Option Investor
Newsletter

Daily Newsletter, Tuesday, 01/19/1999

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The Option Investor Newsletter         Tuesday  1-19-98  
Copyright 1999, 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.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        1-19-98         High     Low     Volume   Advances Decline
DOW     9355.22 + 14.67 9399.25  9210.01  786,785k  1,507   1,499
Nasdaq  2408.17 + 59.97 2408.43  2364.52 1061,400k  2,258   1,892 
S&P-100  623.32 +  6.86  623.32   612.84   Totals   3,765   3,391
S&P-500 1252.00 +  8.74 1253.27  1234.91            52.6%   47.4%
$RUT     430.89 +  3.84  431.08   427.05
$TRAN   3177.85 + 29.32 3189.79  3142.30
VIX       29.80 +   .05   31.72    29.40
Put/Call Ratio      .42
*************************************************************


AtHome dialed Excite's number and Compaq is on hold....


AtHome agreed to purchase XCIT today for $7 billion. This was
a significant premium over the current stock price but when 
you are an Internet stock this could be a one day move. 

Rumors are flying that Compaq is preparing to make a major
Internet purchase maybe as early as tomorrow. Lycos is the
most mentioned possible target.

This Internet mania helped power the Nasdaq to another record
close and is credited with pulling the Dow out of another 
valuation worry induced profit taking session. How can you
be bearish about the market in general when the tech stocks
are continuing to beat earnings estimates and blow away whisper
numbers.

Microsoft announced after the close and showed just how big
the $5 bln gorilla really is. The $5 bln was sales for last
quarter. MSFT announced $.73 vs estimates of $.59 and blew
away the whisper number of $.62. Microsoft was trading up +5.00
after the close. There was no split announcement and this could
be attributed to the trial publicity. They don't want to appear
too prosperous for the penalty phase. The conference call was
typically pessimistic as they tried to keep a lid on analyst's
estimates for the future. I would expect MSFT to gap open on
Wednesday.

The futures are up +6.50 at 7:10 ET and we give the credit to
MSFT and several other announcements after the bell. The fly
in the ointment could be the Alan Greenspan testimony tomorrow
in Washington. He is sure to be asked some "irrational exuberance"
type questions and the answers could be earth shaking. Some
analysts say Mr. G. has been criticized so severely by congress
for his previous market moving performances that future comments
will likely be constrained. Don't bet the farm on this. Alan
is tasked with many insurmountable projects one of which is 
keeping the U.S. markets under control. The recent Internet
"froth" is something that other Fed governors have pointed at
in the past as a sign of a speculative bubble. So even though
the futures are up now, we may see some weakness before the
testimony. If we get by without any earthquake comments then
the week could continue up strongly. The Brazil problem could
even be a muzzle for Mr. G. Better to be quiet than roil the 
markets and have to lower rates again next month to rescue them
again.

Clinton gets a major play tonight with the televised State of
the Union speech. He is under a strong spotlight as people look
for signs of cracks in the presidential armor. What should he do?
Pull out some heavy firepower! He is planning just that. Clinton
will unveil his support for a plan to take some Social Security
funds and put them into the market in a retirement savings account
program. Estimates in the $500-700 bln range are being tossed
about. This is not a new concept but his support for this popular
plan is new and timely given the other problems he is facing. 
Maybe we should keep his feet to the fire longer if he is going
to do us favors like this. Not only would I rather my Social
Security was gaining ground in an account of this style but can
you imagine the market impact of a $700 bln inflow of cash?
Don't count your chickens yet but stay tuned for plan details
if it is ever approved. Opponents claim losses could occur if
a long term bear market were to appear.

I got considerable email about the 10% plan in Sunday's commentary.
Some good and some bad. Most of the good came from traders that
started putting this type of plan into action several months ago
when I wrote about it last. Most of them have multiplied their
accounts by several hundred percent. The negative mail seemed to
come from readers that were new to the newsletter and had small
accounts and were adamant that you should only settle for 200-300%
returns on every trade. We will see what kind of mail I get several
weeks from now when we start publishing the results from the readers
who are going to implement the plan. I had many readers email that
they were going to faithfully try it and report back. Good Luck!
The first ten who can show ten trades will win a years subscription.
Anybody can still play. Just send a recap of your completed plays
after 1/17/99 using the 10-20% plan from Sundays newsletter.

This is going to be an interesting week. Keep your options open
and make those trades. With the put/call ratio at .42 and the
advances only barely beating the declines 1506/1492, we are not
out of the woods yet. Tommorrow could be another record breaker
for the Nasdaq but the broader market internals are still weak.
Just three stocks in the Dow accounted for over +60 points today.
T +7.75, IBM +7.06, GM +4.69. The odds are real good that these
stocks will not be the leaders tomorrow and new leaders are hard
to find. Without these huge gains today we would have been very
negative. -46 without accounting for the positive impact they
had on other Dow components. Keep your fingers crossed.


Good Luck

Jim Brown



Market Posture
*******************************************************
As of Market Close - Tuesday, January 19, 1999 

                   Key Support
Broad Market         /Resistance    Last    Posture/Since  Alert
****************************************************************

DOW Industrials    9,100   9,730   9,355    Neutral   1.15            
SPX S&P 500        1,210   1,280   1,252    Neutral   1.12    
OEX S&P 100          600     635     623    Neutral   1.12   
RUT Russell 2000     420     435     431    Neutral   1.12  

NDX NASD 100       1,900   2,010   2,030    BULLISH   1.19 *   
MSH High Tech        930     980     991    BULLISH   1.19 *   

                   Key Support
Technology           /Resistance    Last    Posture/Since  Alert
****************************************************************
XCI Hardware         830     875     897    BULLISH   1.19 *    
CWX Software         610     665     687    BULLISH   1.19 *         
SOX Semiconductor    360     410     402    Neutral   1.8        
NWX Networking       420     450     448    Neutral   1.8         
INX Internet         470     570     534    Neutral   1.8    

                   Key Support
Financial            /Resistance    Last    Posture/Since  Alert
****************************************************************
BIX Banking          650     710     663    Neutral   1.15              
XBD Brokerage        630     725     664    Neutral   1.14   
IUX Insurance        590     620     596    Neutral   1.15        

                   Key Support
Other                /Resistance    Last    Posture/Since  Alert
****************************************************************
RLX Retail           800     860     822    Neutral   1.8  
DRG Drug             740     795     752    Neutral   1.8    
HCX Healthcare       720     780     730    Neutral   1.8            
XAL Airline          310     350     331    Neutral   1.12              
OIX Oil & Gas        245     260     242    BEARISH   1.14               



Posture Alert

After advancing into record territory and holding, we have turned 
BULLISH across select technology sectors including NASD 100, 
hardware and software.  We remain Neutral, however, across other 
broad market indices and industry sectors.

