Option Investor

Daily Newsletter, Tuesday, 12/29/1998

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The Option Investor Newsletter         Tuesday  12-29-98  
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Also provided as a service to The Online Investor Advantage

Published three times weekly, Sunday, Tuesday, Thursday evenings.
        12-29-98         High     Low     Volume   Advances Decline
DOW     9320.98 + 94.23 9334.88  9187.67  588,036k  1,752   1,233
Nasdaq  2181.70 +  1.40 2186.15  2161.83  918,249k  2,171   2,007 
S&P-100  613.79 +  5.78  614.48   604.74   Totals   3,075   4,045
S&P-500 1241.81 + 16.32 1241.86  1220.78            43.2%   56.8%
$RUT     410.41 +  2.13  410.41   406.37
$TRAN   3066.39 + 25.56 3075.61  3032.53
VIX       21.93 -   .88   24.19    21.83
Put/Call Ratio      .51

Santa Clause Rally ! Ho - Ho - Ho !!  

The Santa Claus rally caught fire today and the Dow soared to within
50 points of a new all time high. The Dow opened lower again today
but waiting buyers bought the dip again and it never lloked back.

The Nasdaq suffered from the Internet stock busy signal today as
the normal big gainers gave back some of the gains from yesterday.
When AMZN, YHOO and AOL were all up between $20-30 dollars on Monday
did anybody really not expect a pullback today? Yahoo gave back the 
least with only -5.50 from the +28.38 on Monday. AMZN dropped -19.63
from the +27.13 yesterday. AOL (not a Nasdaq) only lost -2.63 from the
+20.63 gain. In spite of the poor showing by the Nasdaq today, +1.47,
the advancers squeaked by decliners 2181 to 2018. By closing positive
the Nasdaq squeeked out a fifth record close in the last seven 
trading sessions.

The S&P-500 notched another record close at 1241.81. The technicals
on all the major averages are amazing year over year but even more
incredible if you measure them from the October 8th lows. The Dow
is the laggard here with a +26% gain compared with the S&P and RUT
both gaining +33% since October.  

The biggest gainers today were the drugs and retailers. Pfizer (PFE)
and Bristol Meyers (BMY) lead the drugs with +5.19 and +4.94 followed
by MRK +3.06, WLA +2.19, SGP +2.38, LLY +2.88, JNJ +3.19.

Retailers Gap (GPS) +5.13, Dayton Hudson +2.69, PSS +2.88, WMT +2.06,
JCP +1.19, were up strong on news of stronger consumer spending.

Oil service stocks took yet another hit after Haliburton (HAL) issued
a profit warning. HAL dropped -2.56 on the news. These stocks are so
low the PE is now single digits and "value" investors are starting
to move in slowly. RIG PE=9, DO 9, RON 8, ESV 4, TDW 4, HP 9.

Adding to the overall bullishness today was Ralph Acomporaspan on
CNBC saying things like Dow 11,500 is possible by 1999 year end.
Of course there were enough caveats in the interview to allow a
close anywhere between 8600 and 11,500 to be possible. His current
"reasonable" target is between 9800-9900. 

The market is very bullish. In fact it is definitely overly bullish.
The Vix closed at 21.93 and that is the low end of the normal range.
The hig of 60 in October is the other end of the spectrum. If you
look at a chart on the Vix you will see an exact pattern repeating
from Dec/Jan of 1997. If the pattern holds true we could have an
incredible Jan/Feb. In Jan/Feb/Mar 1998 the Dow went from 7500 to 
over 9000 in less than three months. The Vix pattern appears to be
pointing to a repeat. Yes, I know, many other factors actually
move the market and the Vix is only a reflection of the conditions
but it is a reliable indicator.

The reason for the bullishness is simply the inflow of cash from
baby boomers and the gen-xers. The long running bull market has
created a wealth effect from investors getting back to back 25%
or better returns each year. This ripple down investing along with
a constantly growing economy just keeps the money flowing. For the
last 4 weeks a net inflow of $12 billion to mutual funds has powered
the current rally. The 401k and IRA contributions hit high gear
next month and the market is sure to profit from it.

S&P futures have been down almost -1.00 since the close but this 
is normal after the big day. They are currently trending up and 
are now up almost +1.00. The outlook for Friday is good.

With falling volume expected the next two days any moves will 
be exaggerated. The current eight day streak for the Dow is the 
longest string of consecutive positive days in two years. This 
means we are due for a serious profit taking day soon. The Dow 
is now up almost +550 points in eight sessions so be careful!

Good Luck

Jim Brown


Another mixed bag to report. While the broader market was down
yesterday the Internets were soaring. Good news for several plays
but I also got bit by the "stop loss" bug late yesterday.

I had several things happening yesterday so I set stop losses on
all my open positions after the Dow turned weak at midday. When
I checked back just before the close it was an ugly sight. The
sharp drop had been just enough to stop me out of all my remaining 
open positions for losses. I was not a happy camper in spite of a 
sizeable morning profit. In retrospect it saved me from a steeper
loss today with the exception of my OEX calls. With IBM, MSFT, RMBS
all down today, I would have been cussing myself from the open. 
Instead I viewed the rally today from strictly an observer position
and not a participant. I will be leaving town on vacation tomorrow
so I did not start any new positions. I am really looking forward
to next week.

All options were bought on the dip at the close on Dec-24th
and sold or stopped out on Monday.

Qty Stock Option      Symbol Cost    Sold    Profit/loss

40 AOL  JAN-130 CALLS AOE-AF $14.38  $31.00  $66,480
40 IBM  JAN-180 CALLS IBM-AP $10.19  $11.25  $ 4,240
10 SCH  JAN-50  CALLS SCH-AJ $11.56  $16.88  $ 5,320
10 SCH  JAN-50  CALLS SCH-AJ $11.56  $17.00  $ 5,440
10 BRCM JAN-140 CALLS RCQ-AB $15.50  $25.00  $ 9,500
20 NEON JAN-40  CALLS QNO-AH $ 5.81  $ 4.38  < 2,860> Stopped out
20 NEON JAN-40  CALLS QNO-AH $ 5.81  $ 4.25  < 3,120> Stopped out
20 MSFT JAN-140 CALLS MSQ-AH $ 6.75  $ 6.00  < 1,500> Stopped out
10 RMBS JAN-90  CALLS BNQ-AR $14.13  $12.00  < 2,130> Stopped out
20 OEX  JAN-610 CALLS OEY-AB $11.25  $ 9.25  < 4,000> Stopped out
                              Total Profit   $77,370

Current open option positions: None, all cash.


A word about taxes.

Of course, at this time of year, a lot of investors continually 
ask about taxes.  " How are gains and loses figured in on my taxes?"
"What tax bracket am I in?"  These are questions that every investor
should be asking and taking action on right now if you haven't done
so already.  There are only a few days left in 1998, and investors
should take advantage of portfolio gains and loses to lower their
tax liability for the upcoming months.

