Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Jan 20, 2017 at 10:01 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades
Analysts are weighing in on biotech stocks Bristol-Myers Squibb Co (NYSE:BMY), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), and Endo International plc – Ordinary Shares (NASDAQ:ENDP). Here's a quick roundup of today's bearish brokerage notes on BMY, TEVA, and ENDP.

  • BMY is down 9.8% at $50.00 -- within a chip-shot of a new two-year low -- after the biotech said it will not be pursuing accelerated approval from the Food and Drug Administration (FDA) for its lung cancer drug combination treatment. In addition, Cowen and Company downgraded BMY to "market perform" from "outperform" and slashed its price target to $65 from $85. Guggenheim also issued a price-target cut to $68 from $86. The biotech, which is due to report earnings next week, is down 53% from its July peak. In the option pits, recent buyers may be kicking rocks, with Bristol-Myers Squibb Co's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sitting just 4 percentage points from an annual peak.
  • TEVA is down 0.2% at $33.40 -- and just off a 10-year low of $33.28 -- after a downgrade to "neutral" from "overweight," and price-target cut to $40 from $45 by J.P. Morgan Securities, which also cut its price target to $40 from $45. TEVA has been steadily slipping lower for the past year, giving up more than half its value. In the option pits, near-term traders have been more put-biased than usual, with Teva Pharmaceutical Industries Ltd's Schaeffer's put/call open interest ratio (SOIR) of 0.77 sitting higher than 76% of all other readings from the last 12 months.

  • ENDP is trading 4.1% lower at $12.40 -- fresh off its own decade-plus low of $12.31 -- following a round of bearish analyst attention, including a cut to "neutral" from "overweight" by J.P. Morgan Securities, which also trimmed its price target to $20 from $30. Deutsche Bank also delivered a price-target cut, to $20 from $25. ENDP is down over 87% since touching an all-time high in April 2015 -- and was 2016's worst performer -- with the shares recently contained by their 160-day moving average. Today's drop could have been in the cards even without the help from the pessimistic analyst attention; as of yesterday, Endo International plc's 14-day Relative Strength Index (RSI) of 29 sitting in "oversold" territory.


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Published on Jan 20, 2017 at 10:52 AM
Updated on Mar 19, 2021 at 7:15 AM
Back in June, airline stock United Continental Holdings Inc (NYSE:UAL) bottomed at $37.41, and the shares have been spreading their wings ever since. In fact, UAL has roughly doubled since then, last seen trading at $74.44. Helping the shares along the way was a vote of confidence from Warren Buffett, while the company just last week raised its revenue guidance for the current quarter. Based on UAL's technical and sentiment setups, there's reason to believe the stock could continue to rally, too. 

For instance, United Continental has been consolidating since hitting an all-time high of $76.80 on Dec. 15, with a recent pullback contained by the round $70 level and the rising 40-day moving average. Looking closer, this trendline has actually been supplying support for UAL stock since its bull gap back in July. Based on data from Schaeffer's Senior Quantitative Analyst Rocky White, the shares have gone on to average a 5% gain over a five-day timeline after the last seven encounters with this moving average, closing positive 86% of the time. UAL's chart is certainly painting a bullish picture. 

Daily Chart of UAL Jan 20

And if UAL does continue to rise, it could benefit as pessimism across Wall Street unwinds. Starting in the options pits, puts have been extremely popular. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows traders have bought to open 1.21 puts for every call during the past 10 weeks -- a ratio that sits in the high 90th percentile of its annual range.

Mirroring this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 is just 2 percentage points from a 12-month high, signaling a very unusual put-skew among near-term speculators. Of course, some of this put activity may be due to shareholders hedging their positions, given the stock's impressive run up the charts. 

Speaking of options data, it's an excellent time to purchase UAL options that expire within three months. For one, UAL has a Schaeffer's Volatility Index (SVI) of 31%, which ranks below 94% of all others from the past year, indicating near-term options are attractively priced, from a volatility perspective. What's more, the stock's Schaeffer's Volatility Scorecard (SVS) comes in at a near-extreme of 98, meaning the shares have tended to make bigger-than-expected moves on the charts within the past 12 months, compared to what the options market has priced in. 

If that's not enough, United Continental Holdings Inc (NYSE:UAL) could also benefit if short sellers continue to cover their positions. For instance, short interest on UAL declined by over 20% during the last two reporting periods, but nearly a week's worth of buying power is still controlled by these bears, going by average daily volumes. In other words, there's still cash on the sidelines that could come in and help lift UAL shares. 

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Published on Jan 20, 2017 at 11:04 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades

Analysts are weighing in on social media stock Facebook Inc (NASDAQ:FB), credit card company American Express Company (NYSE:AXP), and semiconductor stock Skyworks Solutions Inc (NASDAQ:SWKS). Here's a quick roundup of today's bullish brokerage notes on FB, AXP, and SWKS.

  • FB is up fractionally at $127.57, after Pacific Crest resumed coverage of the stock with an "overweight" rating and $150 price target -- in all-time high territory -- noting that the stock is well-positioned to take advantage of growth opportunities. FB is up more than 35% year-over-year, and recently reclaimed its 100-day moving average, and broke out above resistance in the $124-$125 area. Near-term Facebook Inc option players are more put-heavy than usual, with FB's Schaeffer's put/call open interest ratio (SOIR) of 0.74 sitting higher than 97% of all other readings from the past 12 months.

  • AXP is down 0.4% at $76.42, after the company reported fourth-quarter adjusted earnings that came in under analysts' expectation. Despite the profit miss, an upbeat fiscal 2017 forecast and a round of optimistic analyst attention has helped AXP pare its losses. No fewer than six brokerage firms issued price-target hikes for AXP, including one to $91 from $85 at Bernstein -- in the range of a new annual high. American Express Company shares are up by more than 28% from their mid-October lows, and look to be testing a foothold atop their 30-day moving average. Elsewhere, AXP's SOIR of 1.89 sits just 4 percentage points from an annual peak, indicating a heavier-than-usual put-skew among near-term option traders.

  • SWKS has jumped 12.1% to trade at $87.82 -- and earlier hit a new 12-month high at $88.90 -- after the firm delivered better-than-expected earnings last night, along with upbeat guidance, and announced a $500 million share buyback. Analysts have been quick to weigh in, with no fewer than 13 brokerage firms issuing price-target hikes, including Oppenheimer, which raised its price target to $105 from $100. Today's move has SWKS breaking out above the $80-$82 region that has contained the shares since December 2015. Skyworks Solutions Inc option bears may be sweating, with SWKS' 10-day put/call volume ratio of 1.32 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) resting higher than 79% of all other readings from the past year.
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Published on Jan 20, 2017 at 11:40 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News
  • By the Numbers

Thanks to some upbeat analyst attention, "FANG" stocks are in focus today, with Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOGL) all moving higher. The four tech stocks have been hovering near record highs in recent weeks -- with one tapping a fresh all-time peak just yesterday. And while we've already seen how FB stock is moving on today's bullish brokerage note, we'll check in on AMZN, NFLX, and GOOGL, to see how traders have been playing the recent outperforming FANG stocks.

The only "FANG" component not on the receiving end of analyst attention today is AMZN, although the shares are nonetheless up 0.3% at $811.42. The company revealed today it will launch digital versions of its popular Dash buttons, allowing purchases of staple items to be made with one click from the Amazon.com homepage and app. The stock has recently been edging back toward its Oct. 6 record high at $847.21, ushered higher by its 10-day moving average in recent weeks. Longer term, the shares are sitting on a 41% year-over-year lead.

Sentiment toward AMZN is broadly upbeat, with the majority of brokerage firms calling the security a "buy" or better. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), meanwhile, call buying has been popular, per the stock's 10-day call/put volume ratio of 1.25 -- in the 87th percentile of its annual range. What's more, AMZN's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.60 shows near-the-money calls outweigh puts in the standard January series. Notably, 19 of AMZN's top 20 open interest positions reside in this series, which will expire at tonight's close. With heavy call open interest at the January 2017 820-strike call -- where 7,866 contracts are in residence -- the expiration of these options could clear resistance at this just-overhead level, and possibly put Amazon.com, Inc. on a path to fresh all-time highs.

