Schaeffer's Midday Options Update Features Abercrombie & Fitch, Caremark Rx, Guess, Stratasys, and Sprint Nextel.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Abercrombie & Fitch (NYSE:ANF), Caremark Rx (NYSE:CMX), Guess (NYSE:GES), Stratasys (NASDAQ:SSYS), and Sprint Nextel (NYSE:S). 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. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 .

Options Update: Trading Options on Sprint Nextel

Investors waited with bated breath this morning, waiting to hear the latest Fed news from new committee Chairman Ben Bernanke. The new Chairman told Congress that more rate hikes "may" be needed as the threat of higher inflation persists. Bernanke continued to state that higher energy prices could still spill over into wider price inflation while the risk remains that "output could overshoot," which would put more upward pressure on prices. In reaction to this news, relieved investors have helped push the Dow Jones Industrial Average to its highest level since June 2001.

In other news, the Empire State Manufacturing index increased to 20.3 in February from January's reading of 20.1. The pace of growth in February matches the average growth from the past several months. Economists were expecting a slip to 18.1 from the index. The American Petroleum Institute (API) announced an increase of 8.1 million barrels in the past week, bringing its total crude stockpile to 329 million barrels. The API also announced that distillates increased 1.1 million barrels and gasoline inventories increased 176,000 barrels. The Department of Energy reported an increase of 2.2 million barrels in crude.

Abercrumble

Yesterday, Abercrombie & Fitch (NYSE:ANF) posted "blow-out" fourth-quarter earnings, but the news wasn't so good today. The trendy teen retailer dropped more than three percent following a conference call late yesterday where ANF Chief Executive Mike Jeffries set a restrained tone, noting "After such an amazing year, we're faced with the challenge of improving what has become a hugely successful business." This morning analysts stated the belief that ANF is trying to lower investor expectations that it can continue to post 20-percent and 30-percent same-store sales results as it has in the past year.

Going Above the Mark

Caremark Rx (NYSE:CMX) announced fourth-quarter, adjusted earnings of 55 cents per share this morning. These results matched the consensus estimate. CMX also posted revenue of $8.37 billion, outpacing the Street's expectation for $8.26 billion. The company noted that its results were helped by strong growth in generic dispensing rates. Turning an eye to the future, CMX forecast 2006 earnings of $2.25 to $2.30 per share with revenue growth between five and 10 percent.

Guess Who?

The Securities and Exchange Commission (SEC) told Guess (NYSE:GES) President and Chief Operating Officer Carlos Albernini that it may recommend a civil enforcement action against him. In a filing with the SEC, GES noted that the action would only be related to his actions at Footstar, Albernini's previous employer. In 2004, Footstar filed bankruptcy and the SEC announced last week that it may charge the firm over accounting issues. Albernini plans to submit a filing to persuade the SEC not to bring charges.

Through the Stratasysphere

Stratasys (NASDAQ:SSYS) added more than 20 percent this morning, after reporting fourth-quarter earnings of 30 cents per share. The Street set the bar for the company's earnings at 25 cents per share with revenue of $22.2 million (SSYS reported $22.2 million). SSYS then confirmed its 2006 forecast for earnings between $1.15 and $1.25 per share on revenue of $98 million to $102 million.

Most-Active Options Update

At 1:40 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,022.2) has dropped 0.05 percent. The S&P 500 Index (SPX - 1,275.36) has given back 0.01 percent, and the Nasdaq Composite (COMP - 2,267.1) gained 0.22 percent. At 1:42 p.m. Eastern time, 2,995,048 calls have changed hands versus 2,139,154 puts, equaling a single-day put/call volume ratio of 0.71. The CBOE's equity put/call volume ratio weighed in at 0.64.

Sprint Nextel Corporation

According to the company's website, Sprint Nextel (NYSE:S) will step into the earnings confessional next Wednesday to present fourth-quarter earnings. According to Zacks, the Street expects S to report earnings of 30 cents per share. The telecommunications giant's history holds a mixed bag of results. The past five times S reported earnings it missed three times (by an average of nearly 10 percent) and it beat expectations twice (by an average of 15 percent).

Today, S has seen a sizeable accumulation of call activity on its February 25 contract (SBE). You may be asking yourself, what does this have to do with next week's earnings report? I have to answer truthfully, very little. Friday brings about February options expiration, which will eliminate the sizeable options-related resistance at the 25 level. With this barrier eliminated there is a chance that the shares will ascend past 25, but peak call open interest in March rests at the 25 level. The 25 level has acted as resistance since late 2000.

Adding to the resistance of the 25 level is S's 80-month moving average. This powerful moving average lurks overhead and has put an end to each of the shares' forays above the 25 level. The trendline is now working its way through the 25 region and is pointed lower.

S's long-term performance has certainly been nothing to write home about, but its short-term trend is showing signs of improvement. The speculative options crowd seems to have taken notice of S's short-term performance as its Schaeffer's put/call open interest ratio shows that optimism is on the rise. Unfortunately, there isn't much in the way of short-covering support for S. It would take less than four days to cover the 45 million shorted shares, which account for less than two percent of the company's total float. Basically, the equity can't count on a short-covering rally to push the shares through overhead resistance.

My greatest concern for S (other than its 80-month moving average) comes from analysts. According to Zacks, 13 of the 18 analysts covering S rate it a "buy" or better. This configuration leaves the door open for downgrades, which could push the shares lower still. Clearly, downgrades as a result of negative sentiment from analysts could impact the shares much more than upgrades.

Click the following link to see a Monthly Chart of S Since January 2002 With 80-Month Moving Average: http://www.schaeffersresearch.com/wire?ID=15321 .

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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 .