Schaeffer's Midday Options Update Features QUALCOMM.

CINCINNATI -- Today's Schaeffer's Midday Options Update features QUALCOMM (NASDAQ:QCOM). 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.

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Options Update: Is QUALCOMM a Quality Investment?

The major market indices are split as we head into the latter half of the session today. The Dow Jones Industrial Average has taken out potential support at the 12,100 level, while the S&P 500 Index is lower by a fraction and the Nasdaq Composite has a tenacious grip on positive territory. In commodities, crude oil has come under a bit of pressure today, but the front-month contract is holding firm above the $60-per-barrel mark. Sparking the weakness was a report from the International Energy Agency that it was trimming its 2006 global oil-demand growth forecast, citing lower third-quarter demand from China and some industrialized nations. At last check, the December crude contract was lower by 61 cents at $60.55 per barrel.

Most-Active Options Update

At 2:07 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 12,085.7) has given up 0.15 percent, while the S&P 500 Index (SPX - 1,376.75) is 0.11 percent lower. The Nasdaq Composite (COMP - 2,380.3) has edged 0.18 percent higher. At 2:08 p.m. Eastern Time, 3,674,038 calls have changed hands compared to 2,338,541 puts, equaling a single-day put/call volume ratio of 0.63. The CBOE's equity put/call volume ratio stands at 1.04, while the ISE's ratio weighs in at 0.97.

QUALCOMM

Struggling manufacturer of digital telecommunications equipment QUALCOMM (NASDAQ:QCOM) has seen a flood of call activity in the options pits today. More than 23,000 of these bullishly aligned options have crossed the tape so far today at the stock's November 35 strike, on open interest of just 14,426 contracts. Currently, the 35 level is a distant fourth when it comes to call open interest, with the 40 strike leading all contracts in the November series. However, the 35 strike is important because QCOM just broke below this region during yesterday's session. Today, the shares have found some resistance at this level.

But this type of optimism for QCOM is nothing new, which is especially disconcerting given the stock's lack of performance lately. Currently, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.55 ranks below 63 percent of all those taken during the past year. What's more, this ratio has been in decline mode for the past several weeks, which is bad news for QCOM, as the stock tends to move in the same direction as its SOIR.

Looking at the stock's other sentiment indicators, I see very little to help stop a backslide in the equity. Short sellers have ignored QCOM, as it would take less than two days to cover the roughly 26 million shorted shares. Meanwhile, 18 of the 24 analysts covering the stock rate it a "buy" or better, leaving little room for upgrades that could provide a little life for QCOM. In fact, this configuration provides ample room for downgrades that could create the opposite effect.

Technically speaking, in August, QCOM managed to pull out of a nosedive that began in May. However, the equity has yet to take advantage of this stalled decline, having entered a sideways trend between the 34 and 40 levels. There are some grounds for a case for a rebound in QCOM at this point, purely from a technical perspective, as the stock has reached the bottom of this recent range. However, a look at other technical charts make this a distant likelihood.

On a weekly chart, QCOM remains capped by its 10-week and 20-week moving averages. Furthermore, the 35 level has long been a thorn in the security's side. A daily chart shows that the stock has ignored this region recently, but from a long-term perspective, the 35 level will eventually choose either support or resistance. With QCOM's 10-week and 20-week moving averages poised for a bearish cross, I'm betting on the latter at this point.

Given all of this information, QCOM earns a Schaeffer's Equity Scorecard rating of 4.0 out of 10. Now this rating is neither a wholly bearish reading, but it is certainly not a bullish indicator by any means. Personally, I'm leaning toward a pessimistic outlook on QCOM, but the more conservative traders out there may want to place a hold on the equity until it finally breaks out of its current trading range.

As always, thank you for reading, and good luck in your trading.

Click here to see the following charts: Weekly Chart of QCOM Since May 2006 With 10-week and 20-week moving averages, Daily Chart of QCOM Since May 2006 With 10-day and 20-day moving averages, SOIR chart of QCOM since November 2005, and November open interest configuration for QCOM: http://www.schaeffersresearch.com/wire?ID=17720 .

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 and get entered to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&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 .