Following the company's upbeat earnings report Wednesday evening, NFLX shares hit a record high of $143.46 in Thursday's trading. This positive price action is continuing today, with shares are up 1% at $139.96, following a price-target hike to $175 from $140 at J.P. Morgan Securities. The stock could benefit from even more bullish analyst attention, too, as 14 of 33 brokerages maintain a "hold" or worse rating on NFLX. Meanwhile, short interest -- though down 7% in the most recent reporting period -- still accounts for a full week's worth of trading, based on NFLX's average daily volume.

Options traders haven't been especially optimistic, either. In fact, NFLX's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.84 ranks in the 84th annual percentile, while its SOIR of 1.17 is docked at a 12-month peak. Either way, buyers of Netflix, Inc.'s near-term options should be getting a good deal after earnings. The stock's short-term options are pricing in unusually muted volatility expectations, per its Schaeffer's Volatility Index (SVI) of 29% -- in the low 7th percentile of its 12-month range.

GOOGL has lately been hovering just below its Oct. 28 record high of $839.00, and appears to have found a recent foothold at the $825 mark. Analysts have been in the stock's bullish corner, with 26 out of 28 issuing a "buy" or better rating. And just this morning, Pacific Crest resumed coverage on GOOGL with an "overweight" opinion and $1,030 price target -- deep into never-before-seen territory. At last check, the shares are 0.3% higher at $827.01, even as the stock shakes off a Wall Street Journal report saying Alphabet regularly puts its own products in the top advertising spots in Google searches.

Call buying has been popular in GOOGL's options pits, with the stock's 10-day call/put volume ratio at the ISE, CBOE, and PHLX clocking in at 1.54 -- higher than two-thirds of the past year's readings. And even with Alphabet Inc's earnings just around the corner -- due next Thursday evening -- the stock is presenting an unusual bargain for options buyers. GOOGL's SVI of 24% is docked lower than 99% of all comparable reading from the last 12 months, indicating near-term options are currently very well-priced, from a volatility standpoint.

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Published on Jan 19, 2017 at 9:21 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

The Dow appears set for a fifth straight loss, as traders digest the latest interest-rate decision from the European Central Bank (ECB). Among specific equities in the spotlight are streaming media stock Netflix, Inc. (NASDAQ:NFLX), cybersecurity issue Check Point Software Technologies Ltd. (NASDAQ:CHKP), and transportation concern CSX Corporation (NASDAQ:CSX). Here's a quick look at what's driving NFLX, CHKP, and CSX.

  • NFLX is up 7.1% ahead of the open, on pace to hit a new record high out of the gate, after reporting fourth-quarter earnings above expectations. Boosting the shares further is the company's largest-ever quarterly increase in subscribers, topping even Netflix, Inc.'s own forecasts, with 7.05 million users added during the period. Analysts have been rushing to weigh in on the news, with Macquarie offering an upgrade to "neutral" from "underperform," while no fewer than 14 brokerage firms raised their price targets on the stock. At $133.26, NFLX has added more than 23% year-over-year, but not everyone is likely to be cheering this morning's gains, as near-term options traders are currently at a put-skewed extreme.
  • An earnings beat has CHKP up 6.7% in pre-market trading, on track to open at its highest level since 2001. The shares have been stair-stepping higher since September, but the brokerage bunch has yet to adjust, with 13 out of 23 analysts rating Check Point Software Technologies Ltd. a "hold" or "strong sell." What's more, the average 12-month price target of $86.48 sits below last night's close at $89.61. Simply stated, a round of overdue upgrades and/or price-target hikes could add fuel to CHKP's fire.
  • CSX is poised to tack on 19% at the bell, which would put the shares well into never-before-seen territory. Boosting the stock is news Canadian Pacific Railway Limited (USA) (NYSE:CP) CEO Hunter Harrison has stepped down ahead of his expected July departure, to join forces with activist investor Paul Hilal. The plan is reportedly for the pair to force a shake-up at CSX Corporation, which would put Harrison in a senior management role. Analysts have since taken a favorable view, as Morgan Stanley and Scotiabank both upgraded the stock -- to "equal weight" and "outperform," respectively -- while also raising their price targets. Citigroup also offer a price-target hike, to $51 from $41. CSX had already added 62% over the past 12 months, as of last night's finish at $36.88, but short sellers may find this pending pop hard to digest. At CSX's average daily volumes, it would take two weeks to buy back the 7.7% of the stock's total float that's wrapped up in short interest. 