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

www.OptionInvestor.com/marketposture




Market Sentiment - By Pinnacle Capital Advisors
************************************************************ 

Option Speculators Quiet ahead of State of the Union Address 

With the State of the Union Address and Greenspan scheduled to
speak tomorrow, not much was revealed in the market today with
respect to market sentiment.  Pinnacle is still tracking what
option speculators do over the next couple of days for clues as
to where the broader market is likely to go.

We are entering a new expiration period and therefore some of the
indexes and put/call ratios will become volatile over the next
couple of days as options traders establish new positions.

Pinnacle is still concerned by the excessive Bullish sentiment as
tracked by Investors Intelligence latest poll - 60% Bullish, %30
Bearish.  This is the highest level for bullish sentiment that
we have seen for a while.

Pinnacle's short-term indicators are still flashing bearish
overtones over the near-term so we advise subscribers to
tightly protect their long positions.  Any questions regarding
market sentiment can be directed at:
pinnacle@OptionInvestor.com



Market Sentiment at a Glance  Friday    Tues     Thurs  
Indicator                       (1/15)    (1/19)   (1/21)  Alert
****************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (620-635)     1.7      1.8            
Underlying Support  (595-610)     1.0      1.1



Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .5       .5
CBOE Equity P/C Ratio              .4       .4                *                      
OEX P/C Ratio                     1.2      1.2


Peak Open Interest (OEX):
-----------------------------------------------------------------
 
Puts                              610      610
Calls                             610      610
P/C Ratio                         1.0       .8


Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                         29.75    31.42               *




Investors Intelligence:
-----------------------------------------------------------------
Bullish                          60.0%    60.0%               *  
Bearish                          30.0%    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                       (1/15)     (1/19)   (1/21)
-----------------------------------------------------------------

               
                    (630-635)      2.6       3.0
                    (620-625)      1.1       1.3
Overhead Resistance (620-635)      1.7       1.8

OEX Close                        616.5    622.12

Underlying Support  (595-610)      1.0       1.1
                    (605-610)       .9        .9
                    (595-600)      1.0       1.7

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is Moderately weak at the OEX 620/635
level while the underlying support is moderately weak.



Put/Call Ratio 
-----------------------------------------------------------------
                                Friday     Tues     Thurs
Strike/Contracts                (1/15)     (1/17)   (1/19) 
-----------------------------------------------------------------
CBOE Total P/C Ratio              .52      .54
CBOE Equity P/C Ratio             .38      .39
OEX P/C Ratio                    1.23     1.19



Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday          Tues          Thurs
Strike/Contracts     (1/15)          (1/17)        (1/21)
-----------------------------------------------------------------
Puts                 610 / 8,152     610 /  9,959
Calls                610 / 8,360     610 / 11,799
Put/Call Ratio       .97             .84



 



Volatility Index (VIX)
-----------------------------------------------------------------
                    Major
Date                Turning Point       VIX
-----------------------------------------------------------------
October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38

January 15, 1999                        29.75
January 19, 1999                        31.42



 



Investors Intelligence Survey
-----------------------------------------------------------------
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish
-----------------------------------------------------------------
October 97          Bottom            22.0        48.3       
July 20, 1998       Top               52.0        24.0         
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top ?             58.3        30.0

January 19, 1999                      60.0        30.0   *




Please view this in COURIER 10 font for alignment
*****************************************************
RESULTS THIS WEEK

Index   Last    Tue
Dow      9355 14.67
Nasdq    2408 59.97
$OEX      622  5.66
$SPX     1251  7.63
$RUT      431  3.84
$TRAN    3178 29.32
$VIX     29.8  0.05

Stock  Price  Change

ATI     92.63  9.25 Really worth about $101.25 as of today.
T       91.38  7.13 Finally has it's own Internet portal in an indirect way.
YHOO   323.00  6.00 Excite stole the lime light today
MSFT   155.63  5.88 Earnings Explosion  $0.73 vs. $0.59 estimate
NOK/A  144.00  5.38 Still a split candidate
SUNW   105.31  4.88 Earnings on Thursday/ Split candidate
CSCO   106.38  4.69 Approaching 52 week high.
LXK    102.38  4.31 Earnings next Monday
CHKPF   55.50  4.25 Earnings run for Thursday
AOL    150.50  4.00 Major split candidate for next Wednesday (27th)
LU     114.06  3.81 Earnings on Thursday/ Split candidate
DELL    82.13  3.13 Nasdaq leader and winner
CCU     63.13  2.69 Digital radio appears to be a popular idea
QCOM    66.50  2.63 Another earnings blowout
WCOM    77.25  2.19 Bells continue to suffer in court
EMC    102.13  2.06 Just keeps going up.  Earnings next week
MU      73.00  1.69 New 52 week high
COF    131.50  1.06 Met estimates but no split
PRIA    35.50  1.00 Part of the Nasdaq charge
ETH     49.56  0.63 Consolidating after last week's run
DIS     36.50  0.50
MYG     64.69  0.44 Steady as a rock
JBL     73.75 -0.13 Wait for upward momentum to return
TLAB    84.63 -1.31 Profit taking after last week.

Puts

WLA     66.44 -3.38 A one drug company?
RMBS    87.25 -2.25 Earnings slow down
MCHP    33.38 -1.75 Downgraded by 4 brokers in one day
LLY     79.50 -1.50
BDX     38.38 -1.38
PKN     94.00 -1.38
DD      55.94 -1.06
CPB     44.25 -0.88
BAC     64.00 -0.56 Missed earnings
HSY     60.88 -0.38
AVT     46.00 -0.25
EK      68.75 -0.25
ERTS    47.00  0.50 Up with the Nasdaq
MRK    147.75  0.63


PICKS WE DROPPED
****************
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.


CALLS:
******

None.


PUTS:
******

XCIT $110.00 +42.50 (+42.50) Gapped up on buy out news from
At Home (ATHN). Represents one of the biggest Internet deals
to date. Pinnacle, therefore, dropping XCIT. It does
underscore one of the benefits of buying a put instead of
shorting the stock. Only the premium is lost on the $42 gap.

BMCS $41.50 +1.44 (+1.44) Pinnacle dropping software firm
after BMCS closed above key $41 benchmark and the Software
Index (CWX) closed in record territory.



