While many consumer-driven sectors of the market are struggling amid the global economic downturn, the so-called "sin sector" is back in style. Since the beginning of the year, the International Securities Exchange (ISE) SINdex (SIN) has soared more than 35%, easily doubling the broader S&P Retail Index's (RLX) gain of about 15% for the same time frame. What's more, SIN has outperformed the S&P 500 Index (SPX) by more than 40 percentage points on a relative-strength basis during the past 60 trading days.
Gambling has long been a staple of the sin sector, and few gaming stocks for 2010 have performed better than Las Vegas Sands Corp. (LVS) in 2009. The equity has soared more than 50% on a year-to-date basis, due in large part to LVS' massive 513% surge from its March 9 low. As a result of this impressive technical prowess, the security has outperformed the SPX by more than 275% on a relative-strength basis during the past 60 trading days.
The 2010 best stock's rally has found unwavering support from its 10-day and 20-day moving averages, below which LVS has closed only one session since March 12. The equity has also toppled potential resistance in the 9 region, which is home to the security's Jan. 6 peak. The shares are currently pulling back to this area, creating a potential opportunity for a long position on LVS.
Options traders have warmed to LVS' impressive price action. The 2010 best stock's Schaeffer's put/call open interest ratio (SOIR) of 0.50 indicates that calls double puts among options set to expire within the next three months. Additionally, this ratio ranks below all but 35% of those taken in the past year.
Despite the elevated bullish sentiment toward LVS, options traders' hunger for call options has not abated. Specifically, data from the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) indicates that nearly four calls have been bought to open for every one put purchased on LVS during the prior two weeks. What's more, traders have pursued these bullish bets at a faster pace only 26% of the time in the prior 52 weeks.
Digging into the 2010 best stock's open interest configuration reveals that peak call open interest resides at the out-of-the-money June 10 strike, with almost 25,000 contracts in residence. By comparison, put activity has been pretty paltry, with 14,391 contracts representing peak put open interest at the out-of-the-money June 7.50 strike.
But bullish sentiment stops at the option pit's door. Short sellers have placed heavy bets against LVS, with more than 23% of the 2010 best stock's float sold short, despite a 6.6% decline in short interest during the most recent reporting period. Should the equity extend its strong price action, we could see more bears abandon their short positions, thus providing additional buying pressure for LVS.
Finally, Wall Street analysts don't think very highly of the company at the moment. Currently, 10 of the 11 brokerage firms following LVS rate the shares a "hold" or worse. Any upgrades from this bearish bunch could be quite beneficial for the equity.
To take advantage of a continued rally in LVS shares, investors should consider a 9-strike call option - the July call (premium is 20% of the stock price for 2010) or September call (premium is 27% of the stock price for 2010).
Central European Distribution Corp. (CEDC)
Central European Distribution Corp. (CEDC) distributes more than 700 brands of beer, spirits, and wines, according to Hoovers. The company offers spirits made by Bacardi and Diageo, as well as well-known name brands including Corona, Jim Beam, and E&J Gallo wines. The firm also distills vodka under the brands Absolwent, Zubrówka, Bols, and Royal.
As another strong performer within the sin sector, CEDC has outperformed the SPX by more than 160% on a relative-strength basis during the prior two months. The best stock of 2010 has nearly quadrupled in value since tagging a low of $5.97 per share on March 3, riding support at its rising 10-day and 20-day moving averages. Furthermore, the equity has pulled its 10-week and 20-week trendlines into a bullish cross - a technical formation that often precedes additional gains for the security.
One caveat to this strong technical backdrop is potential overhead resistance from CEDC's declining 10-month moving average. This long-term trendline is currently perched in the 25 area, and could prove troublesome for the equity. However, there is plenty of potential sideline money that could help pressure CEDC past this hurdle.
For instance, there is a growing acceptance of the 2010 best stock's uptrend in the options pits. The ISE/CBOE 10-day call/put volume ratio of 3.24 indicates that more than three CEDC calls have been bought to open on these exchanges for every one put purchased during the prior two weeks. What's more, this ratio ranks above 74% of all such readings taken in the past year, underscoring this rising bullish bias.
But the long call trade is far from crowded, as CEDC's SOIR of 0.70 ranks near the midpoint of its annual range. As more options traders join the bullish bandwagon, it could provide additional lift for the security.
Elsewhere, short sellers are growing increasingly nervous. During the most recent reporting period, the number of CEDC shares sold short plunged by more than 12%. Still, roughly 11% of the 2010 best stock's float remains sold short, providing ample fuel for a short-covering rally should the equity make a break with potential resistance at its 10-month moving average.
Analyst coverage is thin on Wall Street, with only five brokerage firms covering CEDC. Among those, three have issued "buy" ratings, while two have doled out more cautious "holds." Despite the bullish slant to this coverage, there is still room for upgrades or additional coverage to help usher CEDC steadily higher.
Philip Morris International Inc. (PM)
While the market has been kind to gaming and alcohol companies, the tobacco group hasn't enjoyed the same kind of success. Philip Morris International Inc. (PM), for example, rests on a year-to-date decline of about 2%. The best stock of 2010 has rallied alongside the SPX since the March bottom, but the shares have been unable to topple technical resistance in the 43-44 region. This area held PM largely in check between October 2008 and January, allowing the shares only one weekly close to the upside during this time frame. With the stock's 50-week moving average descending through the 44 level, another rejection in this area seems increasingly likely.
