Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Apr 12, 2016 at 12:18 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity

Biotech stocks had an especially rough start to 2016, with many still deep in the red on a year-to-date basis. And as the sector attempts to rally its way back, the options market is pricing in some especially hefty volatility expectations for Eagle Pharmaceuticals Inc (NASDAQ:EGRX), TESARO Inc (NASDAQ:TSRO), and Sarepta Therapeutics Inc (NASDAQ:SRPT), meaning near-term options on these equities are relatively expensive at the moment.

  • EGRX is down 8.4% at $33.33 today, after hitting a new annual low of $33.02 earlier in the session. The stock has shed more than 62% year-to-date, due in part to poor fourth-quarter earnings and a string of bad news from the U.S. Food and Drug Administration (FDA). Short interest on EGRX has fallen by nearly 11% during the past two reporting periods, but still accounts for almost half of the stock's total float. At EGRX's typical daily volume, it would take about a week to buy back all the shorted shares. Option volume on the equity is generally light, on an absolute basis, but open interest is at an annual high. Buyers of EGRX's near-term options aren't getting their positions cheap, however. The stock's Schaeffer's Volatility Index (SVI) of 121% is currently at an annual high, as is its 30-day at-the-money (ATM) implied volatility (IV) of 120.6%.
  • TSRO started the year with a massive drop, hitting an annual low of $29.51 in early February. The shares have since been on the mend with support from their 30-day moving average, but are struggling to break decisively north of their 200-day moving average, which rejected rally attempts in December. Today, TSRO is up 1.4% at $45.19, but remains 13.8% lower year-to-date. All seven of the analysts providing coverage now call the stock a "strong buy." Still, short interest accounts for nearly 28% of the TSRO's available float, or more than two weeks' worth of trading, at the equity's average daily pace. Option volume is light, on an absolute basis, but the stock's SVI of 103% is still in the top percentile of its annual range, meaning TSRO's short-term option traders are pricing in historically high volatility expectations at the moment.
  • SRPT is off 42% so far this year, due mostly to a huge bear gap on discouraging drug news in mid-January. The shares have been recovering over the past two months, and are currently on pace to finish the week above their 20-week moving average for the first time since early January. Traders may be holding on to hope for good news, as the FDA is due to review SRPT's muscular dystrophy drug next month -- and Oppenheimer expects good things. Still, seven out of 12 analysts maintain "hold" or "strong sell" ratings on the security, and short interest has been on the rise. Specifically, these bearish bets increased by nearly 23% during the last two-week reporting period alone, and now represent 43% of SRPT's float, or six times the stock's average daily volume.

    SRPT option traders have been more put-heavy than usual, with SRPT's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) higher than 86% of the past year's readings, at 0.55. Put open interest is also currently at an annual high. Meanwhile, SRTP's near-term options reflect historically elevated volatility expectations, as the stock's SVI of 233% is in the 89th percentile of its annual range, while its 30-day ATM IV of 252.5% is in the 98th annual percentile. SRPT is down 0.9% at $22.27 today.

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Published on Apr 12, 2016 at 1:09 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview
Earnings season is underway, after aluminum firm Alcoa Inc (NYSE:AA) unveiled its first-quarter results to little fanfare. Financial firms will get the ball rolling over the next several sessions, with big bank JPMorgan Chase & Co. (NYSE:JPM) slated to report earnings tomorrow morning -- and fellow Dow component Goldman Sachs Group Inc (NYSE:GS) on tap next week. Options traders have been growing restless on JPM stock ahead of the scheduled event, with put buying picking up steam in recent weeks.

Specifically, JPM's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.98 ranks in the 70th annual percentile. In other words, puts have been bought to open relative to calls at a faster-than-usual clip.

In the front-month series -- which expires at this Friday's close -- peak put open interest is found at the underfoot April 57.50 strike (11,592 contracts, to be specific). As such, this level could serve as options-related support for JPM through week's end.

Meanwhile, despite the uncertainty surrounding JPM's earnings event, options traders can still buy premium on the stock's near-term options at a relative bargain. In fact, JPM's Schaeffer's Volatility Index (SVI) of 24% sits lower than 73% of all comparable readings taken in the past year, meaning short-term volatility expectations are low, historically speaking.

Looking back over the past eight quarters, JPM has averaged a single-session post-earnings move of 2.2% -- with four quarters enjoying a positive earnings reaction and four succumbing to a negative earnings reaction. This time around, the options market is pricing in a bigger 4.3% swing.