PICK NEWS - CALLS
*******************************************************
SUNW $105.31 +4.88 (+4.88)  This could be a huge week for 
Sun Microsystems.  Already, the horses are off and running.  
On Tuesday, Sun added +$4.88 to set another all time high in 
intraday trading at $105.44.  In an awesome display of 
strength, it broke and held above its former resistance level 
of $104.50.  Maybe the move was propelled by some formidable 
press releases.  Royal Philips Electronics NV and the Sony 
Corp. will announce an alliance with SUNW.  The plan is to use 
Sun's Jini, a form of the Java programming language, to develop 
software that can network entertainment devices and appliances 
by using the Internet.  The Sharper Image, Digital Video 
Express, 1-800-FLOWERS, Egghead.com, Inc., and Brite Voice 
Systems have all turned to Sun's highly reliable servers, 
storage, and software products to handle their growing needs.  
More than likely the stock is taking off because of Sun's 
earnings announcements which are due out after the market 
closes on Thursday Jan. 21st.  Earnings estimates for SUNW 
are $0.66.  Along with a solid earnings report, we are 
predicting a 2:1 stock split announcement.  SUNW last split 
in November of 1996 when the stock was trading near $60.  
With 950 mln shares authorized and only 380 mln outstanding
they have plenty of room for a split.  After MSFT's huge
earnings explosion, the techs should take off tomorrow,
but then again investor enthusiasm will be fighting
investor fear with Greenspan speaking on Wednesday.

MYG $64.69 +0.44 (+0.44)  Maytag is looking good so far this 
week.  The turn around in the market on Tuesday seemed to 
help Maytag add +$0.44 on the day.  Hopefully the market will 
continue to stabilize and help MYG challenge its latest 
resistance level of $66.00 which isn't too far away 
considering Maytag inched up to $65.25 in intraday trading.  
Maytag announces its earnings on Feb. 4th and remains one of 
our split candidates.

FTL $18.00 +$1.31 (+1.31) Even though we are playing FTL as a
take over play, (on rumors), with this weeks news that the 
clothing maker is now the exclusive apparel supplier for 
all 56 Planet Hollywood Cafes, FTL still opened on a down
note.  But picked up the pace and shot up to $18.75 for 
the daily high, then settling down to close at $18.00.
Rumors had a $23.00 buy out announcement coming on last 
Tuesday but as we all know, it didn't show. FTL is still
showing volatility, so be careful with this one.

CCU $63.13  +$2.69 (+2.69)  CCU was added as a play this 
weekend and did not disappoint us on the first day of trading
News about this new concept in Internet communications
(digital radio) is all around the street.  By investing 
in the research that will carry Net surfing to new levels,
CCU might just catch that big wave.  CCU opened and tested
it's support of $60.00 by dipping its toes below the water 
line at $59.62.  Then came up for a big gulp of air to 
$64.00, and caught a good wave to finish at $63.12 on
the day. Protect your profits, while watching for tomorrow's
next call of "surfs up"!  

EMC $102.13 +2.06 (+2.06) EMC just keeps going up.  It set a
new 52 week high today, and closed at the high.  There was an
interesting article at MSN MoneyCentral comparing EMC and its
rival NTAP.  An observation by the article was that every bit
of new e-mail, every sale over the Internet, and every extra
page view increases the need to build more storage into the
Internet.  It also pointed out that EMC has just begun selling
software to its customer base.  Software sales are expected to
grow from $400 million in 1998 to $1 billion by 2001.  EMC
reports earnings before the open on 1/26 (next Tuesday).  

JBL $73.75 -.13 (-.13) JBL keeps bouncing around and off its 21
day moving average which is currently at $72.82.  We really
need something to get this stock going again.  We have not had
any news, and JBL doesn't release earnings until March.  JBL's
two main competitors, SLR and SCI, both went up today.  JBL has
been following these two, so maybe JBL will start moving up. 
Otherwise, its chart is starting to flatten out and it looks
like its momentum is slowing.  Wait for confirmation of upward
movement before initiating any new trades. 

UTX $109.00 -.69 (-.69) UTX gapped open this morning and then
traded down the rest of the day.  There was an article today
about the run that UTX has been on since October in seeming
defiance of a slowing global economy.  UTX does about 55% of
its business overseas.  Analysts pointed out that the company's
forecast of 15% growth in 1999 has been one of the keys to its
recent run.  UTX releases earnings this Thursday.  Only play
UTX if the Dow is moving up, otherwise wait for the earnings
release on Thursday to see which direction UTX is headed.
There is the possibility of a split announcement with their
earnings but we don't feel that strongly about it.

QCOM $66.50 +2.63 (+2.63) QCOM announced earnings today of 65
cents per share and blew away the estimate of 59 cents per
share.  QCOM also reported the highest quarterly revenues in
its 13-year history.  Revenues were $941 million for the first
quarter of fiscal 1999, an increase of 20 percent over the
first quarter of fiscal 1998.  Net income for the first quarter
was $49 million compared to $37 million for the first quarter
of fiscal 1998, a 32 percent increase.  In other news, QCOM's
joint venture with Microsoft announced their first service
offering, named Revolv.  Revolv is a service that will provide
mobile professionals with secure access to information using a
variety of wireless or mobile devices form anywhere they
travel.  QCOM should have no trouble with its old 52 week high
of $67.38 tomorrow.  

DELL $82.13 +3.13 (+3.13)  More un-noticed, great 
news.  "Dell has become a force to be reckoned with in the 
personal workstation market," said Tom Copeland, 
workstation analyst at IDC.  "Dell's workstation market 
share grew at 186 percent, substantially more than the 
industry average of 36 percent, and far more than any other 
vendor"(Business Wire). Dell is now tied with Hewlett 
Packard as the number 1 producer of personal work stations.  
They announce new products weekly without fanfare.  Dell 
closed at a new all-time high today on average volume in 
the wake of stellar NASDAQ gains.  Volume was 14 million 
shares, a little light for our taste.  But we'll take a $3 
gain any way we can get it.  Look for Dell to move up more, 
market permitting.  Wait for small pullbacks to scale into 
a position.  Earnings to be announced February 16.

CSCO $106.38 +4.69 (+4.69)  Cisco closed $0.12 off its 
high of the day.  Nice show of strength on 21% higher 
than average volume.  No earth shaking news, but 
Cisco has announced 3 new programs to not just sell 
equipment to service providers, but design, manage and 
implement its installation for maximum efficiency and least 
cost to the client.  More important to the bigger picture, 
CSCO is the big beneficiary in developing the Internet, 
including providing equipment for the AT&T/TCI deal.  
Looking strong, but after 3 days of higher closings, keep 
an eye out for the dip, and then make your move.  
Resistance is $108.  Still a split candidate.  Look for 
earnings February 2.

AOL $150.50 +4.00 (+4.00)  Not much AOL news since last 
week.  Today's Internet spotlight held all eyes on @Home's
proposed purchase of Excite, which should have thrown some
competitive cold water on AOL, but it didn't.  Even on 60%
of average volume, AOL added $4.00.  We'll feel a lot 
better when AOL adds volume to confirm the upward price 
movement.  In the meantime, AOL adds more tension to the
rubber band as it consolidates toward a "snap" date between
now and earnings scheduled to be announced on January 27th
after 5:00pm ET.  AOL is also a split candidate at these 
price levels (over $120).  We anticipate a split along with
earnings.  For the next couple of days, target shooting
your entry to coincide with the dip after opening should 
get a better entry.  As always, confirm market direction
first.

