Bernie’s Shopping List

10/13/2006 12:00 am EST

Focus:

Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

From a technical standpoint, Bernie Schaeffer and his staff are exceptionally skilled at pinpointing the right time to buy–and sell–investments in any sector. And he recently issued his opinion on this quartet of very diverse investments…

“A diverse foursome of stocks has caught my eye this week, for different reasons.

They are presented here worst to first, or least attractive to most attractive from an Expectational Analysis ® perspective.

“PC manufacturer extraordinaire Dell (DELL NASDAQ) has been hanging right on its 160-month moving average for the past couple of months or so. So is the stock a "bargain" compared to its $59.68 high in 2000 or “expensive” compared to its 24-cents low a dozen years ago? Seems like the $52 billion market cap Dell retains might help in the decision process.

Chicago Mercantile Exchange (CME NYSE) shares have been consolidating sideways into their 40-week moving average of late, a key trendline for the stock, helping skew it higher in April 2005. So far, its role as support is unbroken, following a collision with this trendline in the week ended September 8. The stock could benefit from some upgrade activity on Wall Street. Six of 10 analysts rate CME a "hold" or "sell," leaving open the possibility of a shift toward more bullish waters.

BMC Software’s (BMC NYSE) recent price action illustrates one of the perils of heavily shorted stocks. The shares recently plunged throughout the session on no volume and no news. My guess is this was because the short sellers saw a lack of bids and jumped all over it. It is true that, theoretically, one can only short on upticks. Perhaps large short players maintain an inventory of long positions for this purpose – wouldn’t surprise me.

“You gotta like the huge October 62.50 put volume on Harley-Davidson (HOG NYSE), especially as it combines with a successful recent pullback to the 160-unit intraday trendline after a big run to all-time highs. The Wall Street Journal recently said the stock has gained nearly 16% since changing its ticker symbol to the catchier "HOG" in mid-August. Should the stock continue to plow higher, we could see some short-covering activity unfold. About 8% of the float is devoted to the short side, resulting in a short-interest ratio of 13.3 days to cover. As these bears begin to motor toward the exits, a short-squeeze situation could arise, forcing the shares even higher. Just three of the 20 covering analysts have a “buy” rating, leaving a bevy of “hold” and “sell” designations that, given the stock's new all-time-high perch, could change at any time.”

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