Schaeffer's Trading Floor Blog

Buzz Stocks: Tekmira Pharmaceuticals Corporation, Procter & Gamble Co, and Tesla Motors Inc (TSLA)

Today's stocks to watch in the news include TKMR, PG, and TSLA

by 10/24/2014 9:28 AM
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U.S. stocks are poised to pare some of yesterday's gains, as traders weigh news of a confirmed Ebola case in New York City. One stock set to benefit from the escalating jitters is drugmaker Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR), while blue-chip conglomerate Procter & Gamble Co (NYSE:PG) and electric vehicle maker Tesla Motors Inc (NASDAQ:TSLA) are garnering early attention for their own reasons.

  • TKMR is headed 3% higher in pre-market action, after landing at $19.82 on Thursday. Earlier this week, the company said it started limited manufacturing of its Ebola drug, which is expected to be available in early December. On the charts, Tekmira Pharmaceuticals Corporation has soared more than 148% in 2014, and recently bounced off support at its 80-day moving average. Analysts are in the bulls' camp, as four out of six have doled out "buy" or better ratings, and not one considers TKMR a "sell." Option buyers, meanwhile, have preferred calls over puts, as the equity's 10-day call/put volume ratio sits at 1.68 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

  • PG is pointed 2.5% higher, as traders digest the company's quarterly earnings report, as well as plans to spin off its Duracell unit into a separate company. Technically speaking, PG has blazed a slow and steady trail higher since early 2009, settling at $83.23 on Thursday. What's more, the stock boasts a year-to-date gain of 2.2%, compared to the Dow's gain of 0.6%. Nevertheless, option buyers were upping the bearish ante ahead of today's earnings release, as the security's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.36 stands just 1 percentage point shy of an annual pessimistic peak. Short-term speculators were paying a pretty penny, too, as the stock's Schaeffer's Volatility Index (SVI) of 15% stands higher than two-thirds of all other readings from the past year, suggesting Procter & Gamble Co's short-term options are expensive right now, relatively speaking.

  • Finally, TSLA is slightly lower ahead of the bell, after Toyota Motor Corp (ADR) (NYSE:TM) confirmed reports that it cut its stake in the electric automaker. Still, the shares of Tesla Motors Inc are up 56% on a year-to-date basis, and have outperformed the broader S&P 500 Index (SPX) during the past three months. Plus, a mass exodus of option bears or short sellers could help TSLA resume its long-term ascent. The security's Schaeffer's put/call open interest ratio (SOIR) rests at a 12-month high of 1.63, indicating a bigger-than-usual put bias among near-term options players. Meanwhile, short interest represents nearly 24% of the stock's total available float.

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Analyst Upgrades: Bank of America Corp, Citigroup Inc, and JPMorgan Chase & Co.

Analysts issued bullish notes on BAC, C, and JPM

by 10/24/2014 9:22 AM
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Oppenheimer upwardly revising its ratings on a number of big financial firms today, including Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM). Here's a quick look at today's bullish brokerage notes on BAC, C, and JPM.

  • BAC -- which has seen optimism emerge from all corners of the Street this week -- saw its price target lifted to $19 from $18 at Oppenheimer, which also underscored its "outperform" rating on the shares. However, with Bank of America Corp sporting an impressive year-over-year advance of 17.1%, there's still plenty of room for the brokerage bunch to up their outlooks. At present, 45% of covering analysts maintain a "hold" or "strong sell" suggestion toward BAC, and the consensus 12-month price target of $18.11 stands at a slim 9% premium to the stock's current perch at $16.60.

  • Since taking a strong bounce off its 200-day moving average last Wednesday, Oct. 15, C has rallied nearly 7% -- and reclaimed the round-number $50 mark in the process. Oppenheimer thinks there's more room to run, and raised its price target on the shares to $67 from $64 -- while underlining its "outperform" rating -- representing expected upside of 30.3% to Citigroup Inc's present price of $51.41. The stock could get an additional boost, should option bears capitulate to C's recent uptrend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.53 ranks in the 72nd annual percentile, meaning puts have been bought to open over calls at a faster-than-usual clip of late.

