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Daily Newsletter, Tuesday, 03/23/1999

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The Option Investor Newsletter         Tuesday  3-23-99
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)
************************************************************
        3-23-99          High     Low     Volume   Advances Decline
DOW     9671.83 -218.68  9891.06  9632.71  814,278k    660   2,337
Nasdaq  2322.84 - 73.10  2392.56  2319.96  974,928k  1,138   2,876 
S&P-100  631.90 - 17.65   649.55   629.09   Totals   1,798   5,213
S&P-500 1262.14 - 34.87  1297.01  1257.46            25.6%   74.4%
$RUT     383.37 -  9.83   393.20   382.91
$TRAN   3195.11 - 80.57  3283.21  3187.71
VIX       29.11 +  2.46    30.21    27.02
Put/Call Ratio      .71    
*************************************************************
 
What a difference a day makes! 


Yesterday we traded almost the entire day in a narrow 30 point
range while earnings worries were cussed and discussed. Today
the barrage of earnings downgrades hammered the market early
and did not let up. We were down -160 points by 11:00. The 
9725 level provided some support for most of the day but the
sellers took over and pushed the Dow down as much as -260 
points just prior to the close. We closed well below 9700 and 
only 20 over support at 9650.

The one two punch of multiple analyst downgrades on Coke (KO)
this morning started the run for the exits. Fears of slowing
growth and weak sales in Latin America and Japan, where they
get 40% of their profit, prompted Merrill and Morgan Stanley
to reduce estimates. The next blow was a downgrade of Texas
Instruments. TXN gets 10% of its revenue from disk drive
sales and soft PC sales will impact this profit center.

BellSouth warned this morning that earnings would be on the
lower end of previous estimates due to the increased costs
from building high speed access. The warning was not a big
factor by itself but coupled with everything else was just
too much for the market to handle.

Need I say decliners are overwhelming advancers severely.

The last nail in the Dow coffin today was of course the war
beginning in Kosovo. Experts are worried that the conflict
could escalate quickly and involve surrounding countries.
Russia is strongly opposed to the NATO intervention and could
cause trouble for NATO. Analysts are concerned that this will 
eventually require land troops and long term occupation.

These things on top of a +750 point Dow advance, when we are
right in the middle of the two week earnings warning period
were just too much for the blue chips to bear. The broader
market had been selling off for some time. Now instead of 
focusing on Dow 10,000 we may be faced with Dow 9,500. 
Instead of the broader markets catching up with the blue
chips, it appears the blue chips may be trying to match the
broader market. The good news today was a possible bottom
by IBM and Intel. Both leaders in the market, failed to fall
substantially even though the market was selling off.

The reason that earnings warnings appear to be having a
stronger impact may be because the tide is mounting toward
more negative warnings than positive. Last quarter we had
more positive than negative but this quarter First Call says
we are having more negative warnings than usual among S&P

500 companies. Already 14 of the Dow 30 stocks are expected
to have flat or down earnings this quarter. This is not the
kind of trend Wall Street likes to hear. Another trend that
is promoting caution is the sell off severity trend. Five of
the last six times the Dow corrected the bounce came at the 
200 day moving average. If we are really going to correct
again on the basis of weak earnings then the real bottom is 
the 200DMA of 9,000. A whopping 700 points down.

Without a real earnings disaster or someone joining the wrong
side in Kosovo, I can't imagine dropping that far. There is
far too much cash on the sidelines looking for an entry point.
As we all know, cash in our accounts promotes itchy trigger
fingers. Fund managers are the same way. They do not win
any popularity contests turning in returns that look like
money market numbers. 

The key imperative again is "watch and wait". We need to 
see the fallout from the bombing. (hopefully just a pun)
If we get a quick halt for more "peace talks" the market
will likely recover very quickly. The NATO spokesman on
the news said, "when they want the bombing to stop, they 
know our phone number." Hey guys, I will gladly pay for 
the call if it will turn the market back around! Until
somebody calls a halt I expect the market to fall as long
as bombs fall. This is not like launching a few cruise
missiles at a toothless, friendless IRAQ. This could get 
really messy. 

You should all be in cash now. A serious drop like we have
had this week should have closed out all your stops. You
should be analyzing new play possibilities and preparing
for the eventual relief rally. If you did not have stops,
either profit or stop loss, and you are still in the market,
then you are going to have a restless night. If "it will
come back, I know it will, I know it will.." is your 
lullaby tonight you could have a very restless night.
Nothing ever has to come back! Hope has no impact on stock
prices. Real market and world events do have impacts on 
prices. Buying is easy, selling is hard. This is a prime
example of why we preach stop losses and waiting on the 
market. If you place stop losses you may lose money, but
not all of your money. You can still come back and play
again when the market rebounds. Instead of waiting on the
edge of your chair for weeks and hoping your option gets 
back to what you paid for it, you could be profiting from
the coming market rebound. It could be this week or several
weeks away but it will be profitable for those ready to
seize the moment when it comes. I got several emails today
from traders who made money today as the market went down.
I did too and it was great to be on the right side of a
major market move. Now we are all waiting for the next 
signal and hopefully you are also!!

If you have never read the Market Sentiment Section before,
you really need to read it tonight. Pinnacle has listed 
all the market factors that point to the likely direction.
It could save you a lot of money!

Good Luck, Don't buy too soon!

Jim Brown
Editor


************
New Feature
************

Because of the renewed focus in the Dow-30 and their
fall from grace, we have added a Dow-30 chart link to
the left side navigation bar. This link will display
a chart for each of the Dow-30 stocks, ON ONE PAGE!
The default charts are 30 day but there is a link for
a 10-day page as well. I strongly urge you to look at
the 10-day page and see what is happening behind the
index that controls our destiny. For the email only
readers here is the link to the 10-day. 

