3 Stocks to Watch: Bristol-Myers Squibb, FedEx, and Tyson Foods

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Today's column includes a look at a rise in call trading on Bristol-Myers Squibb ( BMY ) and FedEx ( FDX ), while put trading increased on Tyson Foods ( TSN ). Each day, 3 Stocks to Watch focuses on stocks seeing heavy options trading and gives you a unique insight into each stock's sentiment backdrop.

Bristol-Myers Squibb ( BMY )

Options players were attracted to Bristol-Myers Squibb Co. ( BMY ) on Monday, as more than 24,600 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 11,531 contracts, according to data from WhatsTrading.com. In addition, traders were feeling optimistic, as 88% of the volume changed hands on the call side.


Monday's preference for calls runs counter to the dominant sentiment picture on BMY. For example, the International Securities Exchange (ISE)/Chicago Board Options Exchange ( CBOE ) 10-day put/call volume ratio comes in at 0.86, which is higher than 82% of all those taken during the past year, pointing to a growing skepticism.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for BMY comes in at 0.81, which is higher than 83% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 17% of the time during the past 12 months.

Wall Street also has some doubts about the security. According to Zacks , the stock has earned 11 "buy" ratings, 12 "holds," and three "strong sells."

Technically speaking, the shares of BMY are up less than 1% on the year. Since hitting staunch resistance at the 28 level, the stock has steadily fallen under resistance at its 10-day and 20-day moving averages. The equity is now approaching former support in the 24-25 region.

 DAILY CHART OF BMY SINCE SEPTEMBER 2010 WITH 10-DAY AND 20-DAY MOVING AVERAGES

FedEx ( FDX )

FedEx Corp. ( FDX ) received a solid boost on Monday after Credit Suisse raised its rating on the shares from "neutral" to "outperform" while increasing its target from $98 to $111. "Following a soft patch in Q3 and Q4, we believe that global industrial production is entering a re-strengthening stage," Credit Suisse said. "If prior patterns hold, FDX shares (which have lagged the market and the transport group for most of 2010) should outperform over the next 3 to 6 months."

FedEx was understandably the center of some heavy call trading yesterday, as Andrea Kramer has reported. More than 27,700 contracts crossed the tape, which is nearly five times the stock's average daily trading volume of 5,922 contracts, according to data from WhatsTrading.com. In addition, approximately 75% of that volume changed hands on the call side.

FDX calls have been a growing favorite on the ISE and CBOE. During the past 50 trading sessions, 2.65 calls have been purchased to open for every one purchased to open. This ratio of calls to puts is higher than all other readings taken during the past year, indicating an extreme level of optimism.

However, the SOIR for FDX comes in at 1.11, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio of puts to calls is still higher than 65% of all those taken during the past year, pointing to a bearish leaning. A shift in sentiment among options players could give the security a nice boost higher.

Checking in on Wall Street, we find that FDX remains a favorite. According to Zacks , the stock has earned 14 "strong buys," one "buy," and seven "holds."

From a technical perspective, the shares of FDX surged higher on Monday, adding to their year-to-date gain of 9.7%. The security has also broken above former short-term resistance at the 90.50 level as it has bounced off support at its rising 10-week moving average.

 WEEKLY CHART OF FDX SINCE JUNE 2010 WITH 10-WEEK MOVING AVERAGE

Tyson Foods ( TSN )

Tyson Foods Inc.( TSN ) was the center of some heavy options trading on Monday, as more than 24,700 contracts changed hands. This surge in volume was more than five times the stock's average daily trading volume of 4,738 contracts, according to data from WhatsTrading.com. In addition, traders were feeling skeptical of the shares, as 79% of the volume changed hands on the put side.

The ISE and CBOE have seen an increase in put trading recently. During the past 50 trading sessions, 1.5 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 92% of all those taken during the past 52 weeks, pointing to a growing skepticism among speculators.

What's more, the SOIR for TSN comes in at 0.94, as put open interest is nearly in parity with call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than more than half of the readings taken during the past year, reflecting a bearish leaning.

Short sellers are also increasing their bearish bets. During the most recent reporting period, the number of TSN shares sold short edged 0.37% higher to 20.2 million shares. This accumulation of pessimistic positions accounts for 6.77% of the company's total float and is 4.8 times the stock's average daily trading volume. A continuation of this trend could pressure the security lower during the near term.

Technically speaking, the shares of TSN are up more than 31% since the beginning of the year. However, the equity has struggled since putting in a 2010 high near 20 in April. TSN recently pulled back to support at its rising 20-month moving average and is now struggling to hold above support at its 10-week and 20-week moving averages.

 WEEKLY CHART OF TSN SINCE MARCH 2010 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: BMY , CBOE , FDX , TSN

Schaeffer's Investment Research

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