Diving into our reasoning for initiating a long position on CROX
Subscribers to our Schaeffer's Weekend Trader service notched a 101% profit with our suggested Crocs, Inc. (NASDAQ:CROX) January 20, 2023 70-strike call in less than a month. Below, we dive into our reasoning for betting bullishly on the retail stock.
At the time of or recommendation on Sunday, Nov. 6, CROX was fresh off a 11% bull gap from a third-quarter earnings and revenue beat. This put the shares above a potential trendline of resistance connecting prior three-weeks highs, as well as the $77 region, which was a breakdown level in August from a trendline connecting higher lows. That also the site of the stock's previous post-earnings reaction as well, and a retake of that region could have squeezed out shorts.
It's also worth noting that short interest had also increased 60% since March. Using the 150-day moving average as proxy for average shorted price, shorts were underwater at around $64, suggesting they could begin covering into the end of the year.
Though short covering is still on the table -- the 5.13 million shares sold short make up 8.5% of the stock's available float -- CROX did surge since our recommendation. In fact, Crocs stock was last seen up 1.2% at $100.86. Prior to yesterday's multi-month high, we closed our position, allowing traders to collect the full 101% profit and double their money within a month.
