Schaeffer's Midday Options Update Features Cisco Systems, Netflix, Circuit City, Wal-Mart Stores, and ChevronTexaco

Business Wire, Sept 7, 2004

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Cisco Systems (Nasdaq:CSCO), Netflix (Nasdaq:NFLX), Circuit City (NYSE:CC), Wal-Mart Stores (NYSE:WMT), ChevronTexaco (NYSE:CVX). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - 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. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1

Schaeffer's Midday Options Update for Tuesday: Fueling Up with ChevronTexaco

A drop in oil prices and positive economic data out of Japan and Germany appeared to lift traders' spirits today. The October contract on crude dipped $1.07 in intraday trading, last seen at $42.92. Investors cited an easing of tensions surrounding Hurricane Frances for the backslid in oil. Meanwhile, Japan released a quarterly survey that indicated a 10.7-percent rise in capital spending over the prior year, raising hopes that the nation's gross domestic product growth will be revised higher later this week. German industrial production also provided a shot in the arm, arriving at 1.6 percent, doubling forecasts for a 0.8-percent rise.

It was a busy day outside the realm of economic data and oil as well, with tech stock's once again dominating the headlines. Cisco Systems (Nasdaq:CSCO) surged back to the forefront, after a major brokerage firm boosted its rating on the firm to "sector outperform" from "sector perform" citing expectations for accelerated growth over the coming quarters. Meanwhile, semiconductors stocks continued to "assume the position," as another major brokerage firm slapped home a "equal weight" downgraded on Intel (INTC), National Semiconductor (NSM), and ASML Holding (ASML).

It was a banner day for both Netflix (Nasdaq:NFLX) and TiVo (TIVO), as a Newsweek article reported that the two companies plan to unveil a partnership later this month that could allow subscribers to download movies directly to TV-set-top boxes. As a result, NFLX soared more than 16 percent, prompting a brokerage to reiterate its "buy" rating on the company. TIVO also surged sharply on the news, gaining more than 16 percent.

Retails continued to vie for a piece of the limelight in today's session, with Circuit City (NYSE:CC) reporting second-quarter sales of $2.35 billion, rising 8.9 percent over the same period last year. Same-store sales for CC grew 2.9 percent. The world's largest retailer also joined the fray, as Wal-Mart Stores (NYSE:WMT) reiterated that September same-store sales are expected to fall between the two- to four-percent growth range. However, WMT warned that Hurricane Frances is expected to negatively impact sales in Florida.

At 1:08 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,348.3) is up 0.86 percent and the S&P 500 Index (SPX - 1122.269 is higher by 0.81 percent. The Nasdaq Composite (COMP - 1863.8) is up 1.05 percent. At 1:09 p.m. in the options pits, 1,085,666 calls and 831,192 puts traded for a composite put/call ratio across all five exchanges of 0.76. The CBOE put/call ratio for equity options weighed in at 0.78.

With today's pullback in crude prices, several oil concerns are garnering investor attention. One stock in particular, ChevronTexaco (NYSE:CVX), has piqued the curiosity of the options crowd today. CVX's September 100 put has seen more than 5,700 contracts change hands in the options pits so far today. With open interest at this strike of only 1,096, most of today's activity should translate into new positions. This bearish activity could have a lifting effect on CVX's already rising Schaeffer's put/call open interest ratio (SOIR). The equity's SOIR has climbed lately, increasing from its August 27 reading of 0.56 in the 27th percentile to its current value of 0.65 in the 48th percentile. Elsewhere, short sellers are decreasing their bearish positions, as short interest skipped two percent lower over the past month. The resulting 6.9 million CVX shares sold short could now be covered in roughly 2.42 days at the stock's average daily volume, providing little fuel for a covering rally. However, Wall Street remains bearish on the equity, as Zacks reports that 11 of the 18 covering analysts rate the shares a "hold" or worse.

Riding the rising price of crude, and its 10-week and 20-week moving averages, CVX has powered higher over the past year, gaining more than 39 percent on a year-over-year basis. What's more, the stock has hammered the broader market (as represented by the SPX) on a relative-strength basis during this time frame. However, the 100 level is a key area of resistance for the shares. Not only is 100 important from a psychological level (as round numbers often act as staunch levels of support/resistance), but CVX has never posted a monthly close above this long-term resistance level. This area is also the site of peak call open interest (nearly 20,000 contracts) in the front three months of options, adding a layer of options-related resistance to the security's advance. With rather mixed investor sentiment toward the equity, it will be important to watch the stock's reaction at in this region. Naturally, a rejection could send CVX back for a retest of support at its 10-week trendline, while a breach of this level could spur a series of upgrades that could send the stock soaring higher.