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Pioneer Natural Resources Shrugs Off Downgrade

Deutsche Bank pegged PXD with a lukewarm 'hold'

by 11/11/2011 12:30:03 PM
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Before the market opened this morning, Deutsche Bank dropped its rating for Pioneer Natural Resources Company (PXD - 93.06) to "hold" from "buy."

There could be more negative notes in the cards for PXD. According to Zacks, only 29% of the brokerage bunch concur with the tepid rating. While there are 17 "buy" or better endorsements for PXD, there are seven "holds" and not a single "sell" in sight.

Moreover, the consensus 12-month price target -- as calculated by Thomson Reuters -- rests at $107.94, which represents a 17.7% premium to Thursday's close of $92.12.

There seems to be an overwhelming preference for calls among options traders, as evidenced by the stock's 10-day call/put volume ratio of 20.45 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This call-heavy ratio arrives in the 95th percentile of its annual range -- just five percentage points from an optimistic peak -- signaling that traders on these exchanges have rarely purchased bullish bets over bearish at a faster pace during the past year.

Plus, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.35 indicates that calls nearly triple puts among options slated to expire within three months. This ratio ranks in the 2nd annual percentile, indicating that near-term option traders have seldom been more bullishly aligned toward PXD.

However, this recent trend toward calls may not be as bullish as it would initially appear. Short interest on the equity is up roughly 5% during the most recent reporting period. These bearish bets now account for 8.5% of the security's available float. Consequently, it's possible that a portion of the recent call volume was a result of hedging activity by the shorts.

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