The shares of Marinus Pharmaceuticals Inc (NASDAQ:MRNS) are up 11.2% to trade at $5.75, after the biopharmaceutical firm said its postpartum depression drug, ganaxolone, was well-tolerated in a mid-stage study, and that patients showed no serious side effects to the treatment.

Cantor Fitzgerald was quick to chime in, underscoring its "overweight" rating on MRNS stock, and raising its price target to $25 from $19 -- a 335% premium to current trading levels. This echoes the generally bullish bias among the brokerage bunch, with all four analysts in coverage maintaining the equivalent of a "strong buy" rating, and the average 12-month price target perched all the way up at $18.50.

On the charts, MRNS stock topped out at a three-year high of $10.54 on Oct. 1, before plummeting all the way down to a seven-month low near $4 by Nov. 27. The shares have now retraced 23.6% of this plunge, and are pacing for their highest close since Nov. 1.

A continued round of short covering could help Marinus Pharmaceuticals stock extend this recent bounce. Short interest is down almost 26% since its early July record peak, but there are 3.39 million shares still sold short. This represents a healthy 8.5% of the equity's available float, or 4.9 times the average daily pace of trading.

NutriSystem Inc. (NASDAQ:NTRI) stock is trading up 31.3% today at $44.90, following news the dieting expert is being bought by Tivity Health Inc (NASDAQ:TVTY) for $1.4 billion, or $47 per share. The shares had been trading around their downtrending 200-day moving average since early November, moving further away from their 52-week peak of $55.10 from last December.

This rally from NTRI stock may be a shock for all those shorting the name. Specifically, more than one-fifth of the float is held by short sellers, or more than nine times the average trading pace. Recent options traders had been bearish, too, with put buying more than tripling call buying during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Mitek Systems, Inc. (NASDAQ:MITK) is also gaining today, trading up 12% at $10.05, after ASG Technologies Group raised its buyout offer for the financial technology firm to $11.50 per share from $10. Elliott Management-backed ASG said it made the offer public because Mitek has refused to engage in reasonable discussions about a takeover deal.

MITK stock is now trading in double-digit territory for the first time since January, with the $10 mark acting as a ceiling in recent months. Earlier, in fact, the equity touched an annual high of $10.16. Still, the shares have enjoyed tremendous upside since bottoming at $6.32 in early October. All four brokerage firms covering Mitek Systems have "strong buy" recommendations.

Meanwhile, Yelp Inc (NYSE:YELP) stock is trading 2.1% higher at $35.33, after major shareholder and hedge fund SQN Investors LP called for an overhaul of the company's board, and said it wants the review site to consider all options, including a sale (subscription required). The stock has underperformed this year, down roughly 16% in 2018 and touching a 52-week low of $29.35 a month ago.

Most analysts have already taken a skeptical view of YELP shares, with 16 of the 21 in coverage handing out "hold" or "strong sell" recommendations. In a similar vein, options traders have pushed the 10-day put/call volume ratio at the ISE, CBOE, and PHLX to 2.29 -- ranking in the bearish 94th annual percentile.

Just before the Thanksgiving holiday, the National Association of Active Investment Managers (NAAIM) exposure index was sitting at its lowest point since February 2016, at 30.55. In other words, active money managers were very limited in their overall equity exposure, as the S&P 500 Index (SPX) was testing its October lows. However, NAAIM bulls have re-emerged with a vengeance, with the index more than doubling to 61.96 in the past two weeks -- something we haven't seen in more than three years.

There have been just 11 signals of this kind since 2006, considering one signal every month, per Schaeffer's Quantitative Analyst Chris Prybal. Specifically, the last time the NAAIM index jumped 100% or more in two weeks was in October 2015. Prior to that, you'd have to go back to October 2014, when the index skyrocketed 650%. Of note, this signal also flashed in March 2009, what we now know was the start of a years-long bull run.

