Schaeffer's Trading Floor Blog

Highs & Lows: General Motors, Qihoo 360, and Teva Pharmaceutical

GM and QIHU tagged annual peaks, while TEVA slipped to a new low

by 12/31/2012 1:55 PM
Stocks quoted in this article:

Less than half a day remains for lawmakers on Capitol Hill to steer the U.S. economy away from the fiscal cliff, and avoid automatic tax hikes scheduled for 2013. In afternoon action, a cautious mood has made its way onto the Street, as investors await any sign of a deal. While major market indexes are looking to end the year on an up note, the number of equities at new highs is edging out those at new lows. There are currently 63 peaks and 18 bottoms on the NYSE, while the Nasdaq counts 37 tops and 21 lows. Among the names charting notable moves are General Motors Company (NYSE:GM - 28.22), Qihoo 360 Technology Co Ltd (NYSE:QIHU - 29.30), and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA - 37.13).

  • Automaker GM rallied to the $28.33 level today, marking its best price in more than 16 months. Technically speaking, the shares have performed quite well in 2012, rising 39.2% year-to-date. In fact, since notching an all-time low of $18.72 on July 25, the stock has rocketed some 54%. In light of this positive price action, GM has seen plenty of call activity, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.36, confirming calls nearly triple puts among options slated to expire within three months. This ratio ranks in the 20th percentile of its annual range, suggesting short-term options players have been more call-heavy just 20% of the time during the past year. However, short sellers could be responsible for some of the call buying of late, picking up optimistic options to hedge their pessimistic positions as the equity moves higher. Short interest inched up during the most recent reporting period, and now accounts for a healthy 8% of GM's available float.

  • According to an analyst at T.H. Capital Research, there is a high probability that China's QIHU will work with Google Inc (NASDAQ:GOOG) to learn how to monetize search functions on its so.com. Investors applauded the report and lifted QIHU to a 19-month peak of $29.59. Elsewhere, there appears to be a significant upswing in optimism in the options pits toward the Chinese Internet company. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals a 10-day call/put volume ratio of 5.55, which shows that 5.55 calls have been bought to open for every put during the past two weeks. Meanwhile, short interest spiked roughly 13% over the past month, hinting at potential hedging by the shorts. With buy-to-open call volume and short interest rising in tandem, it's possible that short sellers are picking up bullish contracts simply to protect their shorted shares.

  • Biotech concern TEVA pulled back to the $36.63 mark today, which marked its worst price since October 2011. On this last trading day of the year, the security is staring up at its 10-month and 20-month trendlines, which have acted as resistance for almost two full years. TEVA could add to its 8.2% 52-week deficit, as 13 out of 26 analysts consider the biotech firm worthy of a "buy" or better rating, while the other half maintain tepid "hold" suggestions. Furthermore, the average 12-month price target sits at $46.45, which represents a 26.8% premium to TEVA's new nadir.

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