Walt Disney Co (NYSE:DIS) stock is up 2% at $116.42 in afternoon trading, and just off a two-year high of $116.84, as investors await the media powerhouse's impending earnings report, which is slated for after the close tomorrow, Aug. 7. Below we will take a look at what the options market is pricing in for Disney after earnings, and how the stock has been faring on the charts following Comcast's (CMCSA) bid withdrawal for Twenty-First Century Fox (FOXA) assets.

Disney stock has been on an uptrend since early May, a time that coincides with the 30-day moving average transitioning from a ceiling of resistance to a line of support for the shares. DIS has picked up 10% in just the past month, and is set to mark its highest close since November 2015.

Digging into the blue chip's earnings history, DIS has closed flat or lower the day after the company reports in four of the last eight quarters, including a 2.2% decline in May 2017. Looking back eight quarters, the shares have moved 1.9% the day after earnings, on average, regardless of direction. This time around, however, the options market is pricing in a much larger-than-usual 6.2% move for Wednesday's trading.

Switching gears, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), DIS options traders have been leaning bearishly ahead of the company's highly anticipated report. Disney stock's 10-day put/call ratio of 1.09 stands in the 71st percentile of its annual range. In other words, puts have been bought over calls at a faster-than-usual clip.

Analyst sentiment has also been pessimistic, with nine of the 13 firms in coverage on DIS sporting a tepid "hold" recommendation. Further, the stock's average 12-month price target of $117.57 is a discount to current trading levels. Should Disney surprise to the upside after earnings, an exodus of option bears or a wave of upbeat analyst attention could propel the blue chip even higher.

CVS Health Corp (NYSE:CVS) stock is 0.8% higher at $65.85 in today's trading, as investors gear up for the drugstore giant's second-quarter earnings report, scheduled for before the market opens, tomorrow, Aug. 8. Below, we will take a look at how CVS has been faring on the charts, and what the options market is pricing in for the stock's post-earnings moves.

Starting with technicals, CVS Health stock has been on a downtrend since hitting a year-to-date peak in late January, and more recently has been stuck in a series lower highs. More recently, losses have been limited by a floor of support found at the $63 mark, and today's breakout attempt has been capped by the 120-day moving average -- a trendline that has acted as a ceiling of resistance for the shares in the past.

Looking toward earnings, CVS has closed lower the day after the company reports in six of the last eight quarters, including the last five in a row. Looking back eight quarters, the shares have moved 4.1% the day after earnings, on average, regardless of direction. This time around, the options market is pricing in a slightly larger-than-usual 6% move for tomorrow's trading.

Options traders have been leaning bullish on the drugstore chain ahead of earnings. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing CVS Health stock with a 10-day call/put volume ratio of 2.52, ranking in the 77th percentile of its annual range. This shows that during the past two weeks of trading, calls have been bought over puts at a faster-than-usual clip.

Analysts are echoing this optimistic sentiment toward the security. Of the 15 brokerage firms covering the stock, 12 sport "buy" or "strong buy" recommendations. Plus, the stock's average 12-month price target comes in at a more than 30% premium to current levels.

Lastly, short interest on CVS Health rose 7% during the most recent reporting period, and now represents nearly 5% of the stock's total available float. At the average daily trading volume, it would take well over a week for shorts to cover their bearish bets.

This week we'll do a quick sector analysis using our contrarian philosophy. For those unfamiliar with our contrarian approach, we look for stocks that have performed well, but are despised by investors. That pessimism is an indicator of sideline money. As a stock outperforms, it gets harder and harder for those bears to resist. As they capitulate, that sideline money turns into buying power, pushing the stock higher. Conversely, we’re bearish on stocks that have underperformed yet are loved by investors. 

The Most Bullish Sectors

We run numbers on about 2,300 stocks broken down into about 40 sectors. I created a sector ranking system that considers price action of stocks within a sector, and also the sentiment on those stocks. The price action piece of the rating looks back one year and takes into account the average return of the stocks and the percentage of them that have beaten the S&P 500 Index. The sentiment part of the score considers broker buy/sell recommendations from Zack's Investment Research and short interest.

