) is up 7% for the same period. So it has some catch up to do in the short term. But for the 12 months period, CASY is up 13% much higher than the sector exchange-traded fund.
When management reported, it beat earnings estimates for this quarter and this was a triple-digit increase over this same period last year. Sales on the other hand were soft. CASY missed expectations by almost 6%, which is also a flattish red performance relative to last year. The good news in this is that clearly management is able to manage through tough times.
To that, management lowered its next quarter earnings estimate but raised it for the full year of 2019. This indicates that they have a hold on their business and that they have a plan to fix it by year-end.
This gives me confidence in the team, so if I own the shares I stay in them for as long as my thesis remains intact. For those looking to invest in Casey’s General Store stock for the long term, this is as good a time to buy. Management over-delivered on earnings and is forecasting better results for the full-year outlook.
For those who prefer to trade the CASY stock short term, there are important levels to note.
How to Approach CASY Stock Today
It is rare to see a brick-and-mortar retail company like CASY be a momentum stock, but this one acts like it. It has its fans since last year when the equities were in free fall into December, it traded in a three-month horizontal trading range. They did not fall into lower lows like the rest. In fact, CASY stock set its lows two weeks before the S&P 500 Christmas bottom.
So when markets, in general, hit their bottom in December, CASY set a higher low at $121 per share and rallied to set new all-time highs. Since then, it has had four 10% moves in either direction, so clearly, traders in it are active.
In December, CASY stock set its low of $117 per share. This is the biggest pivot and it has been in contention since 2015. On the way down, such pivots act as support because both bulls and bears fight over them hard, thereby creating congestion. This was also the same spot from which Casey’s General Store stock broke out last September. Management reported earnings and the stock sprang to its higher trading range.
Conversely, the net reaction to the March earnings report was negative after a brief pop. So now it needs to hold $124.5 or risk retesting $120, which is the last line of short-term defense before the December low. While this is not a forecast, it is a realistic scenario that investors need to know.
I don’t look for help from the Wall Street experts as they are split with their opinions between BUY and HOLD and the stock is trading well below their average price target ranges.
So I could try to be surgical in my entry points or just buy CASY stock near potential support and stick to tight stop loss levels. Otherwise, I trade it from the long term and not worry so much about finding the perfect entry point as long as I don’t chase it too high. Right here, CASY should have enough support to serve as a decent entry point for a swing trade higher or a long-term hold alike.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.