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AutoNation (AN) Upgraded

Jocelynn Drake

9/28/2006 11:40:59 AM

AutoNation (AN: sentiment, chart, options) received a boost this morning when Bear Stearns upgraded the firm from "peer perform" to "outperform." The brokerage firm cited lower financing costs and attractive valuation. Furthermore, analyst Michael Geoghagan stated that production cuts at the Big 3 auto makers -- General Motors, Ford Motor and DaimlerChrysler -- could be a positive for AutoNation "to the extent that leaner inventory reduces floor-plan (inventory) financing costs and supports higher transaction prices (because of less pressure to liquidate)."

Technically speaking, the shares have jumped more than two percent this morning on the positive comments, pushing them through former resistance at the 20.80 level. What's more, the stock has skipped above its declining 20-week moving average, which it has logged only one weekly close above since mid-May.

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Opening View: Waiting for Employment Data

Jocelynn Drake (jdrake@sir-inc.com)

9/1/2006 8:21:18 AM

Many of our observations are now available as audio presentations that you can hear on your computer or download from Apple's iTunes Music Store to play on a portable device such as an iPod. To see the full menu of observations, please visit http://www.schaeffersresearch.com/commentary/podcasts/ . Today's Opening View features news from QUALCOMM and Intel.

Futures are slightly higher this morning, as investors anxiously await the release of August employment data. In news around the Street this morning, QUALCOMM (QCOM: sentiment, chart, options) reported that a U.S. federal court has dismissed Broadcom's (BRCM: sentiment, chart, options) antitrust complaint against the company. Originally filed in July 2005 and later amended, the complaint alleged a variety of antitrust violations by QCOM, each of which was rejected by the court. Meanwhile, BRCM has said that it would still pursue federal antitrust claims against QCOM. BRCM stressed that the dismissal only held that any alleged abuse does not warrant antitrust liability, not whether QCOM's alleged conduct was lawful or not.

Meanwhile, last night Openwave Systems (OPWV: sentiment, chart, options) announced that it plans to reduce its worldwide staff by about 65 people and eliminate four senior management positions as part of an effort to streamline its management team. The senior positions include the chief marketing officer, chief administrative officer, chief operating officer, and chief corporate strategy and business development officer. The company will incur related charges of $8.5 million to $10 million.

Keeping with this theme, Intel (INTC: sentiment, chart, options) is expected to announce as early as next week that it is cutting between 10,000 and 20,000 jobs from its worldwide workforce of 100,000, according to media reports Friday. Both The Wall Street Journal and CNET News.com reported that INTC could publicly disclose the cuts after market close Tuesday.

After the close last night, Northrop Grumman (NOC: sentiment, chart, options) announced that it has won a $95.8 million contract for the detail design of the Navy's 21st century DDG 1000 destroyer. The contract runs through September 2007, and when fully funded will total more than $300 million through 2013.

Electronic Arts (ERTS: sentiment, chart, options) reported that it has sold more than two million copies of its Madden NFL '07 game in the first week, making it the best first-week performance in the 17-year history of the game franchise. The firm stated that unit sales are about 12 percent higher than a year ago.

Economic News

The economic data continues to pour in, regardless of whether traders have departed early for a long weekend. Before the open, August non-farm payrolls and the unemployment rate will hit the Street. The University of Michigan will release its final Consumer Sentiment Index reading for August at 9:45 a.m. Then at 10:00 a.m. Eastern time, the August Institute of Supply Management manufacturing index, July construction spending, and July pending home sales will be released. Meanwhile, the bond market is slated to close at 2:00 p.m. for the Labor Day holiday.

Market Statistics

Equity option activity on the CBOE saw 453,433 put contracts traded on Wednesday compared to 606,733 call contracts. The resultant single-session put/call ratio jumped to 0.75, while the 21-day moving average increased to 0.69.

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Overseas Trading

Overseas trading is modestly higher this morning, with 13 of the 19 markets that we follow in positive territory. The cumulative average return on the group stands at a gain of 0.14 percent. In Asia, stocks were mixed Friday, with blue-chip technology companies such as Canon and Konica Minolta fronting a broad retreat on Japan's Nikkei Average. By the end of the session, the Nikkei had lost 6.5 points and the Hong Kong Hang Seng edged 32 points higher.

Turning to Europe, the various markets notched light gains ahead of the release of key U.S. economic data. The group was helped by French drugmaker Sanofi-Aventis, as the company rallied on a favorable ruling in a patent case covering the Plavix blood-thinning treatment. The ruling outweighed news that the company also cut its 2006 earnings forecast, now seeing adjusted earnings per share growth of two percent, hurt by Apotex already selling its generic version of Plavix before the ruling.

The U.S. Dollar Index (DX/Y – 85.05) edged 0.09 percent higher on Thursday, hitting resistance at its 10-day and 20-day moving averages. In early trading this morning, the dollar is relatively flat against the other currencies as traders await the release of August employment data.

The September futures contract on the 30-year bond (US/U6 – 110'22) increased 12/32 on Thursday. Treasury prices moved slightly higher, as the yield on the benchmark 10-year note stayed at a five-month low following today's economic reports. This morning, Treasurys are expected to open flat ahead of the release of key U.S. employment data.

Commodity Corner

The December gold futures contract (GC/Z6 – 634.20) increased 1.3 percent yesterday. The yellow metal moved higher after Iran refused to give in to the U.N.'s demands to stop enriching uranium. While the precious metal logged gains for the day, August saw the contract lose $12.60. Silver gained 36 cents Thursday, finishing 13 percent above July's close. Meanwhile, the mining stocks received a boost on news that Glamis Gold (GLG: sentiment, chart, options) agreed to be acquired by Goldcorp (GG: sentiment, chart, options) for $51.49 per share. The purchase will create one of the world's top gold mining companies. GLG finished Wednesday's trading session at $38.86 per share, and GG's offer values the company $8.6 billion. GLG has agreed to pay a break fee of $215 million to GG. As a result of the purchase, GG shareholders will own roughly 60 percent of the new company.

The October crude oil contract (CL/V6 – 70.26) edged 0.33 percent higher, holding onto the 70 level. Crude futures rallied as the nuclear tensions between Iran and western nations were ratcheted higher after Tehran refused to stop enriching uranium for its nuclear program. Black gold finished August with a loss of more than seven percent. At the end of July, it would have cost $75.68 per barrel.

Friday, September 1, 2006

8:30 a.m. Aug. Non-farm Payrolls (previous: +113K)
8:30 a.m. Aug. Unemployment Rate (previous: 4.8%)
9:40 a.m. Aug. ECRI Inflation Gauge (previous: 124.0)
9:45 a.m. Aug. University Of Michigan Consumer Sentiment Index, final (mid-Aug 78.7; previous: 84.7)
10:00 a.m. Aug. ISM Mfg Index (previous: 54.7)
10:00 a.m. July Construction Spending (previous: +0.4%)
10:00 a.m. July Pending Home Sales (previous: +0.4%)
2:00 p.m. Bond markets close early ahead of Labor Day Holiday
N/A Aug. Auto Sales

Unusual Put and Call Activity:

For an explanation of how to use this information, check out "StreeTools^TM- A Quick Reference Guide"

Earnings calendar with current estimates:

For a complete list of earnings for the week, check out Schaeffer's Looks Ahead.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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