Bernie Schaeffer's CNBC Picks
The following are the stocks recommended on this afternoon's "Taking Stock" segment on CNBC. The factors behind these recommendations are provided here as a supplement to that discussion.
E*Trade Group (EGRP):
EGRP closed today above both its 10-day and 20-day moving averages for the third consecutive day. The stock is also above its 20-week moving average.
The stock's weekly relative-strength measure versus the S&P 500 Index (SPX) is now above its 20-week moving average.
The AMEX Securities Broker/Dealer Index (XBD) is also in an uptrend, having closed above its short-term moving averages for three days in a row. EGRP is the top performing component of the XBD.
EGRP and other on-line brokers were recently featured in a major weekly financial publication as stocks to avoid. Such negative sentiment on an uptrending stock has bullish implications.
Hewlett-Packard (HWP):
HWP reported second-quarter earnings on May 17 that blew away Street expectations by eight cents per share, the company's fourth straight positive earnings surprise.
The stock is bouncing higher after consolidating toward its sharply ascending 10-week moving average, a trendline that has lifted the stock 32 percent higher since mid-April.
The equity's weekly relative-strength measure versus the SPX turned sharply higher in early April. This measure is currently trending near annual high levels.
On Monday, the PHLX Box Maker Index (BMX) broke above the 252 mark, the top level of a short-term trading range that had capped the index since mid-May. The BMX completed a successful test of this level today. This show of technical strength bodes well for index components like HWP.
Options speculators are expressing pessimism with additions to out-of-the-money puts. In particular, put open interest at the July 90 strike has more than doubled over the past five trading days.
Lucent Technologies (LU):
LU's last four quarterly earnings reports have come in ahead of Street expectations. Its most recent success came in April, when second-quarter earnings beat forecasts by two cents per share.
This week, LU broke above the top of a short-term trading range at 63 and today closed at an all-time high. The stock is in the midst of a solid uptrend on the weekly chart, with its 10-week and 20-week moving averages teaming up to contain all weekly closes since October.
LU's relative strength versus the SPX has been in a steady uptrend since early 1998. This measure reached an all-time high today.
LU is easily the most shorted stock on the NYSE at 102 million shares. With a short interest ratio of 13, a short-covering rally is a definite possibility.
Every market day, our research team finds two to eight picks such as these and presents them on bullish and bearish lists in our Schaeffer On Stocks service. Special trial subscriptions are available at
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