Schaeffer's Trading Floor Blog
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U.S. stocks are extending their record-setting run today, as Wall Street continues to applaud overseas stimulus measures. Among the names making significant moves are 3-D printer maker 3D Systems Corporation (NYSE:DDD), fertilizer firm Potash Corp./Saskatchewan (USA) (NYSE:POT), and alternative energy issue Trina Solar Limited (ADR) (NYSE:TSL). Here's a quick look at how DDD, POT, and TSL are faring on the charts today.

  • DDD is 3.1% higher at $36.21, on news the firm will buy Cimatron Ltd. (NASDAQ:CIMT) for about $97 million. From a longer-term perspective, 3D Systems Corporation remains 60% lower year-to-date, and has underperformed the broader S&P 500 Index (SPX) by more than 36 percentage points during the past three months. As such, it's no surprise to find short interest represents more than 35% of DDD's total available float, though some of those skeptics may be picking up options hedges. 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 2.22 stands higher than 86% of all other readings from the past year, pointing to a healthier-than-usual appetite for long calls over puts of late.

  • POT is down 4.8% at $34.84, on reports that Russian rival Uralkali is preparing to restart operations at half its damaged mine. Last week, news that production at the mine was halted sent POT and most of its sector peers soaring, though the equity's rally was stifled in the $37 region -- where the security sat before an early July bear gap. Prior to today's retreat, the stock's 14-day Relative Strength Index (RSI) soared to 72 -- in overbought territory, suggesting a pullback may have been in the short-term cards. In the options pits, Potash Corp./Saskatchewan's (USA) short-term contracts are flying off the shelves, as the equity's 30-day at-the-money implied volatility has popped 9.7% to 23.1%, and overall options volume is running at three times the average intraday pace. While bears are seemingly buying to open the weekly 11/28 34.50-strike put, it looks like bulls are purchasing to open weekly 11/28 35-strike calls.

  • TSL is 6.4% lower at $10.23, after the company reduced its full-year solar module shipment guidance. The post-earnings reaction is likely music to options traders' ears, as speculators were upping the bearish ante ahead of this morning's report. The stock is now sitting on a 25% year-to-date loss, and could be vulnerable to downgrades and price-target cuts, should bullish analysts jump ship. Currently, four out of six brokerage firms offer up "strong buy" opinions of Trina Solar Ltd. (ADR), and the consensus 12-month price target of $18.31 represents expected upside of 79% to the stock's perch.

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Analyst Downgrades: Barrick Gold Corporation (USA), Keurig Green Mountain Inc, and Pandora Media Inc

Analysts downwardly revised their ratings on ABX, GMCR, and P

by 11/24/2014 9:28 AM
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Analysts are weighing in today on precious metals producer Barrick Gold Corporation (USA) (NYSE:ABX), coffee concern Keurig Green Mountain Inc (NASDAQ:GMCR), and Internet radio issue Pandora Media Inc (NYSE:P). Here's a quick roundup of today's bearish brokerage notes on ABX, GMCR, and P.

  • Raymond James weighed in on a number of mining issues, including ABX, where the brokerage firm cut its price target to $17 from $18, and underscored its "market perform" rating. On the charts, the shares are down more than 27% year-to-date, and have seen a recent rebound contained by their descending 40-day moving average. Not surprisingly, the brokerage crowd is pretty united in its skeptical stance toward Barrick Gold Corporation (USA). Specifically, 15 of the 17 analysts following the security have assigned it a "hold" or "strong sell" recommendation, mirroring the recent pessimism noted in ABX's options pits. On Friday, ABX settled at $12.85.

  • GMCR was started with a "neutral" rating at Longbow Research, despite the stock more than doubling in value year-over-year to trade at $140.37. Late last week, though, the equity plummeted below its previously supportive 40-day moving average, following a disappointing current-quarter forecast. This pullback is likely being cheered in the options pits, as Keurig Green Mountain Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.94 sits above 73% of other readings taken in the last year. However, it's possible some of these bearish positions may have been initiated by shareholders seeking a pre-earnings hedge -- a smart move, given the post-event sell-off.

