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Schaeffer's Daily Market Blog Features: Time Warner, Clorox, IBM, Apple Computer, and Martha Stewart Living Omnimedia

Posted on: Tuesday, 31 October 2006, 12:00 CST

Among the stocks featured in the October 31 edition of Schaeffer's Market Blog are Time Warner (NYSE:TWX), Clorox (NYSE:CLX), IBM (NYSE:IBM), Apple Computer (NASDAQ:AAPL), and Martha Stewart Living Omnimedia (NYSE:MSO). 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-months' series, and this collection of bullish bets could provide resistance.

9:42 AM Time Warner Upgraded

Earlier this morning, Cowen and Co. upgraded Time Warner (NYSE:TWX) to "outperform" from "neutral." The brokerage noted that the shares are poised to break a three-year trading range of $15 to $20 and outperform the market by at least 15 percent during the next 12 months. Cowen's analyst noted: "we are encouraged by AOL's aggressive new advertising-focused strategy," and "while it will take several years for investors to fully evaluate the success of the strategy, near term data points are likely to be positive and drive margin improvement in its newly acquired Adelphia systems."

Believe it or not, the stock is struggling with the 20 level this morning. Will the news be enough to help propel the stock through 20 once and for all? We shall see, but a rejection at this isn't disaster, just a confirmation of the strength of resistance.

10:18 AM Clorox Ahead of Earnings

Clorox (NYSE:CLX) is in an interesting technical predicament on the eve of Wednesday's trip into the earnings confessional. After reaching an annual high on October 10, the stock has drifted slightly lower, forcing its now-overhead 10-day and 20-day moving averages into a bearish cross, which is forming this week. The move has also brought the shares toward potential support in the 63-64 area, which previously acted as resistance during the first half of the year but may now reverse roles to serve as support. What's more, the stock's 10-week moving average has risen toward the 63 threshold, fortifying this support zone. Analysts are currently targeting first-quarter earnings per share of 71 cents for CLX, on par with year-ago results.

10:27 AM IBM Hits a New Annual High; Now What?

Technology giant and Dow Industrials heavyweight IBM (NYSE:IBM) is among the 118 New York Stock Exchange members to hit a new annual high during the first hour of Tuesday's trading. Big Blue has skipped up about half a percent to the 92.43 mark, rebounding higher from short-term support at its 10-day moving average. The shares are now trading at their highest level since March 2005. In the front three-months series, the December 95 strike is among the sites of heaviest call open interest, with nearly 23,000 out-of-the-money contracts in residence. What's more, more than 24,500 calls are open on the January 95 call.

The in-the-money 90 strike is also a force to be reckoned with; there are currently 18,000 open November 90 calls and more than 40,000 open calls at the January 80 strike. With the 90 strike serving as structural support and the 95 mark providing an options-related challenge, IBM could be bouncing around in a trading range over the short term. A break above the 95 mark could set the stage for a run at 100, which the stock has not solidly overcome since the first quarter of 2002.

10:28 AM New iPod for Sale on Friday

This morning, Apple Computer (NASDAQ:AAPL) announced that the latest version of the iPod shuffle digital music player will be available for purchase worldwide on Friday. The shuffle has one gigabyte of memory and holds roughly 240 songs. As was previously disclosed, the new iPod will carry a price tag of $79.

While this news has not sent the shares skyrocketing, they have rebounded off the 80 level. Now that the stock's 10-day moving average has moved into the picture, it could provide further support. While AAPL continues to shuffle higher, the speculative options crowd is rather bearish, evidenced by the firm's Schaeffer's put/call open interest ratio (SOIR) of 1.34, which is higher than 96 percent of those taken during the past 52 weeks. If the firm's rally continues, keep an eye out for buying pressure to push it higher.

11:38 AM Martha Stewart Living Narrows Loss

It has been a good morning for Martha Stewart Living Omnimedia (NYSE:MSO) after reporting a narrower third-quarter loss. In early trading, the stock jumped as much as eight percent, but has settled down a bit, sporting a five-plus-percent gain. The domestic diva's conglomerate reported a loss of 49 cents per share in the quarter, including a charge of $18.2 million. Taking that charge out of the equation, MSO lost 13 cents in the quarter. Revenue for the quarter came in at $61.1 million, up from $41.3 million a year ago.

The stock has performed well recently, thanks to support from its 10-day moving average. Looking at MSO's sentiment makeup, we could see a bit of a short-covering rally, as 46 percent of its float is sold short, and it would take 21 days to buy back these shorted shares. This combination is more than enough to spark a short-covering rally, which could help take out overhead resistance at 22. Also keep watch for some buying pressure, as MSO's Schaeffer's put/call open interest ratio of 1.84 is higher than 88 percent of those taken during the past 52 weeks. The bottom line is that MSO's Schaeffer's Equity Scorecard rating of 8.0 out of 10 suggests that the path of least resistance leads higher.

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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