Home Site Map Advertise with Us About Us My Account Shopping Cart Help Sign In

Schaeffer's Options Center

newer

Schaeffer's Daily Option Blog

older

A Unique Day

Ryan Detrick CMT

9/27/2006 2:32:04 PM

A pretty wild day out there, as right now we're flat on the Nasdaq Composite and S&P 500 Index – but up slightly on the Dow Industrials. What really interests me is most of the ETFs that I follow are down, yet internals are very strong – with an advance/decline line at the NYSE coming in at a very strong 1.60. Honestly, today is a unique day. Two leading sectors are energy and metals, while brokers are leading to the down side. One stock that's having a good day is Reynolds American (RAI: sentiment, chart, options) , which is up almost five percent after receiving an upgrade from UBS this morning. Of course, this comes after a huge drop in the shares the past week – ranging from a downgrade to a negative lawsuit result.

permalink

Mixx

Close Article

Sector Update: The Soft Side of the Market

Ryan Detrick, CMT (rdetrick@sir-inc.com)

8/31/2006 10:42:25 AM

One area that currently looks strong to me is software, represented by the AMEX Software HOLDRs Trust (SWH: sentiment, chart, options) . This was one sector that definitely was beaten down pretty good during the May correction, but recently has been looking very strong technically.

Getting right to the SWH, the exchange-traded fund formed a picture-perfect double bottom in June and then in July. Then on August 15, it enjoyed a solid breakout above the $35 level. Using simple technical analysis, we can project a move up to about $38. This can be calculated from the difference of the low of $32 and the high of $35 for three points. Then you add back in three points from the $35 breakout and get a target of $38, or about 4.7 percent higher from current levels.

Daily chart of the Software HOLDRs Trust since May 2006

So we have a technically attractive sector. Now let's look at some of the sentiment measures. According to our database, according to Zacks there are 51 percent "buys" on the software sector. This is a pretty high number of "buys", as it ranks 11th out of 28 sectors that we follow – meaning it could be potentially overloved.

But digging into the data a little more reveals that this could be because some of the larger names are highly skewed to the bullish side. Larger names like Microsoft (MSFT: sentiment, chart, options) , Oracle (ORCL: sentiment, chart, options) , Autodesk (ADSK: sentiment, chart, options) , and Adobe Systems (ADBE: sentiment, chart, options) all have a lot of analysts covering their shares and the majority of the ratings are definitely "buys."

I'm not saying we should completely avoid these names (although you might want to), but remember as contrarians we like to see skepticism towards outperformers as a sign there's still cash on the sidelines – so we'll want to avoid the overloved giants.

After looking at the stocks in the group, I must say that ORCL does look very technically attractive. I like how it broke out above $15.20 earlier this month, came back and tested that level, and has since move higher. This is nice price action and it's good to see a larger name going higher. It's always nice to see the larger names pulling their weight, but I definitely prefer to find the small, more volatile, names when it comes to option trading.

Now the problem with ORCL (as I mentioned earlier), is that analysts are fairly bullish on it. Right now there are 15 "buys," seven "holds," and two "sells." But the optimism doesn't stop there, as it would take only a day for the shorts to cover their bearish bets - reducing the chance of a short-covering rally - and short-term option players are bullish as well. So the technical picture is nice, but the sentiment is bullish – let's move on and see if we can find some plays that have negative sentiment and strong price action.

Using our internal database, the two highest-rated stocks according to our Schaeffer's Equity Scorecard are BMC Software (BMC: sentiment, chart, options) and Intuit (INTU: sentiment, chart, options) . These are the names that we want to play, strong performers amid heavy skepticism.

Looking at BMC, it checks in with a Schaeffer's Equity Scorecard of 9.0 out of 10.0. Technically, the enterprise management software firm looks very strong, as it has gained over 31 percent year-to-date. On the sentiment front, things are very skeptical. First off, it would take a healthy seven days for all the shorts to cover their bearish bets. What's more, after all of its gains, the analysts haven't even begun to take notice, as there is currently one "buy" rating, five "holds," and four "sells." Finally, short-term option players continue to try to pick a top, as the firm's Schaeffer's Open Interest Put/Call Ratio (SOIR) checks in at a massive 2.84 – higher than all but three percent of readings over the past year.

Daily chart of BMC Software since June 2006

Now looking at personal finance software maker Intuit (INTU), we see a similar looking picture, with this one checking in with a Schaeffer's Equity Scorecard rating of 8.0 out of 10.0. Technically, the shares have gained over 15 percent this year and another 37 percent the past 12 months, and they continue to look strong. On the sentiment front, there are seven "holds" or worse out of 11 total recommendations on INTU, and a SOIR that is higher than 86 percent of the readings over the past year. Add it up, and this one should continue to gain as well.