WCOM $77.25 +2.19 (+2.19) Baby Bells lost another one in 
court today in an attempt to over turn provisions of the 
Telecommunications Act of 1996 which are effectively 
preventing from entering the long distance business.  Under
the Act, the Bell companies are prohibited from offering
long distance service to their local customers until they 
have opened their local networks to competitors (Reuters).
Though this is beneficial for all long distance carriers,
WCOM appeared to be an indirect beneficiary of AT&T news. 
Today's volume was 20% over average, a very good sign.  We
look for WCOM to test and break through resistance of $79,
having cleared $76 easily.  The more conservative play is 
to wait until it breaks $79 and holds.  But in light of the 
telco sector's momentum, we can make a case for jumping in
after confirming market direction.  Just don't try to catch
a falling knife if profit taking sets in.

T $91.50 +7.25 (+7.25)  Welcome to what seems like 
the newest Internet play.  Michael Armstrong, AT&T's 
chairman, is trying with measurable success, to turn the 
Queen Mary on a dime, from a copper-based dinosaur to a 
broadband fiber based communications powerhouse.  AT&T is 
actually a big beneficiary of @Home's offer to purchase 
Excite.  Here's why:  @Home's largest shareholder is TCI 
who is about to be absorbed into AT&T.  With Excite, AT&T 
now has a substantial "portal" to the Internet which can be 
delivered over TCI's cable infrastructure.  AT&T had, from 
what we could tell, its largest 1-day gain ever on volume 
exceeding the average by 80%.  Resistance has been 
obliterated.  The sky is the limit, market pending.  Watch 
out for profit taking on such a large 1-day run-up, and buy 
the dip. 

MSFT $155.63 +5.88 (+5.88)  MSFT blew away earnings 
estimates true to form, by posting a fiscal Q2 net of $0.73
a share, well ahead of the First Call mean estimate of
$0.59.  Revenues rose 36.8% to $4.9 billion.  As of this
writing, we have heard no news of a split just yet.  But in
after hours trading, the stock was up $9.00 in the $164
range.  For those of you with a position held over earnings
(which we normally don't recommend), congratulations.
Remember to protect your profits with stop-loss/stop-limit
orders.  Also, don't use a market order to enter a play in
the morning, you could be filled at the high of the day.
Instead, if MSFT sells off in the first 30-45 minutes of
trading, enter the play on the rebound.  



***** Play updates continued in section two *****



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DISCLAIMER
**********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.




The Option Investor Newsletter         Tuesday  1-19-98  
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.

PICK NEWS CONTINUED 
**********************************************************
TLAB $84.63 -1.31 (-1.31)  No news to be found on 
TLAB today, just old-fashioned profit taking on 1/3 less 
than average volume.  This really is a "buy the dip" 
opportunity.  We still like TLAB and expect further gains 
when investors de-couple from today's Internet magnet.  
Confirm upward direction before entering a play.

DIS $36.50 +.50 (+.50) Disney edged a little higher today. 
A judge dismissed the $20 million that had been awarded to
Children's Broadcasting Corp. when Disney ended it's
agreement to sell national advertising for a Children's
Broadcasting deal with AAHS World Radio.  Meanwhile,
Infoseek, Disney's partner in the Internet portal GO 
NETWORK (and 43% owned by Disney), has completed its 
acquisition of Quando, another Internet company.  
Infoseek's Ultraseek Server powers the web site search 
capability of many top private and state universities, as 
well as several corporations.  A report shows a drop of 1% 
in all theme park attendance in 1998. However, for Disney, 
that may not be too great a cause for concern. Its Magic 
Kingdom saw a 23% jump in attendance only the year before. 

NOKA $144.00 +5.38 (+5.38) Nokia blasted to a new intra-day
high today of $145.75, and set a new closing high as well: 
$144.00.  Nokia has chosen to use the high performance, 
highly secure processing products made by Chrysalis-ITS. 
Separately, Dolphin Telecom, of France, has chosen Nokia to 
supply and install the infrastructure equipment for its 
Tetra digital wireless communications network in France. 
Nokia plans to double production of mobile phones at its 
plant in Bochum, Germany to meet increasing demand. The 
entire telecommunications market is hot now, and Nokia is 
one of the top ten providers of telecommunications products
in the world, and the leading maker of cellular phones. 
Looking strong, Nokia is also a split candidate.

MU $73.00 +1.69 (+1.69) Micron gained $1.69 on the day, 
even as Novellus dropped after reporting earnings only in 
line with analysts' expectations. The pre-earnings run-up 
for Novellus had been driven by investors' expectations. 
Robert Maire, an analyst at Donaldson, Lufkin, and 
Jennette, issued cautious statements about the semi-
conductor industry. He believes that it has not started a 
full recovery yet and chip stocks are ahead of themselves. 
Intel and Micron must not have gotten the news, for they 
were both up today.  Intel's numbers showed a 12% surprise, 
and Micron is reportedly doing well this quarter.  MU's 
current quarter doesn't end until February, though, and 
earnings won't be out until March--enough time for a bit of 
an earnings run. 

PRIA $35.50 +1.00 (+1.00) Up a full dollar is a decent rise
on a $35 stock.  In fact, this stock was only down one of 
the last 5 trading days, and that was on a down market day.
PRIA has been steadily climbing since its early December 
correction and it looks like it intends to keep going. The 
same factors helping the semi-conductor industry will help
drive up this stock: increasing demand for computers and 
other equipment that use chips, and a decrease in the 
formerly overabundant supply of chips.

LXK $102.38 +4.31 (+4.31) LXK had a stellar day today with its
rise of 4%. This seems to be a pre-earnings run. We have 
noted in past commentaries that LXK has had earnings runs of
an average of $6.00 over the last four quarters. It seems that
this quarter will be no different. There is added expectation
that LXK will announce a split. We have the earnings date as
January 25th. If we hear different we will update you. LXK had
an interesting article written about it's trials in selling 
printers to China. The problem wasn't the printers themselves,
but the paper they were printed on. The paper was so difficult
that LXK sent reams of paper to their researchers and told them
to develop a printer that would print on the ancient paper. Shows
the extent at which companies are willing to go in this world
economy.