Unlike its fellow SINdex members, PM has attracted a wave of optimism from the investing public. The stock's SOIR of 0.69 indicates that calls easily outnumber puts among near-term options, while eight of the 10 analysts following the shares rate them a "buy" or better. If PM is rejected once again by technical resistance in the 43-44 region, we could see this bullish sentiment unwind in the form of additional selling pressure.
Finally, short interest accounts for a miniscule 1.65% of the 2010 best stock's total float, providing very little in the way of potential short-covering support in the event of a sell-off. What's more, the number of PM shares sold short rose by more than 3% during the most recent reporting period. These bears could gain confidence and double down on their positions if the equity fails to overcome technical hurdles.
Pessimism Surrounds P.F. Chang's China Bistro
Brief Summary:
This article observes that many restaurant chains have struggled amid the ongoing recession, but notes that P.F. Chang's China Bistro (PFCB) appears to be thriving. In addition to a 38% improvement in first-quarter profits, the Chinese restaurant also improved its operating margins. What's more, says the author, the best stock for 2010 has doubled from its November 2008 price.
In this upbeat commentary, PFCB's notable outperformance is attributed to deft management. "The company has avoided wholesale restructuring and panicky discounting," observes the author, explaining that management has instead introduced a few carefully chosen lower-priced menu options, and scaled back its expansion plans. In short, concludes the article, the Chinese chain has succeeded "by focusing on process improvement rather than helter-skelter growth."
Contrarian Takeaway:
PFCB's price action has been impressive, with the best stock for 2010 vaulting 40.8% higher year-to-date. A recent pullback was contained by support at the security's 10-week moving average, which hasn't been violated on a weekly closing basis since early March.
Despite this uptrend, pessimism remains heavy toward the shares. The restaurateur's Schaeffer's put/call open interest ratio (SOIR) weighs in at 2.26, with puts more than doubling calls among options set to expire within three months. Meanwhile, short interest accounts for a remarkable 36.7% of PFCB's available float.
Analysts are also crowded onto the bearish bandwagon, with Zacks reporting that 10 out of 14 analysts maintain a "hold" or worse rating on the outperforming stock of 2010.
Considering PFCB's solid technical performance, it seems likely that these skeptics will soon be forced to capitulate to the stock's strength. As this bearish sentiment comes unwound, look for the shares to continue their journey up the charts.
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| Highest Option Volume for the Week Ending Tuesday, May 26, 2009 | ||||||
| Ticker Symbol | Call Volume | Put Volume | Total Volume* | Put/Call Ratio | ||
| Spdrs(SPY) | 383,554 | 529,410 | 912,964 | 1.38 | ||
| Bank of America Cp(BAC) | 311,240 | 184,687 | 495,927 | 0.59 | ||
| General Motors Cp(GM) | 318,720 | 135,778 | 454,498 | 0.43 | ||
| Citigroup Inc(C) | 278,944 | 150,276 | 429,220 | 0.54 | ||
| S&P 500 Index(SPX) | 138,691 | 166,963 | 305,654 | 1.20 | ||
| Nasdaq 100 Index Trckng Stck(QQQQ) | 95,729 | 201,592 | 297,321 | 2.11 | ||
| Ishares Russell 2000 Index(IWM) | 45,040 | 113,993 | 159,033 | 2.53 | ||
| CBOE Market Volatility(VIX) | 92,322 | 13,017 | 105,339 | 0.14 | ||
| Ishares Msci Emerging Markets(EEM) | 34,867 | 60,497 | 95,364 | 1.74 | ||
| Streettracks Gold Trust(GLD) | 74,807 | 15,099 | 89,906 | 0.20 | ||
| Highest Option Volume Compare to Average Volume for Week Ending Tuesday, May 26, 2009 | ||||||
| Ticker Symbol | Call Volume | Put Volume | Total Volume* | 5-week Avg Volume | Volume Ratio | Put/Call Ratio |
| Computer Sciences Cp (CSC) | 5,252 | 6,558 | 11,810 | 4,524 | 0.80 | 1.25 |
| Citrix Systems Inc (CTXS) | 54,260 | 6,889 | 61,149 | 20,229 | 7.88 | 0.13 |
| Dicks Sporting Goods Inc (DKS) | 10,870 | 5,127 | 15,997 | 5,781 | 2.12 | 0.47 |
| Ishares Msci Canada (EWC) | 3,883 | 6,422 | 10,305 | 3,914 | 0.60 | 1.65 |
| Hsbc Holdings Plc (HBC) | 552,147 | 21,009 | 573,156 | 190,872 | 26.28 | 0.04 |
| Infosys Technologies Ltd (INFY) | 14,488 | 13,214 | 27,702 | 10,006 | 1.10 | 0.91 |
| Invesco Plc (IVZ) | 9,269 | 4,627 | 13,896 | 4,344 | 2.00 | 0.50 |
| Progressive Cp (PGR) | 3,707 | 8,401 | 12,108 | 4,132 | 0.44 | 2.27 |
| Regional Bank Holdrs Trust (RKH) | 7,910 | 44,117 | 52,027 | 19,388 | 0.18 | 5.58 |
| Tenet Healthcare Cp (THC) | 22,472 | 4,097 | 26,569 | 9,009 | 5.48 | 0.18 |
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