Schaeffer's Trading Floor Blog

Highs & Lows: US Airways, Merck, and Deckers Outdoor

RAI, LCC, MRK, and DF claim new highs, while DECK and CEDC fall to new lows

by 6/21/2012 1:42 PM
Stocks quoted in this article:

The major indexes are spiraling deeper into the red this afternoon, thanks to a lackluster round of economic reports. However, a large number of equities have bucked the broader trend lower to venture into new-high territory. At last check, the New York Stock Exchange (NYSE) shows 47 securities at new highs and 27 stocks at new lows, while the Nasdaq has 35 stocks at fresh peaks, versus 32 at new lows. Among the stocks touching 12-month highs or lows in today's trading are Reynolds American, Inc. (RAI), US Airways Group, Inc. (LCC), Merck & Co., Inc. (MRK), Dean Foods Company (DF), Deckers Outdoor Corporation (DECK), and Central European Distribution Corp (CEDC).

Notable Stocks at Annual Highs

  • Reynolds American (RAI - 43.34) crept to a new high of $43.67 today, boosting its year-over-year gain to more than 13%. The stock has also bested the broader S&P 500 Index (SPX) by north of 12% over the past two months. However, skeptics remain undaunted by this technical prowess, as the equity sports a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.96, indicating that puts bought to open have nearly doubled calls in recent weeks. Plus, this ratio ranks in the 74th annual percentile, which means that traders have been scooping up puts over calls at an accelerated clip. Further reflecting this bearish skew toward RAI is the fact that short interest on the tobacco giant skyrocketed by over 54% during the past month, and now accounts for 3% of the equity's float. Meanwhile, only one of the analysts covering RAI has deemed it worthy of a "strong buy" rating, compared to nine lukewarm "holds" and one "sell" recommendation.

  • US Airways Group (LCC - 13.37) has been a technical standout lately, soaring more than 164% year-to-date, and notching a new high of $13.78 earlier today. The equity has also surged ahead of the SPX by a whopping 80% during the past 60 sessions. Yet pessimism abounds on the airliner, as the Schaeffer's put/call open interest ratio (SOIR) stands at 1.09 just 10 percentage points from an annual peak. What's more, LCC's 20-day ISE/CBOE/PHLX put/call volume ratio rests at 3.21, as puts bought to open have more than tripled calls during the past month. Elsewhere, short interest on the security ramped up by more than 28% during the last two reporting periods, and now makes up a lofty 16% of the LCC's float. However, there is plenty of optimism to be found on the Street, as the stock boasts eight "strong buys" and one "buy" recommendation, versus just two "holds" and zero "sells."

  • Merck & Co. (MRK - 39.58) touched a new high of $39.79 today, amid rumors that the pharmaceutical empire is in talks to acquire India-based Micro Labs, Ltd, a drug ingredient manufacturer. Currently, the stock shows a year-over-year advance of close to 11%, and has been trading above support at its ascending 10-day moving average since early June. Most of the analysts following MRK hold a high opinion of the security, as 12 "strong buy" endorsements have been handed out, compared to six "holds" and nary a "sell" rating. On the near-term options scene, calls are preferred over puts, as evidenced by the security's SOIR of 0.76. This ratio registers in the 35th annual percentile, suggesting that short-term options players have been more call-heavy toward MRK just 35% of the time over the past year. Although it should be noted that short interest on the pharmaceutical firm jumped by more than 23% during the most recent reporting period, these bearish bets make up less than 1% of the equity's float -- hinting that MRK's pessimistic camp is far from crowded.

  • Technically speaking, Dean Foods (DF - 16.80) is sitting pretty lately, having advanced by more than 51% so far this year, and blazing ahead of the SPX by nearly 46% over the past eight weeks. The food and beverage behemoth also managed to touch a new peak of $17.08 in today's session. What's more, Thomson Reuters pegs DF's average 12-month price target at $16.83, just a stone's throw away from its current price -- leaving the door wide open for future price-target hikes. It stands to reason that calls are dominating DF's options activity, as traders on the ISE/CBOE/PHLX have bought to open more than six calls for every put during the past month. Still, the security is no stranger to bearish speculation, as short interest on the food product producer exploded by more than 118% over the last two reporting periods. Meanwhile, the stock's relative strength index (RSI) of 77 puts DF near overbought territory -- implying that a change in tide may be on the horizon.

Notable Stocks at Annual Lows

  • Deckers Outdoor (DECK - 45.93) has been technically sluggish lately, having shed roughly 45% in the past 52 weeks, and lagging the (SPX) by close to 29% over the last two months. Today's session certainly hasn't helped matters, as the stock fell to a new low of $45.75 this morning. There is plenty of pessimism surrounding the equity among the options crowd, as data from the ISE/CBOE/PHLX shows a 10-day put/call volume ratio of 1.65, confirming that puts bought to open have comfortably outnumbered puts during the past two weeks. This ratio arrives in the 95th percentile of its annual range, meaning that traders have been snapping up bearish options over bullish at a much faster-than-usual pace. Meanwhile, short interest on the footwear maker rose by 7.5% over the past two reporting periods, and now accounts for a hefty 24% of DECK's float. At the stock's average pace of trading, it would take more than six days to cover these shorted shares. However, there is still a great deal of optimism toward the security on Wall Street, as eight analysts have issued "buy" or better endorsements, compared to five "holds" and not a single "sell" rating.

  • Shares of Central European Distribution (CEDC - 2.62) fell to a new low of $2.60 today, despite receiving an upgrade to "neutral" from "underperform" at Credit Suisse earlier this week. Today's 6% decline has merely exacerbated the equity's technical woes, considering its 12-month loss of more than 76%. The beleaguered stock has also trailed the SPX by roughly 46% during the last 60 days. Surprisingly, however, the adult beverage maker is still seeing plenty of call activity, as evidenced by its 50-day ISE/CBOE/PHLX call/put volume ratio of 2.16 -- meaning that traders have bought to open more than two calls for every put during the past few months. This ratio arrives in the 97th percentile of its annual range, as speculators have rarely purchased calls over puts at a faster pace. However, it bears mentioning that short interest on the security climbed by nearly 4% during the last two weeks, and now represents a formidable 22% of CEDC's float -- or nearly 17 days' worth of pent-up buying pressure, at the stock's average pace of trading. This hints that some of the recent call volume could be the work of short sellers looking to hedge their bets.

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