Schaeffer's Street Chatter Highlights the Following Stocks: Ford Motor, King Pharmaceuticals, and Elan.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Ford Motor (NYSE:F), King Pharmaceuticals (NYSE:KG), and Elan (NYSE:ELN). "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. It appears that they really mean it this time. After saying that employee pricing for everyone was for a limited time only, simply to extend the deal, it definitely seems that Ford Motor (NYSE:F) is going to let the deal expire in four days. Alas, that is only part of the reason that the Detroit damsel in distress is being talked about. Last week, there was a story in the New York Times that F plans to increase production of hybrid electric vehicles tenfold, to 250,000 vehicles, annually, by the end of the decade. That means that half of the company's Ford, Lincoln, and Mercury models would offer hybrid technology as an option. This would account for roughly eight percent of the three brands' current sales. F added that it would also increase the number of its models that can run on ethanol, a corn-based fuel.

This news has had an impact equal to the end of employee pricing on the discussion boards. While there has been a bit of an increase in the stock's price during the past few days, let's not ring the rally bell. F has dropped from a near-term high of 14.27 to its current perch slightly below the 10 level (it is trading at 9.88 as I write the article). What's more, note how far the motor maven has dropped since its all-time high in early 1999. To say that the stock has decelerated would be a bit of an understatement.

If I were bullish on F, (which I am not), I would be concerned about how the stock is below the 10 level, which is the site of a heavy accumulation of front-month call contracts. This accumulation could provide quite resistance to the shares. Digging a little deeper into F's call contract backdrop, I notice that the 12.50 level is the site of peak call contracts for December, and the 15.00 level is the site of peak call contracts for January. However, in order to get to the 15 level, the stock will have to fight its way through the 90,000-plus contracts at the 12.50 level. It definitely appears that the road higher for F is filled with speed bumps.

This sizeable amount of call activity has resulted in a Schaeffer's put/call open interest ratio (SOIR) of 0.40, a reading lower than 98 percent of those taken during the past year. Apparently the options pits have decided to ignore the equity's poor performance.

Meanwhile, complacency is evident in the 6.32-percent drop in short interest during the past month. This affords the firm a bit of short-covering support as it would take more than six days to cover the shorted F shares.

Further support could come in the form of analyst upgrades, as Zacks shows 14 of the 17 analysts covering F rate it a "hold" or worse. If this gloomy gathering changes its mind, the shares could receive a bit of a boost.

While these are two possible layers of support for F, the downside pressure from poor sales and higher gas prices seem to be too much for this struggling stock to break. Compounding this is the high level of optimism from the Street. The end result is a Schaeffer's Equity Scorecard rating of 2.0 out of a possible 10, indicating that the path of least resistance for F is lower still.

Click the following link to see the Monthly Chart of F Since January 1999 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/commentary/observations.aspx?click= home&ID=14210 .

2. We now turn to the medicated section of today's Street Chatter. First is King Pharmaceuticals (NYSE:KG), which has been able to perk up a bit in 2005. The weekly chart below shows that the shares have been able to show a bit of life and, thanks to their 10-week and 20-week moving averages, have been able to finally break through resistance at the 14 level.

Yes, this level is the site of peak call contracts; but, the accumulation of these contracts is minimal. I noted that F faced substantial call-related resistance; in that case there are more than 90,000 contracts at the January strike. There are slightly less than 4,000 open call contracts at the 15 strike, hardly substantial.

On a daily basis, the stock has lost a bit of momentum, slipping below its daily 10- and 20-unit moving averages. However, the shares have rebounded off the 14.50 level before, and it may happen again.

Another place where the shares may find a bit of support is from last week's news that the Food and Drug Administration (FDA) has accepted its supplemental new drug application filing seeking a new indication for its kidney treatment, Altace.

KG is a stock that has failed to impress the options pits, the firm sports a SOIR of 0.32, which is higher than 59 percent of the readings taken during the past 52 weeks. What's more, short interest marked a slight increase during the past month; another indication of growing sentiment from the Street.

While it would take less than three days to cover the shorted KG shares, leaving little in the way of short-covering support, the firm may find a boost should the analysts change their feelings. According to Zacks, all eight of the analysts covering the firm rate it a "hold." Should this apathy change to positive coverage, further upside momentum could be applied to the shares.

Click the following link to see the Weekly Chart of KG Since January 2004 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/commentary/observations.aspx?ID= 14210&obspage=2 .

3. Following in the footsteps of KG, we have pharmaceutical company, Elan (NYSE:ELN). To say that the company has seen its share of bad news would be an understatement; however, the reason for the problems (multiple-sclerosis treatment, Tysabri) is the reason that ELN is on the discussion boards today. Last week, the company announced that it expects to complete its review of Tysabri in the coming weeks. This prompted heavy trading in the company's January 2006 options, mainly on the negative side. While there is sizeable call-related resistance at the 10 level in the front three months of options, there is a massive amount of possible put-related support at the 7.50, five, and 2.50 levels.

I have included only one chart in this analysis, a weekly chart. The reason for this is so you can see how far the stock has dropped, but also an eerie similarity. Notice the drop precipitated by some negative news surrounding Tysabri. While that is a large drop, I want you to look at said "eerie similarity." Notice that the shares and the weekly moving averages are in nearly the same spot as it was in January 2004 (right before they took off). If history can repeat itself, watch for the company to make some sizeable gains.

The Street frowns upon ELN, as its SOIR of 0.71 is lower than 97 percent of the past year's worth of readings. What's more, analysts line up on the negative side for ELN. According to Zacks, all 11 of those covering the firm rate it a "hold" or worse. Should this group change its mind, we could see some much-needed support that could send the shares higher.

Click the following link to see the Weekly Chart of ELN since January 2004 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/commentary/observations.aspx?ID= 14210&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 .