Option Investor

Daily Newsletter, Thursday, 01/07/1999

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The Option Investor Newsletter         Thursday  1-7-98  
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.
        1-07-98         High     Low     Volume   Advances Decline
DOW     9537.76 -  7.21 9616.29  9369.12  820,428k  1,136   1,952
Nasdaq  2326.09 +  5.47 2333.70  2284.24  530,174k  1,539   1,756 
S&P-100  632.76 +  1.76  633.11   624.95   Totals   2,675   3,708
S&P-500 1269.73 -  2.61 1272.34  1257.68            41.9%   58.1%
$RUT     427.83 +   .04  428.16   423.79
$TRAN   3319.67 +  2.21 3339.00  3270.75
VIX       24.15 +   .55   25.47    24.00
Put/Call Ratio      .43

This was a great day in the market as buyers overpowered sellers!

After a huge profit taking drop at the open and a general sell off
at midday the market clawed its way back to zero from a -118 point
deficit. The Nasdaq, S&P-100 and Transports all closed in positive
territory and all the major indexes appear poised to soar again.

Besides the expected profit taking several other factors drug on
the market. Abbey Joseph Cohen made headlines by reducing her 
weighting of stocks in her model portfolio to 70% from 72%. She
increased her bond holding to 27% from 25. The reweighting was
more flash than substance. The reason given was the current market
levels were conducive to profit taking and reinvesting the profits
in more conservative bonds. Must have been a slow news day!

Brazil also made headlines again as a state governor under financial
pressure, announced a 90 day debt moratorium. This shock wave sent
the Brazil markets down -5.1%. The initial worry was an Asian style
economic crisis developing in Brazil. As the day wore on the news
improved with confidence that this was an isolated incident and 
feelings that Cardosa would take whatever action was needed to keep
the IMF bailout payments flowing.

Since the market appears to have already discounted the impeachment
trial and traders bought the dip aggressively today, we are still
bullish on the general trend. Overhead resistance seems to be
evaporating as more and more money continues to flow into the funds.
Yesterday alone, TrimTabs said funds received $4 billion in new cash
in addition to $3 bln in the last week.

The market continues to be driven by forecasts that Asia is 
starting to recover and the Fed is on watch. The PC/Internet
boom continues to gain momentum with no end in sight.

Speaking of Internets, if you are like me, you look at the 
huge gains made every day and wish you had the guts to bet 
on them yesterday. You have repeated the phrase "they can't 
go up anymore" every day for the last two months. Don't look
now but they just keep gaining speed. AMZN added +20.88 today
and +74.25 for the week. CMGI was up +19.25 today, +63.75 for
the week. (splits tomorrow) YHOO +29.00 today, +83.06 for the 
week. BRCM +14.00 today, +52 this week. If the Internets were
overpriced last month, last week, then what are they this week?

CSCO is coming home for dinner. They announced a new push to put
their technology into every home to deliver voice and data. The
Internet giant is now pressing into the biggest market of all.
Set a new 52 week high, again.

The Airtouch saga just keeps getting better. News that WCOM and
now a German company are preparing a bid for ATI just keeps pushing
the price upward. The results of this bidding war may not be 
known for some time but the $95 Vodaphone bid may not be the 
winner. Some analysts think it will take over $100 to get the

Several earnings warnings hit the street today but had no impact
on the market as a whole. J.C. Penny and Borders Group were the
culprits. Holding up the retail sector with stronger sales were
Walmart +9.4%, Dayton Hudson +6.5%, Kmart +4.2%.

This was the fifth record close in a row for the Nasdaq and 
using the same analogy as the Internet stocks, "it can't go
up much longer". We are due for a Nasdaq correction and Friday
would be the perfect day. After the HUGE Internet and tech
stock rises this week there will be a strong reluctance to
leave these profits on the table over the weekend. If we do
get a pullback then look at it as an opportunity to start
some new tech positions.

The "buy the dip" mentality is still alive and well. This is
good news of a continued rally. When traders quit buying the
dips we will need to worry. Until then keep your stops close
on Friday and don't worry about getting taken out for a profit.
S&P futures are down about -3.50 at 8:30PM ET which could mean
another drop at the open and a repeat of today's drop.

Good Luck

Jim Brown

Market Posture
As of Market Close - Thursday, January 7, 1999 

                   Major Support
Broad Market         /Resistance    Last    Posture/Since  Alert

DOW Industrials    8,600   9,400   9,538    BULLISH   1.07 *           
SPX S&P 500        1,180   1,240   1,270    BULLISH   1.07 *   
OEX S&P 100          580     615     633    BULLISH   1.07 *  
RUT Russell 2000     385     405     428    BULLISH  12.24 

NDX NASD 100       1,640   1,740   1,966    BULLISH  12.18  
MSH High Tech        770     790     946    BULLISH  12.18  

                   Major Support
Technology           /Resistance    Last    Posture/Since  Alert
XCI Hardware         740     815     860    BULLISH   1.05    
CWX Software         560     615     654    BULLISH  12.29        
SOX Semiconductor    325     360     392    BULLISH   1.05        
NWX Networking       360     400     433    BULLISH   1.05        
INX Internet         300     340     454    BULLISH   1.06   

                   Major Support
Financial            /Resistance    Last    Posture/Since  Alert
BIX Banking          610     680     700    BULLISH   1.07 *            
XBD Brokerage        415     540     638    BULLISH  12.24  
IUX Insurance        555     620     618    Neutral  12.17      

                   Major Support
Other                /Resistance    Last    Posture/Since  Alert
RLX Retail           770     780     856    BULLISH  12.18  
DRG Drug             730     765     788    BULLISH  12.29    
HCX Healthcare       730     760     767    BULLISH  12.29            
XAL Airline          270     300     341    BULLISH   1.05             
OIX Oil & Gas        250     260     254    Neutral   1.07 *              

Posture Alert

After advancing into record territory and holding, we have
turned Bullish across broad market indices including the DOW,
S&P 100 and 500.  We have also turned bullish across the
banking sector and raised our posture on the  Oil & Gas
sector from Bearish to Neutral.

