Schaeffer's Trading Floor Blog

New Annual Lows: Health Net, Netflix, and Zynga

HNT, NFLX, and ZNGA dropped to new annual lows

by 8/3/2012 2:24 PM
Stocks quoted in this article:

Despite the lack of economic relief from the Federal Reserve or European Central Bank earlier in the week, Wall Street is overrun with bulls today, thanks to a well-received nonfarm payrolls report. At last look, the number of stocks at new annual lows is overshadowed by the number of stocks at new highs. The NYSE has seen 15 securities at new lows, while the Nasdaq tallies 41 annual nadirs. Among the equities taking a record-breaking dip are Health Net, Inc. (NYSE:HNT - 18.33), Netflix, Inc. (NASDAQ:NFLX - 54.09), and Zynga Inc (NASDAQ:ZNGA - 2.79).

  • After posting better-than-expected second-quarter earnings, HNT slashed its full-year guidance, which pushed the stock to the $16.65 level -- its lowest price since May 2010. The stock has been slipping on the charts recently, losing 38.5% in 2012, and lagging the broader S&P 500 Index (SPX) by more than 15% during the past 60 sessions. Calls have been the options of choice recently, as evidenced by the stock's 10-day call/put volume ratio of 6.18 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 call-heavy activity: short interest rocketed nearly 120% during the past month. With buy-to-open call volume and short interest rising in tandem, it's possible that short sellers are picking up optimistic options simply to hedge their pessimistic positions.

  • NFLX dipped to a near two-and-a-half year low of $52.81 this morning, but has since reversed this pullback to trade just atop breakeven. Even though the stock is sitting on 20.6% year-to-date deficit, it is still seeing plenty of call activity, as evidenced by the Schaeffer's put/call open interest ratio (SOIR) of 0.79, confirming that calls outnumber puts among options slated to expire within three months. This ratio ranks in the 28th percentile of its annual range, suggesting that short-term options players have been more call-heavy just 28% during the past year. However, short interest currently accounts for more than 23% of the stock's float -- again, hinting at potential hedging.

  • Following a poor second-quarter report, two lawsuits filed earlier this week, and a shake-up among its top executives to get things sorted out, ZNGA today tripped to a new all-time worst of $2.66. And just moment ago, reports surfaced that ZNGA was hit with more litigation -- this time from Electronic Arts (NASDAQ:EA), which claimed that the online gaming site "copied and misappropriated" parts of its popular SIMS game. During the past three months, the security has trailed the broader SPX by more than 66%, and has hacked off 70.7% since January. But perhaps ZNGA is ready for a turnaround. At last check, the stock has battled its way atop breakeven, and has jumped some 3.7%. In fact, the security's Relative Strength Index (RSI) checks in at a slim 21 -- which resides in oversold territory.

Keep reading to see what was on today's new highs list.


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