NEW BEARISH Plays
XPO Logistics, Inc. - XPO - close: 26.89 change: -0.04
Stop Loss: 30.30
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 21, 2015
Time Frame: Exit PRIOR to earnings on November 4th
Average Daily Volume = 2.0 million
New Positions: Yes, see below
Sometimes you can have too much of a good thing. Wall Street loves deal making. Yet it seems that XPO, which has been snapping up smaller rivals, may have made one deal too many.
XPO is in the services sector. They are part of the transportation and freight services industry. According to the company,
"XPO Logistics, Inc. (XPO) is a top ten global provider of cutting-edge supply chain solutions to the most successful companies in the world. The company provides high-value-add services for truck brokerage and transportation, last mile logistics, intermodal, contract logistics, ground and air expedite, drayage, global forwarding and managed transportation. XPO serves more than 30,000 customers with a highly integrated network of over 54,000 employees and 887 locations in 27 countries. XPO's corporate headquarters is in Greenwich, Conn., USA, and its European headquarters is in Lyon, France. The company holds an 86.25% controlling interest in Norbert Dentressangle SA." Read more at www.xpo.com
XPO has been on an acquisition spree as the company gobbled up smaller rivals over the last few years. On April 29th Wall Street applauded the news that XPO was buying French logistics company Norbert Dentressangle. Yet the rally quickly stalled and shares of XPO peaked a couple of weeks later. That proved to be the top.
XPO rolled over into a bearish trend of lower highs and lower lows.
The mood on Wall Street changed when XPO announced they were buying trucking company Con-way (CNW) in September. The stock plunged to new lows for the year on the announcement. Wall Street could be worried about XPO's soaring debt levels to fuel its acquisition spree. Several analysts have lowered their price targets on XPO following the Con-way deal news.
Short interest in XPO is elevated. The most recent data listed short interest at 33% of the 83.3 million share float. Currently the momentum in shares of XPO favors the bears. The big oversold bounce from XPO's late September low has failed.
Shares look like they are coiling for another big drop. Due to the high amount of short interest I am labeling this an aggressive, higher-risk trade. Consider keeping your position size small to limit risk. Tonight we are suggesting a trigger to launch bearish positions at $26.65. This is a short-term trade. We'll exit prior to XPO's earnings in early November.
Trigger @ $26.65 *small positions to limit risk*
- Suggested Positions -
Short XPO stock @ $26.65
- (or for more adventurous traders, try this option) -
Buy the NOV $25 PUT (XPO151120P25) current ask $1.30
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike