Option Investor
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Daily Newsletter, Tuesday, 02/16/1999

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The Option Investor Newsletter         Tuesday  2-16-99  
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)
************************************************************
        2-16-99         High     Low     Volume   Advances Decline
DOW     9297.03 + 22.14 9387.66  9234.73  650,911k  1,525   1,533
Nasdaq  2313.87 -  8.02 2368.41  2300.52  817,404k  1,748   2,301 
S&P-100  619.74 +  3.60  626.74   614.94   Totals   3,273   3,834
S&P-500 1241.87 + 11.74 1252.27  1230.13            46.0%   54.0%
$RUT     396.40 -  2.04  402.73   395.60
$TRAN   3120.76 + 23.87 3140.48  3095.33
VIX       32.42 +  1.07   33.42    30.76
Put/Call Ratio      .65
*************************************************************

The king has fallen and all the kings horses and all the kings
men could not put him back together again.

Dell computer announced earnings after the close and it was not
pretty. All the pundits who expected Dell to again soar to new
heights, after the punishing blow they took on Friday, are 
suffering from shell shock tonight. The king of ever increasing
sales, revenue and profits showed a crack in its armor today.
Dell is not bullet proof after all. The direct sales giant
posted great numbers for any other company but the expectations
for Dell were higher. Higher may now be a thing of the past.

Dell announced +.31 EPS, exactly what the street expected. No
whisper beating blowout. Revenues of $5.17 bln was less than
expected. Some estimates were from $5.2 bln to $5.6 bln.
Sales in the Americas were actually DOWN -3%. Desktops were
down -1% and enterprise servers and notebooks were flat.
Sales on the Internet were strong at over $1 bln in the 4th
quarter. About $14 mln a day.

So what happened? Competition. With all the major PC makers
gaining ground in the direct sales market the competition
for Dell is heating up. Compaq, Gateway, Hewlett Packard are
all ramping up their direct models. Four years ago Dell was
the only major direct seller and they were killing the computer
store outlets with build on demand, custom configurations.
Big companies like CPQ, HWP, IBM are not going to sit still
and let a rival upstart steal their business forever. Times
change.

Why does this impact the entire market? In the current tech
led rally the focus has always been on just a few leaders.
DELL, MSFT, INTC, CSCO. The latter three held up their end
with growth and profits and positive outlooks. Their high 
PE ratios are still safe. They are leaders in their fields.
Dell was a leader. Dell had a PE last week of 100. Dell's
competitors have all suffered from rational PEs while
watching Dell command the big bucks. For instance the PE
for IBM is 26, GTW 32, HWP 27.  Now that Dell has shown
some weakness in the game plan the PE field is about to be
leveled. To equate PE to dollars, a Dell PE of 40 would be
require a stock price of $60. A PE of 30 would need a stock 
price of $45. I don't think Dell will fall this far but 
the piper must be paid. 

Even the announcement of a 2:1 split was not able to hold
up Dell in after hours trading. Last I heard Dell was down
as low as $75 (-13 from the close). I heard some rumors
that is was down as much as -$17. The stock split ploy is
obviously an attempt by Dell to soften the blow. They
normally split their stock in the $110-120 range and to 
announce a split at $88 shows they knew in advance how 
bad the earnings would hammer the stock price. Splitting 
again now will put the current outstanding shares at 2.4 
bln and make any future earnings surprises and price gains 
even harder.

The market opened up strong with the Dow up +113 at one
point but the nagging worries that DELL, HWP and AMAT
might miss numbers after the close pushed the averages
back into negative territory by midday. There was a 
small bargain hunting rally in the late afternoon to
finish positive but the storm clouds were gathering. 

What does this mean for tomorrow? Down is my bet. Earnings
problems by a tech leader always ripple through the entire
sector. After hours INTC was down -$3, MSFT -$2 and HWP,
who blew out earnings with a $.91 to $.82 estimated, was
down -$3 in sympathy.

Wall Street has no mercy when leaders lag and tomorrow
could be a bad day. Futures are already down -7.00 on the
news. 

The market has been struggling to move forward at this
level due to a lack of breadth. The averages have been 
dragged along by only a few leaders in each sector. Since
techs have been so strong for so long the apparent earnings
weakness by THE leader will kill the entire sector and
maybe even the broader market. The advance/decline line
was negative again today with 3,834 declines to 3,273
advances. The continued deterioration of the market internals
along with the Dell disappointment could be the catalyst
the market needed to break through support and retest
old lows. You know I have a bullish outlook towards the
long term market. There is no reason for a correction
other than profit taking. If you are looking for reason
don't look on Wall Street. This could be the straw that
broke the camels back. I hate it when I finally turn negative. 
Fortunately whenever this has happened in the past the
market immediately turned around and soared to new highs.
It is as if I was the last remaining bull and everybody 
was waiting for me to turn bearish before buying. If that
is what you are waiting for then get ready. I am leaning
toward a near term correction and strongly advise not
opening any new call positions until the market shakes
off this news and establishes a new upward trend.

Time to revisit holding over earnings again... I got many
emails this weekend about holding over Dell earnings. I
tried to respond to all of them with cautions. Especially
Dell. The standard is so high for Dell there was just too
much possibility for failure. Sure, if Dell had announced
$.40 and beat estimates by 25% then we would be looking for
a blowout to the upside tomorrow. We constantly warn about
holding over an announcement and this is a prime example
of the pitfalls. Take your profit a day or two before and
you will always sleep better.


 
Good Luck

Jim Brown


*******************************************************
Jims Plays
*******************************************************

I had planned to list last weeks plays here today but 
computer problems in the office today kept me from
completing the summary. Look for it in Thursdays newsletter.

When I saw the market internals dropping shortly after
the open this morning I closed all my remaining positions
and I am now entirely in cash. I do not plan to trade
again until after the Feb 23/24th seminar. This will let
me focus entirely on the seminar preparations.


*******************************************************
Options Seminar
*******************************************************

Several weeks ago we announced an options seminar that
OIN was putting on in Denver next week. The response
was so strong that we were unable to accommodate all the
applicants. We scheduled a follow up seminar on Mar 8/9th
to handle the overflow. We were not going to advertise
this one but we have had several cancellations and now 
have room for about 10 people. If you would like to 
attend please email Dana at seminar@OptionInvestor.com
We guarantee you will not be disappointed. The seminar
is taught by the newsletter staff and will focus on trend
trading. This is NOT a beginning options seminar. We
will assume you have a basic knowledge and we will show
you how to take that knowledge and turn it into a profit.  





*******************************************************
Market Posture
*******************************************************
As of Market Close - Tuesday, February 16, 1999 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************

DOW Industrials    9,200   9,500   9,297    Neutral   2.11            
SPX S&P 500        1,210   1,280   1,242    Neutral   2.11   
OEX S&P 100          610     635     620    Neutral   2.11    
RUT Russell 2000     420     435     396    BEARISH   2.4    

NDX NASD 100       1,900   2,150   1,954    Neutral   2.2  
MSH High Tech        930   1,040     938    Neutral   2.11      

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         870     970     867    BEARISH   2.16 *        
CWX Software         620     680     619    BEARISH   2.16 *           
SOX Semiconductor    375     420     394    Neutral   2.11    
NWX Networking       400     450     395    BEARISH   2.12            
INX Internet         470     570     461    BEARISH   2.16 *     

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          630     675     647    Neutral   2.11                  
XBD Brokerage        630     700     668    Neutral   2.5      
IUX Insurance        570     610     599    Neutral   2.11            

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           825     880     871    Neutral   2.11    
DRG Drug             750     795     782    Neutral   2.11      
HCX Healthcare       750     780     776    Neutral   2.11              
XAL Airline          300     330     307    Neutral   1.29                
OIX Oil & Gas        230     250     229    BEARISH   2.16 *                 



Posture Alert

Although we remain Neutral across broad market indices after 
gapping up and giving up most of its gains today, we caution
investors that Tuesday's (2/16) action may likely be a news 
reversal - a bearish development.  To that end, we have turned
BEARISH across select technology sectors and Oil & Gas after
violating near-term support levels.

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

www.OptionInvestor.com/marketposture


******************************************************
Market Sentiment - By Pinnacle Capital Advisors
******************************************************
The Subtlety and Power of News Reversals

Many investors are left in the dust wondering what happened today 
while savvy option traders have already exited the game after
today's news reversal.  What is a news reversal?  A news
reversal is when the market gaps up but does NOT move higher
after seemingly good news has come into the marketplace.  This
happen Tuesday (2/16) after favorable news from Japan caused the
stock market to gap higher more than 100 points and then
proceeded to give up the gain.  See attached chart of the OEX. 
From a technician's point of view, a news reversal is a powerful
bearish development, because it tells experienced traders that
the market DID NOT DO what investors expected.  




As Pinnacle has cautioned subscribers over the past several 
weeks, be careful not to chase this DIP.  The sell-off is likely
not over because of our technical and sentiment indicators.  
Above and beyond today's news reversal, the market is still
working off its failed rally signal on Friday (2/12).  As such,
subscribers should be building a balance attack and developing
hedge positions.  What's more, expectations, as measured by our 
Pinnacle Indexes, are at extreme levels indicating that stocks
may be subject to a precipitous sell-off if expectations are not
met.  Dell Computer, serves as an excellent example.  Tonight
after the close, DELL is trading down by more than $10 in after
hours trading after the PC maker released its earning report
despite announcing a stock split.    

A detail breakdown of Pinnacle Capital Advisors' market
sentiment analysis together with supporting charts, graphs,
tables and explanations can be accessed through OI's
website at:

http://www.OptionInvestor.com/marketsentiment/index.asp





Market Sentiment at a Glance
********************************************************************   
                                Friday      Tues      Thurs  
Indicator                       (2/12)     (2/16)     (2/18)  Alert
********************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (630-655)     5.2         6.3
Underlying Support  (600-610)     2.2         2.1


Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .5          .8
CBOE Equity P/C Ratio              .4          .5                   
OEX P/C Ratio                     1.0         1.4              *  


Peak Open Interest (OEX):
-----------------------------------------------------------------
Puts                              610         610 
Calls                             660         660  
P/C Ratio                        1.20        1.13 





Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                        31.35       32.42              *



Investors Intelligence:
-----------------------------------------------------------------
Bullish                          61.7%      61.7%              *  
Bearish                          25.9%      25.9%              *
		



The Power of Sentiment 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                       (2/12)     (2/16)    (2/18)
-----------------------------------------------------------------
               
                    (650-655)     34.8       40.5
                    (640-645)      7.2       22.0
                    (630-640)      2.2        2.6
Overhead Resistance (630-645)      5.2        6.3

OEX Close                       616.14    619.71

Underlying Support  (600-610)      2.2       2.1
                    (605-610)      2.0       1.9
                    (600-605)      2.6       2.6

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is Heavy at the OEX 630/645
level while the underlying support is weak at the
OEX 600/610 level.


Put/Call Ratio 
-----------------------------------------------------------------
                                Friday      Tues      Thurs
Strike/Contracts                (2/12)     (2/16)    (2/18) 
-----------------------------------------------------------------
CBOE Total P/C Ratio               .52       .84
CBOE Equity P/C Ratio              .36       .50
OEX P/C Ratio                     1.04      1.37


Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday         Tues           Thurs
Strike/Contracts     (2/12)          (2/16)          (2/18)
-----------------------------------------------------------------
Puts                 610 / 16,753   610 / 16,751
Calls                660 / 14,775   610 / 14,824
Put/Call Ratio       1.20           1.13      


 
 


 


Market 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

February 12, 1999                       31.35   *



 



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

February 16, 1999                     61.7        25.9   *




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

Index   Last      Tue   Week
Dow    9297.03  22.14  22.14
Nasdaq 2313.87  -8.02  -8.02
$OEX    619.74   3.60   3.60
$SPX   1241.87  11.74  11.74
$RUT    396.40  -2.04  -2.04
$TRAN  3120.76  23.87  23.87
$VIX     32.42   1.07   1.07

Stock  Price    Tue    Week

VOD    183.88   3.75   3.75 Split Candidate
WCOM    83.00   3.56   3.56 Closed above $80!!
EMC    105.88   3.50   3.50 Momentum is back
ANF     78.00   3.44   3.44 Beat estimates
DH      63.75   3.19   3.19 Surging on retail #s
WMT     87.56   3.19   3.19 Beat estimates
UTX    121.50   2.50   2.50 Closed near high
MWD     90.44   1.94   1.94
MEDI    51.88   1.63   1.63 Light volume today
AMTD    91.81   1.50   1.50 Huge trading range
SLR     87.25   1.25   1.25 Momentum continue
AOL    159.50   1.00   1.00 Four days before split
LOW     54.44   0.50   0.50 Bounce of support
MCD     81.81   0.50   0.50 Splits in March
VISX    60.19   0.44   0.44 Trending higher
PSIX    34.56   0.00   0.00 Holding
SUNW   100.44   0.00   0.00 Resting on 30 dma
EGRP    45.69  -0.31  -0.31 Resisting sellers.
COMS    31.88  -0.38  -0.38 Dropped, no bounce
CLX    129.06  -0.44  -0.44 Resting
LVLT    55.00  -1.00  -1.00 Earnings Thursday
DELL    88.75  -1.13  -1.13 Dropped, Disappointment
MSFT   156.25  -1.50  -1.50 Dropped, Video flaws?
COF    120.00  -1.81  -1.81 Wait for confirmation
GTW     68.00  -2.25  -2.25 Dropped, sympathy to Dell
MDT     81.00  -3.00  -3.00 Dropped, below estimates
ORCL    53.44  -3.25  -3.25 Sitting on support.

Puts

MCHP    27.13  -1.75  -1.75 Breaking below key $30 support
ADBE    42.25  -1.31  -1.31 Breaking below 100dma
BMCS    45.31  -0.75  -0.75 Leaking again
BDX     34.44  -0.44  -0.44 Declining relative strength
WLA     69.25   0.25   0.25 Up fractionally
ERTS    41.13   0.44   0.44 Up fractionally
BKB     37.19   1.38   1.38 Up on banking sector strength
BAC     64.63   1.75   1.75 Up on banking sector strength
PHSYB   65.88   2.13   2.13 Support at $65
PG      89.69   2.19   2.19 Trying to find a direction
AXP    102.19   2.25   2.25 Up on banking sector strength
ELNK    67.25   4.19   4.19 Post earnings bounce



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:
******

COMS $31.88 -0.38 (-0.38)  When playing "dead cat bounces," 
the bounce should come immediately.  Since we initiated it as 
a play back on Thursday (Feb 11th), the Nasdaq's 80+ point
drop on Friday didn't help any, and COMS has continued to 
fall.  While it appears that a bottom may be near, there
doesn't seem to be any investor interest in rumors of a 
takeover by Intel.

MDT $81.00 -3.00 (-3.00) MDT came close to $85 Friday and 
again today, but pulled back after each try. It appears that 
the good news on MDT's new next generation defibrillator, as 
well as its mergers may already be in the stock, and 
resistance is building just below $85. MDT said today that 
third quarter results for Arterial Vascular(AVE), a recent 
acquisition, fell short of expectations, as competition for 
its stents hurt sales. Although it has 2 next-generation 
stents in the pipeline, one will not be released in the U.S. 
until later this quarter, and the other until late in 1999. 
Investors decided the selling wasn't over and proceeded to
punish MDT even after hours.  

DELL $88.75 -1.13 (-1.13)  Toto, we're not in Kansas 
anymore.  We hate being Toto.  While giving us a 2:1 split 
effective March 5, Dell equaled but failed to exceed 
analysts' expectations of $0.31 earnings on 6% lower than 
expected revenues.  Those analysts who stuck their neck out 
Friday were right.  While on the conference call, Michael 
Dell and Tom Merideth, Dell's CFO, rattled off statistics 
related to market share and growth that would be the envy 
of any other player in the business, particularly troubling 
were the comments that "we could have done better", 
"weren't as aggressive", "we missed a beat" and "not 
perfect on our visibility".  With 5 million after hours 
shares traded at as little as $78.50, tomorrow morning will 
be downright UGLY!  The only consolation is that they have 
the biggest backlog of business they've ever had thanks to 
some bid wins as the exclusive provider to 2 Fortune 50 
companies. Frankly, we are unimpressed and expect better 
from Dell.  Dell is still a fine company and we may pick it 
up again after the market has its way with Mikey.  

MSFT $156.25 -1.50 (-1.50)  MSFT committed the fatal error; 
actually, a couple of them.  First, technically, they have 
violated their 30-day moving average, which is an indicator 
they are not likely to move up soon.  The March 26 
effective split date is too far away to make any difference 
right now.  All other technicals too, have moved to 
negative territory.  Second, they are giving a poor 
performance on the witness stand as reported by most media 
sources in their DOJ trial.  Although we expect no affect 
on earnings, the Washington Post reported that "most 
observers of the trial believe the odds are high that the 
judge will rule against Microsoft later this year".  We may 
pick it up as the split nears, but it's "bye-bye" for now.

GTW $68.00 -2.25 (-2.25) GTW started strong out of the gates,
but whimpered out and closed at its lows of the day.  We are
dropping GTW in sympathy to Dell.  Dells earnings were right
on estimates, but after hours it was being killed.  We still
feel GTW is undervalued compared to its peers, but stock
performance short term will be dictated by the market and 
its rival DELL's performance.


PUTS:
******

NONE



PICK NEWS - CALLS
*******************************************************
ORCL $53.44 -3.25 (-3.25) ORCL did not have a good day today. 
After gapping up at the open it traded down the rest of the
day.  The only good news was that ORCL bounced off of support
at $52.50 towards the end of the day.  There wasn't any news on
ORCL today, and maybe that was a part of the problem.  It would
not be a good sign if ORCL were to break below the support at
$52.50.  Be cautious.  Dell's riptide might pull big name 
Nasdaq stocks down even further.

UTX $121.50 +2.50 (+2.50) UTX gapped up at the open, just like
the Dow, but retreated quickly.  Then towards the end of the
day it traded up nicely to close at its high for the day.  UTX
closed just above its 10 day moving average which is at
$121.25.  In the news, UTX confirmed that its automotive unit
is up for sale, and that the first round of bids were received
during the last few weeks.  Analysts have placed the value of
the unit at between $2 to $3 billion.  UTX expects to close on
a deal by early summer.

LOW $54.44 +.44 (+.44) LOW traded pretty flat today.  All of
LOW's shorter term moving averages (i.e. less than 30 days) are
starting to converge, and LOW is starting to lack direction. 
LOW reports earnings next Monday.  We could view the flatness
as a base for LOW to start its pre-earnings run, but it is
running out of time.  We have not had any news on LOW. 

EGRP $45.69 -.31 (-.31) EGRP gapped up at the open and then
drifted back down the remainder of the day.  It closed just
below its 21 day moving average which is at $46.80.  In the
news, EGRP received approval form the SEC and the NASD to enter
the asset management business.  The approvals will allow EGRP
to introduce its own family of mutual and money market funds. 
EGRP plans to launch its first fund, an S&P 500 Index Fund,
next week.  This is another step in EGRP's strategy to
diversify by leveraging its electronic business model.

EMC $105.88 +3.50 (+3.50) EMC posted a nice gain today.  EMC is
starting to regain some momentum, and we are hoping that the
NASDAQ doesn't get in the way.  The next resistance level for
EMC is its 52 week high of $109.88.  In the news, there was
another glowing customer testimonial.  This one was from a
company that provides Internet based patient records services
for healthcare facilities.  They selected EMC because of their
reliability and efficient back-ups.  

ANF $78.00 +3.44 (+3.44)  ANF did decide to announce their 
earnings on Tuesday- and report they did!  They company came 
through with earnings that were 65% higher than that of last 
year.  That equates to $1.12 vs. $0.68 per share a year ago.  
It even crushed estimates of $0.97.  Net sales also increased 
44%.  Not to shabby!  The company went on to say that it will 
be opening 56 more stores in '99.  Investors seemed to like 
the numbers.  The stock jumped +$3.44 to close at its high for 
the day of $78.00.  With the good news leading the way, ANF 
could challenge its resistance and all time high of $79.38.  
But, set your stop losses tight to protect your profits.      

COF $120.00 -1.81 (-1.81)  COF looks to have reached a 
temporary setback.  On Tuesday, it dropped just below its 15 
dma of $122.14.  However, the slight drop doesn't concern us 
too much- yet.  The volume behind the drop was relatively low.  
Only 291,000 shares traded hands when normally the number is 
higher at 420,000.  The absence of buying can cause prices to 
drop with low volumes such as these.  But, until it resumes 
its upward trek with a more normal trade volume, we suggest 
holding any thoughts on buying new options for COF.  

MCD $81.81 +0.50 (+0.50)  McDonald's gave some detailed 
numbers on Tuesday.  Since reporting its earnings back in 
January, the company added that its 1998 free cash flow has 
nearly tripled that of 1997.  (Free cash flow equals cash from
operations minus capital expenditures.)  It also announced 
that it would repurchase 19 million common shares.  McDonald's 
is also splitting 2:1 on March 5th.  Look for MCD to keep 
on moving up if the markets can maintain some stability.  



***** 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  2-16-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


PICK NEWS - CALLS (continued)
*******************************************************

SUNW $100.44 +0.00 (+0.00)  On Tuesday with the help of 
General Electric Co.'s GE Capital Vendor Financial Services, 
Sun formed a new unit called Sun Microsystems Finance to help 
its customers "finance" Sun workstations, servers, and software.  
The news helped SUNW trade as high as $104.13.  But the turn in 
the market caused SUNW to close the day with no change.  Sun 
seems to be hanging in there.  It keeps bouncing off its 30 dma 
which is resting at approximately $100.44.  As long as it keeps 
bouncing and doesn't drop way below that number, Sun still has 
a fighting chance.  It is splitting 2:1 on April 8th.  But, we 
don't recommend initiating new plays until Sun makes a definite 
move upward.   

WMT $87.56 +3.19 (+3.19) Although we did not get the split we 
were hoping for, WMT beat estimates and announced record 
earnings of $1.6 billion in the fourth quarter, an increase 
of 21%. Earnings per share were $.70 versus $.66 the previous 
year. Same store sales were up 8.7%, while overall sales rose 
15%. Tight controls on costs and especially strong sales of 
sporting goods, electronics, and food helped the bottom line. 
The stock climbed $3.19 on strong volume today.

MEDI $51.88 +1.63 (+1.63) MEDI continues to trade on relatively 
light volume. It reached as high as $52.88 today, but closed 
a dollar lower than that. With no news to drive the stock, 
it is still managing to tack on small gains. Possible 
resistance at $54.50.

AMTD $91.81 +1.50 (+1.50) AMTD gapped up over $2.00 at the open 
today and traded in an $11.50 range. This stock can 
experience wide swings in price in a given day. (Today was 
less volatile than many days are.) As we suggested Friday, 
consider day-trading this stock. Use caution. If you choose 
your entry and exit with some care, you should be able to cut 
your risk and day trade it profitably. Remember, AMTD splits 
Feb.23, so the general trend should be up until then. AMTD 
will broadcast its annual shareholders meeting live online 
on Feb.17. Register at www.amtd.com

AOL $159.00 +1.00 (+1.00)  It isn't much of a gain, but 
we'll take it.  Only 10 million shares traded hands today.  
That's only 68% of normal, and actually a good sign unless 
accompanied by strong selling volume.  The market is 
trapped by fear of poor earnings (see DELL) with investors 
sitting on the sidelines looking for direction.  It's tough 
playing anything when the market works against us, but AOL 
is in good position to capitalize on any rally thanks to 
its 2:1 split effective February 22.  Wait to take a 
position until you see strong upward volume.  This is the 
sign that investors are putting money back into the market 
and driving the shares up once again.  Patience is a 
virtue.

