'The Interview' is Dead. What About Sony Corp (ADR) (SNE) Shares?

Sony Corp (ADR) put buyers have picked up the pace in recent weeks

by Alex Eppstein

Published on Dec 18, 2014 at 2:29 PM
Updated on Apr 20, 2015 at 5:32 PM

So the news everyone is talking about is the decision by Sony Corp's (ADR) (NYSE:SNE) movie studio to pull the plug on "The Interview" -- the Seth Rogen flick about the assassination of North Korean dictator Kim Jong-un -- following anonymous threats. Of course, this comes just days after Sony Pictures Entertainment balked at the notion of canceling the film.

The movie has been an incredible source of controversy -- which the filmmakers likely understood during production, considering they reportedly consulted the U.S. State Department about the movie's final scene, featuring Kim's fiery death. Of course, it comes as little surprise in this digital age that the controversial scene has hit the Internet, despite the best efforts of hackers to suppress the movie in toto. Even less surprising -- government officials have confirmed that North Korea was "centrally involved" in the cyberattack.

Amid all of these developments, SNE shares have moved sharply. The market seemingly ignored the initial data breach, which surfaced during the final week of November. In fact, the stock continued to trend higher atop its 10-day moving average, eventually topping out at an annual high of $22.32 on Dec. 1, before entering a brief period of consolidation in the $22 area.

In the ensuing days, however, SNE began a sharp descent. The equity gapped lower on Dec. 8 -- as hackers took down the company's PlayStation Network -- and eventually pulled all the way back to its 50-day moving average earlier this week. The shares have since bounced, up 3.4% today -- and 7% from their intraweek low of $19.71 on Monday and Tuesday -- to trade at $21.08.

Daily Chart of SNE Since October 2014 With 10-Day and 50-Day Moving Averages

All the while, sentiment in the options pits has swung to a bearish extreme. SNE's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 5.51 is higher than all similar readings from the past year. To put that in perspective, the ratio prior to the cyberattack was a slim 0.12, with long calls outweighing long puts by a nearly 10-to-1 margin.

Going forward, however, this could be a boon for Sony Corp (ADR) (NYSE:SNE). If the shares continue to rebound, a capitulation among the recent bearish bettors could spell additional upside.


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