Schaeffer's Trading Floor Blog

Midday Market Stats: Dow Jones Industrial Average Soars On Strong Retail Sales

Edwards Lifesciences Corp scores a patent win; Goodrich Petroleum Corporation jumps on well update

by 4/14/2014 12:09 PM
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The Dow Jones Industrial Average (INDEXDJX:.DJI) is enjoying a triple-digit lead at midday, as better-than-expected retail sales data overshadows a tepid business inventories reading. Specifically, retail sales for March rose 1.1% -- the most since September 2012. Economists, meanwhile, were calling for a slimmer rise of 0.8%. Excluding car sales, retail sales arrived at 0.7%, well above the consensus estimate of 0.4%. Business inventories, meanwhile, landed at 0.4%, just shy of the 0.5% whisper number. Heading into the second half of the session, the DJI is up 112.67 points, or 0.7%, at 16,139.42 -- just a stone's throw off the highs of the day.

Here are a few noteworthy stats at midday:

  1. The equity put/call volume ratio across all 12 options exchanges currently stands at 0.87, with call volume slightly outpacing put volume. So far today, 3.75 million calls have changed hands, compared to 3.28 million puts.

  2. Among the names seeing heavy call activity is Edwards Lifesciences Corp (NYSE:EW), which is flirting with a 13% lead at last check to trade at $82.33. On Friday, a federal court in Delaware ruled in favor of EW's transcatheter heart valve patent infringement case against sector peer Medtronic, Inc. (NYSE:MDT). Option players are cheering today's price pop, with more than three-quarters of the day's overall options volume occurring on the call side.

  3. The advance/decline ratio on the New York Stock Exchange stands at 3.23. Advancing stocks more than triple declining issues.

  4. One of the biggest gainers on the Big Board today is Goodrich Petroleum Corporation (NYSE:GDP), which is up 34.2% to $24.70. Earlier, the company announced the completion and a successful operational update of its Blades 33H-1 well in Louisiana.

  5. The CBOE Volatility Index (VIX) has surrendered its foothold atop 17. The "fear gauge" is currently down 3.3% at 16.47.

  6. Today's put/call volume ratio on the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) stands at 1.58, with puts having the edge over calls. The ETN is 0.9% lower today at $44.36.

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

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Finisar Corporation (FNSR): Are Higher Highs Ahead?

The bearish sentiment levied toward FNSR may have bullish implications going forward

by 4/14/2014 10:59 AM
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Similar to sector peer Cisco Systems, Inc. (NASDAQ:CSCO), put players have been active in Finisar Corporation's (NASDAQ:FNSR) options pits. During the past five sessions, more than 11 puts have been bought to open for each call at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), resulting in a put/call volume ratio of 11.04.

Including data from the NASDAQ OMX PHLX (PHLX) -- and widening the time frame out to two weeks -- yields a similarly skeptical stance. In fact, FNSR's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.94 ranks in the 96th percentile of its annual range, indicating puts have been bought to open over calls with more rapidity just 4% of the time within the past year.

This penchant for puts has translated into a front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.91, which means that near-the-money put open interest in the soon-to-expire April series nearly doubles call open interest. What's notable about these accumulations of open interest at strikes near present trading levels is that they can potentially have more of an impact on the equity's short-term price action versus deeper out-of-the-money strikes.

Looking elsewhere reveals that this bearish bias toward FNSR isn't relegated to the options arena. Short interest jumped 11.2% during the latest reporting period, and now accounts for an impressive 17.4% of the stock's available float. This equates to 15.6 million FNSR shares sold short -- the loftiest amount since November 2010.

On the charts, however, Finisar's strong performance hasn't warranted this skepticism. Year-over-year, shares of FNSR have tacked on more than 78%, thanks to a lift from their rising 160-day moving average. What's more, a quick bounce off this trendline in mid-March helped send the stock to a two-year high of $28.07 just three weeks ago. Going forward, a capitulation from either group of option bears or short sellers amid this positive price action could translate into a contrarian boon for Finisar Corporation (NASDAQ:FNSR).