Technically, JPMorgan Chase & Co. (NYSE:JPM) has struggled over the long term, down 16.4% from its late-July all-time high of $70.61. Today, although the stock is enjoying broad-market tailwinds -- up 1.5% at $59.05 -- it is running out of steam near its 40-day moving average, a trendline that has worked against JPM for most of the year.

JPM daily chart

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Published on Apr 12, 2016 at 2:13 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Intraday Option Activity
Chesapeake Energy Corporation (NYSE:CHK) is eyeing its second straight double-digit percentage gain, with the shares 32.7% higher at $5.97 -- making the energy stock the leading advancer on the New York Stock Exchange. It's also the most-traded stock on the Big Board, and its intraday volume currently sits in the 100th percentile of its annual range. This enthusiasm has carried over into CHK's options pits, where traders are betting on both sides of the aisle.

By the numbers, CHK options volume is running at nine times the average intraday rate, and is on pace to set an annual high. The most popular option is the May 3.50 put. Over 31,000 contracts have traded at this strike, thanks to two simultaneous block trades of 20,000 and 10,000 contracts -- which may have been sold to open as part of a larger spread involving the May 5 put and 7 call.

Taking a step back, today's move higher is great news for recent call buyers. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.40, putting it in the 75th annual percentile. 

The analyst community is worth keeping an eye on, too. Seventeen of the 18 brokerage firms that cover CHK rate it a "hold" or worse. Plus, the stock's now trading above its consensus 12-month price target of $3.86. With this being the case, there's at least potential for bullish analyst attention in the future. 

As mentioned, Chesapeake Energy Corporation (NYSE:CHK) has exploded during the past two sessions, thanks to yesterday's news that the company amended its credit agreement. Moreover, CHK -- which is on pace for its best finish in roughly five months -- is also benefiting from a sector-wide rally in energy stocks.

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Published on Apr 12, 2016 at 2:54 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Commodities
  • Stocks On the Move
  • Expectational Analysis
Oil stocks are blazing higher today, as a potential production freeze breakthrough between a pair of major crude exporters lifts oil prices. However, a number of these oil stocks are among the most hated by analysts, making things extra interesting for contrarians like us. Below, we'll take a look at how Murphy Oil Corporation (NYSE:MUR), Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), and Southwestern Energy Company (NYSE:SWN) have been performing amid rampant skepticism -- and what it could mean going forward.

MUR is putting on a clinic this afternoon, up 10.6% at $29.10. Year-to-date, the stock has now advanced roughly 30%, and is flirting with levels not explored since early December. What's more, MUR is set to topple its 200-day moving average for the first time since mid-2014. Nonetheless, not a single analyst out of 11 considers the oil stock worthy of anything better than a "hold" rating. Plus, short sellers have been active, accounting for 12.9% of Murphy Oil Corporation's float -- or a week's worth of pent-up buying power, at the stock's typical daily trading volumes. 

PBR has soared 9.3% to trade at $6.44, even as high-level state officials are being arrested following a corruption probe. Since tagging an all-time low of $2.71 on Jan. 20, the Brazilian oil stock has soared 137%. However, analysts remain unconvinced. Of the nine brokerage firms tracking Petroleo Brasileiro SA Petrobras, 100% have handed out a "hold" or worse recommendation. On the other hand, options traders have been buying to open calls over puts at a breakneck rate. PBR's 10-day call/put volume ratio of 4.91 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks just 2 percentage points from a 12-month peak. Echoing that, PBR call volume is running at four times the average intraday clip today, with traders betting on a surge north of $8 by May options expiration -- which encompasses the company's April 28 shareholder meeting.

Rounding out our trio, SWN has jumped 16.1% to flirt with $10.60 -- on track for its highest settlement since mid-November. More recently, the oil stock has outperformed the broader S&P 500 Index (SPX) by over 21 percentage points during the last month. On the sentiment front, however, only 10% of analysts consider Southwestern Energy Company worth buying, while over one-quarter of its float is dedicated to short interest.

As contrarians, the deep skepticism being levied toward all three stocks is worth noting, especially against a backdrop of extreme outperformance. Should this trio of oil stocks continue to chug higher, analyst upgrades and/or short-covering activity are both distinct possibilities -- potentially fueling the fire.
Published on Apr 12, 2016 at 3:00 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update
Analysts are weighing in on tech stock Yandex NV (NASDAQ:YNDX), retailer L Brands Inc (NYSE:LB), and in vitro diagnostics firm T2 Biosystems Inc (NASDAQ:TTOO). Here's a quick roundup of today's brokerage notes on YNDX, LB, and TTOO.

