CAR could bounce off the historically bullish 40-day moving average
Avis Budget Group Inc. (NASDAQ:CAR) is down 1.5% at $244.33 this afternoon, likely still reeling from Deutsche Bank and J.P. Morgan Securities reiterating their "sell" ratings on the security earlier this week, while praising competitor
Hertz Global (HTZ). Investors shouldn't fret CAR's pullback just yet, however, as it placed the security back near a trendline with historically bullish implications, which could have the stock adding to its impressive 556.7% year-to-date lead in a not-so-distant future.
The trendline in question is Avis Budget stock's 40-day moving average, with shares now within just one standard deviation of the trendline, after spending several months above it. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, no fewer than nine similar signals were seen over the last three years. CAR enjoyed a positive return one month later in 67% of those cases, averaging an 11.7% gain. From its current perch, a comparable move would place the stock back above $272.
The brokerage bunch is firmly in the bearish camp. Of the seven analysts in question, all but one carry a tepid "hold" or worse rating. Plus, the 12-month consensus target price of $224.29 is an 8% discount to current levels, suggesting CAR could benefit from a shift in sentiment.
Short sellers are already hitting the exits in droves. Short interest fell 36% over the most recent reporting period, but the 8.66 million shares sold short still make up 15.6% of the stock's available float, or nearly four days' worth of pent-up buying power.
Plus, the equity's Schaeffer's Volatility Scorecard (SVS) stands at 89 out of 100. This suggests CAR has exceeded options traders' volatility expectations during the past year.