Call Traders Target RKT as Stock Rallies from Lows

Rocket Companies Inc (NYSE:RKT) is seeing a bullish options surge today, with 22,000 calls across the tape so far, which is three times the intraday average. The weekly 12/9 and weekly 12/30 9-strike calls are the most active, with new positions opening at both. 

This sentiment is keeping with the past couple of weeks, as RKT has seen 3.96 calls for every put in the last 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 80% of readings from the past year, showing long calls being picked up at a faster-than-usual rate. 

Analysts are singing a different tune, however, which leaves room for bull notes. Of the 13 analysts in coverage, 12 carry a “hold” or worse rating on Rocket stock, with only one “strong buy.” Plus, the 12-month consensus price target of $7.19 is a 15.3% discount to current levels. 

On the charts, RKT has been attempting to rally from its Oct. 21 record low of $5.97, though long-term pressure at its 200-day moving average could keep a cap on gains. Today, RKT is up 2% at $8.47 at last glance, down 44.3% year-over-year. 

In this special presentation we’re looking at stocks that investors should be selling now. When the market is down, there is a temptation to look at deeply discounted stocks to buy and hold. But buying the dip is a strategy that fits stocks that have a proven track record of growth in revenue and – more importantly – earnings.  

But when a stock is not scoring well on either of these fronts, it’s time for investors to challenge the reason(s) why they own the stock. If the stock no longer fits that thesis, it’s likely time to sell.

This doesn’t mean you can’t find hidden gems that are flying under the radar for whatever reason. But even in those cases, you have to see a business case that supports owning the stock. If that case no longer exists, loyalty to that stock is a one-way proposition.  

This strategy applies to both bull and bear markets. That’s because some sectors are better to buy at different times. The end of the year is a good time to reassess your portfolio and weed out the stocks that are no longer serving you well. If you own any of the following stocks, they may be candidates to sell.

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