Schaeffer's Trading Floor Blog

Buzz Stocks: eBay Inc, Move Inc., and Catalyst Pharmaceutical Partners, Inc.

Today's stocks to watch in the news include EBAY, MOVE, and CPRX

by 9/30/2014 9:26 AM
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Futures are pointed higher this morning, as traders take a glass-half-full approach on the final trading day of the third quarter. In company news, today's stocks to watch include online auctioneer eBay Inc (NASDAQ:EBAY), Internet real estate issue Move Inc. (NASDAQ:MOVE), and biopharmaceutical firm Catalyst Pharmaceutical Partners, Inc. (NASDAQ:CPRX).

  • EBAY is up 8% ahead of the bell, after saying -- to the delight of Carl Icahn -- it will split off its PayPal business into a separately traded public company in 2015. According to the company's CEO John Donahoe -- who will step down once the separation is complete -- the decision "will give eBay and PayPal focused strategic flexibility and an ability to move quickly and decisively in this changing environment." On the charts, eBay Inc has been on the mend since hitting its most recent low of $50.04 on Sept. 12, with the shares up 5.2% to trade at $52.66. In the options pits, however, bears have been emerging amid this rebound, as evidenced by the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.63, which ranks in the 84th annual percentile.

  • MOVE is poised to pop 37% right out of the gate, following News Corp's (NASDAQ:NWSA) $950-million -- or $21 per share -- bid for the company. In a statement, NWSA CEO Robert Thomson said, "In addition to boosting Move's subscription, advertising and software services, this acquisition will give News Corp a significant marketing platform for our media assets." Technically speaking, MOVE hasn't done much to write home about, with the shares off 4.4% year-to-date to linger at $15.29. Traders weren't expecting much from Move Inc., either. In fact, short interest accounts for a healthy 7.8% of the stock's available float, and would take almost nine sessions to cover, at MOVE's average daily pace of trading.

  • CPRX is also looking north ahead of the bell, with the shares up 13%, after the firm said its autoimmune disorder drug, Firdapse, was successful in a late-stage study. The treatment -- which is expected to launch in early 2016, pending approval -- will be available soon to those enrolled in the Food and Drug Administration's (FDA) Expanded Access Program. In addition to this fundamental win, the stock received price-target hikes from Roth Capital (to $6 from $5) and Piper Jaffray (to $5 from $4), with the brokerage firms underscoring their respective "buy" and "overweight" ratings. Considering Catalyst Pharmaceutical Partners, Inc. is already up 53.3% in 2014 to hover at $2.99, sentiment among the options crowd is tilted toward the bullish side. Specifically, speculators at the ISE, CBOE, and PHLX have bought to open 3.11 calls for every put over the past 10 sessions.

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Analyst Downgrades: Alcatel Lucent SA (ADR), Angie's List Inc, and Visa Inc

Analysts downwardly revised their ratings on ALU, ANGI, and V

by 9/30/2014 9:22 AM
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Analysts are weighing in today on networking solutions provider Alcatel Lucent SA (ADR) (NYSE:ALU), business review site Angie's List Inc (NASDAQ:ANGI), and credit card concern Visa Inc (NYSE:V). Here's a quick roundup of today's bearish brokerage notes on ALU, ANGI, and V.

  • After agreeing to loan Ikanos Communications, Inc. (NASDAQ:IKAN) up to $10 million yesterday, ALU was hit this morning with a price-target cut to $4.10 from $4.40 at Goldman Sachs. With the shares already off nearly 30% year-to-date to trade at $3.10, additional bearish brokerage notes could be forthcoming. After all, Alcatel Lucent SA's (ADR) consensus 12-month price target of $4.69 represents a more than 50% premium to current trading levels, and stands in territory not explored since July 2011.

  • Cowen initiated coverage on ANGI with a "market perform" rating and $7 price target. This, after the company announced on Monday a new debt refinancing program. Meanwhile, on the charts, Angie's List Inc has tumbled 57% year-to-date to its perch at $6.52, and yesterday hit an all-time low of $6.38. Short sellers have taken notice of these technical woes, too. In fact, more than one-fifth of the equity's float is sold short, which would take three weeks to cover, at ANGI's average pace of trading.

  • Finally, V received a price-target cut to $261 from $268 at Evercore -- although the new target still represents a nearly 24% premium to the stock's current perch at $210.93. Technically speaking, Visa Inc has struggled in 2014, down 5.3%. As such, bearish betting has heated up in recent months at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, V's 50-day put/call volume ratio across this trio of exchanges is 0.91 -- or just 6 percentage points from a 52-week bearish peak.

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Analyst Upgrades: Facebook Inc (FB), Huntsman Corporation, and Rambus Inc.

Analysts upwardly revised their ratings on FB, HUN, and RMBS

by 9/30/2014 8:57 AM
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Analysts are weighing in today on social network Facebook Inc (NASDAQ:FB), chemical products maker Huntsman Corporation (NYSE:HUN), and tech name Rambus Inc. (NASDAQ:RMBS). Here's a quick roundup of today's bullish brokerage notes on FB, HUN, and RMBS.

