Schaeffer's Trading Floor Blog

Rally Time

by 5/26/2005 3:44 PM
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Well wouldn't you know it, as soon as you think all the traders left early for the three day weekend we get some action. Since 3:00 p.m. the SPX has gone up two points and is now at its highs for the day. Leading us higher are steel stocks, semiconductors, and housing. On the downside, metals, and medical supplies are underperforming.

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One stock that looks attractive from our contrarian-based methodology is Affymetrix (AFFX: scorecard, quote, chart) . The stock has been in a tight uptrend since mid-March. A look at a weekly chart reveals that the equity has actually been trending higher since mid-August of 2004. Despite its solid technical performance, there are signs of skepticism in its sentiment backdrop. Short sellers have made hefty bets against the security, as short interest accounts for more than 13 percent of its float. Financial analysts remain unimpressed as well. According to Zacks, there is one "buy" rating, five "hold" ratings, and one "sell" rating on AFFX, leaving plenty of room for upgrades or additional analyst coverage to boost the stock higher. Today, the stock is trading $1.35 higher to $53.58.

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Cyberonics is one stock going crazy today, apparently on no news. For those of you not familiar with CYBX (CYBX: scorecard, quote, chart) , it's a medical device company whose system is a pacemaker-like device implanted under the collarbone with a lead attached to the vagus nerve in the neck. The device delivers intermittent signals to the brain, dubbed vagus nerve stimulation (VNS), to control epileptic seizures. The signals can be programmed by the physician with a personal computer; patients can activate additional signals with a hand-held magnet if they feel a seizure coming on. The company is pursuing additional Food and Drug Administration (FDA) approval for VNS to be used to treat severe depression that does not respond to other therapies. The stock took a hit last week after it announced that it had received a letter from the Senate Finance Committee stating that the Committee is examining the F.D.A. panel's recommendation to approve VNS for treatment-resistant depression in adults. Today CYBX is more than eight percent higher. Puts and calls are unusually active with both seeing more than twice the normal volume at midday.


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Western Digital (WDC: scorecard, quote, chart) , which was once coined Western Critical due to poor performance, is continuing its winning ways in Thursday's session. The shares have been trending along its 10-day and 20-day moving averages since late April. With the stock achieving a new annual high in Thursday's session, the stock is pressing against levels not since October 2003. Our Gold scorecard currently ranks the stock a seven (out of ten).

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Internet security software provider VeriSign (VRSN: scorecard, quote, chart) has moved above the 30 level today on a five percent rally. The 30 level has provided technical resistance in March and April and it also represents the biggest call open interest for the June options series. Sentiment has become more bullish with the SOIR at 0.47 which ranks in the middle of the past year's readings, but the ratio is trending downward. A look at the analyst ratings shows 13 "buy" ratings, six "hold" ratings, and one "sell" rating.<

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