Drug Stock Heads for Best Day in Years on DMD Data

NTNX hit a 12-month high earlier this month

Jan 25, 2018 at 3:17 PM
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The U.S. stock market has carved out fresh all-time highs today on the back of some well-received blue-chip earnings. Among individual equities making big moves are biotech Summit Therapeutics PLC (NASDAQ:SMMT), cloud concern Nutanix Inc (NASDAQ:NTNX), and Rubbermaid parent Newell Brands Inc (NYSE:NWL). Here's a quick look at how shares of SMMT, NTNX, and NWL are trading.

Summit Therapeutics Gaps Above Key Resistance

After being halted in electronic trading, Summit Therapeutics stock was last seen 11.9% higher at $13.66 -- on track for its biggest one-day percentage gain since October 2016, and its highest close since before a mid-September bear gap. Boosting the shares is positive mid-stage data for the company's duchenne muscular dystrophy (DMD) drug, which showed a notable reduction in muscle damage.

The stock has been fighting back from its Nov. 2 annual low at $8.80, but had recently run out of steam near $12.85 -- a 50% Fibonacci retracement of SMMT's fourth-quarter plunge. Thanks to today's surge, the shares are now trading well above here, and are sporting a 26.5% year-to-date gain.

A number of short sellers got out just in the nick of time, too. Short interest plunged 80.25% in the most recent reporting period, and these bearish bets now account for a slim 0.08% of SMMT's available float.

Nutanix Stock Downgraded on Corporate Tax Cut Concerns

J.P. Morgan Securities downgraded Nutanix to "underweight" from "neutral," with the brokerage firm saying it's backing away from companies that "lack earnings, cash flow valuation support, do not benefit materially from corporate tax cuts and would not screen into value portfolios." In reaction, NTNX stock is down 8% to trade at $33.48 -- breaching long-term support atop its 80-day moving average.

The shares had been charging higher since notching a record low of $14.38 last May, and are still up 114% on a year-over-year basis. In fact, Nutanix stock hit an annual high of $38.80 on Jan. 9.

Part of the stock's recent upside was likely due to an intense round of short covering. Since topping out at a record high of 16.66 million shares in mid-September, short interest has plunged almost 53%. However, the 7.86 million shares that are still sold short represent a lofty 22.12% of the security's available float.

Sale Talk Sends Newell Brands Stock Spiraling

Newell Brands said it was exploring strategic options, including the sale of some assets that would result in fewer factories and warehouses -- and potentially halve is customer base. The move comes as major retailers cut prices amid increasing competition, with the consumer products specialist also citing last fall's Toys "R" Us bankruptcy. The company also lowered its full-year forecasts for this year and next.

As a result, NWL stock tapped $23.85 earlier -- its lowest mark since March 2013 -- and was last seen down 20.7% at $24.75. The shares are now staring at a nearly 53% six-month deficit, and put players are pouncing.

Specifically, 38,654 NWL puts are on the tape so far -- 40 times what's typically seen at this point in the day, and volume pacing in the 100th annual percentile. However, considering the stock's 30-day at-the-money implied volatility of 52.5% is at a new 12-month high, indicating short-term options premium is relatively rich at the moment, traders appear to be selling to open the February 23 puts.

If this is the case, put writers could be hoping for a post-earnings volatility crush. Newell Brands is expected to report fourth-quarter earnings the morning of front-month options expiration on Friday, Feb. 16.

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