Schaeffer's Street Chatter Highlights the Following Stocks: Federated Department Stores, Microsoft, and Pharmion.

Business Editors

CINCINNATI--(BUSINESS WIRE)--May 20, 2004

Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Federated Department Stores (NYSE:FD), Microsoft (Nasdaq:MSFT), and Pharmion (Nasdaq:PHRM). "Street Chatter" is a report that analyzes three newsworthy stocks that are generating a lot of attention on Internet message boards. "Street Chatter" is published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.

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Street Chatter:

1. Retailing giant Federated Department Stores (NYSE:FD) was unusually popular among options players yesterday. The parent of Macy's and Bloomingdale's saw 5,010 contracts trade on the May 50 put, most of which were ultimately liquidations, as open interest on the soon-to-expire position subsequently plunged lower this morning. The activity may have been the work of one institutional player, as 5,000 contracts crossed the tape just after noon between the bid and the ask price.

As a result of Wednesday's shenanigans in the FD options pits, the equity's Schaeffer's put/call open interest ratio (SOIR) rose to 1.89 from 1.78. The indicator is now just 19 percent shy of a new annual peak and may be poised to advance in the very short term. Although the SOIR for front-month (May) options stands near 1.33, the combined SOIR for June and August options weighs in above 4.0, suggesting a hefty amount of pessimistic positioning on the horizon. Pessimism (or at least hesitancy) is also hinted at among the Wall-Street community. Of 13 analysts following FD shares, nine have named the stock a "hold," with only six "buy" ratings on the shares.

On the technical front, FD followed the example of many broader-market measures on Wednesday, topping its 10-day moving average on an intraday basis only to close below this short-term trendline. From a longer-term perspective, FD is sitting about four percent below its 10-month moving average. If the stock fails to overtake this trendline in the next six trading days, it will mark the first monthly close beneath the 10-month since March 2003. In other long-term technical news, the security's 10-week and 20-week moving averages are nearing a bearish crossover.

Click the following link to see the Daily Chart of FD Since March 2004 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=10198 .

2. Microsoft (Nasdaq:MSFT) said this morning that, in order to save as much as $80 million each year, it would reduce prescription drug benefits and employee stock discounts for its sizeable staff. MSFT officials assert that the software giant still boasts a benefits package that is above average. In other news, MSFT agreed to a licensing pact with Comcast to distribute Microsoft TV software.

The equity's price action has been quite peculiar of late. MSFT gapped higher in late April following a positive earnings surprise for the third quarter but has since been settling lower, digesting these gains and floating above its 50-day moving average. From a longer-term perspective, MSFT has been unable to move above the 30 mark or below the 22 level since August 2002.

The SOIR for MSFT currently stands at 0.48, which is lower than 68 percent of the past year's worth of readings. In today's trading, there has been heavy LEAPS activity at the January 2005 30, 32.50, and 35 strikes, which are already the sites of extremely heavy open interest, home to 60 million, 30 million, and 10 million open contracts, respectively.

Despite MSFT's range-bound technical predicament, the stock remains one of Wall Street's favorite names. Of 27 analysts following the stock, there are 26 ratings of "buy" or better. As a result, MSFT is extremely vulnerable to downgrades in the event of any disappointing news.

Click the following link to see the Daily Chart of MSFT Since January 2004 With 50-Day Moving Average: http://www.schaeffersresearch.com/wire?ID=10198 .

3. On a percentage-gains basis, Pharmion (Nasdaq:PHRM) is the winningest stock on the Nasdaq Composite today, up nearly 50 percent in midday trading. Wednesday evening, the U.S. Food and Drug Administration approved PHRM's Vidaza drug, which treats the bone marrow disease (and leukemia harbinger) myelodysplastic syndrome. The company, which earned this approval slightly earlier than expected, plans to launch sales of the treatment on July 1.

Not surprisingly, the stock's surge higher, which occurred on heavy volume, boosted PHRM to a new 52-week high this morning of 44.80. Short-covering activity could soon be in the offing. Last month, the number of PHRM shares sold short increased by 41 percent to about half a million, which, when compared to the stock's scant daily volume, represents a short-interest ratio of nearly four days to cover. Panicked short-covering activity from these loss-saddled bearish players could help the shares rise even higher in the short term.

Click the following link to see the Daily Chart of PHRM Since April 2004 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=10198 .

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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 .