Avis Budget Group (CAR) Stock Price and Forecast: CAR crash coming

Another day, another short squeeze in what seems like the endless gamification of Wall Street. Las Vegas casinos must be looking on enviously, and surely soon many will replace the one-armed bandits in the gambling halls with trading screens and open outcry pits. Now that would be interesting.

Avis Budget (CAR) ended Tuesday up over 100%. Pretty tasty you might think, but that actually represented a collapse from the intraday high. CAR stock soared to $545.11 before closing at $357.17. So a close over 100% higher on the back of a near 100% collapse intraday. Our intraday CAR graph below shows the moves in percentage terms. Best of luck trading in that type of wildness.

Avis Budget (CAR) chart, 15 minutes

AVIS Budget (CAR) stock news

The big news today is the stock is down in premarket and probably not being helped by a downgrade from Deutsche Bank. In case you are wondering what caused the surge, the main reason was a massive beat on earnings. Avis Budget announced EPS of $10.74, which was nearly double the street estimate. Avis Budget also announced an increase of over $1 billion to its share buyback program. Added to this was the high short interest in the stock, reportedly at near 20%, and you had the perfect recipe for a surge of epic proportions.

Profit-taking after such a move is inevitable and now with Deutsche Bank acting as party pooper, expect more declines. Deutsche did downgrade the stock, but in a nod to the price move actually upgraded its price target from $119 to $210. That is a decent increase, and it was nice work for some options buyers yesterday. Benzinga cites the $260 call for November 19 expiry as surging over 10,000% on Tuesday. Hedge Fund SRS stands to gain over $5 billion, according to a report first carried in The Financial Times. The NY-based hedge fund holds about 27% of Avis Budget (CAR). 

Avis Budget (CAR) stock forecast

You want me to forecast this one? Really? Ok, here goes. I see some profit-taking ahead. That was a hard call after much thought!

Seriously though, Fibonacci retracements are the only game in town here, and the key ones are usually the 38.2% retracement at $403.54 and then the 61.8% at $316.18. Volatility has now gone through the roof, so buying options become crazy expensive with huge theta. Theta is a fancy word for time decay. If you buy an option, it has a time element to expiry and as every day passes the option will lose value even if the underlying stock price remains flat. After a huge spike in volatility is not the time to be chasing more options in our view. 

CAR 1-day chart