Historically, a notable rush of reinvigorated NAAIM bulls has preceded strong S&P 500 returns. A week after signals, the SPX was up 1.2%, on average, and was higher 70% of the time. That's more than 10 times the index's average anytime one-week return of 0.1%, looking at data since 2006. Two weeks out, the S&P was up an impressive 2.8%, on average, and was higher 90% of the time. That's compared to an average anytime one-week return of just 0.3%, with a 62% positive rate.

One and two months out, it's a similar story. The S&P was up an average of 2.7% and 2.6%, respectively, and was higher 80% of the time after signals. That's far better than its average anytime returns for both time frames. Six months and a year later, the index also generated bigger-than-usual average gains of 5% and 9%, respectively. Plus, those returns would be much larger, if not for the 2008 signals (of which there are three), when the stock market was in the throes of the financial crisis.

The lone outlier is the three-month marker, with the index down an average of 0.3%, and higher just 60% of the time. That's mostly due to the steep 30.1% loss suffered after the July 2008 signal.

In conclusion, these NAAIM signals have preceded big rallies for the S&P historically, with the exception of the intermediate-to-long-term returns during the financial crisis. However, the stock market's trajectory after the most recent signal will likely be determined by the S&P 500's price action around a pair of key long-term moving averages, per Schaeffer's Senior V.P. of Research Todd Salamone.

It's a volatile session on Wall Street today, and United States Steel Corporation (NYSE:X) is no exception. X shares jumped 1% at the open after UBS upgraded the steel stock to "neutral" from "sell," saying its 2018 decline has created an attractive valuation. However, the brokerage firm also cut its price target to a Street-low $22, down from $28, and the equity was last seen down 1.6% at $20.97, fresh off a 17-month low of $20.42.

Options volume is accelerated, too, continuing a trend seen in recent sessions. In fact, X popped up on Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 S&P MidCap 400 Index (MID) stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. While today's activity is occurring on the call side, U.S. Steel options traders have been unusually put-skewed over the last two weeks.

At the International Securities Exchange, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), X's 10-day put/call volume ratio of 2.07 ranks in the 96th annual percentile, meaning long puts have been initiated relative to calls at a quicker-than-usual clip. The bulk of this action has centered at the December 22 puts, which were likely bought to open back on Nov. 27, when a speculator rolled down their December 24 puts.

Today, call traders are busier than usual, with 10,000 calls on the tape -- 1.5 times what's typically seen at this point -- compared to just 7,000 puts. The weekly 12/14 21.50-strike call is most active, and it looks like traders are selling to open the options, betting on a ceiling for the steel stock through this Friday's close.

Looking at the charts, U.S. Steel stock is down 56.3% from its March 1 seven-year high of $47.64, with its 10-day moving average ushering the shares to a 9.7% December loss so far. But while the equity is pacing for a roughly 32% fourth-quarter decline, it hasn't finished a week below the round $20 since May 2017.

The shares of Five Below Inc (NASDAQ:FIVE) are up 2.9% to trade at $98.21 today, after Loop Capital upgraded the discount retailer to "buy" from "hold," while nudging its price target up to $120 from $110. The analyst in coverage is encouraged by the company's improving merchandise and brand awareness, and believes it is "more economic downturn resistant" than other retailers.

It's been a volatile stretch for Five Below stock, based on its 30-day historical volatility of 54.7%, which ranks in the 92nd annual percentile. Back in September, FIVE gapped higher after a blowout earnings report, netting a record high of $136.13. The shares pulled back from there, but appear to have found support at their 200-day moving average. Overall, FIVE boasts a 48% lead year-to-date.

The equity is ripe for a short squeeze, and that could keep the wind at FIVE's back. Short interest increased by 19.2% in the last reporting period to 3.61 million shares, the most since Aug. 1. This now accounts for nearly 7% of the stock's float and at FIVE's average daily volume, it would take more than four days for all of the bearish bets to be covered.

In the options pits, calls are in vogue, despite limited absolute volume. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 3,012 calls were bought to open in the last 10 days, compared to 1,780 puts. This call/put volume ratio of 1.69 registers in the elevated 72nd percentile of its annual range, pointing to a healthier-than-usual appetite for bullish bets lately. 

"After Friday's move back below [SPY] $280, bulls should seek a move back above this round number and the FOMC decision-day close of $280.50, before getting aggressive..."
-- Monday Morning Outlook, November 12, 2018

"Despite last week's rally, equities are still locked in an area that is pivotal for bulls and bears alike. In other words, the bulls are not out of the woods, but the bears have to be somewhat disappointed in last week's advance... SPX resistance is in the form of a trendline drawn through the early October high -- one day prior to Powell's 'long way' remarks on rates -- through the mid-November high... Whereas the SPY 265 strike is put-heavy and the SPY 275 strike is call-heavy, amid an environment over the past couple of weeks of negative and positive headlines with regard to the Fed and trade talks with China, it is not a huge surprise to see the put-heavy strike defended and the call-heavy strike posing as resistance."
-- Monday Morning Outlook, December 3, 2018

Monday's session was about the only bright spot for equities last week. The SPDR S&P 500 ETF Trust (SPY - 263.57) gapped above potential resistance at the 275 strike that morning after President Donald Trump indicated progress in trade relations with China after a weekend G-20 dinner. But clouds quickly darkened as reports emerged about the lack of details with respect to this progress.

While it was announced the U.S. and China would suspend additional tariffs for 90 days, investors weighed the uncertainty of the outcome of the trade situation as the yield curve continued to flatten, hinting at slowing economic growth ahead. Talk of a pause in rate hikes ahead of an anticipated increase next week helped build support for stocks, albeit only temporarily. By Thursday and Friday, the SPY and SPX found themselves toying again with their October and November lows in the area of the put-heavy 265 strike that I discussed last week, which is also in the vicinity of the 80-week moving average, the importance of which I discussed in my commentary on Nov. 26:

"Since 1980, breaks of the 80-week moving average have usually preceded tests of the 160-week moving average, which approximates a roughly three-year moving average. With the 160-week moving average currently situated around 2,400, bulls run the risk of at least another 10% pullback if there is a significant breach of the 80-week moving average on a weekly closing basis. A break of the 160-week moving average would likely foreshadow further bear-market action."
-- Monday Morning Outlook, November 26, 2018

The bottom line is the SPY and S&P 500 Index (SPX - 2,633.08) failed at $280 and 2,800, respectively. Last month, I cautioned that you should be wary about rallies that fail to take these levels out convincingly. Within one day of closing around $280, the SPY found itself back below another resistance level at $275 and within one week, both the SPY and SPX found themselves below their respective 80-week moving averages for the second time in three weeks heading into the weekend, albeit only barely below.

Therefore, caution flags are out once again about the increased possibility of bear-market action in the coming months, or at the very least a further correction down to the 2,400 level on the SPX or $240 on the SPY -- site of the 160-week moving averages, also discussed in my late-November commentary.

The continued technical deterioration in the SPY has occurred in the immediate aftermath of the Fed holding the fed funds rate steady on Nov. 8. In the 22 instances during the current tightening cycle in which the Fed held rates steady at an FOMC meeting, the SPY has rallied 77% of the time in the one month following the pause, with an average return of 1.46%. During the past month, however, the SPY declined an eye-opening 6%. A decline of this magnitude when bullish conditions were in place is another risk for bulls.

An immediate risk to bulls, since we are only two weeks away from standard December expiration and amid the sharp decline last week, is the big put open interest lingering at the SPY 260 strike, a large majority of which was bought to open, according to Chicago Board Options Exchange (CBOE) data.

As long-time readers know, a big put open interest strike like this can sometimes act as a magnet due to "delta hedging," which occurs when sellers of the puts are forced to sell S&P futures to hedge their positions as the SPY approaches a put-heavy strike. Since the put options grow more sensitive to SPY action during the decline, sellers of the puts are forced into selling more and more S&P futures to remain neutral.