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


Market Sentiment - By Pinnacle Capital Advisors
Thursday, January 7, 1999

Overhead Resistance Evaporated

As the market powered into record territory Tuesday (1/6), 
overhead sentiment resistance evaporated at the key OEX 610-615
level.  Assuming the broader market holds its gains above prior
summer highs, break out levels could serve as support.  On a 
bearish note, the latest Investor Intelligence report is flashing
the highest level of Bullish sentiment (58.3%).   

Any questions regarding market sentiment can be directed at:

Market Sentiment at a Glance
                                Friday    Tues    Thurs  
Indicator                       (12/31)   (1/5)   (1/7)   Alert

Pinnacle Index (OEX):          
Overhead Resistance (610-625)     5.1      4.9     1.2   *
Underlying Support  (585-600)     1.6      1.7     2.1

Put/Call Ratio (OEX):
CBOE P/C Ratio                    1.1      1.1     1.2

Peak Open Interest (OEX):
Puts                              580      575     575
Calls                             580      620     620
P/C Ratio                         1.0      1.1     1.3

Market Volatility Index (VIX):	
CBOE VIX                         25.3     25.2    25.0

Investors Intelligence:
Bullish                          56.4%    57.1%   58.3%  *  
Bearish                          32.5%    30.3%   30.0%

The Power of Expectation Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

Pinnacle Index
OEX                             Friday    Tues     Thurs
Benchmark                       (12/31)   (1/5)    (1/7)

                    (630-635)                      5.7

                    (620-625)     14.6    14.1     1.3
                    (610-615)      3.2     2.9     1.0
Overhead Resistance (610-625)      5.1     4.9     1.2

OEX Close                        604.0   615.4   632.8

Underlying Support  (585-600)      1.6     1.7     2.3
                    (595-600)      1.8     1.6     2.6
                    (585-590)      1.5     1.7     2.1

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is moderate at the OEX 630/635
level while the underlying support is moderate.

Put/Call Ratio 
                                Friday    Tues     Thurs
Strike/Contracts                (12/31)   (1/5)    (1/7) 
CBOE Total P/C Ratio               .52     .51     .51 
CBOE Equity P/C Ratio              .40     .40     .38
OEX P/C Ratio                     1.07    1.14    1.21

Peak Open Interest (OEX)
                     Friday          Tuesday          Thurs
Strike/Contracts     (12/31)         (1/5)            (1/7)
Puts                 580 / 8,671     575 / 9,455     575 / 12,637
Calls                580 / 8,668     620 / 9,858     620 /  9,982
Put/Call Ratio       1.00            .96             1.27

Please view this in COURIER 10 font for alignment

Index	Last	Mon	Tue	wed	Thu	Week		
Dow	9538	2.8	126.9	233.8	-7.2	356.33		
Nasdq	2326	15.4	43.2	69.6	5.2	133.40		
$OEX	633	0.9	10.5	15.6	1.8	28.73		
$SPX	1270	-1.1	16.7	27.6	-2.6	40.50		
$RUT	428	-0.7	0.8	5.7	0.0	5.87		
$TRAN	3320	-31.7	74.7	125.1	2.2	170.36		
$VIX	24.15	0.29	-2.17	0.07	0.55			
Stock	Last	Mon	Tue	wed	Thu	Week		
AMZN	158.88	33.69	6.19	13.50	20.88	74.26	Amazing !!	
CMGI	170.25	8.00	6.22	30.28	19.25	63.75	Splits Friday	
BRCM	172.75	6.13	6.38	25.50	14.00	52.01	Going along for the ride	
NOK/A	140.00	7.75	6.31	7.75	-2.25	19.56	Only non-bidder for ATI	
MSFT	150.50	2.31	5.50	4.75	-0.75	11.81	More court news daily	
CSCO	103.63	2.50	1.63	2.81	3.88	10.82	Another new high	
ATI	82.00	-4.19	7.13	4.50	2.13	9.57	WCOM and a german co now bidding	
EMC	93.75	2.00	4.13	-1.63	4.25	8.75	New deal with HWP	
LU	116.50	4.25	-0.06	3.06	-0.69	6.56	Profit taking	
T	82.25	2.13	1.63	3.38	-0.63	6.51	Attention on ATI	
IBM	190.19	-1.38	6.63	-0.88	1.44	5.81	Moving again	
DELL	78.19	1.00	1.06	2.88	0.06	5.00	No weakness here	
SUNW	89.69	4.44	2.50	-1.63	-1.25	4.06	Lost top server slot to Dell	
WCOM	75.13	-1.88	5.06	3.44	-3.25	3.37	Bidding for ATI??	
JBL	77.38	-1.63	2.13	1.19	1.19	2.88	Moving up again	
WMT	84.13	-0.81	0.63	1.38	1.50	2.70	Sales up +9.4%	
LOW	53.81	-0.38	0.06	1.38	1.56	2.62		
KSS	62.25	-0.19	-0.25	2.94	-1.69	0.81		
SCI	58.50	-3.31	2.00	2.06	0.00	0.75		
MYG	62.56	-1.31	-0.44	1.69	0.38	0.32		
GDT	109.75	-5.63	-0.50	1.94	3.94	-0.25	Recovering nicely	
EDS	49.44	-0.81	0.44	0.56	-0.94	-0.75	New deal with Forte	
TWX	60.94	-0.50	1.81	-0.38	-2.06	-1.13		
AGPH	56.00	-0.25	-2.88	0.00	0.38	-2.75	Dropped again	
HD	58.44	-2.38	-0.44	1.00	-0.94	-2.76	Dropped	
SLR	89.94	-0.94	-5.00	-0.94	3.88	-3.00	Recovering from Profit taking	
LXK	97.44	-2.25	0.06	-0.13	-0.75	-3.07	Profit taking??	
SWY	57.50	-0.13	-2.19	0.63	-1.75	-3.44	Dropped	
LGTO	61.00	-2.94	-0.13	-0.25	-1.63	-4.95	Dropped	
AOL	147.88	-6.31	-1.88	2.06	-1.13	-7.26	Split candidate	
HAL	35.50	0.56	0.19	2.31	2.81	5.87	Dropped	
NWK	10.44	0.19	0.06	0.13	-0.19	0.19		
PRMS	12.06	-0.06	0.63	2.38	-0.06	2.89	Dropped	
RI	19.19	-0.75	-0.94	0.38	-0.75	-2.06		
BMCS	42.56	0.31	-2.31	0.88	-0.88	-2.00		
LLY	82.38	-2.88	-0.19	-0.69	-2.75	-6.51		

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.


HD $58.63 -.75 (-2.56) HD has turned down and has spent the 
entire week under its 10 day moving average.  We are going 
to drop them as a current pick, although we continue to read
about how the prospects for HD over the long term are very 
good.  In fact, HD announced today that you can buy stock 
in the company directly through their web site.

SWY - Safeway Stores $57.50 -1.75 (-3.43)
Safeway closed today at its open of $57.50.  SWY appears 
to have run out of steam, and lost its momentum so we are 
dropping SWY today as a play.  There is no bad news but no
positive momentum.


HAL $35.50 +2.81 (+5.88) Oil and gas services as a sector 
participated heavily in the overall market gains on Wednesday
(1/6) moving 8-10%. These substantial short-term gains and 
broad-based participation may signal value-based investing, 
bottom fishing, and/or accumulation. As such we are dropping 
are our put recommendation. 


CMGI -  $170.25 +19.25 (+63.75)
Participating in the 5th straight record breaking close of 
the NASDAQ. CMGI gave those patient and hearty traders a 
welcome boost in their accounts.  CMGI opened at $144.00 
then looked for some support and skyrocketed to $175.00 to
finish the day just above $170.25.  Remember tomorrow, 
(Friday) is the last day before the split on Monday Jan. 
11th.  Again, we don't recommend holding over the split 
dates.  This week The Internet Stock Review 
www.internetstockreview.com announced that its list of 20 
Watch List Stocks increased an average of 157%. The 
announcement of the top 5 performers as of (01-06-99 included
CMGI increasing by 634% moving from $14.00 to $106.00.  If 
you were on this roller coaster this week and hung on as it 
plunged to 106, then blasted off into the stratosphere you 
have to be a happy camper. 

IBM  $190.00 +1.25 (+5.63) IBM opened today $190.313, slid 
along with the rest of the DOW to $188.50 and bounced back to 
close nearly at its open for the day of $190.313 and at its 
support of $190.00 On the news front today IBM introduced new
models to its Aptiva (R) and ThinkPad (R) i Series lines and 
significant enhancements to its Owner Privileges (1) program.
They also announced arrangements with Internet leaders Excite, 
Lycos, and Yahoo to offer easy access to the World Wide Web, 
along with a special promotion with Earthlink Sprint.  IBM is 
reporting that with these arrangements along with their PCs, 
laptops, and software services it makes IBM a provider of the 
most comprehensive suite of consumer products in the industry.

EDS $49.44 -0.94 (-.75) After an open of 50.12 and lack 
luster volume, EDS could not stay above its support of $50.00.
This could have been a victim of the early morning sell off, 
closing below its support of $50.00 to $49.44. This week EDS
announced their collaboration with Forte Software, Inc. as a
strategic partner. Participating in a major new distribution
and production planning system for one of the world's largest 
steel manufacturers, STAHLwerke BREMEN GmbH. 

DELL - $78.18 +.063 (+5.00) On your marks,,,get set,,,GO!!!!! 
DELL was added yesterday as our (Play of the Day). Please visit
the web site for more details. At the open, DELL was at its 
low for the day of $76.63, finishing nearly at its high of 
$78.93, to $78.18. We expect DELL to start its earnings run to
February any time now.  However remembering the NASDAQ is in 
record territory we suggest closely watching your stops. In the 
past, subscribers have reported great results and exciting days
playing DELL. DELL has been known to run up to its earnings by 
posting 10 to 15 even 20 point gains.  As you can see in today's
news, DELL is looking very favorable to their existing customer 
base and adding new satisfied customers daily as the Computer 
Industry is on a rampage. In today's' news. The Technology 
Business Research's 4th quarter Customer Satisfaction Study, 
shows that one of five end users have switched to DELL. 
Dell also regained the top server provider spot from SUNW.
We urge caution in playing Dell before a Nasdaq profit taking
session. We would expect any options purchased today to recover
before earnings but by waiting for a Nasdaq correction you should
be able to buy them cheaper.