First the tax brackets.
For individuals:
$         0----- $  25,350        15%
     25,350-----    61,400        28%
     61,400-----   128,100        31%
    128,100-----   278,450        36%
    278,450-----   .........            39.6%

Married and Filing Jointly and Surviving Spouses:
$         0------$  42,350        15%
     42,350------  102,300        28%
    102,300-----   155,950        31%	
    155,950-----   278,450        36%
    278,450-----      ............        39.6% 

As a general rule of thumb, an individual can use short term 
losses (losses incurred within 12 months ) to offset short term 
gains(gains incurred within 12 months) and can deduct up to a 
$3,000.00 net loss per year.  Any loss greater than $3,000.00 
within a 12 month period of time can be carried forward to the 
next year (1999) to offset any short term gains in that year, 
and if necessary losses can be brought forward to future years.
Hopefully that is not the case with any of us.

Generally, for sales of long term assets after May 6, 1997, the 
maximum capital gains rate is 20% (10% for individuals in the 15%
tax bracket).  If you have held and asset for more than 5 years
and sell after December 31, 2000, a special lower rate of 18% is
used (8% for individuals in the 15% tax bracket).

A very commonly asked question is " How are options that expire 
worthless taxed? If an options expires worthless (lapses), the 
loss is figured by calculating the taxpayers cost basis in the 
option and is used in the tax year that it expires.

Of course, always consult your tax adviser on any and all 
questions concerning taxes on any asset.

Have a very profitable New Year!

Matt Ford
J. Michael-Patrick,  L.L.C.   
Phone: 1-888-432-5671 or 314-725-7275 
Email: jmf610@freewwweb.com 

Market Posture
As of Market Close ­ Tuesday, December 29, 1998 

              Major Support
Broad Market     /Resistance Last Posture/Since Alert

DOW Industrials 8,600 9,400 9,321 Neutral 11.24 
SPX S&P 500     1,140 1,190 1,242 BULLISH 12.21 
OEX S&P 100       560   590   614 BULLISH 12.21 
RUT Russell2000   385   405   410 BULLISH 12.24 

NDX NASD 100    1,640 1,740 1,823 BULLISH 12.18 
MSH High Tech     770   790   871 BULLISH 12.18 

              Major Support
Technology       /Resistance Last Posture/Since Alert
XCI Hardware      740   750   804 BULLISH 12.18 
CWX Software      560   615   622 BULLISH 12.29 * 
SOX Semiconductor 325   360   339 Neutral 11.24 
NWX Networking    360   400   393 Neutral 11.24 
INX Internet      300   340   416 Neutral 12.29 * 

              Major Support
Financial        /Resistance Last Posture/Since Alert
BIX Banking       610   680   673 Neutral 12.17 
XBD Brokerage     415   550   585 BULLISH 12.24 
IUX Insurance     555   620   602 Neutral 12.17 

              Major Support
Other            /Resistance Last Posture/Since Alert
RLX Retail        770   780   855 BULLISH 12.18 
DRG Drug          730   765   782 BULLISH 12.29 * 
HCX Healthcare    730   760   772 BULLISH 12.29 * 
XAL Airline       270   300   294 Neutral 12.17 
OIX Oil & Gas     250   260   250 BEARISH 12.3 

Posture Alert

In the midst of the S&P Holiday rally, we remain Bullish
across broad market indices including the S&P 100 (OEX)
and S&P 500 (SPX). Each of these sectors is setting new

We have also turned Bullish on the Software, Drug and Healthcare
sectors after breaking out to into new territory. Separately, we have
turned Neutral on the red hot Internet sector following our short-term
reversal signal today (12/29).

A detailed description of our Market Posture and its
applications can be found on OIšs website at:


MSFT $140.50 -$1.88 (-$1.25)  Lackluster trading today and yesterday
on low volume.  No news to speak of either.  Don't be lulled to sleep.
MSFT is giving us a great buying opportunity.  They are entering stock
split range and the anti-trust case against MSFT is losing steam.
Good news and volume will move MSFT up rapidly as traders return from 
the Holidays.  Could still see choppiness until the new year--always 
confirm direction before playing.

AOL $154.06 -$3.19 (+$17.43)  Internets were whacked a bit today after
stellar run yesterday - just a bit of profit taking on slightly higher
volume in light of yesterday's 20 point gain!  15 minutes after the 
close, AOL pared its loss to under $3.00.  AOL 's volume coming from 
its addition to the S&P 500 this Thursday, thus all index funds need 
to add AOL to the portfolio for accurate reflection.  Of course, this 
drives the price up.  No real year-end selling on the Internet stocks 
and AOL should be a real winner in 1999.  Still susceptible to some 
market jostles this Holiday week.  Again, confirm upward movement 
before starting a new play.

CSCO $93.50 -$.69 (-$.69) WOW!  Just kidding.  A slow day with no 
real news yet this week on 1/2 normal daily volume.  J.P. Morgan 
picked CSCO as a top stock in its industry for 1999.  We still like 
CSCO and expect it to move up when traders return from the Holidays 
to begin buying again.  Slow days make a good buying opportunity, so 
get ready for the new year.  Even for the strong plays, exercise 
caution on the before entering.

WCOM $74.25 +$2.31 (+$4.07)  Nice strength from the long distance group
this week as they gain in the wake of bad news in court and FTC hearings
for local phone companies - good news for long distance, data, internet,
etc.  WCOM has performed nicely  and should continue to show strength well
into the new year.  Bandwidth is the name of the game for the new milleniem
and WCOM (and AT&T) have it.  As always, confirm the direction when making
any play.  

T $78.81 +$4.19 (+$4.12)  AT&T'S plan to cut 18,000 jobs is nearly 
complete a year ahead of schedule (WSJ) and courts continue to hear 
long distance company arguments that Baby-bells (SBC and Ameritech) 
have not opened their markets to local phone competition.  Local 
carriers need to beef-up to compete in the long distance market and, 
thanks to the courts and FTC, are having a hard time doing so--good 
news for the long distance guys like AT&T.  AT&T jumped big today on 
heavy volume signaling lots of buyers.  Still looking strong.  Be wary
of any potential pullback tomorrow if the Dow decides to turn red.

