Fastenal Stock Ready to Ramp Up Latest Rally

A capitulation from weak bears could create tailwinds for FAST

by Research Dept.

Published on Feb 26, 2019 at 10:14 AM
Updated on Feb 26, 2019 at 10:19 AM

Fastenal Company (NASDAQ:FAST) is up 15.5% year-over-year and has already added 19.8% in 2019. During this climb, the stock overcame staunch technical resistance located at the $60 level, and in early February successfully re-tested this area as support. FAST has gone on to trade above its October and December 2018 highs, and shrugged off a KeyBanc downgrade to "sector weight" on Feb. 12 -- suggesting the machinery name's rally has plenty of room left to run.

WKEND Chart FAST

A capitulation by options bears could fuel more upside for the stock. In the options pits, FAST's 10-day put/call volume ratio of 9.63 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 100th annual percentile, meaning puts have been bought to open over calls at an annual-high clip. Digging deeper, there is a large amount of put open interest in the March and May series at the 60 strike that could be unwound to fuel a push higher.

Shorts have been piling on, even amidst FAST's rally. Short interest increased by 16.3% in the last two reporting periods to 26.26 million shares, the most since April. This represents a healthy 9.2% of the equity's total available float, and 6.3 days' worth of pent-up buying power, at FAST's average daily volume. A capitulation from some of the weaker bearish hands could create tailwinds for the equity.

There's room for upgrades to draw buyers to the table, too, with nine of 14 brokerages in coverage rating FAST a tepid "hold."

Options are an ideal vehicle to bet on more upside for FAST, too, with the security's Schaeffer's Volatility Index (SVI) of 21% ranking in the 1st percentile of its annual range. What's more, the stock has been an attractive target for premium buyers over the last 12 months, according to its Schaeffer's Volatility Scorecard (SVS) of 93 (out of a possible 100) -- which means the shares have regularly realized greater volatility than what FAST option premiums have priced in.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this FAST commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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