/members/misc/10dayhrly.asp





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

DOW Industrials    9,500  10,000   9,672    Neutral   3.19                
SPX S&P 500        1,250   1,325   1,262    Neutral   3.19     
OEX S&P 100          630     660     632    Neutral   3.19      
RUT Russell 2000     400     435     383    BEARISH   3.12     

NDX NASD 100       2,000   2,100   1,961    BEARISH   3.23  *     
MSH High Tech        900   1,000     945    Neutral   3.19             


Technology

XCI Hardware         800     900     827    Neutral   3.5              
CWX Software         600     650     604    Neutral   3.5                
SOX Semiconductor    350     420     354    Neutral   3.5        
NWX Networking       420     450     425    Neutral   3.4              
INX Internet         500     570     542    Neutral   2.19       


Financial

BIX Banking          675     710     675    Neutral   3.19                      
XBD Brokerage        700     825     758    Neutral   3.19          
IUX Insurance        630     655     632    Neutral   3.19                


Other

RLX Retail           875     940     881    Neutral   3.19        
DRG Drug             800     835     794    BEARISH   3.23  *       
HCX Healthcare       775     835     794    BEARISH   3.23  *                
XAL Airline          340     365     333    BEARISH   3.23  *   
OIX Oil & Gas        245     260     255    Neutral   3.19                        



Posture Alert

Plagued by earnings concerns and the possibility of 
military action in Kosovo, the equity market endured a 
broad-based sell-off Tuesday. We have turned Bearish across 
select industry sectors including Airlines, Drug and
Healthcare while other sectors are close to rolling
over. We want to caution investors that several industry
sectors revealed major reversal signals last Friday 
(3/19) and that the broad market may not eclipse 10,000 
over the near-term.

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

www.OptionInvestor.com/marketposture
 



Market Sentiment 
****************

Don't Even Think About It

When the market sells off precipitously, many investors begin to 
think about buying the dip -  don't even think about it.  Many of
our trusted technical and sentiment indicators are telling us that
it's too soon to be thinking long and you may be well advised to 
develop a balanced attack.  This past weekend, Pinnacle highlighted
several key Bullish and Bearish factors.  As shown below, the Market
Volatility Index (VIX) crossed over into the Bearish column.


BEARISH Signs:

Top Reversal              Several industry sectors revealed 
                          Tweezer top candlestick formation on 
                          Friday (3/19)

Peak Open Interest        April peak open interest - .65

Interest Rates            Bouncing off 200dma and holding above
                          important 5.50% level (5.56%)

Russell 2000              Breaking below key 400 level.  Generals  
                          leading but troops are not following.

Advance/Decline Line      Deteriorating A/D line. 

Market Volatility (VIX)   Trading above 50-day moving average
                          26.875.



OTM Call Analysis

Last week, Pinnacle began tracking the open interest at OTM 
call option (650-700). As documented all last week, out-of-the
money (OTM) call buying reached extreme levels and contributed,
in part, to the precipitous sell-off on Friday (3/19) and 
Tuesday (3/23).  

We thought it might prove useful to track separately the call
buying activity as we move into April's expiration cycle.  If we
see an unusual level of  optimism, OI subscribers will be the
first to catch the activity.


OEX OTM Call Analysis (Open Interest MAR 650-700)
Date                 Open Interest     Change %    Alert

Friday, March 5             58,085         -
Thursday, March 11          65,569      +12.9%
Friday, March 12            68,675      +18.2%
Tuesday, March 16           79,480      +37.8%      
Thursday, March 18          85,124      +47.6%     *    
   


OEX OTM Call Analysis (Open Interest Apr 650-700)
Date                 Open Interest     Change %    Alert

Friday, March 19            35,626         -
Tuesday, March 23           48,953        37.4%    *
 


Market Volatility (VIX) 

Pinnacle Capital Advisors has long been tracking the relationship 
of the major turning points with the Market Volatility Index
(VIX).  This past weekend, we alerted subscribers that a major
turning point would be confirmed if the VIX violated and crossed
above its 50-day moving average (26.50).  On Monday (3/22), the
VIX closed above this benchmark giving savvy option traders a
jump on other investors on the market downdraft.  Tonight, the
VIX has closed firmly above its 50-day moving average (29.11). 
It is our view that the market will continued to be under
pressure while the VIX remains above its 50-day moving average. 


 


Market Sentiment at a Glance    Friday     Tues      Thurs  
Indicator                       (3/19)     (3/23)    (3/25)  Alert
********************************************************************

Pinnacle Index (OEX):          

Overhead Resistance (650-665)     1.7       1.3       
Underlying Support  (625-640)     1.0       1.4


Put/Call Ratios:

CBOE Total P/C Ratio               .6        .5
CBOE Equity P/C Ratio              .4        .4                *   
OEX P/C Ratio                     1.3       1.3                *                


Peak Open Interest (OEX):

Puts                              630         640
Calls                             700         700
P/C Ratio                        .63         .65


Market Volatility Index (VIX):	

CBOE VIX                        25.95       29.11              *



Investors Intelligence:

Bullish                         52.6%       52.6%              *  
Bearish                         17.6%       17.6%              *
		



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                       (3/19)      (3/23)     (3/25)

               
                    (660-665)      5.4         3.1
                    (650-655)       .9          .8
Overhead Resistance (650-665)      1.7         1.3  

OEX Close                       650.11      631.90

Underlying Support  (625-640)      1.0         1.4
                    (635-640)       .9         1.4
                    (625-630)      1.0         1.3

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 650/665
level while the underlying support is weak at the
OEX 625/640 level.



Put/Call Ratio                  Friday      Tues       Thurs
Strike/Contracts                 (3/19)     (3/23)     (3/25)

CBOE Total P/C Ratio               .62         .49
CBOE Equity P/C Ratio              .43         .40
OEX P/C Ratio                     1.31        1.33


(OEX)
Peak Open Interest   Friday         Tues           Thurs
Strike/Contracts     (3/19)         (3/23)         (3/25)

Puts                 630 / 5,622    640 /  7,217
Calls                700 / 8,916    700 / 11,191
Put/Call Ratio       .63            .65   

 
 




(VIX)
Market Volatility Index
Date           Major 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
March 4, 1999       Bottom              28.15   

March 19, 1999                          25.84  *
March 23, 1999                          29.11  *         


 
 



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   

March 3, 1999                         50.9        32.1   
March 10, 1999                        49.1        32.5   
March 17, 1999                        52.6        17.6  *   



******************
CHANGES THIS WEEK

Index    Last    Mon     Tue   Week
Dow    9671.83 -13.04 -218.68 -231.72
Nasdaq 2322.84 -25.33  -73.10  -98.43
$OEX    631.90  -0.56  -17.65  -18.21
$SPX   1262.14  -2.28  -34.87  -37.15
$RUT    383.37  -3.38   -9.83  -13.21
$TRAN  3195.11 -62.80  -80.57 -143.37
$VIX     29.11   0.81    2.46    3.27