EGGS $25.19 -$0.31 (+$1.34)  EGGS took a rest today, not even much 
profit taking on low volume following yesterday's great Internet 
performance (EGGS too).  EGGS has made nice steady gains since we 
picked it 10 days ago - already up 13%.  Technicals still looking 
good.  The Holidays were good for the Internet.  EGGS should resume 
upward when Internets have their next big day (a few per week, that's 
all we ask).  Still an Internet.  Trade with caution using stop-limit 

CMGI $126.50 -5.00 (+3.19) The news wires are particularly quiet
this week.  We have no, new news since the last update on CMGI.  As 
previously mentioned, there was a lot of profit already in the stock 
and that we should be attentive for a pullback and it happened today.
Sector wide profit taking was prevalent on the net today and CMGI was 
not left out.  Earlier today CMGI dropped to $123,  two points below 
the support of $125, offering a few brave souls an opportunity to jump 
on board.  CMGI closed up over the $125 support level to $126.50. The 
split date is only 8 business days away (Monday, Jan. 11th).  Remember 
we don't recommend holding over the split date.
IBM $187.125 -2.125 (+2.13) IBM succumbed to some profit taking 
today as selective stocks witnessed some of their gains in the past 
week reallocated.  IBM gapped down at $188.63 and dropped to a low 
of $187 but gained some of it back due to what the street says was 
a suspected program buy today at 11:20 this morning. Other than the 
most recent new price target from John Jones of Salomon Smith Barney, 
raising their price target from $180 to a range of $210 to $215.  
No additional brokers have as of yet adjusted their price targets 
accordingly. There is still a chance other brokers may or may not 
follow suit, to the upside.  But with continued momentum and a strong 
finish for the year, IBM could finish with a nice run past $190.

EMC $82.06 +.06 (+.44) EMC is still in a holding pattern.  There 
was another glowing customer testimonial released yesterday.  Thomson 
Consumer Electronics, the number one US manufacturer of TV's and 
VCR's under the brand names of RCA, GE and ProScan, implemented an 
EMC storage system in its engineering and product development group.  
Thomson indicated that the information sharing that was possible with 
the EMC system has resulted in reduced time to market new products, 
higher profitability, and an overall competitive advantage.  We are 
just waiting for EMC to break out of its current basing pattern.

HD $61.56 +2.19 (+1.56) HD set a new high today and closed near the 
high.  In all of the year end reviews and forecasts for next year, 
we see HD's name mentioned a lot as a good long term holding.  HD 
announced today that homeowners can get personalized home and garden 
tips from the HD website by signing up for it HomeMinder service.  
HomeMinder is a free Internet based reminder service that delivers 
bi-weekly home improvement tips to the customers email address. 

JBL $70.88 -.94 (-.69) JBL started to take off on Monday, but stalled 
and then traded down the rest of Monday and today.  Remember that 
JBL's moves have been mirroring those of Solectron, and Solectron 
gets added to the S&P 500 after the close of business tomorrow.  One 
can never be sure, but there is a good chance that there is going to 
be a lot of buying on Solectron tomorrow.  Wednesday may be the day 
to play JBL.

AIG $99.31 +3.13 (+.38) AIG traded down on Monday to its 10 day 
moving average where it bounced and traded up pretty nicely today.  
We believe that if we get some nice, strong market moves, AIG can 
take out the resistance at $100 to $102.50.  Remember that AIG is 
acquiring SAI, and SAI has cleared out all resistance on its chart.  
So once AIG is able to do the same, it could really take off.  Until 
then I would just keep it on the watch list.  We haven't had any news 
on AIG or its sector.

NOKA $123.00 -1.81 (-.63) After setting yet another new intra-day
high yesterday of 125.44, Nokia took a day of rest today, closing
down 1.81 at 123.00. Many of the ADRs drifted today as the year-
end approaches and one source claimed that people are waiting to
see what happens when the Euro-conversion takes place. Nokia
transferred approximately 32 million shares (5.3%) from a 
Netherlands subsidiary to a Finnish subsidiary, a move that will
allow it to buy back shares in the spring. This stock has been on 
a long climb upward, and should continue after a brief rest. We
are playing this one as a possible split as well as a momentum

WMT $81.94 +2.06 (+.81) Yesterday Wal-Mart had the post Christmas
blues, losing a couple dollars in the first hour of trading.
Today, however, the stock dipped only a bit at the open before
gaining back everything it gave up yesterday and then some. It
set a new intra-day high along the way of 82.75 and closed at a
new high of 81.94. Tom Tashijian, of Nationsbanc Montgomery
Securities said, "in eight of the last ten years, the first 
quarter has been the best time to own retail stocks." WMT says
December sales have exceeded plans and it is comfortable with
earnings. In the second annual Fortune Magazine list of 100 Best
companies to work for in America (to be published in early Jan.),
Wal-Mart is #66. A gradual, but steady climber, Wal-Mart is also
a split candidate.

BRCM $123.25 -5.00 (+2.75) The Internet stocks were flying high 
yesterday, and Broadcom, which makes super-fast communication 
chips for cable modems and other internet access devices, flew
with the internet stocks.  Up 7.75 to close at 128.25 on Monday,
it had been as high as 135.00 (+14.50), a new intra-day high.
Today the stock gave back much of yesterday's gains, but is still
up 2.75 since Christmas. In response to a reader's question, Steve
Harmon, of Internet.com said that he thinks Intel would make a
perfect BRCM acquirer. "Intel is the king of PC chips. If Broadcom
is the princess of broadband chips, maybe that's a Cinderella
story combo in the making." With a market cap of $6 billion on a
company that has generated only $150 million in the past year,
this is a stock that traders love to short, but the market seems
to see great potential in BRCM and its cutting-edge technology,
and the shorts keep getting squeezed. When they cover, the price
goes even higher. Try to buy on dips.

TWX $62.00 +1.56 (-.38) After its record close the day before 
Christmas, Time Warner took a breather yesterday. Today it gained
back all but .38 of yesterday's 1.94 loss. The Christmas weekend
was the biggest three-day box office of all time for the movie 
industry. Although some analysts think there could be tricky
problems ahead for the entertainment business, TWX and Viacom 
Inc. are experiencing a boom in business that looks like it will 
continue well into 1999. Fred Moran at Furman Selz says these 2 
companies produce about 15% cash flow driven by robust advertising
demand for cable network programming. Chris Dixon, at Paine
Webber, says the industry is going to have a record Hollywood box
office and there's been a resurgance in the music industry.
Analysts expect TWX's earnings to grow 13-15% next year. Fred
Moran sees stock price gains of 30% next year, but Larry
Petrella, at Lehman Brothers, questions how far they can go.
Short term, the stock still looks good.

SLR $87.50 +2.75 (+3.00) SLR has continued its up-trend this week.
On Monday, SLR traded as high as $90.63 before falling to a close
of $84.75. SLR is being added to the S&P 500 and many of our 
readers wonder how this effects the stock. First of all, there are
dozens of funds out there that are considered index funds. Since 
the S&P 500 is a weighted index, each stocks market cap determines
the stocks influence on the index. When companies like SLR and AOL
get added, these index funds must add the proper percentage of the
new stock. The interesting thing with SLR is that it accounts for
only .0011% of the index. That is 1/10th of 1%. Though this doesn't
seem like much, a fund like the Vanguard Index 500 would need to
buy $76.5 million worth of shares. This is just one fund. The other
interesting thing is that at the end of December, institutions
already held 88.5% of the shares outstanding. This means that unless
a lot of institutions sell their shares, there will be few shares 
left for the index fund managers to buy, thus the price goes up. The
question is how long will this last. We have seen quite a run in SLR,
but it still seems poised to continue higher. SLR is not officially
added to the S&P 500 until after business close on December 31, 1998.