  • JPM has also been in rebound mode since unveiling a poorly received earnings report last week, with the shares up 4.6% from their Oct. 15 close at $55.53 to trade at $58.06. As such, Oppenheimer boosted its price target on the stock to $72 from $69 -- record-high territory for JPM -- and reiterated its "outperform" rating. On the sentiment front, option traders have taken the bearish route, as evidenced by JPM's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.16, which ranks higher than 92% of similar readings taken in the past year. Outside of the options pits, though, short interest accounts for less than 1% of JPMorgan Chase & Co.'s available float, and would take just over two days to cover, at JPM's average daily pace of trading.

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The SPY and Its 200-Day Moving Average, Revisited

Why owning the SPDR S&P 500 ETF Trust (ETF) when its below the 200-day moving average isn't a great idea

by 10/24/2014 9:02 AM
Stocks quoted in this article:

Ready for another flashback?

All the way back on Oct. 13, the SPDR S&P 500 ETF Trust (SPY) closed below the 200-day moving average for the first time in nearly two years. As we showed a few days later, owning SPY when it's below the 200-day wasn't the greatest idea in the world. But, it was a "bad" trade in a rather odd way.

The SPY has dipped below the 200-day 73 times since its invention in 1993, and if you bought on the first close below the 200-day, and then sold on the first close after, you made a winning trade 67 out of 73 times. But, over the course of time, you missed most of the SPY gains over the last 21 years, thanks to the fact that three of those six losses were disasters.

Well, we can now add a 74th round trip to our database. The SPY closed back above the 200-day on Tuesday. The system would have triggered a buy on the Oct. 13 close of 187.41, and then a sale on the Oct. 21 close of 194.07, for a nice tidy 3.55% profit.

That's actually the best trade in this system since a trade was initiated on Sept. 23, 1999!

But, I really wouldn't recommend this at home. Part of the nice return is thanks to circumstance. The SPY closed at 190.54 on Oct. 19, a mere 0.02 above the 200-day, and then it tanked the next day, giving you a much better entry. Then, on the way back up, SPY closed at 190.30 on Oct. 20, vs. 190.64 on the 200-day. The next day produced a big rally to 194.07, which is our exit point. So, a few pennies either way and you would have had a near-scratch trade, as you could have entered and exited in the 190.5 to 191 range.

In the real world, you shouldn't use any sort of system that's so rigid. It's interesting and informative to look at the history, but there are so many moving parts around each instance that it's never right to stick perfectly to any of these.

The lesson that we learned a couple weeks ago still holds true. A very long run above the 200-day doesn't tend to immediately morph into a disastrous fall under the 200-day. By the time we've gotten back below the 200-day, we've seen most of the damage.

The quickest boom-to-bust turn was in 2008, and even then, you had a few months to get out before the real bear took hold. And let's face it: The 2008 experience is still fresh enough in everyone's memory to color our impression of every shakeout.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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Options Check-Up: BlackBerry Ltd, Coach Inc, and Facebook Inc (FB)

Analyzing recent option activity for BBRY, COH, and FB

by 10/24/2014 8:12 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are handset maker BlackBerry Ltd (NASDAQ:BBRY), accessories designer Coach Inc (NYSE:COH), and social network Facebook Inc (NASDAQ:FB). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on BBRY, COH, and FB.

  • BBRY ended yesterday's session 4.3% higher at $10.31, bringing its year-to-date advance to nearly 39%. In recent sessions, the shares have found a reliable foothold at the round-number $10 level. Not surprisingly, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open calls over puts at a rapid-fire rate in recent weeks. BlackBerry Ltd's 10-day call/put volume ratio of 6.27 across those exchanges ranks in the 89th percentile of its annual range. What's more, based on the stock's Schaeffer's Volatility Scorecard (SVS) of 100, BBRY has tended to make outsized moves over the past year, relative to what the options market has priced in.

