3 Stocks Sinking After Bear Notes

DXC plunged more than 30% on Friday after a weak forecast

Aug 12, 2019 at 2:27 PM
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Political unrest in Hong Kong is creating chaos in global markets, with U.S. stocks down sharply today. Among individual names making notable moves are Chinese internet firm NetEase Inc (NASDAQ:NTES), crane manufacturer Manitowoc Company Inc (NYSE:MTW), and business-to-business IT specialist DXC Technology Co (NYSE:DXC). Here's a quick look at what's moving the shares of NTES, MTW, and DXC.

NetEase Set to Snap Win Streak

NetEase stock is down 2.5% to trade at $236.75, after Goldman Sachs downgraded the name to "neutral" from "buy," and cut its price target to $270 from $293. The analyst in coverage cited Chinese regulatory headwinds, which will "continue to limit the supply of new games in 2019."

Today's downside has the stock set to snap its four-day win streak, a rally that brought NTES head to head with its 200-day moving average. Options traders had been positioning for more upside. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NetEase's 10-day call/put volume ratio of 1.75 ranks in the 76th annual percentile, meaning calls have been bought to open over puts at an accelerated clip in recent weeks.

Manitowoc Stock Eyes Worst Day of 2019

Baird cut its rating on Manitowoc Company to "neutral" from "outperform," and lowered its price target by $3 to $19. This follows the Wisconsin-based company's second-quarter revenue miss from last week, and has the construction stock down 6.9% at $15.83 -- on track for its worst day since Dec. 4. Longer term, the shares are up roughly 6% in 2019, though gains have been capped in the $18.50-$19.00 range.

In the options pits, the September 14 put is home to peak open interest, and data from Trade-Alert points to buy-to-open activity here. If this is the case, speculative players expect MTW stock to sink below $14 over the next two months, territory not charted since late May/early June.

DXC Technology Options Hot During Slump

DXC Technology plunged 30.5% on Friday after the company's weak forecast was met with a round of bearish analyst notes. The hits keep on coming, with Citigroup slashing its price target by $17 to $60, citing DXC "unexpectedly disappointing quarter." In reaction, the stock is down 5% at $34.12, earlier tagging a three-year low of $33.81.

DXC options volume is running hot amid this extended sell-off, with roughly 52,000 calls and 50,000 puts on the tape so far -- 22 times what's typically seen at this point, and a new annual high. The September 32.50 put and 37.50 call are most active, due to what appears to be the initiation of a collar strategy. Elsewhere, speculators may be selling to open August 35 calls, betting on the $35 to serve as a ceiling through expiration at the close this Friday, Aug. 16.


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