Schaeffer's Trading Floor Blog

Highs & Lows: Zynga, Kayak, and Hewlett-Packard

ZNGA and HPQ dropped to new annual lows, while KYAK marched to a new high

by 11/9/2012 1:11 PM
Stocks quoted in this article:

Stocks have seen both sides of breakeven today, but appear to be building on a midday lead, thanks to upbeat consumer sentiment data. Regardless of this uptick, the number of stocks dipping to new lows easily outweighs those tagging new highs. So far today, the NYSE has tallied 48 new peaks and 89 new bottoms on the NYSE, while the Nasdaq counts just 11 new highs and 100 new lows. Among the stocks charting notable moves are Zynga Inc (NASDAQ:ZNGA - 2.13), Kayak Software Corp (NASDAQ:KYAK - 39.45), and Hewlett-Packard Company (NYSE:HPQ - 13.85).

  • Online games outfit ZNGA has been on a steady downward spiral in 2012, peeling off 77% since January and plunging 87% after reaching a post-IPO best of $15.91 back in March. On a relative-strength basis, the shares have lagged the broader S&P 500 Index (SPX) by 27 percentage points during the past 60 sessions. Considering this weak price action, it should come as no surprise that sentiment is considerably downbeat toward ZNGA. Of the 20 analysts following the stock, 17 consider it a "hold" or worse rating. Meanwhile, the average 12-month price target of $4.05 represents a 94% premium to today's record low of $2.09.

  • In mergers and acquisitions news, Wall Street newcomer KYAK has been purchased by Internet travel site Priceline.com (NASDAQ:PCLN). Speculators applauded the deal, lifting the stock some 27% to the $40.41 mark -- its loftiest price since going public on July 20. Elsewhere on the Street, there seems to be a glut of negativity toward KYAK. Despite inching lower over the past month, KYAK short interest still makes up a healthy 8.9% of the equity's available float. At KYAK's typical rate of trading, it would take over 10 days to buy back all these shorted shares, which short sellers may be rushing to do in the wake of today's news.

  • Finally … Dow heavyweight HPQ exacerbated its year-to-date deficit of roughly 46% today, falling to a 10-year worst of $13.64. Perhaps contrary to the tech giant's technical backdrop, there has been surge in call activity recently, as evidenced by the stock's 10-day call/put volume ratio of 2.39 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio arrives in the 84th percentile of its annual range, signaling that traders on these exchanges have made bullish bets over bearish at a faster pace than usual during the past two weeks. However, there could be a less-than-optimistic reason for this call-heavy activity. Short interest leapt 35.5% during the past two reporting periods. With buy-to-open call volume and short interest rising in tandem, it's possible that short sellers are picking up optimistic options simply to hedge their pessimistic positions.

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