AMZN $158.88 +20.88 (+74.26)  Fasten your seatbelts.  Investors are 
still hot on Amazon and this Internet is on fire!  It has already 
passed Oppenheimer's 12 month, pre-split price target of $400 set a 
mere month ago.  Earnings?  Valuation?  Many investors are ignoring 
technical analysis and are instead concentrating on POTENTIAL.  Many 
feel that the Internets are the stocks of the future with Amazon in 
the pole position.   Enthusiasts may feel that Amazon is still a 
great buy at these post-split prices and might continue to jump on 
the bandwagon.  Watch any plays closely since both the NASDAQ and 
Amazon are at record highs.  Profit taking could be lurking around 
the corner.  

MYG $62.56 +0.38 (+0.31)  Ahhh, back on track!  Maytag started the 
week off in a rut but is slowly working its way back up.  MYG's 
resistance is currently resting at its all time intraday high of 
$64.50 set last Tuesday Dec. 29th.  It remains one of our split 
candidates since it has split at these levels back in the '80s.  
No new news.  

SUNW $89.69 -1.25 (+4.06)  Sun Microsystems flew with the market 
to another all time high of $94.63 in intraday trading on Wednesday.  
But, it just couldn't hold on and dropped to $89.69 by Thursday's 
close.  Profit taking can always be faulted.  Maybe news from two 
studies that recently ranked SUNW in the #2 spot behind some 
familiar competitors could also be a cause.  Dell re-took the #1 spot 
in the Technology Business Research, Inc. 3Q98 Computer Business 
Quarterly Rankings.  IBM said its high end Unix servers were ranked 
higher than Sun's based on a study by D.H. Brown Associates.  Will 
temporarily dropping from #1 really phase Sun?  Probably not.  Later 
this month, Sun will be adding some new servers, service packaging, 
and partners as well as introducing Jini Technology, a new way of 
networking home and offices.

EMC $93.75 +4.25 (+8.75) EMC set a new 52 week high at the open on
Wednesday, but traded down the rest of the day, and then took off
again today.  We find it interesting that on Wednesday when the
NASDAQ was really up, EMC traded down, and today when the NASDAQ was
flat, it really took off.  If you look at an intraday chart on EMC,
there was a lot of buying at the close on Wednesday.  Could that be
a bunch of pros buying anything that has gotten a little bit beaten
up?  In the news, EMC and HP have agreed to a three year extension
of their strategic reseller relationship, considered to be one of
the most successful in the enterprise computing industry.  From the
time the relationship began in late 1995 through the first three
quarters of 1998, the relationship has generated more than $1.3
billion in revenues for EMC.

JBL $77.38 +1.19 (+2.88) JBL gapped down this morning, but 
recovered nicely by the end of the day to close at a new 52 
week high.  The industry as a whole has been doing very well 
as of late.  We mentioned in Tuesday's write-up that there 
are some analysts thinking the group is a bit overvalued, and 
then there was an article by The Motley Fool today talking about 
how the Street currently loves the group.  The article did point
out, though, that the Street has had a love / hate relationship
with the sector, and that the sector could be a bit overvalued. 


The Option Investor Newsletter         Thursday  1-7-98  
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.

PICK NEWS - CALLS (continued)

NOKA $140.00 -2.25(+19.56) Still awesome! Although NOK.A lost 2.25 
today, it was up 7.75 in yesterday's strong market, setting 
another new intra-day record of 142.50, and a closing high of 
142.25. At the close yesterday, Nokia was up 21.81 in only three 
days of trading and was ripe for profit taking. Given the worries 
over Brazil's economy, the dollar sliding on impeachment 
procedings, and the general drop in ADRs today, the mere 1.5% drop 
in NOKA's price was actually a sign of strength. The competing 
bids for Airtouch and an upgrade to "strong buy" from "accumulate" 
today from Prudential should propel this stock even higher. A 
split sometime soon could send it soaring. Profit taking in the 
overall market might cause a further pullback for Nokia, so look 
for upward movement before jumping in.

BRCM $172.75 +14.00(+52.00) Incredible! Broadcom is FLYING with 
the internets! BRCM is up 52.00 on the year so far and nearly 
40.00 in only two days--on strong volume, too. Today BRCM set a 
new intra-day high of 178.38 and a new closing high of 172.75. 
Steve Harmon, who writes Internet.com, claims a gain of 312% on 
his top 10 internet picks for 1998. His new top 10 picks for 1999 
include Broadcom, based on its strong broadband technology. With 
so much profit built into this stock, exercise caution. It still 
has great upside potential, but the ride may have large dips, so 
pick your entry carefully.

GDT $109.75 +3.94(+5.87) Up 9.75 in the last two days, Guidant 
looks like it may be starting its pre-split run. The only 
resistance is at its December high of 113.00. GDT is one of the 
six stocks on SmartMoney.com's list of the best stocks in the best 
sectors to own in 1999. SmartMoney.com cites an expected 22% 3-5 
year EPS year growth rate for the company. Guidant's medical 
devices cater to the mushrooming aging population and it is 
spending its R&D dollars wisely to develop new technologies that 
will improve clinical outcomes--a huge area of growth. Market 
permitting, this stock should be setting new highs very soon. 
Split date: January 27.

