Schaeffer's Trading Floor Blog

Highs & Lows: Molycorp, Baidu, and ARM Holdings

MCP and BIDU dropped to new annual lows, while ARMH marched to a new high

by 11/14/2012 2:55 PM
Stocks quoted in this article:

U.S. stocks remain on a southbound track, falling to session lows as Wall Street dwells on what Washington will do to tackle the nation's looming deficit. Against this backdrop, the number of equities drifting to new bottoms is easily surpassing those at new highs. Currently, the NYSE is counting 160 new lows and just 15 peaks, while the Nasdaq tallies 111 nadirs and only 13 new highs. Among the stocks charting notable moves are Molycorp Inc (NYSE:MCP - 6.34), Baidu, Inc. (ADR) (NASDAQ:BIDU - 94.45), and ARM Holdings plc (ADR) (NASDAQ:ARMH - 34.14).

  • Beleaguered MCP is taking a beating on the charts, while investors thrash the shares following Monday's headline that the rare-earths producer is being investigated by the Securities and Exchange Commission on the accuracy of its regulatory filings. And things could get even worse, although the stock has lopped off 74% in 2012, and lagged the broader S&P 500 Index (SPX) by 47 percentage points during the past two months. The average 12-month price target for MCP sits at $16.61, which represents a whopping 167% premium to today's new all-time worst of $6.21.

  • Earlier today, Chinese Internet search engine BIDU retreated to the $91.88 area -- its worst price since September 2010. Technically speaking, the equity hasn't fared so well lately, underperforming the SPX by more than 24 percentage points over the past 60 sessions, and diving more than 18% since the beginning of the year. As a result of this weak price action, the security's Relative Strength Index (RSI) now resides at 29 -- in oversold territory -- suggesting that the security could be due for some upside in the near future.

  • Semiconductor issue ARMH is extending its 23% year-to-date upswing, touching a 12-year best of $34.78 on the heels of a price-target hike from Citigroup this morning. Looking at the sentiment backdrop, we see that calls have been the options of choice recently, as evidenced by ARMH's 10-day call/put volume ratio of 3.90 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). But there could be a less-than-bullish reason for this call-heavy activity, as short interest swelled 11.6% 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 bullishly slanted options simply to hedge their bearish bets.

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