Schaeffer's Trading Floor Blog

Buzz Stocks: Urban Outfitters, Inc., Twitter Inc, and Sarepta Therapeutics Inc

Today's stocks to watch in the news include URBN, TWTR, and SRPT

by 10/17/2014 8:51 AM
Stocks quoted in this article:

U.S. stocks are headed higher ahead of the bell, as traders applaud strong blue-chip earnings and await a speech from Fed Chair Janet Yellen. Among the equities in focus, today's stocks to watch include retailer Urban Outfitters, Inc. (NASDAQ:URBN), microblogging issue Twitter Inc (NYSE:TWTR), and drugmaker Sarepta Therapeutics Inc (NASDAQ:SRPT).

  • URBN is poised to plunge 13.5% out of the gate -- and could explore two-year lows -- after the firm issued a profit warning. As a result, Urban Outfitters, Inc. is navigating a barrage of bearish brokerage notes; among them, Goldman Sachs downgraded URBN to "neutral" from "buy" and removed it from "America's buy list," while slicing its price target to $31 from $44 -- a discount to the equity's closing price of $34.56 on Thursday. Similarly, Janney reduced its fair value on URBN to $32 from $41 and downgraded the stock to "neutral" from "buy." URBN has already shed 6.8% in 2014, and the company will unveil its fiscal third-quarter results after the close on Monday, Nov. 17.

  • TWTR is headed 2% higher in pre-market action, after the company said it's partnering with SoundCloud to debut a streaming audio service. Since skimming the $30 region in May, the shares of Twitter Inc have tacked on roughly 61% to land at $48.23 on Thursday. What's more, the equity has outperformed the broader S&P 500 Index (SPX) by more than 41 percentage points during the past three months, yet 13 out of 28 analysts maintain "hold" or "strong sell" opinions. Likewise, short interest rocketed 19.5% higher during the most recent reporting period. Should the stock extend its longer-term uptrend, or should the company report stronger-than-expected earnings later this month, a flood of upgrades or a short-squeeze situation could add fuel to the security's fire.

  • Finally, SRPT is on pace to open 9% higher, thanks to encouraging data on its experimental Ebola drug. The shares of SRPT finished at $22.30 on Thursday, and are sitting on a year-to-date gain of 9.5%. Option traders, however, have been upping the bearish ante. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.58 stands higher than 83% of all other readings from the past year, pointing to a healthier-than-usual appetite for long puts over calls during the past two weeks. In the same skeptical vein, short interest accounts for nearly 36% of Sarepta Therapeutics Inc's total float, and would take nearly 14 sessions to buy back, at the stock's average pace of trading -- plenty of fuel for a potential short-covering boost.

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Why SPY Action Could Signal Short-Term Pain, Long-Term Gains

Drilling down even further on the SPDR S&P 500 ETF Trust (SPY) after its 200-day moving average break

by 10/17/2014 7:47 AM
Stocks quoted in this article:

As we noted yesterday, a general strategy of going long when the SPDR S&P 500 ETF Trust (SPY) is below its 200-day moving average doesn't tend to work out so well on a relative basis. That's mainly because it puts you on the sideline for long-term bull moves, while it also keeps you exposed to short-term implosions.

But, those implosions are few and far between. We identified three of them in 21-plus years of data. So, the real key to investing, no matter how you slice it, is to avoid being too exposed when those accidents occur.

And who says I don't have a grasp of the obvious!

Of course, avoiding them isn't so simple. There is clearly intense fear that we're about to hit an air pocket now. The current proximal causes are Ebola, ISIS, Greece, the weakening economy, the end of QE and, well, I'm sure there's more. I'm a strong believer that markets move independently of actual news, and the causality correlation is all hindsight, but whatever, that's neither here nor there.

One thing I did notice going through the data: We never had a pattern where an extended gain riding long when SPY was above the 200-day was immediately followed by an extended dip after passing through the 200-day, with one sort-of exception (guess what: it involves 2008).

I bring this up because we're fresh off a blast below the 200-day, after realizing a 34.7% return for sitting long while it was above the 200-day for nearly two years.

So, let's say you went long when SPY went below the 200-day the last six times the immediately previous "SPY Over" trade yielded over 10%. Here's how the returns look over one-month, three-month and six-month holding periods:

SPY Returns

Generally speaking, the trade doesn't work well at first. After three months it was OK, and then after six months, it panned out. Well, except once. Actually, that August 2007 experience is an anomaly all around. In that instance, going long when SPY busted below the 200-day did OK early, then awful over time.

