Market Overview

Will Goodyear Drive Higher?

Shares of Goodyear Tire & Rubber (NYSE: GT) are trading higher on the session by 3.92%, trading at $13.80. The stock has been consolidating for the past few weeks, following a massive gap lower on January 10th on high volume.

While the 20-day moving average recently crossed the 50-day moving average to the downside, typically a bearish signal, shares have since popped to regain both averages. This places Goodyear Tire & Rubber at a critical point, where the stock will either come into selling pressure or negate the bear indicators and move higher.

One tip off to the stock's direction may be options activity. Call volume has generally been outpacing put volume over the past two weeks; specifically, GT is seeing some heavy call buying today.

The March 2012 $14.00 call is seeing the majority of the action, where 8,925 contracts have traded on open interest of only 419 contracts. This indicates new positioning. These contracts were largely purchased, ~80% being purchased on the offer. Traders buying these options are betting that shares pop over $15.00 in the next few months; clearly they are betting on a gap fill.

Note that Goodyear Tire & Rubber has also 4.49% of the float sold short, which can add some fuel to a bull rally.

The Goodyear Tire & Rubber Company is a manufacturer of tires. The company, along with its subsidiaries, is principally engaged in the development, manufacture, distribution and sale of tires and related products and services worldwide.

Posted-In: Long Ideas Technicals Options Markets Trading Ideas

 

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