The stock of Jack in the Box could soon live up to its name.
Rising short-term interest in shares of the West Coast-based fast-food chain appears to put the stock up for a short press, Danielle Shay, director of options at Simpler Trading, told CNBC’s “Trade Nation” on Friday.
“I like Jack in the Box here, but for a short-term options trade,” Shay said.
Although the stock is not far away from the heights of all time, which usually excludes Shay from shopping, she made an exception because of the unusual activity. Jack in the Box currently has 9.2% short interest, according to FactSet.
“With something like this that has short interest, it has the potential for a short press, and it has earnings coming up,” Shay said. “For that reason, I like to trade shorter dated calls in the earnings series. That way, I can take advantage of just the momentum that goes into the earnings report and the increase in [implied volatility]. “
For investors looking for a long-term trade in space, Shay suggested the stock on McDonald’s.
“If you look at a weekly chart of McDonald’s, it has been consolidated for some time. I think this consolidation will break out to the upside. I am targeting $ 240,” she said. “It’s a bit more of a long-term trade, so you can sell put-spreads on a regular basis [or] buy long calls 90-120 days out. “
McDonald’s shares ended trading less than half of 1% at $ 213.90 on Friday.
“It takes a while for restaurants that rely on indoor dining,” Shay said. “People will be worried about going. They are not able to open up at full capacity … For me personally, I would rather focus on the fast food chains, as their model is already specifically focused on drive-through.”
Piper Sandler’s Craig Johnson agreed that limited service restaurants are a better bet than their full service counterparts right now.
“This is where you start to see that some of the same stores’ sales components are really proving to be positive,” he said in the same “Trading Nation” interview, pointing to a chart of Chipotle Mexican grill.
“This has been a long-term winner. It is a name that we have owned in our model portfolio for some time and we still believe it should be bought,” Johnson said, noting that the stock is above its 50 and 200-day highs. days. moving average in an upward channel and shows a strong performance relative to S&P 500.
“This stock seems to still have more room to run,” he said. Chipotle ended up trading 1% on Friday.
Johnson’s second choice was the stock of Chili’s parent Brinker International.
“On a weekly chart that looks back on a handful of years, you will see that you have finally reversed a downward trend from those ’14 heights, and now we are breaking out to new heights,” he said.
Brinker’s performance is also strengthening relative to S&P, “which gives us confirmation that something positive is happening here,” Johnson said. Brinker shares closed about half 1% lower on Friday.
“It seems like a lot of these restaurants are looking in really good technical shape next to another leg higher,” Johnson said.
New York restaurants reopened for indoor dining with 25% capacity on Friday.
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