IntercontinentalExchange Inc. (NYSE: ICE, Stock Forum) is an Internet-based, global electronic marketplace that specializes in the trading of futures and over-the-counter commodities and derivative financial products. The company's key products include contracts based on crude or refined oil, natural gas, and power. Meanwhile, ICE has expanded its operations during the past couple of years, acquiring the New York Board of Trade for $1 billion in 2007, and purchasing Creditex in August 2008.
Shares of the investment services firm have performed admirably in 2009, despite a slowdown in the global economy. The equity has rallied more than 25% on a year-to-date basis, besting the S&P 500 Index's (SPX) loss of about 2.2% for the same time frame. What's more, ICE has outperformed the SPX by roughly 57% on a relative-strength basis during the past 60 trading days.
Technically speaking, the security has vaulted 96% higher since setting a low near $53 per share in early March. Throughout this rally, the stock has enjoyed the support of its rising 10-day and 20-day moving averages - logging only three breaches of this duo on a closing basis since March 3. Currently, ICE is consolidating its gains into short-term support near the 100 level - a region that has provided both support and resistance since the start of May. What's more, the equity's 10-week trendline is rising into the area, and could bolster technical support for the security.
Despite the strong technical performance, options traders remain unconvinced. Specifically, ICE's Schaeffer's put/call open interest ratio (SOIR) of 0.70 ranks in the 65th percentile of its annual range, pointing toward trepidation from the speculative options community. That said, it would appear that sentiment is shifting toward a more bullish stance on ICE, as call buying is dominating options activity on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE).
Digging into data from the ISE and CBOE reveals a 10-day call/put volume ratio of 3.60. This reading means that 3.6 calls have been bought to open for every put purchased on these exchanges during the prior two weeks. Furthermore, this ratio ranks above 98% of all those taken during the past year, meaning that options traders have had a larger appetite for call buying only 2% of the time in the past 52 weeks.
For those looking to jump into ICE options, implied volatility on the June series is relatively low from a historical perspective. Currently, the June 105 call has an implied volatility of 51%, while the June 100 put's implies rest at 57%. The stock's one-month historical volatility arrives at 77.06%, meaning that both near-the-money options are inexpensive at the moment.
Outside the options pits, the bears are in fully in control. Short interest on ICE rose roughly 6% during the most recent reporting period, and now represents a respectable 5.85% of the stock's total float. Should these bears be forced to buy back their bets, we could see ICE benefit from the added buying pressure.
Finally, Wall Street remains heavily pessimistic on ICE's prospects. Specifically, nine of the 11 analysts following the shares rate them a "hold" or worse. Additionally, Thomson Reuters reports that the average 12-month price target for the security rests at $96.36 per share - a discount of nearly 7% from the stock's close of $103.61 on Monday. Any upgrades or price-target increases from this negative bunch could bolster ICE's steady uptrend.
By Joseph Hargett