Schaeffer's Outside the Box Blog
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Schaeffer's Senior VP of Research Todd Salamone recently flagged the significance of the $33 level on General Motors Company (NYSE:GM) shares. The stock popped back above this level in Tuesday's trading after spending a couple of sessions south of this mark.

The $33 level is:

  • The initial public offering (IPO) price when GM emerged from bankruptcy in 2010

  • A 38.2% Fibonacci retracement level from the stock's 2012 low ($18.72) to its December 2013 high ($41.85)

  • Near the site of its 80-week moving average (at $32.82)
Weekly chart of General Motors (GM) since June 2012 with 80-week moving average

And the stock is hovering near this critical threshold ahead of its earnings report next Thursday. The automaker is due to report its first-quarter earnings that morning, and analysts are expecting a per-share profit of 43 cents, or 24 cents lower than the previous year's results.

GM shares have topped analysts' estimates in five of the past seven quarters, but their post-earnings price action hasn't been terribly impressive. In fact, GM has moved lower in four of the last seven post-earnings sessions, and has managed to gain an average of just 1.6% in the full week after issuing its results.

Meanwhile, on the options front, speculators are placing bullish intermediate-term bets ahead of the quarterly event. In Tuesday's session, the June 37 call saw more than 33,000 contracts change hands (including one block of 30,606 contracts), nearly all of which traded off the ask price and translated into new open interest overnight.

In other words, option bulls added new long positions, betting on GM surging through the $37 level between now and June options expiration in a little over two months. The shares haven't traded north of $37 since mid-March and are sitting with a year-to-date loss of 18.4%.

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Moving averages are a key technical indicator traders use to filter out the day-to-day fluctuations of a stock's price movement. This allows investors to focus on the equity's overall trend -- and perhaps predict what may lie ahead. Schaeffer's Senior Quantitative Analyst Rocky White recently released a list of stocks that have moved or are moving into historically significant trendlines, and outlined what this could spell for the securities going forward. Three names that caught our attention are insurance issue American International Group Inc (NYSE:AIG), global software provider Pitney Bowes Inc. (NYSE:PBI), and drugstore chain Rite Aid Corporation (NYSE:RAD).

American International Group Inc (NYSE:AIG)

AIG has been charting a path steadily higher since November 2012, thanks to a lift from its 160-day moving average -- and since that time, the shares have risen roughly 50%. More recently, the stock has been stuck in a rut, churning between $49 and $51 since early February, and last seen at $50.06. However, this tepid price action brought the equity face-to-face with its aforementioned technical friend, and in the three other times this signal has occurred, AIG averaged a 21-day gain of 6.5%, and was positive 100% of the time.

In spite of AIG's longer-term tenacity, not everyone on the Street is convinced of the stock's ability to maintain this upward trajectory. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AIG's 10-day put/call volume ratio of 0.53 ranks in the 81st percentile of its annual range, meaning puts have been bought to open, relative to calls, at an accelerated clip in recent weeks. Meanwhile, among the brokerage bunch, 10 tepid "hold" ratings are levied against AIG, compared to eight "strong buys." A capitulation from these skeptics could help AIG continue its path higher.

Pitney Bowes Inc. (NYSE:PBI)

PBI's time on the charts over the past 52 weeks has been nothing short of impressive, with the stock up roughly 70% to trade at $25.77. A few quick bounces off its rising 40-day moving average have helped PBI sustain this upward momentum -- and tag a new five-year high of $27.58 last Friday. The equity is once again consolidating around this historical trendline, and in the eight other times this has happened, PBI has averaged a gain of 8.6% in the subsequent 21-day period, and was positive 86% of the time.

Similar to AIG, sentiment surrounding this technical outperformer tends toward the skeptical side, which could have bullish implications going forward. The equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.45 ranks in the bearishly skewed 74th annual percentile, while short interest accounts for more than 13% of PBI's available float. An unwinding of these bearish bets may translate into a contrarian boon for PBI. Short sellers, in fact, have started taking note of the stock's positive price action, as short interest declined roughly 10% over the last two reporting periods.

Rite Aid Corporation (NYSE:RAD)

Shares of RAD have more than tripled in value over the past 12 months. This technical tenacity was in full view in yesterday's session, when the equity bucked the bearish broad-market trend on an upbeat earnings forecast to tack on 8.4% -- and tag a 12-year high of $7.39 along the way. RAD's 80-day moving average has been critical to this technical success, and a recent consolidation around this trendline could spell more gains for the stock going forward. In the five other similar occurrences, the security has gone on to post a 21-day return of nearly 18%, and was positive 80% of the time.

The brokerage bunch has been slow to praise RAD's sharp move higher. Only five analysts currently cover the stock, resulting in three "buy" or better ratings, compared to two lukewarm "holds." Even more telling, the consensus 12-month price target of $6.62 stands at a discount to the stock's current perch at $6.94. RAD could be poised for a contrarian-related boost, should any of these analysts follow in the footsteps of Jefferies, Imperial Capital, and Raymond James -- which all issued price-target hikes for the stock ahead of this morning's open.

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