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J.Crew Board Members Bow Out

Beth Gaston Moon (bgmoon@sir-inc.com)

9/29/2006 12:07:40 PM

Publicly traded for less than three months, upscale apparel retailer J. Crew Group (JCG: sentiment, chart, options) is already in the throes of a management shake-up. Three of the companies board members; co-founder Emily Scott, her husband Thomas Scott, and Bridget Ryan Berman, have all chosen to relinquish their posts. Ms. and Mr. Scott, directors since 1992 and 2002, respectively, are exiting due to personal reasons effective December 2, while Berman, on the board since 2005, is assuming a new role with the U.S. subsidiary of Giorgia Armani as of December. The JCG board will be left with eight remaining members.

JCG shares have dropped more than two percent today and are testing the mettle of their 10-day moving average. The stock's intraday low intersected with this trendline, which has helped guide the shares higher during the past few weeks.

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Drilling for Opportunities in Oil Services

Jocelynn Drake (jdrake@sir-inc.com)

9/1/2006 12:21:35 PM

August proved to be an ugly month for crude oil, as the price per barrel slipped more than seven percent. I'll admit that I'm not complaining too loudly, considering I can skip down the block and buy a gallon of unleaded gasoline at $2.46 a gallon. If we can get back below $2 per gallon, we just might witness some dancing in the streets.

But I digress. My focus today drills down on the oil-services sector, which had its technical troubles well before the price of oil started its descent. In fact, it appears that when oil prices briefly stalled in May and June before bouncing back, this group never recovered. Since mid-May, the PHLX Oil Services Index (OSX) has battled resistance at its 10-week and 20-week moving averages. During this time frame, the index has closed only one week above this duo. Furthermore, August marked the index's first monthly close below its 10-month trendline since November 2003. While the index is still sitting on a year-to-date gain of six percent, OSX has shed more than 19 percent since tagging a near-term peak in May.

Despite the group's pullback during the past few months, sentiment remains wildly bullish. According to Zacks, 74 percent of the 199 analyst ratings offered up on OSX components come in at a "buy" or better. Should Wall Street begin to shed some of its optimism and issue downgrades, this sector could come under additional selling pressure.

Drilling down a little deeper, one company that catches my bearish eye is Noble Corp. (NE: sentiment, chart, options). The security has been guided lower under its 10-week and 20-week moving averages since mid-May, creating a series of lower highs and lower lows. It also didn't help that the company reported per-share earnings on July 20 of $1.30, a penny shy of the consensus estimate. By the close of that trading session, the equity had retreated nearly six percent.

WEEKLY CHART OF NE SINCE MARCH 2006 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

Meanwhile, investors refuse to acknowledge that the shares may be having some problems. Short interest for the security plunged 17 percent in August, resulting in a short-interest ratio that is just two times the stock's average daily trading volume. This paltry accumulation of bearish bets leaves the equity low on potential short-covering support should it succeed in drumming up a little good news.

Options speculators are also optimistic when it comes to Noble. Peak call open interest in the September series rests at the out-of-the-money 70 strike with nearly 3,600 contracts, while peak put open interest in the front-month series comes in at the 60 strike with only 2,200 contracts. In fact, call open interest among near-term options nearly doubles put open interest.

This combination of optimistic sentiment against the stock's weakening technical backdrop leaves that shares primed for a bearish play. Investors should consider the stock's January 2007 65 or 70 put.

Weatherford International (WFT: sentiment, chart, options) is in much the same boat as Noble. The stock has broken what looked to be solid support at the 45 level and is retreating under pressure from its 10-week trendline. What's more, August marked the stock's first monthly close below its 10-month moving average since May 2005.

WEEKLY CHART OF WFT SINCE MAY 2006 WITH 10-WEEK MOVING AVERAGE

While short sellers are jumping on the bearish train, with short interest soaring 27 percent last month, Wall Street refuses to shed its bullish stand. Zacks reports that 11 of the 15 analysts following the company rate it a "buy" or better. Any downgrades from this group could spell trouble for the shares. A January 2007 45 put would allow speculators to capture some gains on a continued pullback in the shares.

One last bearish pick from this sector arrives in the form of Baker Hughes (BHI: sentiment, chart, options). The stock has tumbled more than 21 percent from its June high and has drifted lower under its 10-day and 20-day moving averages since late July. However, I'm a little wary of this security, as it is currently testing round-number support at the 70 level.

DAILY CHART OF BHI SINCE MAY 2006 WITH 10-DAY AND 20-DAY MOVING AVERAGES

Furthermore, options players have grown somewhat skeptical of the shares, as they have loaded up on puts. On the other hand, short sellers have yet to jump on this security. The stock's short-interest ratio sits at a meager 2.2 days to cover. Wall Street is also deeply entrenched in the bulls' camp, with 71 percent of analyst ratings a "buy." Traders should consider the stock's January 2007 70 put. However, keep a tight stop-loss price on this position in the event that it succeeds in bouncing off support at the 70 level.

Of course, there are a handful of bullish opportunities sparkling within the sector. Smith International (SII: sentiment, chart, options) is currently perched on long-term support at its 10-month moving average. Cameron International (CAM: sentiment, chart, options) is also consolidating into support at its ascending 10-month trendline, which it has not finished a month below since April 2004.

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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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.

Read more at WhatsTrading.com

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