Stock            Mon     Tue    Week

AOL     121.13  10.75   -8.88  1.87 Necessary correction. Possible entry?
INSS     67.00   1.75   -1.50  0.25 Up Monday.  Fell with market today
G        61.75   0.63   -0.88 -0.25 Showing plenty of strength
JPM     122.88   3.31   -3.56 -0.25 Wants to go higher.  Dow profit taki
OMC      73.50   1.63   -2.06 -0.43 New high on Monday.  Entry point today?
FSR      92.13   0.00   -0.50 -0.50 Holding strong, waiting for the market.
PFE     139.25   2.31   -3.81 -1.50 Viagra opens in Japan.
AHP      63.63   1.13   -3.31 -2.18 Wait for bounce off 30 dma
QCOM     82.13   3.06   -5.50 -2.44 New high on Monday. Entry point today?
BVSN     62.88  -1.25   -1.88 -3.13 Showing strength for an Internet
C        61.13  -0.63   -2.50 -3.13 New upgrade and higher estimates
MWD      97.88  -5.25    1.50 -3.75 Earnings are Thursday. Split Candidate
WMT      90.50  -1.44   -2.81 -4.25 Look for bounce off its 30 dma
EMC     113.88  -2.50   -1.88 -4.38 Another possible entry point.
LOW      59.38  -2.38   -2.00 -4.38 Consolidating with the Dow
MSFT    166.56   1.63   -6.25 -4.62 Diving with the Nasdaq. Splits Friday
SCH      85.00  -0.50   -4.13 -4.63 Even more profit taking
MER      85.69  -0.81   -4.25 -5.06 More profit taking
GE      106.56  -1.63   -3.81 -5.44 Dow component.  Wait for bounce.
TLAB     86.63  -1.25   -4.25 -5.50 Profit taking with the down Nasdaq
WCOM     86.00  -2.75   -2.75 -5.50 Crashing with the Nasdaq!
RFMD     85.75  -0.13   -9.25 -9.38 Ouch!  Wait for bottom.  Splits on 3/31
IMNX    164.63  -6.44   -7.31-13.75 Dropped…splits after Thurs.
CMGI    164.00  -6.06  -14.00-20.06 At near term bottom, look for bounce up
RNWK    118.00  -6.56  -17.19-23.75 Ouch!  Consolidating for a new run.

Puts

NSOL    231.56 -43.25  -13.19-56.44 Dropped, fell too early
CTXS     68.00  -5.87   -3.88 -9.75 New put, just fell through 200 dma
LLY      84.19  -2.37   -0.88 -3.25 New put, new competition
IBM     165.38  -1.56   -1.63 -3.19 Still might Pre-announce
LXK      85.56  -1.06   -1.88 -2.94 PC worries means printer worries
CMB      79.56  -0.63   -2.31 -2.94 New put, look for drop through $79
LHSG     34.88  -1.13   -1.63 -2.76 No support from new coverage
NEON     56.88   0.19   -2.31 -2.12 Looking weak.
CGX      46.50  -0.69   -0.31 -1.00 Use limit orders
BMCS     33.19  -1.50    0.69 -0.81 Put paradox appears again!
CPQ      30.63  -0.63    0.50 -0.13 Put paradox again
SBUX     28.63   1.66   -1.06  0.60 Bounced yesterday, but still falling
GIS      74.81   0.69    0.13  0.82 Defensive play…won't last



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:
******

IMNX $164.63 -7.31 (-13.75) IMNX jumped +10.13 in last week's 
trading.  On Monday, normal profit taking set in after the 
big gain.  Tuesday, weakness in the markets was to blame for 
the additional -$7.31 loss.  Even though IMNX could very well 
rebound, we are dropping it as a play.  It is splitting 2:1 
after the market closes on Thursday.  We feel the risks are 
too high for such a short play.  If you continue to hold your 
positions (it means you forgot to use trailing stops, but...), 
remember that we never recommend holding over the split.  
7 out of 10 companies suffer from post split depression. 



PUTS:
******

NSOL $231.56 -13.19 (-56.44) NSOL dropped and dropped big on
Monday.  We weren't expecting a drop until after the split
had taken place.  It is unfortunate, because we knew it would
fall but it beat us too the punch.  Our target price was 
$240 (or $120).  Because it reached that level yesterday,
we consider this play dead.  Sure it dropped again today,
but many of the Internet stocks are near support and after
the Nasdaq's big fall today, odds of a bounce are strong.
NSOL still has plenty of room to drop since its 30 dma is
around $193 or it could find support at the psychological
level of $200 (or $100 tomorrow).  We will be looking for a
similar play on DCLK if we can get the right entry point
before it splits next month.




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

AHP $63.63 -3.31 (-2.18)  AHP looked like it was about to 
break out of its recent trading pattern by gaining +$1.13 on 
Monday.  However, Tuesday's -218 point collapse in the DOW 
smashed AHP's hopes of breaking out to the plus side as it was 
hit for a -$3.31 loss on the day.  AHP is now just barely below 
its 30 dma.  But, with such a huge drop in the markets, the 
bargain hunting begins and prices can quickly rebound.  Look 
for AHP to recover but wait for the markets to show green 
before opening any new positions.  

INSS $67.00 -1.50 (+0.25)  Back on Friday, INSS dipped -$3.25 
and provided an entry point.  The stock resumed its upward trek 
on Monday by adding +$1.75.  However, the beginnings of a split 
run were cut short by the tremendous negative market action on 
Tuesday.  INSS fought hard to rise as high as $69 but the 
pressure was just too much.  INSS finished the day with a loss 
of -$1.50.  Again, this dip could prove to be an entry point.  
INSS splits 3:2 on April 5th.  As always, wait for the market 
conditions to improve before entering new plays.  In other news, 
INSS continues to show its leadership in helping the 
telecommunications industry.  INSS unveiled a new framework of 
services and software products that should help better serve 
the telecom companies. 

LOW $59.38 -2.00 (-4.37)  At one point in Tuesday's market 
massacre, LOW had actually traded up as high as +$0.43.  
However, with over a 200 point plummet in the market, it 
couldn't hold on to those gains and fell -$2.00.  LOW's 
initial strength was a good sign.  However, we don't suggest 
initiating any new plays until the markets firm and recoup.   

OMC $73.50 -2.06 (-0.44)  OMC has been floating higher and 
higher like a hot air balloon on a spring day.  On Monday, it 
even reached an all time high of $76.75.  However, the 
mischievous market put an end to the peaceful ascent by poking 
a -$2.06 hole in the OMC balloon.  The markets dropped over 200 
points on Tuesday and took just about everything down with it.  
We strongly feel that OMC will recover and head back up- how 
soon is the question.  It is imperative to wait for the markets 
to stabilize before opening any new positions.  

QCOM $82.13 -5.50 (-2.43)  On Monday our split candidate set 
a new all time high of $90.25 in intraday trading.  Part of 
the gains may be attributed to the fact that the US Patent 
Office said that one of QCOM's CDMA patents was valid and that 
the company was entitled to an additional 19 new claims.  In 
other news, QCOM could also get large royalties from China.  
The country has recently expressed a huge interest in buying 
CDMA networks.  An announcement on their CDMA plans could come 
next month when Premier Ahu Rongji visits the US.  Look for 
QCOM to shrug off its Tuesday losses.  The -$5.50 set back 
could prove to be an entry point.  

WCOM $86.00 -2.75 (-5.50)  The weak market drug WCOM down 
with it on Tuesday.  The company is now just above its 30 dma.  
By looking at WCOM's graph, it appears to bounce off this level 
and head back up.  However, we suggest waiting for a definite 
upward confirmation in both the market and the stock before 
initiating any new plays.  

WMT $90.50 -2.51 (-4.25) WMT sold off on strong volume today 
to continue a 3-day slide. It is about to test its 30 dma, 
which has provided support since early Oct. Hopefully we will 
get a bounce and head higher. We strongly recommend, however, 
that you wait for the overall market to turn positive before 
adding any new positions. The April 19 split date is nearly 4 
weeks in the future, so a split run is still a week or 2 away 
and profit taking can do a lot of harm in the mean time. In 
the news, the makers of Teletubbies are suing WMT over a toy 
it is selling called Bubbly Chubbies. The suit claims Bubbly 
Chubbies are an obvious copy of the popular Teletubbies. On a 
positive note, Gabielli, chairman of the Gabielli Funds, and 
a guest on CNBC this morning, said he thinks WMT will become 
the next big Internet play. He thinks WMT will jump into 
e-commerce in a big way to challenge the existing players.

MER $85.69 -4.25 (-5.06) The financials have run up so far 
recently they were ripe for profit taking when the market 
turned negative. After a nice gap up Friday morning, MER has 
been sinking into a sea of red ever since. The stock still has 
excellent potential to move higher, especially with consolidation 
and merger talks taking place--WHEN THE MARKET TURNS POSITIVE.

SCH $85.00 -4.13 (-4.63) Unlike a lot of other stocks, SCH only 
lost $.50 yesterday. But today it tumbled nearly 5% or $4.13 on 
fairly strong volume. The whole market was hit hard, but the 
financial sector, fat with weeks of gains, was an obvious choice 
for profit takers. The strongest businesses in this sector, 
including Schwab, should be the leaders in gains once again 
after the market correction is over. Be patient and wait for 
the market to turn positive again before starting new positions.

GE $106.56 -3.81 (-5.44) GE's new high Friday of $112.94 was 
followed by a small loss yesterday. Today this Dow-reactive 
stock gave up a much bigger $3.81 and is now sitting below its 
10 dma. We would like to see it rise back above its 10dma before 
we would consider new positions and that means a turnaround in 
the Dow.  In the news today GE Power Systems, a $9.5 bln global 
power unit of GE, will buy the heavy duty gas turbine business 
of Alstrom France S.A., a licensee and business associate of GE. 
This will strengthen GE's position in Europe. 

G $61.75 -.88 (-.25) Bucking the trend, Gillette set a new high 
this morning of $64.38, before succumbing to market pressure 
to close down $.88. Yesterday it closed right at its resistance 
number of $62.63. G is ready to run, if only the market would 
let it. It sounds like a broken record, but be patient and wait 
for the breakout. World wide battery demand is expected to rise 
7.8% annually. Rechargeable battery growth will be especially 
strong, with an increase in the use of laptop computers and 
wireless phones. That is good news for major battery suppliers 
such as Duracell, a unit of G. In another area of business, G 
launched a global ad campaign for its Mach 3 razor. After 7 
years and $1 bln in development, the razor is hugely successful. 
G now commands over 71% of the blade market. 


***** 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  3-23-99  

(continued)
***********

RFMD $85.75 -9.25 (-9.38) RFMD finished yesterday off only $.13. 
Today was a different story as the stock dropped a whopping 
$9.25 or almost 10%. That was almost equal to all of last 
week's gains. This is a stock that has made tremendous gains 
in recent months, and in a market correction like we saw today, 
profit takers rush in to protect those gains. If the market 
turns around in the next day or 2, we will likely see an equally 
impressive rebound in RFMD. It splits 2:1 "on or about" March 
31. That leaves only 5 days to play this one.

C $61.13 -2.50 (-3.12) So here is the good news: Stock 
underwriter and brokerage, Raymond James, said it raised 
its rating on C to "accumulate" from "underperform" after a 
meeting with company executives.  Also, their analyst 
raised his first quarter estimate to $0.84 a share from 
$0.76 a share and his 1999 estimate to $3.60 a share from 
$3.20 a share. He estimates Citigroup will earn $4.00 a 
share in 2000 (Reuters).  C still plans to acquire $2 
billion in shares over the next 12 months.  Low volume lent 
comfort that C would not be taken to the woodshed for a 
whoopin'.  The technical chart is looking weak, but so is 
every company's.  In the financial group, there are none 
stronger than C.  Confirm upward market before starting a 
new play.

MSFT $166.56 -6.25 (-4.63) Anyone want to catch this 
falling knife?  In Sunday's letter we cautioned, ".. if the 
market retreats before the split, there will be nothing to 
support the price".  MSFT closed just $0.31 off its low 
today on average volume.  Word of settlement talks filled 
the press releases yesterday, but quickly wore off today.  
Although MSFT will split on 3-26 after the close, that won't 
help if the rest of the market is down.  Depending on your 
risk profile, be prepared to sell by Friday's close since, 
as a matter of principle, we don't recommend holding over a 
split.  If you play MSFT this week, wait for the reversal 
and confirm upward market first.  

AOL $121.00 -9.00 (+0.75) ING Baring Furman Selz reiterated 
"strong buy" rating on this online service provider as company 
expected to reach the 20 million total subscriber level by 
mid-1999 (briefing.com).  New price target is $180.  Henry 
Blodget of Merrill Lynch fame believes that AOL will 
maintain a market share of 45-50 percent, while continuing 
to enjoy healthy subscriber growth.  AOL had been on a 
meteoric rise until today where the loss came with heavy 
volume.  It looks like profit taking, some short selling 
and a little panic to us.  Even the upgrades and positive 
talk didn't help.  Nonetheless, AOL is back in split 
territory with an earnings report scheduled for April 27th.  
When the market halts its slide, we expect AOL to move up 
again.  If you play, wait for confirmation of upward market 
direction.  Possible entry point here, watch the market
tomorrow.

EMC $113.88 -1.88 (-4.37) As we cautioned Sunday, "watch 
for profit taking since EMC has risen $20 in the last month 
without much pull back".  In light of yesterday's retreat 
from its highs, losing only $1.88 today on heavy volume 
when others were having the rug pulled from under them is a 
sign of strength in our book.  EMC was down as much as 
$3.84 today and came back, showing us that market willing, 
the worst may be over for EMC.  In the news, EMC was ranked 
#4 in the Barron's 500 last weekend and #4 in the Business 
Week 50.  90% of the other companies in the survey are EMC 
customers.  The growth potential for data storage is huge.  
No matter, confirm upward direction before playing.

BVSN $62.88 -1.88 (-3.12) BVSN has closed down the last two
days, but we are encouraged that it has held up as well as 
it has.  On Monday, BVSN traded as high as $72.38 before 
falling with the market.  Though Tuesday saw BVSN continue
lower, it did bounce off its 10-dma and close over $2 higher
than its intra-day low.  The $61 range has held as pretty
good support over the last 1 1/2 weeks.  BVSN and Andro-
media today announced a strategic alliance to provide 
e-commerce merchants first-of-its-kind "high value" data 
analysis and reporting enabling them to more effectively 
manage their online businesses.  With the emergence of on
line retailing, BVSN stands prepared to reap some rewards
for its in-depth One-on-One software.  

MWD $97.88 +1.50 (-3.75) MWD showed surprising strength on
Tuesday with a buck and a half gain.  This is nice, but MWD
did lose $5.25 on Monday.  MWD announces earnings after the
close on Thursday, and this is most likely the reason MWD 
held up strong today.  MWD is well above prior split prices 
and does have the shares to announce a split.  It's hard to 
know whether they will announce with earnings, but with the 
market struggling, MWD might want something to push the stock 
further upward.  If a split is not announced with earnings,
it is likely it will be announced at the shareholder meeting
in April.  MWD has had positive surprises in the past, but
we caution on holding over earnings. 

RNWK $118.00 -17.19 (-23.75) RNWK has given up a little over
half of its gains from last week.  Other than the drop in 
the market, RNWK has come under a little pressure with the
rumor talks that Yahoo! is pursuing Broadcast.com, RNWK's main
competitor.  RNWK's has previously voiced its goal to stay
independent, but we feel at the right price, RNWK will take
a good look at the right offer.  RNWK is now sitting right
on its 10-dma.  Make sure that RNWK is confirming upward
movement before jumping in.  Option premiums are large.  One
analyst reiterated his price target of $200 for RNWK today.

TLAB $86.63 -4.25 (-5.50) TLAB took a dive today, though it
did close almost a $1.50 higher than its intra-day low.  The
stock is sitting just above its 20-dma.  TLAB's announced on 
Monday the availability of Feature Package 3.0 (FP 3.0) for 
its CABLESPAN 2300 Universal Telephony Distribution System, 
which will enable cable operators to provide integrated voice, 
data and video solutions.  TLAB's earnings are in a month,
and it is likely that a split could be announced with earnings
or at the shareholder meeting on April 21st.  TLAB's prior
splits have come around the $70 mark.  The strongest support
for TLAB is at its 30-dma at around $82.50.

JPM $122.88 -3.56 (-0.25)  This powerhouse traded as high 
as $128.50 today, but closed near its support level.  The 
market sentiment was just too powerful for JPM to hold its 
advances.  Yesterday, JPM did close right near its high at 
$126.44 to demonstrate its strength and strong fundamentals.  
Consider this pullback as an entry point to start a new play, 
however remember to confirm direction first.  

PFE $139.25 -3.81 (-1.50)  Viagra goes on sale in Japan 
after record breaking approval time by their government.  
This is a potential goldmine for Pfizer!  Japan is the 2nd 
largest market for pharmaceuticals and the company estimates 
over 7 mln men consider this drug a necessity.  Prior to 
Viagra's approval, many men took "Viagra Tours" to Hawaii to 
acquire the drug and blackmarketeers were able to procure 
upwards of $50 per pill.   On Monday, PFE hit $143.94 to set 
a new 52 week high only to be broken today when it traded as 
high as $144.50!  The stock, unfortunately, was dragged down 
at the close with the multitudes of other Dow victims.  This 
is a great example of the importance of keeping stops in 
place.

FSR $92.06 -0.56 (-0.57)  The fury in the market doesn't seem 
to be effecting this stock one way or the other.  FSR has 
been relatively stable for the past few days trading in a 
narrow 3 point range. FSR is a short-term split play 
(3:1 4-15-99) and we're looking for this stock to breakout 
again. We warned that this stock requires market momentum 
to drive it upwards.  The stock needs to bounce off its 
10dma at 92 before initiating any new plays.  Verify stock 
and market direction and please put stops in place.  




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

SBUX $28.63 -1.06 (+0.60)  SBUX continued its post split 
depression descent as the markets crashed and burned to over 
a 200 point drop.  SBUX followed with a -$1.06 loss.  Make 
sure to set your stop losses tight in case there is a 
rebound on Wednesday.  

LHSG $34.88 -1.63 (-2.75) From Sunday, "We may have found a 
bottom here."  WRONG!  LHSG continued its descent into 
purgatory.  Today, Volpe Brown and Prudential came out with 
"neutral" and "hold" ratings, respectively.  This is not 
even close to an endorsement, just notice that they have 
started coverage.  There is no news to report.  We may see 
a dead cat bounce, but it won't change the trend of the 
stock.  Confirm market direction before starting a new 
play.

BMCS $33.19 +0.69 (-0.81) Call it the "put paradox", that 
phenomenon we experience when a traditional loser cuts 
against the grain of a general down-market direction.  It 
doesn't last, but raises eyebrows on the unsuspecting.  The 
technical chart is still ugly.  BMCS is reaching new lows 
daily.  Look for downward pressure to resume.  Shareholder 
lawsuits dominate the press releases and there is no other 
news.  Confirm stock direction before playing and keep the 
stops tight in case it gets a bit of good news.

LXK $85.56 -1.88 (-2.94) PC sales slow downs are still 
affecting the peripheral (including printer) market.  Until 
CPQ, IBM, DELL or the like give us a nice surprise 
(doubtful), LXK will tag along for the ride.  The only news 
regards product and service releases.  Volume has been 
rising as the price keeps dropping.  Watch the PC sector 
for clues to the next move.  For now, we expect further 
declines.  Keep your stops set in case the trend reverses 
and confirm market direction before starting a new play.

CGX $46.50 -0.31 (-1.00) This is a low volume stock which 
makes it inherently risky.  So far, so good.  Weak support 
is $45.  Once through it, $32 is the next stop.  There is 
no price moving news to be found.  The technical chart is 
still unglamorous (ok, ugly).  Fundamentals are no better.  
Depending on your risk profile, you may want to wait for 
the descent below $45 before starting a play.  Either way, 
we think CGX has a long way to fall.  Confirm market 
direction first and use a limit order to enter the play.  
Otherwise the spread will eat into your potential profit.

GIS $74.81 +.13 (+.81) GIS has held strong this week.  We
still like GIS as a put and feel the last few days have been
a consolidation of its drop.  GIS 200-dma is around $72 and
a drop through this level would be very bearish.  We could
also see a bounce down from GIS 10-dma at $76.75.  Today's
move upward could be seen as a reaction to the Dow's drop.
GIS, despite its recent performance, is considered a 
defensive play.  When the market falls, people buy a stock
like this believing that "hey, everyone buys cereal, no 
matter how broke they are".

NEON $56.88 -2.31 (-2.12) Yesterday's trading rendered great 
profits for those that chose to target shoot NEON.  The 
stock had a spread of over 10 points going as low as $53.38 
and also providing great entry points on its high of $63.63. 
And today, the Nasdaq tech stocks were hit by the cuts in 
earnings estimates for IBM.  NEON was no exception and took 
a ride on the tail of IBM and dropped -2.31.  Whispers are 
that NEON may miss 1Q earnings, too.  No verfication yet as 
to whether New Era has lost JP Morgan as a client or not.  
Investor Relations, Cynthia King, maintains that it is just, 
a rumor, stating no basis on fact.

IBM $165.75 -1.25 (-2.81)  IBM had a good sell off on Monday 
as the fears heightened on WallStreet about 1Q revenues for 
the company.  Also, Morgan Stanley cut their target price 
on IBM to $195 from $210.  Dell's downgrade today and 
BancBoston's 1Q earnings estimates cut to 1.37 p/s from 1.42 
caused more deterioration for the stock.  According to Daniel 
Niles, the cut is due to "hardware growth below plan" and he 
feels the stock is unlikely to rebound in the current bearish 
environment.  IBM may gap down again, but remember this stock 
can move quickly so consider this an aggressive play.  Keep 
your stops in place.

CPQ $$30.63 +0.50 (-0.12) The pressure regarding the PC 
demand question is making investors and analysts queasy and 
this sentiment is seeping throughout the entire sector.  The 
introduction of sub-$500 PC's is also one of the driving 
factors effecting the industry leaders.  CPQ is down 41% from 
its 52 week high of $51.25. There is speculation CPQ may 
pre-warn that they will not meet expected 1Q earnings.  
Kevin McCarthy, from DLJ, believes Compaq needs a 
"sales surge" to meet estimates of .32 p/s and also, if 
CPQ does pre-warn the stock could fall to $25.  Wait for this 
stock to slip through its support of $30 before beginning a 
new play.



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

CMGI - CMG Info Services $164.00 -14.00 (-20.06)

CMGI is a direct market service provider which invests in, 
develops and integrates advanced internet, interactive and 
database management technologies.  The company and its 
subsidiaries offer a wide variety of direct marketing 
services including internet and interactive media direct 
marketing software technologies, literature fulfillment and 
turnkey outsourcing and business-to-business telemarketing 
services.  The company also offers accurate mailing lists, 
database management, design and development capabilities, 
consultative list management and brokerage services. 
(company desc. from Stock SmartPro)

CMGI has taken a hit the last week and a half.  On the 9th
of March, CMGI hit an intra-day high of $226.  We are adding
CMGI as a call play because we feel it has corrected to the
point that it can now resume its up-trend.  CMGI is sitting
right at its 20-dma and has just about filled the gap open
it made on the 8th of March.  This is a risky play.  Make
sure CMGI has decided to move up before jumping in.  If the
market decides to continue down, CMGI will most likely follow.

CMGI blew away earning estimates on the 19th of March, posting
a gain of $.28 when expected to post a loss of $.23.  CMGI 
has been in the news as of late because of its strong opposition
of the USA/Lycos deal.  CMGI is a major shareholder in Lycos
and feels the USA offer is not good enough.  

BUY CALL APR-165*QGW-DM OI=532 at $16.25 SL=12.50
BUY CALL APR-170 QGW-DN OI=445 at $14.00 SL=10.75
BUY CALL APR-175 QGW-DO OI=234 at $12.25 SL= 9.50
BUY CALL MAY-175 QGW-EO OI=  4 at $22.63 SL=17.50

Picked on Mar 23rd at $164.00   PE =630
Change since picked     +0.00   52-week low = 13.52
Analysts Ratings    2-5-1-0-0   52-week high=226.00
Last Earnings 03/99  est -.23   actual .28 surprise +222% 
Next Earnings 06-12  est -.20   versus .00
Average daily volume = 3.91 mln.
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m

CMGI - CMG Info Services $164.00 -14.00 (-20.06)

CMGI is a direct market service provider which invests in, 
develops and integrates advanced internet, interactive and 
database management technologies.  The company and its 
subsidiaries offer a wide variety of direct marketing 
services including internet and interactive media direct 
marketing software technologies, literature fulfillment and 
turnkey outsourcing and business-to-business telemarketing 
services.  The company also offers accurate mailing lists, 
database management, design and development capabilities, 
consultative list management and brokerage services. 
(company desc. from Stock SmartPro)

CMGI has taken a hit the last week and a half.  On the 9th
of March, CMGI hit an intra-day high of $226.  We are adding
CMGI as a call play because we feel it has corrected to the
point that it can now resume its up-trend.  CMGI is sitting
right at its 20-dma and has just about filled the gap open
it made on the 8th of March.  This is a risky play.  Make
sure CMGI has decided to move up before jumping in.  If the
market decides to continue down, CMGI will most likely follow.

