Schaeffer's Midday Options Update Features Apache.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Apache (NYSE:APA). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.

Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1

Options Update: Apache Gallops into Technical Troubles

Today's news from the real-estate front was grim, with price gains dropping to a 10-year low. During June, existing home sales dropped 1.3 percent to a seasonally adjusted annualized rate of 6.62 million. This was slightly above analysts' expected decline to 6.58 million. The inventory of unsold homes expanded to a record-setting 3.725 million, representing a 6.8-months' supply, the highest reading since July 1997. Finally, the median price has inched 0.9 percent higher during the past year to $231,000, the smallest increase in a decade.

Elsewhere, consumer confidence made modest headway in July, according to data from the Conference Board. The index rose to 106.5 from 105.4 the previous month, surprising analysts, who were expecting a drop to 103.9. The present situations index rose to 133.0 from 132.2, while the expectations index rose to 88.8 from 87.5.

Most-Active Options Update

At 2:37 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,031.1) has lost 0.18 percent. The S&P 500 Index (SPX - 1,260.35) has shed 0.04 percent, and the Nasdaq Composite (COMP - 2,059.2) has fallen 0.13 percent. At 2:37 p.m. Eastern Time, 2,888,295 calls have changed hands compared to 2,376,304 puts, equaling a single-day put/call volume ratio of 0.82. The CBOE's equity put/call volume ratio stands at 0.92, while the ISE's ratio comes in at 0.77.

Apache

Apache's (NYSE:APA) August 65 calls (APA HM) were popular in the options pits this morning, ahead of the firm's quarterly report, due out on Thursday 27. Open interest before trading commenced was 18,643 contracts, but 8,075 contracts had crossed the tape by the time we compiled our figures for this piece. The stock was trading at $66.85 at last check, so these calls have a little intrinsic value alongside their time value.

From a technical perspective, APA is very interesting. Since March the stock has neglected to make headway, though it's only fair to say that we have just seen it move back above its 10-day and 20-day moving averages.

However, the retracement levels between the April high of 75.66 and the June low of 56.50 tell an interesting story. It seems that investors this month are unwilling to push the stock higher than its 61.8-percent retracement level at $68.28, or below its 32.8-percent retracement level at $63.73. I did notice that the 64 area provided support back in March and May, which the bulls could use as an argument to buy on dips.

Zooming out to a monthly view, we see that the stock had a very good run but its 10-month trendline has rolled over. APA is now sandwiched between its 10-month and 20-month moving averages, with the 10-month bearing down to offer overhead resistance to any attempts APA might make to move higher.

Something has to give, but what will it be? Perhaps the sentiment can shed some light on the matter.

Quick Sentiment Facts on APA:

--Percent of analysts tracked by Zacks who rate the stock with a "buy" or better: 81%

--Number of analysts tracked by Zacks: 16

--Short interest as a percent of float: 1.73%

--Short-interest ratio: 1.39

--Schaeffer's put/call open interest ratio (SOIR): 0.64

--SOIR percent rank: 24%

--Overall Schaeffer's Equity Scorecard rating: 4.0

Analysts are still bullish on APA, which is a bad thing from our contrarian perspective. APA seems to have run out of steam, yet brokers are urging their clients to buy. With that much buying pressure and a declining stock price, obviously there's some selling pressure somewhere in the equation. And if the brokers change tack and issue a downgrade or two, there could be still more selling pressure.

Short interest is low, too, so we won't be hoping for any short-covering support if the stock does start to rise.

On our Schaeffer's Equity Scorecard the stock earns 4.0 out of 10, slightly to the bearish side of neutral. This is an interesting stock to look at. It could present some opportunities further down the line. But opinion is too mixed right now for me to pick a direction. That's fine. Investing is all about patience and timing. You can learn just by watching.

Click here to see a Daily Chart of Apache since March 2006 with 10-day and 20-day moving averages, a Daily Chart of Apache since March 2006 with Fibonacci retracement levels, and a Monthly Chart of Apache since August 2001 with 10-month and 20-month moving averages: http://www.schaeffersresearch.com/wire?ID=16995

The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1

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.