Schaeffer's Trading Floor Blog

Highs & Lows: Bank of America, Procter & Gamble, and Gilead Sciences

BAC, PG, and GILD jumped to fresh highs

by 12/11/2012 1:30 PM
Stocks quoted in this article:

With some promising developments taking shape surrounding the budget talks in Washington, equities markets are noticeably higher this afternoon. While optimism fills Wall Street, there are decidedly more equities at new highs than new lows. On the NYSE, there are currently 106 new peaks and just 11 bottoms. Over on the Nasdaq, things are very much the same, with 64 tops and 19 fresh lows. Among the stocks charting notable moves are Bank of America Corp (NYSE:BAC - 10.65), The Procter & Gamble Company (NYSE:PG - 70.86), and Gilead Sciences, Inc. (NASDAQ:GILD – 76.50).

  • U.S. banking giant BAC continues to enjoy a standout year on the charts, rallying roughly 92% in 2012, and outperforming the S&P 500 Index (SPX) by nearly 16 percentage points during the past three months. In fact, BAC leapt to the $10.71 mark today, marking its loftiest price since July 2011. But BAC's impressive uptrend is still not receiving the bullish brokerage attention one might expect. The consensus 12-month price target resides at the $10.19 level, which is a discount to today's fresh peak. Moreover, only 36% of the 25 analysts following the Dow heavyweight consider it worthy of a "buy" or better endorsement.

  • Fellow Dow component PG also flexed some technical muscle today, running to a more than four-year best of $70.97 just before lunchtime. Although this rally added to the stock's modest 5.2% year-to-date return, options players appear to be upping the bearish ante. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows PG's 10-day put/call volume ratio of 1.13 -- which ranks in the 86th percentile of it annual range -- has more than doubled its 50-day put/call volume ratio of 0.53.

  • Finally … GILD announced a two-for-one split of its stock that will take effect in early 2013. Investors were pleased by the news, and buoyed GILD to a record peak of $76.75. Looking closer at the technical backdrop, we see that GILD's positive price action has been an ongoing trend for some time, as the shares have rocketed 86% in 2012, and gained 96% year-over-year. This overall uptrend could help to explain the upbeat sentiment in the options pits. During the past 10 days, speculators on the ISE, CBOE, and PHLX have bought to open 2.96 calls for every put. However, there could be a less-than-bullish motive for this call-heavy activity, as short interest rose 17% higher over the most recent reporting period, and now accounts for a healthy 4.7% of the security's float. Oftentimes, short traders will buy calls as hedges for their pessimistic positions -- and this could be what's happening here.

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