Schaeffer's Trading Floor Blog

Biggest Movers: E-Commerce China Dangdang Inc (ADR), Sears Holdings Corp, and Brink's Company

DANG, SHLD, and BCO are making dramatic movements Tuesday afternoon

by 4/15/2014 2:40 PM
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As we approach the final minutes of the trading day, three of the top movers are Beijing-based e-commerce name E-Commerce China Dangdang Inc (ADR) (NYSE:DANG), venerable retail name Sears Holdings Corp (NASDAQ:SHLD), and security solutions provider Brink's Company (NYSE:BCO). Here's a quick roundup of how this trio of names is faring on the charts this afternoon.

  • Despite any major news drivers, DANG has dropped 8.6% today to $11.28, but is still hovering just above its 120-day moving average. In late February, the equity bounced off of this trendline. The stock has still more than tripled during the last 12 months, however, and the options crowd still remains pretty committed to the bullish cause. During the last 10 trading days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), nearly 17 calls have been purchased to open for each put, resulting in a 10-day call/put volume ratio of 16.99. This ranks higher than 87% of all readings from the past year, indicating a higher-than-usual relative demand for E Commerce China Dangdang Inc (ADR) long call options.

  • On the sunny side of the Street, SHLD has rallied 6% today to $33.62, after last night announcing a new head of its Sears Home Services unit. Year-to-date, SHLD has had a rough go of it, surrendering roughly 15% of its value. Against this backdrop, analysts have been quick to dismiss (in fact, have outright ignored) shares of the retailer. In fact, just one analyst follows the shares, awarding a tepid "hold" rating. What's more, the standing 12-month price target of $20 is well below the stock's current price, and in territory Sears Holdings Corp has not explored in roughly a decade.

  • BCO shares are sitting with an 11.8% deficit in late-afternoon trading. The company reported it would suffer a first-quarter charge after writing off charges related to the devaluation of the Venezuelan bolivar. What's more, Moody's placed Brink's Company shares under review for possible downgrade. Now perched at $25.20, the shares hit a year-to-date low of $24.85 earlier today and are not far from their annual low of $24.07. The stock has recently become a popular choice among short sellers; during the last reporting period, short interest rose by more than 66%, to a total of 4.6 million shares. It would now take more than 11 trading days (at BCO's average daily volume) to cover all of the outstanding bearish bets.

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Earnings on Deck: Google Inc, International Business Machines Corp., and Bank of America Corp

Previewing GOOGL, IBM, and BAC ahead of their upcoming earnings reports

by 4/15/2014 2:29 PM
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It's already been a big week in the earnings confessional, but the fun's not over yet. Still slated to report are search titan Google Inc (NASDAQ:GOOGL), blue-chip tech concern International Business Machines Corp. (NYSE:IBM), and financial firm Bank of America Corp (NYSE:BAC). Here's a quick look at these names as earnings approach.

  • Google Inc (NASDAQ:GOOGL) will unveil its first-quarter earnings after the close tomorrow, and has exceeded analysts' bottom-line estimates in four of the past seven quarters. Wall Street is optimistic when it comes to the stock, as 25 out of 29 analysts offer up "buy" or better ratings, with nary a "sell" in sight. Meanwhile, options traders prefer calls over puts. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.83 indicates that calls outnumber their put rivals among options expiring within three months. Likewise, the security's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) rests at 1.45, indicating that traders have bought to open more GOOGL calls than puts during the past two weeks. At last check, the stock has shed 0.9% to flirt with $540.60, as investors digest the company's purchase of Titan Aerospace.

