Schaeffer's Trading Floor Blog

How Thanksgiving Is Treating American Eagle Outfitters, Abercrombie & Fitch Co.

Retail rivals American Eagle Outfitters and Abercrombie & Fitch. Co. have had different Thanksgiving weeks

by 11/28/2014 9:29 AM
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Over the weekend, Schaeffer's Senior Quantitative Analyst Rocky White took a look at some stocks that tend to outperform during the week of Thanksgiving. With Christmas (read: gift-giving) just around the corner, it was no surprise to see a number of retailers among the 20 stocks that have historically fared well this time of year. The two we'll take a look at today are teen apparel rivals American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF).

Diving right in, AEO has indeed performed admirably this week, advancing 1.8% as of Wednesday's close at $13.92. Longer term, however, the shares have struggled, down 3.3% year-to-date. In recent weeks, in fact, the equity has encountered resistance at its descending 80-week moving average, currently lodged at $14.18.

As such, pessimism is on the rise throughout the Street. For one, short interest rose 24.4% during the two most recent period periods, and now represents 18.4% of AEO's float -- which would take nearly a week to cover, at the stock's typical trading volume. What's more, 75% of covering analysts rate the shares a "hold" or worse, and the consensus 12-month price target of $13.86 sits below AEO's current perch.

It's a similar set-up for ANF -- though this stock has had a surprisingly harsh Thanksgiving week, down 1.1% to trade at $29.12. This only adds to the equity's longer-term technical struggles, as the shares have dropped 11.5% since the calendar year began.

The Street has taken note of this downward trend, as well. About 30% of ANF's float is sold short, which would take more than a week to buy back, at the stock's average daily pace of trading. What's more, bearish betting has picked up at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where ANF's 10-day put/call volume ratio checks in at 2.00. Not only does this reading signal puts have been bought to open at twice the rate of calls over the last two weeks, but it also ranks in the 83rd percentile of its annual range.

Looking ahead, American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF) are scheduled to step into the earnings confessional next Thursday evening and next Wednesday morning, respectively. AEO has tumbled in the wake of its past four turns under the spotlight, averaging a single-session post-earnings loss of 8.4%. The opposite is true of ANF, which has averaged a 3.1% gain in the session following its last four trips to the confessional.

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Buzz Stocks: Alibaba Group Holding Ltd, Chevron Corporation, and Delta Air Lines, Inc.

Today's stocks to watch in the news include BABA, CVX, and DAL

by 11/28/2014 9:08 AM
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Futures are sticking close to breakeven this morning, after the major market indexes notched notable milestones on Wednesday. Among specific equities in focus are China-based e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA), oil-and-gas firm Chevron Corporation (NYSE:CVX), and airline issue Delta Air Lines, Inc. (NYSE:DAL).

  • BABA has thrown its hat into the Internet TV ring. The new product -- which launched in China on Wednesday -- is available in three sizes, and comes equipped with entertainment and shopping components. Since going public in late September, shares of Alibaba Group Holding Ltd have soared 21.5% to their current perch at $112.67, so it's no surprise to see sentiment tilted toward the bullish side. In the options arena, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.96 calls for every put over the past 10 sessions. Elsewhere, all 22 analysts covering the shares maintain a "buy" or better rating.

  • CVX is bracing for a 4% drop right out of the gate, as traders react to the Organization of Petroleum Exporting Countries' (OPEC) decision to not reduce its crude oil output. It's been a tough ride for the energy sector in recent months, and Chevron Corporation is no exception -- with the shares off almost 15% from their late July record high of $135.10 to trade at $115.11. Traders are keeping the faith, however, as evidenced by the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.70, which ranks in the bullishly skewed 62nd percentile of its annual range. Additionally, less than 1% of the stock's float is sold short, and it would take roughly two sessions to cover these bearish bets, at CVX's average daily pace of trading.

  • Poised to benefit from the plunge in oil prices is DAL, with the shares up roughly 5% ahead of the bell. Today's projected price movement only highlights Delta Air Lines, Inc.'s technical tenacity, with the shares 61% higher year-to-date. What's more, the equity tagged a record peak of $45.21 as recently as Nov. 18, and closed Wednesday just 2.1% below this notable milestone, at $44.24 -- meaning a fresh all-time peak could be on today's agenda. While all 11 analysts covering the equity maintain a "buy" or better rating, sentiment in the options pits has a more skeptical tone. Specifically, DAL's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.64 ranks just 11 percentage points from an annual bearish peak. An unwinding of these pessimistic positions in the face of DAL's uptrend could help propel the shares higher.

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Analysts are weighing in today on Internet retailer, Inc. (NASDAQ:AMZN), java giant Starbucks Corporation (NASDAQ:SBUX), and solar issue Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE). Here's a quick look at today's brokerage notes on AMZN, SBUX, and YGE.

