Barron's tapped Apple Inc. (NASDAQ:AAPL) as one of its top 10 picks for 2019 (subscription required), saying the FAANG stock's "valuation looks attractive and there appears to be limited risk to current-year earnings even if one assumes a 5% to 10% decline in iPhone sales." The financial news magazine also pointed to Apple's massive buyback program as a source of significant buying power next year.

Options traders are showing a preference for calls over puts in today's trading, too, echoing a recent trend. In fact, Apple is on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. In the last two weeks, roughly 2.39 million calls have changed hands on AAPL, compared to about 2 million puts.

Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a notable portion of this activity was of the buy-to-open kind. AAPL stock's 10-day call/put volume ratio of 1.85 ranks in the 65th annual percentile, showing calls have been bought to open relative to puts at a modestly quicker-than-usual clip.

Drilling down on the front-month series, the December 170 call saw a prominent rise in open interest over the last two weeks. Data from the major options exchanges confirms a number of positions were bought to open, meaning traders expect a breakout above $170 by expiration at the close this Friday, Dec. 21.

On the charts, Apple stock's tumble from its Oct. 3 record high of $233.47 has been swift, with the stock down 28%. Plus, the shares entered bear-market territory in late November, and have shed 9% since an early December rejection at $185 -- near the site of that bear market threshold. And while the shares are up 1.6% today at $168.18, they are still staring up at their year-to-date breakeven mark of $169.23.

Last week, the three major market indexes fell into "correction" territory -- defined as at least 10% off their recent highs -- at the same time. It was the first time the Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), and Nasdaq Composite (IXIC) were in correction territory simultaneously since around the August 2015 "flash crash." Prior to that, the broader stock market signal hadn't sounded since January 2008, during the financial crisis, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Below are all the times the three indexes moved 10% from their highs at the same time, looking at data since 1972 (the first year we have Nasdaq data). The first "alarm bells" sounded in April 1973, which was the only signal for eight years. It's also notable that the signal went off on Oct. 16, 1987 -- just one session before "Black Monday" on Oct. 19, 1987. Likewise, the correction signal went off in April 2000, around the start of the dot-com bubble bursting.

It's no surprise, then, to find that these steep, simultaneous pullbacks have preceded notable stock market sell-offs in the past. After the 10 signals, the S&P 500 was down another 0.6%, on average, compared to an average anytime return of 0.67%, looking at data since 1973. One year later, meanwhile, the index was up a weaker-than-usual 2.75%, and higher just half the time. That's compared to an average anytime one-year gain of 8.84% and a 75% win rate.

The outlier is the three-month marker, with the index generating a better-than-average gain of 3.09%, compared to 2.05% anytime. It's also worth noting that greater-than-usual volatility tends to persist after signals, looking at the Standard Deviation columns in the chart below.

In conclusion, if past is prologue, stocks could be in for a wild ride. From a specific technical standpoint, bulls are hoping previous 2018 lows hold, and the SPDR S&P 500 ETF Trust (SPY) $255 level could emerge as the next line of defense, per Schaeffer's Senior V.P. of Research Todd Salamone's latest Monday Morning Outlook. However, the latest short interest data indicates the shorts haven't even begun to smell blood yet, which could put a lid on stock rallies.

At last check, shares of Molina Healthcare Inc (NYSE:MOH) are down 9.7% to trade at $118.94. The dramatic drop is part of a sector-wide spiral on news of a Texas judge deeming the Affordable Care Act (ACA), widely called "Obamacare," unconstitutional, in a ruling issued late Friday. In a statement, Molina said it was "disappointed" with the decision, but recognized "that this is a first step in what will be a lengthy appeals process." 

Before today's bear gap, MOH stock was in the midst of a rebound off its 160-day moving average, after testing the trendline in mid-November. The stock just last week briefly peaked above $140 -- about a 61.9% Fibonacci retracement from MOH's Sept. 24 all-time high of $154.06 to its Nov. 20 intraday low of $114.44 -- but is now trading south of the aforementioned moving average for the first time since early March.

Analysts at Evercore ISI said that Molina, an ACA-exposed managed care provider, and others like it are the most susceptible to volatility after the ruling, but suspects that ultimately the mandate will be overturned. An analyst at BMO Capital also predicted an appeal, calling the sudden drop a buying opportunity for healthcare stocks.

