Schaeffer's Street Chatter Highlights the Following Stocks: Merck, Best Buy, Apple Computer, and Amazon.com.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Merck (NYSE:MRK), Best Buy (NYSE:BBY), Apple Computer (NASDAQ:AAPL), and Amazon.com (NASDAQ:AMZN). "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:

Merck

Bright and early this morning, Merck (NYSE:MRK) confirmed plans to implement a global restructuring. The plan will include the elimination of 7,000 jobs by the end of 2008 and the closing of five of the company's 31 manufacturing plants. For 2006, MRK sees adjusted earnings of $2.28 to $2.36 per share, well below analyst projections of $2.38 per share.

While equities usually rally when a company announces restructuring plans, MRK has fallen more than 3.5 percent on the news. This move lower by the shares should be rather concerning to bullish traders, as the stock is now trading below long-term resistance at the round-number 30 level. Furthermore, MRK's drop corresponds with yet another unsuccessful test of resistance at its declining 10-month trendline, which, in collusion with its 20-month counterpart, has forced the security lower since January 2001.

Complicating matters even further, peak call and put open interest for the front three months of options resides at the 30 strike. Breaking through the potential options-related support in this region does not bode well for the shares. Meanwhile, the now overhead plethora of call open interest could stymie any attempt by MRK to rebound from this pullback.

Digging further into MRK's options configuration, we find that optimism increased sharply on Friday. This potentially tryptophan-induced surge has dropped the stock's Schaeffer's put/call open interest ratio (SOIR) from Friday's reading of 0.69 in the 59th percentile to today's reading of 0.52 in the seventh percentile. This increase in optimism also does not bode well for MRK from our contrarian point of view.

Checking in on short interest, we find that the number of MRK shares sold short increased by 14 percent during November to its highest reading taken in the past four year. Despite the impressive sounding nature of this rise in pessimism, it would still take a mere 2.6 days to cover the 25 million MRK shares sold short at the stock's average daily trading volume, leaving the strength of any short-covering support or rally in question.

Finally, Wall Street has taken a wait-and-see approach to MRK in light of its recent drug troubles. Zacks reports that the equity receives four "buys," 14 "holds," and three "sells."

As a result of this sketchy technical performance and the moderately bullish investor sentiment backdrop, our Schaeffer's Equity Scorecard has issued a ranking of 3.5 out of 10 for MRK, indicating that the shares could see additional downside before MRK gets back on track.

Click the following link to see a Monthly Chart of MRK since January 2001 with 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=14678 .

Best Buy

Retailers became the center of attention with the advent of "Black Friday." The National Retail Federation reinforced this spotlight on the retailing sector when it reported a 22-percent year-over-year increase in sales for the period, with electronics goods a popular purchase.

While Best Buy (NYSE:BBY) tagged a fresh all-time high back in August, the shares have struggled with long-term resistance in the 51-52 area ever since. The stock has recently put together a nice rally along the support of its 10-day and 20-day moving averages, advancing more than 22 percent since mid-October, but today's pullback on positive news is a bit disturbing.

Complicating matters for BBY is the heavy accumulation of call open interest in the front three months at the 50 strike, which the shares have edged below in today's trading. Peak put open interest for the same period resides at the 45 level and could offer up some support, but it would require an 11-percent pullback in the shares before this support would kick in, not a positive sign for BBY. Furthermore, optimism surged on "Black Friday" toward the electronics guru, as the stock's SOIR plunged from 0.88 in the 20th percentile to today's perch at 0.70 in the ninth percentile.

Our other sentiment indicators are also heavily skewed toward the bullish end of the spectrum. For instance, complacency is reigning among the short-sellers, as the number of BBY shares sold short fell by more than five percent during November to its lowest reading since February. Furthermore, it would take a mere 2.24 days to buy back the roughly 16 million BBY shares sold short. Not exactly a convincing amount of short-covering support for the equity.

Meanwhile, Wall Street reiterated its conviction for the security today as Deutsche Bank restated its "buy" rating on the stock. The rest of the Street lines up nicely with this bullish view of BBY, as Zacks reports that 15 of the 23 covering analysts rate the shares a "buy" or better.

With the holiday shopping season gearing up, I find it hard to bet against BBY despite its wealth of optimistic sentiment. Apparently our Schaeffer's Equity Scorecard agrees with this iffy assessment, rating BBY a 5.0 out of 10.

Click the following link to see a Daily Chart of BBY Since July 2005 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14678 .

Apple Computer

When someone mentions electronic goods or electronic "toys" for Christmas, I immediately think of Apple Computer (NASDAQ:AAPL). Apparently, many online shoppers feel much the same way, as Amazon.com (NASDAQ:AMZN) said Friday that AAPL's iPod music players were among the online retailer's best-selling items so far for the holiday-shopping season. AMZN noted that, between November 1 and November 22, two models of the iPod were among the hottest consumer-electronic items selling. AAPL's two gigabyte iPod Nano in black was the second-best seller in the category, while the 512-megabyte iPod Shuffle rounded out the top three sellers in the electronics category.

Shares of AAPL are apparently on the wish list of many Wall Street investors, as the security continues to set new all-time high after new all-time high. Today marks the fourth consecutive fresh all-time high for the shares, as they continue to rally along the stalwart support of their 10-day and 20-day moving averages.

However, many investors on the Street are still rather Grinch-like when it comes to AAPL. In today's trading, AAPL is attempting to overcome peak December call open interest at the 70 level in today's trading. However, following December expiration, there is little in the way of overhead call activity, as peak call open interest drops to the 55 level in January and March. This lack of options-related resistance means that there could be smooth sailing higher for the shares, especially if AAPL manages to best the 70 level. Furthermore, the stock's SOIR of 1.00 ranks above 95 percent of all those taken during the past year, indicating an extreme level of pessimism from the group. This ratio has been on the rise lately, and is a positive sign for AAPL, as the shares tend to trend in the direction of this ratio.

Meanwhile, Wall Street seems rather iPooped, as only nine of the 21 covering analysts rate the shares a "buy" or better. Any upgrades from this stingy bunch of scrooges could provide some added lift for AAPL.

The net result of this wealth of pessimism and solid technical performance is a Schaeffer's Equity Scorecard rating of 7.0 out of 10, indicating that AAPL's upside potential is much greater than that of me getting an iPod Video for Christmas.

Click the following link to see a Daily Chart of AAPL Since July 2005 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14678 .

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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 .