The automobile rental business continues to have a bumpy ride. Shares of Hertz Global Holdings, Inc. (HTZ) traded as high as $22.37 on Aug. 22, 2018, to a low of $13.01 on Oct. 24 – a bear market decline of 41.8%. This range continues into 2019.
Hertz stock closed last week at $19.61, up 43.7% year to date and in bull market territory at 50.7% above its Oct. 24 low of $13.01. The stock is also in correction territory at 12.3% below its Aug 22 high of $22.37. Hertz shares saw a positive reaction to earnings on Aug. 6 and again on Nov. 8. The 2019 high of $21.15 set on Feb. 26 followed earnings released on Feb. 25.
Analysts expect Hertz to report a loss of $1.30 per share when the company releases results after the close on Monday, May 6. Car rental companies face competition from low used car prices and the expanding presence of Uber and Lyft, Inc. (LYFT). Some say that insider buying of shares is a positive, while others are cautious about a lawsuit by Hertz against former executives. There are nine analysts covering the stock, and only two have buy ratings. The consensus price target is $22.75.
Hertz Global is the world's largest car rental brand, operating around 8,100 locations in 147 countries. The company is number one at the airports in the United States.
The daily chart for Hertz
The daily chart shows that Hertz stock has been bouncing up and down for the past 52 weeks. As 2019 began, we had semiannual and annual risky levels at $38.88 and $42.70, respectively. As the second quarter began, we have a quarterly value level at $17.10. As May began, we have a monthly value level at $16.14. As long as weakness holds $17.10 to $16.10, the upside potential is to the semiannual and annual risky levels at $38.88 and $42.70, respectively.
The weekly chart for Hertz
The weekly chart for Hertz is positive, with the stock above its five-week modified moving average of $17.98. The stock is well below its 200-week simple moving average, or "reversion to the mean," at $29.81, last tested during the week of June 26, 2015, when the average was $81.07. The 12 x 3 x 3 weekly slow stochastic reading rose to 43.24 last week, up from 42.23 on April 26.
Trading strategy: Buy Hertz shares on weakness to the quarterly and monthly value levels at $17.10 and $16.14, and reduce holdings on strength to the 200-week simple moving average at $29.81.
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 semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.