WCOM $83.00 +3.56 (+3.56)  In the wake of strong earnings 
last week, WCOM, like a phoenix in the desert, rose on 44% 
greater than average volume, giving us that penetration of 
$82 we'd been seeking before taking a new position.  Market 
willing, it's safe to get back in the water.  We look for 
WCOM to see blue sky for a while since technicals just 
turned positive today.  Confirm market direction first, 
then make your play (again, we are concerned about a Nasdaq
wide pullback in sympathy to DELL's disappointment).
Remember to use stop orders for protection if the market
moves against you.

DH $63.75 +3.19 (+3.19)  Like an umbrella in a rainstorm, 
fund managers and big investors are buying DH as a safe 
shelter in market turbulence.  While volume was lower than 
average, DH closed at its high of the day -- a bullish 
sign.  64,000 shares, priced at $63.75, changed hands at 
the close today while other blocks of greater 50,000 traded 
earlier in the day.  It sounds like a broken record, but 
only 40 million shares are available for daily trade since 
approximately 85% of outstanding shares are institutionally 
owned and therefore not likely to trade.  A Reuters article 
reported today that because of the strong sales in January, 
retailers did not have to resort to heavy discounting, 
which clears store shelves but pressures profit margins 
(Reuters).  Earnings are scheduled March 2.

CLX $129.06 -.44 (-.44) CLX traded in a pretty narrow range
today of $128 to $130.75, considering the market volatility.
There is news that an Indonesian distribution company is in
talks with CLX to be CLX's Indonesian distributor.  They will
have a trial in March.  CLX has gone down the last two trading
days, but on light volume.  After a nice run up, a little 
consolidation helps the stock for its next run.  Resistance
is found at CLX's 52-week high of around $133. 

VISX $60.19 +.44 (+.44) VISX looked as if it was ready to
break out of its consolidation early on today, but the 
market dragged it back down to its prior trading range.  
VISX reached $62 today and though it gave up much of those
gains, it still finished positive.  When the market decides
to breakout of its funk, we feel VISX will jump.

LVLT $55.00 -1.00 (-1.00) LVLT traded as high as $59.13
today, but succumbed to the market pressure.  LVLT announces
earnings before market on Thursday.  LVLT did have news which
announced that RCN Corporation is going to share the cost in
some markets to build its fiber optic network.  LVLT did
come back off its lows and closed right on its $55 support
line.  We do not recommend holding over earnings for any
company unless circumstances dictate otherwise.  Holding
your position over the announcement is a riskier play.

PSIX $34.56 +0.00 (+0.00) PSIX traded as high as $36.50
today, but also came back down with the market.  One sign
of strength for PSIX is its ability to hold positive even
though the Internets got hit hard today.  Remember that
earnings are before market on the 23rd.  We feel an earnings
run is likely.  Make sure of market direction before opening
new plays.

MWD $90.44 +1.94 (+1.94)  MWD had a nice day today and closed
right on its high.  MWD announced they have set up a web
based system to help merchants with Discover Card purchases.
MWD is near some prior resistance.  We would like to see a 
break above $92 on strong volume.  Market permitting, we 
would like to see MWD continue its recent surge.

SLR $87.25 +1.25 (+1.25) SLR had a nice day today in spite of
the market.  SLR's high of the day was $89.75.  Though it 
dropped off this level, we like the fact it stayed positive. 
SLR is calling in $230 million worth of its convertible 
subordinate notes.  They also announced the approval by its
board for its 2-1 stock split.  SLR is nearing its 52-week
high of $93.50.

VOD $183.88 +3.75 (+3.75)  VOD a very nice day.  VOD reached
a high of $184.63.  British telecoms have done well on the 
strong earnings of British Telecom(BTY).  VOD is still $14
shy of its 52-week high, but is definitely showing a nice
reversal off its recent drop.  


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

ADBE - $42.25 -1.31  Stock gave up nearly a point and a 
half while the software company violated its 100-day moving
average today amid Tuesday's (2/16) the technology sell-off.
just couple of point. Adobe announced Tuesday that it will
begin shipping its new After Effects 4.0. This software is
part of Adobe's dynamic media solution which enables creative
professional to develop dynamic, compelling content for film,
video, multimedia and the web.

AXP - $102.19 2.25 Stock snapped up above its 50-day 
moving average following today's strength within the banking
sector. Overhead resistance between $100-105. 
Therefore stock could still fail given the Banking index is
trading below its 50-day moving average. Today, IBM and 
American Express announced they would offer 2 million AMEX
small business credit card holders discounts on IBM products.

BAC - $64.63 1.75 Stock rallied back above its 50-day 
moving average following today's strength within the banking 
sector. Stock still BELOW failed rally price of 65. Bank of
America and Marsico Capital Management, LLC announced today
that Nations Bank had completed its purchase of a 50 percent
interest in Marsico Capital.

BDX - $34.44 -.44  Stock slipping further below key 
support level of $35. Stock trading below 50 and 100-day
moving averages. BDX announce last week the acquisition of 
Biometric Imaging (BMI), a privately-held company serving the
transfusion medicine. 

