This morning’s OTAS Lingo market report on the Stoxx600 highlights the car manufacturer Renault as experiencing a significant recent increase in its cost of credit protection. Further analysis indicates it is the only stock in the Stoxx600 which is flagging both an extreme move higher in its cost of credit and unusually high levels of implied volatility whilst additional sentiment risk indicator, Short Interest, is also displaying a negative shift.

Renault shares are +29% YTD having outperformed the Autos & Part sector by +22%. Current holders of the underlying equity should be aware of these factors and their potential impact on the shares.


  • Implied Volatility in Renault shares increased 21% in the last week significantly more than peers in its sector and is at the highest sector relative level in 2 years. The options market is now pricing in a 20% move for the shares over the next 3 months.
  • There has also been an abnormal move* in Renault’s cost of credit over the last week. The 23% increase was markedly larger than any of its closest peers and suggests the credit market is focussing its concerns primarily on Renault.
    *current 5 day move compared to historic 5 day moves.
  • Short Interest, depicted by the move in percentage of free float on loan has seen a notable increase in the last week for Renault. This is particularly interesting given its closest peers have broadly seen a contraction in free float shares on loan post the collective move down in share prices.

You are probably sighing in front of the screens these days while watching the Asian markets dipping lower and lower every day as the Chinese and Hong Kong shares continue to fall. Here are a few observables from OTAS which could provide you some insights before you make your next trading decision.

The ‘Express’ App under our Launcher Bar is the best tool for you to gather the data you need when you are in a hurry. With the Top Stocks tab sitting on the left and the Lingo tab on the right, you get a quick glance of what’s happening in your portfolio or chosen indices  with a clean textual summary in seconds.

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From the Top picks generated above, we see that Bank of East Asia (23 HK) is probably a stock that we need to watch out for. The stock is flagging as it is trading significantly below its average valuation over the last two years. On further inspection, the short base of the stock has spiked reaching its highest level since beginning of the year. 3.8% of free flat shares are on loan, up by 55% in the past week. Earnings momentum is also at its lowest  being one of the 10% of all the negative performers in the sector, with 12 months forward EPS momentum down by 6.5%.

(Please note about the particulars of the scrip dividend scheme which could be the cause of the spike in short interest, source:

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The second stock we are going to look at is Cheung Kong Holdings (1 HK). Coming close to earnings release in four days, the implied volatility of the name is seen to be pretty stable relative to the sector. And even though the earnings momentum has risen up from a negative to a positive percentage point in the past month, its valuation is extremely expensive and the dividend pay-out does not look to be that generous. Valuation is expensive as the current 12 months forward Price/Book is 0.9x forward earnings.


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Recently an OTAS intraday Relative Return Alert fired in Playtech indicating the stock has materially outperformed its bespoke basket of stocks in the last hour. This is unusual and not typically how it would be expected to trade.


Clicking on the Alert takes you to the OTAS Microstructure which enables traders to better understand what’s driving the shares, whether the move has gone too far and if/how they should react.

Microstructure Observations:

  1. Stock(white line) deviated away from basket(green line) by 73bps in last hour depicted in the top chart, an extreme move compared to its own history.
  2. Volume chart indicates current traded volume is well below its 30 day average, suggesting buyers are really struggling to find stock for sale today.
  3. Expectations that the stock reverts back to its basket are currently slim – as the stock makes new highs the liquidity chart shows that buyers(green line) are still the visibly dominant party on the order book and they continue to impact the shares.
  4. Little change in the current Spread also reinforces this view.


Conclusion – Given the current intraday market conditions of Playtech and the significance of their impact, buyers would be well be advised to adopt a more passive approach and wait for normalisation of such market metrics. Additionally, they should monitor the microstructure charts & Alerts for changes in volume characteristics, liquidity bias and spread for opportune times to increase participation.
Sellers meanwhile have all the information needed to trade very effectively today. 

With the latest launch of the Express App, users are able to view the most important flags ranked by positive and negative flags in their selected watch list, market or sector. Additionally, users can read the Lingo report on these lists, as well as select the names of interest and view the top stamps for that stock. This feature enables users to view all the most important analytics for stocks of interest in OTAS in one place.

