A confluence of moving averages could serve as a launch pad
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After breaking out from a downtrend and retest, Tractor Supply Co (NASDAQ:TSCO) stock just pulled back to a confluence of moving averages – namely, the 20-, 50-, and 80-day trendlines – that could act as a launch pad. The shares are pushing back above a 50% Fibonacci retracement level from recent peaks to lows after retesting it early in the week, while the $265 area, a pivot point through summer trading, held strong earlier last week. Given this solid technical foundation, we’re recommending a long position on TSCO.
A shift in analyst sentiment could also help the security move higher, considering 16 of 32 in coverage rate the equity a “hold” or worse. Plus, shorts have covered all year, so while short interest recently increased, a majority of shorts are still expected to be underwater as short interest sits at 2020 and 2021 highs. The 7.33 million shares old short represent 6.8% of TSCO’s total available float.
Our recommended November call has a leverage ratio of 8.2, and will double on a 12.5% rise in the underlying shares.