BKB - $37.19 1.38  Stock traded higher today following the 
strength within the banking sector. Stock still trading below 50
and 100- day moving averages. Bank of Boston announced recently
that it is providing $225 million in financing to Golden Northwest
Aluminum. 

BMCS - $45.31 -.75  Stock beginning to leak again after 
recent rally failed at $46. Stock could come under pressure if 
stock violates near-term support at $43.50. Compaq Computer 
announced Tuesday that its computer services division will offer
a new network services for internet-based networks and announced
linkups to a set of new strategic partners including BMC Software.

ERTS - $41.13 .44  Stock holding at key support level of $40
but still trading below its 50 and 100-day moving average. 
Electronic Arts, the world's largest interactive entertainment
software company, announced today that it has shipped NASCAR
Revolution for the PC. NASCAR Revolution offers an extremely
deep driving experience to race fans.

ELNK - $67.25 4.19  Stock traded higher on the strength 
of its latest earning report which reported that the company
doubled its revenues and subscriber base. Stock still trading
below its 50-day moving average and overhead resistance
between $70-75. 

MCHP - $27.13 -1.75  Stock breaking down after
violating near-term support at $30. Stock now trading well
below its 50 and 100-day moving averages with next support
level at $20.

PG - $89.69 2.19  Stock rebounding after selling off a 
couple of points last Friday (2/12). Stock still trading below
failed rally point of $90.

PHSYB - $65.88 -2.13 (-2.13) Stock rallied back after breaking
down and selling off below $65 Friday (2/12). Stock still
trading below near-term support of $70.

WLA - $69.25 .25 (.25) Stock up fractionally despite rally
within the drug sector. Still trading below declining 50 and
100-day moving averages. Ulcer drug Prilosec last year
became the pharmaceutical industry's first $5 billion
prescription medication.


******************
NEW CALL PLAYS 
******************

No New Call Plays

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

No new Put Plays


*****************************************************
COMBINATION PLAYS   
*****************************************************
A storm on the horizon...

Tuesday, February 16

U.S. stocks ended mixed Tuesday as high bond yields boosted some
financial services stocks but concerns about earnings at blue-chip
technology companies dampened the early rally. The DJIA finished
up slightly at 9297.03 but the technology-heavy Nasdaq ended a few
points lower at 2313. The market was dragged down for much of the
day on concerns of earnings at Hewlett-Packard and Dell; due after
the close of trading. Dell wound up reporting earnings that were
in line with expectations and a future stock split, but still fell
after-hours. In other news, a better-than-expected earnings report
helped Wal-Mart gain $3, boosting the Dow in the process. The S&P
500 Index rose 11 points to 1241.87 but the Russell 2000 Index of
small stocks shed another 2 points to 396.40.
 
AMR was on our focus list this morning; it traded higher with the
market but eventually fell below $55. The debit spread was closed
at $4.00 for a small profit. QTRN also traded lower to a support
area around $45. The bearish portion of the butterfly spread can
be closed for $0.87. TXN was up at the open and the $0.50 target
for the FEB105C/100C credit spread (last Thursday) was available.
That short position should now be fairly safe (Dell earnings!).

NRC continued to rebound today but MSFT failed in the afternoon.
With the mediocre earnings from DELL, the credit spread position
is tenuous so make sure you have an early exit planned for the
short side. If this one continues to slump, we can make money on
the long position as it moves through recent lows around $155.

New Sunday Plays:

UK 	APR42C/MAR42C $0.75   Debit (Fell sharply at 10:00 am)
GTSG	APR65C/APR60P $10.00  Debit (fairly active/easy to enter)
PMS	MAY40C/MAY35P $4.62   Debit (opening prices were inflated)
TECD	MAR22C/MAR22P $3.50   Debit (a $4 move today)	
TSM	APR20C/APR17P $2.75   Debit (hardly even flinched)
RNWK	MAR65C/MAR70C $2.25   Debit (new languages for the RP-G2)
RNWK	MAR55P/MAR50P $1.62   Debit (opened higher then faltered)

We had a few positive comments on the neutral plays and (double
spreads for the over-priced debit straddles). We'll try to offer
more of those when they are available. There is one new straddle
candidate in today's edition...
******************************************************************
				- NEW PLAYS -
******************************************************************
BLS - BellSouth  $49.50     *** Rampant Speculation ***

BellSouth provides local telephone service in nine southeastern
states, wireless service to more than 5.5 million customers in
the US, and international telecom services in 13 countries, while
serving almost two million customers. The company also provides
directory publishing and advertising and wireless cable TV.

Facing competition in its local telephone business (two-thirds of
its revenues), BellSouth is hoping growth in other sectors can
make up for lost local business. They are also seeking permission
to offer long-distance services within its local territories.

The stock climbed an incredible $5 today to the top of its recent
trading range with no "news" and almost no change in the buying
pressure (and just a slight increase in volume). The short-term
history of this stock reflects a tendency to retrace previous
moves almost daily. We have no idea what is happening behind
the scenes but the stock price should continue in one direction
or the other.