Select Express from the drop down Apps menu:

express app

Select preexisting market from list or type in a watch list name or sector in the Search bar:

Express markets enter

Express Search

Click on Top Stocks to view top positive and negative flags. You may click on a stock to view a natural language report on the top flags.

Express Top Stocksexpress top stock detail

Click on Lingo to view the significant overnight, weekly, MTD, or monthly changes in your list. When you click on a highlighted name, you will be able to see the top flags and a natural language description of the activity.

Express Lingo Express detail

This Express app is also available through a web-based link for users on the go.

Jack Dorsey, Twitter’s co founder, chairman and interim CEO bought $875,000 of the company’s shares last Friday, in his first trade since the company listed. He is buying alongside a number of other company insiders this month, as shown on the chart of Twitter’s stock price below.

Twitter Insiders

What is interesting is that the total dollar amount committed to buying Twitter shares of late pales alongside the amount raised by the one seller, Evan Williams, a former President, CEO and CFO of the company, who has unloaded multiple millions of dollars worth of stock.

In OTAS we differentiate between routine sales by insiders who understandably want to dispose of stock accumulated prior to the listing, and trades afforded high importance that have a directional bias. Williams has made only one high priority disposal, which was back in May, but it is sufficient to mark him out as the most successful insider trader of Twitter shares.

Dorsey may grab the headlines, but to date Williams takes the plaudits as the better trader of Twitter shares. Time will tell whether Dorsey and his colleagues have made a profitable investment, but the size of their purchases might indicate a lack of complete conviction. EPS Momentum is firmly negative for the shares, although the stock price has fallen well below the trend of forward earnings estimates, as investors raise serious questions about whether the growth rate that Twitter can deliver justifies the valuation attached to the group.

At 30x EV/EBITDA Twitter is at the lowest value since its listing, both in absolute terms and relative to peers and the market, but still has the highest absolute valuation of all but Linkedin. With no yield and precious little free cash flow yield to support the shares and an EV/Sales ratio that would make all but Facebook blush, Dorsey and his fellow insiders have their work cut out to convince investors that the timing of their recent modest share purchases was well informed.

Check out OTAS for more detail on everything discussed in this blog, including a full listing of insider traders at Twitter and a ranking of directors by success or failure of their trades.

There has been a fair bit of focus on the transportation sector of late and whether its sell off is a harbinger of economic slowdown. The theory goes that as the sector ships the goods that are then sold to companies and consumers, it is a bellwether of future spending and hence of economic growth.

The focus has been most intense in the US, where several companies have warned of a sales slowdown, especially given the strength of the dollar. The largest stocks in the sector are freight carries of different hues and hence earlier cycle than the airlines that are some of the larger companies among European names.

The chart below shows that there has been a marked fall in the valuation of the North American transport sector, but that this fall was from an extreme long term high and has done nothing other than restore the mean valuation of the industry.

US Transport Aug 2015

Relative to the broader market however, the sector appears inexpensive and has started to bounce off a significant multi-year low.

US Transport Rel Aug 2015

EPS Momentum in transportation stocks is negative to the tune of a little over half a percent, but this is only slightly worse than the minus one quarter percent for the Russell 1000. Both readings are in keeping with the age old issue of overly optimistic analysts having to downgrade earnings expectations over the course of a year, triggered to do so by the realities revealed in quarterly reports.

Add the dollar strength to the picture and it is no surprise that some companies are hurting and that lower dollar oil prices are insufficient compensation for certain industries.

Implied volatility for North American transportation stocks suggests a +/- 15% move in the average sector constituent by early November, which is +/- 2% points more than for the average market constituent. It is, however, very much in the normal long term range of volatility.

If there is a warning sign, it is in relative volatility, which is at the upper reaches of the long run trend and signalling potential weakness in the sector. This measure will be one to watch carefully over the next couple of weeks, because if it declines swiftly then any panic in the sector is likely to be done and dusted with the earnings season.

US Transport Rel Vol Aug 2015

What such an occurrence would then remind us is that the biggest moves in markets are being driven by relative change in monetary policy, which is first and foremost reflected in currency rates. Transportation stocks are much more exposed to the exchange rate than domestic plays and hence have suffered relatively in recent times.

Prospects of a recovery are likely to hinge on whether the Fed really does raise rates in September.

Post Script

European transportation stocks have lower implied volatility than the broader market and flat EPS Momentum compared to -0.3% for the STOXX 600. While relatively cheap, the valuation discount is not as marked as in the US, lending support to the theory that it is dollar strength that is hurting US names, rather than a broader warning from transport shares about an impending slowdown in GDP.

OTAS Director Dealing analysis is differentiated because it flags only directional insider trades, eliminating the noise of tax and option related dealing and further offers a unique historic performance back-testing on each individual.

Here we look at a number of recent ‘insider’ transactions by directors of FTSE 100 companies and establish whether they can offer any inference of sentiment and/or future share price direction.

Lloyds Bank

Chief Operating Officer Karin Cook sold 78k shares yesterday. Whilst modest in size, our 8 year back-testing shows that this is the first ever sell transaction by a Level A director and follows a host of larger sales by Level B directors seen in mid-June. With the first of many Government stake sales in RBS happening in the last week are internal assumptions that Lloyds will continue to be the funding trade.

SAB Miller

Two recent transactions by insiders are noted in SAB Miller shares differing in both view and seniority. The recent Level B sale eclipses the purchase in terms of notional and is the largest reported sell transaction since 2013.

Whilst our star ranking indicates Guy Elliot has reasonably reliable backtested performance historically when buying this is Mr Van Kralingens first ever significant transaction. This is potentially symbolic in terms of timing with SAB Sales release tomorrow and the fact Mr Van Kranglingens is also giving up his right to the dividend which also goes ex tomorrow (£0.80)

Royal Dutch

Are insiders telling us they think the shares have fallen too far ? Further internal director buying was in evidence at Royal Dutch yesterday following a $585k Level C purchase of stock on Friday. Non-Exec Director Linda Stuntz bought $115k in the ADR B shares which was her first transaction in 3 years. Looking at the resultant performance of the shares following her trades historically suggests she has a high degree of reliability.

Facebook reports Q2 earnings tomorrow. OTAS is highlighting that despite the stock price being divergent with Volatility over the past month as the price has pulled back from the highs recently, an increase in volatility may be pointing to something else.

Filtering the Dashboard for Events this week and then sorting by Divergence, FB US was one name of interest. The stock has performed better than other social media names post the Q1 earnings season and has only recently become overbought. There was a technical signal that fired four days ago which shows the stock as overbought. However, with our backtesting over the past 9 years, the stock actually continues to trade higher 71% of the time.

FB Filter

FB stamps

technical signal spread perf vs industry

Digging into the Volatility,we see that the stock’s 3M implied vol is higher than its peers by over 2 standard deviations, and its own absolute level is higher than normal. However, both the Upside Skew and Downside Skew are at extreme levels, highlighting potential positives to the stock, as investors are paying up for upside and paying lower prices for downside protection. Looking at the Top Ten Traded Volume for yesterday, the most active contracts are the near dated out of the money calls.

implied vol summtop vol

As we move headlong into Q2 reporting season we again turn to the Earnings Positioning view in OTAS whereby we cut through all the noise and discuss those stocks which may be carrying unanticipated risks or conversely present a potential investment opportunity which the broader market may be overlooking. Here, our focus is on the companies in the FTSE 350 which report Sales or Earnings next week

Fresnillo: –

Of the 35 companies which report next week, Fresnillo shares are one of only 4 who’s current share price condition is in a technically oversold state on a standard RSI measure. Performance year to date has been nothing less than horrific with the shares down -19% in absolute terms whilst under-performing the broader Basic Resources sector by around -10%, however, looking at recent price returns that relative bet may be unwinding with the shares finding some positive momentum, outperforming peers by +3.5% in the last week alone.
With just under 15% of shares currently on loan, short interest remains at extremely inflated levels and has seen little signs of contraction suggesting Hedge Funds are happy to run positions in Fresnillo into numbers so perhaps it is value funds, who may now be focussing on it’s inexpensive valuation and considerable contraction in implied volatility levels, that are re-adjusting sector weightings helping contribute relative support for the shares.
Other factors such as earnings expectations continue to be revised downwards putting them in the bottom quartile of the sector for downgrades over the last month. Analysts forecast 12m fwd EPS estimates have been cut by just under -7% whilst seemingly the adjusted market price has more than reflected this, -13% in absolute terms over the same period. The shares remain a consensus ‘Buy’ rating currently offering a 28% discount to the median analyst price target.
If the company manage to meet (or beat) current guidance there is the risk of a relief rally from these levels which could be exacerbated by Hedge Funds. With over 15 days trading volume to cover the entire short base, negative directional plays should also consider the short squeeze risk of such an event. Earnings Tuesday 4th August

Fresnillo: Price vs Short Interest

Enterprise Inns:-

Another Company which heads into its Sales release on the back of less that spectacular performance is Enterprise Inns.
With investors continuing to shun the beleaguered pub sector following proposed structural Government reforms at the end of last year the shares have returned just +2.4% year to date and have underperformed the wider European Travel & Leisure sector by  c-14%. Screening the stock on the Earnings Positioning view some interesting elements are observed.

Similarly to Fresnillo above, technically the shares are now oversold on the RSI measure and are also within touching distance of the 200dma, potential support indicators for traditional chartists.
From a fundamental perspective analyst forecasts have remained largely unchanged in the last month, seeing just 40bp downward revisions to estimates. The price action over this period (-10%) suggests the market is anticipating a far worse earnings scenario this time around.
Such concerns are clearly not being expressed by management however. Just last week Chairman Robert Walker purchased 160,000 shares in the company, only his second purchase to date with the shares rallying +12% the following month post his previous transaction. Our rating system shows he is the most reliable of all directors at Enterprise when considering their historic back-tested performance.
Investor positioning continues to show a heavily negative bent with short interest (depicted by % of free float on loan) standing at around 2.7%, the highest level for over 8 years equating to a not insignificant 14 days to cover. The question is how much is already in the price and who do you back from here…the street or the Company Chairman !? Sales Release Thursday 6th August

Chairman Robert Walker’s backtested performance and ranking

Direct Line:-

Direct Line shares have continued to attract investor attention due to the current favourable pricing environment in car insurance premiums and its aggressive dividend policy (DLG group current 12m fwd yields is 8%,) however the Earnings Positioning view highlights some potentially negative risk indicators are forming ahead of its earnings release next week.

Performance-wise Direct Line has blown its closest competitors out of the water this year, generating returns in excess of 20% versus the sector and closest peers with 1 week price action showing little signs of slowing. However, it is the more fundamental factors which are flagging that could interpret signs of stress.
Over the last month 12m fwd earnings estimates have been revised down by a shade under 3% which puts them amongst the bottom 5% of negative performers in the industry group, yet despite this the shares have rallied 12% over the same period. This relationship between price and EPS has become the most statistically diverged across the entire European Insurance sector. As a result of the strong share price performance the current 12 Fwd P/E valuation of 12.6x is at its peak multiple on an absolute basis at 2 year highs relative to the sector.
Hedge Funds seem reticent to bet against Direct Line given that Short Interest in the name is minimal, however Long holders who have been in the stock for its income and capital appreciation may now choose to re-assess the shares ahead of earnings. Earnings Tuesday 4th August

Direct Line – Price vs 12m Fwd EPS ests (1 yr view)


Dont forget, similar such screening can easily be conducted across your own Portfolio or stock watchlist.

For your free OTAS demo contact

This morning, OTAS intraday Alerts fired consecutively in 4 Real Estate names indicating an unusually aggressive move down in the shares over the last hour.  Bovis, Redrow, Bellway and Barratt Developments all flagged that their absolute share price returns were now exceptional compared to how they would typically be expected to trade over a similar time frame historically. When analysing the individual microstructure of each stock none were experiencing significantly high volumes to accompany the move. They were being inadvertently forced lower.


Noting such a high concentration of sector peers exhibiting similar behaviour in performance implied an unrestricted Sector ETF or Real Estate basket seller was at work. Whoever was trading the basket had little consideration of the impact they were having or the magnitude of their actions.

However, it seems these idiosyncratic share price moves were alpha signals to some market participants/OTAS users.


The OTAS ‘Return Low’ Alerts identified the price* inflection points almost to the minute – with all 4 stocks rallying from their lows.

Manage your order flow better or take advantage of those that dont via OTAS Alerts.

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*denoted by the white line on the charts