The Move Today for This Toy Maker is Nothing to Play Around With
Hasbro Inc (HAS) is a Rhode Island-based play and entertainment company. The sell action figures, arts and crafts, electronic toys and other interactive toys. If you’ve been to a toy aisle, I’m sure you’ve seen Transformers, Nerf, Play-Doh, My Little Pony, Power Rangers and other brands the company manufactures.
Over the past couple months, it has not been all fun and games for toy manufacturers. The heart of the issues is that most toys are manufactured in China. As a result, many of these companies were feeling the heat before the broader market began to realize the impact of the coronavirus.
What was troubling these companies was having their supply lines compromised as China closed their factories in response to the coronavirus. A February interview with the founder of the company that makes the LOL Surprise! Toys said, “This is the worst supply chain disruption I’ve ever seen in my life.” As Trump is hoping to have businesses opened by Easter, April 12, and as China production has been coming back online, maybe this is the right time to consider this company. Apparently hedge funds appear to think so as they’ve increased their positions in HAS.
Since peaking in mid-2019 over $120, HAS is back down near its 2013 lows around $40 to $50. Over the past week, HAS has seen some increased volume on up days as it has been stabilizing. On Monday, the price gapped up a little before forming a high-volume doji candle formation. That pattern represents balance between buyers and sellers, and Tuesday’s breakout on significant volume is an indication of seller exhaustion. This is a significant indication of a reversal in the trend.
Looking at the decline in the price since the February high near $110 provides a near-term target of $84 near the 61.8% retracement of that down-move.
Option traders might want to consider the 17 APR 20 62.50/65 long call vertical for around $1.25. That gives a max gain of $125, or 100% ROR, if the price closes above $65 by expiration. Consider closing early if it can be sold for $2 or more.