Schaeffer's Midday Options Update Features Microsoft, IBM, Ruby Tuesday, Great Atlantic & Pacific Tea, and BEA Systems.CINCINNATI -- Today's Schaeffer's Midday Options Update features Microsoft (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :MSFT MSFT Microsoft (stock symbol) MSFT Movimento Sociale Fiamma Tricolore (Italy) MSFT Multi-Stage Fitness Test MSFT Master of Science in Family Therapy MSFT Macalester Students for Fair Trade ), IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) (NYSE NYSE See: New York Stock Exchange :IBM), Ruby Tuesday (NYSE:RI), Great Atlantic & Pacific Tea (NYSE:GAP), and BEA Systems BEA Systems, Inc. (NASDAQ: BEAS) is one of the major companies developing enterprise infrastructure software. BEA makes middleware, products that help software run on top of databases. (NASDAQ:BEAS). 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. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 . Options Update: Trading Options on BEA Systems The Labor Department The Department of Labor (DOL) administers federal labor laws for the Executive Branch of the federal government. Its mission is "to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working announced that nonfarm payrolls Nonfarm payrolls is an economic employment report released monthly. It is a compiled name for goods-producing, construction and manufacturing companies. The data is released at 1:30pm BST on the first Friday of every month, or according to the U.S. came in at 108,000, while the unemployment rate dropped to a cyclical low of 4.9 percent. Economists expected adjusted growth in nonfarm payrolls of 205,000. In 2005, payrolls increased by two million. For December, average hourly wages increased five cents to $16.34. Average hourly earnings rose 3.1 percent in 2005, while total hours worked dropped 0.2 percent in December. The average workweek dropped to 33.7 hours. It appears that investors are pleased with the data, as the stocks moved higher in early trading. Soft Sell? Shares of Microsoft (NASDAQ:MSFT) have slipped today, following a brokerage downgrade. Credit Suisse First Boston Credit Suisse First Boston was originally the trading name of the Financière Crédit Suisse-First Boston, a London-based 50-50 investment banking joint venture formed in 1978 between the First Boston Corporation and Credit Suisse. (CSFB CSFB Credit Suisse First Boston CSFB Cyclically Shifted Filter Bank ) downgraded the sultan of software to "neutral" from "outperform." CSFB attributed the downgrade to valuation. The brokerage stated that MSFT "could still serve as a nice hedge against near-term volatility in the market, however we find other software stocks as offering greater long-term growth potential." The equity has lost more than 1.5 percent in today's trading. Not Singing the Big Blues Yesterday, IBM (NYSE:IBM) announced that it would make changes to its pension plan and revamp the nation's largest 401(k) plan in 2008. The changes will take effect in January 2008 and will have no effect on IBM's current base of 125,000 retirees, employees who retire before January 1, 2008, or on former employees who have vested retirement benefits. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the new plans, pension plans will not accrue future benefits, while all retirement benefits earned before the end of 2007 will be fully preserved. Good Buy, Ruby Tuesday? Ruby Tuesday (NYSE:RI) posted second-quarter net earnings of $17.4 million, or 28 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . While this was a decrease when compared to last year's same-quarter earnings, it matched the consensus estimate. During the second quarter, Mick Jagger's favorite place to eat posted a same-restaurant sales increase of 1.9 percent. Standing in the GAP The Great Atlantic & Pacific Tea Company (NYSE:GAP) announced a third-quarter loss of $1.74 per share, narrower than the previous year's same-quarter loss of $1.96 per share. GAP's loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the narrowed to $1.80 while total sales dropped 37 percent to $1.58 billion. On a good note, U.S. comparable sales increased 1.8 percent. GAP also announced that it intends to continue the cost-cutting initiative its new management team started and will invest in upgrading its stores. Most Active Options At 2:00 p.m. eastern time, the Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. (DJIA DJIA See Dow Jones Industrial Averager (DJIA). - 10,957.2) has added 0.69 percent. The S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,284.94) is 0.89 percent higher, and the Nasdaq Composite The Nasdaq Composite is a stock market index of all of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. (COMP - 2,304.0) has added on 1.19 percent. At 2:01 p.m. Eastern time, 3,648,406 calls have changed hands compared to 2,084,126 puts, equaling a single-day put/call volume ratio of 0.57. The CBOE's equity put/call volume ratio weighed in at 0.57. BEA Systems Well, today's midday morsel mor·sel n. 1. A small piece of food. 2. A tasty delicacy; a tidbit. 