  • Despite being down 16.4% year-to-date to trade at $333.57, AMZN saw its price target upped by $50 to $400 at Piper Jaffray, which reiterated its "overweight" recommendation. This positive perspective is fairly standard as far as the brokerage crowd is concerned, with the stock sporting 18 "buy" or better ratings versus a dozen "holds" and not a single "sell" assessment. Optimism is brimming at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), as well., Inc.'s 10-day call/put volume ratio across those exchanges is 1.63 -- just 5 percentage points from a 12-month peak.

  • SBUX has been running up the charts since its mid-October low of $70.77, settling at $79.70 on Wednesday -- a 12.6% advance. As such, the shares' price target was boosted to $100 from $90 at Piper Jaffray, while the brokerage firm underscored its "overweight" rating. Elsewhere, however, Starbucks Corporation's Schaeffer's put/call open interest ratio (SOIR) of 1.20 ranks in the 86th percentile of its annual range, suggesting short-term traders have rarely preferred puts over calls more strongly. A capitulation among these skeptics could pave the way for additional upside in SBUX shares.

  • YGE's price target was reduced to $3 from $3.50 at Roth, which also maintained its "neutral" opinion toward the equity. On the charts, the stock has been in freefall, down almost 41% in 2014 to trade at $2.98. Not surprisingly, short sellers have been rolling the dice on Yingli Green Energy Hold. Co. Ltd. (ADR). Short interest on the shares represents nearly 16% of YGE's float, and would take about two weeks to cover, at typical daily trading volumes.

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Is Transocean LTD (RIG) At Risk of Additional Losses?

Pockets of optimism can still be found on struggling Transocean LTD

by 11/26/2014 2:14 PM
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With energy prices on the decline -- and more recently, news of a suspended dividend payment from one of its sector peers -- it's been a terrible month for Transocean LTD (NYSE:RIG). The stock is down almost 8% today to churn near $23.31 -- and earlier hit a 10-year low of $23.22 -- extending its month-to-date decline to 22%. Not surprisingly, option players have shown a distinct bearish bias toward RIG in recent weeks.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 1.56 ranks in the 76th percentile of its annual range. Simply stated, puts have been bought to open over calls at a faster-than-usual clip of late.

Echoing this put-skewed bias is the stock's Schaeffer's put/call open interest ratio (SOIR) of 2.35, which rests higher than 90% of similar readings taken in the past year. In other words, short-term speculators have been more put-heavy toward RIG just 10% of the time within the past year.

This glass-half-empty approach has spilled outside of the options arena, as well. Short interest jumped 6.3% during the last two reporting periods, and now accounts for more than one-quarter of the stock's float. What's more, looking back to June 2000, the 83.54 million shares currently sold short are the most RIG has seen over this 14-year time span.

That said, not everyone has climbed on the bearish bandwagon. Specifically, the stock's average 12-month price target of $27.70 stands at a nearly 19% premium to current trading levels -- leaving RIG at risk of future price-target cuts, which could pressure the shares lower. Today, in fact, Zephirin Group reiterated its "sell" rating on Transocean LTD (NYSE:RIG), and slashed its price target by $8 to $20 -- territory not charted by the stock since December 2003.

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Why Contrarians Should Feast Their Eyes On Nike Inc (NKE)

Outperforming NKE remains a target of skeptics

by 11/26/2014 11:09 AM
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Athletic apparel retailer Nike Inc (NYSE:NKE) has put in a strong performance on the charts in 2014, with the shares up more than 24% to trade at $97.77. This week alone, the equity has edged 0.4% higher, which shouldn't come as a surprise. In fact, according to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, NKE has averaged a 2.2% return over the last 10 Thanksgiving weeks, and has been positive 90% of the time. Longer term, the equity could be poised to extend this momentum should skeptics both in and out of the options arena capitulate to its upward trajectory.

Daily Chart of NKE Since January 2014

In the options pits, speculators have been initiating long puts over calls at a near-annual-high clip over the past few months. Specifically, NKE's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.81 ranks in the bearishly skewed 96th annual percentile.

In recent weeks, however, traders have been switching sides, per the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.06, which ranks higher than 77% of similar readings taken in the past year. A continued capitulation by option players could translate into tailwinds for NKE.

Elsewhere on the Street, eight out of 19 covering analysts maintain a tepid "hold" rating toward a stock that's outperformed the broader S&P 500 Index (SPX) by more than 19 percentage points over the past three months. Plus, the consensus 12-month price target of $97.35 stands at a discount to current trading levels. Simply stated, the door is wide open for a round of upgrades and/or price-target hikes to help propel NKE higher.

One final note, short interest jumped 11.7% during the last two reporting periods -- a time frame in which shares of NKE surged roughly 12%, and tagged a series of higher highs along the way. The ability of Nike Inc (NYSE:NKE) to soar in the face of this selling pressure speaks volumes to the security's underlying strength.

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