Schaeffer's Trading Floor Blog

Highs & Lows: CarMax, Illumina, and ARM Holdings

KMX, ILMN, and ARMH saw new annual peaks today

by 12/20/2012 1:30 PM
Stocks quoted in this article:

U.S. indices are close to breakeven this afternoon, following a barrage of economic reports. Though markets are little moved, the number of equities tagging new highs is easily surpassing those at new lows. The NYSE has seen 115 peaks and nine bottoms so far today, while the Nasdaq tallies 65 tops and 12 lows -- including an earnings-induced 14-month worst for Bed Bath & Beyond Inc. (NASDAQ:BBBY - 55.54). Among the stocks charting notable moves are CarMax, Inc. (NYSE:KMX - 37.96), Illumina, Inc. (NASDAQ:ILMN - 56.37), and ARM Holdings plc (ADR) (NASDAQ:ARMH - 38.12).

  • Riding the wave of its well-received third-quarter report, KMX rocketed to an all-time best of $38.24 this morning. At last check, the stock has climbed some 9%, bolstering its year-to-date gain to about 24.5%. Should the used car retailer extend this post-earnings rise, short sellers could continue to hit the bricks. Short interest slipped by 2.6% during the most recent reporting period, but still makes up 5.3% of the equity's available float. At KMX's average pace of trading, it would take nearly eight sessions to buy back all of these pessimistic bets, which could translate into a contrarian tailwind.

  • Investors lifted biotech concern ILMN to the $57 mark today -- its loftiest price since August 2011 -- on rumors of a buyout from Swiss pharmaceutical company Roche. Prior to today's pop on the charts, options traders appeared to be exceedingly optimistic, as confirmed by the stock's 10-day call/put volume ratio of 19.64 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). However, there could be a less-than-bullish reason for this recent call-heavy activity. Short interest accounts for a hefty 25% of the equity's available float. Oftentimes, short traders will buy calls as hedges for their bearish bets, and this could be what's happening here.

  • Semiconductor issue ARMH jumped about 1.5% higher today, lifting its 2012 return to more than 37%. From a shorter-term perspective, the stock has outperformed the broader S&P 500 Index (SPX) by over 37 percentage points during the past three months. On the sentiment front, ARMH boasts seven "buy" or better endorsements, versus five "hold" or worse suggestions, leaving room for the skeptical holdouts to join the bullish camp. In fact, the consensus 12-month price target sits at $35.97, which represents a more than $2 discount to today's more than 12-year acme of $38.19, tagged around noon.

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