  • Despite seeing its Instagram unit get blocked by China yesterday, FB received a price-target hike to $95 from $90 at Evercore. The brokerage firm also underscored an "overweight" rating. This latest bullish brokerage note is par for the course, with the stock boasting 29 "buy" or better recommendations, compared to three "holds" and not a single "sell" rating. Technically speaking, Facebook Inc has been a market outperformer, besting the broader S&P 500 Index (SPX) by 19 percentage points during the past three months, to rest at $79.

  • Having just announced the construction of a new chemical plant, HUN saw its price target upped to $34 from $32 at Keybanc, which also reaffirmed its "buy" opinion. On the charts, the shares have racked up about a 28% year-over-year gain. Nevertheless, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been betting bearishly, per Huntsman Corporation's 10-day put/call volume ratio of 1.03 -- which is higher than 81% of all readings from the past year. An unwinding of this pessimism could result in tailwinds for the security.

  • Finally, Jefferies lifted its price target on RMBS to $14 from $13.50, while maintaining its "hold" assessment on the stock. The shares have had an excellent 2014 -- rallying almost 31% to trade at $12.40 -- helped higher by a steady layer of support at their 32-week moving average. However, Rambus Inc.'s short interest-to-float ratio stands at 7.6%, and it would take 12.5 sessions to buy back these bearish bets, at the stock's average daily trading volume. In other words, RMBS could be on the verge of a short-covering rally.

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Amid Signs of Fear, Is the VIX Keeping Up?

The CBOE Volatility Index (VIX) is riding along its widening upper Bollinger Band

by 9/30/2014 8:52 AM
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So, in the past couple of weeks, we've noted many signs of fear spiking.

We have the CBOE SKEW Index (SKEW) hitting 16-year highs. Volatility in currencies has spiked. The CNN Fear and Greed Index tilts way toward fear. The Russell 2000 Index (RUT) has hit multi-year lows vs. the S&P 500 Index (SPX). The iPath S&P 500 VIX Short-Term Futures ETN (VXX) and the CBOE Volatility Index (VIX) are acting relatively well -- and on and on.

But, there's one spot that hasn't gotten extreme in all this. And that is, oddly enough, the VIX itself.

Sure, VIX has crept up lately. In fact, it has more than crept -- it's rallied about 35% since the middle of last week (click chart to enlarge).

CBOE Volatility Index (VIX)

It really hasn't broken out, though. It's riding along the widening upper Bollinger Band, but it's stopping short of stretching too far from its 10-day moving average. We haven't quite met the "20% above the 10-day" threshold that I use as the "official" marker for overbought. You could really make the case that we deserve overbought by now.

Meanwhile, 10-day historical volatility in SPX has continued to pick up. It's now about 13, which is far from enormous, but a nice steady lift of readings below 4 at the beginning of September.

And, the volatility is picking up steam. This, via Dan Nathan:

So, in a way, VIX isn't quite keeping up. It averages about a 4-point premium to realized volatility -- now it's more like 2-to-3. Granted, that "premium" tends to contract when realized volatility actually does lift. VIX does tend to expect mean-reversion. It's just that the "mean" sure feels like it will stay a bit elevated for now. I'm on the fence directionally, but I do believe volatility will hang in as the calendar flips to October.

I want to make clear that I'm only referring to VIX itself. The VIX futures term structure still slopes upward, as it always does. So, while I believe it makes sense to price options as if the market will remain somewhat volatile in the next few weeks, I don't really see the need to pay for VIX futures that expire half a year from now. Someday that will work, but no reason to think the current hypothetical VIX spike is the one.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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Stocks quoted in this article:

Around midday, three of the market's biggest movers are oil-and-gas issues Athlon Energy Inc (NYSE:ATHL) and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), as well as biotechnology name Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP). Here's a quick roundup of how ATHL, PBR, and TNXP are performing on the charts so far.

  • ATHL has soared nearly 25% to $58.26 -- and earlier tagged a record high of $58.30 -- after Canada-based Encana Corporation (USA) (NYSE:ECA) said it would buy the company in an all-cash deal totaling $5.9 billion, or $58.50 per share. Heading into today's session, Athlon Energy Inc was already enjoying a healthy 54.5% lead on the year. In the stock's options pits, meanwhile, short-term speculators have shown a distinct preference for calls over puts, as evidenced by ATHL's Schaeffer's put/call open interest ratio (SOIR) of 0.34, which ranks lower than 85% of similar readings taken in the past year.

  • PBR has stumbled 9.9% today to trade at $14.83, as uncertainty surrounding Brazil's upcoming election -- and signs of increased support for President Dilma Rousseff -- has sparked a sell-off in Ibovespa components. However, Petroleo Brasileiro Petrobras SA (ADR) has been losing ground since hitting an annual high of $20.94 earlier this month, off 29%. Against this backdrop, not only have PBR's short-term options been growing more expensive, but sentiment has been drifting toward the bearish side of the aisle. Specifically, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.64 ranks just 8 percentage points from a 52-week peak.

  • TNXP has lost roughly half its value today, after its lead pain management drug failed to meet expectations in a mid-stage study. The security is now sitting 33.5% below its year-to-date breakeven line to churn near $6.85. The stock could find some additional headwinds, should analysts begin to re-evaluate their ratings in the wake of today's sharp decline. In fact, all three brokerage firms covering the security maintain a "strong buy" recommendation, while the consensus 12-month price target of $13.34 roughly doubles Tonix Pharmaceuticals Holding Corp.'s current price.

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