Outperforming Johnson Control Stock an Attractive Pick for Bulls

The security's short interest levels indicate bears may be holding onto losing positions

by Research Dept.

Published on Jul 2, 2019 at 11:05 AM
Updated on Jul 2, 2019 at 11:05 AM

Johnson Controls International PLC (NYSE:JCI) has rallied to fresh highs, bringing its year-to-date gain to almost 40%. The shares recently pushed back former resistance at the $40 level, home to the year-over-year breakeven point, suggesting this breakout could have legs. As such, bulls could still have time to get behind the outperformer.

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Traders should also note that there is a large build-up in open interest on both the call and put side, which could bring this price point into focus in the near term – and a move to this level would mark a roughly 100% gain for our recommended call. Plus, put buying has picked up in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), and similar trends in the past have corresponded to upside moves in the stock.

What’s more, short interest has roughly tripled in recent months to multi-year highs, meaning many bears are likely holding losing positions. Short covering could also help push JCI stock to new heights. Short-term options are relatively cheap at the moment, as well, according to the Schaeffer's Volatility Index (SVI) of 18%, which ranks in the low 12th annual percentile.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this JCI 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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