Daily chart of Intuit since March 2006 with 50-day moving average

One final software name that looks strong is salesforce.com (CRM). The enterprise software company recently reported great earnings and the shares jumped nearly 20 percent as a result. In fact, we had some calls on this one ahead of that event and our Schaeffer's Players Series booked profits of 639 percent. But enough marketing hype ... this one still looks good. What I like about it is that even after its spike higher, the shares refused to give back much at all. To me this shows there's very strong demand for this security. Turning to the sentiment, over 12 percent of the equity's float is sold short, short-term options players continue to be bearish, and analysts have lots of room for upgrades, as there are currently 13 of 25 total ratings at a "hold" or worse.

Daily chart of salesforce.com since May 2006

As long as the overall market can continue to hold up, I think there are some definite opportunities from this sector.

permalink

Mixx

Close Article

newer

older

View Most Recent Blogs

Featured Brokers

Profile

Apply Now

Profile

Apply Now

Profile

Apply Now

Commentary by WhatsTrading.com

CBOE Volatility Index (.VIX) $21.90 -5.56%

9/3/2010 3:20:00 PM

The top options trades so far today are in the CBOE Volatility Index (.VIX) after the Sep - Oct 25 put spread trades at 45 cents, 58000X. The same spread traded yesterday and the action looks like rolling from one month to the next. Open interest in the Oct 25 puts increased by 54,880 to 129,900 following yesterday action and if today's block of 58K adds to it, then the increasing interest is likely to make the contract the second biggest position in the VIX; behind the Sep 25 puts, which have 289K of open interest. VIX is down 1.33 to 21.86 today and has now suffered a four-day slide of about 20 percent. The large blocks of puts on the VIX might be hedges of VIX futures.

Read more at WhatsTrading.com

Close Article

Sprint Nextel Corporation (S) $4.39 +1.15%

9/3/2010 2:00:02 PM

Sprint Nextel (S) shares are up a nickel to $4.39 and have now added 12.5 percent since Monday. Some players might be worried that the gains won't last, as a block of 20K Sep 4 puts recently traded at the 4-cent ask price. It might be a closing trade. Meanwhile, 8,000 Jan 4 puts also changed hands, including 4000 at the 38-cent ask and 4,000 at 37 cents. The Jan 4 puts look opening and marked "tied", so possibly a protective put or volatility play. Implied volatility in Sprint is down 4 percent to 48.5 today, compared to a 52-week high and low of 87 and 46.5.

Read more at WhatsTrading.com

Close Article

Urban Outfitters (URBN) $32.98 +1.23%

9/3/2010 12:00:01 PM

Urban Outfitters (URBN) adds 42 cents to $33 and options volume is 3X the average daily, led by a Sep 33 - 34 call spread, 3300X on ISE. Looks like it was sold at 45 cents and is possibly rolling up in strikes after a three-day 8.7 percent gain in the share price. URBN saw relative strength and was one of the best gainers in the NASDAQ 100 yesterday. The company is due to present at a Goldman Sachs Retailing Conference on 9/14.

Read more at WhatsTrading.com

Close Article

Ford Motor Company (F) $11.95 +2.04%

9/3/2010 11:00:00 AM

Ford Motor (F) adds 24 cents to $11.96, now up 5.7 percent month-to-date, after reporting an 11 percent decline in August sales on Sep 1. Options action is picking up today, with 25K calls and 9,930 puts traded on the automaker, or two times the typical volume for the first hour of trading. Early trades included blocks of Sep 14 calls at 7 cents on ISE, where sentiment data hints at opening customer buy orders. 10,775 contracts now traded.

Read more at WhatsTrading.com

Close Article

Microsoft Corp (MSFT) $23.90 +0.00%

9/2/2010 4:00:06 PM

Microsoft (MSFT) is flat at $23.91 and recent trades include an Oct 25 - 27 call spread at 32 cents, 5000X on CBOE. Looks like a buyer initiating the trade and the spread has been repeated multiple times. Now volume in both contracts exceeds 9000. Another noteworthy trade in Microsoft today is a block of 9555 Jan 27.5 calls at the 44-cent ask price in afternoon trading. This morning, about 30 minutes after the bell, a block of 5,720 Jan 24 calls was bought to open at $1.60 on ISE, according to ISEE data. 81,000 call options now traded on the software giant, compared to 13,000 puts. The bullish trading comes ahead of a presentation at the Citi Global Tech Conference Tuesday at Noon ET.

Read more at WhatsTrading.com

Close Article

Mariner Energy Inc (ME) $22.85 -2.14%

9/2/2010 1:20:02 PM

Mariner Energy (ME) shares sank in volatile morning trading on reports of an explosion on one the company's oil rigs in the Gulf of Mexico. ME sank to $19.62 and were recently down $1.04 to $22.31, and 13.7 percent off session lows. Meanwhile, options volume is running 145X the average daily, with about 23,000 puts and 3,190 calls traded. The top trade is a lot of 456 Sep 20 puts at 80 cents. It traded at 11:45 and thirty minutes after the news broke. 15.4K now traded and the contract is now bid at 40 cents. CNBC reports that no oil spilled as a result of the explosion and Dahlman Rose analysts say the explosion is likely a platform. Consequently, the fallout is likely to be consirably smaller. Still, implied volatility in the Houston-based oil driller is up sharply, almost 200 percent to 76.5.

