Put Volume Spikes on Cypress Semiconductor Corporation

Puts are crossing the tape at a fast and furious pace on Cypress Semiconductor Corporation (CY) today, with roughly 22,000 of these bearishly oriented options trading so far. By contrast, the stock was only expected to see put volume of about 600 contracts.

The day's most popular strike by a mile is the June 12 put, where 11,233 contracts have changed hands on open interest of 11,704 contracts. With 77% of these contracts trading at the ask price -- and implied volatility on the June 12 put jumping 4.1% so far -- it seems that buyers are responsible for the bulk of today's activity.

The heavy attention being paid to puts today is a continuation of the recent trend on CY, which has garnered a 10-day International Securities Exchange (ISE) put/call volume ratio of 3.12. This ratio ranks higher than 92.5% of other such readings taken during the past year, suggesting that traders have rarely shown a greater appetite for bearish bets over bullish.

However, this isn't necessarily outright pessimistic speculation. With CY tapping a fresh all-time high of $12.55 earlier this week, it's possible that cautious investors are looking to lock in some paper profits by purchasing protective puts on the shares. By purchasing June 12 puts, these traders have the right to sell 100 shares per contract of CY at no less than $12 apiece.

On the charts, CY is currently pulling back from record-high territory, with the stock off nearly 2% at last check. However, the shares remain situated comfortably within their recent trading range between $12 and $12.50, with support from their 10-week and 20-week moving averages resting not far below.

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Put Trading Rises on China Mobile Ltd. (CHL) Ahead of Earnings News

China Mobile Ltd. (CHL) announced that its 2009 net income totaled 115.21 billion yuan ($16.88 billion), or 5.74 yuan a share, up 2.3% from 112.4 billion yuan, or 5.62 yuan a share, a year earlier. Revenue was 452.1 billion yuan, an on-year rise of 9.8% from 411.81 billion yuan. China Mobile said its subscriber base grew by 14.2% during the year to 522 million users.

In addition, the telecom company proposed a final dividend of 1.46 Hong Kong dollar (19 U.S. cents) a share, compared to final dividend of 1.40 Hong Kong dollar a year ago.

Options players are extremely skeptical of the shares. The International Securities Exchange (ISE) has reported 1.2 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 92% of all those taken during the past year, pointing to growing skepticism.

Furthermore, the Schaeffer's put/call open interest ratio comes in at 0.84, which is higher than 64% of all those taken during the past 12 months.

Technically speaking, the stock has gained more than 4% since the beginning of 2010. The equity has recently bounced off support in the 47 region but it is still facing short-term resistance at the 50 level.

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Sentiment Shifts Toward Burger King Holdings (BKC) as Call Trading Rises

Burger King Holdings (BKC) is poised to edge higher this morning after it was upgraded from "hold" to "buy" at Deutsche Bank after a 60% underperformance relative to the market over the past year. "While the stock has bounced a bit recently, we see room for further upside from here as sales and margins remain well below cyclical peaks and as investors may begin to seek out cheaper names that can still benefit from a recovering economy," the broker said.

There is ample room for more analysts to jump on the stock's bandwagon. According to Zacks, the stock has earned 14 "hold" ratings and just four "strong buys." Should more of the brokerage firms jump shift to the bulls' camp, it could increase the buying pressure on the shares.

In fact, options players are already starting to make the switch to the bulls' camp. The International Securities Exchange (ISE) has reported more than five calls purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 76% of all those taken during the past 12 months, pointing to a rising optimism.

However, there is still room for optimistic sentiment to grow. The Schaeffer's put/call open interest ratio comes in at 1.29, which is higher than 74% of all those taken during the past 12 months. In other words, short-term options players have been more pessimistically aligned toward the shares only 26% of the time during the past year.

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HSBC Holdings (HBC) Downgraded and Put Trading Soars

HSBC Holdings (HBC) could stumble this morning following a downgrade at FBR from "outperform" to "market perform." The broker said it continues to believe in the prospects for medium-term growth and U.S. recovery at the bank, but added it feels that the market will require more evidence of that recovery before it is priced into HBC's stock. FBR noted that peer-group companies in the U.S. generally reported improved asset quality in the fourth quarter, but HSBC Finance's deteriorated. "Whilst this may be a seasonal uptick, we believe it will take at least one further set of results to explain this divergence from U.S. peers," the broker said.

There is still ample room for additional downgrades. According to Zacks, the stock has earned six "strong buy" ratings and four "holds. Any additional downgrades could weigh on the shares.

Meanwhile, options players have taken a bearish stance. The Schaeffer's put/call open interest ratio comes in at 2.02, as put open interest doubles call open interest among options slated to expire in less than three months. This reading is higher than 79% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 21% of the time.

Furthermore, the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have seen an increase in put trading. The 50-day put/call volume ratio comes in at 1.91, which is higher than 84% of all those taken during the past year, pointing to a growing skepticism.

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Option Skews - Relatively Heavy Call Activity on JPMorgan Chase & Co, Intel Corp, Skechers USA Inc, Research in Motion Limited

Here are the stocks that saw a bias toward call activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Contrarians may want to focus on situations where there is call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign .

Companies included in today's scan results: Citigroup Inc (C), DIAMONDS Trust Series I (DIA), CALPINE Corp. (CPN), JPMorgan Chase & Co (JPM), Intel Corp. (INTC), Arch Coal (ACI), Alcoa (AA), General Electric (GE), Boston Scientific (BSX), Lincoln National (LNC), Skechers USA Inc (SKX), SPDR Gold Trust (GLD), NVIDIA Corp. (NVDA), Clorox (CLX), United States Steel Corp (X), Weatherford International (WFT), Qualcomm Inc (QCOM), MEMC Electronic Materials Inc (WFR), 3M (MMM), Google Inc (GOOG), Sprint Nextel (S), Yahoo! Inc (YHOO), Potash Corp. of Saskatchewan (POT), Exxon Mobil (XOM), Research in Motion Limited (RIMM).

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Option Skews - Relatively Heavy Put Activity on Bank of America Corp, Wal-Mart Stores Inc, CIENA Corp

Here are the stocks that saw a bias toward put activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Contrarians may want to focus on situations where there is put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign.

Companies included in today's scan results: PowerShares QQQ Trust (QQQQ), Bank of America Corp (BAC), Wal-Mart Stores Inc (WMT), SunTrust Banks (STI), Evergreen Solar Inc (ESLR), Cummins (CMI), Family Dollar Stores (FDO), Lowe's Companies (LOW), Barrick Gold (ABX), CIENA Corp. (CIEN), AFLAC Incorporated (AFL), Oracle Corp. (ORCL), Home Depot (HD), Tenet Healthcare (THC), Manitowoc (MTW), Garmin (GRMN), Microchip Technology Incorporated (MCHP), Potlatch (PCH), Kinetic Concepts (KCI), Yum! Brands (YUM), Coca-Cola Enterprises (CCE), Cliffs Natural Resources Inc (CLF), Ross Stores (ROST), Wynn Resorts Limited (WYNN), Continental Airlines (CAL).

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Stocks Advancing Amid Heavy Short Interest - Crocs Inc, Jazz Pharmaceuticals Inc, Garmin Ltd, Suntech Power Holdings Co Ltd

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

Methodology - the query scans a database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10 percent of their float sold short and showed a gain in the previous trading day. This can be used as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: BankAtlantic Bancorp (BBX), Pacific Capital Bancorp (PCBC), Crocs, Inc. (CROX), Jazz Pharmaceuticals, Inc. (JAZZ), Banner Corp. (BANR), Martin Marietta Materials (MLM), Vulcan Materials (VMC), International Bancshares (IBOC), Fannie Mae (FNM), TBS International Limited (TBSI), Zale Corp. (ZLC), Freddie Mac (FRE), Lamar Advertising (LAMR), American Axle & Manufact. Holdings Inc (AXL), Netlist, Inc. (NLST), Massey Energy (MEE), Chiquita Brands International (CQB), Lithia Motors (LAD), Garmin Ltd (GRMN), FormFactor (FORM), Suntech Power Holdings Co Ltd (STP), Cascade Bancorp (CACB), Greenhill (GHL), Coinstar (CSTR), Jack In The Box (JBX).

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Stocks Showing Unusually Heavy Volume - The Medicines Co, Cardica Inc, KongZhong Corp, China Finance Online Co

Here are the results for today's unusual stock volume scan. The scan looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.

Companies included in today's scan are: Fuqi International Inc (FUQI), The Medicines Company (MDCO), Cardica, Inc. (CRDC), Polycom (PLCM), Vitesse Semiconductor (VTSS), KongZhong Corp (KONG), China Finance Online Co. (JRJC), Akeena Solar Inc (AKNS), Federal Agricultural Mortgage (AGM), LSI Logic (LSI), Ascent Solar Technologies Inc (ASTI), Jazz Pharmaceuticals, Inc. (JAZZ), Multimedia Games (MGAM), Blockbuster (BBI), RXi Pharmaceuticals Corp (RXII), Hartford Financial Services (HIG), Vulcan Materials (VMC), ARIAD Pharmaceuticals (ARIA), Citrix Systems (CTXS), optionsXpress Holdings Inc (OXPS), JDA Software Group Inc (JDAS), Fannie Mae (FNM), Pharmasset, Inc. (VRUS), Freddie Mac (FRE), CIT Group Inc (CIT).

These are the top stocks from today's scan, which has some basic filters to eliminate stocks that don't trade frequently. A description of the column headings is below.

• Move Previous Day - yesterday's percent return.
• Volume Increase - looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.
• Close - yesterday's closing price.
• Total Ratings - number of analysts who track the stock, according to Zacks.
• Buy Percent - percent of the analysts who rate the stock as a "buy". This can help gauge sentiment and potential buying demand. If everyone already loves a stock, that means a steady stream of new money will need to enter the stock to fuel a rally.

Note - sentiment data is current as of the previous trading day...

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Futures on the Dow Jones Industrial Average Suggest a Flat Open

Good morning everyone - welcome to Thursday. We start the day with stock futures more or less flat. The S&Ps are within a few cents of fair value. As they stand now, futures on the Dow Jones Industrial Average (DJIA) are suggesting an open that would be within 5 points of Wednesday's close.

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Daily Wrap-up - A 48-Point Gain for the Dow Jones Industrial Average

The day ends with the Dow Jones Industrial Average (DJIA) up 48 points. The S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) also posted moderate gains. The Semiconductor HOLDRS (SMH) and Regional Bank HOLDRS (RKH) led while the streetTRACKS Gold (GLD) and Amex Biotech Index (BTK) lagged.

Chart Courtesy of Thomson Reuters

Click here for symbol descriptions

My midday post noted that all the indexes tagged a new annual today. The charts below show the market is overbought but in an uptrend.