Admittedly, this is a tricky situation, as there is a bullish counter-argument to this situation. That is, any short positions associated with the 260-strike put open interest that exists now will get steadily unwound if the SPY remains above $260 and we move closer to expiration day.

But if the 260 strike breaks, selling could accelerate as shorting of futures accelerates. However, I would expect any selling related to delta-hedging to stop once SPY 255 and 250 are approached, as many of these puts were sold to open, which effectively dampens volatility -- unlike instances in which the puts are bought to open, which drives volatility.

The bulls do have a few arguments to make their case. The first is a repeat pattern emerging of the February-through-May action, in which the SPY made several lows around the area we have been probing since October. The main difference between these two time periods, however, is that longer-term moving averages did not break down earlier in the year.

The action in the Cboe Volatility Index (VIX - 23.23) last week was also interesting. On one hand, stocks nosedived when the VIX declined to the 16.28 level, which is 50% above the August closing low of 10.85. However, the VIX peaked around 25.15, which is half its 2018 intraday high. If we are still engulfed in a volatile trading range for the foreseeable future, buying opportunities will emerge around VIX 25, whereas bouts of selling will emerge on VIX declines to the 16 area. If my VIX read is correct, it is "advantage bulls" in the very near term. But if the VIX closes significantly above 25.15, watch out below.

Risks are growing for longer-term bulls, unless the SPX can quickly gather steam and rally back above 2,800 convincingly. Until then, the best they can hope for is the volatile range action that we are witnessing now.

Continue reading:

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Marvell Technology Group Ltd. (NASDAQ:MRVL) is bucking broader tech headwinds today, after the chipmaker reported adjusted third-quarter profit of 33 cents per share on $851 million in revenue -- more than analysts were expecting. And even though company forecast a roughly 10% decline in current-quarter storage revenue, MRVL stock is up 3% in electronic trading.

Not everyone is impressed with Marvell Technology's earnings report, though, with no fewer than seven analysts cutting their price targets on the chip stock. Morgan Stanley set the lowest bar at $19 -- down from $23. Jefferies, on the other hand, called MRVL's valuation "compelling."

Looking at the charts, the stock has been trending lower since its early-August peak of $22.25, with its 30-day moving average applying steady pressure in recent months. The shares bottomed at an annual low of $14.69 on Nov. 20, and were down almost 28% heading into today's trading, closing Tuesday at $15.50.

Options traders have been anticipating more downside for the tech stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MRVL's 10-day put/call volume ratio of 0.85 ranks in the 93rd annual percentile, meaning puts have been bought to open relative to calls at a quicker-than-usual clip.

On the other hand, short sellers have been cashing out during MRVL's recent slide. Short interest fell 17.8% in the most recent reporting period to 23.05 million shares. These bearish bets now account for just 3.7% of the stock's available float, or roughly two times its average daily pace of trading.

Tech stocks are once again in the spotlight today, as the arrest of Huawei's CFO sends shockwaves through the sector, and threatens U.S.-China trade relations. Meanwhile, FAANG stocks Facebook Inc. (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX) are in Stifel's crosshairs, with the brokerage firm downgrading one and cutting its price target on the other.

While U.S. markets were shuttered Wednesday to mourn President George H.W. Bush, a British lawmaker released 223 pages supporting claims that Facebook picked favorites regarding the sharing of user data, and strategically iced out companies it viewed as rivals. Stifel opined that the regulatory and political ramifications could eventually lead to restrictions on how the social network giant operates. In addition, the analyst noted the distrust growing among users, downgrading FB stock to "hold" from "buy."

It's been a rough stretch for Facebook recently, amid a stream of PR problems. The stock has dropped more than 38% since its July record high of $218.62, with rebound attempts stalling at its 30-day moving average. Today, FB shares have given up 2.7% to trade at $134.21.

In the options pits, put buying has been gaining in popularity. FB's 10-day put/call volume ratio of 0.75 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 91st percentile of its annual range, indicating that speculators have shown a much healthier-than-usual appetite for bearish bets during the past two weeks.

