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Strategies & Market Trends : Ask DrBob
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To: Drbob512 who started this subject8/21/2000 3:13:56 PM
From: mike60613  Read Replies (2) of 100058
 
Option Guru: Buy Puts on RF Micro (RFMD) a.k.a. the mule

Shares of RF Micro Devices (RFMD - $71.19) lost 50%
since its
near-term high of $141 on June 6, 2000. The firm makes
and
markets radio frequency ICs used in cellular and PCS
wireless
products. Option expert Bernie Schaeffer sees the
beleaguered
stock dropping even further, and he recommends two
ways to
capitalize. Schaeffer's regression analysis shows that
shares
are unlikely to rebound any time soon, and his measure
of the
stock's relative strength has recorded a string of
lower
highs and lower lows since March 2000.

Option punters are optimistic, and that is a bearish
sign to
the contrarian Schaeffer. He sees significant overhead
call
resistance that could hamper any recovery attempts. RF
Micro's put/call ratio does not reflect the amount of
pessimism he says indicates a bottom in the stock.
Schaeffer
adds that RF Micro "appears to be overloved by Wall
Street,"
as eight of the 12 analysts covering the stock rate it
a
"strong buy" while the other four rate it a "buy." He
says
this leaves RF Micro shares vulnerable to downgrades.

Schaeffer recently recommended shorting RF Micro
Devices
shares as well as buying the September 80 put (RFZUP),
depending on risk tolerance.
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