Schaeffer's Trading Floor Blog
Stocks quoted in this article:

The Dow has made a slight improvement from yesterday's downturn, trending roughly 0.8% ahead of yesterday's close. Among today's equities in focus are athletic apparel guru Lululemon Athletica inc. (NASDAQ:LULU), SSD manufacturer STEC, Inc. (NASDAQ:STEC), and credit card issue Visa Inc (NYSE:V).

Deutsche Bank initiated a "hold" rating for LULU today, joining the majority of the brokerage bunch who maintain such a tepid recommendation for the stock. Since the start of 2013, LULU -- currently docked at $62.95 -- has dropped almost 18%, and during the past month, the stock has plummeted 20.5%, trailing the broader S&P 500 Index (SPX) by 17 percentage points in that same time frame. Still, calls seem to be the options of choice in LULU's options pits. Specifically, speculators have bought to open almost two calls for every put within the last 20 sessions, resulting in an International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 20-day call/put volume ratio of 1.89. Even so, short interest accounts for 15.5% of LULU's available float, representing a high level of pessimism among stock traders. Therefore, it is possible that some of the heavy call activity is due to short sellers hedging their bearish bets.

While STEC is down 10.3% year-over-year, the stock has made an impressive rebound on the charts as of late. Specifically, STEC has gained 36.6% since the beginning of 2013, and within the past four weeks alone, the stock has skyrocketed a whopping 89.7% to its current perch of $6.74. With that being said, it's no wonder Wedbush raised its rating for STEC to "neutral" from "underperform," and boosted its price target to $6.85 from $3. Currently, six of the seven analysts weighing in on the stock give it a lukewarm "hold" recommendation, while one considers it a "strong sell," and zero endorse it as a "buy" or better. Not to mention, analysts' consensus price target now sits at $5.04 -- a discount to present trading levels. Should STEC continue its brow-raising trek north, more rounds of upgrades and/or price-target hikes could be in store, leading to a further escalation of the stock.

Following in the recent footsteps of Morgan Stanley, Bernstein increased its price target for V to $181 from $149 today, while maintaining its "market perform" rating. Technically, V has enjoyed a steady climb forward over the past year, advancing 48.5% to its current mark of $180.17. Moreover, the stock has outperformed the broader SPX by 5.8 percentage points during the last two months. In its options pits, V has been a favorite among bullish speculators. In fact, throughout the past 50 sessions, speculators have bought to open more than two calls for every put, according to V's ISE/CBOE/PHLX 50-day call/put volume ratio of 2.22. This ranks in the 96th percentile of its yearly range, signifying calls are being snatched up over puts at a near annual-high pace. Likewise, V's Schaeffer's put/call open interest ratio (SOIR) of 0.89 ranks just 3 percentage points above its annual nadir, conveying that put open interest for options with a shelf-life of three months of less, relative to call open interest, is sitting near an annual low.


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