Why This Restaurant Stock is the Right Pick for Bulls

The equity is now above its +50% year-to-date breakeven level

Jan 6, 2021 at 2:00 PM
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Buffalo Wild Wing's rival Wingstop Inc (NASDAQ:WING) has recently broken above its +50% year-to-date breakeven level, which it was having trouble doing for most of November and December. This area could act as support, as well as the myriad of moving averages the equity has pulled back to in recent weeks. Specifically, WING has retracted to the breakout level of a medium-term five-to-six-month downtrend. In other words, now is an opportune time to buy calls.

Looking toward short covering, short interest on WING is well off its highs, but continued covering could still produce tailwinds. In fact, during the most recent reporting period, short interest rose 10.2%, and now accounts for 10.6% of the stock's total available float.

There is also room for upgrades, with six covering brokerages sporting a tepid "hold" rating on the equity. Lastly, premiums look attractive on WING at the moment, based on its Schaeffer’s Volatility Index (SVI) of 45%, which ranks in the 10th percentile of its annual range. Our recommended call has a leverage ratio of 5.35, and will double in value on a 18.5% rise in the underlying security.

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