Trex Stock Faces Off With Key Trendline

TREX suffered a 9% post-earnings bear gap this week

Feb 26, 2021 at 10:45 AM
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Trex Company, Inc. (NYSE:TREX) is the world’s largest manufacturer of wood-alternative composite decking, railing, and other eco-friendly outdoor items.

On Tuesday, Feb. 23, Trex gapped lower after earnings by 9%. However, the drop was contained by the shares' 60-day moving average. Year-over-year, the stock boasts a gain of 84.5%, and that 60-day trendline hasn't been breached on a closing basis since mid-November.

TREX Stock Chart

A short squeeze could help recoup some of this weeks losses. Short interest fell by 15% in the two most recent reporting periods to 7.29 million shares sold short. Yet this still accounts for a healthy 12.5% of TREX's total available float, or 10.2 times the average daily trading volume.

And with earnings out of the way, TREX premium is affordably priced amid a volatility crush. The security's Schaeffer's Volatility Index (SVI) of 46% stands in the first percentile of its annual range, suggesting the equity sports attractively priced premiums at the moment.

One key takeaway from the company’s press release were comments related to its future sales expectations. Trex expects its first quarter sales to come in at $235 million to $245 million, currently up 20% at the midpoint. The company also projects strong double-digit sales growth for 2021.

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