Schaeffer's Option Activity Watch Features Clear Channel Communications, Intel, Sohu.com

Business Wire,  July 8, 2004  

Tags: Clear Channel Communications Inc., Intel Corp., Sohu.com

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CINCINNATI -- Today's Schaeffer's Option Activity Watch Clear Channel Communications (NYSE:CCU), Intel (Nasdaq:INTC), Sohu.com (Nasdaq:SOHU). The Option Activity Watch is a report that takes a closer look at three equities appearing in our most unusual option activity report from the previous day. The Option Activity Watch is published on 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=PROAW1M&PAGE=1 .

Schaeffer's Option Activity Watch:

1 Since the Federal Communications Commission cracked down on the airwaves, shares of broadcasting conglomerate Clear Channel Communications (NYSE:CCU) have experienced a fair amount of static. The company's very public legal battle with shock rock DJ Howard Stern notwithstanding, the stock has shed more than 26 percent since the beginning of the year. During this time frame, CCU underperformed its peers in the S&P 500 Index (SPX) on a relative-strength basis, while its 10-day and 20-day moving averages hampered all but the most exuberant of rallies. In fact, the last time the shares peaked above these trendlines was in late April. This technical breakdown even has CCU trading back below both its 10-month and 20-month moving averages as the stock approaches a key support level in the 34-35 area. Investors will want to keep an eye on this region, as the shares have not traded below it in more than a year. A breach of this support could send bullish investors running for the sidelines.

On the sentiment front, investors remain cautiously optimistic toward the equity. CCU's Schaeffer's put/call open interest ratio (SOIR) rests just beneath the midpoint of all readings taken in the past year at 0.73 (in the 46th percentile). However, yesterday's activity in the options pits may signal a shift in opinion from the group. Options speculators expressed a preference for puts on Wednesday, adding 5,772 contracts at CCU's August 35 strike. This activity lifted the SOIR to its current reading from 0.55 (in the 21st percentile), and is rather interesting given that the 35 level is a key technical support zone for the security.

Short interest is also indicating a degree of optimism (or at least complacency), dropping 21 percent over the most recent reporting period. The resulting 13.6 million CCU shares sold short resides at a two-year low and could be covered in 3.46 days at the stock's average daily trading volume. While this is a moderate accumulation of bearish bets, the fact that the security continued to slither lower during the latest round of short-covering should send up warning flags for investors. Even Wall Street analysts find this underperformer appealing. According to Zacks, CCU has accumulated 13 "strong buys," five "buys," and four "holds." Given the elevated nature of analyst expectations, the stock is now at a greater risk of downgrades that could add a loadstone to its decline.

Click the following link to see the Daily Chart of CCU since January 2004 with 10-Day and 20-Day Moving Averages:

http://www.schaeffersresearch.com/wire?ID=10547 .

2. Saying that semiconductor stocks have had a rough couple of days would be an understatement. With analyst downgrades flying left and right and profit warnings appearing daily, it is surprising to see continued investor optimism toward chip bellwether Intel (NASDAQ:INTC). Options players continue to call for a rebound in the shares, adding 7,987 call option contracts to the security's July 27.50 strike. Open interest at this front-month option has ballooned to 83,520 contracts, placing it second only to the 128,796 calls residing at INTC's July 30 call. The equity's SOIR of 0.58 also reflects this heavy degree of bullish sentiment, coming in below 88 percent of all readings taken in the past year. And while short sellers increased their positions by 11 percent in the past month, the resulting 69.2 million shares could be covered in a paltry 1.30 days of trading. Analysts are also having a hard time containing their elation over the shares, doling out 17 "strong buys," seven "buys," and seven "holds," according to Zacks.

If optimism drove a stock's gains, INTC's technical picture would almost be a mirror image of its current performance. Not only has the security lost nearly 10 percent since the beginning of the year, but its relative-strength measure versus the SPX is adamant in its march lower. The shares have found continued resistance at their declining 10-week and 20-week moving averages, and have been forced to close five consecutive months below their 10-month trendline. However, there is a sliver of hope rising into the area in the form of INTC's 20-month trendline. The equity also appears to have found additional support in the 25-26 area. A break below these key support levels could spell further downside for the shares, as optimistic sentiment unwinds in the form of added selling pressure.