WMT $84.00 +1.38(+2.56)  Bucking the downward trend today in 
retail stocks, the world's leading retailer moved higher, breaking 
yesterday's new highs with yet another all-time intra-day high of 
85.06 and a closing high of 84.00. Retail numbers for the holiday 
season are out and Wal-Mart saw same store sales rise 9.1% for the 
5 week period. (This compares to a 4.2% increase in same store 
sales at K-mart, WMT's closest competitor.) Total sales were up 
15.8% to 19.11 billion. Sales at Wal-Mart's Sam's Club division 
were up 13.4%.  You won't get the incredible gains of an internet 
stock with Wal-Mart, but you won't get the extreme volatility, 
either. This stock just keeps marching steadily higher. WMT is 
entering the price range we believe may result in a split 

TWX $60.94 -2.06(+1.12) Yesterday Time Warner set a new intra-day 
high of 64.00, but today the stock slipped with the rest of the 
market. The only news on the media giant is TNT's purchase of "Law 
and Order" and WB Network's approval on a new fall pilot set in 
Washington D.C.  A 300,000 block trade was executed mid-day today 
at 61.50. The entertainment company Viacom was downgraded today by 
AG Edwards, and there could be a sympathy move by TWX.

SLR $89.94 +3.88(-3.00) SLR continued its downward trend on 
Wednesday but came back well today. SLR closed above it's 10-dma
on Thursday which has not broken down for more than one day since
October. SLR traded as high as $92.75 on Thursday, just $1 short
of it's all-time high. In what is expected to be one of the 
largest original equipment manufacturing agreements in its history, 
SLR on Wednesday announced its intention to acquire IBM's Electronic 
Card Assembly and Test operations in Austin, Texas. As part of the 
agreement, SLR will provide PCB assembly services to IBM for three 
years, and become the exclusive provider of PCBs for IBM notebook 
computers. As part of the transaction, SLR will lease IBM's 405,000
sq.-ft. manufacturing facility in Austin for three years. In 
addition, SLR will offer employment to 1,300 IBM employees at the 
manufacturing center. Remember, SLR has a shareholder meeting on 
the 12th of January and a vote to double shares is part of the agenda.

LXK $97.44 -.75(-3.06) LXK continued to suffer some profit taking 
today. LXK bounced off it's 10-dma once again, which is a good 
sign. Next earnings are on January 20th and possibilities of a stock 
split are pretty good. LXK's 52-week high is at $102.00. Though LXK
is in a profit taking mode, it still is tracking along with it's

KSS $62.25 -1.69(+.82) Wednesday saw KSS with a $2.00 gain, but
on Thursday we saw some profit taking. KSS announced on Thursday
that same store sales rose 6.7% from the year ago period. They
also announced that for the 5 weeks ending Jan.2nd that sales rose
20.6% to $682.8 million. The numbers are great, so the negative
trading today is a bit unusual. With sales numbers up, a few
upgrades could be in the making. 
SCI $58.50 +0.00(+.75) SCI closed even on Thursday, but did close 
near it's high of the day. On Wednesday, SCI closed up over $2. SCI
bounced off it's 10-dma for the 2nd straight day. SCI's 52-week high 
is at $59.13. A strong push through this level should start a new
uptrend. Earnings are scheduled for the 21st of January. 

LOW $53.81 +1.56(+2.62) LOW's announced today that for the five-
week period ended January 1, 1999, sales increased 23.7% to $1.21 
billion from $978.3 million a year ago. The Company's comparable 
store sales for December 1998 increased 10.6%. This news played
well on the stock as LOW closed up $1.56. LOW traded as high as
$54.75 before settling at $53.81. Since Tuesday, when LOW bounced
off it's 10-dma at $50.25, LOW's has increased more than $2.60. 
LOW's could also benefit from some upgrades after posting strong
retail numbers.

LGTO $61.00 -1.62(-4.94) LGTO continued to trade lower today. 
We have kept LGTO on the list for two reasons. One is the fact that
a stock split could be announced with earnings on January 20th. The
2nd reason is there is strong support at the 20-dma($50.25). Wait
for a bounce off this level. If LGTO closes below this level, it
will most likely sell off further. 

ATI $82.00 +2.13(+9.56) For those of you who purchased ATI when 
first mentioned, you have done well. ATI is the benefactor of a
bidding war. New to the game is MCI. They are rumored to be offering
over $55 billion for ATI. This would give ATI a value of around $100.
Like we've mentioned numerous times, takeover plays are risky. If
any negative news comes out, ATI will drop drastically. On the other
hand, a bidding war is good news for ATI owners. When it comes to 
a play like this, technicals don't mean a thing. This has become
strictly a takeover play. 

LU $116.50 -.69(+6.56) LU jumped over $3 on Wednesday, though at
one point was trading up over $5.50. On Thursday, LU traded in a
range from $114.31 to $117.25. Cincinnati Bell Supply Company 
announced today the execution of a three-year contract with LU to 
refurbish and sell LU's telecommunications equipment under LU's
Authorized Remarketing Supplier (ARS) Program. Under this three-year 
agreement, Cincinnati Bell Supply will remarket LU telecommunications 
products, under the label "Classic Lucent." This program includes 
products that qualify for inclusion under LU's maintenance and 
installation contract provisions. The ARS program also encompasses 
a "buy-back" plan that gives LU customers the option of selling
their used equipment to Cincinnati Bell Supply when upgrading 
their telecommunications systems. LU's 52-week high is $119.88.
LU is in definite stock split territory. This could occur with
earnings or at the shareholders meeting in February. An earnings
run should be forth coming none-the-less.

MSFT  $150.50 -$0.75 (+$11.81)  The price marches on and so does 
the trial!  Along with the rest of the market, MSFT shot out of a 
canon yesterday, up $4.75 at a new all-time high on slightly 
higher than average volume.  Today's lack of conviction in the 
early morning sell-off, where MSFT dropped to only $148, 
underscores the current strength of MSFT and the market.  
Retirement cash is going back to work in a big way.  MSFT is still 
a major split candidate since, historically, they split like 
clockwork at $140.  We are "pounding the table" for the 
announcement along with earnings (anticipated 1-21-99), barring a 
surprise in the trial.  It's only a matter of time and dips should 
be met with buying.  In the "am not", "are too" news, presiding 
Judge, Jackson, expressed grave concerns that the AOL's purchase 
of Netscape would greatly effect the outcome of the trial.  
Tuesday, Intuit's CEO acknowledged under cross-examination that 
his company switched from the Netscape browser when it turned out 
that Microsoft was far more likely to provide what Intuit needed 
in a timely way.(Reuters)  Justice Department's case looking 
really weak - the market seems to agree.  So do we.  

