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Schaeffer's ``Behind the Headlines'' Highlights the Following Stocks: Advanced Micro Devices and Intel

Posted on: Friday, 29 December 2006, 15:00 CST

Today's "Behind the Headlines" from Schaeffer's Investment Research focuses on Advanced Micro Devices (NYSE:AMD) and Intel (NASDAQ:INTC). "Behind the Headlines" is a report that analyzes newsworthy stocks that are generating a lot of attention on Wall Street. "Behind the Headlines" is published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.

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=PROAW13M&PAGE=1.

Behind the Headlines: Chipping Away at Intel

Advanced Micro Devices: Late yesterday, Intel (NASDAQ:INTC) reported that it will turn over documents related to its overseas sales tactics to Advanced Micro Devices (NYSE:AMD) as part of AMD's antitrust suit against the computer chip giant. A Delaware federal court ruled that INTC must produce documents and other evidence related to its foreign dealings with PC makers, distributors, and others. The ruling overturns Intel's prior objections. The Special Master, a court appointee who arbitrates discovery matters, stated on December 15 that AMD's requests "are reasonably calculated to lead to the discovery of exclusionary conduct that would be indicative of monopoly power in the global marketplace." However, the Special Master left the matter of whether the foreign documents will actually be admissible up to the judge.

According to an article on MarketWatch, AMD originally filed its antitrust suit against INTC in June 2005, accusing the firm of bullying a range of computer makers, distributors, and retailers from Europe to Asia into not selling or supporting AMD products. AMD has subpoenaed roughly 70 parties so far in the case, and as a result of this court order, it is likely AMD will target INTC's business partners in Japan, where antitrust regulators there have suggested INTC abused its position as the world's number-one computer-chip maker.

The latest announcement has done little to help the shares of AMD. The stock has been range-bound between 22 and 20 since the equity gapped lower on October 19. What's more, the security is facing staunch resistance in the form of its 10-week and 20-week moving averages, which have ushered the shares lower since March.

From a sentiment perspective, it should come as no surprise that there are signs of pessimism in the stock's sentiment backdrop. The equity's Schaeffer's put/call open interest ratio (SOIR) is higher than 78 percent of those taken during the past 52 weeks and 18 of the 23 analysts following the firm rate it a "hold" or worse.

However, the one concern comes from short sellers. They have avoided the company. In December, the number of AMD shares sold short dropped by three percent. As a result, the stock has a short-interest ratio of only 1.3 days to cover at its average daily trading volume. Pessimism is still far from an extreme on this chip company, indicating that it may still have some downside ahead of it before it finally reaches a bottom.

Click the following link to see a Weekly chart of AMD since February 2006 with 10-week and 20-week moving averages: http://www.schaeffersresearch.com/wire?ID=17968 .

Intel: Technically speaking, Intel (INTC) isn't looking much better at the moment. The stock is attempting to bounce off former support/resistance at the 20 level, but is hitting resistance at its declining 10-day moving average. The equity is facing additional resistance in the form of its descending 20-day trendline. These short-term trendlines have guided the security lower since late November. From a long-term perspective, INTC is being squeezed between support at its 10-month moving average (at 20) and overhead resistance at its 20-month trendline. The stock has logged only one monthly finish above both of these moving averages since September 2005.

Much like AMD, options players are skeptical of the firm. However, Wall Street is quite enamored of the chip company. Zacks reports that 19 of the 29 analysts following INTC rate it a "buy" or better, while just one gives it a "sell" rating. This configuration leaves the shares vulnerable to potential downgrades.

During the near term, the security is likely to remain stuck in the 22.50 to 20 region. The 22.50 strike is the site of peak January call open interest with more than 260,000 contracts, while the 20 strike is close behind with 245,000 calls. Meanwhile, the peak January put strike is the 20 level with more than 245,000 contracts. This buildup of options contracts will likely keep the security pinned to the region until they expire.

Click the following link to see a Daily chart of INTC since July 2006 with 10-day and 20-day moving averages: http://www.schaeffersresearch.com/wire?ID=17968 .

The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive 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=PROAW13M&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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