Chris Tyler, Optionetics.com
December 21, 2010
Ho-ho-hopeful bulls pull out their wallets for large cap tech and some influential financial misfits enjoying less-naughty seasonal interest for a second straight day. As of 11:05 ET the SP-500 (SPY) is up 0.45% in more of the same but slightly less “VIX’ing” price behavior.
From across-both-ponds the light news has been more mixed than merry during Tuesday’s session. In the spotlight but largely dismissed by ye ol’ faithful, credit ratings agency Moody’s put Debt PIIGS constituent Portugal’s debt on review.
Separately and also not making an impact on those barely-stirring bears of late, England’s government borrowing came in at a new record while China in near unison, which owns sizeable euro-based assets and reserves, implored EU and IMF officials to get its financial house i.e. debt crisis in order.
Stateside, nary an economic report and two strong reports out of tech have managed without too much effort, to find bulls support. Business software giant Adobe (ADBE) is in the NASDAQ 100’s Percentage Leaders top spot with its 4.50% gainer.
Today’s price action finds shares of ADBE using its 200SMA as support within a substantial gap zone which bulls hope will be well-served by the age old adage of all gaps getting filled.
By the numbers, Adobe beat by four cents on earnings of $0.56 per share, saw a modest sales beat with growth of 32.2% and issued above-views Q1 EPS guidance of $0.54 - $0.59 versus Street estimates of $0.51 per share.
Printed circuitry boards manufacturer Jabil (JBL) is up an even stronger 10.50% as it hits fresh intermediate three year highs by about 6%.
Much to the bear camps chagrin, a “sell the news” profit-taking style reaction in JBL shares has been lost on traders impressed by the company’s $0.07 beat on profits of $0.61 per share, better-than-expected revenue growth of 32.2% and upside, above-views guidance.
Elsewhere and for a second session, financials (XLF) which had looked like they’d been banished to the land of misfit toys are enjoying relative strength leadership as laggards get swept up in alpha-chasing “year-enders” sponsorship.
“Dogs of the Dow” and financial constituents General Electric (GE), “Bilk of America” (BAC), American Express (AXP) and JP Morgan (JPM) are that index’ top gainers today with increases of 1.35% to 2.85% respectively.
In those often intertwined markets of notice, despite gains and Little Drummer Boy type cheerleading by bulls, the EUR/USD is under slight pressure and failing to show any increased appetite for risk daring-do exploits while the US Dollar (UUP) finds an equally modest bid.
Bulls very precious of late Silver (SLV) contract is also seeing light profit-taking. SLV is off -0.35% but a whooping forty-plus percent above its 200SMA. Lastly, the CBOE Volatility Index ($VIX) remains wedged in day two of some inside candle action just off its test of YTD lows and about 8% below its 10SMA.
Finally and in those sometimes accurate heat-seeking option markets, SanDisk (SNDK) is seeing a near threefold increase in its options today on total volume of 26,500 contracts. Shares broke out this morning from a fractionally high handle built on top of a weekly cup of six months after broker Raymond James raised shares to “Outperform.”
Analysts at Raymond James cited increased demand for solid-state drives due to tablet computing devices sales which they feel the Street is still too conservative on. As much, they see SNDK shares as “quite reasonable” at a mid-teens P/E multiple and based on projected 2012 estimates have set a price target of $63.
As for traders today, favor has been overwhelmingly in favor of playing shorter-term calls by a margin in excess of three-to-one. Most active have been the out-of-the money January 55 call on more than 8,400 contracts
With SNDK near 51.50 and priced at $1.02 per contract, a bull will need SNDK to rally a bit more than 10% over the next month in order to see a double in premium for the naked long call position.
Personally, with earnings slated for the February option cycle, not much of a skew differential between those months (Feb 42%, Jan 38%IV) and the holiday’s upon us—that particular contract looks like a better hedge for other bullish opportunities such as the OTM calendar which I’ll discuss in further detail this afternoon at Investor’s Business Daily.
Senior Staff Writer & Options Strategist
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