Charts Courtesy of Thomson Reuters

My earlier post also mentioned to be on the lookout for some thoughts from Bernie Schaeffer about the 160-month moving average. If you missed it, you can find his commentary here - Schaeffer on Charts: Taking the Long View. This is a must read. And that is where I will pick up in the morning. Have a nice evening.

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Speculators Snap Up At-the-Money Calls on Applied Materials, Inc.

Call volume has spiked to six times the usual level today on Applied Materials, Inc. (AMAT), with approximately 49,000 contracts crossing the tape so far. By contrast, the stock was only expected to see about 8,000 calls change hands today.

Most of this activity is centered around AMAT's April 13 call, which will assume front-month status on Monday. This at-the-money strike has traded volume of 33,246 contracts on open interest of 17,121 contracts, indicating that a healthy portion of today's volume consists of newly opened calls.

With the majority of these calls crossing the tape at the ask price, buyers appear to be responsible for most of the volume at the April 13 strike. Implied volatility on the option is up 1.5% this afternoon, confirming that demand is on the rise.

Today's bullish onslaught is simply more of the same for AMAT, which has racked up a 10-day International Securities Exchange (ISE) call/put volume ratio of 6.10. Not only does this ratio reveal that traders have bought to open six times more calls than puts during the past two weeks, it also ranks higher than 78.1% of comparable readings taken during the previous year -- suggesting that option players are showing a greater appetite than usual for calls over puts.

However, call players might be disappointed if they're expecting AMAT to muscle above $13 during the next month. Resistance from the stock's 10-week and 20-week moving averages -- which haven't been bested on a weekly closing basis since mid-January -- is resting just below this popular strike.

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Midday Market Check - The Dow Jones Industrial Average Gains 55 Points

We head into the second half of the session with the Dow Jones Industrial Average (DJIA) up 55 points. The average is at its best levels of the day and hitting a new annual high. The S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) are each posting moderate gains and hitting new annual highs as well.

Chart Courtesy of Thomson Reuters

Today's strongest groups are the Oil & Gas Index (XOI), Semiconductor HOLDRS (SMH), and Regional Bank HOLDRS (RKH). The Amex Biotech Index (BTK), AMEX Pharmaceutical Index (DRG), and streetTRACKS Gold (GLD) are the weakest areas.

Click here for symbol descriptions

Tiffany & Co. (NYSE: TIF) and Fuqi International, Inc. (NASDAQ: FUQI) are among the stocks seeing unusual option volume so far today.

Click image to see live data from
WhatsTrading.com in our Options Center

Shares are Tiffany are more or less flat but option volume is running 81 times the average with 99% of the activity on the call side. A check of the company's dividend history page shows the stock goes ex-div tomorrow. Whenever I see heavy option volume ahead of earnings my first thought is that it is a dividend capture strategy. Fuqi International is a different story. Last week I looked at the sentiment behind the stock and talked about the constructive price action. Obviously, I was wrong about that as the stock is down over 35% after concerning comments from the company. Option volume is running 9 times the norm with slight bias toward puts.

Yesterday ended with moderate gains as the SPX pushed through its January highs. The DJIA is now challenging its peak from two month ago. A breakout here would (obviously) put all of the major indexes above former resistance. The market is overbought on a short-term basis but that former resistance would be viewed as support. Also, I have been exchanging some emails with Bernie Schaeffer about the 160-month moving average. Look for some more on that soon...

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Call Writer Bets on Stagnant Price Action for Meridian Bioscience, Inc.

Call volume has spiked to 95 times the norm today on lightly traded Meridian Bioscience, Inc. (VIVO), with more than 1,100 contracts crossing the tape so far. This represents a major increase over the equity's expected call volume of just about a dozen contracts.

However, this doesn't appear to be an uptick in bullish speculation. Shortly after the open, a block of 1,000 calls traded at the bid price on VIVO's July 22.50 call, indicating they were most likely sold. With only 166 contracts in residence at this back-month strike, it's a safe bet that these are newly opened positions.

By writing calls at the 22.50 strike, this speculator is essentially wagering that VIVO will remain stuck beneath the $22.50 level through July expiration. In other words, it's a bet on relatively stagnant price action during the intermediate term. If the option player's prediction pans out, she'll get to retain the initial upfront premium from the sale of the calls as her maximum potential profit.

With the right amount of money in your margin account, it's possible to write calls on stocks you don't own. This strategy is known as a "naked call." However, traders who own the underlying equity can also write out-of-the-money calls, using the strategy to generate profits during periods of sluggish price action. This tactic is known as the "covered call."

On the charts, VIVO has plummeted more than 16% today, breaching support at its 10-day and 20-day moving averages in the process. The stock is swallowing a steep drop after lowering its fiscal 2010 earnings outlook, and the shares are now testing previous support near the $19-to-$20 neighborhood.

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The Sentiment Behind Polycom Inc

There is some buzz about Polycom, Inc. (NASDAQ: PLCM) as the stock jumps to a new annual high. Here is a look at the sentiment profile...

(Click image to see live data)

As shown below, shares of Polycom pushed through resistance last week and they are extending that rally here. However, only 7 of 19 analysts (37%) rank the stock with a buy rating. Short interest has been rebounding after a decline. According to data collected by our Quantified Analysis department, 9% of the stock's float is sold short. The open interest configuration graph shows light build ups for March but the April configuration is more skewed to calls and that may intensify after today. A look to the option chain shows over 10,000 April 30 calls have traded so far. Open interest at that strike is only 5,700 contracts.