ATI $92.63 +9.25 (+9.25) ATI did as expected and gapped open
on Tuesday. The open was $95.75, over $3 above the close of
the day. ATI and VOD have stated the deal needs to be completed
by December 31st, 1999. The deal states that ATI shareholders
will get 1/2 share of VOD plus $9 in cash. This will cause the
value of the deal to change as time goes by. ATI is obviously
trading well below the true value of the deal, but this is
common until the deal is finalized.  If you want to play 
the rest of this deal (since currently ATI should be worth
$101.25 based on VOD's close today):

*We suggest waiting for the next dip.
BUY CALL FEB-85 ATI-BQ OI= 6868 at $10.00 SL=7.50 ITM $7.63
BUY CALL FEB-90 ATI-BR OI=10024 at $ 6.88 SL=5.25
BUY CALL APR-90 ATI-DR OI=  658 at $ 9.25 SL=6.75

LU $114.06 +3.81 (+3.81) LU had a pretty good day on Tuesday
and closed just $.75 off its highs for the day.  We are now
just $6 from LU's 52-week high.  We have verified LU's earnings
date.  Earnings will be announced before the market opens on 
the 21st of January (this Thursday). We are seeing a nice 
earnings run which should continue until the earnings release. 
Watch for pullbacks to initiate new plays. There are always 
times to purchase, just be patient and buy the dips.

XIRC $42.00 +2.13 (+2.13) XIRC shot up today on the expectations 
of it's earnings announced after the close today. We had the 
earnings date as January 21st, so we apologize for the mis-
information.  For those of you that are holding XIRC, the 
earnings came in at $.39 a share.  This is $.04 more than
estimates and a penny ahead of the whisper. If anyone is
thinking of buying into XIRC, wait for a pullback after the
gap open.  XIRC's earnings were $.11 same quarter last year.
XIRC unveiled high-speed ISDN data support for its Global-
Access RealPort Ethernet+Modem and modem-only integrated
PC cards. This technology connects notebook PCs at 128Kbps.

COF $131.50 +1.06 (+1.06) COF announced earnings today and 
they came in right on estimates of $1.04. This originally
pushed shares of COF down slightly. As the day played on,
COF traded up and ended up at its high of the day. The whisper
number was the same as the estimate. COF is sitting right 
around its 52-week high. If the market continues to trend up
then COF should be a leader. Their earnings rose from $.86 a
share in the same quarter last year.  We were a little bit
disappointed that they did not announce a split.  We are 
guessing that COF's management does not have a split clause
in their compensation.  They receive some pretty big bonuses
if they can get COF's share price to $175 within the next
2 1/2 years. 

CHKPF $55.50 +4.25(+4.25) CHKPF took off today and closed just
1/2 a point off its intraday highs. CHKPF blew by its prior 52-
week high on strong volume. CHKPF's earnings are on the 21st,
and we are seeing the effects of an earnings run. CHKPF has
historically blown away earnings estimates. CHKPF's last five
earnings surprises have gone like this: 13,22,28,23,78. These
are percentage surprises. Numbers like these cause an earnings
run. Though a split isn't eminent, they do have shares to do
a split.

ETH $49.56 +.63 (+.63) ETH traded in a range of $49.13 to $50.75. 
Not a bad day considering that ETH is not in the technology 
arena.  ETH announced earnings on the 13th of January and beat
estimates by $.02.  The general feeling out there is that 
furniture stores had a great holiday season.  ETH is still $17
away from its 52-week high.  This leaves a lot of room to go.

YHOO $323.00 +6.00 (+6.00) YHOO had an interesting day.  YHOO
opened at $340, which was a premium of $23 above Friday's close.
YHOO traded as high as $345 and as low as $318.  YHOO got it's
boost from the purchase of XCIT by @Home.  This has stirred up
speculation that other consolidation is in the works.  YHOO has
had a strong correction over the last week and this could be
the start of a new Internet frenzy. This remains a risky play. 
Wait for upward confirmation.  YHOO continues to be a blue-chip
of the Internet.  The price of Exodus Communications rose 34% 
from the mention that it is in a deal with YHOO. Remember, YHOO 
has a split coming up at the end of the month (about 3 weeks).


PICK NEWS - PUTS
*******************************************************

AVT $46.00 -.25 (­.25) Stock experiencing continued weakness off of
recent earnings warning. Stock now under short and long-term moving
averages. Lots of overhead. Could to retest 52 week lows at $35. 
stock lost .25 in mixed trading on Tuesday (1/19). Tighten protective
stop loss - $48. 

BAC $64.00 -.56 (­.56) The financial sector under pressure because of
Brazil. Stock gave up -.56 on Tuesday (1/19). Recommend
staying with position while BAC stays below $65.

BDX $38.38 ­1.38 (­1.38) Topside consolidation makes for conservative
play. Stock is unlikely to go much higher than the trading range of
about $43 in the next 3-6 monthsŠ Earnings are projected to be
$1.57 share for fiscal 99 with a PE of 24.5, fairly pricey. Stock
trading just above key $38 benchmark. If Stock violates support at
$38.00 could retest low set back in September at $34. Tighten
protective stop loss - $40. 

CPB $44.25 -.88 (-.88) Stock gave up another nearly $1 during
the mixed trading on Tuesday (1/19). Stock still under
pressure with considerable overhead at $49.

DD $55.94 ­1.06 (­1.06) Stock gave up what it gain on Firday
(1/15). Stock still below declining moving averages and
trading just above key support level of $52.. Tighten
protective sell stop to $58.25.

EK $68.75 ­.25 (­.25) Stock gave up another .25 today in
mixed trading and still trading below key benchmark support
of $70. Stock also downgraded by Morgan Stanley Dean Witter.

ERTS $47.00 +.50 (+.50) The stock up fractionally during Tuesday
Fridayıs strong tech rally. Still sitting precariously at it 200-day
moving average. Tighten protective sell stop to $49.25. Whisper
number of $1.18 per share for earnings due to be released on 1/21/99. 
Pinnacle believes that holiday enthusiasm, if any, will be short-lived
by the realities of an increasing complex and competitive market for
entertainment software. If ERTS trades below $44, could retest prior
low of $34-39.

HSY $60.88 -.38 (­.38) Stock gave up .38 Tuesday (1/19) and 
trading below key $62 benchmark. Tighten protective
stop to $62.25

LLY $79.50 ­1.50 (-1.50) 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. Sold off $1.75
after rallied over $6 last Wednesday. Stock now just trading
above key $77 benchmark. Tighten protective sell stop to
$80.25.

MCHP $33.38 ­1.75 (­1.75) Stock gave up nearly $2 after being
downgraded by Alex Brown. Stock trading below consolidation
of $36-40. Tighten protective stop to $36.25

MRK $147.75 .63 (.63) Keep an eye on MRKıs key benchmark
at $145. If MRK trades below this key benchmark, it could
re-test support at $136 at its 200-day moving average. Drugs
starting to see sector rotation after Fidelityıs Magellan
Fund reported that MRK is among top 10 holdings.