CSCO  $103.63 +$3.88 (+$10.82)  A great week for CSCO.  By closing 
at another new all-time high on 23 million shares, investors are 
backing this company with cold green cash.  CSCO pierced 
resistance of $98, then $100, without even a hiccup.  The only 
resistance is at its interday high of $105.  Old resistance of $98 
is now support given CSCO bounced off $98 interday, today.  We are 
really bullish on CSCO.  CEO, Chambers was to deliver the keynote 
speech today at the Consumer Electronics Show in Las Vegas.  As of 
this writing, we're unable to report any of his comments.  
However, our Tuesday comments still apply today: "We look for the 
momentum to continue, as CSCO is a Morgan Stanley top 1999 pick, 
has a price target of $120 from DLJ and though a recent splitter, 
is in split range again - probably 3:2 unless shareholders vote to 
increase the shares outstanding.  Zack's expects earnings 
announcement 2-2-99; we expect the split announcement then too.  
A snippet of today's news from CBS Marketwatch, "Cisco and 
communications-equipment maker General Instrument Corp said 
they'll work with AT&T to develop an Internet telephony system 
that would allow AT&T to offer its customers the ability to watch 
TV, send and receive faxes, surf the Net and talk on the telephone 
simultaneously."    Can you say TCI Cable?  CSCO will benefit 
greatly from AT&T's integration of TCI (which see).   As always, 
confirm market direction before playing.

AOL  $147.88 -$1.13 (-$7.25)  Quick bookkeeping error:  We 
incorrectly reported AOL -$2.32 in Tuesday's letter - it is
current for today's writing.  Now we resume:  AOL is still basing 
in the sub-$150 range.  Although they had a nice gain over $2 with 
yesterday's market run, they gave back half of it today.  We still 
view this as a good sign given lower than average volume.  That 
means no sellers anxious to dump the stock or take already huge 
profits.  The funds still need to buy this to accurately represent 
their index funds and we're still looking for a split announcement 
anytime prior to earnings, currently anticipated 2/9. Management 
probably can't wait that long given they've always split in the 
$120 range.  A split announcement stampede and fund buying 
pressure would set up the equivalent of a short squeeze, just 
adding fuel to the fire in a huge price runup.  Today, CIBC 
Oppenheimer, the same broker bringing you the $400 (pre-split) 
price target for Amazon.com, maintained its "buy" rating on AMZN 
while making it very clear that they rate AOL as another premiere 
internet stock in the same league.  A Deutsch Bank analyst stated 
a similar view on AOL and expects further appreciation in the 
stock.  Just like our update Tuesday, this seemingly slow period 
is a good time to buy the dip.  Be patient and execute your plan.  
Another major play in the making.

WCOM  $75.13 -$3.25 (+$3.38)  What the market giveth, the bad deal 
taketh away.  At least that's what investors thought of WCOM's 
rumored $55 billion bid for AirTouch Cellular.  Seriously, this 
bid is 23% higher than either of the other 2 bids and seems a bit 
rich, especially given WCOM's current high debt load incurred in 
it's meteoric growth rate.  Investors assume WCOM feels the pinch 
to compete on all levels worldwide with AT&T, including cellular.  
WCOM has said in the past they don't need it to be a leader, but 
won't comment on the report.  Keep in mind, there was lots of 
profit built into the stock in yesterday's rise.  Today's volume 
was over 37 million shares, so the damage could have been a lot 
worse if this was a real panic sell-off.  It wasn't.  We view it 
as a buying opportunity given we're still up over $3 for the week.  
Always a good idea to protect profits though.  If you started this 
play earlier in the week, today was a great example of how a stop-
limit order can protect those profits.  Still has room to run.  
From Tuesday's update: "Buy dips.  Use stops.  Follow your plan.

T  $82.25 -$0.63 (+$6.50)  Good old-fashioned momentum and 
investor's fresh cash just keep moving T upward.  Yesterday was a 
stellar day for the mother of all Bells - up $3.32 on twice normal 
volume. That tells us investors have lots of confidence in the 
stock.  Today's lack of selling confirms it.  @Home selected AT&T 
to help build out is network to provide simultaneous 
internet/cable/phone/fax/etc. over 15,000 miles of fiber.  
Integrate that with TCI "last mile" access and Wow!  What a 
company!  We expect continued strong upward movement, market 
willing.  Only resistance is at yesterday's high of $82.88.  Still 
a buy on any weakness. 

AGPH  $56.00 +$0.38 (-$2.75)  Darned if we do, darned if we don't.  
AGPH had a lousy day yesterday, not budging off it's previous 
close in the face of great market strength.  We said Tuesday to 
confirm direction before entering the play, but we got no signal 
and had to wait for one today. Today, it actually gained $.38, but 
on very weak volume.  This means there's no buying pressure and 
the stock is drifting.  That's our signal to exit.  We think our 
picks should perform better than this so we're dropping AGPH.


