Schaeffer's Trading Floor Blog

Hot Streak Continues for Google Inc. (GOOGL) Amid New Hire

Google Inc (GOOGL) has a new CFO

by 3/24/2015 10:40 AM
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Shares of Google Inc (NASDAQ:GOOGL) have been gaining momentum the past few months. Since touching an annual low of $490.91 on Jan. 12, the security has added 17.4%, last seen 1.9% higher at $576.23. The stock appears to be riding atop its 10-week moving average, a trendline that acted as resistance in late 2014 but has seemingly switched roles.

Weekly Chart of GOOGL since October 2014 with 10-Week Moving Average

Even with GOOGL's recent surge, options traders have remained focused on puts. 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 0.82 is higher than 91% of all similar readings from the past year. In other words, puts have been bought to open over calls at a faster-than-normal rate.

Recently, Google Inc (NASDAQ:GOOGL) has benefited from a string of fundamental developments, and the firm's at it once again today. The company has reportedly hired Ruth Porat, chief financial officer and executive vice president of Morgan Stanley (NYSE:MS), as its CFO. Porat will start at Google on Tuesday, May 26.

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Buzz Stocks: Facebook, Inc., Ocwen Financial Corporation, and Chesapeake Energy Corporation

Today's stocks to watch include Facebook Inc (FB), Ocwen Financial Corp (OCN), and Chesapeake Energy Corporation (CHK)

by 3/24/2015 9:26 AM
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Stocks are poised for a start in the black, with investors preparing for a fresh round of economic data, including new home sales. Among the equities in focus are social network Facebook Inc (NASDAQ:FB), financial services provider Ocwen Financial Corp (NYSE:OCN), and natural gas producer Chesapeake Energy Corporation (NYSE:CHK).

  • FB is up 0.4% in pre-market trading amid reports that the company is in negotiations with news publishers to host their content directly on its site. The equity has simply been on fire lately, adding close to 7% in March to close yesterday at $84.43, after touching an all-time high of $84.96 earlier in the day. Analysts are bullish on Facebook Inc, with 28 of 30 covering brokerage firms rating it a "buy" or better. Additionally, FB's average 12-month price target of $92.14 represents a 9% premium to current trading levels.

  • OCN is falling fast in electronic trading, dropping 5.7% after the New York Stock Exchange warned the company it is not in compliance with listing standards. This negative development is overshadowing the company's agreement to sell $25 billion worth of mortgage servicing rights. The security has already had its fair share of technical issues, underperforming the S&P 500 Index (SPX) by over 40 percentage points during the past three months, finishing yesterday at $8.80. Options players have placed bearish bets in response, with Ocwen Financial Corp's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 4.64 ranking higher than 86% of all similar readings from the past year. Elsewhere, short interest accounts for 32% of OCN's float.

  • CHK cut its budget for capital expenditures in 2015 due to falling commodity prices. However, Carl Icahn upped his stake in the firm for the first time in two years -- to 11% from 9.9%. Investors have responded positively, with the shares seeing a 2.6% jump ahead of the opening bell. It's a boost Chesapeake Energy Corporation desperately needs, as it's lost 28% in 2015 to settle yesterday at $14.11. In fact, the shares hit a two-year low last week. In the options pits, speculators have grown more put-skewed than normal, according to the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.85. This reading ranks higher than 83% of all comparable figures from the past year.

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Analyst Upgrades: Netflix, Inc., Monster Beverage Corporation, and Yamana Gold Inc.

Analysts upwardly revised their ratings on Netflix, Inc. (NFLX), Monster Beverage Corp (MNST), and Yamana Gold Inc. (USA) (AUY)

by 3/24/2015 9:21 AM
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Analysts are weighing in today on streaming giant Netflix, Inc. (NASDAQ:NFLX), energy drink issue Monster Beverage Corp (NASDAQ:MNST), and commodity concern Yamana Gold Inc. (USA) (NYSE:AUY). Here's a quick roundup of today's bullish brokerage notes on NFLX, MNST, and AUY.

  • NFLX received price-target hikes from Barclays (to $450) and Cantor (to $500) overnight, with the latter residing in never-before-seen territory. However, the stock has put in an impressive performance in 2015, and based on last night's close at $425, is 24.4% higher on the year. On the sentiment front, short-term traders are more put-heavy than usual toward Netflix, Inc., as evidenced by the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.28, which ranks in the 80th annual percentile.

  • BMO raised its price target on MNST by $10 to $150 -- matching the equity's average 12-month price target. Although the security has yet to trade north of $143.90, this all-time peak was reached as recently as Feb. 27, thanks to a well-received earnings report. Longer term, the shares have more than doubled over the past 52 weeks, and settled last night at $137.94. Should the equity continue to linger near record-high territory, more bullish brokerage notes could be on the horizon. Currently, 54% of covering analysts maintain a lukewarm "hold" recommendation on Monster Beverage Corp, leaving the door wide open for a round of upgrades.

  • Since hitting a six-year low of $3.33 on March 11, AUY has been on the mend, thanks to a bounce in gold -- up 22% at $4.05. TD Securities thinks there's more room to run, and boosted its price target on the stock to $6 from $5, as well as raising its rating to "buy" from "hold." Options traders have also taken an optimistic stance toward Yamana Gold Inc. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AUY's 10-day call/put volume ratio of 19.51 ranks in the 92nd percentile of its annual range.

