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Stocks moved lower Wednesday in the wake of a mediocre profit forecast from Cisco Systems (NASDAQ:CSCO) and a rise in crude-oil futures. The major equity averages endured moderate selling pressure throughout most of the morning, however a number of bellwether issues, such as Hewlett-Packard (NYSE:HPQ), Cigna (NYSE:CI) and Ebay (NASDAQ:EBAY) managed to achieve notable gains.

Our attention was focused on ImClone Systems (NASDAQ:IMCL) and 3M Company (NYSE:MMM), both of which retreated slightly in conjunction with the broader slump in equities, and Synaptics (NASDAQ:SYNA), which plunged further in the wake of Monday's downgrade by Bear Stearns. The moves in MMM and IMCL were favorable, but the slide in SYNA shares was the final straw for any remaining traders in the bullish spread.

Despite the sharp decline, the outcome should have been profitable if trading stops were employed. The initial credit in the spread was $0.45, thus a stop-loss order of up to $1.20 (extremely generous) on the short position could have produced a gain in the position as the FEB-25 puts are currently bid near $0.80. Most conservative investors would have exited the position Tuesday for a small profit, however we would be interested to hear the results (and the specific order/fill prices) of any plays that were closed today.

MCM Staff

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