There are several factors within the automobile industry that have put downward pressure on the car rental business since 2014. Today's focus is on Hertz Global (HTZ - Get Report) and how to trade its share-price volatility after the company reports earnings after hours Tuesday.
Hertz set its all-time intraday high of $125.32 during the week of Aug. 22, 2014. This was when ride-sharing companies such as Uber and Lyft began to gain market share as consumers looked to save a buck by avoiding the need to rent a car. More recently, weak used car pricing put downward pressure on the value of cars in the rental fleets. These competitive pressures contributed to Hertz crash of 93%, to its multi-year low of $8.52 set on June 21.
Since this low, shares of Hertz are up 78.9% and the weekly chart suggests that further gains lie ahead. The stock closed Monday at $15.24, down 29.3% year to date and 48.1% below its post-election high of $29.36 set on Nov. 9. The strong rebound since June is driven by increased air travel and hotel lodging. If the economy continues to improve, so should demand for car rentals.
Hertz Global reports earnings after the closing bell Tuesday and analysts expect the company to report a loss of 10 cents a share. A warning for Hertz came after the close on Monday when shares of Avis Budget Group (CAR - Get Report) plunged by as much as 10% on missed earnings. Shares of Hertz traded as low as $13.91. The stock opened Tuesday at $15.24. and has lost 10 cents about two hours into the session.
The daily chart shows that Hertz Global has been under a "death cross" since election day when the stock closed at $27.70. A "death cross" occurs when the 50-day simple moving average crosses below the 200-day simple moving average, indicating that lower prices lie ahead. This tracked the stock to its post-election low of $8.52, set on June 21.
The Weekly Chart for Hertz Global
Courtesy of MetaStock Xenith
The weekly chart for Hertz Global ($15.24 on Aug. 7) is positive with the stock above its five-week modified moving average (in red) at $14.13. The stock has been below its 200-week simple moving average (in green) since the week of June 26, 2015, when this average was $81.07. This "reversion to the mean" is now at $65.32. The 12x3x3 weekly slow stochastic reading is projected to rise to 66.28 up from 61.16 on Aug. 4.
Investment strategy: Buy weakness to the 50-day simple moving average of $12.25. Sell strength to my weekly risky level of $17.65. The 200-day simple moving average has a sell level of $18.88.
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