The table below shows the top-rated sectors using the criteria explained above. Looking at those sectors, it seems there’s little brokerage confidence in consumers. A lot of the sectors seem to rely on discretionary spending, such as personal goods, leisure goods, retailers, travel & leisure, etc.

The table below shows the best stocks year-to-date in the personal goods sector, the top-rated sector above. All ten of these stocks have returned at least 20% for the year. Only two of them, however, have more than half of the analysts in coverage rating them a buy. This could be an indicator that pessimism remains on the stock and, therefore, ample sideline cash exists.

The Most Bearishly Ranked Sectors

Here are the 10 worst sectors based on my ranking system. The mining sector struggles are linked to gold and other commodity prices. There are only nine stocks in the beverages sector and the mobile telecom sector (the average return in the mobile telecom sector is boosted by one stock, Intelsat SA (I), which has returned over 500% year-to-date). To me, the auto sector was the most interesting part of the chart below.

Here are the worst stocks, year-to-date, from the automobile & parts sector. All of these stocks are negative on the year. Some of them have very bearish sentiment already. The two that stand out as having done poorly but most analysts still recommend buying are LKQ Corporation (LKQ) and General Motors (GM). Downgrades on these stocks could pressure their shares even lower.  

Cloud storage specialist Dropbox Inc (NASDAQ:DBX) is about to release earnings for the second time since going public in March, with the company set to report after the close tomorrow, Aug. 9. The first time around, DBX shares dipped 2.2% the day after earnings, even though the company topped estimates. Going by options data, Wall Street is expecting a much more explosive move this time, with implied volatility data pricing in a 15.2% swing for Friday's session.

A quick check at the numbers on the equity from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows that put buying has outpaced call buying during the past 10 days. During this time frame, the October 30 put saw the largest increase in open interest, with heavy buy-to-open activity confirmed. To be even more recent, the September 27 put led the way in the past five sessions, and traders were mostly buying to open positions here, as well.

For the most part, DBX shares have traded in a tight range since their IPO, save their dramatic mid-June rise to $43.50 -- which, for what it's worth, coincided with massive gains in the cloud sector as a whole. The stock also recently dipped below the $27 mark, though analysts labeled this a buying opportunity. Dropbox was last quoted at $30.85, just above its 20-day moving average.

Auto stocks are in focus today after China levied a 25% retaliatory tariff on $16 billion of U.S. goods, most notably crude oil and cars. In addition to sector peer Dana Inc (DAN), both LKQ Corporation (NASDAQ:LKQ) and General Motors Company (NYSE:GM) could struggle in the coming months.

LKQ Rally Appears To Have Lost Steam

At last check, LKQ Corporation stock was down 1.1% to trade at $34.06. The auto parts maker has rallied 13% since consolidating near the $30 level in late April, but has not been able to fill the entirety of that earnings-induced bear gap. Overall, LKQ is staring at a 16% deficit for 2018. 

To make matters worse, LKQ found itself on a list compiled by Schaeffer's Senior Quantitative Analyst Rocky White containing stocks with the worst 2018 returns, but have yet to receive proper bearish analyst sentiment. More specifically, of the 12 brokerages covering LKQ, 11 still rate it a "buy" or "strong buy," with zero "sells" on the books. Should LKQ keep struggling, it may prompt these analysts to re-think their bullish stance.

Options traders have been almost exclusively targeting LKQ calls lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 1,797 calls bought to open in the past 10 days, compared to just 13 puts. The resultant call/put volume ratio ranks in the 91st percentile of its annual range, indicating calls have been bought over puts at a faster-than-usual clip during the past two weeks.

General Motors Stock Held In Check By Key Trendline

Looking at General Motors, the stock is flat today at $37.58. Since a mid-June high near the $45 area, GM has given back 16.5%, ushered lower by its 20-day moving average. More recently, the stock gapped lower in late July following a subpar earnings report, running the year-to-date deficit to more than 8%. 