MOH short interest dropped 22.5% in the past two reporting periods, but several holdouts could be cheering today. These bearish bets still account for a healthy 8% of MOH's total available float, or about six days' worth of trading, at the equity's average daily volume.

MOH's dip has options traders more active than usual today. While absolute volume remains light, Molina has seen more than 300 puts and 330 calls change hands -- three times the average intraday pace.

 

The shares of HyreCar Inc (NASDAQ:HYRE) are bucking the broad-market trend lower today, thanks to some optimistic analyst attention. Specifically, Northland Capital initiated coverage of HYRE shares with an "outperform" endorsement and a price target of $5 -- more than double the penny stock's current price -- citing improving gross margins. At last check, HYRE stock was up 11% to trade at $2.35.

The car-sharing concern actually priced its initial public offering (IPO) at $5 a share back in late June. The equity peaked at $6.50 the day it went public, on June 27, and has since endured a steady downtrend, bottoming at $1.53 on Dec. 4. While the shares are now on pace to end atop their 60-day moving average for the first time ever, upside momentum has stalled recently in the formerly supportive $2.50 region -- half the aforementioned IPO price.

Even before Northland Capital came on the scene, the two analysts following HYRE were bullish, issuing "buy" endorsements. Plus, the consensus 12-month price target on the security stands at $4.50, representing expected upside of nearly 88% to current levels.

It's shaping up to be another down day for the U.S. stock market. Three stocks in the news are Madison Square Garden Co (NYSE:MSG), drugmaker Proteostasis Therapeutics Inc (NASDAQ:PTI), and behavioral sciences specialist Acadia Healthcare Company Inc (NASDAQ:ACHC). Here's why shares of MSG, PTI, and ACHC are making big moves today.

Knicks Sale Talk Lifts MSG Stock

The shares of MSG are up 2.3% today at $267.44, after CEO James Dolan told ESPN he would consider selling the Knicks at the right price if it were the right thing to do for shareholders. Dolan suggested some have valued the Knicks franchise at $5 billion, but confirmed there are currently "no plans" to sell the team.

Madison Square Garden stock had been grinding steadily lower since its all-time high of $330 from July, and hasn't traded above its 80-day moving average since early October. Still, the equity is pacing to close 2018 with a 26.5% lead. On the sentiment side of things, 80% of analysts in coverage have a "strong buy" rating on MSG.

PTI Shares Cool After Genentech Deal

PTI stock is trading up 0.6% at $4.83 -- and earlier peaked at $5.80 before cooling off -- as Wall Street digests the company's new agreement with Roche's Genentech. As part of the deal, PTI Therapeutics will receive more than $100 million in upfront payments and royalties, and could wind up getting more based on the sales performances of certain drugs.

A bull gap sent PIT shares up to $10.38 on Oct. 18, after the company's positive data on a cystic fibrosis treatment, but since then they've struggled to gain momentum. That may be why options traders have been showing bearish tendencies recently, with put buying more than doubling call buying during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

New Lows for Acadia Healthcare Stock After CEO Change

ACHC stock hit a nearly six-year low earlier of $26.68, and was last seen down 5.6% at $27.30, after the company's board gave the boot to Chairman and CEO Joey Jacobs, with the latter position being filled by Debbie Osteen from Universal Health Services (UHS). Brokerage firms William Blair and Jefferies each said they were surprised by the C-suite change, but suggested it could indicate the company is moving toward a sale. Acadia Healthcare shares have been decimated in recent months, declining from a Nov. 2 peak above $45 to today's fresh low. In the meantime, short sellers have been taking profits, as short interest dropped by 20.4% in the past two reporting periods.

NCR Corporation (NYSE:NCR) shares have been stuck in a two-year downtrend, falling from an early 2017 peak near $50 to Monday's close of $22.71. In more recent months, the 80- and 120-day moving averages have capped upside advances, and the stock just yesterday hit a nearly two-year low of $22.58.

RBC isn't worried, however. The brokerage firm already had an "outperform" rating on NCR, and just raised its opinion to make the stock its top pick, lifting its price target to $40 from $36 in the process. The analyst in coverage cited the equity's attractive risk-reward setup, and management's new focus on recurring revenue.

There are other bullish analysts outside RBC, too, with half those in coverage handing out "strong buy" ratings. Moreover, the average 12-month price target of $34.93 represents an almost 54% premium to current levels. Short interest is high, however, representing almost 8% of the total float. Going by average daily volumes, it'd take these bears 12 sessions to cover.

