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Schaeffer's Daily Market Blog Features: Wal-Mart Stores, Verizon Communications, Yahoo!, Millennium Pharmaceutical, McDonald's

Posted on: Monday, 30 October 2006, 15:00 CST

Among the stocks featured in the October 30 edition of Schaeffer's Market Blog are Wal-Mart Stores (NYSE:WMT), Verizon Communications (NYSE:VZ), Yahoo! (NASDAQ:YHOO), Millennium Pharmaceutical (NASDAQ:MLNM), and McDonald's (NYSE:MCD). Schaeffer's Market Blog is just one of the many free market commentaries written every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. The Market Blog is written throughout every trading day by Schaeffer's financial analysts and traders. They are quick insights to the day's most notable market activity from an options perspective. To have this report delivered to you free via email every day click on the following link and you'll also get an opportunity to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13M&PAGE=1 .

Don't forget that many of our observations are available as audio presentations that you can hear on your computer or download from Apple's iTunes Music Store to play on a portable device such as an iPod. To see the full menu of podcasts, please visit http://www.schaeffersresearch.com/commentary/podcasts/.

10:47 AM Caution! Falling Prices Ahead

Let's just say that the first hour-plus of trading hasn't been all that kind to retailing giant, Wal-Mart Stores (NYSE:WMT). This morning, the company announced that it expects October same-store sales to inch 0.5 percent higher. This rate would be the weakest same-store sales gain for WMT in nearly six years. So, where does the blame for the poor performance lie? The Arkansas-based company noted poor sales in its women's apparel departments, and a disruption to sales from remodeling efforts at roughly half of its U.S. stores. So far this morning, the stock has shed nearly three percent.

Today's drop has allowed major resistance levels to reclaim their prior positions. First, the stock has slipped below its 10-day moving average, which has acted as resistance in the past. Second, the 50 level is now poised to provide overhead resistance. This level is the site of peak call open interest in the front three-month series, and this collection of bullish bets could provide resistance.

11:01 AM Verizon Drops

I noted earlier the problems that Dow Jones component, Wal-Mart Stores (WMT), was encountering. The morning hasn't been much better for Verizon Communications (NYSE:VZ). The company posted ex-item, third-quarter earnings of 68 cents per share on revenue of $23.25 billion. VZ had been forecast to earn 66 cents per share on revenue of $23.03 billion, so why the nearly four-percent drop this morning? VZ continues to lose customers from its traditional local-phone business and the company faces competition as cable-television companies move into the phone business. In addition, some subscribers have completely dropped landlines and have opted for Internet phone services. VZ has built an expensive fiber network that would give it the ability to offer the nation's fastest Internet speeds and a pay-TV service to rival cable. VZ plans to connect 18 million households to this network by 2010.

Today's drop has sent the stock below its 10- and 20-day moving averages for only the seventh time since July. However, some could consider this an attractive entry point for a strong performer, as VZ continues to enjoy the support of its 10-week moving average, and its 10-month moving average is on the verge of a bullish cross of its 20-month counterpart.

12:48 PM Yahoo! Attempting to Make a Comeback

Shares of Yahoo! (NASDAQ:YHOO) have made a little run today on the heels of an upgrade, and are now facing resistance at their down trending 10-week moving average. Options players seem to be betting that the stock's rebound will continue as they have traded four times as many call options thus far today as put options. Too much optimism could squelch this rally before it really has a chance to extend itself.

1:19 PM Heavy Put Trading on Millennium Pharmaceutical

A put/call open interest ratio is simply the ratio of total put open interest to total call open interest. We compute Schaeffer's put/call open interest ratio (SOIR) based on open interest in the front three months only. These near-term options tend to attract a more speculative crowd, the sentiment of which is more useful for shorter-term trading.

One of the filters available in our Schaeffer's Plus is the Daily SOIR Changes filter, which lists the stocks that have seen the largest percentage jump in their SOIR overnight. In the table below, I have listed the top 10 stocks that saw the largest increase in their SOIRs.

Table of 10 Stocks with Sharp SOIR Increases

From the results, I was caught by the significant jump in Millennium Pharmaceutical's (NASDAQ:MLNM) SOIR from 0.50 to 0.81, which is now higher than 89 percent of the readings taken during the past year. In trading on Friday, open interest at the equity's November 12.50 put exploded from 2,609 contracts to more than 12,600 contracts. The option saw a block of 1,000 contracts cross the tape at 11:37 a.m. Eastern time at an ask price of 1.00. A block of 4,000 contracts changed hands at an ask price of 1.00 at approximately 11:41 a.m., while another block of 4,676 contracts traded at 1:28 p.m. at an ask of 1.00.

1:43 PM Brisk Call Trading on McDonald's

Fast-food giant McDonald's (NYSE:MCD) is seeing some heavy call trading this afternoon. The equity's November 42.50 call has seen nearly 6,400 contracts change hands on open interest of 13,697 contracts. Meanwhile, the January 2007 42.50 call has traded more than 6,200 contracts on open interest of 8,584 contracts. From 10:02 a.m. through 10:38 a.m. Eastern time, both options saw several small blocks cross the tape marked "spread," making it likely the volume between the two options is linked.

Technically speaking, the stock has pulled back to support at its rising 20-day moving average and has bounced off this short-term trendline to climb back above its 10-day moving average. Furthermore, the equity is moving into support at its ascending 10-week moving average, which is climbing into 40 area.

For more information on these stocks or any stock in your portfolio, feel free to visit our Schaeffer's Equity Scorecard feature. Click here to read all of today's Market Blog: http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13C&PAGE=1.

Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day and get entered to win an IPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13M&PAGE=1.

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 .

Source: Business Wire

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