Like LKQ, GM showed up on White's list of stocks vulnerable to bear notes. Of the 15 brokerages covering GM, nine rate it a "buy" or better, with not a single "sell" on the books. In addition, the security's consensus 12-month price target of $46.84 sits at a nearly 25% premium to its current perch. 

Traders looking to take advantage of the equity's struggles may want to do so with near-term options, which are attractively priced at the moment. GM stock currently sports a Schaeffer's Volatility Index (SVI) of 23%, which ranks in the 21st percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.

Furthermore, the auto stock has been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 93 out of 100, which shows it's tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.

The shares of optical components maker Finisar Corporation (NASDAQ:FNSR) have added 7.5% in the past week. However, FNSR stock is flashing a historic "sell" signal on the charts -- and the bearish alarm has yet to be wrong. As such, now might be the time to consider short-term puts on the security.

Jumping right in, Finisar shares are now within one standard deviation of their 200-day moving average, after a lengthy stretch below this trendline. There have been five similar signals of this kind in the past, after which FNSR went on to sink 4.37%, on average, the subsequent week, per data from Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the stock was lower 100% of the time, down an average of 12.26%.

As you can see on the chart below, the equity has been in a channel of lower highs and lows for roughly one year, with highs kept in check by the 200-day moving average. FNSR shares were last seen down 0.2% to trade at $18.24 -- an area that represents a roughly 25% gain from the security's April closing low of $14.67, and a 10% decline year-to-date. From current levels, another 12.26% pullback would put Finisar stock around $16.

Despite the stock's long-term struggles, Wall Street remains enamored. FNSR still sports six "buy" or better ratings, compared to five lukewarm "holds" and not a single "sell." The consensus 12-month price target of $21.09 represents a premium of nearly 16% to the equity's current price, and stands in territory not charted since March. A round of analyst downgrades or price-target cuts could send the shares reeling again.

Meanwhile, options traders have been picking up FNSR calls over puts at a rapid-fire rate. On 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 9.92 indicates nearly 10 Finisar calls have been bought to open for every put in the past two weeks. This ratio registers in the 96th percentile of its annual range, pointing to a much healthier-than-usual appetite for bullish bets over bearish of late.

However, short interest represents more than 19% of Finisar's total available float, even after declining 6.6% in the past two reporting periods. Considering FNSR's recent run higher, it's possible some of the aforementioned call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge.

Whatever your motive, now is an opportune time to strike on FNSR's near-term options. The stock's Schaeffer's Volatility Index (SVI) of 35% is at the bottom of its annual range, suggesting short-term options are pricing in relatively low volatility expectations for the underperformer.

Online discount warehouse Overstock.com Inc (NASDAQ:OSTK) is gearing up to report second-quarter earnings after the market closes tomorrow, Aug. 9. Last seen trading 4% lower at $36.73, Overstock shares have been moving sideways on the charts since late March, stuck between the $30-$40 levels. OSTK's mid-July breakout attempt was quickly capped by the 120-day moving average, and year-to-date the stock is sporting a 42% deficit. Below, we will take a look at what the options market has priced in for the the stock's post-earnings move.

Looking at OSTK's earnings history, the stock has closed higher or flat the day after the company reports in six of the last eight quarters, including a 30.7% surge in November. Looking back eight quarters, the shares have moved 9.3% the day after earnings, on average, regardless of direction. This time around, the options market is pricing in a 22% move for Friday's trading.

Digging into options, Overstock's Schaeffer's put/call open interest ratio (SOIR) of 0.32 ranks in the low 12th annual percentile. This SOIR reveals that calls outnumber puts by a wider-than-usual margin among options set to expire within three months. Looking closer, the weekly 8/10 40-strike call saw the largest increase in open interest in the past 10 session.

Plus, the online retail concern has been a good purchase for premium buyers during the past 12 months. That's per OSTK's Schaeffer's Volatility Scorecard (SVS) of 85 out of 100, which shows the stock has tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.