While stocks were taking a drubbing during the month of November, natural gas futures were in the midst of a high-volatility move of their own -- albeit in the complete opposite direction. The United States Natural Gas Fund (UNG) wrapped up last month on a gain of 39.8%, which marked its biggest monthly advance in a decade (and which contrasted all the more impressively with a meager 1.9% rise in the broader S&P 500 ETF Trust, and a 22% plunge in UNG's "cousin" vehicle, the United States Oil Fund).

To underscore even further the near-vertical nature of UNG's November ramp, it's irresistible to avoid pointing out that the exchange-traded fund (ETF) collected all three of its biggest daily gains of the past two years last month -- on Nov. 14 (+18.90%), Nov. 16 (+11.42%), and Nov. 28 (+10.54%). So yes, the overall November performance by the fund was not too shabby at all, considering that UNG's total share price gain through the first 10 months of 2018 was a comparatively quiet 14.5%.

But the commodity's rapid run higher seems to have reversed almost as quickly as it occurred. After a few weeks spent appearing to test its footing around a 10% correction from its mid-November high of $39.87, UNG gapped lower twice last week -- once on Wednesday, to the $33 level, and again on Friday, down to $31. The stock closed the week just below the latter price point... and subsequently, just below its 40-day moving average (which previously served as support in early November following the late-September breakout above the 320-day trendline), as well as the $31.89 level that marks a precise 20% drop from its recent peak.

And as we enter the week in which standard December options are set to expire, the $31 area takes on another layer of significance: It's home to peak open interest for the series, with 7,875 calls in residence at this strike price. Notably, a review of the volume history at the December 31 call suggests the bulk of these contracts were sold to open on the supremely inopportune date of Nov. 13, just ahead of a historically massive single-day rally for UNG (to be followed by an encore performance just two days later).

For those who may be thinking to themselves that this story is starting to sound familiar, there's a fair chance that you read last month about the implosion of a hedge fund that sold naked calls on natural gas futures just ahead of the aforementioned parabolic move higher. According to our research, there were no December-dated calls involved in that firm's ill-fated recommendations -- but unless these soon-to-expire bets were sold against a long position on natural gas futures, it's reasonable to speculate that the outcome for the seller(s) of these December 31 calls was somewhat similar to that of the hedge fund's clients.

Meanwhile, as we've noted previously, seller-driven open interest at near-the-money strikes tends to have a volatility-dampening effect on the underlying as expiration approaches. And while the magnitude of the open interest at the UNG December 31 call isn't quite substantial enough to influence the trading action in natural gas futures, we'd expect that the commodity's call writers would certainly welcome such a respite from the fourth quarter's wild volatility.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, December 16.

The shares of Philip Morris International Inc. (NYSE:PM) are down 1.8% to trade at $79.95, after Credit Suisse downgraded the tobacco name to "underpeform" from "neutral," while slashing its price target to $74 from $92. The analyst in coverage says the company's reliance on heated tobacco products leaves it exposed to significant downside risk. 

The $74 level represents territory Philip Morris stock hasn't traded near since 2012. In fact, the $75 level has served as a longer-term floor dating back nearly six years. In the short term, PM has shed nearly 23% year-to-date, and even shorter term, is heading toward its third straight weekly loss.

Despite the stock's struggles, the analyst sentiment remains stacked in PM's favor. Of the 14 brokerages in coverage, nine rate the security a "buy" or better, with only one "sell" on the books. Further, its average 12-month price target of $93.25 is a nearly 15% premium to the stock's current perch, and sits in territory the stock hasn't traded at since a massive bear gap back in April. 

In addition, there is ample room for more short sellers to come aboard the struggling tobacco name. The 9.53 million shares sold short is the lowest amount since the July 1 reporting period, represents a meager 0.6% of PM's total available float, and only 2 times the average daily trading volume. 

Those wanting to bet on the tobacco name may want to consider an options buying strategy, as Philip Morris has been a strong target for anyone buying premium. This is per the stock's Schaeffer's Volatility Scorecard (SVS) of 82 out of a possible 100, which indicates that PM has tended to make outsized moves over the past year, relative to what the options market has priced in.

Boeing Co (NYSE:BA) said it's boosting its quarterly dividend by 20%, and hiking its share buyback program by $2 billion to $20 billion. In reaction to the news, BA shares are up 4.2% to trade at $329.53, climbing back above their 320-day moving average, which has served as a magnet in recent weeks.