YHOO $270.00 -5.50 (+22.87) It is always strange when a stock closes
down $5.50 on the day, but is still up close to $23.00 for the week.
YHOO dropped with the rest of the Internets today. We notice that
of the 33 internet stocks we track, only 3 closed positive with a 
few near break-even. YHOO should continue to trend higher as 
investors see a stock split eminent and with the possibilities 
that YHOO might be the next Internet to be added to the S&P 500.
YHOO has a 52-week high of $286.00, which was its intraday high
on Monday. YHOO is in the process of trying to settle a dispute
with Shopping.com.  YHOO alleges that Shopping.com was in breach of
contract. This shouldn't amount to a lot, just a matter of YHOO and
Shopping.com working out the details of the breach.

LXK $93.94 +.31 (+.71) LXK has started to consolidate a little
after its nice move up the last few weeks. Both Monday and Tuesday
saw LXK get as high as $95.13 only to fade late in the day with 
marginal gains. LXK's 10-dma($92.63) has held as support in most 
cases in the last few months. Wait for a bounce off this level or
a break above $95.25 before initiating new plays. LXK continues to
be a split candidate, most likely with earnings in January. 

KSS $60.06 +1.12 (+2.93) KSS has continued to move on up. It has
closed up 10 of the last 11 trading days. KSS is benefiting from 
the holiday shopping. An analyst with Stein Roe & Farnham sent 
an update stating the though the 4th quarter of 1998 has not been 
extraordinary as far as earnings, he sees the outlook for 1999 as 
positive. He says that earnings in the 1st quarter might still be
dragging, but should increase starting in the 2nd quarter.  KSS is
recognized as on of the best department stores.  KSS is well above
all moving averages. A pullback would be a good buying opportunity.
Numbers for December sales should be out in the next week.

LGTO $62.38 –1.37 (+.13) LGTO traded as high as $65.13 today, but 
succumbed to profit taking and finished in the red. LGTO announced
yesterday that they will expand their Legato SmartMedia Developer's 
Consortium to include application vendors; SmartMedia advantages will
now be offered to independent software vendors. LGTO is being added 
to the MidCap 400 Index at the end of the year. Though this doesn't 
supply as much buying pressure as the S&P 500 additions, it will 
definitely supply some added buying.

SCI $56.69 -.44 (-1.06) SCI has been in a consolidation the last 
few trading days. The last two days have seen a trading range of one
dollar. Volume has been on the very light side. Look for a break 
above $58.00 before initiating new plays. SCI has a short interest
ratio of 10. This means it would take 10 trading days at normal 
volume to cover all the shorts. A move up could result in a classic
short squeeze.

LOW $51.13 +.38 (+.88) LOW has continued to trend higher, even if
by baby steps. LOW has traded higher in 9 of the last 10 trading 
days with the only loss being $.06 on Christmas eve. LOW is bene-
fitting from the strong housing market.  When housing numbers come in
high, then that usually translates to sells for companies like LOW's.
LOW has a 52-week high of $52.94 reached intraday on Monday. 

INKT $127.00 –10.38 (-9.00) INKT was going to be dropped for 
imitation of an internet stock, but after the close today, INKT 
announced a 2-1 stock split.  This will take place on January 27th.
Though most Internet stocks suffered today, INKT reacted a lot worse.
This stock split should send INKT up like many other Internet stocks
have. The way to play this is to wait for an intraday pullback 
before initiating new play. INKT will most likely gap up tomorrow.

ATI $69.00 +1.50 (+1.12) ATI had a nice day, trading as high as
$69.50. Yesterday ATI reached a new 52-week high of $69.25, only too
have it eclipsed by .25 today. ATI has no new news to speak of. 
ATI has many commercials out there promoting their cellular service.
The cellar industry is a booming field. ATI has a consensus future
growth rate of 32.85%. We apologize for the misinformation listed
under ATI as news on Sunday.

MYG $64.38 +1.88 (+2.63)  In the past nine trading days, Maytag has 
popped up $6.25.  It even set another all-time high in intraday 
trading at $64.50 on Tuesday.  We love this stock.  However, some 
consolidation might be around the corner.  Whenever a stock moves up 
for that many consecutive days, slight profit taking could drop the 
stock back a bit before the next run.  Remember the cycles: 
"3 up, 1 down,"  "5 up, 2 down,"  "7 up, 2 down," etc.   Consider
waiting for a slight pullback before initiating new plays.  It remains 
a split candidate since it had previously split at levels like these 
back in the '80s. 

AMZN $332.31 -19.63 (+7.50)  On Monday, Amazon shot up $27.13 on 
reports of strong online retail sales over the Christmas holidays.  
It set yet another all-time high at $361.88.  "This holiday season 
marks the year that online retailing moved from an interesting 
consumer experiment to an accepted retail alternative," said David 
Pecaut, a senior vice president at the Boston Consulting Group.  
Profit taking ensued on Tuesday and Amazon fell back -$19.63.  But, 
later in the evening after the market closed, CNBC broadcasted some 
interesting statements about Amazon.  Bob Sullivan from MSNBC.COM 
said that some colleagues seem to think that Amazon should have 
incredible revenue reports.  Bob said that one analyst believes that 
Amazon will beat an estimate of $198 million in revenues by as much 
as 50% as a result of the increased online holiday shopping.  Amazon 
will announce their earnings on Jan 22nd.  In other news,  Anderson
Computers/Tidalwave Corp. announced that it has become a registered 
associate of Amazon.  Remember, there are only two and a half days 
of trading left until Amazon splits after the bell on Monday Jan. 4th.  
As always, you have to make your own decision but we never recommend 
holding over the actual split.  Too many times the average stock 
goes down the day of or the day after a split.  But we admit, AMZN
is anything but an average stock.

SPLS $44.13 +1.06 (-1.06)  Last week during the Christmas holidays, 
Staples reached an all-time high in intraday trading of $46.19.  The 
profit taking that followed on Monday is typical of a stock consolidating 
its gains.  After some rough trading Tuesday morning, Staples managed 
to claw its way back up to finish at a +$1.06 for the day.  Hopefully, 
Staples is now ready to venture higher again.  Don't forget, it has a 
3:2 spilt coming on Jan. 28th.  No new news. 

SUNW $84.31 -0.69 (+1.00)  Sun Microsystems chalked up a nice gain 
on Monday by adding +$1.69.  On Tuesday, it gave back -$0.69 from 
investors taking some profits.  Both days, SUNM reached the same 
intraday high at $85.06.  Looks like we have a short term resistance 
level.  In the news, "Sun Microsystems is supporting a legacy 
migration marketing program from Informix" which provides business 
users with another way of upgrading their computer systems.(-Newsbytes)  
Wait for momentum to swing back upwards before playing this possible 
splitter.  SUNW posts their earnings in the middle of January which 
could pose as a nice time to announce a 2:1 stock split.   

