The shares of Box Inc (NYSE:BOX) are up 2.7% at $21.73 at last check, following news that activist investor Starboard Value LP plans on taking greater control of the company, nominating four directors for election to its board. Box's current board responded to the statement this morning, noting it does not believe the proposed changes are warranted.

The security's recovery from its late-2020 plummet to the $15 level has been a choppy one, though the 320-day area has provided a floor for some of this volatility back in January and February, before launching the equity to a March 22, two-year high of $26.47. BOX has dropped dramatically since then, suffering a rather large bear gap in early April. Despite the dip, though, the equity still sports a 25.6% year-over-year lead. 

It looks like option bears can't get enough of the volatile cloud stock, per BOX's 10-day put/call volume ratio of 5.50 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than all but 1% of readings from the past year. This means long puts have been picked up at a much quicker clip than usual during the past two weeks. 

Despite some of this choppiness, the security's Schaeffer's Volatility Index (SVI) of 31% stands in the 1st percentile of its 12-month range, meaning option traders have rarely priced in lower volatility expectations for the security during the past year. In other words, premiums on BOX options are relatively cheap right now. 

Not everyone on Wall Street is so pessimistic on BOX. The brokerage bunch has taken a much more bullish stance, with just one of the seven analysts in coverage calling BOX a "strong sell," compared to six "buy" or better ratings. What's more, the 12-month consensus price target of $26.80 is a 24% premium to current levels. 

“… Cboe Market Volatility Index futures options buyers have returned, with the 20-day buy (to open) call/put ratio at 2.21… its highest level since late-May 2020, which preceded a VIX pop. Long-term readers of Monday Morning Outlook have seen comments in the past along the lines of VIX option buyers historically being smart money… the VIX moved below one half its 2021 closing high (37.21) at 18.60. Be on the lookout for a sharp move higher if the VIX closes back above 18.60 in the days and weeks ahead.”

            -Monday Morning Outlook, April 12, 2021

One month ago, the CBOE Market Volatility Index (VIX--16.69) hit a pandemic low with a reading just below 16. The volatility decline that we were seeing at the time is usually bullish for stocks, but there was something amiss, as described in the observation that I made during that mid-April period, excerpted above. 

Specifically, option buyers on VIX futures were buying calls at an increasing rate relative to puts, an action that has historically preceded VIX pops. As such, I noted that this option activity increased the risk of a pullback, although momentum continued to favor equity market bulls.

It was at that time, and in hindsight, that the 20-day, buy (to open) call/put volume ratio on VIX futures peaked at 2.50. Meanwhile, the VIX made a calendar-year and 52-week closing low at 16.25 just a few days after my mid-April comments.  

Fast forward to early last week, with the VIX hitting an intraday high of 21.85 and a closing high of 19.48. VIX option buyers were correct about the direction of the VIX during the ensuing month. But another move above the 18.50 level, or half its 2021 closing high, proved only temporary. 

Encouraging for equity market bulls is that the option activity I observed last month preceded a narrow trading range around all-time highs in the S&P 500 Index (SPX -- 4,232.60), resulting simply in a loss of momentum from the late-March into mid-April rally. 

While volatility expectations, as measured by the VIX, advanced during this period, it was hardly a volatility pop like that of early June 2020, when the VIX increased by nearly 50% in only one week. This pop occurred after the ratio of VIX futures call buying to put buying on VIX futures in late May hit 2.50, like we saw in mid-April of this year.

With the VIX back below 18.60, following the gradual advance higher discussed above,  the 20-day ratio of call buying to put buying is on the decline, currently at 1.75.  With VIX call buying  relative to put buying decreasing, the worst of a volatility increase hinted at last month may have passed.

“… after the Fed meeting, the SPX completed a third successive day in which the open and close were roughly the same. I referred to them as ‘doji-like,’ as the open and closes were not exactly the same, but close enough that it was easily observed… It remains to be seen if last week’s reversal pattern precedes an immediate decline like we witnessed in January and February.“

“A move into the channel suggests loss of momentum since last month’s breakout and risk of a further pullback to a second line of defense at 4,131, which is exactly 10% above the 2020 close.  A third potential support level is 4,100, which is the level at which the breakout above the top of the channel occurred on April 9.”

            -Monday Morning Outlook, May 3, 2021

I have noted increasing vulnerability to a market pullback for weeks now, whether sentiment-based or, in the case of last week, daily candlestick patterns that emerged in late April -- the tri-star doji pattern (circled in graph below) -- that traditionally hint at trend reversals like we saw in January and February.