  • Finally, P saw its price target slashed by $10 to $35 at Pacific Crest -- though the brokerage firm reiterated its "outperform" rating. Technically speaking, it's been a tough year for Pandora Media Inc, which has lost 27% of its value to rest at $19.40. In fact, during the past three months, the stock has lagged the broader S&P 500 Index (SPX) by 30 percentage points. Inexplicably, 72% of analysts covering the shares maintain a "buy" or better assessment, compared to six "holds" and one "strong sell." Plus, P's consensus 12-month price target of $30.61 stands about 58% above current trading levels. In other words, the equity is at risk of getting hit with additional price-target reductions and/or downgrades.

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Buzz Stocks: Tesla Motors Inc (TSLA), Lions Gate Entertainment Corp. (USA), and Starz

Today's stocks to watch in the news include TSLA, LGF, and STRZA

by 11/24/2014 9:17 AM
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U.S. stocks are set to kick off a holiday-shortened week with modest gains. Among the equities in focus are electric vehicle maker Tesla Motors Inc (NASDAQ:TSLA), as well as media companies Lions Gate Entertainment Corp. (USA) (NYSE:LGF) and Starz (NASDAQ:STRZA).

  • TSLA is pointed 1% higher ahead of the bell, after CEO Elon Musk said the firm is in talks to collaborate with Germany's BMW on "battery technology or charging stations." On the charts, TSLA has added 61.4% in 2014, with pullbacks contained by its 200-day moving average. More recently, the shares finished Friday at $242.78 -- just below their bearishly crossed 10-week and 20-week trendlines -- and have underperformed the S&P 500 Index (SPX) by about 13 percentage points during the past three months. As such, Tesla Motors Inc's short-term options crowd has grown increasingly pessimistic, as the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.58 stands higher than 98% of all other readings from the past year -- implying that near-term traders have rarely been more put-heavy.

  • LGF is set to surrender 3.2%, after the latest "The Hunger Games" installment fell short of forecasts at the box office. While the movie raked in an estimated $123 million in the U.S. and Canada its opening weekend -- marking the biggest domestic debut of the year -- the numbers lagged the two series predecessors. The shares of Lions Gate Entertainment Corp. (USA) dropped 5% on Friday, settling at $33.25, amid early signs of weakness for the movie. The stock is now trading south of its 10-day and 20-day moving averages for the first time since Oct. 20. Should LGF extend its pullback, a flood of bearish brokerage attention could exacerbate selling pressure, as all nine covering analysts maintain "buy" or better opinions. Plus, the average 12-month price target of $39.69 stands in uncharted territory for the stock.

  • Finally, LGF is also making headlines as a potential suitor for STRZA. According to The New York Post, Starz is looking to sell itself for $5 billion, with LGF and CBS Corporation (NYSE:CBS) emerging as the most likely buyers. Against this backdrop, STRZA is poised to pop 10.3% at the opening bell, and could explore all-time highs north of $35. The equity has already added 10.1% in 2014, and today's jump could spook a few shorts into hitting the exits. Short interest represents nearly eight sessions' worth of pent-up buying demand, at STRZA's average pace of trading -- plenty of fuel for a short squeeze to push the security even higher.

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More Data, More Problems

When it comes to market data, look for quality over quantity

by 11/24/2014 9:11 AM
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Coming soon to a theater near you -- Big Data! Not the band, the data.

I'll let CNBC's Bob Pisani Pisani-splain it.

"Did you ever hear or read a comment about a market trend and wonder how accurate it was over a certain time period? Or when some trader says, "We are entering a seasonally strong period of the year," did you ever wonder exactly how often that was true, and under what circumstances?

Sure you have. All of us who cover the markets engage in this kind of research every day.

Today, CNBC has announced a strategic partnership with Kensho, a company that was set up to answer complex financial a few seconds."

It all sounds great on the surface. I mean -- more info, more ways to find out if Event X really leads to Market Reaction Y.

But here is the problem: Data isn't about pure access. It's about asking the proper questions and, perhaps more importantly, it's about putting the answers in the proper context.

Sports broadcasts are filled with this sort of stuff all the time. Ever watch a football game and find out such-and-such team is 20-1 every time Random Running Back has rushed for over 100 yards? Or that Pick Any Baseball Team is 70-3 when leading after eight innings? Both stats sound impressive on the surface, but minus any context, they don't necessarily mean much.

