Bucking the trend
08/16/18

When trading screens are a sea of red, like they were yesterday, those little pockets of green can look especially interesting.

With the S&P 500 (SPX) off more than 1% and the Nasdaq 100 (NDX) pushing -2% in early trading, traders were getting busy in Clovis Oncology (CLVS), driving call options volume to more than 10 times its normal daily total, and nearly 100 times the volume of put options, as shown in the following LiveAction scan:

LiveAction scan: High call/put ratio, 8/15/18. Call volume dwarfed put volume

Source: OptionsHouse

That’s a lot of potentially bullish sentiment. Was it born out in the stock action? A glance at a CLVS chart at the time may have been a little surprising, since the stock seemed to be barely budging from its recent lows. But that was a bit of an optical illusion.

Clovis, a bio pharma company specializing in cancer treatments, had been trending lower since the end of July 2017 when it approached $100/share. After falling to around $42 in May, the stock consolidated until the beginning of August, when an earnings miss was followed by a downside breakout of the range and a drop to new lows around $34, the stock’s lowest price since late 2016:

Clovis Oncology (SATS), 1/31/18–8/15/18. Clovis Oncology (SATS) price chart. Up 2% on down market day

Source: OptionsHouse

Nonetheless, after four days of sideways price action, the stock rallied more than 2% intraday yesterday—with nary a bit of company-specific news crossing the wire and the broader market in the midst of its biggest multi-day pullback (and second-largest one-day drop) in two months.

Last year, Clovis was a widely rumored takeover candidate in biotech circles1—something that (along with a raging bull market) may have helped pump up shares, just as the absence of any deal may have subsequently fueled some disappointment among investors. Does yesterday’s trend-bucking rally mean the stock has finally reached a base from which it can rally?

We’ll soon find out. On a side note, the Street doesn’t seem to have given up on the stock. Analyst rankings aren’t infallible, but the following TipRanks chart shows the average 12-month CLVS target is close to $73:

Clovis Oncology (CLVS) analyst price targets, 8/15/18. Street still positive

Source: TipRanks

Despite yesterday’s gains, CLVS is still relatively close to its recent swing low of $33.85—a plus for traders looking for technical guideposts: Bulls will want the stock to only temporarily trade below that level (in the event the broader market remains under selling pressure), but preferably continue to follow through to the upside and challenge the consolidation breakdown point around $42. On the flipside, one or two solid closes below that level may re-energize short sellers.

Market Mover Updates: Stocks weren’t the only thing getting hit yesterday. Commodities—everything from crude oil to copper, gold, cotton, and soybeans—took it on the chin, too. September copper (HGU8) tumbled more than 4%, October WTI crude oil (CLV8) fell more than 3% to below $64/barrel, and December gold (GCZ8) fell more than 1% to its lowest level since December 2016.

 

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1 Bloomberg.com. Former Biotech Darlings Tesaro, Clovis Pin Hopes on 2018 Rebound. 5/10/18.