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by 10/16/2000 1:25 PM
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On Friday, a Market Observation noted Gateway's (GTW – 50.31) third-quarter earnings report and subsequent rally. This rally took GTW 21 percent higher, allowing the stock to clear its 20-day moving average for the first time since early September. However, our observation questioned this rally's staying power, as GTW continues to face resistance at its 20-month moving average.

Today, GTW has given back about one-fourth of Friday's gains, sloughing off 5.3 percent and dipping back below its 20-day moving average in the process. Over 1,000 calls have traded at both the October 45 and October 50 strikes. These are likely liquidations, as these positions expire on Friday. Speculators are perhaps trying to capitalize on GTW's recent run higher. <

by 10/16/2000 12:58 PM
Stocks quoted in this article:
Juniper Networks (JNPR – 239-3/16) manufactures Internet routers that help transmit data across computer networks. Today, JNPR is clobbering its peers in the AMEX Networking Index (NWX – 1121.0). In early afternoon trading, JNPR has risen almost five percent to notch an all-time high at 244-1/2. Meanwhile, the NWX is trading more than one percent in the red.

This type of relative-strength effort is typical for JNPR, which has been outperforming its peer group since the stock's inception in July 1999. In fact, the security's daily relative-strength measure has rallied to a new peak over the past week's trading.

On the options front, JNPR is seeing moderate activity at a number of front-month, in-the-money calls. <

by 10/16/2000 12:31 PM
Stocks quoted in this article:
Humana (HUM – 11) is bouncing higher today after last week's test of its 20-day moving average. Since hitting a multi-year low in mid-June, the stock has advanced by 130 percent with the assistance of the key 20-day trendline.

Optimism on HUM is at an extreme, as Schaeffer's put/call open interest ratio (SOIR) on the stock is at an annual low of 0.11. On Friday, open interest on the November 10 and 12-1/2 calls increased by 3,500 and 1,650 contracts, respectively. The November 12-1/2 strike is now the site of peak call open interest of 8,777 contracts and, as such, could serve as potential options-related resistance to any near-term rally attempts.

by 10/16/2000 12:30 PM
Stocks quoted in this article:
Since peaking on October 5, Rational Software (RATL – 52-1/2) has dropped 25 percent. However, support at the stock's 20-week moving average continues to hold.

Early October also marked a peak in pessimism on RATL. Its Schaeffer's put/call open interest ratio (SOIR) dropped from an annual high of 1.14 on October 4 to today's reading of 0.77. For more information on SOIR, please visit Schaeffer's Daily Sentiment.

Contributing to this falling SOIR was a 4,900-contract increase to open interest on the January 35 call. This was one of the most-active calls on the CBOE on Friday. <

by 10/16/2000 11:22 AM
Stocks quoted in this article:
Brokerage titan Merrill Lynch (MER – 57-3/16) is castigating some of its peers today, announcing a series of earnings estimate reductions shortly before the open. The firm reduced its 2000 and 2001 earnings estimates for Goldman Sachs Group (GS – 100-1/4), Lehman Brothers Holdings (LEH – 118-7/8), and Morgan Stanley Dean Witter (MWD – 77-5/16). Additionally, MER cut its earnings estimate for Citigroup (C – 49-11/16) for 2001 only.

MER's 2000 earnings estimate for GS was reduced from $6.45 to $6.20, while its 2001 estimate fell from $6.65 to $6.30. For LEH, MER trimmed its 2000 estimates from $13.10 to $12.65, and 2001 earnings are now expected at $12.05 rather than $12.50. MWD saw its 2000 earnings expectations fall from $5.10 to $4.95, while 2001 earnings were reduced to $4.70 from $4.80. For C, MER nudged its expectations lower from $3.10 to $3.05 (all numbers indicated are on a per-share, full-year basis).

All four downgraded names are trading lower today, albeit slightly.

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