  • YNDX is up 7.2% at $16.79, after Goldman Sachs raised its outlook on the shares to "buy" from "neutral" and its price target to $19.90 from $15.50. Today's positive price action just extends the stock's recent rally off its Jan. 20 year-to-date low of $11.00. Short sellers, meanwhile, have been betting on a reversal of fortune for Yandex NV, with short interest surging nearly 64% in the two most recent reporting period to 3.6 million shares -- the most since early December.

  • Goldman Sachs also chimed in on LB, removing the stock from its "conviction buy" list, and lowering its rating to "neutral" from "buy," citing concern over the recent restructuring at Victoria's Secret. While CNBC's Jim Cramer said he was a "little disappointed" with the note, shares of LB are off 0.04% at $79.25 -- widening their month-to-date deficit to almost 10% -- and on track to notch their lowest close since Aug. 25. In the options pits, put players are circling, with put volume running at four times the average intraday pace this afternoon. Longer term, L Brands Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 7.15 ranks in the bearishly skewed 81st annual percentile.

  • TTOO was hit with price-target cuts from BTIG and Canaccord Genuity (to $12), as well as Leerink (to $11), after the firm offered up lower-than-expected preliminary first-quarter sales. At last check, the shares of T2 Biosystems Inc were off 11.7% at $9.36 -- after earlier plunging nearly 19%. This negative price action is nothing new for the stock, which has shed half its value year-over-year. What's more, a recent rally attempt was quickly halted by the equity's 200-day moving average, a trendline not conquered on a closing basis since last June. Should the shares of T2 Biosystems Inc continue to slide, another round of negative analyst notes could be on the horizon. Currently, four of the five brokerages covering TTOO maintain a "buy" or better rating.
For other stocks in analysts' crosshairs, read Analyst Upgrades: Apple Inc., Pandora Media Inc, and QUALCOMM, Inc. and Analyst Downgrades: Alcoa Inc, Juniper Networks, Inc., and Starbucks Corporation.
Published on Apr 12, 2016 at 3:35 PM
Updated on Mar 19, 2021 at 7:15 AM
  • By the Numbers
Short sellers continue to target Valeant Pharmaceuticals Intl Inc (NYSE:VRX), even though the biotech stock has already dropped 88% since its all-time high of $263.81 in August. In the latest two-week reporting period alone, short interest on VRX increased by 56.1% to 18 million shares -- the most since early August. However, there's still plenty of room on VRX's bearish bandwagon, considering it would take short sellers less than one day to cover their positions, at the average daily pace of trading. 

Meanwhile, it looks as if options traders have been betting on a rebound. VRX's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 2.26 -- in the 83rd percentile of its annual range. In short, call buying has been extremely popular lately. Given the massive increase in short selling, though, some of this could be indicative of shorts hedging their bearish bets.

Elsewhere, while the majority of analysts are skeptical of the stock, there's still a handful of holdouts. Specifically, five brokerage firms still say VRX is a "strong buy," while the average 12-month price target of $63.67 is roughly double the equity's current perch. This morning, though, RBC lowered its price target on VRX to $65 from $69. 

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has found no shortage of ways to make headlines in recent months, as the shares have plummeted. Today, however, VRX has managed a 2.4% gain at $32.09, in light of news that the company has received an extension for filing its annual report. VRX now has until May 31 to release its financial statement. 
Published on Apr 11, 2016 at 12:11 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News

Drugmaker Insys Therapeutics Inc (NASDAQ:INSY) fell to an annual low of $13.20 this morning, after reporting declining preliminary fiscal first-quarter revenue for its narcotic pain drug, Subsys, which has drawn criticism in the past. Amid soaring volume, the stock was last seen down 23% at $13.59, with the day's huge drop landing INSY squarely on the short-sale restricted list (SSR). 

INSY is off 53% so far in 2016, and has given up more than 70% since hitting an eight-year high of $46.17 last August. But analysts have been relatively kind, giving the security two "strong buy" ratings and just one "hold."

Short sellers, however, have been plaguing INSY, with their bearish bets accounting for 26.5% of the stock's available float. At INSY's typical daily volume, it would take more than four weeks to cover all of these positions.