Netflix stock, meanwhile, was last seen 2.6% lower to trade at $268.17, after Stifel slashed its price target to $380 from $474. NFLX shares have also surrendered about 38% since their June record high of $423.20, pressured beneath their own 30-day trendline.

Nevertheless, most analysts remain bullish. NFLX boasts 22 "buy" or better endorsements, compared to nine lukewarm "holds" and only one "strong sell" rating. Plus, the average 12-month price target of $395.66 represents a premium of nearly 48% to the equity's current perch. A continued slide by the FAANG stock could bring downgrades or additional price-target cuts.

Traders looking to speculate on NFLX should consider short-term options. The equity's Schaeffer's Volatility Scorecard (SVS) stands at a lofty 97 out of 100, indicating the shares have handily exceeded options traders' volatility expectations in the past year.

The shares of animal drug maker Zoetis Inc (NYSE:ZTS) have taken a breather since touching a record high of $96.57 in early November. However, the outperforming equity could be ready to launch its next leg higher, with ZTS shares flashing historical buy signals.

Specifically, Zoetis stock is back within one standard deviation of both its 160-day and 200-day moving averages, after lengthy stretches north of these trendlines. In the past three years, there have been six similar pullbacks to the 160-day, after which ZTS was higher one month later 100% of the time, boasting an average gain of 7.36%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. There have been four similar retreats to the 200-day, after which ZTS was up an average of 7.55% a month later, and higher 100% of the time.

On the charts, the pharma concern has been in rally mode since early 2016, more than doubling in that time frame. More recently, ZTS has spent the past few months consolidating atop the $88 level, with the aforementioned trendlines now ascending into this neighborhood. At last check, the equity is down 1.3% on the day, trading at $89.23. Another 7.55% rally from current levels would put the shares just under $96.

While Zoetis options volume tends to run light, on an absolute basis, speculators have shown a growing affinity for bearish bets lately. On 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 1.14 is in the 85th percentile of its annual range. This suggests options buyers have picked up ZTS puts over calls at an accelerated clip in the past two weeks. An unwinding of this pessimism on another rally off trendline support could bode well for the shares.

The shares of Akorn, Inc. (NASDAQ:AKRX) have plunged 19.4% to trade at $4.51, earlier bottoming at an eight-year low of $3.54. The stock is reacting to a Delaware court ruling, which upheld an October judgement that found Germany-based Fresenius (FMS) legally ended its $4 billion bid for Akron back in April.

Against this backdrop, AKRX options volume is running at a faster-than-usual clip today, with roughly 6,350 calls and 2,800 puts on the tape -- four times what's typically seen at this point. The March 7.50 call is most active, where it looks like speculators may be liquidating their positions. Elsewhere, traders are potentially purchasing new positions at the January 2019 10-strike call, betting on a quick bounce into double-digit territory.

The 10 strike has been popular among options bulls, with the March 10 call home to AKRX's top open interest position, and data from Trade-Alert indicating at least some of the 13,016 contracts have been bought to open. Among front-month strikes, the deep out-of-the-money December 25 call is the most heavily populated, with 12,669 contracts outstanding. 

Outside of the options pits, short sellers have been cashing out on the devastated drug stock. Short interest has plunged 73% since hitting a record high 26.63 million shares last December. The 7.3 million AKRX shares still dedicated to these bearish bets account for 7.8% of the equity's available float, or about 2.2 times the average daily pace of trading. Today, the equity is on the short-sale restricted list.

What's notable is AKRX's inability to capitalize on this steady stream of buying power, with the shares down 86% year-to-date. Today's downside gap puts the security on track for a seventh straight daily loss, and in the red 34.3% on the week.

U.S. stocks are lower again today, amid lingering concerns about U.S.-China trade and after a tame jobs report. However, one group is bucking the trend: weed stocks. Aphria Inc (NYSE:APHA) is higher on a nod from Citron Research, while fellow pot stocks Aurora Cannabis Inc (NYSE:ACB) and Canopy Growth Corp (NYSE:CGC) are enjoying a halo lift from Cronos Group (CRON), which just scored a big investor in Altria (MO). Here's a closer look at what's moving the shares of APHA, ACB, and CGC.

