After a strong run above 120, the stock has seen a massive gap down on news.
What was the news?
Navistar is potentially being bought by Volkswagen, which means NAV will be using Volkswagen engines. CMI sells engines to NAV so it represents a hit to the business.
This assumes the acquisition goes through and that VW will fully integrate with the company.
While this is an event based move, the whole thing feels like an overreaction. The technicals line up here so we should expect some support soon.
What I’m looking for is a “lower low” pattern to manifest. So look for a bounce, then a break of the recent price lows… but with less momentum. Into that, I’ll be looking at the Oct 110/105 put spread sales.