Chart Courtesy of Thomson Reuters

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Option Skews - Relatively Heavy Call Activity on Citigroup Inc, American International Group Inc, Cisco Systems Inc

Here are the stocks that saw a bias toward call activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective.

Citigroup Inc. (NYSE: C) and American International Group, Inc. (NYSE: AIG) both made moves on unusually heavy stock volume last week. Both stocks have since pulled back but Citigroup remains above former resistance near 3.70 and American International Group is so far holding short-term support near 33.

Cisco Systems, Inc. (NASDAQ: CSCO) broke to a new high last week and has been consolidating the gains. The equity is overbought but near-term support sits at 25.

Companies included in today's scan results: Citigroup Inc (C), Wells Fargo & Co (WFC), Intel Corp. (INTC), General Electric (GE), Bank of America Corp (BAC), Allegheny Energy (AYE), Las Vegas Sands Corp (LVS), American International Group Inc (AIG), Microsoft Corp (MSFT), Cisco Systems Inc (CSCO), NVIDIA Corp. (NVDA), Merck (MRK), Potash Corp. of Saskatchewan (POT), Monsanto Co (MON), MGM Mirage (MGM), Wal-Mart Stores Inc (WMT), WellPoint Health Networks (WLP), Pfizer (PFE), Goldman Sachs Group (GS), Gannett Co. (GCI), Yahoo! Inc (YHOO), Dow Chemical (DOW), Micron Technology Inc (MU), Oracle Corp. (ORCL), Aetna (AET).

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Option Skews - Relatively Heavy Put Activity on Verizon Communications Inc, AT&T Inc, Southwest Airlines Co

Here are the stocks that saw a bias toward put activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) both saw some put activity on Tuesday. A look to the weekly charts shows both stocks are near the mid-point of an intermediate-term consolidation.

Meanwhile, shares of Southwest Airlines Co. (NYSE: LUV) have shown strength. The stock has been trending steadily higher since last March and hit a new annual high yesterday.

Companies included in today's scan results: PowerShares QQQ Trust (QQQQ), SPDR Gold Trust (GLD), Verizon Communications (VZ), Coca-Cola (KO), Southwest Airlines (LUV), American Superconductor (AMSC), SunTrust Banks (STI), Home Depot (HD), FedEx Corp. (FDX), Cummins (CMI), Atheros Communications (ATHR), Alcoa (AA), Transocean (RIG), Western Digital (WDC), Kraft Foods (KFT), Altera Corp. (ALTR), Kimberly-Clark (KMB), Coca-Cola Enterprises (CCE), Rowan Companies (RDC), Sherwin-Williams (SHW), Boeing (BA), AT&T Corp. (T), Garmin (GRMN), Arkansas Best (ABFS), Focus Media Holding Limited (FMCN).

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Stocks Advancing Amid Heavy Short Interest - MGM Mirage, Harley-Davidson Inc, Hecla Mining Co, Monster Worldwide Inc

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

MGM Mirage (NYSE: MGM) remains in the intermediate-term consolidation but showed some short-term signs of life yesterday.

Harley-Davidson, Inc. (NYSE: HOG) jumped amid the rumors noted yesterday.

Hecla Mining Company (NYSE: HL) is challenging short-term resistance that begins near 5.75.

Monster Worldwide, Inc. (NYSE: MWW) has rallied back from recent selling. However, the equity would need to push through 19 to break the trading range that has been in place since September. That overhead resistance is still 12% above yesterday's close.

Methodology - the query scans my database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10 percent of their float sold short and showed a gain in the previous trading day. I use this as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: Zale Corp. (ZLC), BankAtlantic Bancorp (BBX), Synovus Financial (SNV), Pacific Capital Bancorp (PCBC), MGM Mirage (MGM), Las Vegas Sands Corp (LVS), Harley-Davidson (HOG), Independent Bank (IBCP), Arch Coal (ACI), Beazer Homes USA (BZH), Barnes & Noble (BKS), Photronics (PLAB), Susquehanna Bancshares (SUSQ), Hovnanian Enterprises (HOV), Sotheby's Holdings (BID), Cell Therapeutics (CTIC), Hecla Mining (HL), Zions Bancorporation (ZION), Monster Worldwide (MWW), American Commercial Lines Inc. (ACLI), Schnitzer Steel Industries (SCHN), AnnTaylor Stores (ANN), Power-One (PWER), Teradyne (TER), ITT Educational Services (ESI).

Like this post?

If so, you can get it delivered to your inbox every day. To try it, simply click here and sign in with your Schaeffer's username and password. If you don't have a free membership, you can create one in just seconds. Once on the alerts page, select "phrase" from the first drop down box, select "intraday", and enter "Stocks Advancing Amid Heavy Short Interest" into the third box. You can repeat that process for other regular posts or change the setting to "author" and enter "Nick Perry" to get all the posts. Just remember, I make multiple posts a day so you will get numerous emails if you select intraday...

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Stocks Showing Unusually Heavy Volume - Icagen Inc, ArthroCare Corp, Pharmasset Inc, ARIAD Pharmaceuticals Inc, Starbucks Corp

Here are the results for today's unusual stock volume scan. The scan looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.

