Jack in the Box stock could soon live up to its name.
Rising interest in the West Coast’s fast-food chain seems to be holding the stock short of pressure, Danielle Shay, director of options at Simpler Trading, told CNBC’s Trading Nation on Friday.
“I like Jack in the Box here, but for a short-term options transaction,” Shay said.
Although the stock is not far from its all-time highs, which would usually prevent Shay from buying, she made an exception due to the unusual activity. Jack in the Box currently has a short interest rate of 9.2%, according to FactSet.
“With something like this that has a short interest, it has the potential to put a little pressure and it has growing gains,” Shay said. “For this reason, I like to trade calls with shorter data in the earnings series. Thus, they can only take advantage of the momentum that enters the ratio of earnings and growth [implied volatility]. “
For investors looking for a longer-term transaction in space, Shay suggested the McDonald’s stock.
“If you look at a weekly chart of McDonald’s, it’s been consolidating for some time. I think this consolidation will break up. I’m targeting $ 240,” she said. “It’s a little more of a long-term transaction, so you could sell credit spreads regularly [or] buy long calls 90-120 days. “
McDonald’s shares closed down less than 1% on trading at $ 213.90 on Friday.
“It will take some time for restaurants that depend on indoor restaurants,” Shay said. “People will be worried about walking. They are not able to open at full capacity … For me personally, I would prefer to focus on the fast food chains that their model has already focused specifically on drive-thru. “
Limited-service restaurants are a better bet than their full-service counterparts right now, agreed Craig Johnson of Piper Sandler.
“Here you start to see that some of the sales companies in the same store are proving to be positive,” he said in the same “Trading Nation” interview, showing a chart of the Chipotle Mexican Grill.
“This has been a long-term winner. It’s been a name we’ve had in our model portfolio for some time and we still think it should be bought,” Johnson said, noting that the stock is over 50 and 200 moving average days. , in an upward channel that shows strong performance compared to the S&P 500.
“This stock seems to have even more room to roll,” he said. Chipotle closed trading up 1% on Friday.
Johnson’s second choice was Father Chili’s stock, Brinker International.
“On a weekly chart, with a look back a few years, you’ll see that you’ve finally reversed a downward trend from those highs of 14 and now we’re starting with new highs,” he said.
Brinker’s performance also strengthens relative to S&P, “giving us confirmation that something positive is happening here,” Johnson said. Brinker shares closed down about 1 percent lower on Friday.
“It looks like a lot of these restaurants look in great technical shape for another taller leg,” Johnson said.
Restaurants in New York City reopened Friday for indoor dining with a 25% capacity.
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