3. A small amount; a piece: a morsel of gossip. 4. is chock-full o' interesting technical developments, so let's get straight to it. BEA Systems (NASDAQ:BEAS) has shown its face on our midday most-active options list, thanks to heavy put action on its January 10 call contract (BUC BUC Block Up Converter (satellite component) Buc Buchnera BUC Business Unit Controller BUC Chief Builder (Naval Rating) BUC Blessed/Uncursed/Cursed (NetHack) AB). It seems that this action was sparked by an early morning upgrade from Credit Suisse First Boston (CSFB), which upgraded the computer software producer to "outperform" from "neutral." CSFB also elevated BEAS's price target to $12 from $9 per share. The brokerage took this action because of BEAS's 2006 thesis of improved enterprise spending and further industry consolidation. Okay, that's the news, let's get our hands a little dirty in the company's technicals. You are going to see this chart three different times, so let's get to it, but for three different reasons and with two different trendlines. First, notice that today's news has vaulted the stock above its powerful 160-week trendline for the first time since the trendline was established. Observe that this trendline has provided a barrier for the shares since the beginning of August. Watch for this level to act as support from here out, there is a tendency for this to happen. Onto the next technical development. For this chart, we are going to expand out to July 2003 and focus on BEAS's 50-week moving average. Said trendline helped support the shares from July 2003 through April 2004. Well, this quickly changed as the moving average assumed the role of suppressor sup·pres·sor n. 1. or sup·press·er One that suppresses: a suppressor of free speech. 2. A gene that suppresses the phenotypic expression of another gene, especially of a mutant gene. and pushed BEAS below the six level. Look at December 2004 through May 2005 (the highlighted section) and see how nicely the trendline capped any advance. In the previous paragraph, I noted that a level of resistance will often switch roles and act as support . . . hmmmmmm, looks like exactly what happened with the 50-week moving average. As this trendline ascends, watch for it to act as support. Oh, and while we are dealing with 50-unit moving averages, should January continue on the path it has started, BEAS will close above its 50-month trendline for the first time since . . . ever. Okay, let's bring an end to the chart madness, shall we? I have mentioned a couple of times that levels of resistance may switch roles when given the chance, that is one of the two reasons for this chart. Look at how pivotal the 10 level has been for BEAS since August 2002. When given the chance, it first acted as support for the equity, but then quickly switched roles in May 2004. Fast forward to today . . . what level did the shares break through? You got it, the 10 level. Oh, and the second reason that the chart is there, I have mentioned innumerable times that peak call open interest can provide resistance and put open interest can provide support. I'll give you three guesses where peak call open interest is, and the first two don't count. As far as past performance goes, BEAS has been caught in a sideways channel for the better part of the past year and a half. Is today's upgrade and subsequent jump enough to break it from this channel? We shall see. Speculative options players seem to be holding out on making a definitive call on BEAS. While today's optimistic option action has brought the company's Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) lower, it still comes in at a middle-of-the-road 0.23. Remember, that is middle-of-the-road when it comes to percentile ranking (52), for those of you thinking "a 0.23 is kind of low." Where I find the biggest potential for a BEAS boost is in analyst rankings. According to Zacks, 74 percent (14 out of 19) who cover BEAS rate it a "hold" or worse. Should this dour bunch follow CSFB's lead and issue upgrades, the equity could receive a push. Short-covering support is a non-factor, as it would take less than two days to cover the shorted BEAS shares. However, the company's performance combined with the existing pessimistic sentiment (mainly from the analysts) results in a Schaeffer's Equity Scorecard rating of 6.0 out of 10. This score indicates that the path of least resistance Noun 1. path of least resistance - the easiest way; "In marrying him she simply took the path of least resistance" line of least resistance fashion - characteristic or habitual practice for the shares leads higher. Click on the following link to access a Weekly Chart of BEAS Since August 2002: http://www.schaeffersresearch.com/wire?ID=14944 . 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 . |
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