Stocks Headed Higher as Bargain Hunters Emerge

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Following a six-day sell-off on the Dow Jones Industrial Average (DJI) , a buying mood has finally hit the Street. Futures on all three major market indexes are pointed modestly north of breakeven this morning, as investors appear ready to brush off an overwhelmingly bearish global bias.

Among equities in focus, Cisco Systems (CSCO ) shorts may jump back on the bearish bandwagon following its quarterly results; Priceline.com (PCLN ) could be on track to snap its historical post-earnings price direction ; sector-wide weakness in global demand weighed on Canadian Solar's (CSIQ ) bottom line.

And now, on to the numbers...

Dow, S&P and Nasdaq futures

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,635,696 call contracts traded on Wednesday, compared to 1,360,464 put contracts. The resultant single-session put/call ratio arrived at 0.83, while the 21-day moving average was 0.67.

NYSE and Nasdaq summary

Volatility indices

From the Trading Floor

Schaeffer's Senior Options Strategist Tony Venosa explains, "With a lack of economic reports, and an earnings season that is basically over, the market has once again switched its attention squarely to the political and economic uncertainty in Europe ."

SPX Investors Intelligence sentiment survey

Currencies and Commodities

  • The U.S. dollar index is flat this morning, with the greenback churning near $80.16.
  • Crude oil is staring at a seventh straight session in the red , with crude for June delivery down 0.4% at $96.40 per barrel.
  • Gold futures continue to fall, as well, with the malleable metal 0.2% lower at $1,591.10 an ounce.

Currencies and commodities

In earnings news, Cisco Systems (CSCO - 18.78) said its fiscal third-quarter earnings improved 20% to $2.17 billion, or 40 cents per share, as revenue rose 6.6% to $11.59 billion. Excluding items, CSCO banked a profit of 48 cents per share. The results narrowly surpassed consensus estimates, which called for earnings of 47 cents per share on $11.58 billion in revenue. Short interest backpedaled by 11.7% during the last two reporting periods, and now accounts for a low 0.8% of the stock's float. With CSCO staring at an 7% drop right out of the gate, some of these short sellers may be encouraged to climb back on board.

Priceline.com (PCLN - 718.95) unveiled a first-quarter profit of $182 million, or $3.54 per share, up 74% from the comparable quarter of 2011. Excluding items, earnings came in at $4.28 per share, while revenue jumped 28.2% to $1.04 billion. Analysts, on average, were expecting a profit of $3.95 on sales of $1.04 billion. Looking ahead, the travel guru is forecasting current-quarter revenue growth of 18% to 23%, falling short of Wall Street's expectations for a 26% increase. No less than 88% of analysts maintain a "buy" or "strong buy" recommendation toward the stock. PCLN is down 2.6% ahead of the bell.

Finally, Canadian Solar Inc. (CSIQ - 3.21) swallowed a first-quarter loss of $21.3 million, or 49 cents per share, compared to last year's profit of $5.9 million, or 13 cents per share, as the solar-power sector has been hit by weakening global demand . Revenue was also on the decline, backpedaling 27% to $325.8 million. Analysts were expecting a wider loss of 52 cents per share on $361 million in sales. Short-term traders were piling up on calls ahead of earnings, with CSIQ's Schaeffer's put/call open interest ratio (SOIR) docked at 0.34.

Earnings and Economic Data

Weekly jobless claims , import and export prices, and the monthly trade balance are on tap today. On the earnings front, we'll hear from Express Scripts ( ESRX ) , Kohl's ( KSS ), Nordstrom ( JWN ) , AMC Networks ( AMCX ), Molycorp (MCP), and Nuance Communications (NUAN) .

Overseas Trading

Asian markets ended mostly lower today, following suit with Wall Street's Wednesday sell-off. In addition to continued political uncertainty in Greece, traders also weighed softer-than-forecast Chinese trade data. Against this gloomy backdrop, banks and energy stocks were among the day's top decliners. However, Shanghai managed to eke out a win, recovering slightly from the previous session's steep loss. By the close, Hong Kong's Hang Seng shed 0.5%, Japan's Nikkei lost 0.4%, South Korea's Kospi fell 0.3%, and China's Shanghai Composite edged up 0.07%.

European equities are wobbling around breakeven at midday. Downbeat data from Beijing is keeping traders on edge, but Spanish stocks bounced back from Wednesday's swoon after the government announced plans to assume a controlling stake in at-risk lender Bankia SA. At last look, the German DAX is up 0.6%, the French CAC 40 is off 0.08%, and London's FTSE 100 is 0.08% higher.

Overseas markets

Unusual Put and Call Activity:

For an explanation of how to use this information, check out our Education Center topics on Option Volume and Open Interest Configurations .

Unusual options activity - puts

Unusual options activity - calls

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This article appears in: Investing , Options

Referenced Stocks: AMCX , CBOE , ESRX , JWN , KSS

Schaeffer's Investment Research

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