Read more at WhatsTrading.com

Close Article

Momenta Pharmaceuticals Inc (MNTA) $14.78 -0.81%

9/2/2010 12:20:01 PM

Momenta Pharmaceuticals (MNTA) loses 14 cents to $14.76 and one strategist pays 25 cents for the Jan 10 - 12.5 (2X1) put ratio spread, 4000X on PHLX. Looks like a new position and might be a hedge. The Food and Drug Administration is expected to rule on Momenta's generic drug M-Enoxaparin by the end of this year. Implied volatility is flat today, but elevated at 92.

Read more at WhatsTrading.com

Close Article

Anadarko Petroleum Corporation (APC) $50.19 +2.87%

9/2/2010 11:00:14 AM

Bullish flow detected in Anadarko Petroleum (APC), with 23,850 calls trading, or 2x the recent avg daily call volume in the name. Shares are up $1.81 to $50.50 after The Australian published a story saying that APC is on BHP's radar screen as a possible acquisition target. 'A senior figure in the global energy industry is convinced that the "second target" for BHP is Anadarko Petroleum Corporation, telling The Australian he believed the US oil and gas independent was firmly on BHP's radar. BHP declined to comment for this article.' (Link). In options action, the focus is on APC Sep 50, 52.5 and 55 calls. Nov 55 calls are among the most actives as well.

Read more at WhatsTrading.com

Close Article

Burger King Holdings Inc (BKC) $18.90 +14.90%

9/1/2010 1:20:00 PM

It's been one Whopper of a day for Burker King (BKC) shareholders. The stock gapped higher, near $19 at the open, on reports the fast food chain is considering putting itself up for sale. However, the early gains faded amid talk 3I Group, the interested party, denied it was in talks with BKC. Shares dropped to $17.13 mid-morning and about 10 percent from session highs. However, the WSJ then released a story suggesting that 3G is in talks with Burger King. CNBC also out saying that it might be 3G, not 3I Group interested in BKC (very confusing -- bottom line is: original speculation about 3I Group was incorrect. It should have been 3G and yet still, it's not confirmed).\n
\nShares rallied back beyond $19 and are up $2.45 to $18.90. Meanwhile, options volume is 7X the average daily, with speculative call buying driving a lot of action in Sep and Oct 20 calls. Looks like two-way flow in Sep 19 puts and calls. Some traders are likely liquidating positions as BKC saw a flurry of activity on 8/25 and 8/26 (see 8/26 color). IV up 23 percent to 53.

Read more at WhatsTrading.com

Close Article

Ensco Plc (ESV) $43.95 +7.77%

9/1/2010 12:00:02 PM

Bullish flow detected in Ensco (ESV), with 5975 calls trading, or 3x the recent avg daily call volume in the name. Shares are up $3.28 to $44.06 on a good day for the oil drillers after crude rallied $2 to $73.92 a barrel. Oil Service HOLDRS (OIH) up nearly 5 percent. ESV is among the day's biggest gainers (RDC, PDE, NE, NBR, and DO also seeing relative strength). In ESV options, the focus is on Sep 43, 44, 45, and 47 calls, as well as Oct 45 and 46 calls. Overall sentiment based on the total order flow is 59 percent Bullish.

Read more at WhatsTrading.com

Close Article

Getting Started with Options

Introduction: Getting Started with Options

Tools and Filters

Options Strategies

Sponsored by

Unusual Option Volume

Stocks

[HELP]

Data by WhatsTrading.com

Option Flow

Call Buying
Put Buying

[HELP]

Data by WhatsTrading.com

Most Active Stocks

Stocks
Indexes
ETFs

[HELP]

Data by WhatsTrading.com

Most Active Option Strikes

Stocks
Indexes
ETFs

[HELP]

Data by WhatsTrading.com

Largest Open Interest

Stocks
Indexes
ETFs

[HELP]

Data by WhatsTrading.com

Monday Morning Outlook:
Prepare for the investing week ahead. Every week, Bernie and his staff provide you with their insight about what has happened and, more importantly, what will happen in the market. We dig deep and show you what's happening behind the scenes, and tell you which indicators are predicting major market moves.

Market Recap:
At the end of every market day, we review the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report.

Opening View:
Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. delivered to your inbox before the opening bell.

First Name Add your first name Last Name Add your last name Email Add a valid address Password Min. size 4 chars

I would like to be contacted periodically by Schaeffer's Investment Research concerning its own products and services, and those of carefully selected advertisers. I understand that I can opt-out of further messages at any time.

Partner Center

options trading course