Schaeffer's Market Observation Features EMC Corp, Seagate Technology, and Verity.

CINCINNATI -- Today's Market Observation EMC Corp (NYSE:EMC), Seagate Technology (NYSE:STX), and Verity (NASDAQ:VRTY). 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: http://www.schaeffersresearch.com/addinfo.

EMC Corp

EMC Corp. (NYSE:EMC) was the center of some heavy call trading on Monday, as investors piled into the security's January 14 strike. Open interest at this back-month option spiked from 18,242 to 32,091 contracts overnight. However, overall sentiment toward the equity remains somewhat mixed. The stock's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.52 and is higher than 71 percent of all those taken over the past 52 weeks. This relatively high reading indicates that options speculators are still somewhat skeptical of the firm. On the other hand, EMC's recent rally has sent short sellers running for the hills. Over the most recent reporting period (yes, we finally have November data for the NYSE), the number of shares sold short plunged by 22 percent to 24.05 million. At the stock's average daily trading volume, these short positions can be covered in less than two days of trading. Wall Street remains quite smitten with EMC, as 15 of the 22 analysts following the tech stock rate it a "buy" or better.

This wellspring of optimism is quite understandable considering the security's recent rally. Since mid-August, the stock has climbed along its 10-day and 20-day moving averages, gaining more than 45 percent. EMC has also enjoyed the support of its ascending 10-week trendline over this time period and is now poised to log its second consecutive monthly close above its 10-month and 20-month moving averages. However, the stock is now battling resistance at the 13.50 level, a region that has served as both support and resistance in the past. Traders should keep an eye on this area as a rejection here could attract some of the short sellers that were shaken out of their positions, increasing selling pressure on the shares.

Click the following link to see a Daily Chart of EMC Since August 2004 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=11825.

Seagate Technology

According to Hoover's, Seagate Technology (NYSE:STX) is a leading independent maker of rigid disk drives (or hard drives) used to store data in computers. Its drives are used in systems ranging from personal computers and workstations to high-end servers and mainframes. The company sells directly to computer manufacturers and through distributors. The security attracted some options players yesterday, as open interest at its December 15 call swelled by almost 5,200 contracts. STX's calls have been a favorite among speculators, as these bullish bets double puts in the front three months of options. The stock's SOIR is also lower than 55 percent of all those taken over the past 52 weeks. Short sellers also abandoned the stock in November, as the number of STX shares sold short dropped by 27 percent to 7.78 million -- its lowest level since the start of the year. Wall Street has its doubts, however, with 11 of the 16 analysts following the company rating it a "hold" or worse. This leaves ample room for potential upgrades, providing the security with a boost higher.

Technically speaking, STX continues to be capped by staunch resistance at the 14.50 level, stopping the stock's rallies in June and October. In fact, the stock hasn't closed a week above this level since April. However, there may be a ray of hope for the shares, as it appears they have formed an inverse head-and-shoulders pattern. The left shoulder tagged support at the 12 level, the head hit a low near 10, and the right shoulder rests at 12.50. A breach of the 14.50 level (the neckline) could result in a sharp move higher in the shares. This is a situation that bears watching. A move above this resistance level could spur a significant round of upgrades for the shares, adding more fuel to the stock's rally.

Click the following link to see a Daily Chart of STX Since April 2004: http://www.schaeffersresearch.com/wire?ID=11825&obspage=2.

Verity

Hoover's reports that Verity (NASDAQ:VRTY) makes software capable of accessing information stored in multiple formats (ASCII, HTML, PDF) and locations (CD-ROM, newswires, intranets). The company's products index, classify, search, and retrieve data for corporate intranets, extranets, and portals; online publishers; manufacturers; and software developers. The stock has rallied higher since late October on the support of its rising 10-day and 20-day moving averages, moving back into resistance at the 14 level. Not only has this area capped the shares in March and May, but it is also home to VRTY's 20-month moving average.

Apparently, options traders have their doubts about the stock being able to breach this level, as open interest at the stock's December 12.50 put surged from 166 to 3,986 contracts overnight. The majority of this volume crossed at 12:45 in several large blocks at an ask price of 0.45. Open interest on the security is extremely light, and yesterday's trades caused VRTY's SOIR to surge from 0.43 to 4.99 overnight. Meanwhile, short interest dropped by 26 percent in October (we're still patiently waiting for the Nasdaq to release short-interest data), resulting in a short-interest ratio of 2.88 days to cover. VRTY has slipped beneath the Street's radar, as only three analysts currently following the stock. Of those three, one rates it a "hold" and two rate it a "buy."

Click the following link to see a Daily Chart of VRTY since March 2004 with 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=11825&obspage=2.

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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.