At the same time, I have suggested that with the trend in equities obviously higher and the index still respecting support levels on pullbacks, one can manage emerging risks by simply hedging long positions versus selling them. Or, at the very least, these various risks suggest that one have a plan to hedge a portfolio without hesitation, if or when support levels on the SPX are no longer holding.

As such, I would not have argued with anyone that began hedging last week when the SPX broke back into its channel and the VIX moved above 18.60, as it makes sense to buy insurance when it is relatively cheap, and the technical backdrop looks “iffy.” Last week, for example, the SPX moved back into a channel that it has been generally trading above since early April. 

But as I noted last week, there are multiple support areas not far below the SPX’s current level. It was the level that coincides with the round 10% -- above the 2020 close that marked support. This SPX 4,131 level was situated only about 1% below that channel line. As such, if last week is indeed a low for the time being, the bearish “tri-star doji” pattern from late April proved to be a good for a negligible 1.3% decline within a few days of the pattern emerging at last week’s intraday lows. In fact, while the SPX broke below its popular 20-day moving average intraday, it never closed below it.  The action around this moving average was like that of late March.

With the SPX closing Friday at an all-time high and more than a week surpassing since the emergence of the bearish “tri-star doji” reversal pattern, one must wonder if the bulls dodged yet another bullet?

With the top of the SPX channel at 4,200 to begin the week and at 4,215 by Friday and last week’s intraday low around 4,130, or 10% above the 2020 close, the area between 4,130 and 4,215 are potentially strong areas of support in the week ahead. But keep in mind that other support levels (discussed in detail last week) lie not far below this zone, so hedging is still recommended as a cheap way to guard against a major unwind of optimism in lieu of moving to cash or even getting overly aggressive on the short side and thus fighting the major trend.

Continue to stay in tune with support levels that I have discussed.  With many companies reporting earnings during the past two weeks, implied volatility on many equity options has decreased substantially. Therefore, you can play the price momentum with call options with those equities helping support the market, such as re-opening plays like traditional retailers, restaurants and metals names that are showing strong price action amid low expectations.

Todd Salamone is Schaeffer's Senior V.P. of Research

Continue reading:

• The Week Ahead: Disney Earnings, Inflation Data Headline Next Week's Slate
• Indicator of the Week: Using Copper as an Indicator of Market Strength

May's second week will be a relatively quiet one. It'll be a slow builder, as economic data trickles in over the course of the week, but looking ahead, investors have some job openings data to pair with more initial and continuing jobless claims. In addition, there's a Federal budget balance report due out, as well as consumer sentiment and retail sales data. The earnings docket is full as well, with Airbnb (ABNB), Alibaba (BABA), JD.com (JD), The Children's Place (PLCE), Walt Disney (DIS), and Yeti Holdings (YETI) all slated to report.

Today a quiet day with economic data but the schedule is packed to the brim with earnings reports due out.

The following companies are slated to release quarterly earnings reports today, May 10:

Looking ahead to tomorrow, things start to pick up on Tuesday as investors digest the latest National Federation of Independent Business' (NFIB) small-business index reading, as well as job openings data. All economic dates listed here are tentative and subject to change.

The first week of May started off strong, as investors demonstrated reopening optimism as several states lifted Covid-19 restrictions. In addition, strong corporate earnings continued to boost investor sentiment. By Tuesday, however, things took a turn for the worse. Though the Dow finished the session marginally higher, it spent most of the day trading in red territory. A Big-Tech selloff and U.S. Treasury Secretary Janet Yellen's comments regarding interest rates took a massive toll on the S&P 500 and Nasdaq, too, both of which finished lower. 

Stellar earnings, paired with upbeat economic data, and U.S. President Joe Biden's statements about waving Covid-19 vaccine patent protections, helped stocks recover on Wednesday. In fact, the Dow went on to notch a record close. That happened again on Thursday, as the blue-chip index notched its second-straight all-time high on better-than-expected  jobless claims data. Additionally, the Nasdaq snapped its four-day losing streak in the final hour of trading. By Friday, however, the benchmarks were eyeing weekly losses following a disappointing April non-farm payrolls report, though indexes did rebound on the day and the blue-chip giant snagged a third-consecutive record high.