What NFL teams with a 100-yard rusher and baseball teams with leads after eight innings don't win 95% of the time? That team-specific data above looks more expected than exceptional.

We would never fall into that trap here in finance -- probably. Back to Pisani:

"For example, a couple months ago the 50-day moving average of the Russell 2000 crossed the 200-day moving average to the downside, a much-feared technical pattern known as the 'Death Cross.' There was much discussion of this on-air, as well as in print.

The Russell did decline that day, but the historical pattern is very mixed. This has happened 20 times since 1988, and five days later the Russell has been down 55 percent of the time, up 45 percent. That is a fairly mixed result, though the downs are somewhat bigger than the ups.

But two months later, the Russell has been UP 63 percent of the time. In other words, for most intermediate-term investors, simply holding would have been better than selling immediately."

Now, that last statement is true on the surface. But there's zero context attached to it. Maybe two months later, the market is higher 75% of the time on random dates, so that Death Cross actually was a modest negative. Or alternately, in the 37% of the time the market did poorly after the Death Cross, it did very poorly. Remember when we ran through numbers on SPDR S&P 500 ETF Trust (SPY) simply crossing below the 200-day moving average? If you bought that first day and held until it crossed back above, you won the trade something like 90% of the time. But the times you lost, you often really lost.

What other errors can we make via this new CNBC toy? Well, sample size comes to mind. Guessing we'll see a lot of cases where Stock or Sector X lifted seven of the last nine times Event Y happened. There's also the fact that markets have so many moving parts that it's more or less impossible to control for all of them so as to isolate how one factor might really influence one sector.

They use large oil price declines as an example, which actually highlights both of these issues. Do we have a statistically significant sample size? Did we control for any other background factors? Without that info, I'm not sure the relationships are terribly predictive.

Look, more data can only help. I really, really, really, strongly advise not taking it at face value, though. It is always meaningless independent of proper context.

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

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Analyst Upgrades: Apple Inc. (AAPL), Cisco Systems, Inc., and SolarCity Corp

Analysts upwardly revised their ratings on AAPL, CSCO, and SCTY

by 11/24/2014 8:54 AM
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Analysts are weighing in today on iPad parent Apple Inc. (NASDAQ:AAPL), networking giant Cisco Systems, Inc. (NASDAQ:CSCO), and alternative energy issue SolarCity Corp (NASDAQ:SCTY). Here's a quick roundup of today's bullish brokerage notes on AAPL, CSCO, and SCTY.

  • AAPL received a price-target hike to $135 from $120 at Susquehanna, which also reiterated its "positive" assessment of the shares. This doesn't come as a huge surprise, considering the stock has rallied 45.3% year-to-date to land at $116.47. Also, Apple Inc. has moved sharply higher since touching a mid-October low of $95.18, tacking on 22.4% since then. In the options pits, however, short-term traders are more put-skewed than usual, per AAPL's Schaeffer's put/call open interest ratio (SOIR) of 1.06. Not only does this metric indicate put open interest edges out call open interest among options expiring in the next three months, it also ranks in the 96th percentile of its annual range. An unwinding among these pessimistic put players could spell tailwinds for AAPL shares.

  • CSCO, which has advanced nearly 20% in 2014 to rest at $26.88, saw its price target lifted to $29 from $28 at RBC, which likewise affirmed its "outperform" opinion. This stock, too, has mounted a strong rally since mid-October, after taking a solid bounce off of its 100-week moving average. Options traders remain unconvinced, however, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Cisco Systems, Inc.'s 50-day put/call volume ratio across those exchanges is 0.90, which sits 4 percentage points shy of an annual bearish peak. From a contrarian perspective, if CSCO can sustain its technical momentum, a mass exodus among these skeptics could provide a lift.

  • Despite trading below its year-to-date breakeven mark at $55.05, SCTY was upgraded to "outperform" at Baird. As such, the shares are pointed about 3% higher ahead of the bell, and look poised to test resistance at their 10-week moving average (at $56.31) out of the gate. On the sentiment front, SolarCity Corp has been a frequent target of short sellers in recent weeks. In fact, during the past two reporting periods, short interest on the stock spiked 24%, and now represents nearly 29% of SCTY's total float. In a similar vein, the equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.72 ranks in the 90th percentile of its 12-month range.

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