If you like the results you have been receiving we 
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may 
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card server or you may simply send an email to


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or you may call us at 303-797-0200 and give us the 
information over the phone.

You may also fax the information to: 303-797-1333

Please see the disclaimer on our website.

The Option Investor Newsletter         Tuesday  12-29-98  
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


NEON $41.63 -.38 (-2.00) NEON tried to bust through the $45 level 
at the open on Monday, but couldn't quite do it.  It is interesting 
to observe on daily charts how resistance levels work and how strong 
they can be.  NEON traded down the rest of the day on Monday and 
traded pretty flat today.  We need to get some news on NEON to propel 
it through the $45 level.  Until then we are going to drop them as a 
pick.  In the meantime, if you want to trade it between $40 and $45, 
it seems to bounce around in that area pretty regularly.

TXN  $84.00 -1.25 (-1.88) Texas Instruments stock spiked twice 
yesterday, but couldn't seem to get past 88.00. Shortly after 
1:00, it headed south and closed down .53 on the day. Today TXN 
slid lower again and we are afraid that there may not be much 
upside left in the near term. TXN seems to climb for a while, then
pull back for a few days before climbing a little higher and 
pulling back again. This may be just another cyclical pullback,
but with many of the other chips are off as well, we are going to
drop it.

INTC $121.06 -1.06 (-3.94) Intel saw a jump and a new high 
following Tom Kurlak's upgrade last week, but since he was just 
about the last remaining Intel "bear", there is now no one left to
issue a new upgrade or a raised price target. We are that afraid 
that all the good news and previous upgrades may now already be in 
the price of the stock. Intel's only recent news was its intent to
sell its holdings in Inktomi and CNET. With shares of INTC down
for two consecutive trading days (and it looking like it might 
have topped), we are dropping Intel.

Please view this in COURIER 10 font for alignment

Index	Last	Tue	Week	Comments	
Dow	9320.98	94.23	102.99	 8 Days in a Row!!	
Nasdq	2181.77	1.47	18.74	New record	
$OEX	613.79	5.78	4.88		
$SPX	1241.81	16.32	15.54	New record	
$RUT	410.41	2.13	4.85		
$TRAN	3066.39	25.56	 		
Stock	Price	Tue	Week		
YHOO	270.00	-5.50	22.88	Holding strong with new highs	
AOL	154.63	-2.63	18.00	Added to the S&P 500 after 12/31	
AMZN	332.31	-19.63	7.50	Great expectations for earnings	
T	79.00	4.33	4.77	Blasting off to new highs	
CMGI	126.50	-5.00	4.63	Only 8 trading days before split	
WCOM	74.25	2.31	4.12	Another telecom explosion	
SLR	87.50	2.75	3.00	Added to the S&P 500 after 12/31	
BRCM	123.25	-5.00	2.75	Huge Intraday Monday	
MYG	64.38	1.88	2.63	The marathon stock	
SWY	61.06	0.75	1.88	New pick and split candidate	
HD	61.56	2.19	1.56	Another long distance runner	
EGGS	25.19	-0.31	1.44	Steady moves for an Internet	
KSS	60.06	1.13	1.38	December sales #s out soon	
ATI	69.00	1.50	1.12	More new highs	
SUNW	84.31	-0.69	1.00	Overhead resistance $85	
LOW	51.13	0.38	0.88	Higher home sales	
WMT	81.94	2.06	0.81	Time for retail stocks	
LXK	93.94	0.31	0.69	Consolidating	
EMC	82.06	0.06	0.44	 Ditto	
AIG	99.31	3.13	0.38	Look for Dow to Move	
LGTO	62.38	-1.38	0.12	Consolidating	
TWX	62.00	1.56	-0.38	Best year for Movies	
NOK/A	123.00	-1.81	-0.62	Time to buy on the Dip	
JBL	70.88	-0.94	-0.69	Resisting the Semi's turnover	
CSCO	93.50	-0.69	-0.69	Buy on the dip	
IBM	187.13	-2.13	-0.82	Buy on the dip	
SPLS	44.13	1.06	-1.07	Splits 3:2 on Jan 28th	
SCI	56.69	-0.44	-1.07	High short interest	
MSFT	140.50	-1.88	-1.25	Buying opportunity	
TXN	84.00	-1.25	-1.88	..Dropped..	
NEON	41.63	-0.38	-2.01	..Dropped..	
INTC	121.06	-1.06	-3.94	..Dropped..	
INKT	127.00	-10.38	-9.00	Announced 2:1 split Today	

SWY - Safeway Stores $61.06 +.75 (+1.87 for the week so far) 

Safeway is one of the largest food retailers in the nation.  Only
Kroger and Wal-Mart are larger.  Safeway has approximately 1,400
stores concentrated in the western areas of the US and Canada. 
Two of Safeways's largest possessions are the Vons Companies and
Casa Ley, two large supermarket chains.  Safeway also manufactures
and sells private-label merchandise.  Safeway is continually
building bigger stores and upgrading their older possessions.  

After spending a couple of weeks basing between $52 and $53, SWY
finally managed to break free and has been in breakout mode ever
since.  Unfortunately, breakout mode for SWY appears a little 
subdued compared to some of the other stocks we are playing.  But,
if you are looking for another conservative play, SWY's chart is
starting to look like MYG's who has had a great run.  Just today, 
several analysts were reported on CNBC as saying that the Grocery 
Industry is no longer acting like a Defensive Industry, but more 
like a Growth Industry.  With this in mind we are adding SWY as a 
new play. 

News has been a little sparse for the grocer but it is quickly 
approaching split territory.  They last split in January of 1998.
They announced a 2:1 at $65 and reached $70 by 2/25/98 before the
split occurred. They currently have 1.5 bln shares authorized with
546 mln outstanding.  That is plenty of room for a split.

BUY CALL JAN-55*SWY-AK OI= 549 at $6.50 SL=4.75, ITM
BUY CALL JAN-60 SWY-AL OI= 359 at $2.56 SL=1.25
BUY CALL FEB-60 SWY-BL OI=  40 at $4.13 SL=2.50
BUY CALL MAR-60*SWY-CL OI=1194 at $5.00 SL=3.25

Picked on Dec. 29th at $61.06           PE = 40
Change since picked   +$ 0.00           52 week low = $29.40
Analysts Ratings    7-4-2-0-0           52 week high= $61.38
Last earnings on 09/98 est= .37  actual= .38 surprise +2.7%
Next earnings on 01-28 est= .48  versus= .43 
Chart = http://quote.yahoo.com/q?s=SWY&d=3m

LU – Lucent Technologies, Inc. $112.06 +.88 (+4.56)

LU is the leading US producer of telecom equipment and software. Their 
products range from telephones to switching equipment to wireless 
networks. Lucent is also a global leader in digital signal processors 
and telecom power systems. 

Here we go again. LU has become a play again. A few days after we 
dropped them last time, they shot up above $100 which we felt was
needed before a new play would be established. LU is a definite
stock split candidate, most likely with earnings in January.  We
show earnings being on January 22nd. LU reached a new 52-week high
today of $113.88. LU is a historic strong performer once it goes
and it looks like it is ready. Ideally, wait for a pullback and then
jump on for the ride.  This is primarily a split/momentum play.

