Despite last Friday's round of dismal economic data, tech stocks
managed to come out ahead, led by a positive forecast from Marvell
Technology Group Ltd. (
). In fact, both MRVL and its sector peer Intel Corporation (
) saw a massive amount of call volume on Friday. However, this call
volume was not necessarily bullish. Let's take a closer look at
Friday's call volume, as well as each stock's technical and
Marvell Technology Group Ltd. (
MRVL led the sector on Friday, after the company said that it
projected earnings of 40 cents per share for its third quarter and
announced a share repurchase program. MRVL took its turn in the
earnings spotlight on Thursday, when the company reported a
consensus-beating second-quarter profit of 40 cents per share.
JPMorgan subsequently raised its price target on MRVL from $23 to
$24, while BMO upped its price target on the tech company from $15
All in all, the brokerage bunch is optimistic toward the
semiconductor stock, with
indicating that 22 out of 27 analysts call MRVL a "buy" or better
-- 16 of which are "strong buys."
Option players also maintain an upbeat outlook on MRVL, as
evidenced by the stock's 10-day International Securities Exchange
(ISE) and Chicago Board Options Exchange (
) call/put volume ratio of 3.94, revealing that calls bought to
open have nearly quadrupled puts purchased during the past two
weeks. This ratio ranks in the upper half of its annual range,
revealing that traders on the ISE and CBOE have shown a greater
appetite for bullish bets on MRVL than usual lately.
On Friday, 107,000 calls crossed the tape -- five times MRVL's
expected single-session call volume of just 19,000 contracts.
However, traders weren't necessarily
The September 15 call was most popular on Friday, with over
25,000 contracts traded -- the majority of which changed hands at
the bid price, revealing they were likely sold. Over the weekend,
open interest fell by over 10,000 contracts, to 20,542. With MRVL
jumping from below $15 to above $16 on Friday, these newly
in-the-money contracts could have been liquidated long calls.
On the charts, MRVL's performance has been less than marvelous
lately. The shares have shed over 22% in 2010, falling steadily
since hitting an April peak above $22. Since then, MRVL has been
guided lower by its 10-week and 20-week moving averages, which have
stifled the stock's progress since April 30.
MRVL is now taking on its 10-week trendline, fueled by Friday's
positive price action. Should MRVL tackle this intermediate-term
moving average -- located just below the $16 level -- the stock
faces an additional layer of resistance around $18, site of its
20-week trendline. With several technical hurdles ahead, it seems
likely that MRVL will continue to remain in technical limbo, at
least in the near term.
Intel Corporation (
Meanwhile, INTC saw volume of 102,000 calls cross the tape on
Friday -- double the tech stock's expected single-session call
volume of around 51,000 contracts.
Traders looked ahead to the October series, with 11,389
contracts traded on the October 19 call -- 69% of which changed
hands at the bid price, revealing they were likely sold. Over the
weekend, open interest at this strike jumped by 7,279 contracts,
confirming that new positions were added here.
One strike higher, over 9,000 contracts traded on the October 20
call. Most of these calls traded at the bid price, and open
interest increased by 8,202 contracts over the weekend, indicating
that these calls were also sold to open.
With INTC hovering around $18.74, it seems that option traders
are expecting the stock to remain somewhat stagnant over the next
few months. Technically speaking, the equity has been range-bound
between the $19 and $22 levels for the past few months. Throughout
this time, INTC has faced additional overhead resistance from its
10-week and 20-week moving averages, which have conspired to
confine the shares since April.
However, in the past few weeks, INTC has been slipping steadily
lower, breaking beneath the lower rail of its trading range. Going
forward, the $19 level, which formerly served as support, could now
act as resistance to the shares. In fact, with peak put open
interest for the September series at the 19 strike, it seems that
quite a few traders are counting on INTC to remain beneath this
level in the near term.
Meanwhile, there is still plenty of room on INTC's bearish
bandwagon. The stock's Schaeffer's put/call open interest ratio
(SOIR) stands at 0.81, in the 56th annual percentile. In other
words, short-term option traders are more bearish toward INTC than
usual lately, but pessimism is nowhere near peak levels, and could
continue to mount as the tech stock treks lower.
In other words, while the tech sector weathered last week's
economic storm, going forward, the short-term outlook for sector
favorites MRVL and INTC isn't exactly looking sunny.
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