Companies included in today's scan are: Icagen, Inc. (ICGN), DRDGOLD Ltd. (DROOY), Knight Capital Group Inc (NITE), W Holding Incorporated (WHI), ArthroCare Corp (ARTC), Harley-Davidson (HOG), Techwell, Inc. (TWLL), Movado Group (MOV), DSW Inc. (DSW), BankAtlantic Bancorp (BBX), American Superconductor (AMSC), Pharmasset, Inc. (VRUS), Boston Scientific (BSX), Comverse Technology (CMVT), General Electric (GE), Columbia Sportswear (COLM), Beazer Homes USA (BZH), GigaMedia Limited (GIGM), ARIAD Pharmaceuticals Inc (ARIA), Clean Energy Fuels Corp. (CLNE), Intel Corp. (INTC), Starbucks Corp (SBUX), SonicWALL (SNWL), Tiffany & Co. (TIF), Angiotech Pharmaceuticals (ANPI).

These are the top stocks from today's scan, which has some basic filters to eliminate stocks that don't trade frequently. A description of the column headings is below.

• Move Previous Day - yesterday's percent return.
• Volume Increase - looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.
• Close - yesterday's closing price.
• Total Ratings - number of analysts who track the stock, according to Zacks.
• Buy Percent - percent of the analysts who rate the stock as a "buy". I use this to help gauge sentiment and potential buying demand. If everyone already loves a stock, that means a steady stream of new money will need to enter the stock to fuel a rally.

Note - sentiment data is current as of the previous trading day...

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Futures on the Dow Jones Industrial Average Suggest a 25-Point Gain

Good morning everyone - welcome to the middle of the trading week. We start the day with stock futures showing an upside bias. The S&Ps are 3 points above fair value. As they stand now, futures on the Dow Jones Industrial Average (DJIA) are suggesting an opening gain of 25 points.

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Daily Wrap-up - A 44-Point Gain for the Dow Jones Industrial Average

The day ends with the Dow Jones Industrial Average (DJIA) up 44 points. The S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) also posted moderate gains. The chart below shows how the day played out. The action drifted to flat ahead of the FOMC announcement, then after the typical post-Fed-stutter-step, buyers stepped in for the final hour.

Chart Courtesy of Thomson Reuters

Most of the sectors I track ended higher as well. The Semiconductor HOLDRS (SMH), Amex Gold Bugs Index (HUI), and US Oil Fund (USO) led while the Amex Biotech Index (BTK) lagged.

Click here for symbol descriptions

My midday post noted that I generally don't put too much emphasis on the broad market action ahead of the FOMC announcements. The subsequent rally is interesting though as it allowed the S&P 500 to finally clear resistance.

Charts Courtesy of Thomson Reuters

All of the indexes remain in overbought territory but the SPX, COMP, and RUT all sit above support. The DJIA is now in a position to challenge its highs from January so that is what I will be watching next. And that is where I will pick up in the morning. Have a nice evening.

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Back-Month Call Volume Skyrockets on Vale S.A.

Call volume has skyrocketed today on Vale S.A. (VALE), with five times the usual number of contracts crossing the tape. So far, about 109,000 of these bullishly oriented bets have traded, easily outpacing VALE's expected call volume of about 22,000 contracts.

The day's most popular strike is far and away VALE's June 33 call, where 79,150 contracts have traded so far. This option currently carries open interest of 10,239 contracts, suggesting that the bulk of today's volume consists of freshly opened calls.

Additionally, buyers seem to be responsible for the majority of the activity at this out-of-the-money strike. Two massive blocks totaling 75,000 contracts changed hands earlier at the ask price, suggesting they were purchased. Implied volatility on the June 33 call is up 0.4% at last check, pointing to rising demand for this back-month option.

This sudden interest in VALE calls coincides with reports on forthcoming price hikes in the raw materials sector. The Brazilian miner is "expected to push for iron ore price increase of around 80% to 90% and around 55% higher coking coal prices," according to a Dow Jones report hitting the wires today.

Today's bullishly biased option volume is a deviation from the norm for VALE, which sports a skeptically skewed Schaeffer's put/call open interest ratio (SOIR) of 0.92, in the 80th annual percentile. However, in light of a 20.6% jump in short interest during the past month, some of the call buying on VALE today could be linked with increased hedging activity by the bears.

On the charts, VALE is up about 2% this afternoon. The stock is hovering between support at its 10-day and 20-day moving averages, and looming resistance near the $32 area -- the site of its current annual high.

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Midday Market Check - The Dow Jones Industrial Average Holds 15-Point Gain Ahead of Fed

We head into the second half of the session with a moderate upside bias as the FOMC rate decision looms. The Dow Jones Industrial Average (DJIA) sits 15 points above the breakeven line. The S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) are holding mild-to-moderate gains. Though, it is worth pointing out that the SPX has ticked to a new annual high.

Chart Courtesy of Thomson Reuters

Today's strongest groups are the Semiconductor HOLDRS (SMH), Amex Gold Bugs Index (HUI), US Oil Fund (USO), and streetTRACKS Gold (GLD). The Amex Biotech Index (BTK) is the weakest area.

Click here for symbol descriptions

Harley-Davidson, Inc. (NYSE: HOG) and Cummins Inc. (NYSE: CMI) are among the stocks seeing unusual option volume so far today.

Click image to see live data from
WhatsTrading.com in our Options Center

Harley-Davidson tops the table with total option volume that is nearly 10 times the average. Just over 60% of the action is on the call side as the stock trades up 6% amid chatter the company could be taken private. Shares of Cummins are flat but option volume is 6 times the average with put volume dominating. It looks like the company has an analyst meeting today.