  • COH tacked on 2% to close at $35.94 on Thursday, but remains roughly 36% lower since the start of 2014. During the past 10 weeks at the ISE, CBOE, and PHLX, the equity has racked up a call/put volume ratio of 2.73 -- just 2 percentage points from an annual acme. However, some of these long calls may have been initiated by short sellers hedging their bearish bets ahead of next Tuesday morning's earnings report. After all, nearly one-tenth of Coach Inc's float is sold short, which would take about eight days to buy back, at the security's average daily trading levels. Looking back a year, COH has been more volatile than the options markets has expected, based on the stock's SVS of 85.

  • Finally, FB touched a record high of $80.63 yesterday, and ended 2.1% higher at $80.04. Nevertheless, options traders have been targeting long puts, relative to calls, at an annual-extreme clip recently. Specifically, Facebook Inc's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.77 is higher than all other readings from the previous year -- though some of this activity may have been at the hands of shareholders looking to hedge their long stock positions ahead of the company's third-quarter earnings report, slated for release after next Tuesday's close. Regardless, now is an opportune time to wager on FB with short-term options, as the equity's Schaeffer's Volatility Index (SVI) of 43% rests below 65% of comparable readings recorded during the last 52 weeks.

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Stocks On the Move: Caterpillar Inc., Celgene Corporation, and IPC The Hospitalist Company Inc

CAT, CELG, and IPCM are moving sharply in Thursday's trading

by 10/23/2014 12:52 PM
Stocks quoted in this article:

U.S. stocks are in the black this afternoon, as Wall Street cheers solid blue-chip earnings. One of the leading Dow components at midday is big-cap construction concern Caterpillar Inc. (NYSE:CAT), and biopharmaceutical issue Celgene Corporation (NASDAQ:CELG) and inpatient care provider IPC The Hospitalist Company Inc (NASDAQ:IPCM) are also making notable moves. Here's a quick look at how CAT, CELG, and IPCM are faring on the charts today.

  • CAT is 4.5% higher at $98.78, second only to 3M Co (NYSE:MMM) among blue chips, and helping prop the Dow to a 242-point lead. CAT traders are celebrating the company's stronger-than-expected quarterly earnings report, as well as an upwardly revised profit outlook for 2014. The shares of Caterpillar Inc. are now 9.2% higher year-to-date, though the equity has yet to enter triple-digit territory today, peaking at $99.94 earlier. In the options pits, short-term traders could be hitting the exits; the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 2.22, indicating that puts more than double calls among options expiring within three months. Furthermore, this ratio stands higher than 88% of all other readings from the past year, implying that near-term traders have rarely been more put-skewed.

  • CELG is up 6.2% to flirt with $100.66, and earlier touched a record high of $100.91 -- marking the stock's first foray north of the century mark. Bolstering the security was a stronger-than-expected third-quarter earnings report, as well as the company's announcement that it's finalizing plans for a Phase III trial of its Crohn's drug. Thanks to today's rally, Celgene Corporation boasts a year-to-date gain of 19.3%, which could intimidate short-term option bears; the equity's SOIR of 0.80 ranks in the 74th percentile of its annual range.

  • IPCM is the worst performer on the Nasdaq, down 17% to linger near $39.05. What's more, the security touched a near-two-year low of $36.12 earlier in the session, as shareholders and analysts balk at the company's downwardly revised full-year outlook. No fewer than four brokerage firms have cut their price targets on IPC The Hospitalist Company Inc, and Wells Fargo downgraded the stock to "market perform" from "outperform." Not everyone is jeering today's swoon, though; short interest accounts for 12.3% of IPCM's total available float, representing more than 16 sessions' worth of pent-up buying demand, at the equity's average pace of trading.

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