Schaeffer's Trading Floor Blog

Highs & Lows: Dell, Activision Blizzard, Moody's, and TASER International

DELL and ATVI drifted lower, while MCO and TASR enjoyed runs higher

by 10/26/2012 4:59 PM
Stocks quoted in this article:

The major indexes saw both sides of breakeven today, as Wall Street digested another bout of corporate earnings news and the latest GDP report. By the close, it was a mixed finish for the major indexes. Following this wishy-washy session, the overall number of stocks reaching new annual highs nearly equaled those hitting new bottoms. There were 65 new peaks and 35 lows on the NYSE today, while the Nasdaq tallied 35 new highs and 57 lows. Among the names charting notable moves were Dell Inc. (NASDAQ:DELL - 9.24), Activision Blizzard, Inc. (NASDAQ:ATVI - 10.79), Moody's Corporation (NYSE:MCO - 47.89), and TASER International, Inc. (NASDAQ:TASR - 8.07).

  • PC maker DELL has been a dud on the charts recently, underperforming the broader S&P 500 Index (SPX) by 22 percentage points over the past three months, and lopping off 36.8% since the start of the year. As if underscoring this technical predicament, DELL retreated to a three-year nadir of $9.19 in lunchtime trading. But this weakness has yet to fully grab the attention of the brokerage bunch. Of 26 analysts following this tech issue, there are still 10 "strong buys" and one "buy" rating. Meanwhile, the average 12-month price target sits at $13.70, which is a 49% premium to today's multi-year low.

  • Just a day after Credit Suisse added video-game publisher ATVI to its U.S. Focus list, the stock shrugged off this note, and slipped to a 14-month low of $10.73. In turn, this drop exacerbated the equity's 12.4% year-to-date deficit. Despite this overall weakness, options traders seem to have an insatiable appetite for calls, as evidenced by ATVI's 10-day call/put volume ratio of 15.23 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio lands in the 81st percentage of its annual range, implying that traders on these exchanges have purchased calls over puts at a faster-than-usual clip during the past two weeks. However, there could be a less-than-bullish reason for this call-heavy activity. Short interest accounts for a healthy 4.1% of the security's float, and it's possible that short sellers are picking up optimistic options simply to hedge their pessimistic positions.

  • This morning, credit ratings firm MCO revealed strong third-quarter results and upped its full-year earnings guidance for the second time in six weeks. With that, the stock rallied to the $49.50 mark -- its highest price since October 2007 -- boosting its already considerable 2012 upswing of 42.2%. In light of this uptrend, short sellers could be closing the door on their bearish bets. During the past two reporting periods, short interest depleted 7.6% and now makes up 9.1% of the security's float. At MCO's average pace of trading, it would take nearly 12 sessions for the remaining shorted shares to unwind, which could translate into a contrarian boon in the near term.

  • Stun-gun specialist TASR also turned in a well-received report for its third quarter, which resulted in a 26% intraday rise and a spike to a four-year best of $8.45 for the shares. Prior to earnings, there was a swell of optimism in the options pits, as evidenced by TASR's 10-day call/put volume ratio of 27.12 on the ISE, CBOE, and PHLX. But this recent trend toward calls may not be as upbeat as it would initially appear. Short interest on the equity ballooned 38% during the most recent reporting period, and now makes up 7% of the available float. Therefore, it's possible that a portion of the recent call volume was the result of hedging activity by the shorts.

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