Buzz Stocks: Baidu, Conatus, Arrowhead Research

Today's stocks to watch include Baidu Inc (ADR) (BIDU), Conatus Pharmaceuticals Inc (CNAT), and Arrowhead Research Corp (ARWR)

Sep 24, 2015 at 9:28 AM

U.S. benchmarks are pointing lower in pre-market trading, as investors breathlessly await Fed Chair Janet Yellen's speech later in the day. Today's equities in focus are Chinese Internet search giant Baidu Inc (ADR) (NASDAQ:BIDU) and drug firms Conatus Pharmaceuticals Inc (NASDAQ:CNAT) and Arrowhead Research Corp (NASDAQ:ARWR).

BIDU is slightly lower ahead of the opening bell, after a report surfaced that it has established a partnership with Dow component Microsoft (NASDAQ:MSFT) (subscription required). Baidu Inc (ADR) has struggled of late, dropping 47% from last November's all-time high of $251.99 to yesterday's close of $132.37. Short-term option players have taken note of the Internet giant's technical foibles, as BIDU's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.73 is higher than 73% of the readings taken during the past 52 weeks. The stock is in danger of further downside, especially if analysts shift their coverage. At last check, eight of the 10 analysts tracking BIDU rate it a "strong buy."

CNAT is set to start the morning significantly higher, up 17% in electronic trading after announcing that its drug, emricasan, lowered blood pressure in patients with cirrhosis (meeting its study goal). Conatus Pharmaceuticals Inc has had a good week -- and the shares have responded accordingly. However, short sellers have stocked up on CNAT, as 9% of the equity's float is sold short. If today's news (combined with the good news earlier in the week) causes short sellers to abandon their bearish bets, a short-covering rally could ensue. With a short-interest ratio of 9.70, it could take nearly 10 days for the short sellers to buy back their pessimistic positions, at CNAT's average daily volume.

Like its pharmaceutical sector mate CNAT, ARWR is pointed significantly higher, jumping 33.5% ahead of the opening bell thanks to upbeat results from a drug trial. Specifically, Arrowhead Research Corp announced positive results of its Phase 2A study of its Hepatitis B candidate drug ARC-520. Technically, the stock has wallowed below the $10 level since last fall, and faces resistance from its 80-month moving average. That said, today's news could spark a significant short-squeeze situation, as 24.5% of ARWR's float is sold short.

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