LU continues to announced agreements with many different companies 
and countries. Lucent Technologies and First Data Corporation (FDC) 
today announced an agreement for FDC to use Visual Insights data 
visualization software to help clients better use their bankcard 
data. LU has numerous news items a day. 

- remember, we suggest waiting for the dip -
BUY CALL JAN-110*LU-AB OI=13153 at $5.75 SL=4.00
BUY CALL JAN-115 LU-AC OI= 3668 at $3.75 SL=2.00 
BUY CALL FEB-115 LU-BC OI=  714 at $7.50 SL=5.75
BUY CALL FEB-120 LU-BD OI=  388 at $5.75 SL=4.00
BUY CALL APR-120 LU-DD OI= 2817 at $8.75 SL=6.50

Picked on Dec.29th at $112.06    PE = 53
Change since picked      0.00    52 week low =$ 34.18 
Analysts Ratings   8-9-12-0-0    52 week high=$113.88
Last earnings on 10/98 est=.39   actual=.41
Next earnings on 01-22 est=.98   versus=.86
Chart = http://quote.yahoo.com/q?s=LU&d=3m

The Nasdaq market surged to a new high Monday after another big
advance by Internet shares. The Nasdaq composite index rose to a
new closing record of 2172.54. The DJIA posted a seventh straight
winning session. The blue-chip barometer is now within striking
distance of the November 23 record of 9374.27.

Trading was dominated by the soaring prices of Internet companies
as the holiday season appears to have driven on-line shopping into
mainstream use. Last week there was a positive sentiment about new
retail-internet sales because people are getting more comfortable
with making a purchase online. Web-based sales more than tripled
over the Christmas selling season, fueling the retailers' rise.

Shares of Schwab, E-Trade Group and other online brokerage stocks
jumped on Monday after E-Trade said its new Web site was luring a
large number of new customers. Robust trading volumes also helped
boost shares in the firms, which are taking business away from
traditional brokerage firms. AmeriTrade said it expected profits
to increase dramatically, helped by record volumes of more than
32,000 trades a day.

U.S. blue chip stocks rallied on Tuesday but Internet stocks gave
back their recent gains. The DJIA moved closer to a new record, up
unofficially 94 points at 9320. Against the trend of recent days,
the Dow outpaced the Nasdaq Composite Index as technology stocks
faded in uninspired trading. The enthusiasm is expected to remain
low until the New Year. Some technical analysts say the underlying
fundamentals are weakening as market leadership continues to fall
on low volumes. Others admit the breadth of the market is eroding
but agree that no significant corrections will occur until atleast
the second quarter because of retirement/401k money flowing into
the market after the New Year. Another worry on Wall Street is
that Internet fever may obscure an underlying problem; that this
kind of speculation is known to presage market downturns. Analysts
warn that when sentiment reverses, the downturn is likely to be
as intense as the rally.

Our new (Sunday) plays went basically as planned. RSLN traded flat
most of the day (the merger should hold the price up near $20) and
the JAN17C/20C debit spread was available for about $1.75. BGP was
a bit more active and two positions were offered; A FEB25C/JAN25C
calendar spread for $1.38 debit and a JAN22C/25C debit spread also
at $1.38. MTRS got off to a great start with the stock moving up
about $3 on the day. The opening prices allowed a $3.00 debit but
due to the low volume/OI in the position we will quote the opening
debit on the FEB40C/FEB45C slightly higher at $3.25. Credit spread
plays on AAS and VNWK were both available near the open; AAS was
a JAN70C/65C bear-call for about $0.68 and VNWK was a JAN30P/35P
bull-put for $0.50. The JMED straddle; MAR35C/35P, was active with
the first trade executing near $5.62 debit for the play. The stock
fell almost $2.00 from the high of the day in the afternoon. Our
AAPL play was still moving strong on Monday and a repeat entry at
the opening prices returned about the same results as last week. A
call-credit spread (JAN47C/45C) produced about $0.43 against the
collateral of $2.06 for a 20% return (if AAPL finishes below $45).
The nice thing about the technicals of this play is the historical
resistance around $40-$42. A correctly placed STOP on the short
position will reduce the risk considerably as any move above the
old trading range will most likely propel the stock to new highs,
allowing a simple roll-out technique to profit. The key to spread
trading is reducing your risk while increasing your probability of
maximum profit and still having the chance to make money even when
the stock moves in the opposite direction from what was expected.

Portfolio Update: RSLN

T R Financial Corp. said Tuesday it would walk away from its
proposed merger with Roslyn Bancorp Inc. unless Roslyn changed
the agreed stock-swap ratio by Jan 2. On Monday Roslyn said that
even though its average shareprice had fallen below the range in
the merger pact, it would maintain the 2.05 stock-swap ratio. T R
said it wants an exchange of 2.1137 Roslyn shares for each T R
share. The merger agreement called for the exchange of 2.05 RSLN
shares for each T R share, but Roslyn's average share price has
fallen below the range specified in the merger pact. T R said that
under the merger agreement it could have elected to terminate the
deal but had chosen not to do so. It said it was giving RSLN until
January 2nd to change the stock-swap ratio.

The stock was up over $2.00 near mid-day and the play was easily
closed for a $0.43 profit (20% ROI with a GTC closing order would
have been filled around 1:00 pm). This will certainly be a bumpy
ride so consider closing early for a small profit if you have a
low risk threshold.
				- NEW PLAYS -
WCOM - MCI Worldcom  $74.25     Calendar Spread/LEAPS

MCI WorldCom provides telecommunications services to business,
government and consumer customers from a network of fiber optic
cables, digital microwave, and satellite stations. MCI WorldCom
is one of the biggest providers of Internet services and with
good fundamentals, this company should continue to outperform
others in the industry group.

The interest in call options on MCI WorldCom swelled Tuesday as
investors smitten with Internet stocks also turned their gaze to
the telecommunications giant. Recent media attention spotlighting
MCI WorldCom's role in providing a big portion of the Internet's
backbone has raised awareness of the company among the public.
One of the top three holdings in the Fidelity Magellan Fund and
recent coverage by Bear Stearns and Deutsche Bank. An excellent
long-term outlook from a technical and fundamental perspective.

PLAY (conservative/long-term):

BUY  CALL JAN00-75 LQM-AO OI=1746 A=$13.00
SELL CALL JAN-75   LDQ-AO OI=2963 B=$2.25

Note: In the long-term calendar spread, we are reducing the net
cost of the LEAP by the amount of credit from the sale of the
nearer term call. If the near-term call expires worthless, we will
sell the FEB call to further reduce our debit. If your short-term
position is ITM on the last day of the strike, you need to buy it
back so that you DON'T have to exercise the long-term position. In
that case, your LEAP is going up in value also and on the last day
of the strike period, the short call will shrink down to intrinsic
value so you will be ahead in the play even after you buy it back.