Yesterday ended with a discussion about overbought readings and research on triple-witching weeks. The buzz today is, of course, all about the Fed. I generally don't put too much emphasis on the broad market action ahead of the FOMC announcements. Instead, I will be watching the subsequent reaction and will post the usual daily charts after the close.

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Short Strangle Speculator Pinpoints a Trading Range for E-Trade Financial Corporation

Options volume has jumped to about three times the expected level today on E-Trade Financial Corporation (ETFC), with both puts and calls enjoying a surge in popularity. Taking a closer look at today's major block trades, it looks as though one speculator is responsible for a healthy portion of the activity on both sides of the fence.

Shortly after the open, a block of 15,000 contracts traded on the July 1.50 put at the bid price of $0.10. Simultaneously, a matching block of 15,000 contracts changed hands on the July 2 call for the bid price of $0.08. With ETFC trading squarely between these two strikes, both of these options are narrowly out of the money.

Today's volume is exceeding open interest at the July 1.50 put, confirming that these are newly opened positions. Open interest still outnumbers volume on the July 2 call -- but with this strike carrying zero intrinsic value, it seems unlikely that call buyers would be liquidating their long positions here today. In other words, this appears to be the initiation of a short strangle on ETFC.

By selling an equal number of calls and puts at these out-of-the-money strikes, the short strangle speculator is wagering that ETFC will remain pinned between $1.50 and $2 per share through July expiration. In this scenario, all of the options involved will expire worthless, with the trader retaining the initial upfront credit as his maximum potential profit.

From a technical perspective, there's reasonable justification for betting on range-bound price action from ETFC. Since May 2009, the stock has made only brief trip north of $2; meanwhile, the $1.40 area has provided support since late August.

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The Sentiment Behind Onyx Pharmaceuticals Inc

Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) gapped higher this morning but the stock has been retreating from its initial highs. While that plays out, here is a look behind the scenes at the sentiment profile.

(Click image to see live data)

As is often the case, we have conflicting indicators. On the one hand we have some mild optimism from the Street. Heading into today, 9 of 15 analysts (60%) ranked Onyx Pharmaceuticals with a buy rating. Meanwhile, we have a rising level of skepticism from short sellers. According to data collected by our Quantified Analysis department, 10% of the stock's float is sold short. The Schaeffer's Put/Call Open Interest Ratio (SOIR) does show a recent surge but that was related to expiration and not a sudden influx of put activity. However, there might end up being some movement on the SOIR as the company popped up on the early edition of our unusual option volume table.

Click image to see live data from
WhatsTrading.com in our Options Center

Total option volume is running twice the average with the majority of the action on the call side. This comes as the stock is trying to break out of congestion.

Chart Courtesy of Thomson Reuters

Shares of Onyx Pharmaceuticals have been battling resistance since December. There have been several rally attempts since then but each was met with selling pressure. Today's gap is the first definite break of this congestion. The key is whether the breakout holds. As illustrated by the chart, this is can be a volatile stock so keep that mind.

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Option Skews - Relatively Heavy Call Activity on General Electric Co, Motorola Inc, Amgen Inc

Here are the stocks that saw a bias toward call activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective.

General Electric Company (NYSE: GE) is showing some signs of strength. The stock hit a peak last September and then staged a short-term pullback which bottomed in November. Since then, shares of GE have been creeping higher and are now challenging the September highs.

Motorola, Inc. (NYSE: MOT) is a slightly different situation. Like GE, it peaked in September but shares of MOT then drifted sideways and began to steadily lose ground in December. The stock finally hit a short-term bottom at the end of January and are now trying to claw their way back.

Amgen, Inc. (NASDAQ: AMGN) remains near the middle of the price compression mentioned last week. Monday's call activity was relatively light but I am noting it as I would start to get concerned if we see a steady build up of calls.

Companies included in today's scan results: Citigroup Inc (C), General Electric (GE), Boston Scientific (BSX), Google Inc (GOOG), Monsanto Co (MON), SLM Corp. (SLM), McMoRan Exploration (MMR), eBay Inc (EBAY), First Solar, Inc. (FSLR), Wal-Mart Stores Inc (WMT), Micron Technology Inc (MU), UnitedHealth Group Inc (UNH), Research in Motion Limited (RIMM), Motorola (MOT), Coca-Cola Enterprises (CCE), Pfizer (PFE), Las Vegas Sands Corp (LVS), Alkermes (ALKS), Lam Research (LRCX), Amgen Inc (AMGN), Dow Chemical (DOW), Coca-Cola (KO), KLA-Tencor (KLAC), Varian Semiconductor Equipment (VSEA), MBIA Inc (MBI).

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Option Skews - Relatively Heavy Put Activity on Zions Bancorporation, JetBlue Airways Corp, QLogic Corp, International Business Machines Corp

Here are the stocks that saw a bias toward put activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

I looked at Zions Bancorporation (NASDAQ: ZION) last week and noted that the stock was surrounded by pessimism. The equity is so far holding the recent gains as it tries to break free of congestion.

The weekly chart of JetBlue Airways Corporation (NASDAQ: JBLU) shows a price compression. A pattern of lower highs is converging on a pattern of higher lows. Something has to break in the next few weeks.

QLogic Corporation (NASDAQ: QLGC) has been moving steadily higher since mid-February and the shares are poised to challenge resistance near 21.

The monthly chart of International Business Machines Corp. (NYSE: IBM) is worth watching. Big blue recently pushed into long-term congestion that begins near 130. The equity initially retreated from this resistance but quickly stabilized and has been holding just below this zone. An eventual push above 140 would mark a significant breakout but keep in mind this is a monthly charts so this will take to play out.