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Published on Jan 19, 2017 at 9:54 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades
Analysts are weighing in on electric automaker Tesla Motors Inc (NASDAQ:TSLA), as well as former TSLA partner Mobileye NV (NYSE:MBLY) and optical components maker Oclaro, Inc. (NASDAQ:OCLR). Here's a quick roundup of today's bullish analyst notes on TSLA, MBLY, and OCLR stocks.

  • TSLA is up 3.8% at $247.20, after an upgrade to "overweight" from "equal weight" by Morgan Stanley, which also hiked its price target to $305 -- all-time high territory -- from $242. The brokerage firm cited a "supportive political environment," due to CEO Elon Musk's recent ties with President-elect Donald Trump, as well as improved expectations for TSLA's Model 3 launch. J.P. Morgan Securities also issued a price-target hike to $188 from $180. Separately, Panasonic expressed interest in expanding its partnership with Tesla Motors, with the company stating it is "deeply interested in Tesla's self-driving system." TSLA has been on a tear upward since its late-2016 bottom near the $180 level, gaining roughly 24% in three months. Even with its recent technical strength, near-term option players are more put-skewed than at any point in the last 12 months, with TSLA's Schaeffer's put/call open interest ratio (SOIR) of 1.86 docked at an annual high. An unwinding of these bets could provide further tailwinds for Tesla Motors Inc.

  • MBLY is trading 4.3% higher at $43.84, after Goldman Sachs raised its rating to "buy" from "neutral," and raised its price target to $50 from $40. The shares are now up more than 30% from their late-December lows, and could close north of their 20-month moving average for the first time since August. In the option pits, bulls have been ramping up their exposure to Mobileye NV, with 4.20 calls bought to open for every put option over the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio is higher than 88% of all other readings from the past year, pointing to a healthier-than-usual appetite for long calls over puts.

  • OCLR is up 14.6% at $9.32, after delivering an upbeat fiscal second-quarter outlook, and being bombarded with optimistic analyst attention in the hours since, including a trio of price-target hikes from Stifel, Craig-Hallum, and B. Riley, to $12, $14, and $15.50, respectively. OCLR has added more than 180% in the past year, though the shares have been churning in the $8-$10 range since early November. Some investors still maintain a healthy sense of skepticism toward Oclaro, Inc., however. Short interest grew 20.5% over the last reporting period, and now accounts for more than 10% of OCLR's float.
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Published on Jan 19, 2017 at 10:29 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Most Active Options Update
The 20 stocks listed in the table below have attracted the highest total options volume among mid-cap names during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are basic materials stocks United States Steel Corporation (NYSE:X) and Steel Dynamics, Inc. (NASDAQ:STLD). Here's a closer look at how options traders are lining up on X and STLD.

most active options mid jan 19

X is having a rare down day, after Citigroup lowered its opinion of the U.S. steel sector to "neutral," citing a potential drop in steel prices in the second half of 2017. Regarding the stock itself, the brokerage firm cut its rating to "neutral" from "buy," but boosted its price target to $37 from $21.

Amid the negative attention, X shares were last seen 4.4% lower at $33.38. Long term, however, the stock has been phenomenal, nearly quintupling in value on a year-over-year basis. Today's pullback has X perched atop its 50-day moving average, and a bounce from here could signal the stock has more room to run.

