Schaeffer's Trading Floor Blog

Buzz Stocks: Cognizant Technology Solutions Corp, RadioShack Corporation, and Molson Coors Brewing Company

Today's stocks to watch in the news include CTSH, RSH, and TAP

by 9/15/2014 9:04 AM
Stocks quoted in this article:

U.S. stocks are hovering around the flat line this morning, as traders take a wait-and-see approach ahead of this week's Federal Open Market Committee (FOMC) policy-setting meeting. In company news, today's stocks to watch include outsourcing issue Cognizant Technology Solutions Corp (NASDAQ:CTSH), electronics retailer RadioShack Corporation (NYSE:RSH), and beer maker Molson Coors Brewing Company (NYSE:TAP).

  • CTSH has agreed to purchase health care IT firm TriZetto Corporation for $2.7 billion in cash. The deal -- which is still awaiting regulatory approval -- is projected to boost revenue for Cognizant Technology Solutions Corp's health care arm by north of $3 billion, and is slated to wrap up in the fourth quarter. On the charts, CTSH is down 11.3% year-to-date to trade at $44.76, but is poised to pare a portion of these losses today, with the equity up 2.8% ahead of the bell. In the options pits, speculators have been waving the bullish flag of late, as evidenced by the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.11, which ranks 6 percentage points from a 52-week peak.

  • RSH is up nearly 19% ahead of the bell, following news the company has appointed Holly Etlin as interim chief financial officer, after John Feray resigned from the position on Friday. Additionally, RadioShack Corporation is reportedly considering a $585 million financing package from UBS AG (NYSE:UBS) and Standard General LP, as it explores strategic alternatives. With RSH down 65% in 2014 to churn near $0.91, it's no surprise to see sentiment tilted toward the skeptical side. Short interest, for example, accounts for more than 34% of the stock's available float. Elsewhere, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.14 is docked at an annual peak, meaning short-term speculators are more put-skewed now toward RSH than they've been at any other point during the past year.

  • TAP is also ready to rally right out of the gate -- which could please Friday's option bulls -- with the stock pointed 6.5% higher on reports Heineken may sell its Czech operations to the Denver-based brewer. Additionally, Stifel weighed in on TAP this morning, raising its price target to $94 from $90 -- representing expected upside of 31% from the equity's current perch at $71.80 -- and maintaining a "buy" rating. More bullish brokerage notes could be on the horizon for a stock that's up nearly 45% year-over-year. Of the seven analysts covering the stock, four maintain a tepid "hold" recommendation, versus three that rate Molson Coors Brewing Company a "strong sell." Plus, the consensus 12-month price target of $79.11 stands at a lukewarm 10% premium to present trading levels.

permanent link

Why You Probably Don't Need to Buy VIX Calls Right Now

Expectations just keep rising for that next big spike in the CBOE Volatility Index (VIX)

by 9/15/2014 8:46 AM
Stocks quoted in this article:

The market feels a little more volatile in the sense that it's weak pretty much every morning these days. And 10-day realized volatility (RV) has in fact nearly doubled in the past week, so there's that.

But the reality is, we're still mired in a whole lot of nothing. That "big" lift in RV is off 16-year lows, and very misleading when expressed in percentage terms. Ten-day RV is all the way up to 6.2, which translates to roughly a 0.4% range on a typical day. That's still incredibly low. And it's not like the directional move over time looks any less pathetic.

Since Aug. 21, the SPDR S&P 500 ETF (SPY) has ticked as low as 198.56 (on Friday, actually), and as high as 201.58. If you're scoring at home, that's a range of about 1.5% over the course of 15 trading days.

That's just unreal.

As always, that next volatility spike is right around the corner. The CBOE Volatility Index (VIX - 13.31) closed at 11.78 on Aug. 20, so it's up around 13% amidst as non-volatile a three-week stretch as you'll ever see. In all fairness, that Aug. 20 reading was a little understated, thanks to the approach of Labor Day.

On the other hand, holidays don't have much impact on the VIX term structure. And here's how it looks now vs. Aug. 14, when the VIX was right where it is now.

VIX Futures

It crept up modestly.

And VIX order flow? Same as it ever was. This, from Options Action on Friday:

Big VIX trade went out-- someone bought 50K October 22-calls for $0.425, and then paid $0.45 for another 70K.

To which I responded:

It's amazing how often that sort of trade goes up...and how infrequently it ever looks good in hindsight.

What I meant was that any time you hear about a big trade in VIX, it's the exact same general concept -- some unknown entity buys a ton of cheap dollar calls. And it works well about as often as a broken clock tells you the correct time.

Now, I assume it's almost always a general hedge against large equity or bond exposure, and it doesn't particularly matter that it rarely works. Because otherwise, all these cheap VIX calls add up to some serious money down the drain over the years, which would strongly argue against the fact that someone keeps buying them.

Want more evidence that fear of future declines persists, this time with the CBOE Nasdaq-100 Volatility Index (VXN)? Steven Place has you covered.

I know I'm a complete broken record on this topic, but I'll say it one more time: So long as every pause and slight dip in the market is met with a spike in demand for protection, that protection is likely to prove unneeded.

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


permanent link

Analyst Upgrades: Sirius XM Holdings Inc., Citrix Systems, Inc., and Eli Lilly and Co

Analysts upwardly revised their ratings on SIRI, CTXS, and LLY

by 9/15/2014 8:45 AM
Stocks quoted in this article:

Analysts are weighing in today on streaming content provider Sirius XM Holdings Inc. (NASDAQ:SIRI), cloud computing firm Citrix Systems, Inc. (NASDAQ:CTXS), and pharmaceutical giant Eli Lilly and Co (NYSE:LLY). Here's a quick roundup of today's bullish brokerage notes on SIRI, CTXS, and LLY.

