Today's Schaeffer's Midday Options Update features Sunoco (NYSE:SUN) and ConocoPhillips (NYSE:COP). 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. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.
Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 .
Options Update: Sunoco Struggles at Three Score Dollars and Ten
In economic news, weekly initial jobless claims dropped by 7,000 to 298,000 last week, while economists were expecting claims to climb to 310,000. The four-week average of new claims tumbled by 4,250 to 312,750. Meanwhile, the number of Americans continuing to collect unemployment benefits drifted lower by 23,000 to 2.47 million.
The Commerce Department reported that U.S. durable goods orders jumped 3.1 percent in June due to a surge in demand for transportation goods. Excluding the 8.6-percent spike in transportation orders, orders for durable goods increased one percent. Analysts had predicted a two-percent increase in orders last month. May's orders were revised higher to show a 0.3-percent gain instead of the 0.2-percent loss previously reported.
Most-Active Options Update
At 2:17 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,098.2) has slipped 0.04 percent. The S&P 500 Index (SPX - 1,264.3) has lost 0.32 percent, and the Nasdaq Composite (COMP - 2,054.5) has fallen 0.77 percent. At 2:17 p.m. Eastern Time, 3,092,563 calls have changed hands compared to 2,509,278 puts, equaling a single-day put/call volume ratio of 0.81. The CBOE's equity put/call volume ratio stands at 0.96, while the ISE's ratio comes in at 0.75.
Sunoco (NYSE:SUN) had a good day yesterday, adding more than four percent. The Dow Jones Newswires said that a "spike in crude-oil prices and strong quarterly results from ConocoPhillips (NYSE:COP) pulled the energy sector higher Wednesday, piling on top of the previous session's gains." The security has been in focus in the options pits this morning, with 11,458 of the SUN August 70 call (SUN HN) crossing the tape by the time we grabbed our figures. Open interest before trading began was 17,542 contracts.
Quick Sentiment Facts on SUN:
-- Percent of analysts tracked by Zacks who rate the stock with a "buy" or better: 80%
-- Number of analysts tracked by Zacks: 10
-- Short-interest ratio: 1.28
-- Short interest as a percent of float: 2.64%
-- Schaeffer's put/call open interest ratio (SOIR): 0.45
-- SOIR percent rank: 2%
-- Overall Schaeffer's Equity Scorecard rating: 3.0
Sentiment toward SUN gives me cause for concern. According to Zacks, eight of the 10 analysts who cover SUN rate it a buy or better, leaving room for downgrades but little room for upgrades.
Meanwhile, it's clear that expectations are high in the options pits. The Schaeffer's put/call open interest ratio (SOIR) for SUN is close to an annual low, suggesting that little money is waiting on the sidelines. The short-interest picture warns of optimism too. Just 2.64 percent of SUN's float is sold short, and it would take little more than one day to buy back these bearish bets at the current average daily trading volume. This configuration leaves little possibility of short-covering support to buoy the stock.
Turning to the technicals, SUN has put in some good work this week, climbing above its 10-day and 20-day moving averages. It has taken out overhead resistance at its 10-week trendline, too, but resistance at the 70 level has troubled it for 10 weeks.
In May, the stock fell below its 10-month moving average, but the 20-month moving average is ascending into the region, giving the bulls another potential chance to get their way. We're almost at the end of July, remember, so there's a good possibility that SUN will close the month above its 20-month trendline. It has not closed a month below this trendline since January 2003.
Optimistic sentiment combines with weak performance to earn SUN 3.0 out of 10 on our Schaeffer's Equity Scorecard, suggesting that the downside might still beckon. However, the technicals are interesting, and SUN is worth watching.
Click here to see a Weekly Chart of Sunoco since July 2005 with 10-month and 20-month moving averages and a Monthly Chart of Sunoco since December 2003 with 10-month and 20-month moving averages: http://www.schaeffersresearch.com/wire?ID=17014 .
The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 .
About Schaeffer's Investment Research (www.SchaeffersResearch.com)
Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .