Option Investor
Newsletter

Daily Newsletter, Thursday, 02/25/1999

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The Option Investor Newsletter         Thursday  2-25-99  
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)
************************************************************
        2-25-99         High     Low     Volume   Advances Decline
DOW     9366.34 - 33.33 9396.19  9233.32  741,295k  1,045   1,957
Nasdaq  2326.82 - 12.56 2334.22  2286.91  860,366k  1,658   2,320 
S&P-100  623.25 -  1.70  624.95   612.79   Totals   2,703   4,277
S&P-500 1245.02 -  8.39 1253.41  1225.01            38.7%   61.3%
$RUT     392.69 -  2.57  395.26   388.97
$TRAN   3220.15 - 29.45 3250.51  3183.56
VIX       28.70 -   .11   31.91    28.70
Put/Call Ratio      .73
*************************************************************

Not quite the bottom, but real close!

The Dow slipped over 300 points from yesterdays high and 
almost touched the recent support at 9200. Traders looking
for an entry point at the bottom of our recent trading range
were eager to step back into the dip and the market bounced
over +133 points off its low for the day. The drop was caused
by a falling bond market and worries of interest rate hikes
in the future. 

With bonds under 5.5% yield investors are more than likely
to buy stocks for a higher yield. With rates over 5.5% the
bond market starts looking more appealing as a safe haven
with a reasonable yield. With the yield at 5.6% the bonds
continued to lead the market lower and extended the afternoon
sell off from yesterday.

Stronger than expected economic data released this morning
renewed concerns that the Fed will be raising interest rates
before summer to cool the economy down.

Alan Greenspan warned traders in his Humphrey-Hawkins
testimony before Congress yesterday that the Fed would be 
forced to take action if the economy continues to expand at
its current pace and developing markets continue to recover
at their current pace. Either way we can't win. Global economy
is down, market is down from earnings worry. Global economy
is up, market is down from economy overheating and interest
rate increases. Go figure.

Another cause for worry was the drop in the dollar compared
to the yen. Traders feel the imbalance is due to Japanese
investors selling their positions in the U.S. markets and
repatriating the proceeds to Japan to bolster their balance
sheets before the end of the current quarter.

The strong bounce was helped by the banking sector which
held its ground and actually closed positive. If analysts
really thought the interest rate would rise sharply then
the banks would be the hardest hit. Since the sector is
still showing strength the feeling is we might only see
a retraction of one of the recent rate cuts and not a big
rise.

Some analysts feel the market may continue to lose ground
over the short term due to the negative internals but others
point the the continued rebounds off 9200. If the closing
rally holds tomorrow then the 9233 low of today could be
considered a "higher low" and a successful retest of the
previous low. All good signs.

Remember that a -310 point drop in the Dow over about a
four hour period in the market, could always trigger a 
technical relief rally AND that rally could be short lived.
We of course hope that it is just not "business as usual"
and back to the 9200-9400 trading range. We will not know 
until the 9400 upper range is broken and held. A successful
retest of the 9600 high could start us on the way to 10,000.
I am not currently convinced this will happen any time soon.
The advance decline line is still severely depressed and
any meaningful rally must include a reversal of this trend.

Traders were optimistic that the end of day bounce would
carry over into Friday and the futures are up slightly at
present. I would be cautious about starting new positions
until the market has established a new direction.

The first Option Investor Seminar is now history and was
a stunning success. Everyone that attended had a great time
and to our amazement many were trying to reregister for
the overflow seminar scheduled for Mon/Tue Mar 8th/9th.
This was true confirmation for us that it was a quality
product and filled a definite need. It was really fun
meeting subscribers and listening to your success stories
and yes, some not so successful stories. Attendees came
from as far away as Italy, Mexico City, Boston, Hawaii.
Many friendships were started as attendees traded stories
and got new ideas from not only the OIN and OIA staff but
from other traders as well. I really enjoyed meeting all
of the attendees (at least is seemed like all) personally.
I hope the individual consultations not only from myself 
but the rest of the staff as well will provide a great
benefit to your trading. I think the entire staff came 
back energized with the feeling that we are making an
impact in the lives of our readers. We are really looking
forward to the March seminar and a chance to meet and talk
with readers again.

Have a great weekend!

Jim Brown



*******************************************************
Market Posture
*******************************************************
As of Market Close - Thursday, February 25, 1999 

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

DOW Industrials    9,200   9,500   9,366    Neutral   2.25  *            
SPX S&P 500        1,225   1,280   1,245    Neutral   2.11   
OEX S&P 100          610     635     623    Neutral   2.11    
RUT Russell 2000     420     435     393    BEARISH   2.4    

NDX NASD 100       1,900   2,150   1,974    Neutral   2.19    
MSH High Tech        930   1,040     960    Neutral   2.19       

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         840     970     863    Neutral   2.25            
CWX Software         620     680     629    Neutral   2.23            
SOX Semiconductor    375     420     389    Neutral   2.11    
NWX Networking       410     450     409    Bearish   2.25  *            
INX Internet         450     570     501    Neutral   2.19       

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          630     675     657    Neutral   2.25  *                
XBD Brokerage        630     700     686    Neutral   2.25  *     
IUX Insurance        570     625     610    Neutral   2.25  *           

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           825     880     866    Neutral   2.25  *   
DRG Drug             750     795     786    Neutral   2.25  *     
HCX Healthcare       750     780     776    Neutral   2.25  *              
XAL Airline          300     330     322    Neutral   1.29                
OIX Oil & Gas        230     250     226    BEARISH   2.16                  



Posture Alert

After challenging new territories and failing, we have turned 
Neutral across select industry sectors.  We have also turned 
Bearish across the Networking sector after breaking below its 
50-day moving average.  We want to caution investors that 
several sectors are revealing failed rallies (lower highs) and 
it could lead to other sectors turning negative.

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

www.OptionInvestor.com/marketposture


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

After challenging new territories, this week's aborted market 
breakout could represent the beginning of a market correction if 
investors become complacent or too optimistic.  As one scans the 
respective industry sector charts, he now finds some pretty 
powerful top reversal signals on indices that are beginning to 
roll over. We already know that the Russell 2000 (RUT) and the Oil 
& Gas (OIX) have been trading below their declining 50-day moving 
averages. Today, however, Networking, has quietly slipped below 
its 50-day moving average after popping its head up during 
Monday's strong rally.  Several other technology sectors including 
hardware (XCI) and Software (CWX) are not far 
behind.



 

Pinnacle is very suspect of the market at this time and believes 
that the market will likely begin to flatten out, consolidate in a 
trading range before rolling over into a correction given our 
technical and sentiment indicators.  As such, we encourage 
subscribers to develop a balance attack and begin to look for 
hedge/short opportunities.

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                       (2/19)     (2/23)     (2/26)  Alert
********************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (620-635)     1.3        1.0         .9
Underlying Support  (595-610)     1.2        1.3        1.5


Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .9         .5         .7
CBOE Equity P/C Ratio              .7         .3         .5 
OEX P/C Ratio                     1.3        1.2        1.8      


Peak Open Interest (OEX):
-----------------------------------------------------------------
Puts                              610        620        620
Calls                             610        610        610
P/C Ratio                         1.1        1.1        1.2


Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                        30.23                 28.70




Investors Intelligence:
-----------------------------------------------------------------
Bullish                          55.7%       55.7%     54.1%  *  
Bearish                          28.7%       28.7%     31.5%  *
		




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                       (2/19)     (2/23)    (2/26)
-----------------------------------------------------------------
               
                    (630-635)      2.1       1.5        1.0
                    (620-625)      1.0        .9         .9
Overhead Resistance (620-635)      1.3       1.1         .9
   
OEX Close                       620.27    635.45     619.00

Underlying Support  (595-610)      1.2       1.3        1.5
                    (605-610)      1.2       1.4        1.6
                    (595-600)      1.1       1.3        1.5

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is light at the OEX 620/635
level while the underlying support is light at the
OEX 595/610 level.


