3 Stocks to Watch: Orexigen Therapeutics, Quiksilver, and Riverbed Technologies

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The bears have taken over today's column, which includes a look at a rise in put trading on Orexigen Therapeutics ( OREX ), Quiksilver ( ZQK ), and Riverbed Technologies ( RVBD ). 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.

Orexigen Therapeutics ( OREX )

Orexigen Therapeutics, Inc. ( OREX ) took a hit on Tuesday, after the Food and Drug Administration (FDA) rejected the company's experimental weight-loss drug . An FDA advisory panel had voted in favor of Contrave back in December, but the regulatory agency is now citing concerns about the drug's potential cardiovascular risks, and has asked for additional data.

Not surprisingly, options players flocked to the shares of OREX yesterday, as more than 122,900 contracts crossed the tape. This surge in volume was more than 10 times the stock's average daily option volume of 11,403 contracts, according to data from WhatsTrading.com. In addition, 64% of the volume changed hands on the put side.

The International Securities Exchange (ISE) has seen an influx of put trading on the shares. During the past 10 trading sessions, 1.1 puts have been purchased to open for every one call. This ratio of puts to calls is higher than 85% of all those taken during the past 52 weeks.

However, there is still ample room for pessimism to grow. The Schaeffer's put/call open interest ratio (SOIR) for OREX comes in at 0.64, which is lower than 63% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 37% of the time during the past 12 months.

Furthermore, OREX is vulnerable to potential downgrades. According to Zacks , the stock has earned six "strong buys," three "holds," and just one "strong sell."

Technically speaking, the shares of OREX plunged more than 70% yesterday and are now resting on the $2.50 level.

 WEEKLY CHART OF OREX SINCE AUGUST 2008

Quiksilver ( ZQK )

Trading was brisk on Quiksilver Inc. ( ZQK ) on Tuesday, as more than 12,800 puts changed hands on the stock. This surge in activity was more than 535 times the stock's average daily put volume. Furthermore, approximately 98.8% of the volume changed hands at the ask price.

The ISE and Chicago Board Options Exchange ( CBOE ) have seen a slight increase in put trading recently. The 50-day put/call volume ratio sits at 0.16, which is higher than 52% of all those taken during the past 52 weeks.

As that ISE/CBOE rating indicates, there is still room for pessimism to grow. In fact, the SOIR for ZQK comes in at 0.21, which is lower than 74% of all those taken during the past 52 weeks. In other words, short-term options players have been more optimistically aligned toward the shares only 26% of the time during the past 52 weeks.

Meanwhile, short sellers are unloading their bearish bets. During the past month, the number of ZQK shares sold short dropped by 12% to 4.75 million. This accumulation of bearish bets accounts for nearly 4% of the company's total float and is 3.4 times the stock's average daily trading volume.

From a technical perspective, the shares of ZQK are down nearly 8% since the beginning of 2011, but are showing signs of a rebound. The stock has bounced off support in the $4.30 area and climbed back above resistance at its 10-day moving average. However, the security must now conquer resistance at its declining 20-day trendline.

 DAILY CHART OF ZQK SINCE NOVEMBER 2010 WITH 10-DAY AND 20-DAY MOVING AVERAGES

Riverbed Technologies ( RVBD )

Options players focused on the shares of Riverbed Technologies Inc. ( RVBD ) on Tuesday, as more than 68,600 contracts changed hands. This jump in volume was nearly three times the stock's average daily option volume of 23,400 contracts, according to data from WhatsTrading.com. In addition, traders were feeling pessimistic, as 85% of the volume changed hands on the put side.

Put volume is on the rise on the ISE. The 10-day put/call volume ratio comes in at 0.95, which is higher than 52% of all those taken during the past 52 weeks, pointing to a rising pessimism.

The SOIR for RVBD comes in at 1.74, 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 higher than 77% 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 23% of the time during the past 52 weeks.

Meanwhile, Wall Street has a slightly bearish bias toward the shares. According to Zacks , the stock has earned 14 "buy" ratings and 15 "holds."

Meanwhile, short sellers are unloading their pessimistic positions. During the past month, the number of RVBD shares sold short dropped by 18% to 8 million. This accumulation of pessimistic positions accounts for nearly 6% of the company's total float and is twice the stock's average daily trading volume.

Technically speaking, the shares of RVBD are rising along the support of their 10-week and 20-week moving averages. These trendlines have guided the shares higher since March 2009.

 WEEKLY CHART OF RVBD SINCE NOVEMBER 2009 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

Trading the News: A Contrarian View. Check out this special report from Bernie Schaeffer here.



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: CBOE , OREX , RVBD , ZQK

Schaeffer's Investment Research

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