Schaeffer's Trading Floor Blog

Why Freescale Semiconductor Ltd (FSL) Could Be Ready to Rally

The bearish sentiment levied toward FSL could create contrarian tailwinds

by 4/16/2014 2:57 PM
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Put players have not been shy about making their presence known in Freescale Semiconductor Ltd's (NYSE:FSL) options pits of late. During the course of the past five sessions, in fact, traders at the International Securities Exchange (ISE) have bought to open 3,734 puts on FSL, compared to just 40 calls.

This growing bearish bias is also evident when including data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) -- and extending the time frame to 10 weeks. Specifically, the equity's 50-day ISE/CBOE/PHLX put/call volume ratio has grown to 1.55 from its April 1 reading of 0.11, and the current ratio ranks in the 98th percentile of its annual range. Simply stated, puts have been bought to open over calls at a near-annual-high clip in recent months.

Looking at the soon-to-be front-month series, peak put open interest can be found at the May 24 strike, where 7,692 contracts are currently in residence. A number of these positions have been bought to open in recent weeks, meaning traders are potentially pleased with today's 0.9% drop, which has brought Freescale Semiconductor south of the strike price.

However, this bearish bias isn't confined to the options arena. Short interest, for example, accounts for a healthy 13.9% of the stock's available float, representing more than six sessions' worth of pent-up buying demand, at the average daily volume. Meanwhile, the consensus 12-month price target of $24.53 stands at a slim 2.4% premium to FSL's current perch at $23.95. However, it appears analysts may be changing their tune, as just yesterday Topeka Capital upped its price target for the equity to $30 from $23.

From a contrarian perspective, such bearish sentiment levied toward an outperforming equity could have bullish implications down the road. In fact, FSL has rallied more than 49% in 2014, and has outpaced the broader S&P 500 Index (SPX) by more than 47 percentage points over the past three months. Assisting the stock in its trek higher has been its 40-day moving average. This trendline helped usher FSL to a record high of $26 on April 3, and more importantly, is containing today's pullback.

Additionally, the company is slated to report earnings after next Thursday's close. Following its last quarterly report in late January, shares of the semiconductor concern rallied nearly 15% the subsequent day. Another well-received earnings report for Freescale Semiconductor Ltd (NYSE:FSL) could shake some of the weaker bearish hands loose, creating a fresh wave of buying power for FSL.


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Analyst Update: Amazon.com, Inc., Cree, Inc., and hhgregg, Inc.

Analysts are weighing in on AMZN, CREE, and HGG

by 4/16/2014 2:16 PM
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The broad-market indexes are higher this afternoon, as Wall Street applauds solid tech earnings and comments from Fed Chair Janet Yellen. Meanwhile, among the equities in focus are e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), LED issue Cree, Inc. (NASDAQ:CREE), and electronics retailer hhgregg, Inc. (NYSE:HGG), which have all attracted the attention of analysts.

  • AMZN is 0.1% higher at $316.50, after Argus upgraded the equity to "buy" from "hold." Despite its year-to-date deficit of more than 20%, Amazon.com, Inc. remains beloved on Wall Street. In fact, 21 analysts deem the stock worthy of a "strong buy," while another pair dish out "buy" ratings. For comparison, AMZN harbors six lukewarm "holds" and not a single "sell" recommendation. Likewise, short-term options players haven't been more call-heavy during the past year, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.88, which stands at an annual low. The company is slated to report first-quarter earnings after the close next Thursday, and a weaker-than-expected report could spook some of the bulls into hitting the exits. An unwinding of optimism in the options pits, or a flood of downgrades, could exacerbate selling pressure on the security.

  • CREE is 1.5% higher at $56.34, thanks to an upgrade to "buy" from "hold" at Needham & Co. Ahead of Cree, Inc.'s turn in the earnings confessional after the close next Tuesday, option buyers are picking up calls over puts at an accelerated clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 5.30 sits just 15 percentage points from a 52-week peak. However, it's worth noting that short interest accounts for nearly 10% of CREE's total available float, meaning some of the recent call buying -- especially at out-of-the-money strikes -- could be attributable to short sellers picking up pre-earnings hedges.

  • Finally, HGG is taking the red road less traveled today, down 0.3% at $7.85, after a price-target cut to $8 from $9 at Jefferies. Beleaguered hhgregg, Inc. yesterday warned of a sharp, weather-induced drop in fiscal fourth-quarter revenue, which translated into a 9.6% bear gap for HGG on the charts. From a longer-term perspective, the equity has surrendered more than 43.8% in 2014, and underperformed the broader S&P 500 Index (SPX) by nearly 30 percentage points during the past three months. As such, it's no surprise to find a bearish bias on Wall Street. Not one of the 12 analysts following HGG deems it a "buy," and short interest accounts for a whopping 60% of the stock's total available float. In the same vein, the security has racked up a 10-day ISE/CBOE/PHLX put/call volume ratio of 22.54, which rests just 2 percentage points from an annual acme.

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Earnings on Deck: General Electric Company, Advanced Micro Devices, Inc., and Chipotle Mexican Grill, Inc.

Previewing GE, AMD, and CMG ahead of their upcoming earnings reports

by 4/16/2014 1:30 PM
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Earnings season is heating up, with a pair of tech-sector earnings helping to light up the charts today. Still slated to report this week are blue-chip conglomerate General Electric Company (NYSE:GE), semiconductor concern Advanced Micro Devices, Inc. (NYSE:AMD), and restaurateur Chipotle Mexican Grill, Inc. (NYSE:CMG). Here's a quick look at these names as earnings approach.

  • General Electric Company (NYSE:GE) will report first-quarter earnings before the open tomorrow. The firm has matched or topped analysts' per-share profit predictions in each of the past eight quarters, yet averages a one-week post-earnings gain of just 0.3%. Ahead of tomorrow's report, options players have picked up GE puts over calls at a slightly accelerated clip, as the stock's 10-day put/call volume ratio of 0.32 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 61% of all comparable readings from the past year. In today's action, however, calls are the options of choice, with intraday volume running at a 52% mark-up to GE's average pace. Digging deeper, it seems eleventh-hour bulls are buying to open the April 26 and 26.50 calls, which expire at the close tomorrow. At last check, GE is 0.8% higher at $26.02.

  • Advanced Micro Devices, Inc. (NYSE:AMD) will unveil its first-quarter figures after the close tomorrow. The company has topped the Street's bottom-line estimates in six of the past eight quarters, yet averages a hefty loss of 10% in the week after reporting. Despite their limited profit potential -- AMD is trading at $3.76, a 0.9% drop -- puts are picking up steam on the long side. The security's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.39 sits just 13 percentage points from an annual high. Echoing this, intraday put volume is running at twice the norm today, with potential buy-to-open activity spotted at the May 3 strike. Elsewhere, short interest accounts for more than 20% of the stock's total available float, representing six sessions' worth of pent-up buying demand, at AMD's average daily trading volume.

  • Finally, Chipotle Mexican Grill, Inc. (NYSE:CMG) is slated to report first-quarter earnings ahead of the bell tomorrow. The firm has matched or exceeded analysts' per-share predictions in five of the past eight quarters, averaging a one-week post-earnings gain of 1%. As such, CMG calls have grown increasingly popular during the past couple of weeks, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 0.89 registers in the 82nd percentile of its annual range. Plus, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at a 12-month low of 0.91, implying that short-term options players haven't been more call-skewed during the past year. In today's session, CMG is 1.8% higher at $549.99, and call volume is running at twice the normal clip.

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Midday Market Stats: Dow Jones Industrial Average Poised for Third Straight Win

St. Jude Medical, Inc. sees post-earnings call trading, while Nimble Storage Inc enjoys an upgrade

by 4/16/2014 12:04 PM
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The Dow Jones Industrial Average (INDEXDJX:.DJI) jumped triple digits out of the gate, and was last seen 106 points, or 0.7%, higher at 16,368.53. A pair of solid tech-sector earnings reports from Intel Corporation (NASDAQ:INTC) and Yahoo! Inc. (NASDAQ:YHOO) has stoked the bullish flames, and an encouraging report on industrial production has overshadowed a slimmer-than-anticipated rise in March housing starts. This afternoon, Wall Street will digest a speech from Fed Chair Janet Yellen, as well as the central bank's Beige Book.

