Option Investor
Newsletter

Daily Newsletter, Thursday, 04/22/1999

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The Option Investor Newsletter         Thursday  4-22-99  
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)
************************************************************
        4-22-99           High     Low    Volume  Advances Decline
DOW    10727.18 +145.76 10753.81 10580.05  915,793k  1,688   1,292
Nasdaq  2561.61 + 72.53  2561.79  2525.26 1053,200k  2,199   1,807 
S&P-100  690.01 + 13.33   690.21   676.68   Totals   3,887   3,099
S&P-500 1358.83 + 22.71  1358.96  1336.12            55.6%   44.4%
$RUT     428.85 +  2.28   432.13   426.35
$TRAN   3609.92 + 53.46  3620.04  3556.72
VIX       23.98 -   .57    24.74    23.74
Put/Call Ratio      .50
*************************************************************

DOW 11,000 ? Thank you Mr. Blue !!

Another day, another record, yawn.... Not hardly !! The buying
opportunity from Monday just kept getting better. With IBM going
against expectations and posting blowout earnings the market got
a profit boost. With every analyst cringing as they got the earnings
news from IBM the surprise was complete. The jump you saw today was
not on excitement from buyers but another huge short covering rally.
The shorts and puts had loaded up in front of the computer giants
earnings, fully expecting another troubled quarter. Not so said IBM.
The lack of a significant Y2K warning broke a recent trend and the
strong showing by the services business and even a jump in mainframe
business, turned the market around on a dime. With techs still 
wandering since the -138 point slaughter on Monday the race was
on to buy again. The staple stocks suffered again and proved they
could get no respect. Consumer goods were down strongly even though
Proctor & Gamble beat estimates. You just can't beat a tech stock
with a +30% growth rate.

After the close today Gateway also announced but it was not the
same blowout that IBM delivered. Gateway announced $.62 vs estimates 
of $.60, beating the estimates but only matching the whisper number.
The conference call was right on the money with Gateway bragging
that business was better than ever. The majority of Gateway's sales
are in the U.S. but they also scored big gains overseas as well.
Sales in Asia were up +97%, Japan +93%. Business sales were up +31%
and educational sales up +21%. Good earnings, good sales, good company
but no blowout. It did provide another confirmation that PC sales
and growth are alive and well and the Compaq problem is unique to
Compaq. The mandatory warning was repeated that Q2 sales would be
a seasonal challenge requiring them to move deeper into the sub $1000
category. Analysts were questioning whether further price cutting
would enable them to maintain their current margins. The unit price
this quarter was down but margins were up. How long can this trend
continue? The other two major PC manufacturers HWP and Dell do not
announce until next month and both have said sales were strong.

Piper Jaffray, today predicted that Dell's first quarter PC shipments
would easily surpass the brokerage house's expectations and last
years levels. Analysts Ashok Kumar and Paul Mansky forecast that 
Dell is on track to ship 2.5 million units this qtr, up +15% from
the recently ended fourth qtr and +50% above the year-ago level.
The analysts also said this should translate into $5.7 bln in
revenue for Dell for the qtr up +45% from the year-ago period.
I bought Dell Monday on the dip and sold for a nice profit today
just in case Gateway missed earnings and tanked the PC sector.
Now I am suffering from sellers remorse and hoping for some Nasdaq
profit taking on Friday to give me a new entry point.

The earnings season is now half over with more than 50% of the 
S&P-500 companies already reported. Of these 50% the statistics
are very encouraging. The vast majority of the companies have
beaten the estimates and fewer than half of the normal number
of companies missed estimates.
	
          Current  Historical
Beat Est.   64%       56%
Met Est.    23%       19% 
Missed Est. 12%       26%

Profit growth is still heavily weighted in favor of techs:

Techs           +46%
Cyclicals       +18%
Financials      +15%
Energy          -48%
Basic Materials -43%


Seemingly a day does not go by without a market moving event.
The market loves mergers, buyouts and bidding wars and tonight
AT&T announced an offer to buy MediaOne Group with a much
stronger offer than Comcast had on the table. AT&T offered
$87.38 per share and would lock up another major block of
cable viewers in areas they are not strong. AT&T is simply
going to be "the cable guy" soon. This could be a positive
impact to the market on Friday.