CMGI blew away earning estimates on the 19th of March, posting
a gain of $.28 when expected to post a loss of $.23.  CMGI 
has been in the news as of late because of its strong opposition
of the USA/Lycos deal.  CMGI is a major shareholder in Lycos
and feels the USA offer is not good enough.  

BUY CALL APR-165*QGW-DM OI=532 at $16.25 SL=12.50
BUY CALL APR-170 QGW-DN OI=445 at $14.00 SL=10.75
BUY CALL APR-175 QGW-DO OI=234 at $12.25 SL= 9.50
BUY CALL MAY-175 QGW-EO OI=  4 at $22.63 SL=17.50

Picked on Mar 23rd at $164.00   PE =630
Change since picked     +0.00   52-week low = 13.52
Analysts Ratings    2-5-1-0-0   52-week high=226.00
Last Earnings 03/99  est -.23   actual .28 surprise +222% 
Next Earnings 06-12  est -.20   versus .00
Average daily volume = 3.91 mln.
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m




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

CMB - Chase Manhattan Corp. $79.56 -2.31 (-2.94) 

The Chase Manhattan Corporation is a bank holding company 
providing diversified financial services.  Chase provides 
domestic and international corporate finance, wholesale banking 
and investment services.  Financial services include personal 
and commercial checking accounts, savings and time accounts, 
personal and business loans, brokerage and insurance.  The 
corporation serves a wide range of customers including 
commercial, professional and middle market customers. 
(from Stock SmartPro)

CMB has had some tough times of late.  On Tuesday, CMB dropped
through its 30-dma.  The chart shows a possible correction
all the way down to the $72 range.  CMB's 50-dma is around $79
and could provide some mild support.  A break through this 
level should push CMB downward.  CMB is looking for a partner,
rumors are it wants Merrill Lynch.   The purchaser often sees
a drag on its stock.  

BUY PUT APR-80*CMB-PP OI=919 at $3.75 SL=2.00
BUY PUT APR-75 CMB-PO OI=920 at $1.50 SL=0.75

Average daily volume = 4.08 mln

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

**********

LLY - Eli Lilly & Co $84.19 -0.88 (-3.25)

This company wants you to take it easy in life.  They are 
the makers of the best-selling anti-depressant drug, Prozac.  
Eli Lilly discovers, develops, manufactures, and sells 
Life Science products.  They also provide healthcare 
management services.

The hot competition from Forest Labs with their new drug, 
Celexa, is slowing the sales of Prozac according to analysts.  
The stock started to dip on Wednesday when it dropped -5.31 
to $88.75.  This spike put LLY well below its 10dma of 
$93-$94.  On Thursday, Cowen & Co downgraded LLY to "buy" 
from a "strong buy" and the stock has since continued its 
descent. Today it closed down on strong volume. Use its daily 
highs to find a good entry point and keep your stops in place. 


BUY PUT APR-80 LLY-PP OI=1591 at $1.50 SL=0.75
BUY PUT APR-85*LLY-PQ OI=2886 at $3.63 SL=1.75

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

**********

CTXS - Citrix Systems, Inc $68.00 -3.88 (-9.75)

Citrix provides application server products and technologies 
that allow networked computers to run Windows-based programs 
from a central server.  This gives their clients effective 
and efficient management of their applications.  Its WinFrame 
software is used by well-known companies such as Sears Tire 
Centers and Hewlett-Packard Europe.

Last week, CTXS was downgrade by AG Edwards from a "buy" to 
"accumulate" and this put a cloud over the stock.  In 
Friday's chaos the stock spiked down -4.87  and that was 
only the beginning.  Yesterday CTXS lost a whopping -5.87 
and today the market momentum dragged it down almost 4 points.  
CTXS just fell through its 200 dma yesterday which is a very
bearish signal.  This stock should continue its freefall, 
market momentum permitting.

*Special note.  CTXS has a 2:1 split on Thursday.  While this
certainly has not been any kind of support so far...it might
try to rally before Thursday.  Conservative players should 
wait until Thursday afternoon and catch any post split 
depression.

BUY PUT APR-70*XSQ-PN OI=  0 at $6.50 SL=4.75 volume=48
BUY PUT APR-75 XSQ-PO OI=952 at $9.75 SL=7.25

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



COMBINATION PLAYS   
*****************

Market tumbles...crash or correction?

Monday, March 22,

U.S. stocks fell lower Monday as Wall Street paused after making
a failed bid last week to close above 10,000 for the first time.
The Dow was off 13 points at 9890 after the index rallied as high
as 9934 late in the day. Most technology stocks also moved lower,
leaving the Nasdaq index 25 points from its starting point at 2395.
In the broader market, declining issues led advances 17 to 11 on
moderate volume of 660 million shares on the NYSE.

Sunday's new plays (positions/prices):

BR   APR37C/APR40C  $1.38 Debit   (easy entry at that price...)
FFD  JUN12C/APR10C  $0.00 No Play (gapped down/no ratio premium)
FFD  JUN10C/APR10C  $0.62 Debit   (best was $0.50 after the gap)
MSFT APR135P/140P	  $0.31 Debit   (good but never made our limit)
NSOL APR200C/A210C  $7.75 Debit   (down about $40!)
NSOL APR170P/A180P  $1.50 Debit   (much better in the afternoon)

Portfolio plays:

FORE continued its short-term rise and the debit spread hit our
GTC target of $2.25 allowing us to close the play early for an
excellent profit. The covered-combo will remain in place but the
sold call could also be closed (near parity) to exit the position
for a favorable return.