  • International Business Machines Corp. (NYSE:IBM) will also report first-quarter earnings after the close tomorrow. The firm has bested the Street's per-share profit projections in six of the past eight quarters, yet averages a one-week post-earnings deficit of 3.1%. As such, options traders are exercising caution ahead of IBM's next earnings release. The stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.66 sits just 6 percentage points from a 52-week peak, suggesting speculators have bought to open puts over calls at a near-annual-high clip during the past two weeks. In the same vein, the security's SOIR of 1.11 stands just 5 percentage points from its own annual acme. Elsewhere, analysts are also wary of IBM, with just four out of 15 doling out "strong buy" endorsements. While IBM has outperformed the broader S&P 500 Index (SPX) by nearly 9 percentage points during the past two months, it's 0.7% lower at $196.34 today, after Citigroup downgraded the shares to "neutral" from "buy" and cut its price target to $200 from $235.

  • Finally, Bank of America Corp (NYSE:BAC) is scheduled to report first-quarter earnings ahead of the bell tomorrow. The company has topped analysts' bottom-line estimates in each of the past three quarters, and advanced 2.3% in the week after its last earnings report. While options buyers have picked up BAC calls over puts at an annual-high clip during the past two weeks on the ISE, CBOE, and PHLX, there's still plenty of room on the bullish bandwagon. Just seven analysts deem BAC worthy of a "buy" or better rating, compared to 12 tepid "holds" and two "strong sells." Plus, the consensus 12-month price target of $17.56 represents expected upside of just 9.1% from the stock's current perch at $16.09. Should Bank of America continue its winning streak in the earnings spotlight, a flood of upgrades and/or price-target boosts could add contrarian fuel to the equity's fire.

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Why the Recent Netflix, Inc. (NFLX) Downtrend Could Continue

The options crowd is surprisingly bullish on underperforming NFLX

by 4/15/2014 12:20 PM
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Netflix, Inc. (NASDAQ:NFLX) has been nose diving since hitting a record high of $458 in early March, pressured progressively lower by the stock's 10-day moving average. At last check, the shares were 5.2% lower at $314.27 -- meaning it would take a rebound of nearly 46% to return to all-time-high levels. This negative price movement, however, is not reflected in NFLX's options pits.

Diving into the details, on the International Securities Exchange (ISE), the streaming content provider has seen 8,233 calls bought to open, compared to 5,574 calls, during the past week. In other words, traders have picked up nearly 1.5 long calls for every put in the previous five sessions.

Even from a wider vantage point, this bullish bias holds up. Specifically, NFLX's 10-day call/put volume ratio on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) checks in at a top-heavy 1.20. This ratio ranks higher than 84% of comparable readings from the past 12 months, conveying traders' stronger-than-usual appetite for long calls over long puts, relatively speaking.

Meanwhile, Schaeffer's put/call open interest ratio (SOIR) on Netflix rests at 0.85, meaning call open interest outstrips put open interest among options expiring in the next three months. What's more, this SOIR sits at the bottom of its 52-week range, which suggests that short-term traders' preference for calls over puts has never been greater in the last year.

On Wall Street, however, sentiment toward NFLX is considerably more mixed. On the one hand, the stock has received just 10 "buy" or better ratings, versus 18 "hold" or worse recommendations. On the other, the shares' consensus 12-month price target of $383.01 represents a considerable premium to their current price.

All things considered, Netflix, Inc. (NASDAQ:NFLX) appears to be in a precarious position, from a contrarian perspective. Should the stock's underperformance continue, an exodus of option bulls and/or a series of price-target reductions could exacerbate losses.

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Midday Market Stats: Dow Jones Industrial Average Stumbles on Mixed Economic News

The Pep Boys - Manny Moe & Jack plunges on earnings outlook; EMC Corporation sees heavy call trading ahead of its earnings report

by 4/15/2014 12:03 PM
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The Dow Jones Industrial Average (INDEXDJX:.DJI) was earlier trying to extend Monday's positive momentum, and helping toward this goal were Dow components The Coca-Cola Company (NYSE:KO) and Johnson & Johnson (NYSE:JNJ), which remain in the black on well-received earnings reports. At last check, however, the blue-chip index had surrendered early gains and was down 68.1 points, or 0.4%, at 16,105.32.

