Schaeffer's Trading Floor Blog

Stocks to Watch Thursday: The Kroger Co., Fossil Group Inc, and Dendreon Corporation

Analyzing KR, FOSL, and DNDN ahead of tomorrow's trading

by 5/14/2014 4:49 PM
Stocks quoted in this article:

Momentum names that made notable moves on Wednesday and could continue to do so into Thursday's session include grocery chain The Kroger Co. (NYSE:KR), fashion accessories specialist Fossil Group Inc (NASDAQ:FOSL), and biotech firm Dendreon Corporation (NASDAQ:DNDN). Here is a quick look at these stocks ahead of tomorrow's opening bell.

The Kroger Co. (NYSE:KR)

Kroger finished today's session 0.2% north of breakeven, at $46.67, after earlier scoring a fresh record high of $46.93. Looking back three months, the stock has climbed nearly 25%, but that hasn't stopped traders from upping the bearish ante. To be specific, short interest spiked 60% over the past two reporting periods, and now represents more than four sessions' worth of pent-up buying demand, at the shares' average daily volume. More recently, however, the rate of call buying (compared to put buying) has hit near-annual-high levels. In fact, during the past 10 trading days, roughly 14 calls have been bought to open for every put, resulting in an International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 13.96 -- which ranks just 2 percentage points from a 12-month peak. Therefore, it is possible that some of this recent call activity came at the hands of short sellers, hedging against more upside on KR.

Fossil Group Inc (NASDAQ:FOSL)

Last night, Fossil reported weaker-than-expected first-quarter earnings and forecast gloomy results for the current quarter, sending the shares 10.3% lower today to close squarely at $100.00. As such, overall options volume on FOSL jumped to roughly six times the average daily amount, with puts more than doubling calls. While FOSL's June 100 put was at the forefront of today's action, the subsequent nine most active options were all of the front-month variety -- eight puts and one call, to be exact. Not surprisingly, the stock ended up on the short-sale restricted list just minutes before the closing bell.

Dendreon Corporation (NASDAQ:DNDN)

Heading into tomorrow's annual shareholder meeting, Dendreon shares bounced 5.4% today to close at $2.16. As such, the equity has now rebounded 19.3% since hitting an all-time low of $1.81 in Monday's session. Going back to the beginning of 2014, DNDN is down nearly 28%, yet speculators have bought to open almost five calls for every put during the past 50 trading days. The resulting ISE/CBOE/PHLX call/put volume ratio of 4.76 ranks in the 73rd annual percentile, meaning long calls have been preferred over puts at a faster-than-usual clip of late. Considering short interest accounts for 27.8% of the equity's float, it is also possible some of these option bulls are really short sellers in disguise.

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