Schaeffer's Outside the Box Blog
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Yahoo! Inc. (NASDAQ:YHOO) gained more than 6% yesterday, thanks to a well-received earnings report followed by a number of upgrades and price-target hikes. Against this backdrop -- and with April options expiration scheduled for today -- Yahoo! call traders exited from a number of front-month positions, presumably to take profits.

As Schaeffer's Senior VP of Research Todd Salamone pointed out, YHOO recently rebounded off of its 52-week (equivalent to one-year) moving average. The next technical challenge facing the stock is the overhead $37.60 mark, which represents double the equity's May 2011 peak. The equity traded north of this area as recently as late March.

Weekly chart of Yahoo! Inc. (YHOO) since May 2011 with 52-week moving average

On the options front, both call and put volume is elevated in Yahoo! Inc.'s (NASDAQ:YHOO) options pits today. The most active non-expiring strike is the October 42 call, where it looks as though some contracts are being sold to open. Volume exceeds open interest, and the lion's share of the activity changed hands at the bid price. The call sellers are betting on YHOO shares remaining below the $42 level through October options expiration, at which point the calls will expire worthless and the sellers will retain the credit collected as profit. If, however, Yahoo! is sitting north of $42 when these options expire, the call sellers may be assigned, and required to unload shares of the stock for $42 apiece (no matter how high the equity might be trading).

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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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