News has been mixed on the economic front, with New York's Federal Reserve reporting an unanticipated drop in manufacturing activity, while the National Association of Home Builders' housing market index came up short of expectations in April. Meanwhile, the Labor Department reported a 0.2% increase in the consumer price index (CPI) last month, edging past economists' estimates. The core CPI (which excludes the food and energy variables) also ticked up 0.2%.

Here are a few noteworthy stats at midday:

  1. The equity put/call volume ratio across all 12 options exchanges currently stands at 0.97, with call volume and put volume near parity. So far today, 3.90 million calls have changed hands, compared to 3.79 million puts.

  2. One name seeing notable options trading today is EMC Corporation (NYSE:EMC), which has slipped 0.5% today to rest at $26.63 after beginning the day with gains. Option volume is running at almost three times the usual pace, and the lion's share of the action has transpired on the call side. EMC is scheduled to report first-quarter earnings ahead of the open next Wednesday.

  3. The advance/decline ratio on New York Stock Exchange (NYSE) stands at 0.58. Declining stocks are currently outpacing advancing names by a margin of nearly 2-to-1.

  4. Among today's biggest decliners on the Big Board is The Pep Boys - Manny, Moe & Jack (NYSE:PBY), which has tumbled nearly 14.6% to $10.22 and earlier hit a new annual low of $10.06. The auto parts retailer posted a decline in fourth-quarter revenue, and warned that the upcoming two quarters' results would be negatively impacted by weak pricing.

  5. The CBOE Volatility Index (VIX) has edged higher today, up 0.8 point, or 5%, to trade at 16.91.

  6. Today's put/call volume ratio on the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) stands at 0.73, with call volume easily exceeding put volume. The ETN has gained 3% today to $45.70.

View a real-time chart of the Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI).

Unusual Option Volume at Midday

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Buzz Stocks: Google Inc, BlackBerry Ltd, Aaron's, Inc., and Motorola Solutions Inc

Today's stocks to watch in the news include GOOGL, BBRY, AAN, and MSI

by 4/15/2014 9:28 AM
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Following a pair of better-than-expected earnings reports from Dow components Johnson & Johnson (NYSE:JNJ) and The Coca-Cola Company (NYSE:KO), stocks are pointed slightly higher in pre-market trading. In company news, here are some stocks to watch today:

  • Google Inc (NASDAQ:GOOGL) has agreed to buy Titan Aerospace, with the intent of using the startup's solar-powered drones to help collect aerial images. Facebook Inc (NASDAQ:FB) had previously courted Titan Aerospace, but instead bought U.K.-based aerospace firm Ascenta. (USA Today)

  • BlackBerry Ltd (NASDAQ:BBRY) announced it has bought a minority stake in health care IT company NantHealth. The two firms are reportedly working toward developing a smartphone to meet the specific needs of health care professionals, including the ability to view 3D images and CT scans while on the go. (FOX Business)

  • Aaron's, Inc. (NYSE:AAN) is purchasing rent-to-own financing issue Progressive Finance Holdings from Summit Partners for $700 million in cash. Separately, AAN announced it has rejected a $30.50-per-share takeover bid from Vintage Capital Management. (AP, via Bloomberg Businessweek)

  • Supply chain specialist Zebra Technologies Corp. (NASDAQ:ZBRA) said it will buy Motorola Solutions Inc's (NYSE:MSI) enterprise unit -- which specializes in barcode scanners, tablets, and rugged mobile computers -- for $3.45 billion in cash and debt. MSI CEO Greg Brown added that his company intends to return the proceeds of the transaction to shareholders, as soon as the deal closes. (Reuters, via Chicago Tribune)

  • Also, JNJ and KO reported quarterly earnings. (CNBC; Reuters)

  • Finally, the Dutch 14-year-old who was arrested for a threatening tweet against American Airlines Group Inc (NASDAQ:AAL) has been released from prison. However, the teen's Twitter Inc (NYSE:TWTR) followers won't be hearing from her any time soon; her account has been suspended. (Mashable)

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