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VIVUS, Inc. (NASDAQ:VVUS - 11.16) has been a technical laggard lately, having shed close to 17% year-to-date, and more than 44% on a year-over-year basis. The biopharmaceutical firm has also trailed the broader S&P 500 Index (SPX) by close to 26 percentage points during the past two months. Meanwhile, a look at the charts shows the stock remains pinned beneath resistance at its 20-week moving average -- a trendline not surmounted on a weekly closing basis since July 2012. Given this lackluster price action, as well as the upbeat sentiment surrounding the security, now could be the window of opportunity for betting on VVUS to continue along its downward trajectory.
From a fundamental perspective, VVUS gapped 12.2% lower on Feb. 26, after reporting a wider-than-expected fourth-quarter loss. The poorly received results were attributed to lackluster sales of the company's obesity drug, Qsymia, as well as considerably higher operating expenses.
Despite these downbeat headlines, optimism continues to run rampant on VVUS. The stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio sits at 6.25, confirming calls bought to open have outpaced puts by a margin of more than 6-to-1. This ratio arrives in the 86th annual percentile, denoting a much healthier-than-usual appetite for calls over puts in recent months.
Similarly, the equity's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.29, indicating calls more than triple puts among options with a shelf-life of three months or less. This ratio hovers just 9 percentage points above a yearly nadir, signaling near-term options players have rarely been more call-heavy toward the security during the last 12 months. However, should optimistic speculators start to change their tune on this underachiever, an unwinding of bullish bets could serve as a contrarian headwind for VVUS.
Also of note, the sentiment scales among the brokerage bunch remain bullishly tipped. The stock currently boasts six "strong buys" and one "buy" endorsement, versus three "holds," and two "sell" or worse suggestions. What's more, VVUS' average 12-month price target of $18.04 denotes a whopping 60% premium to Thursday's closing price of $11.27. This leaves the door wide open for downgrades and/or price-target cuts down the road, which could exacerbate the security's technical woes.
Speculators hoping to cash in on some further downside for VVUS should consider picking up the stock's in-the-money June 16 puts, which presently sport an ask price of $5.25.