United States Steel Corporation (X) Drop Doesn't Shake Bulls

United States Steel Corporation (X) is down today, but could bounce from its 10-day trendline


Published on Jan 29, 2015 at 2:16 PM
Updated on Apr 20, 2015 at 5:32 PM

United States Steel Corporation (NYSE:X) has reversed course following yesterday's earnings-induced bull gap, and at last check was 5.5% lower at $22.28. Hitting the shares is a price-target cut to $37 from $55 at Nomura, as well as a downwardly revised valuation and full-year earnings expectations from Wells Fargo. However, none of this is stopping option bulls from wagering on near-term upside.

X calls are in demand this afternoon, with volume running at 1.3 times the expected intraday amount. Seeing buy-to-open activity is the weekly 2/6 24-strike call, as speculators are confident of a quick bounce. Specifically, the buyers believe X will muscle atop $24 by next Friday's close, when the weekly series expires.

On the charts, the stock's 10-day moving average has contained today's pullback so far. This trendline has served as resistance since early November, and today's bulls may be counting on a role-reversal to support.

During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), puts have been the options of choice. Specifically, X's 10-day put/call volume ratio across these exchanges is 1.44 -- higher than 77% of all similar readings from the last year.

Pessimism extends beyond the options pits, as well. In fact, 29.3% of United States Steel Corporation's (NYSE:X) float is dedicated to short interest -- which would take more than a week to cover, at the stock's typical daily trading level. In fact, it's possible some of today's call buyers are shorts attempting to hedge against a near-term rally.

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