Schaeffer's Street Chatter Highlights the Following Stocks: Yahoo!, Novellus Systems, and Tiffany & Co.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Yahoo! (NASDAQ:YHOO), Novellus Systems (NASDAQ:NVLS), and Tiffany & Co. (NYSE:TIF). "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:

Yahoo!

Internet portal guru Yahoo! (NASDAQ:YHOO) was hit with its second downgrade this week when UBS cut the company to "neutral" from "buy" this morning, citing valuation. UBS said the stock is near its five-year high and that YHOO needs to execute on some key initiatives before the broker can increase estimates. You may remember that YHOO was downgraded by Legg Mason on Monday.

But this recent activity stands in stark contrast to the opinion of the rest of the Street, as Zacks reports that 24 of the 27 covering analysts rate the shares a "buy" or better. This optimism is a bit disconcerting from our contrarian point of view, as it leaves ample room for additional downgrades that could further tarnish YHOO's technical picture.

Technically, YHOO has enjoyed a rather stellar run higher during the past several months. While the stock has recently given up the support of its 10-day moving average, its 20-day stands stalwartly as support. In today's session, YHOO also benefited from support at the 39 level. Furthermore, the 40 level could also provide some lift, as it is home to peak put open interest in the December series. Regular readers of SchaeffersResearch.com know that we feel that heavy accumulations of puts can provide a layer of options-related support for an equity.

Turning to YHOO's sentiment indicators, we find that options players have begun to pile into call positions lately. The stock's Schaeffer's put/call open interest ratio (SOIR) has dropped sharply since November 1, falling from a reading of 1.00 in the 79th percentile to today's perch at 0.87 in the 60th percentile. Now, this is far from an overly bullish reading, but neither is it an extreme bearish reading, leaving little room for a call in either direction.

However, there is some fuel left in the short-selling community. During November, the number of YHOO shares sold short jumped by 10 percent to an annual high. Furthermore, the 86.7 million shorted shares account for nearly seven percent of the stock's total float and would take more than four days to cover, offering up a fair amount of fuel for a short-covering rally.

While there is a slight bias to the upside for YHOO in the sentiment and technical pictures, I am still leery of advocating a bullish take on this stock. Shrugging off today's bad news is definitely a positive sign, but if more analysts follow suit, YHOO's run could quickly come to an end. It is this trepidation that prompts our Schaeffer's Equity Scorecard to hand out a rating of 5.5 out of 10 for YHOO.

Click the following link to see a Daily Chart of YHOO since September 2005 with 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14698 .

Novellus Systems

Novellus Systems (NASDAQ:NVLS) is another equity that dropped quickly on bad news, only to rally back later in the session. Early this morning, NVLS lowered the top end of its fourth-quarter revenue forecast. In its mid-quarter update, the company forecasted sales between $305 and $315 million, compared with its prior forecast of $305 to $322 million. Analysts are currently expecting sales of $316 million. But NVLS maintained its earnings guidance of 15 to 20 cents per share, excluding charges.

Today's strength appears to be a continuation of the stock's recent run higher, as the shares ride their rising 10-day and 20-day moving averages higher. But these supportive trendlines had pushed NVLS lower from August through October before the stock formed a bottom.

Sentiment toward NVLS is a bit of a mixed bag. Options players are rather bullish toward the stock, as its SOIR of 0.38 ranks below 89 percent of all those taken during the past year. However, short interest increased by 10 percent during November and now accounts for more than 10 percent of the stock's total float. But it would still take less than two days for investors to cover this collection of bearish bets at NVLS's average daily trading volume, creating a bit of doubt as to the strength of any potential short-covering rally or support.

Finally, Zacks reports that NVLS receives five "buys," 12 "holds," and four "sells." If the security's technical uptrend had a bit more conviction, I would feel comfortable with this configuration. As it stands, however, these "holds" could just as easily become "sells" that could send NVLS sinking lower.

With a fledgling rally that has the potential to stall at long-term trendlines and a 50-percent retracement level, NVLS is looking rather unattractive at the moment. Combine this with a lack of extreme bearish sentiment, and we are left with a Schaeffer's Equity Scorecard rating of 3.0 out of 10.

Click the following link to see a Daily Chart of NVLS since August 2005 with 10-day and 20-day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14698 .

Tiffany & Co.

While earnings season is "officially" over, several companies still have appointments in the earnings confessional. In fact, Tiffany & Co. (NYSE:TIF) reported third-quarter earnings this morning of $23.8 million, or 16 cents per share, up from $17.4 million, or 12 cents per share in the same period a year ago. The report was in line with the consensus estimate. Revenue rose to $500.1 million from last year's $461.2 million. Analysts were expecting sales of $505 million. TIF also reiterated its 2005 earnings estimate of $1.55 to $1.65 per share and its revenue growth forecast of eight to 10 percent.

Ironically, at least when compared to the aforementioned companies, TIF has fallen sharply on this seemingly harmless news. But don't worry too much about TIF, as the equity is holding support at its rising 10-week moving average, which, in conjunction with its 20-week counterpart, has buoyed the stock nearly 30 percent higher since May. Lending further support is the round-number support of the 40 level, which also happens to be home to a significant accumulation of put open interest for the front three months of options.

Looking at the sentiment picture for TIF, I see some promise for a continuation of the equity's long-term uptrend. Sure, the stock's SOIR of 0.72 still ranks below 81 percent of all those taken during the past year, but this ratio is on the rise, having advanced sharply from yesterday's reading of 0.66 in the fourth percentile. This rising pessimism from the group is seen as a plus from our contrarian point of view.

Lending further credence to continued strength for TIF is the rising number of shorted shares. During November, TIF's short interest rose seven percent and now accounts for more than five percent of the stock's total float. Furthermore, it would take roughly four days to cover the 7.5 million TIF shares sold short, providing fuel for a covering rally that could send the stock skipping higher.

Wall Street is also in a position to benefit TIF, as eight of the 11 covering analysts rate the shares a "hold" or worse. The difference between TIF and NVLS is that TIF has a much more impressive uptrend in place, increasing the odds of upgrades from this bearish bunch of brokerages. As a result, TIF has acquired a Schaeffer's Equity Scorecard rating of 6.0 out of 10, indicating that the path of least resistance remains to the upside.

Click the following link to see a Weekly Chart of TIF Since April 2005 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14698 .

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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 .