Schaeffer's Trading Floor Blog

Index Check

by 7/11/2005 12:53 PM
Stocks quoted in this article:

We drift through lunch with the broad market indices pulling back from their highs but still holding gains...

The upper half of the graph is little changed from what we saw near the open as the broad market indices are mildly positive while select tech sub-groups lead the way...after a relatively flat open, housing stocks have perked up as the HGX hits a new high...oil related stocks have shrugged off the drop in crude to trade flat...gold stocks remain strong as the HUI sits at the resistance I noted earlier...


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Readers Respond - DNA

by 7/11/2005 12:23 PM
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Doug says - "Hi Nick I enjoy reading your posts. Your insights into DNA would be greatly appreciated. DNA is expected to announce earnings today at 5:30. I noticed that the July 85 calls are about 22500 while the July 85 puts are about 700. With options expiring this Friday with so many July 85 calls what are some possible scenarios? "

My response - The chart below shows the current front-month options configuration for Genentech (DNA)...


Chart Courtesy of Schaeffer's Sentiment PowerTools

As Doug points out, 85 is the home to a large number of calls and is the peak call strike for the July series. Meanwhile, 80 is the peak put strike, but is dwarfed by the peak call strike call. While there are many ways to look at this, I tend to view these as the "lines in the sand" that option players have focused on. In "normal" trading I would expect the 85 level to serve as resistance and 80 to serve as support. However, the earnings call obviously creates the potential increased volatility.

With options expiration looming there are a number of mechanical forces at work in the options market, particularly in regard to the 85 call strike. I would expect this level to serve as tough resistance and given the sentiment below (which in general suggests a slant toward optimism) I would think it would take some stellar comments from the company to push through...

  • Percent of analysts tracked by Zacks who rate the stock with a "buy": 73%
  • Number of analysts tracked by Zacks: 26
  • Short interest as a percent of float: 2.7%
  • Short interest ratio: 3.151
  • Put/call ratio percent rank: 69.4%


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Stocks quoted in this article:

One more chart caught my eye...sorry for the barrage...but I thought it was worth noting that after bouncing off support near 195, the Amex Gold Bugs (HUI) was testing 205 which has served as short-term resistance...


Created with SuperCharts by Omega Research


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Stocks quoted in this article:

For some time we have been tracking the Semiconductor HOLDRS (SMH) as it has traded in a fairly well-defined range. On Friday we saw that this proxy for the semi group had once again challenged resistance. Today's advance is helping to propel the SMH above resistance that has contained it since November...


Created with SuperCharts by Omega Research

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We ease into the day with steady buying pressure... my alert for NYSE net ticks has been quiet, but as you can see, the bulls have been able to push the SPX to a new intraday high...


Chart Courtesy of Thomson/ILX

This puts the large cap index near its peak from mid-June...


Created with SuperCharts by Omega Research

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