Options traders are certainly counting on it. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), U.S. Steel has amassed a 10-day call/put volume ratio of 1.60 -- in the bullishly skewed 91st annual percentile. Meanwhile, those looking to place short-term options bets are in luck. The stock sports a Schaeffer's Volatility Scorecard (SVS) of 97, suggesting the shares have made much larger moves over the past year than the options market has priced in.

Turning to STLD, the stock has dropped 2% at $36.51, but has still more than doubled from this time last year. Citigroup's only move on the shares was to lift their price target to $43 from $30 -- in all-time-high territory -- without issuing a downgrade. This glass-half-full approach echoes what's being seen across the Street, where nine of 12 analysts rate STLD a "buy" or better, without a single "sell" assessment to be found.

Not to mention, call buyers have been bombarding the steel stock. STLD's 10-day ISE/CBOE/PHLX call/put volume ratio stands at a top-heavy 16.27, outstripping 92% of all readings from the past year. As with X, it's a good time to purchase short-term STLD options, from a volatility perspective, given its SVS of 78.

Of note, Steel Dynamics, Inc. will report earnings next Tuesday evening. Last year, the stock advanced in the session subsequent to these quarterly events three out of four times. In fact, following the company's most recent earnings release in October, STLD tacked on a gaudy 5.2% -- which the aforementioned call buyers would certainly welcome again.

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Published on Jan 19, 2017 at 10:44 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades
Analysts are weighing in on nutrition retailer GNC Holdings Inc (NYSE:GNC), steel stock AK Steel Holding Corporation (NYSE:AKS), and retail chain Target Corporation (NYSE:TGT). Here's a quick look at today's bearish brokerage notes on GNC, AKS, and TGT.

  • GNC is down 13.4% at $9.66 -- and on the short-sale restricted list -- after a downgrade from Goldman Sachs to "sell" from "neutral," which said "headwinds will be exacerbated by GNC's brand re-launch." The brokerage firm also lowered its price target to $8 from $12. Earlier, GNC touched a new all-time low of $9.46. The shares have been stair-stepping lower over the past year, with breakout attempts repeatedly contained by their 80-day moving average. In the option pits, bearish betting has ramped up in recent weeks. GNC Holdings Inc's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 8.29 sits just 3 percentage points from an annual peak.

  • AKS is trading 6.1% lower at $9.46, after a downgrade to "sell" from "neutral" by Citigroup, which also slammed the broader sector. Nevertheless, the brokerage firm raised its price target on AK Steel Holding Corporation to $8 from $5. AKS, which has slipped from its recent multi-year high of $11.39, is still up more than 400% over the last 12 months. In the option pits, 4.85 calls have been bought to open for every put over the last 10 days at the ISE, CBOE, and PHLX. In other words, traders have high hopes ahead of next Tuesday morning's earnings report.

  • TGT is down 0.4% at $66.58, extending yesterday's losses, after a downgrade to "sell" by Goldman Sachs. Goldman Sachs also slashed its price target to $67 from $77, and J.P. Morgan Securities lowered its price target to $74 from $79. The shares are now down 16% from their near-term peak from late November. Short sellers may be cheering today's drop, with short interest up 10% over the last two reporting periods, and shorted shares now accounting for 6.1% of Target Corporation's float. This would take 8.8 days to cover, at TGT's average daily volume. 
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Published on Jan 19, 2017 at 11:14 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Expectational Analysis
  • Earnings Preview

Tech stock and Dow component International Business Machines Corp. (NYSE:IBM) is 0.3% lower at $166.24 today, as the company prepares to report fourth-quarter earnings after tonight's close -- and it appears traders may be bracing for a repeat of history. The shares have moved to the downside in the session after earnings for at least the past eight quarters, averaging a single-day loss of 3.6%. While IBM options are currently pricing in a slightly wider 4.6% swing in either direction for Friday's trading, sentiment toward the stock is broadly bearish.