Speaking of the market, in the last 15 days the Dow is up an
astounding +941 points. There have only been three down days
for a total of -138 points included in that total. We have 
had several days of the Dow lingering in negative territory
before finally moving upward to positive territory in the
afternoon. This rolling correction has helped maintain the
run but the total lack of any major Dow profit taking is
still a major concern. The advance/decline line has been 
positive nine of the last ten days on the NYSE but the margin
was narrowing until the last hour today. Eventually we will 
have to pay the piper but it is conceivable that 11,000 could 
be touched before then.

The Nasdaq has now added +216 points since the massive -138
point black hole on Monday. Again, nothing moves in a straight 
line and we could also see the Nasdaq waffle again soon. It is
amazing how much fear came out in the market on Monday only
to completely disappear by Thursday. Remember, the Nasdaq was
unable to close over 2600 when we were here last week. Three
days we traded over 2600 only to fall back quickly. Only 39
points away from 2600 now we could encounter resistance here
at any time.

I continue to urge caution when entering a market that is
making a non-stop move. Know your entrance AND exit points
before you start a new position. Be prepared for the market
to turn on you at any moment. You can still trade a stampeding
market, and make a lot of money, but you need to watch it every 
moment. You would not turn your back on a snarling dog and the 
dog is much less dangerous than a runaway market. You saw how 
fast the Nasdaq dropped on Monday. Profit leaves much faster
than it comes. We lost several subscribers on Monday that did 
not have stop losses on their trades. Don't let this happen to 
you. You can be aggressive and careful at the same time. Futures
are down -3.10 at 8:15 so it is possible we will get another 
buying opportunity Friday. 

Entry Points: AOL gave us a great entry point on Monday and 
it is up +$33 since. Should you buy AOL now? NO! You should 
not buy any stock that has made this kind of move until it 
pulls back again. It is frustrating to watch them continue 
on upward but not as frustrating as watching your money 
disappear after you enter a play at the high point.

Wait for an entry point, sell too soon.

Jim Brown
editor





Market Posture
**************


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

DOW Industrials    9,750  10,000  10,727    BULLISH   4.7
SPX S&P 500        1,300   1,350   1,359    BULLISH   4.22 *
OEX S&P 100          660     680     690    BULLISH   4.22 *
RUT Russell 2000     390     420     429    BULLISH   4.22 *

NDX NASD 100       2,075   2,250   2,183    Neutral   4.22 *
MSH High Tech      1,000   1,100   1,057    Neutral   4.22 *


Technology

XCI Hardware         875     900     888    Neutral   4.22 *
CWX Software         600     650     621    Neutral   4.22 *
SOX Semiconductor    375     420     403    Neutral   4.12
NWX Networking       450     490     493    BULLISH   4.22 *
INX Internet         550     700     601    Neutral   4.22 *


Financial

BIX Banking          675     720     724    BULLISH   4.22 *
XBD Brokerage        400     540     460    Neutral   4.14
IUX Insurance        625     655     671    BULLISH   4.22 *


Other

RLX Retail           900     970     919    Neutral   4.22 *
DRG Drug             390     425     398    Neutral   4.22 *
HCX Healthcare       780     850     806    Neutral   4.22 *
XAL Airline          170     185     186    Neutral   3.30
OIX Oil & Gas        250     260     286    BULLISH   3.30



Posture Alert

Favorable earnings news from IBM and a rally among small 
caps has propelled the market into record territory.  We 
have, therefore, turned Bullish across several broad market
indices and industry sectors.  We have also turned Neutral
from Bearish across select technology sectors.

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

www.OptionInvestor.com/marketposture



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

Troops Heeding the Call 

After lying dormant for several months, the troops have 
responded to their commanding officers to advance higher.  
The Russell 2000 jumped more than 3% and is now trading 
above the key 425 benchmark, a positive development for the 
broader market What's more, the Market Volatility Index 
(VIX) has evaporated and is trading comfortably below its 
50- day trend line keeping the current bullish trend intact.


OEX OTM Call Analysis (Open Interest May 680-740)

Date                 Open Interest       Change %    Alert
----------------------------------------------------------
Friday, April 16            30,697          -
Tuesday, April 20           41,209         34.2      *


BULLISH Signs:

Russell 2000              Rallied strongly higher and closed and
                          ABOVE the key 425.

