Schaeffer's Midday Options Update Features OfficeMax, Intel, Martha Stewart Omnimedia, Sprint Nextel, and EnCana.

CINCINNATI -- Today's Schaeffer's Midday Options Update features OfficeMax (NYSE:OMX), Intel (NASDAQ:INTC), Martha Stewart Omnimedia (NYSE:MSO), Sprint Nextel (NYSE:S), and EnCana (NYSE:ECA). 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: Not All Energy Stocks Are Created Equal

The major market indices have rallied rather sharply as we head into the latter half of today's trading. Apparently, a Consumer Price Index (CPI) that indicated that inflation was in check drove investors off the sidelines and into a buying mood. Furthermore, a pullback in crude-oil prices is adding to the mix, and has sent the Dow Jones Industrial Average to a fresh 4.5-year high.

The Rubber-Band Man Snaps Back

OfficeMax (NYSE:OMX) posted a fourth-quarter net loss of $43.1 million, or 62 cents per share. Excluding special items, OMX would have earned $6 million, or seven cents per share. Sales fell to $2.5 billion from $2.7 billion a year earlier. Analysts were expecting a profit of seven cents per share on revenue of $2.4 billion. Shares of OMX were last seen higher by nearly seven percent.

Sprint Falters at Earnings Blocks

Sprint Nextel (NYSE:S) reported fourth-quarter earnings of $197 million, or seven cents per share. On an adjusted basis, the company earned $1.09 billion, or 33 cents per share. Revenue arrived at $11.3 billion for the quarter. Analysts were expecting a profit of 34 cents on revenue of $11.28 billion. S has shed nearly three percent on the news.

Chips Aren't Down, But Intel Is

While the PHLX Semiconductor Index continues to hold steady with a five-percent gain on the day, Intel (NASDAQ:INTC) has dropped more than two percent so far. Driving the chaplain of chips lower today is a downgrade by ThinkEquity to "sell" from "accumulate." The brokerage firm also lowered its price target to $16 to $26 per share. The downgrade was born of the brokerage's belief that INTC is building inventories, losing market share (particularly in servers), and could see a negative impact from pricing cuts.

Martha, Martha, Martha!

Martha Stewart Omnimedia (NYSE:MSO) joined the earnings fray and posted net income of $2.95 million for the fourth quarter. On an operating basis, profit rose to $2.5 million, or six cents per share. Revenue for the quarter rose 40 percent over the prior year to $84.5 million. The Street was expecting a profit of 15 cents per share on revenue of $83 million. On the news, MSO was last seen higher by more than seven percent.

Most-Active Options Update

At 1:22 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,143.30) has added 0.67 percent. The S&P 500 Index (SPX - 1,292.42) has risen 0.73 percent, and the Nasdaq Composite (COMP - 2,285.2) has jumped 0.98 percent. At 1:23 p.m. Eastern time, 2,603,203 calls have changed hands versus 1,699,858 puts, equaling a single-day put/call volume ratio of 0.65. The CBOE's equity put/call volume ratio weighed in at 0.66.

EnCana

According to Hoover's, EnCana (NYSE:ECA) is one of North America's largest independent gas and oil producers. The firm has proved reserves of 501 million barrels of oil and 10.5 trillion cubic feet of natural gas. ECA also has six gas storage facilities in Canada and the U.S.

Yesterday, I focused on the Spyder Energy Select Fund (XLE) in this space, touting the benefits of a bullish stock or option investment strategy on the fund. Today, however, I have been handed an example of why playing an exchange traded fund, or utilizing proven stock picking strategies is a must when dealing with today's market. While the XLE and the oil sector indices are doing quite well as a whole, an investor should not just willy-nilly pick stocks out of outperforming sectors for their portfolios. Natural gas and oil firm ECA is one example where loading your portfolio with equities from an outperforming sector could burn you in the end.

Beginning with the technical rundown on ECA, the shares have recently run into a considerable rough patch on the charts. The stock was recently sharply rejected by its 20-day moving average, and has today pulled back below resistance at its 10-day trendline. In fact, the security has even broken below its 10-month moving average - a trendline that ECA has not closed beneath on a monthly basis since October 2003. There is a bit of hope, as the security is fast approaching key support in the round-number 40 area.

When compared against its peers in the XLE, it is clear that ECA is the black sheep of the energy family. The shares have underperformed the XLE on a weekly relative-strength basis since September 2005. Furthermore, the stock has also languished against the S&P 500 Index on the same basis during the same period, placing ECA squarely in the realm of underperforming securities.

You'd think that with this type of performance on a stock that is a member of a heavily panned sector would itself have some rather pessimistic sentiment levied against it; you would be wrong. Despite the wealth of sentiment piled against the energy sector as a whole, investors are rather taken with ECA. In the options pits, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.39 indicates that calls more than double puts in the front three months of options. What's more, this ratio ranks below 67 percent of all those taken during the past year.

Some rather heavy call option activity has placed ECA on our list today, which is in keeping with the overall bullish sentiment flowing from this short-term trading group. With ECA currently trading close to the 42 level, more than 9,800 calls have crossed the tape today at the deep-out-of-the-money April 60 strike. However, it is hard to tell (due to the bid/ask prices at the times of these trades) whether these contracts were purchased or sold. So, we will have to wait until tomorrow to see if this optimistic trend for the shares continues.

In other sentiment areas, ECA is also struggling. While there is little positive price action to spur any short sellers to cover their positions, there is also a distinct lack of short sellers. In fact, the 2.9 million ECA shares sold short resides near its lows of the past four years and would take less than one day to cover.

Finally, there is a spark from the Wall Street community. Zacks reports that five of the 11 covering analysts rate the shares a "hold," leaving room for potential upgrades should ECA manage to rebound from its current location.

With the ever-present volatility in the energy market, it is hard to take a bearish position on even the worst-performing members of the sector. From our contrarian standpoint, ECA arrives as about the most bearish candidate for a short position in the energy sector. However, one day and a surge in oil and natural gas prices could change all of that. Furthermore, with support at the 40 level looming, and room for upgrades from the Street, ECA becomes an even more risky bearish bet. As such, our Schaeffer's Equity Scorecard has doled out a rather noncommittal rating of 4.0 out of 10. While ECA is probably one of the best candidates for a bearish play in energy, there are better plays in other sectors.

Click the following link to see a Monthly Chart of ECA Since September 2003 With 10-Month Moving Average: http://www.schaeffersresearch.com/wire?ID=15372 .

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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 .