Oversold Stock of the Day: GEO Group (GEO)
Prison owner and operator GEO Group (GEO) is certainly a controversial company. So it should be no surprise that shares have been knocked down 50 percent from their 52-week high.
Operationally, the company has seen a small decline in revenue over the past year. However, shares have been slammed in the past year. More recently, they’ve dropped from $11 to $9, a huge move for the firm. Of course, that kind of massive drop has also sent shares to oversold levels.
The company’s RSI has dropped to just 23. Typically, any relative strength index reading under 30 is a sign that shares are ready to bounce. Shares now trade about 15 percent away from their 50-day moving average, a considerable divergence and a sign that share swill likely rally from here.
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Action to take: The March 2021 $10 calls, which have a bid/ask spread of around $1.05, are an inexpensive way to bet on the shares moving higher in the coming weeks and months. For just 10 percent of the cost of buying shares, traders can bet on a move higher.
The $10 strike price is just under the stock’s 50-day moving average, so there’s a good chance of this option moving in-the-money on a rebound. Traders should look for high double-digit returns on this trade, and to book a profit on any quick swing.