Chart = http://quote.yahoo.com/q?s=WCOM&d=3m
PCS - Sprint PCS Group  $21.18     Calendar Spread

Sprint PCS Group is a tracking stock for the business conducted by
Sprint Corp. for offering or providing domestic wireless mobile
telephony services and any other domestic PCS services, including
the operations of Sprint Spectrum Holdings, SprintCom, PhillieCo
and the majority interest in Cox PCS.

In mid-December, Morgan Stanley Dean Witter initiated coverage of
Sprint PCS Group with a "Strong Buy" rating and a $25 price target.
They believe the company has all the key ingredients to be a very
successful and powerful player in the U.S. wireless arena and are
projecting PCS's network will cover about 70 percent of the U.S.
population by the end of 1999. J.P. Morgan also listed the new
telecommunications services provider among its "Best of Sector"
picks for 1999. The recent positive announcements caused a jump in
the stock price (and options volume) so the stock may be due for a
consolidation. The long-term play is probably more favorable but
we will also list a February position for the aggressive trader.

PLAY (conservative/long-term):

BUY  CALL MAY-22.50 PCS-EX OI=319 A=$2.93
SELL CALL JAN-22.50 PCS-AX OI=160 B=$0.75

PLAY (aggressive):

BUY  CALL FEB-22.50 PCS-BX OI=80  A=$1.68
SELL CALL JAN-22.50 PCS-AX OI=160 B=$0.75

Chart = http://quote.yahoo.com/q?s=PCS&d=3m
AOL - American Online  $154.62     Put-Credit Spread

AOL provides Internet online services such as electronic mail, 
conferencing, software, computing support, interactive magazines
and newspapers, and online classes, as well as access to services
of the Internet.

Options trading in America Online has been especially active (both
the put and call side) following last week's announcement that the
online giant will be added to the S&P 500 index January 1, 1999.
AOL has moved up $50 since the announcement and shows no signs of
giving back much of the gain. It appears there is always someone
ready to buy the stock when it falters in mid-day trading and most
experts consider the company to be well positioned for long-term
success, especially with the intended acquisition of Netscape. A
short-term play based on momentum and the Internet frenzy.

PLAY (conservative):

BUY  PUT JAN-120 AOE-MD OI=3381 A=$2.00
SELL PUT JAN-125 AOE-ME OI=2689 B=$2.62

Chart = http://quote.yahoo.com/q?s=AOL&d=3m
LIPO - Liposome Company  $14.12     *** Speculation Only ***

LIPO is a pharmaceutical company engaged in discovery, development, 
manufacturing and marketing of proprietary lipid & liposome-based
pharmaceuticals, primarily for the treatment of cancer and other
life-threatening illnesses. Back in early November, Liposome said
that three Phase III clinical trials had shown the drug Evacet is
effective as a first-line treatment of metastatic breast cancer.
The company moved forward by preparing a New Drug Application for
Evacet to submit to the FDA this year. However, the recent bullish
trend didn't start until the company was upgraded to "BUY" (12/22)
by Hambrecht and Quist. NationsBanc Montgomery Securities also
recently rated Liposome Technology as a "BUY". The speculation is
rampant; 4th Qtr results are rumored to exceed street estimates or
possibly Evacet being accepted for expedited revue, positive growth
in 1st/2nd Qtr earnings with a possibility that Abelcet is going to
capture its market and a potential blockbuster (ELL-12) that has
now started testing. Most agree that it is a good company with an
excellent management team and with the new upgrades, there should
be more institutional ownership. Play this one at your own risk
with short-term momentum and take profits quickly.

PLAY (speculative/very aggressive):

BUY  CALL JAN-12.50 LPQ-AV OI=40  A=$2.19
SELL CALL JAN-15.00 LPQ-AC OI=281 B=$1.00

Chart = http://quote.yahoo.com/q?s=LIPO&d=3m

Market Sentiment ­ By Pinnacle Capital Advisors
Tuesday, December 29, 1998

Market Breakout looking for Underlying Support 

Notice how quickly the overhead sentiment resistance
evaporated at the OEX 610-615 level. This is a bullish
development as the S&P 100 and 500 continue their breakout. 
To confirm the breakout, Pinnacle likes to see the underlying
sentiment support start to build at the OEX 590-595 level. 
This has NOT happened yet so we caution subscribers to keep
an eye at this important indicator and protect their long

Pinnacle Indexes

          Trading Range Lower End Upper End
Dow Jones           8,500 ­ 8,600 9,400 ­ 9,450
S&P 500 (SPX)       1,080 ­ 1,100 1,190 ­ 1,200 * Breakout
S&P 100 (OEX)         530 - 540     590 - 600   * Breakout 

Pinnacle Indexes
OEX Friday Friday Tues Thurs
Benchmark (12/17) (12/25) (12/29) (12/31)

Resistance (615-620) 14.9
(610-615) 55.0 6.9 
(600-605) 51.8 1.8 1.0

Support (585-590) 9.2 1.3 1.3
(575-580) .7 1.0 1.1

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is moderate at the OEX 610/615
level while the underlying support is moderate.

Last Second Field Goal Crown NFL Challenge Winner 

The Arizona Cardinals kicked a field goal as time expired to
beat the Chargers 16-13 and earn a playoff berth for the
first time since 1982. The field goal dashed Tampa Bayšs
hopes for the final NFC playoff spot.

In many ways, the final weekend of the regular season is much
like the final week before expiration as many at-the-money
options battle it out and finish in-the-money or out-of-the
money. At expiration, the Cardinals finished in-the-money;
the Buccaneers finished out-of-the-money.

1998 NFL Challenge ­ Final Results 

Chris Jackiešs field goal decided the winner and runner up for
our NFL Challenge. Our winner had Arizona in his portfolio
while the runner up had Tampa Bay. 

The Winner will receive a free one-year subscription to
OptionInvestor.com. And because the competition was decided
by a last second field goal, Pinnacle has decided to award
our runner up a free 3-month subscription to
OptionInvestor.com ­ the number one option advisory service
on the Internet. Congratulations!!

1998 NFL Challenge - Winner
Peter Lazidis

1998 NFL Challenge ­ Runner Up 
Michael Zambito

Honorable Mention:

We had an excellent response to the Competition and many
participants developed great initial portfolios, made
excellent trades throughout the competition but came up just

Joe Moore
Robbie Estates
Joan Gonzalez
Kevin Englehardt
Ray Dean
Kristine Andersen
Raeford Divine
Kevin Brockway
Michael Miller
Steve and Renne Freiwirth
John Barton
Ray Stewart
Robert Rall

NFL Challenge

The NFL Challenge was part of a instructional sports analogy
Pinnacle Capital Advisors developed that helped illustrate winning
option strategies and trading techniques. The Competition
addressed several important topics about options including
strategy, risk assessment, capital allocation and time decay, among

The objective of the competition was to determine which NFL
teams would finish "in-the-money" and make the playoffs. 
Highlighted below are the final NFL Standings and the teams
that made the NFL playoffs.

