Technical Support in Place for Burger King Parent

The stock could benefit from a short squeeze, too

Mar 24, 2021 at 1:41 PM
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Burger King parent Restaurant Brands International Inc (NYSE:QSR) has been in rally mode since its last earnings report in mid-February -- breaching the $56-58 region, which was home to major lows back in 2016 and 2018, as well as the $59 level, which is a 61.8% Fibonacci retracement of the stock's 2018 peak through its 2020 trough. 

QSR WT Repost

There's plenty of pessimism surrounding QSR, despite this positive price action, which could push the equity higher as these bearish bets begin to unwind. For one, the equity's 10-day put/call open interest ratio of 1.90 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 74% of readings from the past year, suggesting this penchant for bearish bets is unusual. 

And while short interest makes up just 2.8% of QSR's float, it would take almost a week for bears to cover their positions, which could lead to a potential short squeeze situation. The security could benefit from a round of analyst upgrades and/or price-target hikes, too. Of the 17 in coverage, seven still call the fast food stock a "hold," while the 12-month consensus price target of $66.92 is a slim 2.9% premium to Friday's close.

This looks like an excellent time to get in on QSR's next move with options too. The security's Schaeffer's Volatility Index (SVI) of 27% stands in the lowest percentile of its annual range, implying options traders are pricing in extremely low volatility expectations for the equity at the moment. We should also note that our recommended call option has a leverage ratio of 7.9 and will double in a 12.4% rise in the underlying equity.

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