Option Investor
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Patience is a virtue

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Six or seven months ago I received an e-mail from a subscriber regarding "gorilla trades." Where were they? How come we haven't had any call option trades that were "gorilla winners" like those found on 1999 and early 2000? Here's one I think could be a gorilla in the making, but it has and will require patience.

Vitesse Semiconductor - $0.50 and $1 box

Shares of VTSS rocketed grom the $20 to $39 level back in April when the NASDAQ caught fire short term. That nearly 100% gain came from a very small almost non-existent base. I like the technicals underway in shares of VTSS as this stock and perhaps the market has shown its hand. My thinking is if this stock can double in price from a double top buy signal at $20, then there's more potential in the stock currently from the bullish triangle pattern. With today's pullback taking place in the market, keep an eye on shares of VTSS near the recent buy signal at $19.50 as a good entry point. This stock would be high on my list for a LEAPS trader. If Merrill Lynch is right and we're at the bottom of the cycle for the semiconductors, then this is the type of technicals I'd be looking for. If a stock was able to gain nearly 100% out of a miniscule base and lack of sponsorship, I'm thinking the recent bullish triangle and broader base is truly the first signs of sponsorship beginning to build for the stock. Ideal time for a LEAPS trader or longer-term investor to be accumulating the stock.

Don't put all your eggs in the hands of a gorilla, but do look back at past technicals and find stocks that have given the bullish triangle pattern. Probabilities are that you will find some a few chimpanzees, but quite a few gorillas too.

Jeff Bailey


The Nasdaq-100 (AMEX:QQQ) is down 2.32 percent, and the selling is widespread. Only ten Nasdaq-100 stocks are in positive territory, and only two are up over 50 cents. Ciena is up $0.68, and Tech Data is up $1.42.

Nasdaq-100 Daily Chart

It looks like the triple Qs have finally found resistance at the 50-day moving average, much like they did at the beginning of July. The tracking stock is currently trying to hang on to support at $42.72, the 50 percent retracement bracket. Should that level be lost, stronger support can be found around the $40 area.

Jeffrey Canavan
Assistant Analyst

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