Market Volatility (VIX)   Evaporated and closed comfortably under
                          its 50-day moving average (27.16)
                          keeping current bullish trend 
                          intact for the moment.

Advance/Decline Line      The action among advancers vs
                          decliners is encouraging. 


BEARISH Signs:

Interest Rates            Trading ABOVE 200dma and 5.50%
                          Benchmark. (5.596%)

 

 


 


OTM Call Analysis

As we move through May's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 680-740 among option
speculators. As we have been documenting, excessive out-of-the-
money (OTM) call may serve as overhead resistance.


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

Friday, March 19            35,626         -
Friday, March 26            60,266      +69.2%     
Friday, April 2             70,952      +99.2%     
Friday, April 9             74,028     +107.8%     

May Expiration Cycle
OEX OTM Call Analysis (Open Interest May 680-740)
----------------------------------------------------------
Date                 Open Interest       Change %    Alert

Friday, April 16            30,697          -
Tuesday, April 20           41,209         34.2      
Tuesday, April 22           49,571         61.5      *



Market Sentiment at a Glance    Friday     Tues      Thurs  
Indicator                       (4/16)     (4/20)    (4/22) Alert
***********************************************************

Pinnacle Index (OEX):          

Overhead Resistance (680-695)     2.6       3.7        4.4
Underlying Support  (645-660)     1.4       1.7        1.8

Put/Call Ratios:

CBOE Total P/C Ratio               .7        .5         .4
CBOE Equity P/C Ratio              .5        .4         .3      
OEX P/C Ratio                     1.6       2.4        1.3


Peak Open Interest (OEX):

Puts                              520       660        660 
Calls                             695       720        720
P/C Ratio                        1.19      1.36       1.21       


Market Volatility Index (VIX):	

CBOE VIX                        25.48     26.93 *                

Investors Intelligence:

Bullish                         55.9%     55.9%      56.4% *
Bearish                         30.5%     30.5%      30.8% *	



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                       (4/16)      (4/20)    (4/22)

               
                    (690-695)      8.8        7.4       7.4
                    (680-685)      1.5        2.5       3.2
Overhead Resistance (680-695)      2.6        3.7       4.4

OEX Close                       668.65     662.08    690.01 

Underlying Support  (645-660)      1.4        1.7       1.8
(655-660)	1.7        2.0       2.1 
                    (645-650)      1.2        1.4       1.5
 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 680/695 
level while the underlying support is only moderate at the
OEX 645/660 level.


Put/Call Ratio                  Friday      Tues       Thurs
Strike/Contracts                 (4/16)     (4/20)     (4/22)

CBOE Total P/C Ratio               .67        .54        .44
CBOE Equity P/C Ratio              .47        .36        .34
OEX P/C Ratio                     1.64       2.40       1.33


OEX
Peak Open Interest   Friday         Tues         Thurs
Strike/Contracts     (4/16)         (4/20)        (4/22)

Puts                 650 / 7,383    660 / 9,480   660 / 10,266
Calls                720 / 6,754    720 / 6,964   720 /  8,483
Put/Call Ratio       1.09           1.36          1.21

 
 


(VIX)

Market Volatility Index 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
March 4, 1999       Bottom              28.15

April 16, 1999                          25.48
April 20, 1999                          26.93
April 22, 1999                          23.91 *


 

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
March 24, 1999                        55.9        29.7
March 31, 1999                        55.6        31.6

April 7, 1999                         56.4        31.6
April 14, 1999                        55.9        30.5
April 21, 1999                        56.4        30.8  *





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

Index     Last     Mon    Tue    Wed  Thur  Week
Dow    10727.18  -53.36   8.02 132.87145.76 233.29
Nasdaq  2561.61 -138.43  64.03  79.44 72.53  77.57
$OEX     690.01  -15.76   9.19  14.60 13.33  21.36
$SPX    1358.83  -29.52  16.69  29.95 22.71  39.83
$RUT     428.85   -9.17   2.93  11.23  2.28   7.27
$TRAN   3609.92   38.01 -72.79  62.54 53.46  81.22
$VIX      23.98    3.08   1.45  -2.38 -0.57   1.58