Citron Sees 80% Upside for APHA

Notable short seller Citron Research today tweeted "Congrats to CRON," after Altria said it took a $1.8 billion stake in the company. Further, the tweet said fellow cannabis concern Aphria "is compelling on all metrics," and predicted a move up to $10 -- a premium of more than 80% to yesterday's close at $5.54.

APHA shares are among the best of the New York Stock Exchange (NYSE) today, up 7.2% to trade at $5.94. Earlier this week, the equity sank to record lows on a scathing report from Hindenburg Research and Quintessential Capital Management, alleging that Aphria's Latin American acquisitions are "virtually worthless." The stock just began trading on the NYSE on Nov. 2, and still remains more than 50% below its Nov. 7 peak of $13.45.

So far today, about 12,000 APHA calls have changed hands -- 10 times the average intraday pace, and roughly double the number of puts exchanged. That's already an all-time high for the freshman weed stock. Digging deeper, however, it appears some speculators are employing calls to bet on a short-term ceiling for the security, selling to open December 7.50 calls.

ACB Stock Rides Sector Tailwinds

Aurora Cannabis stock is enjoying sector tailwinds, last seen 8.7% higher at $5.74. The security is on pace to end atop its 10-day moving average for the first time in nearly a month, after yesterday touching its lowest price since ACB first began trading on the Big Board on Oct. 23. The shares are still down 33.5% from their record peak of $8.62 -- tagged on the day of their U.S. debut.

Despite the stock's slide, options traders have remained devotedly bullish. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 13 ACB calls for every put during the past two weeks. That trend is being echoed today, with around 8,600 calls exchanged so far -- two times the norm -- compared to fewer than 700 puts.

CGC Stock Bounces Off Support

Canopy Growth shares -- which have their own high-profile investor in Constellation Brands (STZ) -- are also enjoying a halo lift from CRON, last seen 3.1% higher to trade at $31.27. The stock has spent the past few weeks finding its footing in the $30-$32 region, and while CGC has surrendered about 47% since its Oct. 16 high of $59.25, touched just before Canada legalized recreational marijuana use, the shares have still more than doubled in the past year.

Coming into today, the pot stock was trading near oversold territory, with a 14-day Relative Strength Index (RSI) of 35. Should the equity extend today's bounce, there's plenty of fuel for a short squeeze to drive CGC higher. Short interest jumped 31% in the past two reporting periods, and now sits at a record high, with more than 10% of the stock's float sold short.

Transports have taken a hit during this week's broad-market sell-off, with the Dow Jones Transportation Average (DJT) pacing for its biggest weekly loss since August 2011-- down 7.9% so far. This pullback may have created attractive entry points for some names, with DJT component Union Pacific Corporation (NYSE:UNP) in particular flashing a reliable bull signal.

Specifically, in the wake of a 6.1% retreat from its Monday intraday peak at $159.63, UNP stock is now trading within one standard deviation of its 200-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the five other times since 2015 the equity has come this close to its 200-day trendline after a lengthy stretch above it, the shares were up 5.7%, on average, one month later. Plus, three-quarters of those returns were positive.

More broadly speaking, Union Pacific stock has gained 11.3% so far in 2018. However, a retreat from the equity's Sept. 21 record high of $165.63 had the shares breaching a long-term floor at their 120-day moving average, though the 200-day quickly swooped in as support. At last check, UNP is down 1.6% at $149.21.

Options traders have been targeting more losses for the railroad stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), UNP's 10-day put/call volume ratio of 3.69 ranks in the 100th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual pace.

This skepticism is seen outside of the options pits, too, where nine of 16 analysts maintain a "hold" or "strong sell" rating on UNP. Should UNP stage another sharp bounce off its 200-day moving average, a capitulation from some of the weaker bearish hands and/or a round of upgrades could create short-term tailwinds for the shares.