It was another round of negative foodborne illness news for Chipotle Mexican Grill, Inc. (NYSE:CMG) in late July, when upwards of 100 customers reported food poisoning after eating at a Powell, Ohio, Chipotle location. But unlike the string of outbreaks that sent the stock spiraling lower in 2015, CMG has bounced back quickly from its latest bout of bad PR -- and in fact, data suggests that now might be a particularly appealing time for a bullish play on the fast-casual restaurant chain.

In today's session, CMG is fresh off a new 52-week high of $484.90. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 24%. This SVI arrives in the 6th percentile of its annual range, indicating that speculative plays have priced in lower volatility expectations just 6% of the time in the past year.

Chipotle stock's IV levels remain muted beyond the August options series, too. Trade-Alert data shows 30-day ATM IV at 23.8% -- not far from Tuesday's freshly set annual low of 23.6%.

This combination of a high stock price and low IV has had bullish implications for CMG in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there has been just one prior occasion where CMG has been trading within 2% of its annual high at the same time its SVI has been in the 20th percentile or lower. Following that prior signal, CMG was up 5% one month later.

Of course, that's a very small sample size -- but there's reason to believe CMG's rally has legs this time around, as well. The stock has been cruising higher since late February along the support of its 20-day, 50-day, and 80-day moving averages, and CMG this week has been accelerating away from its late-June highs in the $475 area.

And from a sentiment perspective, continued short-covering support could help fuel Chipotle shares higher. Short interest fell by nearly 17% in the past two reporting periods, but still accounts for 10.6% of the stock's float. At CMG's average daily volume, it would take nearly five days for all of the remaining bearish bets to be covered.

Meanwhile, with 71% "hold" or "sell" ratings from brokerage firms, there's relatively low risk of analyst downgrades -- but plenty of room for possible upgrades. Price-target hikes seem overdue, too, as the average 12-month forecast among analysts stands at just $450.52. In today's trading, CMG is up 1.4% at $483.89, about 8% north of that consensus target.

Burlington Stores Inc (NYSE:BURL) has been a steady climber in 2018, and earlier today touched a fresh record high of $160.67. Making it even more intriguing, data suggests that now might be an appealing time for a bullish play on the discount retailer. 

At last check, BURL was up 1.4% to trade at $159.98. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 27%. This SVI arrives in the 15th percentile of its annual range, indicating that speculative players have priced in lower volatility expectations just 15% of the time in the past year.

This combination of a high stock price and low IV has had bullish implications for BURL in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there has been five prior occasions where BURL have been trading within 2% of its annual high while at the same time its SVI was in the 20th percentile or lower. Following those prior signals, BURL was up 6.31% one month later, indicating fresh record highs could soon be on the horizon.

Looking at the charts, Burlington stock has relied on double-barreled support in the form of its 50- and 80-day moving averages for most of 2018. Longer term, the equity has doubled in the past 12-months, thanks to two earnings-induced bull gaps in March and May. The coat retailer will report earnings before the open on Aug. 30. 

However, near-term options traders have preferred puts. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.06 ranks higher than 82% of all other readings from the past year, meaning speculators are more put-heavy than usual among options expiring in three months or less. There is notable open interest found at the August 150 and 145 puts, most of which has been bought to open, according to data from the major exchanges. Of course, this could be from shareholders using options to hedge.

Luxury apparel stock Ralph Lauren Corp (NYSE:RL) has been in a channel of higher highs and lows since June 2017, with pullbacks contained by its 80-day and 100-day moving averages. The shares have rallied more than 56% in the past year, and notched a three-year high of $147.90 after earnings on July 31, before taking a breather. What's more, there could be more gas in the tank for Ralph Lauren stock, which remains unappreciated on Wall Street. At last check, the shares were up 1.5% at $136.25.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, Ralph Lauren sports one of the best year-to-date returns in the underloved personal goods sector, yet boasts very few "buy" ratings from analysts -- making it an attractive contrarian trade. Specifically, just 13% of analysts consider RL worthy of a "buy" or better endorsement. A round of well-deserved upgrades could propel the shares even higher.

Short interest on Ralph Lauren stock fell nearly 9% during the most recent reporting period, but still represents more than 11% of the stock's total available float. At RL's average daily trading volume, it would take over eight sessions for shorts to cover their remaining bearish bets. That's ample sideline cash to drive RL to new heights.