Companies included in today's scan results: SPDR Trust Series I (SPY), PowerShares QQQ Trust (QQQQ), Goldman Sachs Group (GS), Verizon Communications (VZ), FedEx Corp. (FDX), Petroleo Brasileiro SA (PBR), CIGNA Corp. (CI), JPMorgan Chase & Co (JPM), Continental Airlines (CAL), Fuqi International Inc (FUQI), Zions Bancorporation (ZION), JetBlue Airways Corp (JBLU), Comcast Corp. (CMCSK), QLogic Corp. (QLGC), Netlogic Microsystems (NETL), Western Digital (WDC), Avnet (AVT), Oracle Corp. (ORCL), Assured Guaranty Ltd (AGO), IBM (IBM), Knight Capital Group Inc (NITE), Best Buy Co. (BBY), Simon Property Group (SPG), Infosys Technologies (INFY), Lions Gate Entertainment (LGF).

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Stocks Advancing Amid Heavy Short Interest - Amylin Pharmaceuticals Inc, Alkermes Inc, Cypress Bioscience Inc, Cell Therapeutics Inc

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

Two weeks ago we saw that biotech stocks were dominating this scan. Since then, members from this group have continued to pop up and today is no exception. Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Alkermes, Inc. (NASDAQ: ALKS), Cypress Bioscience, Inc. (NASDAQ: CYPB), and Cell Therapeutics, Inc. (NASDAQ: CTIC) are among the stocks that made a move Monday. (To illustrate the activity, I compiled the links below to the scans posted since the link above.) There are obviously a lot of differences between the various situations. For example, Amylin Pharmaceuticals and Alkermes just hit new annual highs while Cypress Bioscience and Cell Therapeutics recently hit near-term lows. However, they all have shown an ability to post short-term moves so the group is worth watching. Here are the recent short interest scans -

• Stocks Advancing Amid Heavy Short Interest - RF Micro Devices Inc, Freddie Mac, Boyd Gaming Corp, InterMune Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - Affymetrix Inc, Martek Biosciences Corp, China BAK Battery Inc, Netlist Inc, Monster Worldwide Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - InterMune Inc, Molecular Insight Pharmaceuticals Inc, Cell Therapeutics Inc, Ciena Corp
  
  
• Stocks Advancing Amid Heavy Short Interest - American International Group Inc, Travelzoo Inc, Energy Conversion Devices Inc, Cell Therapeutics Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - Netlist Inc, YRC Worldwide Inc, Clearwire Corp, Alkermes Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - Psychiatric Solutions Inc, Amylin Pharmaceuticals Inc, Cardionet Inc, Jazz Pharmaceuticals Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - Clean Energy Fuels Corp, Canadian Solar Inc, Acorda Therapeutics Inc, Sunesis Pharmaceuticals, Inc
  
  
• Stocks Advancing Amid Heavy Short Interest - Salix Pharmaceuticals Ltd, Red Robin Gourmet Burgers Inc, Cbeyond Inc, Digital River Inc

Methodology - the query scans my database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10 percent of their float sold short and showed a gain in the previous trading day. I use this as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: Amylin Pharmaceuticals Inc (AMLN), Alkermes (ALKS), BankAtlantic Bancorp (BBX), XenoPort, Inc. (XNPT), Anchor BanCorp Wisconsin (ABCW), Amcore Financial (AMFI), Pegasystems (PEGA), Silicon Motion Technology Corporation (SIMO), Cascade Bancorp (CACB), Medicis Pharmaceutical (MRX), Cypress Bioscience (CYPB), Pacific Capital Bancorp (PCBC), Beazer Homes USA (BZH), Cell Therapeutics (CTIC), Eastman Kodak (EK), USEC (USU), Focus Media Holding Limited (FMCN), TCF Financial (TCB), Greenhill (GHL), Trinity Industries (TRN), Columbia Sportswear (COLM), Scholastic (SCHL), American Vanguard (AVD), Saks Incorporated (SKS), InterMune (ITMN).

Like this post?

If so, you can get it delivered to your inbox every day. To try it, simply click here and sign in with your Schaeffer's username and password. If you don't have a free membership, you can create one in just seconds. Once on the alerts page, select "phrase" from the first drop down box, select "intraday", and enter "Stocks Advancing Amid Heavy Short Interest" into the third box. You can repeat that process for other regular posts or change the setting to "author" and enter "Nick Perry" to get all the posts. Just remember, I make multiple posts a day so you will get numerous emails if you select intraday...

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Stocks Showing Unusually Heavy Volume - St. Jude Medical Inc, Baidu Inc, Inspire Pharmaceuticals Inc, Hoku Scientific Inc, Angiotech Pharmaceuticals Inc

Here are the results for today's unusual stock volume scan. The scan looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.

Companies included in today's scan are: Boston Scientific (BSX), St. Jude Medical Inc (STJ), Amylin Pharmaceuticals Inc (AMLN), Alkermes (ALKS), BankAtlantic Bancorp (BBX), Baidu Inc. (BIDU), Knight Capital Group Inc (NITE), Quiksilver Inc (ZQK), Inspire Pharmaceuticals Inc (ISPH), Hoku Scientific, Inc. (HOKU), Pegasystems (PEGA), Varian Semiconductor Equipment (VSEA), Angiotech Pharmaceuticals Inc (ANPI), Amcore Financial (AMFI), Medicis Pharmaceutical (MRX), RXi Pharmaceuticals Corp (RXII), Medtronic (MDT), Eastman Kodak (EK), Zebra Technologies (ZBRA), Shuffle Master Inc (SHFL), Myriad Genetics (MYGN), KLA-Tencor (KLAC), Interactive Brokers Group, Inc. (IBKR), DivX, Inc. (DIVX), American International Group Inc (AIG).