And with the equity sitting on the SSR list, many traders have taken to the option pits, where contracts are crossing the tape at twice their usual intraday rate. Though option volume is typically low, on an absolute basis, speculators have been picking up INSY calls over pits at an accelerated clip of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 21.11 is higher than 93% of the past year's readings. But this may not signal a flood of optimism -- the recent preference for long calls could, in fact, be short sellers looking to hedge their positions.

160411_INSY

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Published on Apr 11, 2016 at 1:00 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity
Chesapeake Energy Corporation (NYSE:CHK) is getting a double-barreled boost today from CHK's amended credit agreement and rising crude futures. At last check, shares of CHK were up 13.4% at $4.27, and attempting to notch their first close north of their 20-day moving average since March 22. Against this backdrop, call options on the oil-and-gas stock are trading at eight times the average intraday pace -- with a number of options traders betting on a bigger rally for CHK in the near term.

Beside a massive spread being opened in the April and October series, CHK's April 4 and 4.50 calls are among the most active options. However, with implied volatility up at the majority of strikes and open interest enough to cover volume, it's not easy to tell whether these options are being opened or closed. Elsewhere, though, it looks as if new positions are being purchased at CHK's weekly 4/22 3-strike call. If this is the case, the goal is for the stock to extend its rally through next Friday's close, when the weekly series expires.

More broadly speaking, today's accelerated call volume is nothing new for CHK. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CHK's 50-day call/put volume ratio of 1.08 rests in the 70th annual percentile. In other words, calls have been bought to open over puts at a faster-than-usual clip.

This optimism seems relegated to the options pits, though. In fact, despite short interest dropping 14.8% in the two most recent reporting periods, more than 35% of CHK's float is sold short. As such, it's possible that a part of the recent rush toward long calls -- specifically, at out-of-the-money strikes -- is a result of shorts hedging against any upside.

Regardless, those currently purchasing Chesapeake Energy Corporation's (NYSE:CHK) short-term options are getting a deal. In fact, CHK's Schaeffer's Volatility Index (SVI) of 114% rests lower than 63% of all comparable readings taken in the past year, meaning premium on the stock's near-term options is pricing in relatively low volatility expectations.

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Published on Apr 11, 2016 at 2:35 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity

Seagate Technology PLC (NASDAQ:STX) is up 6.5% at $35.38 today, after an upbeat article in Barron's, which called the stock's dividend yield "enticing" (subscription required). In addition, the author waxed optimistic on demand for large drives utilized in data centers. With this rally, STX has pared its year-to-date loss to 3.5% -- likely to the dismay of recent option buyers.

Speculators have been regarding STX with caution lately. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.51 sits higher than 77% of readings in the past year. Echoing this is STX's Schaeffer's put/call open interest ratio (SOIR) of 1.14 -- in the 86th percentile of its annual range, indicating that near-term traders are far more put-heavy than usual.

Today, STX options are trading at nearly twice their typical intraday pace, but that doesn't mean speculators are changing course. In fact, one of the most active options is the May 36 put, where traders appear to be buying to open new positions. These put buyers are betting that shares of STX will remain below the $36 level through May 20, when the back-month option expires.

Pessimism is rampant outside of the option pits, as well. Of the 21 analysts following STX, 15 rate it a "hold" or worse. And Cowen and Company initiated coverage on the equity this morning with a tepid "market perform" rating and $36 price target. Short interest also remains elevated, representing about seven sessions' worth of trading, at STX's typical daily volume.

However, today's rally may be running out of steam at the shares' 140-day moving average, which capped STX's late-March pop. In fact, Seagate Technology PLC (NASDAQ:STX) hasn't toppled this trendline in more than a year.

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Published on Apr 11, 2016 at 3:05 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News
  • Stocks On the Move
  • Expectational Analysis
Under Armour Inc (NYSE:UA) is staring at its worst daily percentage loss in months, after Morgan Stanley expressed concerns about slowing sales for the sports apparel maker. At last check, UA stock is down 5.5% at $41.15 -- a move anticipated by options traders and short sellers alike.

During the past 50 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHL), traders have bought to open 1.12 UA puts for every call. The corresponding put/call volume ratio ranks near the top quartile of its annual range. Similarly, the stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.18, with puts outweighing calls among options expiring in the next three months.

Elsewhere, short interest makes up a lofty 15.4% of UA's float. At the stock's average daily trading volume, it would take more than two weeks to buy back these shorted shares, pointing to an ample supply of sideline cash available.

