Schaeffer's Trading Floor Blog

Highs & Lows: Baidu, SINA and Costco Wholesale

BIDU and SINA tripped to new lows, while COST rallied to a new high

by 12/4/2012 2:08 PM
Stocks quoted in this article:

Wall Street has given little direction for U.S. markets, as stocks dip into negative territory on fiscal-cliff uncertainty. Against this backdrop, the number of equities reaching new highs is nearly even with those at lows. There are 44 new peaks and 10 bottoms on the NYSE, while the Nasdaq has tallied 25 tops and 26 fresh lows. Among the stocks charting notable moves are Baidu.com, Inc. (ADR) (NASDAQ:BIDU - 90.01), SINA Corp (NASDAQ:SINA - 42.12), and Costco Wholesale Corporation (NASDAQ:COST - 104.43).

  • The Securities and Exchange Commission (SEC) is investigating the Chinese affiliates of the world's five top accounting firms on possible securities violations. It is believed that this inquiry could prompt a removal of U.S. listings for all Chinese firms. Taking a hit on the news is China-based Internet company BIDU, which plummeted to a more than two-year worst of $89.16 today, and pulled its 2012 loss to roughly 23%. On a relative-strength basis, the security has fallen behind the S&P 500 Index (SPX) by 13.6 percentage points over the last three months. But the sentiment picture for this laggard is surprisingly upbeat. BIDU currently boasts 10 "buy" or better ratings, versus four "holds," and not a single "sell." Even options players appear optimistic, as evidenced by the stock's 10-day call/put volume ratio of 2.21 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Furthermore, the Schaeffer's put/call open interest ratio (SOIR) of 0.65 sits only one percentage point away from an annual low, suggesting that near-term options players have seldom been more call-heavy during the past year.

  • Another Chinese business reeling from the SEC allegations is SINA, which has underperformed the SPX by more than 25 percentage points during the past 60 sessions, and has lopped off nearly 19% since the beginning of the year. Elsewhere on the Street, short sellers are ramping up their bearish bets. Short interest climbed more than 6% over the most recent reporting period, and now accounts for 8.1% of SINA's available float. The bearish bandwagon is far from crowded, though, as it would take fewer than three days to buy back all of these pessimistic positions. And there could be additional downside ahead, should bullish analysts begin to jump ship. Only two out of the 13 brokerages are skeptical, donning middling "hold" recommendations. In a similar vein, the consensus 12-month price target of $66.33 is a 58.5% premium to SINA's fresh two-year low of $41.86, tagged this morning.

  • Lastly … Wholesale retailer COST has given up its early lead, but not before springing to a new record best of $104.92. Technically speaking, the shares are sitting on a 25% year-to-date return, which has grabbed some (but not all) of the attention among brokerages. Out of the 20 analysts following COST, nine still maintain a "hold" or worse suggestion. Meanwhile, today's all-time acme represents a $1.54 discount to the average 12-month price target of $103.38.

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