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Analyst Downgrades: JPMorgan Chase & Co., Microsoft Corporation, and 3D Systems Corporation

Analysts downwardly revised their ratings on JPM, MSFT, and DDD

by 4/14/2014 9:24 AM
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Analysts are weighing in today on financial firm JPMorgan Chase & Co. (NYSE:JPM), tech guru Microsoft Corporation (NASDAQ:MSFT), and 3D printing technology manufacturer 3D Systems Corporation (NYSE:DDD). Here's a quick roundup of today's bearish brokerage notes.

  • Analysts continue to bombard JPM in the wake of Friday's weaker-than-expected first-quarter earnings report, which sent the shares 3.7% lower to $55.30. This morning, no fewer than five brokerage firms have doled out price-target cuts on the stock, including UBS and Bernstein, which each slashed their targets by $2, to $63 and $65, respectively. There's still plenty of room on JPMorgan Chase & Co.'s bearish bandwagon, however. The stock boasts 17 "buy" or better recommendations, compared to four "holds" and just one "sell." Meanwhile, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.67 stands higher than just 22% of comparable readings from the past year, suggesting short-term options players are more call-skewed than usual right now.

  • Deutsche Bank downgraded MSFT to "hold" from "buy" this morning. However, the security -- which has outperformed the broader S&P 500 Index (SPX) by 8 percentage points during the past three months -- is no stranger to skepticism. The stock has added 4.8% in 2014, and touched a near-14-year high of $41.66 earlier this month, yet more than half of covering analysts maintain "hold" or "sell" opinions. Plus, the consensus 12-month price target on the shares sits at $39.60 -- just a hair's breadth from the stock's current perch of $39.21. Should Microsoft Corporation extend its uptrend, or should the company report stronger-than-expected earnings after the close on Thursday, April 24, a reversal in sentiment on Wall Street could translate into contrarian gains for the shares.

  • Finally, Goldman Sachs this morning initiated coverage of DDD with a tepid "neutral" rating. However, the brokerage firm issued a price target of $63 for the shares, representing expected upside of 31% from the stock's current price of $48.07. Speculators are taking the glass-half-full approach in pre-market trading, sending DDD 1.8% higher ahead of the bell. From a longer-term perspective, the stock is currently lingering in year-to-date-low territory, but a bounce could be in the cards. The security finished the past two sessions south of its lower Bollinger Band, signaling "oversold" territory. Should 3D Systems Corporation stage a recovery, a short-squeeze situation could add contrarian fuel to the stock's fire. Short interest grew 10.4% during the past two reporting periods, and now accounts for 27.5% of the stock's total available float -- or roughly six sessions worth of pent-up buying demand, at DDD's average pace of trading.

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Buzz Stocks: Facebook Inc (FB), Tesla Motors Inc (TSLA), BlackBerry Ltd, and GlaxoSmithKline plc (ADR)

Today's stocks to watch in the news include FB, TSLA, BBRY, and GSK

by 4/14/2014 9:17 AM
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Following a down week, the stock market looks poised for a modest rebound this morning, with futures pointed slightly higher in pre-market trading. In company news, here are some stocks to watch today:

  • Within the next few weeks, Facebook Inc (NASDAQ:FB) is expected to receive regulatory approval from Ireland to become an "e-money" institution. The authorization will allow the social network to provide financial services, such as allowing users to store funds on FB and issuing electronic money that will be valid in Europe. (The Irish Times)

  • According to sources, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk will visit China this month for talks with Sinopec about building charging units at the refiner's nationwide chain of service stations. According to news portal, the electric charging network would begin in Beijing and gradually spread to nearby Tianjin and Hebei province. (MarketWatch)