PKN $94.00 -1.38 (-1.38) Beginning to sell off after consolidating
tightly in upper range ($90-98). We still anticipate a sell-off and
retracement to $86.

RMBS $87.25 ­2.25 (­2.25). Stock traded lower today after the high
flying chip company whose technology speeds the action of Nintendo
game machines, said its near-term earnings faced a slowdown.

WLA $66.44 ­3.38 (­3.38). Stock gapped down today after Salomon Smith
Barney downgraded stock. Stock now trading below key $67 support
benchmark. Tighten protective sell stop to $70.25.

******************
NEW CALL PLAYS 
******************
F - Ford Motor Co. $63.94 (+1.94)

Everyone knows who Ford is and what they do, but did you also
know that Ford is not only the second largest producer of 
cars and trucks but is one of the largest providers of
financial services in the world?

Not over twenty years ago, certain analysts had all but
the nails in the coffins of the U.S. Automobile Industry.
"A dying industry" it was said to be, "no innovation", a 
"lack of direction", "inefficient".  Let's get back to reality.
Ford Motor Company has taken on a huge European market and 
done quite well thank you.  Their recent acquisitions of an
aluminum stamping company, the assisting of Poland, which is
the second largest auto production country in Eastern and 
Central Europe.  Plus recent media reports of Ford taking 
a 10% stake in Nissan.  Almost forces you to take notice of 
a company with all this potential.  We have and we are adding 
Ford as a new play. 

First call has Ford reporting earnings on this Thursday, 
Jan. 21, while we don't recommend holding over earnings, 
this play has a couple of more days of a possible run up to
the announcement.  If it posts a positive surprise, you may
want to consider jumping back in if you miss the run up. 

BUY CALL FEB-60 F-BL OI= 944 at $4.87 SL=3.00
BUY CALL FEB-65 F-BM OI=1030 at $2.37 SL=1.00
BUY CALL MAR-60 F-CL OI=2980 at $6.00 SL=4.25 
BUY CALL MAR-65*F-CM OI=1562 at $3.75 SL=2.50

Picked on Jan. 19th at $63.99         PE=11.71
Change since picked     +0.00         52 week low =$31.12
Analysts Ratings 3-8-5-1-2            52 week high=$66.50
Next earnings  01-21  estimate =  $1.25 
Chart = http://quote.yahoo.com/q?s=F&d=3m


******************
NEW PUT PLAYS 
******************

NONE

******************************************************************
COMBINATION PLAYS   Merger-mania dominates the telecom group...
******************************************************************
U.S. markets closed higher Tuesday and the Nasdaq hit a new record
high amid optimism about President Clinton's State of the Union
address tonight. The DOW closed up 14 points at 9355 after falling
significantly earlier in the session. Internet/Tech stocks soared,
driving the Nasdaq up 60 points to 2408.20. Traders said rounds of
program trading linked to stock index futures sent stocks lower in
the early part of the volatile session. Post-market earnings and
positive expectations forced investors to speculate in afternoon
trading and that led to a closing frenzy. Traders and analysts are
amazed that investors continue to demonstrate bullish sentiment on
Technology, Internet and Telecom issues.

Our portfolio was quite active, first the new plays: ABI was our
conservative bull-call spread (FEB45C/50C) and the prices near the
open were favorable at $2.87 debit. HUM was the calendar/time play
and the opening price for the MAY20C/FEB20C was $1.25. GMSTF moved
higher right away but there was an opportunity near 10 am to fill
the spread (FEB40P/45P) at $0.50. ELN surprised us with a morning
rally but the best we could manage without "legging" in was $0.75
credit for the FEB80C/75C bear-call spread. COF wandered for most
of the day, the average price for the FEB105P/110P credit spread
was $0.62.

Other activities: We closed the ATI (LEAPS/covered-calls) spread
just after the open for $9.50 credit. There just wasn't any reason
to risk a loss with a successful merger (shrinking volatility/time
values in the options) expected to occur. LU was another morning
exit and we closed the debit position for $3.00, (a $1.25 profit.)
FTL finally started moving again and the positive activity offered
an easy exit for our FEB15C/20C bull-call spread. A closing price
of $2.38 was available and after watching it fall last week, we
decided to take the safe route; $0.87 profit. LUV was up almost $2
at one point and the FEB22C/25C spread closed easily for $2.25 to
achieve a profit of $1.00. OXHP was a calendar position and we
opened the FEB20C at $1.25 against our existing MAY20C for a new
debit of $1.50. WCOM was another open calendar spread and we sold
the FEB75C for $5.25 to reduce the cost basis on our LEAP to $5.62.
NXTL was the final play and our GTC limit of $5.00 was filled near
the end of the day to close the call option. A profit of $2.12 was
the overall outcome for the position.

Other notable portfolio movers included: GM, up almost $5.00, SUNW
up almost $5 and CPQ was $3 higher on news of a possible Web-deal.

Today's plays are mostly speculative positions based on smaller
Internet and Telecom stocks. That's where the action is right now
and the speculation is fairly cheap...
******************************************************************
				- NEW PLAYS -
******************************************************************
PTEK - Premiere Technologies  $11.38   *** Internet IPO? ***

Premiere Technologies provides enhanced communications services.
PTEK services include 800-based services, voice messaging,
enhanced document distribution and conference calling. Recent
speculation and heavy option volume concerning some of the new
technology from the company. Some say it involves USA.net and the
ability to listen to your email messages and post email via voice
from any touch-tone telephone. PTEK's communications management
technology may be used for their mail engine. Others are betting
that PTEK ownership of Usa.Net and Web.Md will create revenue if
either company goes public. The recent hype of internet IPO's
make this a favorable speculation play, using current momentum
and taking advantage of overpriced options.

PLAY (speculative):

BUY  CALL MAR-12.50 TQO-CV OI=18   A=$1.68
SELL CALL FEB-12.50 TQO-BV OI=2010 B=$1.06
NET DEBIT TARGET=$0.50 TARGET ROI=100%

Chart = http://quote.yahoo.com/q?s=PTEK&d=3m
******************************************************************
OMPT - Omnipoint  $14.06     *** Telecom Takeover ***
  
Omnipoint offers digital personal communications services (PCS) to
16 million customers in the US as well as in 30 countries (via 45 
international roaming partnerships) around the globe through GSM
(global systems for mobile communications) technology. Worldwide
PCS services are obtained by the use of a subscriber information
access card. Omnipoint also designs and sells phone handsets for
vendor partners including Ericsson, Mitsubishi, Motorola, Nokia,
Northern Telecom, Sagem, and Siemens. Just another small telecom
getting attention as the merger-mania continues. The short term
momentum has this stock over-extended but the risk is worth the
reward if it finds a partner. A March position gives us time to
sell-off some of the initial debit.

