Two Pullbacks Sing Opportunity

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News that Yahoo! (YHOO Quote) is rolling out its own monthly online music service at a significantly lower price than the competition sent shares of RealNetworks (RNWK Quote) and Napster (NAPS Quote) plunging this morning to $5.80 and $4.27, respectively.

We believe investors who want a short-term trade should consider taking a long position in these two stocks. (We aren't taking any action because we are fully invested.)

We view the respective 20% and 30% selloffs Wednesday morning in RealNetworks and Napster as overdone and believe Napster's earnings report after the close will drive shares of both companies 10% higher by the end of the week. Analysts expect the company to lose 62 cents a share on sales of $17 million. ...