Jack in the Box stocks could soon fulfill its name.
Growing interest in fast-food chain-based stocks on the west coast appears to be preparing stocks for a little pressure, Danielle Shay, director of options at Simpler Trading, told the Trading Nation on Friday CNBC.
“I like Jack in the Box here, but for a short-term options trade,” Shay said.
While the shares are not far from their all-time highs, which would normally prevent Shay from buying, he made an exception due to the unusual activity. Jack in the Box currently has 9.2% short interest, according to FactSet.
“With something like this that has a short interest, it has the potential to make a small squeeze and it has benefits,” Shay said. “For this reason, I like to change calls with shorter dates in the earnings series. That way, I can only take advantage of the momentum that the earnings report enters and the increase in [implied volatility]. “
For investors looking for a long-term trade in space, Shay suggested McDonald’s action.
“If you look at a weekly chart from McDonald’s, it’s been consolidated for quite some time. I think that consolidation will go up. I’m targeting the $ 240,” he said. “It’s a slightly longer-term trade, so you can sell credit spreads on a regular basis [or] buy long calls 90-120 days out “.
Shares of McDonald’s ended Friday down 1% at $ 213.90.
“It will be a while for restaurants that depend on indoor cooking,” Shay said. “People will be worried about going there. They can’t open up at full capacity. … For me personally, I prefer to focus on fast food chains as their model is already specifically focused on drive-thru . “
Limited-service restaurants are a better bet than their full-service counterparts right now, agreed Craig Johnson of Piper Sandler.
“That’s where you start to see some of the same store’s sales prove to be really positive,” he said in the same “Trading Nation” interview, pointing to a Chipotle Mexican Grill chart.
“This has been a long-term winner. It’s a name we’ve had in our model portfolio for a long time and we still think it should be bought,” Johnson said, noting that the shares exceed his 50 and 200. moving average days, in an upward channel and with a strong performance in relation to the S&P 500.
“This stock seems to have even more room to run,” he said. Chipotle ended trading at 1% on Friday.
Johnson’s second choice was the action of Brinker International, Chile’s father.
“In a weekly chart looking back a handful of years, you’ll see that you’ve finally reversed a downward trend from these 14 highs and now we’re opening new highs,” he said.
Brinker’s performance is also strengthening in relation to the S&P, “providing us with confirmation that something positive is happening here,” Johnson said. Brinker shares closed at about half of 1% on Friday.
“It looks like a lot of these restaurants have a good technical way to have another higher leg,” Johnson said.
New York City restaurants opened on Friday for dinner indoors with 25% capacity.
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