Schaeffer's Street Chatter Highlights the Following Stocks: Red Hat, Research in Motion Limited, and ConAgra Foods.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Red Hat (NASDAQ:RHAT), Research in Motion Limited (NASDAQ:RIMM), and ConAgra Foods (NYSE:CAG). "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:

Red Hat

Linux specialist Red Hat (NASDAQ:RHAT) came out swinging in the earnings confessional last night. The company reported third-quarter net income of $23.2 million, or 12 cents per share, compared to last year's net income of $10.8 million, or six cents per share. Revenue for the quarter rose to $73.1 million compared with $50.9 million in the prior year. The report blew away the Street's expectations for earnings of nine cents per share on revenue of $71 million.

On the news, RHAT has surged more than five percent, setting a new annual high in the process. Furthermore, the equity looks poised to challenge its previous high of 29.06 set in June 2004, as it has taken out potential resistance in the 27-27.50 area. On a short-term basis, the security has enjoyed the support of its rising 10-day and 20-day moving averages since August. Pulling back a bit, I see that RHAT has also rallied along the intermediate-term support of its 10-week and 20-week trendlines since April.

However, you'd think that investors would be a little bit more enthused about the shares given their performance lately, but the bears are firmly in command of RHAT's sentiment backdrop. In the options pits, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.96 ranks above 99.6 percent of all those taken during the past year, indicating an extreme degree of pessimism from the group. Furthermore, this ratio has been on the rise lately; a positive sign for RHAT, as the security tends to trend in the direction of its SOIR.

Turning to RHAT's other sentiment indicators, short interest may have decreased by five percent during November, but it still accounts for more than 10 percent of the equity's total float. What's more, it would take nearly five days to cover the 16.5 million RHAT shares sold short, providing ample fuel for a covering rally on today's positive earnings news.

The one chink in RHAT's armor lies with the brokerage bunch. Currently, Zacks reports that 11 of the 17 covering analysts rate the shares a "buy" or better, with no "sells" to be found. While this obviously bullish configuration worries me, today's test in the earnings confessional has alleviated some of this worry for me for the time being.

With heavy short interest, a rising SOIR, and a solid technical portfolio for the past several months, RHAT looks nicely poised to continue its run higher. This configuration has also earned the stock a Schaeffer's Equity Scorecard rating of 8.0 out of 10.

Click the following link to see a SOIR Chart for RHAT Since September 2005 and a Weekly Chart of RHAT Since April 2005 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14848 .

Research in Motion Limited

Our next focus stock has also come under the scrutiny of the Street's earnings eyes this morning. Last night, Research in Motion (NASDAQ:RIMM) reported third-quarter net earnings of $120.2 million, or 61 cents per share, compared with $90.4 million, or 46 cents per share, a year ago. On an adjusted basis, earnings arrived at $139.1 million, or 71 cents per share. Revenue rose to $560.6 million, up from $365.9 million a year ago. Wall Street was expecting adjusted earnings of 65 cents per share on sales of $549 million.

The shares have responded nicely to this Street-beating performance, rallying more than eight percent on the news. However, resistance in the 67-68 area seems to have once again stalled RIMM's advance. This region has capped the equity for the better part of the past three months, and is looking to reject RIMM once again in today's session, despite the earnings news. Pulling back for a monthly view, the stock's 10-month and 20-month trendlines have just completed a bearish cross, with the former quickly descending into the area. While these moving averages have been troublesome in recent months, their resistive ways could come more fully to bear on the shares if RIMM cannot breakout to the upside on today's news.

Switching gears into the sentiment realm, pessimism has begun to creep into RIMM's backdrop. But is it enough to help the shares continue higher? In the options pits, the equity's SOIR has risen from its December 14 reading of 0.82 in the ninth percentile to today's reading of 0.94. But this ratio arrives at a meager annual percentile rank of 58 - not an extremely bearish reading by any means.

Elsewhere, short interest accounts for more than nine percent of RIMM's total float, but it would still take a mere 1.87 days to cover the 13.4 million shorted shares. This mixed reading hints that there could be some fuel in the tank, but the short-interest ratio leaves me with some reservations about going long on RIMM.

Finally, Wall Street seals the deal with 10 "buys," six "holds," and three "sells." Naturally, any downgrades from this group (and there is ample room for such moves) could negatively impact RIMM's chances of rallying above overhead resistance. As a result of this lingering optimism amid a rather questionable technical performance, RIMM has earned a Schaeffer's Equity Scorecard rating of 3.0 out of 10.

Click the following link to see a Monthly Chart of RIMM Since March 2003 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=14848 .

ConAgra Foods

Continuing with our earnings theme for the day, ConAgra Foods (NYSE:CAG) reported second-quarter earnings of $163.1 million, or 31 cents per share, down from a year-ago profit of $239.6 million, or 47 cents per share. Sales slid to $3.81 billion from $4.01 billion in the same period a year earlier. Excluding items, CAG earned 38 cents per share, matching the consensus estimate for 38 cents per share. However, the Street had its revenue estimate set a bit higher at $3.99 billion.

Technically speaking, CAG gapped lower on the news, taking out support at its 10-day moving average. However, the shares have since moved back above this trendline. All in all, though, this is a small accomplishment for the security, as it has been forced lower under its 20-day moving average since October. What's more, CAG's 10-week and 20-week trendlines have hindered any advance from the equity since January.

Sentiment toward this underperformer is a mixed bag. The speculative options crowd has taken a liking to CAG calls lately, as the stock's SOIR of 0.37 ranks below 92 percent of all those taken during the past year. Elsewhere, the eight million shorted shares would take nearly five days to cover, and could provide a bit of a lift for the stock. However, CAG's current downtrend indicates that these bearish investors will be in no hurry to buy back these bets, so a covering rally is a long shot at best.

Wall Street has doled out seven "hold" or worse ratings and one "buy." Again, this indicator could provide some hope for CAG, but with news like today's, I don't see these analysts budging from their pessimistic positions any time soon. The net result of this lingering optimism in the options pits and CAG's negative technical performance is a Schaeffer's Equity Scorecard rating of 3.0 out of 10.

Click the following link to see a Weekly Chart of CAG Since January 2005 with 10-Week AND 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14848 .

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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 .