PLAY (speculative):

BUY  CALL MAR-15 QTT-CC OI=20   A=$2.25
SELL CALL FEB-15 QTT-BC OI=1156 B=$1.25
NET DEBIT TARGET=$0.87 ROI TARGET=75%

Chart = http://quote.yahoo.com/q?s=OMPT&d=3m
******************************************************************
SCUR - Secure Computing  $26.75     *** Positive Earnings? ***

Secure Computing Corporation designs, develops, markets and sells
complete network security solutions, including firewalls, filters,
authentication and network services. Earnings are due shortly and
the whisper number is moving higher. SCUR is expected to maintain
a 30-50% growth rate and now option interest is increasing with
rumors of a stock split. Paine Webber reiterated a "BUY" rating
with a conservative target of $30. The technical outlook is very
bullish with recent support around $20 and heavy buying pressure.

PLAY (very conservative/debit-spread):

BUY  CALL FEB-20 UQU-BD OI=62  A=$7.75
SELL CALL FEB-25 UQU-BE OI=298 B=$3.87
NET DEBIT TARGET=$3.50 ROI(max)=42%

Chart = http://quote.yahoo.com/q?s=SCUR&d=3m
******************************************************************
RHD - R. H. Donnelley  $17.68     *** Internet Yellow Pages ***

R. H. Donnelley is the largest marketer and publisher of yellow
pages advertising in the U.S. with operations in about 15 states.
The company is a spinoff from business marketing and purchasing
information provider Dun & Bradstreet. They sell yellow page ad
space to more than 500,000 small/midsized businesses and service
organizations. R. H. Donnelley services more than 275 directories
through contractual relationships with local telephone service
providers such as Ameritech, Bell Atlantic and Sprint. The company
is expanding into Internet marketing by selling advertising space
on electronic yellow page Web sites. The play is based on Internet
momentum and good technical support around $15.

PLAY (long-term/debit-spread):

BUY  CALL MAR-15.00 RHD-CC OI=0  A=$3.50
SELL CALL MAR-17.50 RHD-CW OI=50 B=$2.12
NET DEBIT TARGET=$1.25 ROI(max)=50%

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




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                      DISCLAIMER
*************************************************************
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.


The Option Investor Newsletter         Tuesday  1-19-98  
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.


**********************************************************
Great Expectations - By Pinnacle Capital Advisors
**********************************************************

With a number of key corporate earnings reports due out this
week, we have highlighted below the companies that will likely
have the greatest impact on the overall market.  Keep close
track of these companies.  If they beat expectations, we are
likely to move higher.  If not, we are likely to re-test our key
support levels again.

Options traders playing the Technology sectors, watch Microsoft
on Tuesday.  Microsoft will likely dictate the climate for
the technology sector for 1Q99.
 
Reporting                            Estimated   Pinnacle
Date       Company                         EPS      Index
--------------------------------------------------------------

Hardware:
1/19 WDC   Western Digital Corp.         -1.01        5.4
1/20 QNTM  Quantum Corp.                  0.24        6.2     
1/20 SGI   Silicon Graphics, Inc.        -0.19        7.2  
1/21 GTW   Gateway                        0.78        1.4
1/21 IBM   Int'l  Business Machines       2.45        5.6
1/21 IOM   Iomega Corp.                   0.05        8.3
1/22 SEBL  Siebel Systems Inc             0.16       11.3
1/22 STK   Storage Technology Corp.       0.51        5.9
1/21 SUNW  Sun Microsystems, Inc.       - 0.66       10.6

Software:
1/19 CA    Computer Associates            0.61        4.5
1/19 CPWR  Compuware Corp.                0.45       11.6
1/19 CTXS  Citrix Systems Inc             0.49       15.1 
1/19 MSFT  Microsoft Corp.                0.59       10.8
1/20 CHKPE Check Point Software           0.47       13.0    
1/21 BMCS  BMC Software                   0.39        4.6
1/21 SYBS  Sybase Inc.                    0.05        3.8

Semiconductor:
1/19 XLNX  Xilinx                         0.40       13.2
1/20 CRUS  Cirrus Logic                   0.04        6.6
1/20 TXN   Texas Instruments              0.54        6.5
1/21 CUBE  C-Cube Microsystems Inc.       0.31        9.1
1/21 LSCC  Lattice Semiconductor Corp     0.43        9.9  
1/21 ADPT  Adaptec Inc.                   0.21        8.3
1/21 QLGC  QLOGIC Corp.                   0.70        4.5

Networking:
1/19 ASND  Ascend Communications          0.31        5.3
1/19 FORE  FORE Systems                   0.10        9.5
1/19 NETA  Network Associates             0.46        1.3
1/19 NVLS  Novellus Systems               0.23        3.0
1/19 QCOM  Qualcom Inc.                   0.59        8.7
1/21 LU    Lucent Technologies            1.00        4.5

Telecommunications:
1/20 USW   US West , Inc.                 0.73        7.0
1/21 AIT   Ameritech Corp.                0.61        3.8
1/21 BEL   Bell Atlantic                  0.69        2.1

Internet:
1/19 ONSL  Onsale Inc                    -0.16        7.0
1/20 ATHM  At Home Corporation           -0.06        4.4
1/20 DCLK  DoubleClick Inc.              -0.26        2.9
1/20 SPYG  SpyGlass Inc.                 -0.15        5.2
1/21 XCIT  Excite Inc.                    0.04        5.0

Financial:
1/18 PNC   PNC Bank Corp                  0.92        8.6       
1/19 BK    Bank Of New York               0.40        1.7
1/19 ONE   Bank One Group                 0.88        7.2
1/19 BAC   BankAmerica Corp.              0.93        2.4    
1/19 COF   Capital One Financial          1.04        4.9
1/19 CMB   Chase Manhattan Corp.          1.19        4.0
1/19 JPM   Morgan (J.P.) & Co.            0.38        6.2
1/19 WFC   Wells Fargo Inc.               0.46        9.3
1/21 BKB   BankBoston Corp.               0.70        9.4
1/21 BT    Bankers Trust New York Corp    0.58         .6

Brokerage:
1/18 SCH   Schwab (Charles) Corp.         0.23        4.5
1/19 MER   Merrill Lynch & Co             0.64        4.3
1/20 PWJ   Paine Webber Group             0.55        3.8
1/21 AMTD  AmeriTrade                     0.09        2.4
1/21 DLJ   Donaldson Lufkin & Jenrette    0.49        4.5

Pharmaceutical:
1/19 PFE   Pfizer Inc.                    0.52        2.2
1/20 BMY   Bristol-Myers Squibb           0.90         .7