NFC Conference Skybox ­ Final 
West Central East

Atlanta* 14-2 Minnesota* 15-1 Dallas* 10-6 
San Francisco* 12-4 Green Bay* 11-5 Arizona* 9-7

--- ITM -----------------------------------------
--- OTM -----------------------------------------

New Orleans 6-10 Tampa Bay 8-8 NY Giants 8-8
St. Louis 4-12 Detroit 5-11 Washington 6-10
Carolina 4-12 Chicago 4-12 Philadelphia 3-13

AFC Conference Skybox - Final
West Central East

Denver* 14-2 Jacksonville*9-3 NY Jets* 12-4 
Miami* 10-6
Buffalo* 10-6
New England* 9-7

--- ITM ---------------------------------------------------
--- OTM ---------------------------------------------------

Oakland 8-8 Tennessee 8-8 Indianapolis 3-13 
Seattle 8-8 Pittsburgh 7-9 
Kansas City 7-9 Baltimore 6-10
San Diego 5-11 Cincinnati 3-13

* Pinnaclešs Ending Portfolio (12/22)

NFL Skybox Flashback

Take a quick look back at how the NFL Challenge started on
October 25th and see if you would have traded your teams
(options) any differently.

NFC Conference Skybox - Week 7 10/25
West Central East

San Francisco 6-1 Minnesota 7-0 

--- Deep ITM ------------------------------------------------

Atlanta* 5-2 Green Bay 5-2 Dallas* 4-3
New Orleans 4-3 Tampa Bay* 3-4 Arizona* 3-4
St. Louis 2-5 Chicago 3-5 NY Giants 3-4
Detroit* 2-5

--- Deep OTM ------------------------------------------------

Carolina 0-7 Philadelphia 1-6
Washington* 0-7

AFC Conference Skybox - Week 7 10/25
West Central East

Denver 7-0 

--- Deep ITM ------------------------------------------------

Oakland 5-2 Jacksonville*5-2 Miami* 5-2
Seattle 4-3 Pittsburgh 5-2 New England 4-3
Kansas City 4-3 Tennessee* 3-4 NY Jets* 4-3
San Diego* 3-5 Baltimore 2-5 Buffalo* 4-3 
Cincinnati 2-5 

--- Deep OTM ------------------------------------------------
Indianapolis 1-6

* Pinnaclešs Starting Portfolio (10/25)

Perhaps the biggest surprise was the dominance of the
Minnesota Vikings and the rise of the Atlanta Falcons. The
Vikings actually finished with a better record than the
Broncos and the Falcons finished ahead of the 49ers in the
NFC West. In contrast, Oakland and Pittsburgh, both 5-2 on
October 25th, fell apart in the second half of the season and
failed to make the playoffs. Also, Check out the Redskins. 
They were 0-7, yet came on strong to finish 6-10.

New Website 

Just a reminder that Pinnacle Capital Advisors will be changing
the name of its section from "Hedge Strategy & Recommendations" 
to "Market Sentiment" and can be found on the website with the 
same title.

The focus of the new section will be sentiment analysis and
providing new indicators and tools that help option traders
track and monitor changing market sentiment ­ sector by
sector. So if you are looking for the big picture, you donšt
want to miss this section.

OEX Skybox 

This week marks the last week for the OEX Skybox. Beginning
January 5th, OptionInvestor.com will be introducing a new
DAILY service for those who want to actively trade the S&P
100 (OEX). It will be called the OEX Trading Pit and is designed
to provide OEX traders real-time daily updates of OI

The benefits of this new DAILY service we be tremendous
because it gives subscribers clear and specific trading
instructions. The new service can be found on the new website
under the link entitle "OEX Trading Pit"

OEX Skybox Replay

On Tuesday (12/29), the market drifted lower on the open and stopped
us out of our long (Jan 600 call) option position. 

Current Positions
Symbol Last Trade Protective Gain/Loss
Entry/Exit Date Entry Price Stop (+/-)

OEX JAN-600 CALL / OEY-AT | 17.63
12/21 / 12/29 | 9.25 15.50 6.25 +

Trading Instructions: 
12/21 New Call position Filled @ $9.25
12/23 Protect entire position tightly at $8.75
12/28 Tighten protective sell stop to $15.50 
12/29 Stopped out of call position at $15.50


Index Power Grid

Beginning January 1st, Pinnacle Capital Advisors will be combining
the Index Power Grid and the Market Posture into one tool for
reference by subscribers. Our plan is to update the new Market
Posture whenever our posture change.

The focus of the enhanced Market Posture section will be short-term
1-2 weeks and will include key benchmarks, support/resistance
levels, market posture and the date we change our posture. We will
also continue to present our posture by industry sector.

Potential Failed Rallies

The following summarizes the potential failed rallies our
analysts are tracking this week and our NEW recommended short
positions. We have also included the current value of the
Pinnaclešs sentiment indicator (PI) as a point of reference
for the level of optimism or expectation. We recommend
taking positions only if they trade through our recommended
entry price. Short positions should be initiated using STOP
orders. After the market sold off precipitously last week, we have 
updated several of our protective sell stops to lock in profit.
Please make a note of these changes.

Symbol 50/100/200 Last Trade
Entry/Exit Date dma PI Entry/Stop Gain/Loss(+/-)


Computer Assoc / CA +|@|- 5.6 | 42.13 12/4 12/29 | 43.75 42.25 1.50 +
Stopped Out

Cabletron / CS +|-|- 2.6 | 8.06 12/4 | 8.75 9.25 .69 +

BMC Software / BMCS -|-|- 5.6 | 45.63 12/28 / 12/29 | 42.75 45.25 2.50 -

Stopped out / Dropped
BUY PUT JAN-45 MCQ-MI OI=1620 at $4.00 SL= 2.75
BUY PUT JAN-40 BCQ-MH OI=405 at $1.63 SL= .75

Boeing / BA +|@|- 5.6 | 32.38 12/2 | 33.69 35.25 1.31 +

Bristol Myers / BMY +|+|+ 4.3 | 134.00 | 126.75 128.25 NT

Merck / MRK +|+|+ 5.4 | 150.50 | 146.75 149.25 NT

Warner Lambert / WLA -|+|+ 3.1 | 73.63 12/21 | 72.75 75.25 .88 -

* NEW ­ New recommendation / NT ­ Not Triggered

Beginning January 1st, Pinnacle Capital Advisors will be including
our popular "Failed Rally" section within the Put Recommendations
section on the Internet. This link on the website will also
include specific Put recommendations for each stock listed.

Pinnacle Capital Advisors

Certain market views and recommendations by Pinnacle Capital
Advisors may differ on occasion from the Option Investor due to our
market timing models and underlying technical and sentiment
indicators. Investors are advised to make their own investment
decision based upon their own investment/risk profile.

For information on these plays  Contact Support

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Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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