Lastly, now may also be an affordable time for short-term traders to jump on the RL bandwagon. This is per the equity's Schaeffer's Volatility Index (SVI) of 26%, which ranks in the 12th annual percentile -- meaning near-term options are pricing in relatively low volatility expectations at the moment.

The Cboe Volatility Index (VIX - 10.72) -- considered the stock market's "fear gauge" -- has dropped roughly 16% already in August, and today is eyeing a sixth straight loss and its lowest close since January. However, recent VIX options activity suggests traders are speculating on (or hedging against) a surge for the index.

The VIX 20-day buy-to-open (BTO) call/put ratio has been rising in recent weeks, and recently clocked in at 5.55 -- the highest since mid-July 2017 (during a similar Nasdaq winning streak, in fact). Echoing that, the 30-day implied volatility skew on VIX options is now at an annual low, suggesting near-term puts have rarely been cheaper than calls in the past year.

In the past two weeks, the deep out-of-the-money VIX December 47.50 call has seen the biggest surge in open interest, with more than 113,000 contracts added. With the VIX currently just below 11, the fear index would need to more than quadruple by the end of the year for these calls to move into the money. Meanwhile, the September 20 and 21 calls, as well as the October 25 call, each saw more than 55,000 contracts added in the past two weeks.

Perhaps some of the recent out-of-the-money VIX call buying is attributable to shorts seeking an options hedge. As of July 31, Commitments of Traders (CoT) data showed large speculators -- a group that has been notoriously wrong on VIX -- were net short VIX futures by the most since mid-December. Plus, the VIX has been known to burst higher in the August-October period.

Whatever the motive, the Cboe Volatility Index has historically popped a week after its 20-day BTO call/put ratio exceeds 5.5. According to data from Schaeffer's Quantitative Analyst Chris Prybal, the VIX has averaged a one-week gain of 9.2%, and was higher 100% of the time after signals since 2010, of which there have been six. That's compared to an average anytime one-week gain of just 1.2%, with a positive rate of 47%, looking at VIX data since 2010.

Likewise, the S&P 500 Index (SPX) tends to dip after the VIX 20-day BTO call/put ratio tops 5.5. One week later, the SPX was down 0.6%, on average, and higher just 33% of the time. That's compared to an average anytime one-week return of 0.2%, with a 60% win rate, looking at data since 2010.

By two months later, however, the VIX has typically reversed lower. The fear gauge was down 2.3%, on average, and higher just once after the last six signals. The S&P 500, meanwhile, was up 2.3%, on average, two months after a VIX options signal -- slightly better than its average anytime two-month gain of 1.9%.

Technology infrastructure concern Switch Inc (NYSE:SWCH) is about to release earnings for the fourth time since going public in October, with the company set to report after the close Monday, Aug. 13. Last quarter, the shares fell 14.9% the day after earnings, and 15.6% the quarter before that. Going by options data, Wall Street is expecting another huge move this time, with implied volatility data pricing in a 12.5% swing for Tuesday's session.

Such a bleak history doesn't bode well for a stock that has struggled so poorly on the charts. SWCH has carved out a series of lower highs and lows since its October IPO. Year-to-date, the equity has shed 24%, guided lower by its descending 120-day moving average since March. SWCH fell to a record low of $11.85 on June 28, and another post-earnings move to the downside could have the stock testing these lows once more. 

Continued technical struggles could spark a flurry of bear notes. Of the 10 brokerages covering SWCH, 70% rate it a "buy" or "strong buy," with zero "sells" on the books. Furthermore, the security's average 12-month price target of $16.82 is a 22% premium to its current perch of $13.85. Downgrades and/or price-target cuts could certainly pressure the beleaguered stock lower.

Meanwhile in the options pits, the top open interest strike by far is the August 15 call, with more than 3,000 contracts outstanding. At the same time, any call activity on SWCH could be coming from short sellers hedging, with more than one-third of the total float tied up in short interest.