All Eyes on Vaccine Stocks

Stocks tied to the vaccine race made waves over the course of the pandemic, and with rollouts of now well underway, it should come as no surprise investors are eager to see the results. Pfizer (PFE) reported a first-quarter earnings and revenue beat, and raised its full-year guidance. Plus, the company moved to get vaccine approval for adolescents aged 12-15.

Elsewhere, Vaxart (VXRT) popped after reporting successful early-trial results for its oral Covid-19 vaccine candidate. Lastly, Moderna (MRNA) plummeted despite better-than-expected earnings and sales forecast. Instead, a revenue miss weighed on the stock.

Earnings Season in Full Steam

Another batch of high-profile corporate earnings reports rolled in over the last five days. Unfortunately for XPO Logistics (XPO), the company failed to capitalize on its quarterly win. The same was true for iRobot (IRBT), which plummeted despite a top-line beat. A handful of names had more successful trips to the earnings confessional, however, including Under Armour (UAA) and T-Mobile (TMUS) -- both of which attracted bull notes following their reports.

Several others had good news to share with investors. Regeneron Pharmaceuticals (REGN) redeemed itself after blowing past analysts' estimates, and so did ridesharing giant Uber (UBER), though analysts had mixed feelings about the latter. Roku (ROKU) also surprised Wall Street with a jaw-dropping profit, while AMC Entertainment (AMC) popped despite a wider-than-expected first-quarter loss.

Reports Continue to Pour In, Economic Data Slows

Looking ahead, the earnings season shows no signs of slowing down, with the likes of Airbnb (ABNB), Alibaba (BABA), Walt Disney (DIS), and Yeti (YETI) all slated to report. On the economic data front, it'll be a slow-building week. Investors will have little to digest at first, though a Federal budget balance, retail sales, and initial and continuing jobless claims data is sure to keep them busy later on.

In the meantime, traders can check out the latest Monday Morning Outlook, in which Schaeffer's Senior V.P. of Research Todd Salamone explores the cautionary tale of doji candles. Plus, Schaeffer's Senior Quantitative Analyst Rocky White took a look at how copper can be used to determine market strength  in his last Indicator of the Week.

On Wednesday, U.S. President Joe Biden's sweeping $2.3 trillion infrastructure bill received 58% approval from Americans in a new CBS news poll. If there's one area of American life that can draw on bipartisan support, its infrastructure; the poll went on to show at least 3 of 4 approve of spending additional federal money on five areas of investment, when asked generally without Biden's name or either party attached. This includes roads and bridges, water pipes, elderly home care, broadband internet in rural areas, and building public schools.

All of this is a long-winded way of saying the infrastructure bill has a chance of making its way through Washington D.C. expediently, or at the very least a compromised version. As polls like these trickled in, copper toppled $10,000 on Thursday and iron ore prices – an integral component to steel – hit a record high. The question then becomes, is there still room for these commodities to run? At the very least, we're going to highlight some stocks that could benefit from this commodity super cycle.

Nucor (NUE) and Steel Dynamics (STLD) both flashed bullish signals on the charts recently. NUE and STLD are both fresh off a round of record highs. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, these recent highs come amid historically low implied volatility (IV) -- a bullish combination for both stocks in the past.

White's study shows that for both stocks, there have been two other times in the past five years when the securities were trading within 2% of its 52-week high, while their Schaeffer's Volatility Index (SVI) stood in the 20th percentile of their annual range or lower, as is the case with NUE's SVI of 31%, which sits in just the fourth percentile of its 12-month range, and STLD's SVI of 35%, which sits in the bottom percentile of its 12-month range.

According to this data, Nucor stock enjoyed an average one-month return of 12.1% following these signals and was higher both times. For Steel Dynamics, the stock averaged a one-month return of 9.1% and also held a 100% positivity rate. For both NUE and STLD, moves of similar magnitude would put both stocks at new record levels.

Biden's bill may also mean copper – which is up nearly 300% year-over-year as of Wednesday – could receive some of those legislative tailwinds. Large amounts of copper are required to rebuild modern infrastructure and energy systems. Per a chart curated by Schaeffer's Senior Market Strategist Chris Prybal on Wednesday, large speculators of copper are starting to cool off, even as the metal advances. What that means is this latest copper rally is not supported by fresh buying, which underscores its technical tenacity.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, May 2.

Welcome back to our weekly series, Schaeffer's Cannabis Stock News Update, where we recap what happened in the world of marijuana stocks last week, and look ahead to how the cannabis industry will continue to develop in 2021.

