Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Mercury: Planetary Profits
05/02/2003 12:00 am EST
One interesting similarity between Bernie Schaeffer and Leo Fasciocco --in addition to the fact that they are both exceptionally astute market observers--is that neither particularly cares if a stock or the market is going up or down. Their analysis looks for the best short and long opportunities at all times, and their records benefit from exploiting these trends. Both advisors currently like the prospects for Mercury Interactive.
"Mercury Interactive (MERQ NASDAQ) makes software for testing and analyzing the performance of enterprise and Web-based applications," says Leo Fasciocco, editor of Ticker Tape Digest. "Mercury's products allow customers to analyze and eliminate Web site performance bottlenecks, automate quality assurance testing, and reduce hardware and operational expenses. The company also offers services such as consulting, maintenance, and training. Customers include Charles Schwab, Nokia, Microsoft, and Target. Mercury is expanding its hosted applications, which complement its software by offering real-time monitoring and load testing services for Web sites. We are forecasting a 28% increase in MERQ's net to $0.92 a share from $0.72 a year ago. Net for fiscal 2004 should climb 22% to $1.12 a share. For the upcoming first quarter, we see net up 45% to $0.20 from $0.14 cents a year ago. Net for the second quarter should jump 45%. Overall, MERQ is a turnaround play. The stock was a $160 stock back at the peak of the bull market. It fell to 16 late last year. But since then it has moved into an up trend. It hit 38 in January and since then has been in a consolidation, showing good accumulation. We see the stock now at an ideal spot to be accumulated with potential to breakout of its base. "
"Mercury has found support on a recent pullback at its
ten-month moving average and is now buttressed by additional support from its
20-month trendline," says options expert Bernie Schaeffer,
editor of The Option Advisor . The 30 mark has
served as support on several occasions in recent weeks. The stock could
benefit from options-related support at this level, which is the site of peak
front-month put open interest with 11,681 contracts. Meanwhile, options players
have positioned themselves at a pessimistic extreme. MERQ's SOIR checks in at 1.35--the highest
reading of the past year. This sign of low expectations has bullish implications
from a contrarian standpoint. Wall Street is also holding back. According to
Zacks, 13 of the 26 analysts following MERQ rate it a buy or better and 13 rate
it a hold. Future upgrades could boost the security higher."
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