  • BlackBerry Ltd (NASDAQ:BBRY) announced plans to release security patches for customers using its email and messaging software on Google Inc (NASDAQ:GOOGL) Android and Apple Inc. (NASDAQ:AAPL) iOS devices, in order to address the threat posed by the "Heartbleed" bug. BBRY Senior Vice President Scott Totzke specified that customers running BBM messaging and Secure Work Space corporate email are vulnerable to hackers, though he noted that the "level of risk here is extremely small" due to the company's security technology. (Reuters)

  • Poland's Central Anti-Corruption Bureau has opened a criminal investigation into GlaxoSmithKline plc (ADR) (NYSE:GSK) for allegedly bribing doctors to promote Seretide, a popular lung drug also known as Advair. GSK said it has already disciplined one employee following an internal investigation, and is currently cooperating with Polish authorities. (Chicago Tribune)

  • Also, Citigroup Inc (NYSE:C) reported quarterly earnings. (CNBC)

  • Finally, a combination of decreased supply and increased demand has led to the highest beef prices since 1987. In February, the average retail cost of fresh beef in the U.S. was $5.28 per pound. (FOX News)

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Analyst Upgrades: Yahoo! Inc., Visa Inc, and Pandora Media Inc

Analysts upwardly revised their ratings on YHOO, V, and P

by 4/14/2014 9:08 AM
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Analysts are weighing in today on Internet issue Yahoo! Inc. (NASDAQ:YHOO), credit card concern Visa Inc (NYSE:V), and streaming music provider Pandora Media Inc (NYSE:P). Here's a quick roundup of today's bullish brokerage notes.

  • After closing last week at $32.87, YHOO is pointed 1.6% higher ahead of the bell, after SunTrust Robinson upgraded the shares to "buy" from "neutral." (However, the brokerage firm also trimmed its price target on the stock to $40 from $42.) Along with its own first-quarter earnings report, the company will unveil revenue and profit figures for Alibaba Group -- of which it owns a large stake -- tomorrow night, which will help gauge expectations ahead of the Chinese e-commerce concern's highly anticipated initial public offering. Friday's activity notwithstanding, YHOO's short-term options crowd is more put-biased than usual right now, as the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.63 sits just 13 percentage points from an annual high. Should Yahoo! Inc. extend its winning streak in the earnings confessional -- the firm has topped bottom-line estimates in each of the past eight quarters -- a mass exodus of option bears could help YHOO add to its 52-week gain of more than 33%.

  • Baird lifted its rating on V to "outperform" from "neutral" this morning. After settling Friday at a year-to-date low of $196.63, the shares are poised to open with a 1.7% gain. The stock is no stranger to optimism, though, as 18 out of 25 ranking analysts consider V worthy of a "buy" or better endorsement, with not a single "sell" in sight. Likewise, the security's SOIR of 0.66 sits higher than just 1% of comparable readings from the past year, suggesting short-term options players have rarely been more call-heavy. Plus, those speculators are paying up to bet on Visa Inc ahead of its turn in the earnings confessional after the close on Thursday, April 24. The stock's Schaeffer's Volatility Index (SVI) of 29% stands in the 70th percentile of its annual range, implying that short-term options are rather pricey right now, from a volatility standpoint.

  • Finally, SunTrust Robinson initiated coverage of P with a "buy" rating and $34 price target, representing expected upside of 34% to the stock's closing price of $25.31 -- a year-to-date low -- on Friday. The shares have underperformed the broader S&P 500 Index (SPX) by nearly 30 percentage points during the past two months, yet Wall Street remains optimistic. Pandora Media Inc sports 13 "buy" or better endorsements, compared to eight lukewarm "holds" and just one "strong sell." Meanwhile, the equity's SOIR of 0.42 ranks in the 16th percentile of its annual range, pointing to a bigger-than-usual call bias of late. Again, those options traders are paying a pretty penny to bet on P's short-term trajectory, as its SVI of 79% sits just 20 percentage points from an annual acme. Of course, the growing demand for P options is undoubtedly related to the company's upcoming earnings report, slated for release after the close on Thursday, April 24. In pre-market action, P is indicated 2.5% higher.

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