While the bears appear to be in the driver's seat today, a longer-term view tells a different story entirely. Since hitting an annual low of $32.66 in late January, UA has rallied 26%. What's more, the stock is currently hovering around its year-to-date breakeven mark, and just above another layer of potential support at its 100-week moving average -- located at $40.25.

From a contrarian perspective, today's pullback looks like it could end up being a buying opportunity. Provided Under Armour Inc (NYSE:UA) resumes its longer-term trek higher -- a solid bet, looking at historical trends -- a capitulation among option bears and/or short-covering activity could act as a powerful tailwind. 

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Published on Apr 11, 2016 at 3:10 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update
Analysts are weighing in on tech stocks Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR), as well as mining firm Silver Wheaton Corp. (USA) (NYSE:SLW). Here's a quick roundup of today's brokerage notes on FB, TWTR, and SLW.

  • Ahead of this week's F8 developer's conference -- which is slated to kick off tomorrow -- FB saw its price target raised to $154 from $136 at Pivotal Research. Not only does this stand at a 40% premium to the stock's current perch, but it sits well above FB's Feb. 2 all-time high of $117.59. Nevertheless, the shares are off 0.9% at $109.68 this afternoon, extending Friday's slide. Longer term, FB remains a technical outperformer, though, up 32% year-over-year. What's more, the stock's recent sell-off has stalled out at FB's rising 50-day moving average -- a trendline that's been supporting the shares since mid-February. Analysts remain firmly in Facebook Inc's favor, too, with all but one of the 28 brokerages following the shares maintaining a "buy" or better, and not a single "sell" opinion to be found.

  • Pivotal Research also chimed in on TWTR, resulting in a price-target hike to $39 from $32. The stock is failing to capitalize on the bullish brokerage note, however, and was last seen off 1% at $16.49. TWTR's technical troubles have been fodder for the Street for some time now, with the shares down 68% year-over-year. In spite of this, options traders have been initiating long calls over puts at a rapid-fire rate. Twitter Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.04 ranks higher than 92% of all comparable readings taken in the past year.

  • Commodity stocks are soaring today, thanks to upbeat attention from RBC. SLW, for instance, had its price target upwardly revised to $21 from $20 by the brokerage firm. As such, the shares are up 5% at $17.32. This positive price action only highlights the equity's longer-term prowess, with SLW up more than 39% year-to-date. Nonetheless, options traders have been growing skeptical lately. Specifically, Silver Wheaton Corp.'s 10-day ISE/CBOE/PHLX put/call volume ratio has jumped to 0.99 from 0.49 over the past two weeks, and now ranks in the 96th percentile of its annual range.
For other stocks in analysts' crosshairs, read Analyst Upgrades: Alphabet Inc, Barrick Gold Corporation, and Yahoo! Inc. and Analyst Downgrades: Goldcorp Inc., Norfolk Southern Corp., and SAP SE.
Published on Apr 11, 2016 at 3:18 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
  • Stocks On the Move
Wearable tech stock Fitbit Inc (NYSE:FIT) is moving higher along with the broader stock market, after Morgan Stanley predicted better-than-expected first-quarter earnings from FIT (and not-so-great results for this athletic apparel name). "Our checks indicate demand for Blaze and Alta were ahead of expectations," said Morgan Stanley, "and retailers are already putting in re-orders for the Blaze..." Shares of FIT were last seen trading 4.1% higher at $15.10, which likely pleases many options traders. 

In fact, call buying has been extremely popular at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio across these exchanges shows that 5.62 FIT call options have been bought to open for every put option. Moreover, short-term options traders are decisively call-skewed, based on FIT's Schaeffer's put/call open interest ratio (SOIR) of 0.39. 

Call volume is accelerated today, too. One of the most popular options is the April 15.50 call, where traders are buying to open positions. By doing so, they're betting on FIT to rally above $15.50 before front-month options expire at this Friday's close.

In the meantime, short sellers have been covering their positions. During the most recent two-week reporting period, short interest on FIT fell by 21.5% -- though 15% of the stock's float is still sold short.

Looking at the charts, FIT has been trying to fill its late-February bear gap which helped send the shares to an all-time low of $11.91 on Feb. 24, but the $16 area continues to push back the shares. Nevertheless, the stock just closed above its 10-week moving average for a second straight week -- a level that sent FIT lower in late 2015 and early 2016.

Finally, the Morgan Stanley note isn't the only reason Fitbit Inc (NYSE:FIT) is buzzing today. Reports suggest a man's Fitbit device helped doctors in New Jersey save his life -- the first of such incidents for any wearable tech company. 

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