Here are a few noteworthy stats at midday:

  1. The equity put/call volume ratio across all 12 options exchanges is currently perched at 0.87, with calls outpacing puts. So far today, 3.74 million calls have changed hands, compared to 3.26 million puts.

  2. One name seeing heavy call trading today is heart device maker St. Jude Medical, Inc. (NYSE:STJ), which is down 3.2% at $61.17, despite reporting stronger-than-expected first-quarter earnings and lifting its full-year guidance. So far, nearly 86% of today's option volume has traded on the call side.

  3. The advance/decline ratio on the New York Stock Exchange (NYSE) stands at 2.67, with advancing stocks more than doubling declining issues.

  4. The biggest upward mover on the exchange so far today is data storage provider Nimble Storage Inc (NYSE:NMBL), which is up 8.6% at $33.74 after an upgrade to "buy" from "neutral" at UBS. (The brokerage firm, however, reduced its price target for NMBL to $45 from $53.)

  5. The CBOE Volatility Index (VIX) is down 0.9 point, or 5.6%, at 14.74. The "fear barometer" is on pace to end the holiday-shortened week with a 13.5% deficit.

  6. Today's put/call volume ratio on the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) stands at 1.34, with put volume outpacing call volume so far. The ETN has shed 1.7% at midday to $43.17.

View a real-time chart of the Dow Jones Industrial Average (INDEXDJX:.DJI).

Unusual Option Volume at Midday


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Buzz Stocks: General Motors Company, Starbucks Corporation, SodaStream International Ltd, and Google Inc

Today's stocks to watch in the news include GM, SBUX, SODA, and GOOGL

by 4/16/2014 9:25 AM
Stocks quoted in this article:

Futures are pointed higher this morning, as investors digest the latest batch of earnings reports. In company news, here are some stocks to watch today:

  • General Motors Company (NYSE:GM) CEO Mary Barra made her first public appearance yesterday since taking part in a series of congressional hearings earlier this month. Barra said that GM has begun to fix the more than 2.6 million faulty cars that were linked to 13 deaths, and intends to launch a "global product integrity" unit to ensure the automaker meets the highest safety standards going forward. (The New York Times)

  • Amid political pressure over alleged tax avoidance, Starbucks Corporation (NASDAQ:SBUX) announced plans to relocate its European home office to London from Amsterdam later this year. "This move will mean we pay more tax in the U.K.," the coffee giant said. (BBC News)

  • SodaStream International Ltd (NASDAQ:SODA) shares are soaring in pre-market trading after a Calcalist report said the home carbonation issue may be considering selling a major stake to a larger competitor. Counted among the potential suitors are PepsiCo, Inc. (NYSE:PEP), Dr Pepper Snapple Group Inc. (NYSE:DPS), and SBUX. (Bloomberg Businessweek)

  • Google Inc (NASDAQ:GOOGL) unveiled its new Project Ara smartphone, which features an "endoskeleton" frame that can accommodate various hardware modules, each designed for a specific task. If all goes according to plan, GOOGL will manage the endoskeleton design, while third-party developers will make modules that will be sold on an online marketplace. (MarketWatch)

  • Also, Intel Corporation (NASDAQ:INTC), Bank of America Corp (NYSE:BAC), and Yahoo! Inc. (NASDAQ:YHOO) reported quarterly earnings. (Reuters; USA Today)

  • Finally, the IRS recently audited supermodel Gisele Bundchen. The former Victoria's Secret Angel responded by blaming Forbes -- which ranked Bundchen the highest paid model in the world, with $42 million in 2013 earnings -- for the audit, claiming the publication inflated her income. Regardless, the IRS found nothing amiss with her taxes. (Orlando Sentinel)


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