  • SIRI received a price-target hike to $4.50 from $4.25 at Pivotal Research, which also reiterated its "buy" rating. Technically, however, the stock is nothing to write home about, up just 3.4% year-to-date to trade at $3.61. Lately, shares of Sirius XM Holdings Inc. have been churning in the $3.55-$3.65 range. Short sellers have taken notice, as roughly 11% of the equity's float is sold short. At SIRI's average daily trading volume, it would take more than eight sessions to cover these bearish bets.

  • CTXS saw its price target raised to $80 from $70 at Mizuho Securities, which sports a "buy" opinion of the shares. This bullish note is well deserved, as the security is up nearly 14% in 2014, and has outperformed the broader S&P 500 Index (SPX) by 12.7 percentage points during the last two months. In fact, additional price-target hikes could be forthcoming for Citrix Systems, Inc. The stock's consensus 12-month price target rests at $69.61, a discount to the current share price of $71.97. Additionally, nearly half of the brokerage firms following CTXS have assigned it a "hold" or worse rating.

  • Finally, MKM Partners raised its price target on LLY to $65 from $61, but maintained its "neutral" opinion of the shares. Taking a step back, the equity has been tearing up the charts -- up 28% on a year-to-date basis -- and has outperformed the SPX by 7.6 percentage points during the previous three months. Still, Wall Street remains skeptical. Two-thirds of covering analysts have given Eli Lilly and Co a "hold" or worse recommendation, and the stock's average 12-month price target of $64.65 is less than the current price of $65.27. Should LLY continue to flex its technical muscle, additional bullish notes may be issued, potentially sparking a fresh wave of buying power.

permanent link
Stocks quoted in this article:

Around midday, three of the top market movers are beauty supplies retailer Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), alternative energy name Trina Solar Limited (ADR) (NYSE:TSL), and oil-and-gas concern Seadrill Ltd (NYSE:SDRL). Here's a quick roundup of how ULTA, TSL, and SDRL are performing on the charts so far.

  • ULTA is soaring -- up more than 20% at $117.39 -- following a stellar turn in the earnings confessional and subsequent round of bullish brokerage notes. The upward move has taken the shares solidly into the green on a year-to-date basis, and above the $115 level for the first time this year. In the options pits, traders are betting bearishly on Ulta Salon, Cosmetics & Fragrance, Inc. The stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.35 is higher than 94% of all other readings from the previous year.


  • Amid a sector-wide rally, TSL has jumped 3.5% to hover near $14.51, bringing its year-over-year advance to nearly 24%. What's more, it appears the solar stock recently found a layer of support at its 50-week moving average. That hasn't stopped short sellers from setting their sights on Trina Solar Limited (ADR). During the two most recent reporting periods, short interest swelled by roughly 25%, and now comprises nearly 31% of TSL's float.


  • SDRL is tumbling as we approach midday, down more than 5% at $31.16, and fresh off a three-year low of $31.09. From a wider perspective, the equity has shed nearly one-quarter of its value in 2014, and is on pace for a weekly loss of more than 10%, after Chief Financial Officer Rune Magnus Lundetrae said the rig market will "be worse next year." Options traders have been betting on additional downside, too, per Seadrill Ltd's 50-day put/call volume ratio of 2.34 at the ISE, CBOE, and PHLX. Not only does this reading indicate long puts have more than doubled long calls during the past 10 weeks, it also ranks in the bearishly skewed 91st percentile of its annual range.

permanent link

Analyst Update: T-Mobile US Inc, Carnival Corporation, and Lululemon Athletica inc.

Analysts adjusted their ratings on TMUS, CCL, and LULU

by 9/12/2014 11:44 AM
Stocks quoted in this article:

Analysts are weighing in today on telecom firm T-Mobile US Inc (NYSE:TMUS), cruise line Carnival Corporation (NYSE:CCL), and yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU). Here's a quick look at today's brokerage notes on TMUS, CCL, and LULU.

  • Argus raised its rating for TMUS to "buy" from "hold." Currently, the shares are trading at $30.98, up 2% for the session. Most other analysts are already bullish on T-Mobile US Inc, with 10 "buy" or better ratings, compared to six "holds" and not a single "sell." Elsewhere, however, TMUS's Schaeffer's put/call open interest ratio (SOIR) of 0.78 stands just 11 percentage points from an annual high. In other words, short-term options traders have rarely been more put-skewed during the past year. TMUS is down nearly 8% year-to-date, but recently bounced from support at its 320-day moving average.

  • CCL was upgraded by Shore today to "buy" from "hold." Nevertheless, the stock is off 0.1% to sit at $39.23, bringing its year-to-date loss to 2.3%. Analysts covering Carnival Corporation are skewing their notes to the bearish end of the spectrum, with nine "hold" or "sell" recommendations outnumbering four "strong buys." 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 1.94 stands higher than 90% of all other readings from the past year, pointing to a healthier-than-usual appetite for bearish bets over bullish during the past two weeks.

  • Target prices for LULU have been raised by no fewer than six brokerage firms, with ISI Group, Deutsche Bank, Mizuho, Citigroup, BMO, and J.P. Morgan Securities all upwardly revising their estimates. J.P. Morgan has the loftiest expectations for LULU, with the firm adjusting its price target up to $46. The post-earnings rally for Lululemon Athletica inc. continues today, as the stock has bounced 3.2% to $45.11. There's plenty of room for more bullish notes, as analysts have handed out 18 "hold" or worse ratings and only seven "buy" or better ratings. LULU could also benefit from an exodus of short sellers, as short interest represents more than 12 days' worth of pent-up buying demand, at the security's average pace of trading.

permanent link
1 
2 
… 
4 
5 
6 
7 
8 
… 
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.