AWE: Ideal Contrarian Play

11/15/2002 12:00 am EST

Focus:

Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

Given his focus on contrary investing, it should not be a surprise that Bernie Schaeffer, editor of The Option Advisor, has turned bearish, despite the growing chorus of bullish advisors. He notes that he won’t buy into the bullishness unless the Dow takes out long-term resistance at 9000. Despite this stance, he adds, "I do see some opportunities on the long side, particularly in some of the beaten down single-digit tech names. These should be viewed as speculative trades for your discretionary capital." Here’s one such play.

"AT&T Wireless (AWE NYSE) rallied strongly in recent trading, surging more than 18% in a day after reiterating a strong earnings outlook for next year. The stock also benefited from two upgrades today. This jolt higher, compounded with the equity’s recent strength, has broken AWE’s recent pattern of lower highs. More dramatically, the stock surged above its ten-week and 20-week moving averages for the first time since August 2001. The options crowd continues to linger in the bearish camp. The security also boasts a hefty short-interest ratio of 11.38. Wall Street is similarly non-committal, as 15 of the 32 analysts rating the stock have named it a ‘hold’ while two list it as an outright ‘sell’ according to Zacks. The powerful combination of strong technicals and skeptical sentiment makes for an ideal contrarian play. For options traders, we recommend buying the April 2003 5 call, which trades under the options symbol AWEDA."

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