The bazillion dollar question, of course, is whether we're more 2007 or 2011 right now. If it's 2007, you basically had two-to-three months' more time to get out before we'll have to look out below. If it's 2011, it's the opposite -- we'll have a flat-to-weak few months, and then a terrific buying opportunity. The common denominator in all the cases is that the worst of the ugliness involved the drop to the 200-day to begin with. Remember that we were coming off impressive uptrends in each case.

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


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Analyst Update: eBay Inc, Petroleo Brasileiro Petrobras SA (ADR), and CSX Corporation

Analysts are weighing in on EBAY, PBR, and CSX

by 10/16/2014 1:42 PM
Stocks quoted in this article:

Stocks are back in the red after making an earlier attempt to move above breakeven. Among equities in focus, online auctioneer eBay Inc (NASDAQ:EBAY), oil-and-gas issue Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), and freight firm CSX Corporation (NYSE:CSX) have all attracted the attention of analysts.

  • EBAY plunged to a nearly two-year low of $46.34 earlier, after the company's third-quarter earnings report and downwardly revised fourth-quarter forecast -- which includes the highly watched holiday season -- was followed by no fewer than 21 bearish brokerage notes. RBC, for example, cut its price target on the stock by $7 to $55 and downgraded its outlook to "sector perform" from "outperform," saying as competition grows in the marketplace arena, EBAY's business is "clearly deteriorating." Year-to-date, shares of eBay Inc have surrendered roughly 13% to trade at $47.58, and should the security continue to struggle, an additional round of downgrades and/or price-target cuts could be on the horizon. At present, 14 analysts have levied a "buy" or better rating toward the stock, compared to 14 "holds" and not a single "sell." Plus, the consensus 12-month price target of $60.86 stands at a 28% premium to current trading levels, and sits in territory yet to be charted.

  • It's been a volatile run for PBR of late -- as uncertainty swirls around Brazil's upcoming presidential election. In today's session, the security has plunged 4.4% to $14.87, after Societe Generale cut its rating on Petroleo Brasileiro Petrobras SA (ADR) to "hold" from "buy," and reduced its price target on the equity's American Depositary Shares (ADR) to $18 from $20. Short-term speculators have shown a preference for calls over puts toward a stock that's up 7.6% year-to-date. Specifically, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.53 ranks lower than 83% of similar readings taken in the past year.

  • CSX is on pace to notch an 11% weekly win, thanks in part to well-received M&A speculation and quarterly earnings results. Today, the shares are up 0.9% at $33.28, after news the freight operator is still in the market for locomotives was met with a round of upbeat analyst notes. Morgan Stanley offered up the most optimistic outlook, raising its price target to $39 from $37, while underscoring its "overweight" rating. Credit Suisse, meanwhile, boosted its target price to by $5 to $38 and upgraded its outlook to "outperform" from "neutral," citing a strong pricing forecast. Elsewhere, activist investor Bill Ackman weighed in on the proposed merger between CSX Corporation and Canadian Pacific Railway Limited (USA) (NYSE:CP), saying "there are some rail combinations that are pro-competitive as opposed to anti-competititve [sic]." In the options pits, sentiment has tilted toward the skeptical side. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.33 ranks in the 86th annual percentile, while CSX's SOIR of 0.86 ranks just 8 percentage points below a 52-week peak.

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Stocks On the Move: CBS Corporation, Baker Hughes Incorporated, and Akamai Technologies, Inc.

CBS, BHI, and AKAM are moving sharply in Thursday's trading

by 10/16/2014 12:43 PM
Stocks quoted in this article:

After an initial plunge, U.S. stocks have pared their losses against a backdrop of mixed economic data and mounting Ebola concerns. Among the names making significant moves are media giant CBS Corporation (NYSE:CBS), commodity concern Baker Hughes Incorporated (NYSE:BHI), and cloud infrastructure issue Akamai Technologies, Inc. (NASDAQ:AKAM). Here's a quick look at how CBS, BHI, and AKAM are faring on the charts today.

