Among the stocks featured in the August 24 edition of Schaeffer's Market Blog are Rite Aid (NYSE:RAD), Williams-Sonoma (NYSE:WSM), Fannie Mae (NYSE:FNM), Ford Motor (NYSE:F), and eBay (NASDAQ:EBAY). 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. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13M&PAGE=1 .
Schaeffer's Market Blog for Thursday, August 24, 2006:
Below are just a few of today's Market Blog entries. Click here to read all of today's Market Blog. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13C&PAGE=1 .
11:45 AM Rite Aid Goes Shopping
Rite Aid (NYSE:RAD) is trading briskly today on news that the company has agreed to acquire about 1,800 Brooks and Eckerd drugstores from Jean Coutu Group, a leading Canadian drugstore chain. The deal is valued at $3.4 billion. Jean Coutu Group will receive a 32-percent stake in RAD in return.
The stock was down more than four percent at last check at $4.48, but this decline follows a 7.3-percent advance yesterday. As things stand, RAD is battling resistance at its 10-day moving average, though it successfully tested the support of its 20-day trendline this morning.
Sentiment is mixed. According to Zacks, all seven brokerages which rate RAD keep it at a cautious "hold" or worse, leaving room for upgrades. However, sentiment in the options pits is optimistic, warning that money might be scarce and expectations are high. The Schaeffer's put/call open interest ratio (SOIR) for the stock is 0.13, telling us that calls are more than seven times as popular as puts in the front three months of options. This ratio is lower than 85 percent of those taken during the past year, so it lies toward an optimistic extreme. Such high expectations can be dangerous. If options players have high expectations, RAD had better maintain its current uptrend. For the past two years, the stock has trended sideways between the 3.25 and 4.80 levels. It came close to 4.80 yesterday, but was rejected.
12:12 PM Williams-Sonoma Lowers Forecasts
Williams-Sonoma (NYSE:WSM) reduced its fiscal 2006 revenue guidance to a range of $3.75 billion and $3.8 billion, from a previous range of $3.8 billion to $3.9 billion. It shifted earnings guidance to a range of $1.87 to $1.94 per share, down from a prior range of $1.97 to $2.01 a share. At last check, the stock was down almost eight percent at $30.00. In 2000, the stock entered an uptrend on support of its 20-month moving average, but it topped out at the 45 level, and has now pulled its 10-month and 20-month moving averages to the brink of a bearish cross. On our Schaeffer's Equity Scorecard, WSM earns 4.0 out of 10. Scores close to 10 suggest that the path of least resistance lies to the upside, whereas scores close to zero suggest the opposite.
1:16 PM Fannie Mae Gets a Pop
Fannie Mae (NYSE:FNM) is up about four percent today after the company announced this morning that the Justice Department is discontinuing its investigation into FNM's accounting practices and does not plan to file any charges. After peaking around $51.90, the shares have pulled back a bit and are trading right around $51.00. We've seen strong call option volume on FNM, and this sign of optimism could be putting a damper on the stock. In fact, call volume on the security is running at about nine times average thus far today.
2:43 PM Airlines and Internet Down
We've bounced a little bit since lunch with the Dow now up five points and the SPX up two points. One area that continues to struggle is the transports, with airlines leading the way lower, as the AMEX Airlines Index (XAL) is down 1.35 percent. Internet isn't doing much better, with the Internet HOLDRs Trust (HHH) down 1.30 percent. All in all, today is more of the same - light volume and not much action.
3:15 PM JC Bamford Excavators to Buy Jaguar?
In Opening View this morning, Joseph Hargett mentioned a USA Today story that cited a source claiming the Ford family (which controls about 40 percent of the company) is pondering whether or not to take Ford Motor (NYSE:F) private. The report suggested that the family wanted to take the ailing automaker private to revamp it without the glare that being a public company entails.
Separately, The Financial Times reported that Britain's JC Bamford Excavators was interested in buying F's Jaguar division. This last piece of news intrigues me. JC Bamford Excavators is a successful vehicle manufacturer. Drive past any construction site in Britain and, chances are, you'll see a familiar yellow JCB. Of course, diggers, forklifts, and backhoes are very different than Jaguars, with considerably less walnut, leather, and thick-pile carpeting, but JCB knows a thing or two about business success. Despite being a private company, it's Europe's biggest manufacturer of construction equipment, according to Hoover's. A return to Britain for the classic, luxury Jaguar marque might be viewed as a positive step by enthusiasts, if only for sentimental reasons, and might even drive buyers into showrooms merely because the car's name is making the news. Meanwhile, although I only just learned about it, I'm already smitten by the JCB Fastrac tractor, which can manage 45 mph, apparently, and looks as if it could bully a Hummer. And I bet you could park it anywhere you wanted.
3:35 PM eBay Downgraded
eBay (NASDAQ:EBAY) was downgraded to "underperform" from "market perform" by Piper Jaffray this morning. The brokerage firm also lowered its price target to $25 from $30, citing a worsening picture, with costs likely to increase. The stock had been in a decline since late January, losing more than half its value, but a bounce in early August gave some hope that the tide may have turned. Alas, today the stock has breached potential support at both its 10-day and 10-week moving averages. It has fallen almost five percent at $25.74. The 20-day trendline lies at the 25 level, which might offer support against a further fall.
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.
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