Ferrari N.V. (RACE) Reverses Lower, Stares at Key Level

Ferrari N.V. (RACE) is trading lower after earnings once again, while the luxury car maker also announced a new CEO

by Josh Selway

Published on May 2, 2016 at 3:02 PM
Updated on May 2, 2016 at 3:03 PM

Luxury car manufacturer Ferrari N.V. (NYSE:RACE) jumped out of the gate this morning, after the company reported better-than-expected first-quarter results, raised its full-year guidance, and appointed a new CEO. However, RACE has since turned lower, down 3.1% at $44.42 at last check, as the stock sells off post-earnings for the second straight quarter. 

RACE hit an all-time high the day it went public, topping out at $60.95 on Oct. 21. The stock is now running into a wall in the $45-$46 area, which marks a 50% Fibonacci retracement from its all-time high to its all-time low of $31.67, tagged in early February. RACE remains atop its rising 10-week moving average, though, which has guided the stock higher over the past two months. 

As for sentiment toward RACE, the stock boasts three "buy" or better ratings among covering analysts, on top of a single "hold," and no "sells." Options traders also seem to have an upbeat attitude toward Ferrari. Although absolute volume has been tepid, there's been a significant call bias among speculators.

For example, more than 700 RACE call options have been bought to open over the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 82 puts. It's more of the same today, with calls trading at three times the average intraday volume. 

However, Ferrari N.V. (NYSE:RACE) is heavily shorted, meaning this call bias may be due to bears buying insurance to protect against an unexpected upside move from RACE. To be more specific, 6.2% of RACE's float is sold short, representing almost two weeks' worth of buying power, at average daily trading volumes. Some short sellers seem to be calling it quits, though. Over the last two reporting periods, short interest on RACE dropped by 13.4%. 

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