Schaeffer’s Market Observation Features Omnivision Technologies
CINCINNATI–(BUSINESS WIRE)–Sept. 5, 2003
Today’s Market Observation features Omnivision Technologies (NASDAQ:OVTI). Schaeffer’s Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. Market Observations are published on www.SchaeffersResearch.com – the home of Bernie Schaeffer and Schaeffer’s Investment Research. To receive a free email notification each time a new commentary is written about one of the featured stocks or any of your favorite stocks, click on the following link. Each new subscriber will receive a FREE copy of Bernie Schaeffer’s Options 101 CD-ROM (a $49.95 value).
A Filter Screen Turns Up NVLS
Reader-requested stocks continue to roll in and are added to the database. I decided to focus on Omnivision Technologies today because the stock is at an interesting point. It has a solid amount of pessimism surrounding it, yet has continued to trend steadily higher. As always, my intent is to show points of interest from the Expectational Analysis(R) point of view as an educational tool. To submit a stock, see the link at the end of this commentary.
Omnivision Technologies (OVTI)
Click on the following link to see the Schaeffer’s Put/Call Open Interest Ratio for OVTI:
Click on the following link to see the Chart of Short Interest for OVTI:
Emphasizing its importance in stock analysis, we start with a couple of sentiment measures. The first chart shows the Schaeffer’s put/call open interest ratio (SOIR), which we use to get a feel for the mood. As of this morning, its SOIR was near one, which means there are roughly the same number of puts as calls in the front three months of options. This positions the ratio near its highest point of the past year. The chart above focuses on the recent action where the SOIR has trended higher as the stock price has steadily increased. I would interpret this bullishly as a signal that there may still be money on the sidelines that could enter.
The next chart shows the number of OVTI shares sold short. The short-term nature of the SOIR chart dovetails nicely with this longer-term measure. While the number of shares sold short has pulled back a bit, it would still take almost eight days to cover all of these positions at the average daily volume. As I have said in the past, short interest is not a perfect indicator, but experience has shown it is still a useful one to watch.
Another sign of skepticism can be seen by looking to data from Zacks. Despite the steady trend in the stock, only six analysts rank the stock and only three of them give it a “buy” rating. Clearly this is not an overly loved equity.
One of the warning signs of a change in trend is that everyone begins to “believe” in the stock and its wall of worry crumbles. The indicators above seem to indicate that the “wall” is still intact. With an interesting sentiment backdrop established, I want to look at some possible levels that may support or impede the security.
Click on the following link to see the Chart of OMVT’s Front-Month Open Interest Configuration:
Click on the following link to see the Daily Chart of OVTI since January 2003:
The first chart above is the September open interest configuration. This can give us an idea of short-term levels that may impact the stock. The second chart shows us the short-term price action with a few simple technical indicators. The open interest chart reveals the largest build-up of calls (what we refer to as the peak call strike) is at the 45 strike. As the second chart shows, this lines up with the resistance zone that has capped the shares during the past two rally attempts.
The regression channel in the second chart highlights the steady uptrend. We can also see the 50-day moving average, which is moving almost in a straight line with the lower rail of the regression channel. The lower rail and the 50-day trendline are situated near 40. This level was resistance in July and has since served as support for the shares.
The nine-day RSI gives us one way to measure how overextended a short-term move may be. As it stands now, this technical measure is not signaling much in the way of danger as it remains near the lower end of its two-month range and well below overbought levels.
The last piece of information I have is the Schaeffer’s Volatility Index (SVI), which is based on the implied volatilities.
Click on the following link to see the Chart of OMVT’s Schaeffer’s Volatility Index:
This is a composite measure of the implied volatilities that can be used as a way of seeing if a stock’s options are becoming cheaper or more expensive. Since this measure closely tracks historical volatility, I tend to view it not as a sentiment gauge. As the chart shows, implieds have been moving steadily lower.
When you pull it all together, you see a strong stock with a healthy amount of skepticism and options that are getting cheaper. The critics may ultimately turn out to be correct but for now, the stock remains in a solid uptrend. The zone around 40 appears important and a break below that would be the first crack in the trend. On the upside, 45 has been a big level and a break above could see follow through as some of the pessimism is unwound.
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About Schaeffer’s Investment Research (www.SchaeffersResearch.com)
Schaeffer’s Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer’s Option Advisor, the nation’s leading options subscription newsletter. The firm’s contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm’s website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron’s. Click here for more details about Schaeffer’s trading methodology: http://www.SchaeffersResearch.com/method .
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