Don't Sweat the Navistar Stock Pullback

NAV options are affordably priced at the moment, too

Assistant Editor
Oct 19, 2020 at 2:44 PM
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Truck and machinery manufacturer Navistar International Corp (NYSE:NAV) has had an interesting run on the charts as of late. The pandemic sent the equity careening down to $15.01 on April 3, its lowest level since the 2016 presidential election. And while NAV recovered reasonably well  -- up 123.4% over the last six months -- the stock has suffered a 19% single-session decline on Oct. 14. The silver lining; this brings the stock back within a historically friendly trendline though.

More specifically, NAV is within one standard deviation of its 40-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, NAV has tested support at this trendline four other times over the past three years. Half of those times, the stock was higher a month later, averaging a 8.3% gain for that time period. A move of similar magnitude from NAV's current perch of $43.32 would put the equity just below $47 -- at a two-year peak.

NAV Chart October 19

The majority of analysts covering NAV are still bearish, meaning there is plenty of room for upgrades and price-target hikes going forward, which could push the stock higher. Of the six in coverage, four carry a tepid "hold" rating. Plus, the 12-month consensus price target of $42.56 is an unimpressive 1.7% discount to current levels. 

In the options pits, there's a increasingly strong appetite for puts at the moment. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Navistar stock with a 50-day put/call volume ratio of 0.98, which ranks higher than 74% of readings in its annual range.

What's more, options traders are pricing in relatively low volatility expectations at the moment, per Navistar stock's Schaeffer's Volatility Index (SVI) of 22%, which sits in the bottom percentile of all other annual readings.

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