Beginning with the brokerage bunch, nearly two-thirds of the analysts following IBM currently recommend holding or selling the stock. The average 12-month price target of $158.90 also sits at a discount to current trading levels. Should IBM turn in a positive earnings surprise, the outperforming equity may be overdue for some upbeat analyst attention, which could prove a boon to the shares.

Short interest on IBM is also elevated. Though short interest plunged 7.9% in the most recent reporting period to 23.1 million shares -- a mild 2.7% of the equity's available float -- it would still take more than eight sessions to cover all these remaining bearish positions, at IBM's typical pace of trading. A continued round of post-earnings short covering could translate into fresh tailwinds for the shares.

Turning to the options pits, speculators have shown an unusual affinity for IBM puts in recent months. The stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.10 -- higher than 88% of comparable readings from the past year. What's more, IBM's Schaeffer's put/call open interest ratio (SOIR) of 1.67 ranks just 2 percentage points from a 12-month high.

IBM's total put open interest is also docked in the 99th percentile of its annual range, with 216,737 contracts outstanding. It appears bearish traders have targeted the January 2017 160- and 165-strike puts, which are home to IBM's top open interest positions and account for nearly 44,000 contracts collectively. According the major options exchanges, a considerable number of these positions have been bought to open, indicating put players are betting on IBM slipping below the respective strikes before tomorrow's close, when the front-month series expires.

All this downbeat pre-earnings sentiment is somewhat understandable, given IBM's post-earnings history. Nevertheless, the blue-chip stock has been a strong technical performer over the past year. The shares have been stair-stepping higher since last February, adding more than 36% on a year-over-year basis, and are now consolidating near the 30-day moving average after hitting an annual high of $169.95 in mid-December. Should International Business Machines Corp. (NYSE:IBM) turn in a well-received earnings report, the prevailing pessimism toward the stock may be setting up an attractive opportunity for contrarian bulls.

IBM Daily Chart January 19

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Published on Jan 19, 2017 at 12:14 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

U.S. stocks are modestly lower, with Donald Trump's upcoming presidential inauguration casting a long shadow over Wall Street. Among specific equities in focus today are drugmaker Mallinckrodt PLC (NYSE:MNK), as well as telecom stocks Sprint Corp (NYSE:S) and Straight Path Communications Inc (NYSEMKT:STRP). Here's a quick look at what's moving MNK, S, and STRP.

  • MNK has jumped 7.1% to trade at $49.84, after the drugmaker yesterday agreed to a $100 million antitrust settlement. Bolstering the stock, Guggenheim Securities said it doesn't see any near-term or midterm threat to Mallinckrodt PLC's flagship drug, Acthar, while Wells Fargo added, "We like Mallinckrodt's valuation but like many investors, we wish Acthar did not have the capacity to attract so much drama." Today's jump aside, the stock has been getting pummeled on the charts, since topping out in late August near $86. Options traders have been scooping up downside bets at a rapid-fire rate, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MNK's 10-day put/call volume ratio rests at a top-heavy 5.76 -- outstripping 81% of comparable readings from the last year.
  • S has surged 2.5% to trade at $8.95, and earlier hit a two-year high of $9.10. The shares are capitalizing on a price-target hike to $7 from $5.40 at HSBC. However, in general, the brokerage bunch has been pretty skeptical toward Sprint Corp. Of the 19 analysts tracking the stock, 17 have doled out a "hold" or worse recommendation. Not to mention, the consensus 12-month price target of $6.74 is well below the current perch of S shares.
  • STRP has fallen 9.1% at $37, and landed on the short-sale restricted (SSR) list, burned by a report by Kerrisdale Capital. The institutional short seller said optimism over last week's Federal Communications Commission (FCC) settlement is "badly misplaced," and waxed pessimistic about a potential spectrum sale. With today's drop, Straight Path Communications Inc is sitting at the 61.8% Fibonacci retracement of its low and high from the past year. While the stock is currently on the SSR list, plenty of bears have already carved out positions. Specifically, a brow-raising 47.4% of STRP's float is dedicated to short interest, which would take nearly three weeks to cover, at the stock's typical trading levels.
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Published on Jan 19, 2017 at 12:33 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Intraday Option Activity

3D Systems Corporation (NYSE:DDD) is on fire today, up 5.8% at $17.04, thanks to a fresh round of takeover chatter that places Dow component General Electric Company (NYSE:GE) as a possible buyer, according to Trade-Alert. Amid this excitement, stock volume is running in the 98th percentile of its annual range, and DDD options are changing hands at breakneck speeds.

