Following my post last week on 27 February entitled” Is NCM likely to try for $36 again this week?”, which I said the stock is likely to be “cooling off”, which it had this week, but more than cooling off, it lost 5.5%. With this new development in momentum, there has been a change in one of its indicators as well.
NCM closed at $32.57 on 2 Mar 2012
NCM definitely underperformed the market for the week ended 2 Mar 2012. Having lost 5.5% for the week, the question top of mind for investors may be “are there anymore downside?” and “are there any signs of possible turn around yet?”
Let’s have a look at options volume first.
Options volume in NCM dropped back down to a more normal level last week. Trading in calls dropped off significantly whilst trading in puts led the stock through out the week as the stock fell. Not a positive turn around sign just yet.
Implied Volatility (IV)
This is one significant indicator that stood out for me . After staying at a low Implied Volatility of around 24% for about 5 weeks, it has started to sneak up last week, closing at the highest level of 26.76 in 5 weeks. This makes me uncomfortable. As once IV creeps up from a low level and is no longer staying flat, it can threaten to continue to head higher. If that is the direction the IV is heading, from this high 26ish, it can go all the way up to 34. This was the level it rose to end of December last year when NCM fell to a low of $29.60 This is a warning sign for me, especially if its IV continues to rise in the coming week. $29.60 or there abouts is my target. Stay out or go short for now.