  • CBS is bucking the broad-market trend lower, up 1.4% at $51.45, after the firm announced plans to toss its hat into the streaming video ring. The decision is just salt in the wound for beleaguered Netflix, Inc. (NASDAQ:NFLX), and comes just one day after a similar announcement from Time Warner Inc (NYSE:TWX). From a longer-term perspective, CBS Corporation shares are still down 19.1% in 2014, but the stock's 14-day Relative Strength Index (RSI) sits at 29 -- in oversold territory, suggesting a short-term rebound may have been in the cards. Amid the security's struggles of late, short interest skyrocketed nearly 68% during the most recent reporting period, though analysts have remained optimistic. Currently, CBS boasts 16 "buy" or better ratings, compared to three lukewarm "holds" and not a single "sell."

  • BHI is down 6.4% at $50.19, and earlier tagged a new annual low of $47.51, as traders pan a weaker-than-expected quarterly earnings report. As such, the stock landed on the short-sale restricted (SSR) list, and intraday options volume is running at three times the normal pace. Digging deeper, it appears bears are cashing in their chips by selling to close the now in-the-money January 2016 55-strike put, which is the most active option thus far. Meanwhile, a flood of downgrades could exacerbate selling pressure on Baker Hughes Incorporated, with 15 out of 23 analysts maintaining "buy" or better recommendations.

  • Speaking of downgrades, AKAM is 3.4% lower at $52.77, after Wells Fargo revised its opinion to "market perform" from "outperform." The brokerage firm cited "concerns on the pace of revenue growth over the next 6-12 months," as well as a slowdown in video and audio streaming action. Bearish analyst attention is relatively rare for Akamai Technologies, Inc., which boasts 16 "strong buys" and just three "holds," with not a "sell" to be found. Plus, the equity's average 12-month price target of $68.33 sits in territory not charted in 14 years. Should the company report lackluster earnings after the close on Wednesday, Oct. 29, additional downgrades and/or price-target cuts could weigh on AKAM.

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Buzz Stocks: Apple Inc., Goldman Sachs Group Inc, and Chesapeake Energy Corporation

Today's stocks to watch in the news include AAPL, GS, and CHK

by 10/16/2014 9:22 AM
Stocks quoted in this article:

U.S. stocks are poised for another steep plunge this morning, as traders await economic data and speeches from the Fed. Among equities in focus, today's stocks to watch include tech titan Apple Inc. (NASDAQ:AAPL), big-cap financial firm Goldman Sachs Group Inc (NYSE:GS) and oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK).

  • AAPL is headed 2.1% lower, with Wall Street seemingly adopting a "been there, done that" attitude ahead of today's product launch. Specifically, Apple Inc. will unveil the details of its latest iPads later today, as well as its new Mac OS, though the firm stole its own thunder by posting premature pictures in its online user guide. On the charts, AAPL has struggled to make a notable breakout into triple-digit territory, and settled at $97.54 on Wednesday. Despite the stock's stagnation, though, analysts remain upbeat, with 27 out of 33 offering up "buy" or better ratings. Should Apple's event -- or its fiscal fourth-quarter earnings, due out after the close on Monday -- fail to impress, a round of downgrades could exacerbate recent selling pressure on the shares.

  • GS is poised to open 3.6% lower, despite reporting stronger-than-expected quarterly earnings and hiking its dividend. The equity landed at $177.24 on Wednesday, just south of its year-to-date breakeven mark and support at its 60-day moving average. Should the pre-market trajectory continue throughout today, Goldman Sachs Group Inc option traders will likely be feeling the heat. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.72 stands higher than just 8% of all other readings from the past year, suggesting short-term speculators have rarely been more call-biased.

  • Finally, CHK is on pace to buck the broad-market trend lower, with the shares headed for an 11% jump out of the gate. Chesapeake Energy Corporation this morning announced that it will sell $5.4 billion in assets to Southwestern Energy Company (NYSE:SWN), which "marks a major step in Chesapeake's transformation and a dramatic improvement in our financial strength," said CEO Doug Lawler. On Wednesday, CHK touched a new annual low of $16.69 before settling at $17.77, and has shed 22.7% so far this month. In fact, the stock's 14-day Relative Strength Index (RSI) sits deep in oversold territory, at 8, and it's no surprise to find most of the Street bearish. Short interest represents nearly seven sessions' worth of pent-up buying demand, at CHK's average pace of trading, and just four out of 19 analysts dole out "strong buy" opinions.

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