Schaeffer's Trading Floor Blog

Highs & Lows: Altera, Dendreon, Norfolk Southern, and ARM Holdings

ALTR, NSC, and DNDN drifted lower today, while ARMH enjoyed a run higher

by 10/24/2012 4:55 PM
Stocks quoted in this article:

An earlier attempt to forge higher unraveled during the final hour of trading, despite several positive earnings reports, new home sales data, and well-received economic news out of China. Against this backdrop, the overall number of stocks reaching new annual lows was nearly at parity with those hitting new highs. There were 63 new peaks and 36 lows on the NYSE today, while the Nasdaq tallied 28 new highs and 53 lows. Among the names charting notable moves today were Altera Corporation (NASDAQ:ALTR - 29.89), Norfolk Southern Corp. (NYSE:NSC - 61.09), Dendreon Corporation (NASDAQ:DNDN - 4.02), and ARM Holdings plc (ADR) (NASDAQ:ARMH - 32.09).

  • Corporate earnings season hasn't fared well for many companies this quarter, and semiconductor manufacturer ALTR is no exception. Earlier today, the shares pulled back to a two-year low of $29.59 on its poorly received third-quarter results and a downwardly revised forecast for fourth-quarter revenue. Brokerages also weighed in on the action, as at least four firms cut their price targets on ALTR. Considering this news, there could be even more downside on tap for the stock that is already sitting on a 19% year-to-date deficit. The average 12-month price target for ALTR among analysts is $38.40, which represents a 30% premium to today's multi-year nadir. Plus, the tech issue has been tapped with 12 "buy" or better endorsements, versus nine tepid "holds," and not a single "sell" recommendation.

  • Another business suffering from post-earnings blues is railroad operator NSC. The Virginia-based company posted a disappointing third-quarter report, which spurred a bout of downbeat analyst attention for the stock, including downgrades from Citigroup and BB&T. In the wake of this action, NSC slipped to $60.96 -- its worst price since October of last year -- and brought its 2012 decline to 16.2%. While there could be an exodus by the brokerage bunch to the bearish camp -- there are 12 "buy" or better ratings, 13 "holds," and zero "sells" -- the options pits were bullishly biased toward NSC, prior to the company's quarterly release. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.00 calls for every put. This ratio arrives in the 92nd percentile of its annual range, signaling that traders on these exchanges have rarely bought calls over puts at a faster pace during the past year.

  • DNDN has struggled on the charts, underperforming the broader S&P 500 Index (SPX) by 16 percentage points during the last three months and faltering 47% since the beginning of the year. In fact, the shares tumbled to a more than three-year bottom of $3.97 this morning. But as the biotech company prepares to disclose its third-quarter results on October 30, optimism seems to be growing in the options arena. During the past 50 days, speculators on the ISE, CBOE, and PHLX have bought to open 8.45 calls for every put. However, short sellers could be behind some of the recent call buying, picking up optimistic options to hedge their pessimistic positions. Short interest ramped up by 8.3% over the past month, and accounts for more than 31% of the equity's float. DNDN has failed to meet Wall Street's profit projections in three out of the past four quarterly events.

  • Lastly … just a day after tech concern ARMH unveiled its third-quarter results and an upbeat outlook for its fourth quarter, Barclays greeted the stock with a price-target hike. This upbeat note lifted the equity to the $33.03 mark -- its loftiest point since November 2000. Despite this technical and fundamental showing, options players remain skeptical of the semiconductor designer. ARMH's 10-day put/call volume ratio of 4.73 on the ISE, CBOE, and PHLX ranks in the 90th percentile of its annual range, signaling that traders on these exchanges have seldom made bearish bets over bullish at a faster pace during the past year. Furthermore, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.16 implies that puts outnumber calls among options slated to expire within three months. This ratio ranks 20 percentage points from an annual high, indicating that near-term option traders are also more pessimistically aligned toward ARMH than usual.

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