These are the top stocks from today's scan, which has some basic filters to eliminate stocks that don't trade frequently. A description of the column headings is below.

• Move Previous Day - yesterday's percent return.
• Volume Increase - looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.
• Close - yesterday's closing price.
• Total Ratings - number of analysts who track the stock, according to Zacks.
• Buy Percent - percent of the analysts who rate the stock as a "buy". I use this to help gauge sentiment and potential buying demand. If everyone already loves a stock, that means a steady stream of new money will need to enter the stock to fuel a rally.

Note - sentiment data is current as of the previous trading day...

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Futures on the Dow Jones Industrial Average Suggest a Flat Open

Good morning everyone - welcome to Tuesday. We start the day with stock futures showing a very slight upside bias. The S&Ps are 3 point above fair value. As they stand now, futures on the Dow Jones Industrial Average (DJIA) are suggesting an opening gain of roughly 15 points.

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Daily Wrap-up - A 17-Point Gain for the Dow Jones Industrial Average

The day ends with the Dow Jones Industrial Average (DJIA) showing a gain of 17 points. The S&P 500 (SPX) finished flat. The Nasdaq Composite (COMP) and Russell 2000 (RUT) held small losses.

Chart Courtesy of Thomson Reuters

The midday sector action showed a downside bias and that improved slightly as the day wore on. The Amex Biotech Index (BTK) led while the US Oil Fund (USO), Natural Gas Index (XNG), PowerShares Clean Energy ETF (PBW), and Oil Service HOLDRS (OIH) lagged.

Click here for symbol descriptions

My midday post said to keep an eye out for buyers to step in. I am not sure I really call a 17 point gain a sign of strength but the Dow did at least manage to rebound from its lows. The charts below show the indexes are still showing overbought readings.

Charts Courtesy of Thomson Reuters

Both the COMP and RUT remain above their January highs. The SPX is challenging its former highs while the Dow has yet to mount an assault. That is the same technical picture we have seen for the last few days (though it feels like an eternity). The obvious change here is that I have added short-term trendlines to highlight the current trends. Simple trendlines like this have many failings in terms of being predictive tools but I still use them to gauge simple trends.

In other words, they offer an easy way to gauge when the speed of a trend may be changing. With the indexes overbought, this gives a quick way to judge any pullbacks or consolidations. Of course, Rocky White's research on triple-witching weeks suggests we may not see a pullback this week. And that is where I will pick up in the morning. Have a nice evening.

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Shorts Could Be Driving Call Activity on Level 3 Communications, Inc.

Level 3 Communications, Inc. (LVLT) has attracted an unusually heavy dose of call speculation today. So far, more than 1,500 of these bullishly oriented options have crossed the tape, easily outpacing LVLT's expected call volume of about 420 contracts.

Nearly all of this activity is taking place at LVLT's September 2.50 call, where 1,530 contracts have traded. Several substantial blocks traded near the ask price earlier today, suggesting that buyers are responsible for the bulk of the volume at this out-of-the-money strike.

With open interest of 10,653 contracts easily outstripping today's volume, it's hard to tell whether today's September 2.50 call volume consists of liquidations or newly opened positions. However, this option is about one point out of the money with roughly six months to go until expiration, so it seems unlikely that call writers would be closing out their positions so soon.

While traders may very well be buying new calls at this strike today, it's not necessarily indicative of bullish speculation. Short interest on LVLT jumped by 9.2% during the most recent reporting period, and these pessimistic bets now represent a noteworthy 7.1% of the stock's float. With so many short sellers piling on, it's possible that traders are buying out-of-the-money calls simply to hedge their bearish stock positions.

On the charts, LVLT is off 1.9% this afternoon. The shares are retreating from stubborn resistance near $1.65, which has rejected all of the stock's rally attempts since mid-September 2009.

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Short-Term Speculators Set Their Sights on SLM Corporation

With options expiration approaching at the end of the week, March 13 calls are the options of choice today for very short-term speculators on SLM Corporation (SLM). The stock's March 13 call has seen 10,348 contracts cross the tape so far, and implied volatility on this option has surged 20% at last check. For comparison's sake, the student lender more casually known as Sallie Mae was only expected to see about 3,200 calls change hands today.

Nearly all of the major block trades on SLM's March 13 call have taken place at the ask price, indicating a bias toward buying activity. This strike currently carries open interest of 13,740 contracts, so it's unclear whether today's volume consists primarily of new additions or liquidations of existing contracts. However, the steep rise in implied volatility suggests that we could be seeing new calls opened at this strike today.

This call-heavy option activity is a deviation from the recent trend on SLM, which has snagged a 10-day International Securities Exchange (ISE) put/call volume ratio of 1.22. This ratio ranks in the 90th annual percentile, revealing that traders on the ISE have rarely purchased puts over calls at a faster pace.

The sudden interest in out-of-the-money calls occurs as SLM strengthens its foothold above the $12 level. This region held the shares in check from December 2009 through the first week of March, but SLM settled last Friday firmly atop this stubborn resistance. The $12 level could now switch roles to act as support, providing the stock with a temporary resting place as it waits for support from its 10-week and 20-week moving averages to catch up with its progress.

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