Schaeffer's Trading Floor Blog

Highs & Lows: Dell, Monster Beverage, Virgin Media, and Whirlpool

VMED and WHR enjoyed notable runs higher, while DELL and MNST drifted lower

by 10/23/2012 4:41 PM
Stocks quoted in this article:

Due to a stint of disappointing earnings on Wall Street today, global economic concerns took a front seat and pulled U.S. equities to considerable losses. Against this backdrop, the number of stocks reaching new annual lows easily trumped those muscling to new highs. There were 31 new peaks -- versus 40 bottoms -- on the NYSE, while the Nasdaq tallied 20 new highs and 80 lows. Among the names charting notable moves today were Dell Inc. (NASDAQ:DELL - 9.35), Monster Beverage Corp (NASDAQ:MNST - 41.08), Virgin Media Inc. (NASDAQ:VMED - 34.13), and Whirlpool Corporation (NYSE:WHR - 93.81).

  • As the bears captured the Street today, PC giant DELL reeled to a more than three-year nadir of $9.31, deepening its year-to-date slide to 36.1%. Things could get even worse for the stock, should the bullish brokerage holdouts succumb to its overall downtrend. The consensus 12-month price target of $13.70 represents a 47% premium to today's multi-year low. Moreover, there are 10 "strong buys" and one "buy" rating on DELL, compared to 14 middling "holds" and a single "strong sell."

  • Goldman Sachs downgraded MNST this morning, in the wake of news that the FDA is investigating reports of five deaths allegedly tied to its popular energy drink. The stock backpedaled to the $40.06 mark -- its lowest price since October of last year -- which pulled its 2012 return to 10.8% south of breakeven. The shares could suffer further declines, as options players up the bearish ante. 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 2.87 puts for every call. This ratio arrives in the 90th percentile of its annual range, signaling that traders on these exchanges have rarely purchased puts over calls at a faster pace during the past year. What's more, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.39 implies that puts outnumber calls among options slated to expire within three months. This ratio ranks 15 percentage points from an annual high, indicating that near-term option traders are also more pessimistically aligned toward MNST than usual.

  • Moving on VMED posted a strong third-quarter showing, thanks to an impressive ad campaign that secured a record number of new cable TV subscribers. Wall Street applauded the news and boosted the shares to an all-time acme of $34.51, bucking today's broad-market downtrend. On the charts, the stock has performed quite well, outpacing the broader S&P 500 Index (SPX) by more than 19 percentage points over the past two months, and enjoying a 59.6% rally in 2012. As a result, though, VMED's Relative Strength Index (RSI) now resides at 78, which is in overbought territory. This suggests that a near-term pullback may be in the cards for the media mogul.

  • Finally, WHR jumped to an earnings-induced high today. The home appliances maker touched a two-year best of $94.34 after posting a stronger-than-projected third-quarter profit and raising its earnings outlook for the full year. Prior to earnings, optimism was on the rise in the options pits, as evidenced by WHR's 50-day call/put volume ratio of 2.02 on the ISE, CBOE, and PHLX. This ratio is in the 85th percentile of its annual range, signaling that speculators on these exchanges have made bullish bets over bearish at a faster pace than usual during the past couple of months. However, this recent trend toward calls may not be as upbeat as it would initially appear. Short interest on the equity increased 15% during the past two reporting periods. Consequently, it's possible that a portion of the recent call volume was the result of hedging activity by the shorts.

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