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The Kentucky (and Cinderellas) of Recent Volatility Plays

The 'Elite 8' of tradable volatility indexes, per CBOE Options Hub

by 3/24/2015 9:15 AM
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Well, an apology for my bracket picks. I still say Villanova is going places this year!

But hey, we do options here most of the time. The volatility world is very CBOE Volatility Index (VIX)-centric, and I'm as guilty as anyone. There are many other volatility indices out there, including lots of tradable ones. Matt Moran of CBOE Options Hub highlights some of the most "volatile" in bracket form:

8 Tradable Volatility Indexes

And the winner is? CBOE Short-Term Volatility Index (VXST)!

That makes some sense. It's exactly the VIX, except that it proxies a nine-day option as opposed to a 30-day option. As such, it's hypersensitive to sudden moves in S&P 500 Index (SPX) and/or fear of sudden moves. It has the potential to pop exponentially more than VIX itself.

VIX itself got into a tough bracket. It comes in second with a 78.3% one-week pop, but unfortunately it lost to VXST in the Elite 8. It's kind of like if you threw Arizona into Kentucky's bracket.

Up next? CBOE Brazil ETF Volatility Index (VXEWZ), which made it out of the "foreign markets" bracket all the way to the finals. It proxies volatility on iShares MSCI Brazil Index (ETF) (EWZ), which is the Brazilian exchange-traded fund (ETF). This is less a "volatility" story, though, than a "Brazil market acts horrendous" story. It lost about 45% of its value from the October highs to the lows (so far) a little over a week ago. But the whole idea here is that CBOE has tradable products to hedge against ugliness like that, and VXEWZ does fit that bill.

And in fourth place we find CBOE Emerging Markets ETF Volatility Index (VXEEM), which also had a tough Elite 8 matchup. Every time I see that name, I think Akeem from "Coming to America." In real life it is volatility in iShares MSCI Emerging Markets Index (ETF) (EEM), the emerging markets ETF. We had a couple of spells of serious ugliness there in 2014. In fact, it was roughly a year back (plus and minus a month or two) that this sector was the reason our markets were doomed.

Perhaps most interesting is that oil volatility -- per CBOE Crude Oil Volatility Index (OVX) -- didn't perform better. I know it's a bit of recency effect in my mind here, but if you gave me this list and told me to rank the volatility moves by product in the last four years, I would have guessed OVX came in second to Kentucky … I mean VXST. I certainly expected that it would have outdone VIX given its historical outperformance versus VIX last autumn. Then again, the story was more one of the persistence of the volatility pop, and this bracket study looks more at compressed lifts.

My big conclusion is I might have picked the volatility brackets worse than the NCAA's, which is really bad considering it's in hindsight.

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

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Analyst Downgrades: MEI Pharma, Inc., MannKind Corporation, and Whiting Petroleum Corporation

Analysts downwardly revised their ratings on MEI Pharma Inc (MEIP), MannKind Corporation (MNKD), and Whiting Petroleum Corp (WLL)

by 3/24/2015 9:11 AM
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Analysts are weighing in on drugmakers MEI Pharma Inc (NASDAQ:MEIP) and MannKind Corporation (NASDAQ:MNKD), as well as oil-and-gas issue Whiting Petroleum Corp (NYSE:WLL). Here's a quick roundup of today's bearish brokerage notes on MEIP, MNKD, and WLL.

  • After the shares dropped nearly 70% yesterday due to subpar test results for its cancer drug, MEIP is pointed 2.6% higher ahead of the bell. The stock is gaining premarket despite a couple of bearish brokerage notes, as Wells Fargo cut its rating to "market perform" from "outperform," and Cantor slashed its price target by 50% to $7, while keeping its "buy" opinion. After closing Monday at $1.93, MEI Pharma Inc is now down 54.8% year-to-date. Prior to yesterday's crash, sentiment in the options pits was already bearish, as MEIP's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.53 ranks in the 81st percentile of all equivalent readings taken over the past year. However, before today's downgrade, the brokerage bunch was unanimously bullish on the stock, as all eight covering analysts had doled out a "strong buy" rating.

  • MNKD is 2.3% higher in electronic trading, after Jefferies cut its price target on the stock by $1 to $9 while keeping its "buy" rating. Looking back, MannKind Corporation has been a technical underperformer, with the shares down about 11.7% year-over-year to close yesterday at $5.22. Sentiment in the options pits has been bearish, as MNKD's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.68 ranks higher than 78% of all similar readings from the past year. Meanwhile, nearly 35% of the security's available float is sold short, which would take 17 sessions to cover, at average trading volumes.

  • Last night, WLL announced a a secondary public stock offering, sending the shares down 21.5% in premarket trading. In response, Susquehanna cut its price target on the equity by $3 to $37, while keeping its "neutral" opinion. Prior to today's imminent dip, Whiting Petroleum Corp was up 16.3% year-to-date to close yesterday at $38.39. Speculative players are upbeat on the stock's prospects, as WLL's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.68 ranks in the 78th percentile of its annual range.

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