Avis Budget Group, Inc. (CAR) reported earnings after the close on Monday, Aug. 5, and beat analysts’ estimates. CAR opened Tuesday, Aug. 6, despite the good news below its 50-day simple moving average at $33.78, which puts it at risk to its 200-day simple moving average at $31.34. The weekly chart warned us before the stock entered this week below its “reversion to the mean” at $34.46.
Avis closed Monday Aug. 5 at $33.90, up 50.8 per cent for the year so far. The stock is now bull market territory at 56.7 per cent above the Jan 3 low of $21.83. It closed May 1 at its 2019 high of $37.27 and is 9 per cent below the May 1 high. It was a big flyer in 2014, setting an all-time intraday high of $69.76 during the week of Aug. 22, 2014, so the stock is also in a longer-term bear market consolidation.
Avis Budget stock has a mixed fundamental picture. It trades at just over nine times earnings, without a dividend, according to Macrotrends. The firm experienced the aftershocks of the pandemic, but saw continued improvement in rentals for leisure use. And it claims a robust residual fleet.
The daily chart for Avis Budget
The daily chart depicts that Avis Budget has been above a ‘golden cross’ since April 2, as the 50-day simple moving average crossed above the 200-day simple moving average, signalling that prices could head higher from here. It traced the stock to $37.27 – the 2019 high posted on May 1––and then crossed the 200-day simple moving average between 20 May and 13 June. This proved to be an opportunity to buy at $30.89.
The Dec. 31 close – input: $22.48 – gives an annual risky: $50.91 The June 28 close – input: $35.16 – gives semiannual value: $22.95, quarterly risky: $44.08,The July 31 close – input: $36.39 – gives monthly pivot for August: $35.52. The 50 day and 200 day simple moving averages are $33.79 and $31.34 respectively.
The weekly chart for Avis Budget
The weekly Avis Budget (CAR) chart is bearish, the stock below its five-week modified moving average (MMMA) at $34.43 as well as its 200-week simple moving average, or reversion to the mean, at $34.46 which just barely failed to hold this week. The 12 x 3 x 3 weekly slow stochastic reading is expected to decline to 76.26 this week down from 76.86 on Aug. 2.
Shares have broken out of their up-trending price channel, which started in late November, powerfully re-affirming my bullishness for Avis. However, at some point, a correction will loom and the security will need rebalancing. Trading strategy: Buy Avis at weakness to the 200-day simple moving average at $31.34, and reduce holdings at strength to the monthly pivot at $35.52.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on July 31. The quarterly level was changed at the end of June.
I believe it is safe to say that after nine years of price volatility between closes everything bullish or bearish is priced in and can get you into a position using your shares and their share price volatility to capture those value and risky levels. A pivot is a value level or risky level that was violated within its time horizon. A pivot is a point of no return and should be considered a magnet, because there is a very high probability that it will be tested again before the end of its time horizon.