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In last week's edition of Trading Tools, commodities concern McMoRan Exploration Co. ( MMR - Snapshot Report ) was examined, as it appeared on the Zacks Unusually High Option Volume filter. However, utilizing the Zacks Put/Call Ratio Greater than 1.0 screener today, I stumbled upon another equity that piqued my curiosity: shipping issue Excel Maritime Carriers Ltd. ( EXM - Analyst Report ) .
The Put/Call Ratio Greater than 1.0 screener
Before we begin, let's break down today's stock screener. The filter looks for stocks with a high put/call open interest ratio, indicating a preference for bearish bets among near-term options. Why is this important? Simply put, a high Schaeffer's put/call open interest ratio (SOIR) measuring options with less than 3 months until expiration suggests that expectations for the security to rally are extremely low. In other words, a high SOIR usually indicates skepticism among short-term options speculators.
Skepticism sails higher
According to Zacks, EXM harbors a SOIR of 1.16, as puts outnumber calls among near-term options. Compared to similar readings taken during the past year, the stock's SOIR ranks in the 91st annual percentile, suggesting that near-term options traders have been more bearishly biased toward the dry bulk diva only 9% of the time during the past year.
The low expectations in the options pits are even more apparent when looking at EXM's front-month open interest configuration. While peak call open interest in the May series rests at the near-the-money 7.50 strike, peak put open interest is docked at the out-of-the-money 2.50 strike, home to nearly 3,000 contracts.
Furthermore, the pessimism among options players is on the rise, as indicated by recent data from the International Securities Exchange (ISE). During the past couple of weeks, speculators on the ISE have bought to open nearly twice as many puts than calls on the equity. This lofty 10-day put/call volume ratio of 1.83 ranks in the 88th annual percentile, implying that investors on the exchange have been scooping up EXM puts at a much faster pace than usual lately.
Now that we know the options arena is bearishly biased toward the shipping sultan, one question remains: is it warranted?
Braving the technical storm
Since grazing the 3 level in early March, shares of EXM have more than doubled. Powering through former resistance at its 10-week and 20-week moving averages, the stock has outperformed the S&P 500 Index (SPX) by an impressive 63% during the past 60 trading sessions. However, the security's run higher could face a potential speed bump in the 8-to-10 neighborhood, which once acted as support, and has contained EXM's rally attempts since November 2008.
Word on the Street
Should resistance in the 8-to-10 region smack the stock lower, the bulls among the brokerage bunch could abandon ship. As analysts capitulate to the bears' lair, a fresh wave of price-target reductions could place additional selling pressure on the shares.
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