Hertz will report earnings after the close on Monday, Aug. 6
As the new month kicks off, car stock Ford Motor Company (NYSE:F) and rental car name Hertz Global Holdings Inc (NYSE:HTZ) could be headed for trouble, after both flashed bearish signals. We'll take a closer look at shares of F and HTZ below.
Ford Stock Historically Struggles In August
Ford stock just wrapped up its worst month since January, but its troubles could be far from over. Historically in August, the equity has only closed the month higher twice in the past 10 years, landing it squarely on our list of worst stocks for August. On average, F has shed 4.2% in August over the past decade -- according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Based on its current perch at $9.94 -- down 0.5% today -- another loss of this magnitude would put the equity at fresh multi-year lows.
To make matters worse, Ford last week slashed its full-year guidance, citing increased tariff concerns, and today released disappointing July sales. On the charts, Ford stock has shed 19% in 2018, and has been guided lower by its 10-day moving average since touching the $12 level back in June.
Despite the security's struggles, short sellers have been fleeing the scene. Short interest fell by nearly 15% in the most recent reporting period to 102.55 million shares, the lowest since March 2017. This represents a meager 2.6% of F's total available float, indicating there is ample room aboard the bearish bandwagon.
Options traders, however, have been targeting Ford calls at a tremendous rate lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 3.82, ranking in the 88th percentile of its annual range, indicating calls have been bought over puts at a faster-than-usual clip during the past two weeks.
HTZ Stock Flashes Bear Signal Ahead Of Earnings
Looking at Hertz, the rental car name has recently climbed to its 40-day moving average. According to White, in the five most recent times HTZ has come within one standard deviation of this trendline after a lengthy stay below it, the security has gone on to average a one-month loss of 15.2%, with four of those returns negative. A move of similar magnitude would send Hertz stock back near its Aug. 17 lows near $12.75.
Hertz stock is down 1% to trade at $15.11, at last check, and has given back almost 32% in 2018. Driving the security lower has been a string of dismal post-earnings reactions. Ahead of Hertz's second-quarter earnings report after the close next Monday, Aug. 6, the options market is pricing in a larger-than-usual 18% next-day swing, regardless of direction. Last May, HTZ stock dropped nearly 19% the day after reporting.
In the options pits, calls are heavily preferred. ISE/CBOE/PHLX data shows HTZ with a 10-day call/put volume ratio of 3.22, which ranks in the 86th percentile of its annual range. However, short interest on Hertz stock increased by 6.5% during the most recent reporting period, with more than 23.37 million shares now sold short -- 5.7 times the average daily trading volume. As such, it's possible some of the recent call activity is a result of short sellers seeking upside protection in the form of call options.