NWK $10.44 -.19 (+.19) High year-end and first of year trading
volume is a signal of possible distribution. Asynchronous 
transfer mode (ATM) switches supplier Network Equipment 
Technologies is experiencing weakness in Asian markets and 
in its leasing business that will result in fiscal Q3 EPS 
"significantly below" the $0.20 expected by analysts surveyed
by First Call. Expects increased expenses in development, 
sales, and marketing for the next several quarters as it 
supports introduction of its new products into strategic 
markets. Stock still trading below breakdown price of $11.

PRMS $12.06 -.06 (+2.88) Stock continues to languish. Possible 
weakness in the telecom sector as Aspect Telecom warns of Q4 
earnings. Telecom sector reaching failed rally point. Reduction
in PRMS direct international revenues is attributable to the 
current economic situations in Asia and Russia. Other obstacles
include indirect channels of distribution, slowdown in 
telecommunications carriers' capital expenditures, mergers of 
the company's customers, quarterly fluctuations, competition, 
limited order backlog.

RI $19.19 -.75 (-2.06) Got the sell off that we were expecting
but did not reach our target. Be patient. After climbing 40% 
after the past three months, this causal dining restaurant 
operation was downgraded from outperform to hold by Wheat First
Union. The stockšs 50-day moving average is $19 while the 100-day
moving average is $17.50. Since the stock is above moving averages,
we recommend closing out position after selling off back to the 
break out price of $17-$18.

BMCS $42.56 -.88 (-2.00) Stock breaking down and couldn't rally
above $44, an important resistance. Look for more downside action.
The distributed systems and application management markets in 
which the Company operates are far more crowded and competitive
than its traditional mainframe systems management markets. The 
Company has experienced long development cycles and product delays
in the past, particularly with some of its distributed systems 
products, and expects to have delays in the future. Delays in new
mainframe or distributed systems product introductions or 
less-than-anticipated market acceptance of these new products are 
possible and would have an adverse effect on the Company's revenues
and earnings. If BMCS break below $40, could garner additional profits. 

LLY $82.38 ­2.75 (-6.50) LLY breaking down below $85, a key support
point, more downside action expected. Classic top side consolidation
in the past few months. Likely distribution happening. A leading 
healthcare management services provider recent topped out at its 
52-week high of $91.31 and showing classic signs of a failed rally 
trading above its 50, 100 and 200-day moving averages. Retracement 
target $75-80 after climbing 30% over the past three months. 

JPM JP Morgan $113.00 +1.75(+7.94)

JPMorgan is the nation's fourth largest bank with $298.5 billion 
in assets. This money center bank operates in a variety of 
capital, commercial, and retail outlets worldwide.

It was a roller coaster year for the large cap banking industry. 
The market drove up stock shares in the sector on mega-mergers and 
expectations of high profits. It then severely punished those same 
stocks on revelations of huge losses from risky hedge fund and 
Russia and third world investments. Only very recently has the 
sector begun to recover. JPMorgan hit 148.75 at its high in April 
and sank to 72.13 at its lowest point in October--a drop of over 
50%! JPM rose from its October low to $117.00 (intra-day) on 
11/23.  However, earnings worries, a holocaust lawsuit, layoff 
announcements, international concerns, and a trading regulation 
lawsuit all took their toll and brought the stock back down to 
$96.56 on 12/14. Currently at $113.00, the stock still has a way 
to go to reach its previous high. However, the banking and 
brokerage industry is taking steps to put most of the negatives 
behind it.  JPMorgan is one of a number of money banks that have 
banded together to prevent another Long-Term Capital Management 
debacle from happening again. In addition, the trading violations 
fine will be over $1million for JPM, and JPM and the other 30-odd 
financial institutions involved in the probe have already paid out 
settlements to individuals, so that chapter will soon be closed. 
Credit quality is better now and loan loss provisions are in 
place. Furthermore, things are looking brighter for JPM as two 
other financial institutions, Lehman Brothers and Morgan Stanley 
Dean Witter, posted much larger than expected fourth quarter 
earnings. The thinking on Wall Street is that maybe expectations 
for the sector were too pessimistic. Big banks with a large 
percentage of revenue derived from securities trading and 
underwriting all rose on the news, including JPM.

We are looking for JPMorgan to move up from here, but use caution 
as the stock approaches $117.00, its December high. If it pushes 
through that possible resistance, it should have clear sailing 
until its earnings report on 1/20.

BUY CALL JAN-110 JPM-AB OI=4264 at $4.38 SL=2.75  ITM/expires 1/16 
BUY CALL FEB-110 JPM-BB OI=1390 at $8.25 SL=6.50
BUY CALL MAR-110 JPM-CB OI= 627 at $8.88 SL=6.75
BUY CALL MAR-115 JPM-CC OI= 983 at $8.00 SL=6.25
BUY CALL MAR-120 JPM-CD OI=1852 at $5.00 SL=3.25

Picked on Jan 7th at   $113.00        P/E=20
Change since picked:     0.00        52 week low =$ 72.13
Analysts' ratings  1-4-10-0-0        52 week high=$148.75
Last earnings on 9/98 est=.80  actual=.58    surprise=28%
Next earnings on12/98 est=.48 versus 1.33 (expected 1/20)

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

On Wednesday, the broad market rocketed to new highs on a day that
was eventually recorded as the 5th-best day in U.S. stock history.
All three of the major gauges set new records as technology stocks
led the market, bringing the tech-heavy Nasdaq Composite to a 9th
record close in 12 sessions. The driving force behind the rally
was the enormous amount of ready investment cash sidelined in late
December and it poured into the market, covering all major sectors.

On Thursday, profit taking drove the market down early but most of
the early losses were regained near the close. The market was only
slightly lower with the Dow off about 7 points while the Nasdaq
squeezed out another record high close. The Presidents impeachment
trial may have initially affected the market adversely but is not
going to have much more effect until a resolution is made. A very
important thing to remember is that the market is always in fear
that some event will be the cause of a new correction.

