Hertz, Dollar Thrifty Pullback Ahead of Earnings

Investors appear to have delivered the coup de grace to the selling in shares of Avis Budget Group (NYSE: CAR) on Thursday after the company reported an unanticipated quarterly loss. But the sympathy selling in rivals Hertz Global Holdings (NYSE: HTZ) and Dollar Thrift Automotive Group (NYSE: DTG) could be what traders really should be paying attention to.

Avis blamed its shortfall on expenses related to its (re)”integration” of Avis Europe, as well as lingering economic effects from the earthquake in Japan. In any event, the stock which had closed lower for two days in a row and five out of six, plunged by more than 13%. CAR is now back in bear market territory, where it had been trading for most of the past several months up until recently.

Falling below the 200-day moving average has finally done what the previous selling had not: send CAR to technically oversold territory. There will be many whose trading discipline will mandate standing aside due to the stock’s current status below the 200-day moving average. But there is no doubt that CAR has finally arrived at levels where traders historically have been more inclined to come off the sidelines as buyers rather than sellers – at least in the short term.

Avis Budget Group has earned “consider buying” ratings of 8 out of 10 ahead of trading on Friday, and a positive, short-term edge of more than 3%.

What may be even more interesting than the double-digit sell-off in Avis are the pullbacks in Hertz and Dollar Thrifty mentioned earlier. Both auto rental companies are scheduled to report earnings next week, and the pullbacks that have entered their third day in the case of Hertz could set the stage for significantly oversold conditions when those quarterly announcements are made.

Looking specifically at both stocks, Dollar Thrifty pulled back by nearly 2% on Thursday, closing lower for the third day out of the last five. The stock is just outside of technically oversold territory above the 200-day moving average, and has a neutral rating of 6 out of 10. Hertz has pulled back for three consecutive sessions, selling off by more than 4% ahead of trading on Friday, and finishing technically oversold for the first time since mid-December. Hertz has a positive edge in the short-term of more than one and three-quarters percent, and a “consider buying” rating of 9 out of 10.

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David Penn is Editor in Chief of TradingMarkets.com