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Schaeffer's Market Observation Features Intel: INTC.

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Today's Market Observation from Schaeffer's Investment Research features Intel (Nasdaq:INTC). Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. These are published on - 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: .

Inside Intel Before Earnings

Intel is the top semiconductor manufacturer in the world, according to Hoover's. The firm's Pentium and Celeron processors can currently be found in about 80 percent of all new personal computers. Presently, the stock ranks 53rd in the Fortune 500. Tomorrow after the closing bell, INTC officials will announce first-quarter earnings results. Wall Street expects the semiconductor giant to collect 27 cents per share, a 93-percent improvement over year-ago figures. INTC boasts an impressive track record in the earnings confessional. According to msn Money, the company has topped analysts' expectations for the past five consecutive quarters by an average positive surprise of 13.04 percent.

Of possible concern for the stock are the high expectations heading into its earnings news. Although INTC has a good chance of surprising the street, what are its odds of rallying on such a positive surprise? Expectational Analysis(R) ( methodology has taught us that high expectations often beget weak price action, as a stock doesn't have to do much to disappoint its eager fans.

One sign of this overt optimism is analysts' rankings on the stock. There are currently 30 brokerage firms following INTC, 24 (80 percent) of whom name the equity a "buy" or better, leaving six "hold" rankings and no outright "sells." This is simultaneously the year's highest "buy" percentage and the year's lowest "sell" percentage, as illustrated in the chart below. An earnings disappointment on Tuesday evening could easily spur some earnings downgrades.

Click the following link to see the Analyst Ratings Chart for INTC Since April 2003: .

Next, options players are notably optimistic on the stock, as evidenced by INTC's declining Schaeffer's put/call open interest ratio (SOIR), which indicates an increased stake in bullish call positions along with a decreased interest in bearish put positions. This ratio now stands at 0.56, meaning total call open interest among near-term options outweighs total put open interest by a margin of almost two-to-one. What's more, this ratio is lower than 92 percent of all SOIR data for INTC measured over the past 12 months.

Click the following link to see the SOIR Chart for INTC Since August 2003: .

Bearish speculators have failed to bet against INTC, suggesting a widespread feeling of complacency toward the stock. Presently, there are 62.3 million INTC shares sold short. While this may seem like a lot on an absolute level, it represents less than one day's worth of trading volume for INTC. As such, the chances of a short-covering-induced rally are slim to none.

Click the following link to see the Shorted Shares Chart for INTC Since June 2003: .

What's even more interesting is the fact that this optimism has not been supported by a strong performance in the shares. After encountering "double-top" resistance near the 35 level late last year, the stock entered a downward spiral and has dropped more than 20 percent in less than four months, compared to a three-percent rise in both the Nasdaq Composite (COMP - 2064.5) and the S&P 500 Index (SPX - 1145.07) and a half-percent increase in the PHLX Semiconductor Index (SOX - 511.05). Since the beginning of the calendar year, the stock has been traveling beneath resistance at its 10-week and 20-week moving averages. Prior to January, these intermediate-term trendlines had offered support to INTC since the first quarter of last year.

Click the following link to see the Weekly Chart of INTC Since January 2003 With 10-Week and 20-Week Moving Averages: .

INTC has also violated its longer-term 10-month moving average, below which it closed last month for the first time since March 2003. The equity's 20-month moving average is still lying in wait to support the shares, but the stock would face a 14-percent decline from present levels before encountering this trendline.

Click the following link to see the Monthly Chart of INTC Since November 2001 With 10-Month and 20-Month Moving Averages: .

The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Midday Report, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day.

About Schaeffer's Investment Research (

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, , 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: .
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Publication:Business Wire
Date:Apr 12, 2004
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