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The Week Ahead: General Motors Company (GM), Pier 1 Imports Inc (PIR), and Constellation Brands, Inc. (STZ)

Surveying sentiment on GM, PIR, and STZ in light of the week's events

by 7/1/2013 12:29:34 PM
Stocks quoted in this article:

General Motors Company (NYSE:GM)

With auto sales set to come out on Tuesday, GM shareholders are hoping for good news to keep the stock's upward momentum going. The shares have tacked on nearly 71% in the last year, assisted by their ascending 20-week moving average, which has acted as a level of support since late August. Just last month, the equity touched a two-year high of $35.49 before a mild pullback to its current perch of $33.89.

In spite of its solid technicals, GM continues to be surrounded by skepticism. The automaker has a 50-day put/call volume ratio of 0.58, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The ratio sits in the 96th percentile of its annual range, confirming a considerably stronger-than-usual pull toward puts versus calls.

In addition, short interest grew 16.2% over the past two reporting periods. Currently, almost 10% of GM shares are sold short, which equates to over three sessions of pent-up potential buying power.

From a contrarian perspective, encouraging auto sales could fuel GM's ascent as the put buyers and shorts begin to hit the exits.

Pier 1 Imports Inc (NYSE:PIR)

PIR's annual shareholder meeting is slated for tomorrow, and investors have much to celebrate. Trading at $23.79, the home furnishings company is walking through territory it hasn't explored since the beginning of 2004. Also, its 20-week moving average has served as a supportive trendline for nearly a year, having been breached just once on a week-ending basis since Aug. 10, 2012. To put things further into perspective: On a relative-strength basis, PIR has outperformed the broader S&P 500 Index (SPX) by over 25 percentage points in the past 52 weeks.

Still, there's no shortage of skepticism on the retailer, particularly in the short term. The stock has a Schaeffer's put/call open interest ratio (SOIR) of 8.82, meaning that put open interest in the front three-months' series of options is outpacing call open interest by a margin of nearly 9-to-1. The SOIR is 2 percentage points away from an annual acme. The unwinding of those bearish positions in the face of PIR's technical tenacity could lead to a potential contrarian boon.

Constellation Brands, Inc. (NYSE:STZ)

STZ takes its turn in the earnings confessional tomorrow, and analysts are calling for earnings of 41 cents per share on sales of $674 million. The alcoholic beverage marketer has beat consensus per-share estimates in six out of the last seven quarters, and on average, has added 4.3% in the week following its quarterly reports. Already this year, STZ is up close to 50%, and hit an all-time high of $54.64 at the end of May -- though the shares have retreated since then, and are currently consolidating around their 20-day moving average at $52.84.

Meanwhile, short interest ballooned by 42% over the past month, and now comprises 4.1% of the equity's total available float. At STZ's average daily trading volume, it would take three days to cover the shorted shares. Suffice it to say, if the company reports yet another earnings beat, a short-squeeze scenario could shake the shares free from their consolidating pattern, and propel them to unprecedented heights.


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