The shares of the aerospace giant are still on track to snap their 10-quarter win streak, down nearly 12% since their Sept. 28 close at $371.91. Short sellers have started targeting Boeing stock amid this weakness, with short interest up 15% from its early September multi-year lows. However, the 4.96 million shares currently sold short account for less than 1% of BA's available float.

Fellow Dow stock Johnson & Johnson (NYSE:JNJ) is also trading higher on buyback news today, last seen up 1.4% at $131.02. The consumer products specialist said its board has approved a $5 billion share repurchase program.

The stock was also oversold coming into today's trading, per its 14-day Relative Strength Index (RSI) of 25 -- which suggests a short-term bounce was likely in the cards. Specifically, JNJ stock shed 12.7% from its Dec. 13 through Dec. 17 closes, after a Reuters report claimed the company knew about asbestos in its Baby Powder product -- an accusation Johnson & Johnson CEO Alex Gorsky called "false" in a CNBC interview.

Options bears have been blasting JNJ stock in recent weeks, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.49 ranks in the 97th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Energy stock EOG Resources Inc (NYSE:EOG) has struggled since its mid-October highs near $133.50, down more than 25%. A negative earnings reaction in early November only exacerbated headwinds for the shares, with the Nov. 1 pre-earnings close creating a stiff ceiling in recent weeks. What's more, a recent rejection at the 40-day moving average sent EOG tumbling below the round century mark, and an unwinding of optimism could lead to bigger losses for the shares.

 

In fact, 29 of 38 analysts maintain a "buy" or better rating on the petroleum refiner, even with its nearly 11% year-to-date deficit. This puts the shares at risk of downgrades, which could spark more selling.

Elsewhere, short sellers have been ramping up their exposure, with short interest surging 42.3% in the two most recent reporting periods. There's still room on the bearish bandwagon, though, considering these bearish bets account for just 2% of EOG's available float.

Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.00 ranks in the 71st annual percentile, meaning short-term traders are more put-heavy than usual. Put open interest is stacked down to the 85 strike in the January 2019 series, which could serve as a magnet for the shares in the near term.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this EOG commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Shares of Puma Biotechnology Inc (NASDAQ:PBYI) are up 6.9% at $22.90, after the company announced successful results of the Phase III NALA trial for its experimental breast cancer drug, neratinib. Analysts are waxing optimistic on PBYI shares, with Cantor Fitzgerald upping its price target to $55 from $50 -- more than double the current price -- and stating the general expectation among investors was for the drug trial to fail. RBC also called the data an "unexpected positive," boosting its price target to $29 from $26.

Puma has endured a rough year, with the equity down 78% year-to-date. The stock has suffered a few dramatic bear gaps, including one in early November, prompted by weaker-than-expected Nerlynx sales. Since then, PBYI has been range-bound, with upside momentum contained by the $24-$25 region, and support emerging in the $20-$21 area.

In light of the beating PBYI stock has taken this year, analysts have been cautious. Although the drug concern currently sports a lofty $40.78 consensus 12-month price target -- which stands at an 81% premium to current levels -- five analysts maintain a "hold" or worse rating, compared to two giving it a "strong buy."

On the other hand, near-term options traders are more call-heavy than usual. PBYI's Schaeffer's put/call open interest ratio (SOIR) of 0.25 sits in just the 16th percentile of its annual range, suggesting short-term option players have rarely been more call-biased in the past 12 months.

The shares of Marin Software Inc (NASDAQ:MRIN) are up 47.3% to trade at $3.73, after the California-based online advertising company announced a three-year revenue share agreement with Alphabet's (GOOGL) Google. Under the terms of the deal, Google will pay Marin Software based on the revenue generated on its platform from clients using the Google Search Engine and other "eligible" search engines.

Heading into today's trading, Marin Software stock had plunged nearly 77% year-to-date, with the $2.25 level creating a floor in recent weeks. The shares are now pacing for their best day ever by far, and are on track to close north of their 120-day moving average for the first time since Jan. 11.

Short sellers have been cashing out amid the stock's long-term technical struggles, with short interest down 9.7% in the last two reporting periods. However, it would take short sellers more than seven days to cover their remaining positions, at the stock's average pace of trading. These bearish bettors are sidelined today, though, with MRIN on the short-sale restricted list.