Our Tuesday plays were part of the huge market rally and only two
were available. At the open, MSPG moved up $6 and was no longer a
favorable position. ATHM was somewhat slower to react to the rally
and the price on the JAN65P/70P was around $0.38 credit. The stock
actually finished the day $16 higher on news of a deal with AT&T.
Our calendar spread with AT&T was also a bit delayed but positions
started trading just after 6:00 AM. The average price was $2.31
debit for the FEB80C/JAN80C spread.

In other portfolio activities;

As suspected, the recent technicals were very bullish for APPL as
it has broken through the intermediate resistance and overcome the
the selling pressure around $42. The original portfolio play has
been closed for a profit but some of you may still be holding the
long position and we will continue to watch this issue for more
positive moves above its new support level. LIPO is losing a bit
of steam with all of the money pouring into the blue-chip issues.
The rally on Wednesday provided an even-money exit for those of
you not out on the first bullish move last week. ATHM and CMGI
continued their incredible runs, both powered ahead again today,
moving comfortably away from our sold positions. Other positive
news is that RSLN is now trading near the maximum profit level and
positions should be closed for at least a $2.25 credit.

BGP was pummeled for a $5.06 loss after the company said that 4th
Qtr earnings would slightly miss their mark. Supposedly, some bad
weather over the past few weeks and unexpectedly strong sales of
its gift certificates (as opposed to actual purchases) accounted
for the shortfall. The only possible saving grace is that on 1/27,
management plans to separately disclose sales and earnings of its
on-line activities. One can only hope they did better there! The
report was a shock to most analysts and they quickly jumped on the
"downgrade" bandwagon. Many of the debit-spread traders were out
on Wednesday's rally with a small profit but the calendar players
were probably still holding positions. The decision now is; when
to sell the long option for the most premium or possibly roll into
another spread (call-credit play?) to recover the initial price of
the position. Good Luck!

QNTM - Quantum Corp.  $24.87     Call-Debit Spread

Quantum Corporation designs, develops and markets information
storage products, including high-performance, high-quality tape
drives, tape media, tape autoloaders, hard disk drives and solid
state disk drives. Coverage was initiated by DLJ in December and
the company also announced a strategic alliance to allow consumers
to take control of television viewing by enabling benefits such as
pause, rewind, slow motion and instant replay of live broadcast
television. At CES, the company is debuting this new product, the
Quantum QuickView. It combines a high-capacity disk drive with
other technologies that make instantaneous time shifting possible.
Earnings are also due in mid-January and some are speculating they
will be higher than expected. Technically, a nice break-out above
previous resistance with excellent volume and buying pressure. The
consolidation should retrace back to about $23 and then this chart
could transistion into a classic stage II.

PLAY (conservative):

BUY  CALL FEB-22.50 QNQ-BX OI=1750 A=$3.87
SELL CALL FEB-25.00 QNQ-BE OI=4547 B=$2.50
NET DEBIT TARGET=$1.25 ROI(max)=100%

Chart = http://quote.yahoo.com/q?s=QNTM&d=3m
MCHP - Microchip Technology  $39.25     Put-Credit Spread

MCHP develops and manufactures programmable microcontrollers,
application specific standard products and related specialty
memory products for consumer, automotive, office automation,
industrial and communications markets. Recently filed complaints
requesting the ITC issue a permanent exclusion order and cease and
desist orders, against Chamberlain Group, world's largest maker of
garage door systems which would bar the importation into and sale
within the United States of products which infringe MCHP's patent.
The investigation concerns the security systems of locking devices
that are activated by remote control, such as a garage or car door
opener which allegedly infringe on MCHP's design. One of the
company's management team was identified by CMP Media's Electronic
Buyers' News, the industry newspaper for purchasing and business
management, as one of the top-25 executives who made their mark on
the electronics industry last year. Some excellent intermediate
support around $37 should help the stock price remain above the
sold strike for 1 week.

PLAY (conservative):

BUY  PUT JAN-30 QMT-MF OI=373 A=$0.18
SELL PUT JAN-35 QMT-MG OI=81  B=$0.75
NET CREDIT TARGET=$0.62 ROI=14% (1 week)

Chart = http://quote.yahoo.com/q?s=MCHP&d=3m
CD - Cendant  $19.93     Calendar Spread/LEAPS

CD operates in the membership, travel and real estate services. CD
offers services such as shopping, travel, home improvement, credit
card packages, car rental, tax services and real estate brokerage
services. The company announced today it has reached a preliminary
agreement to settle one of the primary class action lawsuits that
are currently against the company. This is the beginning-of-the-
end of a long period of uncertainty since this company fell from
grace last year amid accusations of fraudulent accounting methods.
If the potential settlement proceeds as contemplated, Cendant will
record an after tax charge and record an increase in shareholders'
equity. As a result, the potential settlement shouldn't reduce the
company's net book value. In addition it is not expected to reduce
1999 earnings per share. This positive news should boost the stock
easily back into the mid-20's and with more positive news expected
on the horizon, the stock could possibly regain its previous favor.
Technically, a base has formed since early December and with some
renewed institutional interest, this is a very low risk position.

Take a good look at the morning news announcements before opening
a position...the market analysts should have more information about
the effects of this agreement tomorrow. 

PLAY (conservative/long-term):

BUY  CALL JAN00-20 LU-LAD OI=13774 A=$5.00
SELL CALL FEB-20    CD-BD OI=18390 B=$1.38

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 MAR 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=CD&d=3m

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