PLAY (short-term/speculative):

BUY CALL FEB-50.00 BLS-BJ OI=2301 A=$0.25
BUY PUT  FEB-47.50 BLS-NW OI=317  B=$0.43
INITIAL NET DEBIT TARGET=$0.62 TARGET ROI=25%

Chart = http://quote.yahoo.com/q?s=BLS&d=3m
******************************************************************
CATP - Cambridge Tech Partners  $30.12  *** On the rebound! ***

Cambridge Technology Partners provides information technology
consulting and software development services. Their services
include custom deployment, commerce development, information
technology strategy, management consulting, network services,
and training. They are also continuing a global expansion,
primarily through acquisitions.

CATP recently announced that it expects to hit $1 billion in
revenues by 2001 and sees its fast-paced interactive business
nearly doubling this year. The CFO said said Wall Street's 1999
earnings per share estimate range of $1.06 to $1.15 were very
achievable numbers as the company has been receiving contracts
(to connect clients' computer systems via the Internet) that are
worth between $750,000 and $1 million.

Analysts have also suggested that Cambridge might be a takeover
target of a larger computer consulting firm, especially after
last year's offer by Computer Associates to buy CSC Corp. The
company also commented on their aquisition plans by saying that
they have no immediate targets, but see a good deal of upcoming
industry consolidation as smaller players are swallowed up.

PLAY (long-term/calendar spread):

BUY  CALL JUN-30 TQP-FF OI=221  A=$5.75
SELL CALL MAR-30 TQP-CF OI=1556 B=$2.62
INITIAL NET DEBIT TARGET=$3.00 TARGET ROI=50%

Note: In the long-term calendar spread, we are reducing the net
cost of the long option by the amount of credit from the sale of
the nearer-term option. If the near-term call expires worthless,
we will sell the APR call to further reduce our debit. If the
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 long position 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 should be ahead
in the play even after you buy it back.

Chart = http://quote.yahoo.com/q?s=CATP&d=3m
******************************************************************
LUV - Southwest Airlines  $29.06     *** Still going strong! ***

Southwest Airlines has refined the low-cost, no-frills, approach
to air travel, providing about 2,300 flights daily to about 50
cities in 25 states. To curb maintenance and other costs, they
use 260 fuel-efficient Boeing 737s. Southwest offers a ticketless
travel system to trim travel agents' commissions and has its own
reservation system. Beloved by employees and shareholders alike,
the airline boasts a highly participative corporate culture and
a strike-free string of 25 years of profits.

A nice article recently in Fortune magazine about how well the
company is managed and the positive long-term outlook has made
its way into the stock price. Another short-term factor is that
airlines are reaping the benefit of additional passengers in
what is usually a slow travel period as American Airlines has
cancelled hundreds of flights due to a dispute with its pilots.
Southwest Airlines has seen a sporadic increase in traffic, most
noticeably, in Nashville, where Southwest has a direct flight to
Los Angeles.

The chart is comfortably bullish with positive buying pressure
and money-stream, steady volume and new support near $27.

PLAY (conservative/debit spread):

BUY  CALL MAR-25 LUV-CE OI=1765 A=$4.50
SELL CALL MAR-30 LUV-CF OI=2532 B=$1.19
INITIAL NET DEBIT TARGET=$3.25 ROI(max)=53% B/E=28.25

Chart = http://quote.yahoo.com/q?s=LUV&d=3m
******************************************************************
JNJ - Johnson & Johnson  $86.63     *** LEAPS/Covered-Calls ***

Johnson & Johnson is one of the world's largest, most diversified
health care product makers. The company operates in three sectors:
Consumer products; brands like Tylenol and Motrin analgesics,
Reach toothbrushes, Band-Aid bandages. Professional products like
AcuVue contact lenses, surgical instruments and joint replacements,
and pharmaceuticals; such as Ergamisol cancer treatment, Hismanal
antihistamine, and Ortho-Novum oral contraceptives. J & J expands
its product line with acquisitions and partnerships. They enhance
smaller firms by providing marketing muscle for new products.

In late January, Johnson & Johnson announced another quarter of
excellent growth as sales grew 13% over the same period last year.
Earnings per share also increased 10% and some were surprised that
the company continued to deliver double-digit earnings growth and
improved operating margins, despite a year of severe economic
turmoil and protracted negative currency impact. The company was
upgraded by Prudential the next day.

A weekly chart of JNJ reflects a long-term, steady growth pattern
with a 15-20% yearly increase in the stock price. This makes it a
perfect candidate for a LEAP position and we will enhance the
overall return by writing monthly covered-calls.

PLAY (conservative/long-term):

BUY  CALL JAN00-85 LJN-AQ OI=1671 A=$11.25
SELL CALL MAR-85   JNJ-CQ OI=1401 B=$3.50
INITIAL NET DEBIT TARGET=$7.50 TARGET ROI=$100%

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


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                      DISCLAIMER
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This newsletter is a publication dedicated to the education 
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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
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