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Stock News Bot Date: December 20, 2005 11:40:00 AM
TM News Schaeffer's Midday Options Update Features General Motors, Toyota Motor, Morgan Stanley, Under Armour, and Dell
CINCINNATI, Ohio--(BUSINESS WIRE)--Dec. 20, 2005--Today's Schaeffer's Midday Options Update features General Motors (NYSE: GM), Toyota Motor (NYSE: TM), Morgan Stanley (NYSE: MWD), Under Armour (NASDAQ: UARM), and Dell (NASDAQ: DELL). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day.
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Yesterday I wrote about New York commuters stranded in the Borough of Queens following a bus strike. The Dow Jones Newswires reported that negotiators for Transport Workers Union and MTA planned to resume talks, but union warned that plans were firm for large-scale strike. Today, the same source reports that New York subways and buses ground to a halt as transit workers walked off the job at the height of the holiday shopping and tourist season, forcing millions of workers and visitors to find alternatives.
The Producer Price Index (PPI) data for November was released this morning, and it was slightly better than expected. Prices of raw materials and other producers' inputs dropped 0.7 percent, posting the largest single monthly decline since April 2003. According to a poll conducted by MarketWatch, economists expected the PPI to fall 0.3 percent. The core PPI, which excludes food and energy costs, increased 0.1 percent. The same survey showed expectations for a rise of 0.2 percent.
General Motors Hits New Low
Shares in General Motors (NYSE: GM) hit an 18-year low today, following reports that Toyota Motor (NYSE: TM) could soon become the number-one automaker in the world by volume. There is talk that TM might even be making a conservative estimate in order to avoid trade tensions with the U.S. Right now, GM investors are testing the 20 level for support, and it seems to be holding. Trading volumes are high and, in the options pits, I see an interesting configuration at the 20 strike in January. Open interest of 108,213 puts greatly outnumber the 8,348 call contracts, and it will be interesting to see if options-related support is there.
Morgan Stanley Posts Strong Results
Morgan Stanley (NYSE: MWD) posted a 49-percent increase in fourth-quarter net income, catalyzed by growth in its institutional securities and fixed-income businesses. MWD also reported advisory income of $479 million, its highest level in five years. The company posted fourth-quarter earnings of $1.63 per share, including a 26-cent-per-share charge stemming form the American Jobs Creation Act. The Street was expecting earnings of $1.08 per share, but MWD managed revenue of $7 billion.
Under Armour Up and Outperforming
Under Armour (NASDAQ: UARM), the Baltimore-based sports apparel concern made its IPO just last month and, after a few nervous days when investors appeared uncertain how to value the stock, UARM seems to have entered an uptrend. This morning, Credit Suisse First Boston initiated coverage on the stock, at "outperform."
Most-Active Options Update
At 3:07 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,810.8) has lost 0.24 percent. The S&P 500 Index (SPX - 1,259.78) has dropped 0.01 percent, and the Nasdaq Composite (COMP - 2,223.0) has added 0.01 percent. At 3:07 p.m. Eastern time, 2,078,443 calls have changed hands compared to 1,534,236 puts, equaling a single-day put/call volume ratio of 0.73. The CBOE's equity put/call volume ratio weighed in at 0.83.
Dell
I notice that almost 7,000 Dell (NASDAQ: DELL) January 2006 32.5 puts (DLQ MZ) crossed the tape this morning. The only large block comprised 1,000 contracts that crossed at 10:50 a.m. Eastern time on the International Securities Exchange, the electronic options exchange. Interestingly, the bid price was 1.10 and the ask was 1.25, and the trade crossed at 1.30, suggesting that perhaps someone was very eager to buy.
I find DELL quite hard to write about, because it's a good company yet it is hard not to feel bearish. Although the stock clung to the 40 level for the first part of the year, it began to fall in August, and a recent recovery attempt appears to have been stopped by the stock's declining 20-week moving average.
The current price is very close to some key Fibonacci levels between the stock's March 2000 high of 59.68 and September 2001 low of 16.01. As we so often see, it stumbled as it reached the 50-percent retracement level, and now it seems to be hitting overhead resistance at the 38.2-percent retracement level.
To add to DELL's woes, the powerful 10-month and 20-month moving averages just made a bearish cross, another bad sign.
It's also facing some difficulties from its 80-month moving average just now. This trendline has offered support since 2001, but now it seems to be turning resistive.
Finally, the 80-day moving average rejected the stock recently, another layer of resistance serving to keep DELL down.
Let's take a look at the sentiment. We regularly track three areas:
-- Analyst ratings, to gauge Street sentiment
-- Equities sentiment, in the form of short selling
-- Options sentiment, in the form of put/call ratios and trends, and peak open interest
What we hope to find is pessimism, because that would suggest the presence of sideline money ready to pile in if DELL looks like a bargain. Pessimistic sentiment would signal that big gains could come if some trigger, a strong earnings report for instance, were to present itself.
From Zacks I see that 26 analysts rate the stock, awarding:
-- 10 "strong buy"
-- 7 "buys"
-- 9 "holds"
-- 0 "sells"
-- 0 "strong sells"
That doesn't look like pessimism to me. Quite the opposite - it looks as if anyone wanting to by in, probably already has.
What about the short sellers? Almost 31 millions DELL shares are currently sold short, and the number increased by 2.4 percent during November. But only 1.4 percent of the float is sold short, it would take little more than a day to cover these short positions. We monitor short interest because sometimes sudden good news comes along and pushes a stock's price up sharply. This might shake out some of the short sellers, who suddenly see that it will cost more money to buy their stocks back than they tucked under the mattress when they originally sold the positions. If these turncoat short sellers suddenly transform into buyers, they can push the stock price yet higher and perhaps provoke further short covering. We usually take note when the short-interest ratio passes five. DELL is not looking at any kind of short-covering rally. Not at all.
Is there any negative sentiment in the options pits? No really. Today's Schaeffer's put/call open interest ratio (SOIR) for DELL is 0.60, and it lower than 89 percent of all the SOIR readings taken during the past 52 weeks. More optimism.
DELL sports a Schaeffer's Equity Scorecard rating of 2.0 out of a possible 10, which suggests the downside is still the most likely direction for this stock.
Click on the following link to access a Weekly Chart of DELL Since January 2005:
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