Like a number of names in the semiconductor sector, auto stocks are having a monster start to 2018 -- after data on Wednesday showed 2017 sales held near record levels, despite the industry's first annual decline since 2009. Among the names pacing for impressive weekly gains are Fiat Chrysler Automobiles NV (NYSE:FCAU) and Navistar International Corp (NYSE:NAV). And if history is any guide, it could be a prime time to buy calls to bet on even more upside for shares of FCAU and NAV.
Fiat Chrysler shares were last seen trading up 3.9% at $21.45 -- fresh off a record high of $21.62 -- after J.P. Morgan Securities upgraded the stock to "overweight" from "neutral." The brokerage firm said growing volume and stabilizing prices globally will buoy a bull market for the auto sector this year, while U.S. tax reform should lift investor sentiment. FCAU stock is now pacing for a 20.3% weekly gain -- its best week since October 2014.
Plus, the equity's Schaeffer's Volatility Index (SVI) of 35% is ranked in the 39th annual percentile, meaning muted expectations are being priced into short-term options. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the three other times FCAU has been trading near 52-week highs alongside a low SVI since 2008, it has gone on to average a one-month return of 8.74%.
A short squeeze could create even more tailwinds for FCAU shares. Short interest jumped 11.8% in the most recent reporting period to 23.25 million shares -- representing 9.4 days' worth of pent-up buying demand, at the security's average daily pace of trading.
Although Navistar is down 1.6% today to trade at $43.77, the stock is still tracking toward a 2.2% weekly return. Longer term, the truck manufacturer is up more than 42% year-over-year, with a recent pullback from its Dec. 19 six-year high of $47.47 finding a floor near $42 -- home to its pre-bull gap highs from Dec. 18.
Those looking to bet on NAV stock's next leg higher are in luck, too, considering its SVI of 32% ranks in the 5th percentile of its annual range -- meaning short-term options are attractively priced, from a volatility perspective. What's more, since 2008, there have been three other times Navistar's SVI was low when the equity has been perched near a 12-month high, resulting in an average one-month return of 13.89%. Another move of this magnitude would put the shares near $50 for the first time since August 2011, based on their current price.
Analysts have been slow to catch up with Navistar stock's impressive price action, too. Of the 11 brokerages covering the shares, seven maintain a "hold" or "strong sell" rating, while the average 12-month price target of $44.50 is roughly in line with present trading levels. A round of upgrades and/or price-target hikes could draw more buyers to NAV's table.