Wednesday’s Vital Data: Aurora Cannabis, Ford and CVS

Options activity provides a look at expectations on ACB, F and CVS

U.S. stock futures are inching lower this morning after most indexes closed near unchanged on Tuesday.

Wednesday's Vital Data: Aurora Cannabis, Ford and CVSHeading into the open, futures on the Dow Jones Industrial Average are down 0.13% and S&P 500 futures are lower by 0.13%. Nasdaq-100 futures have shed 0.08%.

The lack of urgency in yesterday’s snoozer of a session left little to talk about in the options pits. As usual, call volume won the day, even as overall volume settled to slightly below average levels. Specifically, about 16.2 million calls and 14.1 million puts changed hands on the session.

At the CBOE the action was equally uninspiring, with the single-session equity put/call volume ratio holding steady at 0.67 —  a one-month high. Meanwhile, the 10-day moving average ticked up to 0.61.

Options traders zeroed in on these three stocks yesterday. Aurora Cannabis (NYSE:ACB) was flying high after a glowing report from Cowen. Ford (NYSE:F) stock continues to drift sideways but saw call volumes jump. Finally, CVS Health (NYSE:CVS) dropped to a fresh 3-year low amid the ongoing fallout after last month’s disappointing earnings report.

Let’s take a closer look:

Aurora Cannabis (ACB)

The lovefest for pot stocks heated up Tuesday, sending many of the biggest names in the space higher by double digits. Aurora Cannabis was one of the biggest winners notching a 12.2% gain on the session after Cowen came out with fresh analysis on the marijuana industry. ACB stock was singled out as one of the best plays in the space.

Positive analyst remarks were all the excuse traders needed to swarm. And swarm they did. The 72.99 million shares that changed hands on the session marks the highest volume day ACB has seen since going public.

On the technical front, the stock is in an uptrend complete with rising 20-day and 50-day moving averages. The 200-day is slithering sideways, so we need more elevation before it turns. With Tuesday’s rally, ACB stock is now testing key intermediate resistance at $8. A successful breach of that will set the company up for a run back to its record highs of $12.53.

Traders expressed their enthusiasm by gobbling up calls all day long. Activity grew to 257% of the average daily volume, with 116,582 total contracts traded. Calls were responsible for 84% of the day’s total.

Ford (F)

On the surface, Monday’s trading for Ford leaves little to chatter about from a price perspective. The automaker ended with a narrow-body candle in the middle of a two-week trading range. Its lack of momentum, or trend for that matter, is confirmed by the 20-day and 50-day moving averages, which are treading water here.

If buyers want to get the party started, we need a break above short-term resistance at $9. This ceiling has kept a lid on F stock all year long and needs to be broken before bullish trades become palatable.

Despite the utter lack of drama on the price front, F stock options were hopping. Calls absolutely dominated the session, outpacing puts by over 9 to 1. The total activity jumped to 316% with 182,111 total contracts traded. 91% of the trading came from call options alone.

The increased demand pushed implied volatility higher to 35% placing it at the 37th percentile of its one-year range. Premiums are pricing in daily moves of 19 cents or 2.2%.

CVS Health (CVS)

The fire sparked by CVS Health’s February earnings release has grown into a burning bonfire that is slowly destroying its share price. Yesterday’s 1.79% drop marked the eighth down day out of the last nine trading sessions. With major support at $60 now broken, CVS stock now sits at a three-year low.

Last month’s earnings report was mixed with the company missing revenue estimates and providing weaker-than-expected guidance for 2019. Tack on concerns over the company’s recent $70 billion purchase of Aetna and the fundamental backdrop is not helping the stock right now.

On the options trading front, calls proved more popular than puts despite the day’s slide. Total activity rose to 245% of the average daily volume, with 142,770 total contracts traded. Calls added 66% the sum.

Implied volatility climbed to 29%, placing it at the 36th percentile of its one-year range. Premiums are pricing in daily moves of $1.02, or 1.9%, moving forward.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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