The Jack in the Box stock could soon live up to its name.
Growing short-term interest in stocks of the West Coast fast-food chain appears to be building stock for a brief push, Danielle Shay, options director at Simpler Trading, told CNBC’s “Trading Nation” Friday.
“I like Jack in the Box here, but for a short term options trade,” Shay said.
While the stock is not far from its all-time high, which would normally prevent Shay from buying back, she made an exception due to unusual activity. According to FactSet, Jack in the Box currently has a short interest rate of 9.2%.
“With something like this that has a short interest rate, it has the potential for a short squeeze and there is income ahead,” Shay said. “For that reason I like to trade shorter conversations in the income line. That way I can only take advantage of the momentum going into the earnings report and the rise in [implied volatility]
For longer-term investors in the space, Shay suggested McDonald’s stock.
“If you look at a weekly chart of McDonald’s, it’s been consolidating for quite some time. I really believe that consolidation will break upwards. I’m aiming for $ 240,” she said. “It’s a bit more of a long-term transaction, so you could be selling put credit spreads on a regular basis [or] buy out long talks 90-120 days. “
Shares of McDonald’s fell less than half 1% on Friday at $ 213.90.
“It will take a while for restaurants that rely on indoor dining,” said Shay. “People will worry about going. They won’t be able to open to full capacity. … For me personally, I’d rather focus on the fast food chains that their model is already specifically targeting for drive-thru.”
Limited-service restaurants are a better bet than their full-service counterparts right now, agreed Piper Sandler’s Craig Johnson.
“That’s where you start to see some of the sales mixes in the same store turn out to be really positive,” he said in the same “Trading Nation” interview, pointing to a Chipotle Mexican Grill card.
“This has been a long-term winner. It’s a name we’ve had in our modeling portfolio for a while and we still think it should be bought,” Johnson said, pointing out that the stock is above 50 and 200 days. moving averages, in an up channel and with strong performance against the S&P 500.
“This stock looks like it has even more room to run,” he said. Chipotle finished 1% lower on Friday.
Johnson’s second choice was the stock of Brinker International, Chile’s parent company.
“If you look back a handful of years on a weekly chart, you can see that you’ve finally reversed a downtrend from those ’14 highs’ and now we’re breaking out to new highs,” he said.
Brinker’s performance is also getting better when compared to the S&P, “which gives us confirmation that something positive is going on here,” Johnson said. Shares of Brinker closed about half from 1% lower on Friday.
“It looks like a lot of these restaurants are in really good technical condition looking to go one step further,” Johnson said.
New York City restaurants reopened on Friday for indoor dining at a 25% capacity.
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