Airline:
1/19 DAL   Delta Air Lines, Inc.          1.25        8.4
1/19 NWAC  Northwest Air.                -1.47        2.6
1/20 AMR   AMR Corp.                      1.16        1.7
1/20 UAL   UAL Corp                       1.47        1.6
1/20 U     US Airways Group Inc.          1.21        2.9
1/21 LUV   Southwest Airlines Co.         0.28        4.3

Oil & Gas:
1/19 SLB   Schlumberger Limited           0.50        1.8
1/21 XON   Exxon Corporation              0.57        1.8

Consumer:
1/18 CCE   Coca-Cola Enterprises         -0.09        1.8
1/20 GM    General Motors Corp.           2.61        2.5
1/21 CLX   Clorox Co.                     0.54         .8
1/21 DIS   Disney (Walt) Productions      0.24         .8
1/21 F     Ford Motor Co.                 1.27        9.8
1/21 S     Sears, Roebuck And Co.         1.45        4.6
1/21 PRD   Polaroid Corp.                 0.12        1.1



Excessive Optimism / Pessimism

Often times when companies release corporate earnings, the stock
will move/gap up or down depending on the level of expectation
built into the stock prior to the release date.  This level of
expectation can be measured, in part, by the Call/Put ratio and is 
represented by our Pinnacle Index figure.  The average Pinnacle
Index is 2.0.  Therefore, an index appreciably higher than 2.0
reveals a high level of optimism while an index lower than 2.0
reveals a high level of pessimism.  For aggressive options traders,
we have highlighted companies reaching extreme expectation levels
below:

For example, the company with the highest and lowest expectation
reporting this week is Citrix (CTXS) and Bankers Trust (BT) with a
Pinnacle Index of 15.1 and 64, respectively.  This suggests that if
Citrix does not beat their estimate on Tuesday, they are likely to
sell-off.  Conversely, if Bankers Trust beats their estimate or 
reports any favorable news, they are likely to move higher.

Reporting                            Estimated   Pinnacle
Date       Company                         EPS      Index
--------------------------------------------------------------

Great Expectations:
1/19 CTXS  Citrix Systems Inc             0.49       15.1 
1/20 CHKPE Check Point Software           0.47       13.0    
1/19 XLNX  Xilinx                         0.40       13.2
1/19 CPWR  Compuware Corp.                0.45       11.6
1/22 SEBL  Siebel Systems Inc             0.16       11.3
1/19 MSFT  Microsoft Corp.                0.59       10.8
1/21 SUNW  Sun Microsystems, Inc.         0.66       10.6
1/21 LSCC  Lattice Semiconductor Corp     0.43        9.9  
1/21 F     Ford Motor Co.                 1.27        9.8
1/19 FORE  FORE Systems                   0.10        9.5
1/21 BKB   BankBoston Corp.               0.70        9.4
1/19 WFC   Wells Fargo Inc.               0.46        9.3
1/21 CUBE  C-Cube Microsystems Inc.       0.31        9.1
1/19 QCOM  Qualcom Inc.                   0.59        8.7
1/19 DAL   Delta Air Lines, Inc.          1.25        8.4
1/21 ADPT  Adaptec Inc.                   0.21        8.3
1/19 ONSL  Onsale Inc                    -0.16        7.0


Low Expectations:
1/21 BT    Bankers Trust New York Corp    0.58         .6
1/20 BMY   Bristol-Myers Squibb           0.90         .7
1/21 CLX   Clorox Co.                     0.54         .8
1/21 DIS   Disney (Walt) Productions      0.24         .8
1/21 PRD   Polaroid Corp.                 0.12        1.1
1/19 NETA  Network Associates             0.46        1.3
1/21 GTW   Gateway                        0.78        1.4
1/20 UAL   UAL Corp                       1.47        1.6
1/20 AMR   AMR Corp.                      1.16        1.7
1/19 BK    Bank Of New York               0.40        1.7
1/19 SLB   Schlumberger Limited           0.50        1.8


The Power of Sentiment Analysis 

Last October (1998), Pinnacle Capital Advisors tracked corporate
earnings reports and advised subscribers about the impact that 
excessive optimism and pessimism can have on the stocks's performance
following the release of its quarterly earnings report.  If you 
recall, we identified several stocks that reached excessive sentiment 
levels including Intel (INTC) and Pfizer (PFE).


Reporting                            Estimated   Pinnacle
Date        Company                        EPS      Index
--------------------------------------------------------------
Excessive Optimism:
10/13 INTL  Intel                          .79       5.2
10/13 JNJ   Johnson & Johnson              .70       3.7
10/15 AAPL  Apple Computer                 .49       3.6

Excessive Pessimism:
10/13 JPM   JP Morgan                     1.08        .4
10/12 C     Chrysler                       .87        .7 
10/14 PFE   Pfizer                         .57        .9     
10/13 GM    General Motors                 .98-      1.2
10/16 G     Gillette                       .30       1.3
10/14 MER   Merrill Lynch                  .56       1.5



The first is Intel (INTC).  The semiconductor powerhouse had
rallied ahead of its earnings report Tuesday night (10/13) and closed
at $83.88.  What's interesting is that they beat the street's estimate
by 9 cents and yet the stock gapped down the next morning (10/14).  
And despite the 330 point Dow rate cut rally on Thursday (10/15), the 
stock had trouble taking out its recent previous high of $85.88.  Here, 
our sentiment analysis alerted subscribers that expectations had gotten 
ahead of itself and that despite the good news, the stock had trouble 
advancing.

We saw the opposite in the case of Pfizer (PFE).  This blue-chip 
Pharmaceutical company had sold off more than 20% from its summer high
($120) to close at $95.50 before its release Tuesday night (10/13).  
Here, Pfizer actually missed its estimated earnings by a nickel.  
Although the stock initially gapped down the next morning, it quickly 
rallied and closed higher. Our message: it's all about understanding 
and managing expectations.


Pinnacle Index 

What is the Pinnacle Index.  It is simply the put/call ratio at key 
overhigh benchmark levels.  Typically, there should be two (2) calls 
for every one (1) put.   So when this ratio reaches extremes levels, 
it can presage key turning points in the stock.  The average Pinnacle
Index, therefore, should read 2.0.

One of the key components that separate OptionInvestor.com from any 
other advisory services is our sentiment indicator or Pinnacle Index.
The Pinnacle Index is designed to measure the level of overhead 
resistance at key overhead benchmark levels. This analysis can give 
savvy option traders a jump on other traders.

It's important to note that the Pinnacle Index, like many
sentiment indicators, is a contrarian indictor.  This means
that the stock can and will go higher or lower despite what
our sentiment indicators might suggest.  However, our
experience has shown that the market is subject to a
precipitous sell-off if the Pinnacle Index reaches extreme
levels.  



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