Avis Budget and Hertz Under 'Death Cross' Warnings

The automobile rental business has had bumpy ride so far in 2018. Avis Budget Group, Inc. (CAR) and Hertz Global Holdings, Inc. (HTZ), which both set 2018 highs in the first quarter, are now deep in bear market territory, down by roughly 40%. Both global vehicle rental companies concentrate on airport services. They also operate some truck rentals, leasing agreements and fleet management services.

Avis Budget stock closed Friday, Nov. 2, at $30.17, down 31.2% year to date and in bear market territory at 40.7% below its 2018 high of $50.88 set on March 20. The stock is up 11.9% since trading as low as $26.97 on Oct. 29. Analysts expect Avis Budget to post earnings per share of $3.52 when the company reports results after the close on Monday, Nov. 5. The weekly chart shows that a positive reaction to earnings will have the stock heading up toward its "reversion to the mean" at $38.57. A negative reaction sets the stage for an oversold weekly chart and weakness toward my monthly value level of $26.39.

Hertz shares closed Friday, Nov. 2, at $14.75, down 33.3% year to date and in bear market territory at 41.3% below the 2018 high of $25.14 set on Jan. 11. The stock is 13.4% above its 2018 low of $13.01 set on Oct. 24. Analysts expect Hertz to report earnings per share of $1.78 when it discloses results after the close on Thursday, Nov. 8. The weekly chart shows that a positive reaction to earnings will have the stock above its five-week modified moving average at $15.78 and heading up toward its "reversion to the mean" at $38.53. A negative reaction sets the stage for an oversold weekly chart and weakness toward the June 2017 low of $8.52.

The daily chart for Avis Budget

The daily chart shows that Avis has been below a "death cross" since June 28 as the 50-day simple moving average declined below the 200-day simple moving average, indicating that lower prices would lie ahead. This tracked the stock to its 2018 low of $26.97 set on Oct. 29.

The weekly chart for Avis Budget

The weekly chart for Avis is negative, with the stock below its five-week modified moving average of $31.40. The stock is well below its 200-week simple moving average of $38.57, also known as the "reversion to the mean," last tested during the week of June 29, when the average was $40.79. The 12 x 3 x 3 weekly slow stochastic reading slipped to 20.67, down from 21.18 on Oct. 26.

Given these charts and analysis, investors should buy Avis Budget shares on weakness to my monthly value level of $26.39 and reduce holdings on strength to my quarterly risky level of $36.70.

The daily chart for Hertz

The daily chart shows that Hertz has been below a "death cross" since April 11. This was confirmed when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lay ahead. This tracked the stock to its July 18 low of $13.40. This was followed by a rally to the 200-day simple moving average at $19.54, where investors could have reduced holdings. The 2018 low of $13.01 was set on Oct. 24. The stock ended last week just below my pivot for November at $14.89.

The weekly chart for Hertz

The weekly chart for hertz is negative, with the stock below its five-week modified moving average of $15.78. The stock is well below its 200-week simple moving average of $38.53, also known as the "reversion to the mean," last tested during the week of June 26, 2015, when the average was $81.07. The 12 x 3 x 3 weekly slow stochastic reading slipped to 23.10 last week, down from 28.19 on Oct. 26.

Given these charts and analysis, investors should buy Hertz shares on weakness to the Oct. 24 low of $13.10 and reduce holdings on strength to the 200-day simple moving average of $18.25.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.