Put/Call Ratio 
-----------------------------------------------------------------
                                Friday      Tues      Thurs
Strike/Contracts                (2/19)     (2/23)    (2/26) 
-----------------------------------------------------------------
CBOE Total P/C Ratio               .70        .50       .68
CBOE Equity P/C Ratio              .51        .30       .45
OEX P/C Ratio                     1.03       1.24      1.75


Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday         Tues           Thurs
Strike/Contracts     (2/19)         (2/23)         (2/26)
-----------------------------------------------------------------
Puts                 610 / 8,435     610 / 9,304    610 / 9,764
Calls                660 / 7,650     620 / 8,773    620 / 8,200

Put/Call Ratio       1.10            1.06           1.19


 


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 19, 1999                       30.23   *
February 25, 1999                       28.70   *


 
 
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   6, 1999                     58.3        30.0   
January  13, 1999                     60.0        30.0   
January  20, 1999                     61.7        25.9   
January  27, 1999                     60.7        28.2   

February  3, 1999                     60.0        26.7   
February 10, 1999                     61.7        25.9   
February 17, 1999                     55.7        28.7   
February 24, 1999                     54.1        31.5 *



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

Index    Last    Mon    Tue    Wed  Thur  Week
Dow    9366.34 212.73  -8.26-144.75-33.33 26.39
Nasdaq 2326.82  58.41  34.34 -36.97-12.56 43.22
$OEX    623.25  14.98   0.20 -10.51 -1.70  2.97
$SPX   1245.02  32.92  -0.96 -17.77 -8.39  5.80
$RUT    392.69   5.52   1.19  -3.75 -2.57  0.39
$TRAN  3220.15  97.06  -9.86  27.89-29.45 85.64
$VIX     28.70  -1.43   0.13   1.88 -0.11  0.47

Stock   Price    Mon    Tue    Wed  Thur  Week

AOL      87.19  12.63   1.50  -0.44 -0.38 13.31 post split depression
SLR      46.00   2.00   3.06   1.25 -0.25  6.06 Resisting post split
VOD     185.19   6.56   0.06  -1.06 -2.19  3.37 Split candidate
AMGN    126.75   2.50   2.25  -1.88 -0.25  2.62 Splits 2:1 Tomorrow
LOW      58.94   1.38  -1.88   1.94  0.44  1.88 Resisting market weakness
DH       62.94   2.19   0.63  -1.06  0.00  1.76 Holding on to its gains
WCOM     85.88   0.81  -1.06   0.00  1.94  1.69 Charging ahead
PSIX     35.38   0.75   1.63   0.19 -0.94  1.63 Up 5% for the week
SCH      69.94   2.88   0.88  -3.81  0.94  0.89 Sitting on support
EMC     104.50   0.25   4.13  -3.31 -0.50  0.57 Announced Split
WMT      85.00   3.50  -0.75  -2.94  0.44  0.25 New highs Wednesday
CMA      64.81   2.75  -1.25  -0.13 -1.13  0.24 Wait for reversal
AXNT     36.13  -1.63   2.25   1.00 -1.50  0.12 Bounced off 30 dma
PVN      98.50   5.56   1.81  -2.13 -5.20  0.04 Bond reaction
COF     123.88   5.50   3.19  -3.56 -5.13  0.00 Bond reaction
LVLT     56.75   2.06   0.00  -1.50 -0.81 -0.25 Range bound?
MEDI     55.13   0.50   0.47   1.53 -3.13 -0.63 Profit taking
MCD      84.06   0.06   0.06  -0.69 -0.94 -1.51 Resting for Split run
PG       89.81   1.19  -2.25  -1.19  0.25 -2.00 Dropped
MWD      89.69   4.00  -1.13  -6.13 -0.06 -3.32 Resting on Support
UTX     122.00   1.06  -1.44  -0.94 -2.13 -3.45 Bi-weekly dip pattern
OSSI     41.81   0.13  -0.38  -1.38 -2.19 -3.82 Profit taking, splits on 3/2

Puts

BMCS     41.56   1.44   0.88   0.13 -5.44 -2.99 Downgraded hard
ELNK     61.19  -1.56   4.50  -3.94  0.13 -0.87 Still best Internet play
WHR      43.00  -1.25   1.25  -0.69  0.72  0.03
BDX      33.50   0.69  -0.13   1.00 -1.31  0.25 Broke key support
ERTS     40.50   1.00  -0.50  -0.13  0.00  0.37 Barely holding
ADBE     43.06   1.44   0.00  -0.25 -0.44  0.75 Overhead at $45-50
BKB      40.56   1.38   1.50  -0.88 -0.06  1.94 Dropped
WLA      67.25   3.56   2.25  -1.50 -0.94  3.37 Worst performing drug


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:
******

PG $89.81 +.25 (-2.00) PG broke through the support we referred
to on Tuesday.  PG tried to recover a bit today, but not enough
for our liking, so we are going to drop them as a pick.  We
probably need to have PG trade through the $94 level before
considering them again.  

PUTS:
******

BKB - $40.56  -.06  (1.94)  Stock has traded above its support
level of $40 and its 50-day moving average.  We, therefore are
dropping the stock as a put play.



PICK NEWS - CALLS
*******************************************************

AMGN $126.75 -0.25 (+2.62)  AMGN is splitting tomorrow, 
Friday February 26th.  As predicted, AMGN made its split run 
up until Tuesday's close.  Then market troubles on Wednesday 
and Thursday halted any further upward movement in AMGN 
before the split.  We want to highlight two points to help 
you learn from this play.  All along we have been warning 
you to set your stop losses tight to protect your profits. 
We also recommended selling before the actual split.  If you 
did either of the above, you were safe from the tumble AMGN 
suffered later in the week.  Following the rules can greatly 
help you when surprises affect the market and the options 
you own.

COF $123.88 -5.13 (+0.00)  COF had been having a break-through 
week until bond concerns bombed the markets on Wednesday and 
Thursday.  Capital One had flown past its 30 dma earlier in 
the week only to head immediately back below it on Thursday.  
So basically, we are right were we started the week- no change.  
We still have a bullish outlook for COF and the banking sector.  
But, confirmation is the key.  Wait for the market to rebound 
before heading into new plays.   Days like today are why you
use trailing stops!

MCD $84.06 -0.94 (-1.50)  Good thing McDonald's isn't 
splitting until March 5th.  That should provide enough time 
for MCD to recover from this week's bond/inflation concerns.  
Even after investor's decided to pull out of some positions, 
McDonald's managed to stay above its 30 dma.  That is a good 
sign.  But, we highly suggest waiting for a reversal in the 
market and MCD's before initiating any new plays.      

MEDI $55.13 -3.13 (-0.63)  MEDI had been having a great week 
until Thursday's volatile market hit the stock for a loss.  
However, MEDI still managed to reach an all time high of $59 
in intraday trading on both Wednesday and Thursday.  We would 
like to see MEDI break and hold above that recent resistance 
level before initiating new plays.  If the markets can rebound, 
hopefully they will push MEDI over the hump.  On Thursday, MEDI 
also announced an alliance with Ixsys to further develop 4 
antibodies to help in the fight against cancer.  The potential 
value of the union could generate as much as $50 million, not 
including royalties, if they are successful.    

OSSI $41.81 -2.19 (-3.82)  On Sunday when we were initiating 
OSSI as a play, we expected the company to "fire up the 
barbie," not jump in it!  The stock has been affected by the 
huge swings in the market as of late and is currently down 
-$3.82 in this week's trading.  The stock is under going a 
combination of consolidation and profit taking.  The fact 
that the stock is splitting 3:2 on March 2nd could help the 
stock regroup and head back up once the markets settle.  
Wait for the green signals first!

WMT $85.00 +0.44 (+0.25)  Wal-Mart initially started the week 
with a bang.  In early trading on Wednesday, it even set an 
all time high at $89.50.  But the bonds had something to say 
about that as investor's grew leery.  Wal-Mart proceeded to 
lose some ground.  However, it wasn't about to quit.  It 
managed to bounce off its 30 dma and finished with another gain 
by the close on Thursday.  In other news, a judge in New Mexico 
upheld a $2.3 million award to two women who sued Wal-mart 
with sexual harassment complaints when they worked at Sam's 
Club, a unit of Wal-Mart.  Even with lawsuit money to be paid, 
WMT should continue to rebound if the markets can back it up.  

EMC $104.50 -.50 (+.56) EMC bounced off of its 30 day moving 
average today and recovered nicely towards the end of the day. 
EMC has posted a small gain for the week.  The situation has
been helped by EMC announcing a 2 for 1 stock split today. 
Implementation of the split is subject to stockholder approval
and an increase in the number of authorized shares at the
annual shareholder meeting on May 5.  If approved at the
shareholder meeting the record date for the split will be May
14 and the distribution date will be May 28.

UTX $122.00 -2.13 (-3.44) UTX is holding true to its trading
pattern of the past couple of weeks.  One up week, and then one
down week.  This is the down week.  As we mentioned on Sunday,
UTX will run to a new high one week, and then pull back the
next.  In the news, UTX received an order for $3 billion of jet
engines from UPS.  UTX will start delivering the engines next
year.  We wouldn't initiate any new trades in UTX until we get
some confirmation of upward movement.  

LOW $58.94 +.44 (+1.88) LOW has been slow and steady this week. 
We had some profit taking earlier in the week after the
earnings announcement on Monday, but LOW posted a nice gain on
Wednesday.  LOW gapped open to a new 52 week high today, but
then traded down.  In the news, LOW announced that the pricing
on the 5.5 million share common stock offering will be $58. 
The offering represents 1.56% of the total outstanding shares
of LOW, so we don't believe it will have a material impact on
the share price of LOW.  

PVN  $98.50  -5.19 (+5.25) PVN looked strong Wednesday 
morning, setting a new high of $108.81, but it sank with the 
market to close at only $103.75.  Today it continued down and 
lost another $5.19.  Long term, the stock still looks good, 
but with the current market weakness, PVN may see continued 
near term profit taking.  Look for a good bounce off its 30-day 
moving average at $92.00 before initiating new plays.  If the 
stock breaks below this level, it could keep going as investors 
try to lock in profits.  Again, another excuse to use trailing
stop losses!

AXNT $36.13 -1.50 (+.13) AXNT gave back Thursday most of its
gains for the week.  This isn't much of a surprise with the
drops the market has had in the last two trading days.  AXNT
did show amazing strength on Wednesday as it finished up even
though the market dropped drastically at the end of the day.
Another nice sign was the strong bounce off the 30-dma($35).

CMA $64.81 -1.13 (+.25) CMA has now suffered three straight
down days in a row, but still has a small gain for the week.
CMA is still holding above its 30-dma($63.00) and is well
above its support of $60.  The down days appear to be profit
taking because the drops have been moderate and the volume 
has been below average.  Watch for CMA to turn up before 
initiating new plays.

LVLT $56.75 -.81 (-.25) LVLT is in a trading range.  The
chart shows that the stock has hit its resistance level of
$60 seven times in the last three weeks.  On the other hand,
LVLT has bounced several times off the $55 level.  This
is what happened in the last few days.  On Wednesday, the
stock hit $60 and fell back.  On Thursday, LVLT hit $55 and
came back up.  The prudent play would be to wait for a break
above $60, this would cause some serious short covering.  
Playing bounces off the $55 level could be very profitable, 
but more risky.  LVLT did announce its plans to offer its
network to the city of Atlanta.

MWD $89.69 -.06 (-3.31) MWD really took a hit on Wednesday
with a loss of over $6.00.  Thursday didn't start out much
better, but MWD bounced strongly off its 30-dma($87.75)to 
close almost even.  Most financials have taken a hit with
the fear of a rise in interest rates.  MWD is still a 
takeover candidate, though there hasn't been any news to
speak of.  If the markets are up tomorrow, MWD should do 
well.

PSIX $35.38 -.94 (+1.63) PSIX has held very strong this week.
The stock finished slightly positive on Wednesday with just
less than a dollar loss on Thursday.  PSIX is up around 5%
this week even with the market volatility.  On Wednesday,
First Union Capital Market raised its rating on PSIX from
hold to buy and BancBoston reiterated its buy rating and 
raised estimates for earnings.  They also placed a six-month 
price target of $51.

SLR $46.00 -.25 (+2.88 split adjusted) SLR traded post-split 
today and held up pretty strong.  SLR had a very nice pre-
split run and could continue to be very strong into earnings.  
Earnings are scheduled for the 15th of March.  As SLR's 
earnings date draws closer, we will check with investor 
relations for a firm date.  Watch for a post-split dip to 
initiate new plays.



***** 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         Thursday  2-25-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

VOD $185.19 -2.19 (+3.38) VOD has had some negative days this
week, but is still positive from its big gain on Monday.  On
Thursday, VOD bounced off a very strong resistance level.  
This level is at VOD's 10 and 30-dma.  These two moving 
averages have met at the $184 level.  This could move VOD up
over the near term, but make sure this level holds.  VOD is
still a very strong stock split candidate.

AOL $87.38 -0.19 (+7.19 split adjusted)  AOL began trading
at their 2:1 split price Tuesday.  Since our last report,
AOL has traded as high as $91.81 intra-day, which serves as
new resistance.  Volume dropped to 20 million shares,
however, which tells us that AOL may head into a post-split
blues or consolidation since it's $10.88 (split-adjusted)
rise in the last 8 trading days.  Keep your stops set close
so you don't lose your profits.  We don't recommend starting
a new play until there is clear upward market direction and
volume returns to the stock.

WCOM $85.88 +1.94 (+1.75)  This is the kind of day we like 
to see in WCOM - the stock moves up on greater than average 
volume, even while the market trend is down.  It gives us 
confidence for the future.  Technicals are still strong.  
Earlier this week, the Supreme Court ruled that the FCC has 
the authority and power to force the local phone companies 
to allow access to competitors before local phone companies 
offer long distance services.  This was expected, and 
further solidifies the ability of the competing phone 
companies to thwart the effort of the copper dinosaurs to 
keep them out of their local market.  We expect the trend 
to continue, but confirm market direction before playing.

DH $62.94 +0.00 (+1.75)  Looks like little action on little 
volume - true.  But here's the rationale.  First, DH closed 
near its high of the day after bouncing off its 30 DMA.  
Second, with such high institutional ownership, not many 
shares are in public hands, which means any additional 
demand (volume) will drive the price up.  No news for the 
last 9 days.  Watch for upward movement, then make your 
play.

SCH $69.94 +0.93 (+0.88)  After a strong beginning this
week, Schwab gave it all back in yesterday's dive.  Today
was a positive move down and back up through its 10 dma.
The stock hit a new all time high on the 23rd.  If the
market bounces higher look for SCH to climb.  As a 
side note, it looks like it was Schwab's turn this week to 
have down time affect its online trading system.  They are 
also upgrading their systems to handle the huge increase 
in users.   


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

WHR 43.00 +0.38 (-0.31)  Even with the above average 
volume, WHR is having trouble getting over $44.  WHR is 
trading well under its 30 DMA.  Any downturn in the market 
will send WHR into the vortex.  Other than the transfer of 
their India unit to a subsidiary, there is no news.  Wait 
for stock reversal to the downside, then make your play. 

ADBE - $43.06  -.48  (1.19) Stock still trading below key 
overhead support levels of $45-50 and its 100-day moving 
average.

BDX - $33.50  .25  (.25) Despite strong market rally, stock
continues to leak below key support level of $35.  Stock 
trading below 50 and 100-day moving averages. $35 benchmark 
now serving as overhead resistance.

BMCS - $41.56  -5.44  (-3.00) Stock hit hard today after after
Prudential Securities analyst Douglas Cook downgraded the stock
to an accumulate from a strong buy. The stock is down $6 or 12%
to $41. The company also restated earnings and revenue for fiscal
1998. 

ERTS - $40.50 .00  (.38) Stock holding just above at key support
level of $40 but still trading below its 50 and 100-day moving 
averages despite the market's early week rally.

ELNK - $61.19  +.13  (-.88)  Stock just hanging on a key 
underlying support at $60.  Stock one of a few internet 
companies under 50-day moving average.  Stock still trading
below its 50-day moving average and overhead resistance
between $70-75. Best Internet play on the short side if the 
Technology group begins to roll over. 

WLA - $67.25  -.94 (+3.38) Stock snapped back a bit following
the strong market rally at the beginning of the week. Target 
$65 but could break down beyond this benchmark.  Still the 
best Drug play on the short side.


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

None


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

None

*****************************************************
COMBINATION PLAYS   
*****************************************************
Wednesday, February 24

U.S. stocks were mixed Tuesday in a choppy session that was mostly
driven by comments from Federal Reserve Chair Alan Greenspan. The
economy, interest rates and high stock prices dominated his focus
and spurred an early drop in blue-chip stocks. After fluctuating
much of the day, the DJIA ended little changed at 9544. Technology
stocks seemed to shrug off his comments and the Nasdaq rallied 32
points to 2374. While Wall Street's key indices were mixed, the
overall breadth was negative, with declining stocks outnumbering
gainers on both the NYSE and the Nasdaq.

Portfolio plays:

The LUV debit spread was closed at $4.50 credit for a profit of
$1.38. The CTXS position (MAR90C) was sold at $4.50 on the rally.
We also rolled-down on the (short) calendar positions for DIS;
MAR35C at $1.56 and SKYT; MAR20C at $1.12. Both are bearish in
the short-term but we may be able to recover some of the original
debit. The straddles have also been very active. We exited the
TSM APR20 call $2.38 and the TECD MAR25 put at $4.25. Both plays
are now profitable and we still own the opposing positions.

New Tuesday Plays:

NXTL MAR35P/MAR30P  $3.50 Debit (Not much movement, easy entry)
DAL  MAR50C/55C/60C $0.00 Debit (Gapped up $4, no play yet!)
PG   APR80C/85C/90C $0.75 Debit (Followed the market down)

Thursday, February 25

U.S. markets slumped Thursday and the rise in long-term interest
rates shook Wall Street. Investors are again questioning the high
priced share valuations. There was a significant drop during the
day, but stocks climbed back from their worst levels near the
close of the trading session as investors appeared to make sense
of the underlying economic strength that caused the rates to rise.
The DJIA closed off 33 points at 9366 and the technology-laden
Nasdaq Index ended off 12 points at 2326. Earlier, the index had
been down over 50 points.

Portfolio plays:

AAPL slid lower today and a new position became available on the
APR32C/35C/37C at $2.12 credit. It was a favorable entry point.
******************************************************************
                          - NEW PLAYS -
******************************************************************
DELL - Dell Computers  $81.75     *** SPLIT RUN? ***

DELL designs, develops, manufactures, markets and services and
supports a range of computer systems and enterprise systems. DELL
also markets software, peripherals and service/support programs.

During the last earnings announcement, The DELL Board of Directors
announced a 2-1 stock split in the form of a stock dividend to be
issued on 3/5/99, to shareholders of record as of 2/26/99.

DELL was clobbered after it reported a slowdown in revenue growth
but it is still a champion at its business. Some think it is still
the best PC sales company that ever existed. However, analysts are
still cautious, even with Dell's price near 80, because it's not
clear if revenue growth has permanently slowed.

Even with lowered revenue, Dell continues to outpace rivals like
Compaq, Gateway and IBM at selling machines online and keeping
extremely low inventories and the Dell notebook market grew much
faster than its rivals.

Dell was also added this year to Fortune magazine's list of the 10
most-admired companies in America.

Dell held up remarkably well over the last two days and seems to
be creating a new support level around $79 to $85. With a change
in the internals this could turn into a "handle" formation during
the current consolidation period.

PLAY (conservative/debit spread):

BUY  CALL MAR-75 DLQ-CO OI=1734  A=$9.25
SELL CALL MAR-80 DLQ-CP OI=12183 B=$5.50
INITIAL NET DEBIT TARGET=$3.50 ROI(max)=42%

Chart = http://quote.yahoo.com/q?s=dell&d=b
******************************************************************
RMBS - Rambus, Inc.  $74.81  *** Upgrade - Technical ***

Rambus designs, develops, licenses, and markets high speed chip to 
chip interface technology to enhance the performance and cost 
effectiveness of computers, consumer electronics and other 
electronic systems. For the three months ended 12/31/98, revenues 
rose 13% to $10.6 million.

One Monday, BancBoston Robertson Stephens raised its rating to buy
from long-term "attractive" and set a price target of $90 per share.
This was because the chipset schedule from Intel, which supports 
the Direct RDRAM interface, was to be introduced at Intel 
Developers Forum. Wednesday, RMBS announced specifications that
deliver over two times the memory bandwidth of today's SDRAM,
while meeting the power consumption and physical space requirements
demanded by mobile form factors. 

On Monday, Rambus gapped +$6.50 at the open and closed +$9.56 for
the day (after bouncing off a support area near $55 - $66 from
two days prior). Buying pressure has reversed (strong buying) and
the crossing back above the 150 dma is bullish. The short term
indicators signal a "buy" with the first support level at the 150
dma and the top of the next support level around $65.

PLAY (aggressive/credit spread):

BUY  PUT MAR-60 BNQ-OL OI=368  A=$1.50
SELL PUT MAR-65 BNQ-OM OI=1885 B=$2.50
INITIAL NET CREDIT TARGET=$1.13 ROI=29%

chart = http://quote.yahoo.com/q?s=rmbs&d=b
******************************************************************
HWP - Hewlett Packard  $71.19     *** Technicals Only ***

Hewlett-Packard (HP) is the second-largest computer company in the
world and a top provider of desktop computers, peripherals, and
other services such as systems integration. The company also makes
testing and measurement equipment and medical electronics. More
than half of its sales come from outside the US and HWP is hedging
its bets by collaborating with Microsoft to improve its Windows NT
network operating system and helping Intel design its new chips to
run operating systems other than Windows. The company is moving
into new markets like document copying and digital photography.

Recently HWP reported better-than-expected earnings for its first 
quarter but revenues only edged up slightly to $11.9 billion from
$11.8 billion. Investors were disappointed by this slow growth in
revenues and analysts wondered whether the glory days when sales
soared around 20% a year might be gone for good. Other critics
have said Hewlett-Packard has been slow to catch on to changes
in the information technology business.

We think the play is favorable based on historical prices. HWP is
in the middle of current support (the center of a short term
descending triangle). An intermediate term stochastic "buy"
signal is evident with the top of the next support level at $66.

PLAY (conservative/neutral spread):

BUY  (5)  CALLS APR-65 HWP-DM OI=64   A=$8.62
SELL (10) CALLS APR-70 HWP-DN OI=126  B=$5.00
BUY  (5)  CALLS APR-75 HWP-DO OI=1629 A=$3.00
INITIAL NET DEBIT TARGET=$1.50 ROI(max)=$233%

The butterfly spread is generally a neutral position that is a
combination of both a BULL spread and a BEAR spread. This spread
is designed primarily for the stock that will not experience much
of a net rise or decline by expiration. It usually requires only
a small investment or collateral requirement and has limited risk
but profits are limited as well. It can also be costly in terms of
commissions so you should consider playing these combinations with
a low cost (discount) broker. There are three strike prices in a
butterfly spread with calls, and it can also be done with puts or
a combination of the two. There are several approaches to trading
butterflys successfully and most have similiar risk/reward numbers.

One method would be to only trade high reward/risk flys that have
3 weeks or less remaining. The objective is to ride them out for a
few weeks and capture the time decay as it is highest in the final
weeks of the trade). Another method is to trade the longer term
positions, initially centered. As time passes, and the stock price
moves away from the center of your spread, your strategy is that
at some point before expiration, the stock will again cross the
middle strike of the straddle, allowing you to exit the trade at
a profit.
 
Chart = http://quote.yahoo.com/q?s=hwp&d=b



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