Investor interest in the cannabis industry is growing at an explosive rate, and the leading players continue to break through legal barrier after legal barrier, especially in the United States. More than 40 U.S. states legalized recreational and/or medical marijuana by the end of 2020. Now, more and more companies are starting to see the opportunity in cannabis cultivation, marketing, distribution, and technology.

Here is a quick roundup of major cannabis stock news this week:

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) provided a corporate update and reported financial results for the first quarter of 2021, on May 5. Revenues for the first quarter were nil compared to $0.3 million in the first quarter of 2020. Net loss for the first quarter was $118.4 million compared to a net loss of $100.2 million for the same period in 2020.

cbdMD, Inc. (NYSE:YCBD), one of the world's leading and most highly trusted and recognized health & wellness CBD companies, announced on May 3 that it will host a conference call after the market closes on Wednesday, May 12, to discuss the company's second quarter of 2021 financial results and business progress. YCBD also announced today that it has signed an exclusive sponsorship agreement to be the official CBD partner of the NOBULL CrossFit Games, which will be held in Madison, Wisconsin from July 27 to Aug. 1.

FSD Pharma Inc. (NASDAQ:HUGE) announced the appointment of Nathan Coyle, HUGE's Corporate Controller, as its Interim Chief Financial Officer on May 5, following the departure of Donal Carroll, effective immediately.

Jazz Pharmaceuticals (NASDAQ:JAZZ) provided the completion of its acquisition of GW Pharmaceuticals plc (NASDAQ:GWPH), a leader in the science, development, and commercialization of cannabinoid-based prescription medications on May 5.

HEXO Corp (NYSE:HEXO) announced on May 3 that it has repaid the total outstanding balance on its credit facility established under its credit agreement with the Canadian Imperial Bank of Commerce as sole bookrunner, co-lead arranger and administrative agent. The Bank of Montreal will act as co-lead arranger and syndication agent, together with accrued interest and associated fees, in the ‎amount of approximately $28.9 million.

Innovative Industrial Properties, Inc. (NYSE:IIPR), the first and only real estate company focused on the medical-use U.S. cannabis industry, announced its first quarter of 2021 financial results on May 5. 

Organigram Holdings Inc. (NASDAQ:OGI) confirmed on May 3 that Greg Engel is stepping away from his role as CEO effective Monday. However, he will continue to act as a special advisor to the board of directors through the transition period.

Tilray, Inc. (NASDAQ:TLRY) and Aphria, inc. announced the completion of the previously announced business merger, ushering in a new era in the global cannabis industry on May 3. The combined company will operate as Tilray. TLRY's shares will continue trading on the NASDAQ. Starting on May 5, Tilray's shares commenced trading on the Toronto Stock Exchange.

22nd Century Group, Inc. (NYSE:XXII), a hemp/cannabis research company, announced on May 6 that it filed its first quarter of 2021 financial results. Net sales revenue for the first quarter of 2021 was $6.8 million, comparable to the first quarter of 2020 at $7.1 million. The first quarter of 2021 was $5.0 million compared to $4.0 million in the same quarter last year.

It's been an eventful first quarter, with no shortage of earnings reports and economic data. With that being said, May's second week will be a relatively quiet one. It'll be a slow builder, as economic data trickles in over the course of the week, but looking ahead, investors have some job openings data to pair with more initial and continuing jobless claims. In addition, there's a Federal budget balance report due out, as well as consumer sentiment and retail sales data. The earnings docket is full as well, with Airbnb (ABNB), Alibaba (BABA), JD.com (JD), The Children's Place (PLCE), Walt Disney (DIS), and Yeti Holdings (YETI) all slated to report.

Below is a list of key market events scheduled for the upcoming week. All economic dates listed below are tentative and subject to change.

Kicking things off, Monday, May 10 is a quiet day, with no economic data on the books.

Things start to pick up on Tuesday, May 11, as investors digest the latest National Federation of Independent Business' (NFIB) small-business index reading, as well as job openings data.

On Wednesday, May 12, attention turns toward the consumer price index (CPI) and core CPI readings. In addition, the latest Federal budget balance is due out.

More initial and continuing jobless claims data are due out on Thursday, May 13. Plus, with inflation a hot topic of late, the producer price index (PPI) will garner some much earned attention.

It'll be an absolutely packed Friday, May 14, featuring retail sales, the import price index, and industrial production. Consumer sentiment, business inventories, and capacity utilization reports are also slated for release.