Digging right in, DDD options are trading at nine times the expected rate for this point in the day, with about 35,000 contracts on the tape -- putting total options volume on track for a 52-week high. Leading the way so far is the May 14 put, where a block of 8,000 contracts appears to have been bought to open this morning. On the call side, meanwhile, it looks as though speculators may be purchasing new positions at the February 18 call and the January 2017 17-strike call.

Call buying has been the prevailing trend among DDD options traders in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has seen more than six calls purchased for every put over the past 10 sessions. The resulting call/put volume ratio of 6.12 sits higher than 95% of the past year's readings. Plus, DDD's Schaeffer's put/call open interest ratio (SOIR) of 0.48 is docked at an annual low, indicating near-term traders haven't been more call-skewed anytime in the last 12 months.

Notably, near-term options buyers could be scoring a bargain on DDD. The stock's Schaeffer's Volatility Index (SVI) of 48% is seated in the low 11th percentile of its annual range, indicating historically low volatility expectations are being priced into DDD's short-term options. What's more, the equity has a Schaeffer's Volatility Scorecard (SVS) of 79, meaning the shares have made bigger moves on the charts than the options market has priced in over the past year.

All of this call-heavy action doesn't necessarily mean traders are optimistic, though. Nearly 21% of DDD's total float is currently dedicated to short interest, representing over two weeks' worth of buying power, at the stock's average daily pace. And with the top open interest position among all DDD options residing at the out-of-the-money January 2017 20-strike call, it's reasonable to assume some recent call buyers have in fact been short sellers using options to hedge their bearish bets.

Analysts haven't been overly taken with DDD, either. Out of 13 brokerage firms tracking the security, only two recommend buying the shares. Plus, the consensus 12-month price target of $15.55 sits at a roughly 9% discount to DDD's current levels.

This pessimism seems rather undeserved, considering DDD has tacked on a whopping 165% year-over-year, with the shares benefiting from several bounces off support at the 50-week moving average since last May. Should analysts and traders begin abandoning their bearish positions, 3D Systems Corporation (NYSE:DDD) could be set to run higher on the charts.

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Published on Jan 19, 2017 at 12:49 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Indexes and ETFs
  • Trader Content

The American Association of Individual Investors (AAII) weekly sentiment survey just showed the largest weekly drop in bullish sentiment since March 2016, with optimism fading ahead of Donald Trump's inauguration tomorrow. In fact, we are still in the middle of the second-longest streak of less than 50% bulls since the survey began in 1987. The current streak began on Jan. 8, 2015, and has lasted 107 weeks, or just over two years. The longest streak ever spanned 110 weeks, beginning Jan. 22, 1993 -- two days after Bill Clinton was inaugurated -- and ending in February 1995. Interestingly, both AAII streaks started when the S&P 500 Index (SPX) was at or near all-time highs, and stocks' subsequent trajectory is much the same.  

Below are two charts that track the price action of the SPX during the bull streaks. The charts look remarkably similar. From February 1993 to February 1995, the SPX made a choppy advance with occasional corrections, gaining nearly double-digit percentages. It seems a combination of corrections during this period and the fact that the market was only six years removed from the 1987 crash was enough to keep retail investors skeptical.

Fast-forward to the current AAII streak. Similar to the 1990s streak, the SPX is up around 10% over the current period, in a choppy advance with corrections along the way. And bigger-picture, the market is only 7-8 years removed from two bear markets over a 10-year period. If the price action over the next five years is anything like the price action from 1995 to 2000 -- wherein the SPX rallied more than 200% -- I think both bulls and bears will be surprised.

170119 SPX 1

170119 SPX 2

 

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