Tuesday, March 23

U.S. stocks tumbled Tuesday, driving the Dow further away from
the 10,000 milestone, amid concern profits are falling at major
corporations. The DJIA fell over 200 points to finish at 9671.
The Nasdaq Composite Index slid 73 points to 2322, the worst
loss since February. Seven stocks fell for every two that rose
on the NYSE, the broadest drop since October 8 and none of the
30 stocks in the Dow average rose.

Portfolio plays:

Our debit strangles on PMS and LSI started to move today with the
market correction. The bearish PMS position (MAY35P) will now pay
for the entire play allowing the bullish position to be sold on
a rebound for profit. LSI fell almost $3 to a recent bottoming
area and the APR25P traded as low as $1.75.


NEW PLAYS
*********

GILD - Gilead Sciences Inc.  $46.00     *** Recent Slam ***

Gilead Sciences discovers and develops new human therapeutics
based on nucleotides, the building blocks of genes. The company's
research and development efforts encompass three programs: small
molecule antivirals, cardiovascular therapeutics, and genetic
code blockers. Gilead's research focuses on treatments for viral
infections such as HIV and hepatitis B, cardiovascular disease,
and cancer. Gilead has developed a compound that cures influenza
in laboratory animals within a day; the company began testing the
drug on humans in 1998.

The stock price dropped about 15% Monday after analysts knocked
the company's stock ratings and two of its lead drugs. The two
analysts lowered their recommendations on the stock based on its
current value.

The company had recently reported the latest clinical trials
results for its Preveon drug, saying a smaller dosage still
helped treat HIV in patients and also reduced nephrotoxicity, a
harmful side effect of Preveon that affects patients' kidneys.

One of the analysts said there's still risks involved for the
approval of Gilead's Preveon and GS4104 drug, which treats
influenza and Merrill Lynch analysts expressed concerns about
Preveon's nephrotoxicity side effect, which they said was only
slightly reduced in the smaller dosage. Not all analysts were
negative on the Preveon results, even though those comments
weighed heavier on the stock. Joe Dougherty of Warburg Dillon
Read expects the drug will actually be approved by the FDA by
the end of the year.

For now the stock will probably continue lower but we like the
solid support near $40. That should be just enough to hold this
play in the profitable category at the end of the April strike.

PLAY (conservative/neutral time spread):

BUY  CALL MAY-45 GDQ-EI OI=1155 A=$5.25
SELL CALL APR-45 GDQ-DI OI=100  B=$3.62
INITIAL NET DEBIT TARGET=$1.38 TARGET ROI=25%

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

****

TXN - Texas Instruments  $91.25     *** Another Slam ***

Texas Instruments leads the digital signal processor (DSP) market
with a 45% share. DSPs convert signals such as sound and light
into digital signals. They are used in programmable products,
such as VCRs and camcorders, automobiles, computer peripherals and
in more than 85 million cellular phones. TI continues to pioneer
new technologies: Its digital light processor technology uses tiny
mirrors to create an ultrasharp display for TVs and home computers.
To focus on its DSP business, TI has sold its defense electronics
and memory chip units.

Texas Instruments fell almost 5% today on concerns that sales of
semiconductor components to disk drive makers were slowing. One
of the industry analysts said he told clients that the disk drive
component market for Texas Instruments was softer than expected.
The analyst said he still rated the company as a BUY, (adding
that the stock was his favorite among large cap semiconductors)
but that didn't stop the $10 drop. We think the sell-off was a
bit overdone and the bottom of the recent trading range is above
the sold strike at $80.

Experienced traders may want to watch for (and play) any momentum
by purchasing the long position first and waiting for strength or
weakness in the stock. If you can achieve a small profit on the
long option, close the position. When the stock price strengthens,
initiate the spread for a credit by selling the higher priced put.

PLAY (conservative/credit spread):

BUY  PUT APR-75 TXN-PO OI=2099 A=$1.25
SELL PUT APR-80 TXN-PP OI=1287 B=$1.75
INITIAL NET CREDIT TARGET=$0.62 ROI=14%

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

****

REV - Revlon  $17.06     *** Big Gap Today! ***

Revlon makes fragrances, personal care and salon products. Revlon
keeps it fresh by appealing to new markets with new products as
well as old favorites: It has developed a line aimed at aging baby
boomers and a flashy line for the trend conscious. It also makes
the premium-priced Ultima II-brand makeup. Revlon products are
sold primarily through drugstore and supermarket chains and mass
merchandisers.

The stock gapped over $3 today on incredible volume with no news
and Revlon declined to comment on whether there was any corporate
developments to explain the rise in its stock price. They said in
a statement it was not its policy to comment on unusual market
activity or rumors. The rumor is that one of the conglomerates is
making a bid for the company. The top candidate is most likely
Proctor and Gamble.

The is a speculative play with reasonable technical foundation and
the May position is actually more favorable based on risk/reward.
 
PLAY (aggressive/debit spread):

BUY  CALL MAY-15.00 REV-EC OI=170 A=$3.50
SELL CALL MAY-17.50 REV-EW OI=0   B=$2.06
INITIAL NET DEBIT TARGET=$1.25 ROI(max)=100% B/E=$16.25

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

****

ESPI - Espire Communications  $9.62   *** More Takeovers? ***

E.spire Communications provides discount local telephone service
in direct competition with Bell. Inspired by regulatory changes
opening local phone markets to competition, e.spire has become a
leading provider of voice, data, internet access and other telecom
services to business and government. The company serves small and
medium-sized businesses in more than 30 cities in the southern US.
In cooperation with telecom service providers IXC Communications
and fONOROLA, e.spire offers advanced business services such as
local area network (LAN) interconnection, videoconferencing, and
telemedicine.

Espire has seen continued volatile activity in their call options,
most likely from speculators who think the company is ready to be
acquired. One of the rumored merger candidates is Kodak and some
say the announcement of a deal will take place within 2-3 weeks.
We prefer to take the conservative route on this position offered
by the premium disparity in the June ITM calls. With some technical
suppport in the $5-$7 range, this is a low risk long-term position.

PLAY (very conservative/debit spread):

BUY  CALL JUN-5.00 AQ-FA OI=175 A=$5.00
SELL CALL JUN-7.50 AQ-FU OI=775 B=$3.25
INITIAL NET DEBIT TARGET=$1.50 ROI(max)=66% B/E=$6.50

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






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