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American Axle & Manufacturing (AXL)

Today’s recommendation is a call writing recommendation from Bernie Schaeffer’s Option Advisor. The recommendation is to buy a intermediate-term call on the stock below. The call is currently “in the money,” meaning the stock is currently trading above the strike price – the price at which the call can be...

Today’s recommendation is a call writing recommendation from Bernie Schaeffer’s Option Advisor. The recommendation is to buy a intermediate-term call on the stock below. The call is currently “in the money,” meaning the stock is currently trading above the strike price – the price at which the call can be executed. Here’s his recommendation:

American Axle & Manufacturing

from Option Advisor

AXL is up more than 79% year-to-date, and has outperformed the broader S&P 500 Index (SPX) by close to 12 percentage points over the course of the last three months. Since hitting a multi-year high of $21.41 earlier this month, the shares have pulled back to hover around the $19.50 level, which happens to be 50% above a level of resistance they faced throughout 2012, and also roughly coincides with the automotive parts manufacturer’s 50-day moving average. In other words, AXL’s current spot could serve as a potential level of support going forward.

On top of that, with over 10 million shares sold short, short interest currently makes up about 16% of the stock’s total outstanding float. At AXL’s average daily trading volume, it would take in excess of two weeks for the bearish speculators to cover those shorted shares. That being said, should the stock’s current upward momentum continue, there’s plenty of sideline cash available to trigger a short-squeeze situation, which could propel AXL to new highs.

RECOMMENDATION: Buy the January 18, 2014, 18-strike call. Max Entry Price: 3.60. Closeout Date: 11/19.

Bernard G. Schaeffer, Option Advisor, www.schaeffersresearch.com, 800-448-2080, September 2013