Stock             Mon    Tue    Wed  Thur  Week

MFNX    74.75  -9.19   4.44   4.88  7.88  8.01 Splits 2:1 May 18th
AOL    147.13 -23.75  12.81  14.06  4.38  7.50 Earnings 4/27
LVLT    89.13  -5.69   7.00   6.13  0.00  7.44 Dropped, earnings
ANF     95.38  -6.87   3.68   5.50  3.31  5.63 Earnings 5/11
DELL    41.88  -2.81   2.75   0.25  3.44  3.63 Earnings May 18th
DCX     86.94   0.06   1.50  -0.44  1.44  2.56 Price target=$111
WMT     50.06  -5.25   2.88   1.00  1.31  2.56 No depression here!
PFE    128.31  -9.13   0.81   4.63  4.94  1.25 Approved 3:1 split
AMZN   190.06 -31.06  13.06   7.25 10.81  0.06 Earnings 4/28
F       64.00   0.13  -1.13   0.13  0.00 -0.87 Dropped, not moving
MOB    100.31   2.88  -1.63  -3.56  1.00 -1.31 Dropped, earnings
UCL     39.38   0.56  -1.75  -0.56  0.25 -1.50 Earnings 4/28
SUNW    63.44  -4.81   4.25   5.13  3.93 -1.69 Tech Reversal
CI      87.94  -0.56   0.63  -0.75 -1.31 -1.99 Dropped, not moving
CMGI   258.50 -46.88  -8.00  40.75 11.75 -2.38 Splits 2:1 May 27th
AVP     51.38  -0.69  -4.19   1.50 -1.44 -4.82 Dropped, earnings

Puts

MU      36.94  -1.38   0.25  -2.75 -4.56 -8.44 Downgraded by Niles
RMBS    57.63  -3.13  -2.13   3.25 -6.13 -8.14 Still falling
NSOL    83.44 -19.25 -10.50  32.00 -8.56 -6.31 Competition coming
AMTD   120.63 -38.13  23.25  17.69 -8.19 -5.38 No support
AMGN    62.81  -5.88   8.06  -5.00 -1.19 -4.01 Earnings=no help
DLJ     76.56  -8.75   2.13   4.13 -0.31 -2.80 No support
MSFT    84.94  -5.63   2.13  -1.13  2.94 -1.69 Caution
CAH     66.56  -1.13   0.06   0.81 -0.25 -0.51 Dropped
ATHM   145.44 -26.00  13.81   9.19  3.50  0.50 Dropped
VIA.B   43.05   1.19  -1.06  -0.75  2.80  2.18 Dropped
BGEN   107.88 -13.13   4.88   2.50  8.13  2.38 Dropped
NDB     52.50 -11.50  16.62   4.81 -7.56  2.50 No support
EGRP    96.00 -18.75  16.00   8.69 -2.50  3.44 Late day weakness
COST    86.94  -3.69   4.25   1.88  2.81  5.25 Dropped
GTW     69.94  -4.69   2.00   4.50  3.94  5.75 Dropped
ELN     66.00  -4.50   5.00   3.50  2.00  6.00 Caution
SCH    120.81 -12.81   4.75  11.25  2.81  6.00 Split too far away
SEPR   101.00  -8.13   4.63   7.31  3.19  7.00 Dropped
WCOM    92.44  -2.50   2.63   4.88  2.69  7.70 Dropped
IBM    194.50  -3.63   3.00   2.13 22.63 24.13 Dropped



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:
******

LVLT $89.13 +0.00 (+7.44)  LVLT performed well the past two 
days and picked up another $6.13.  This stock has certainly 
been profitable, but its time to drop it from our play list.  
Earnings are due before the bell tomorrow and we never 
recommend holding over an earnings report (which means 
conservative investors should already be out).

AVP $51.38 -1.44 (-4.81) We are dropping AVP after it 
announced earnings today and then dropped further.  AVP 
did beat the revised earnings estimate of $.27 by a penny, 
but AVP ran last week after pre-announcing better than 
expected earnings.  When this stock finds a base, it should 
continue upward.  We will keep an eye on it.

CI $87.94 -1.31 (-2.00) We are going to drop CI for lack
of performance.  We don't like the fact that the market is
heading up and CI is down.  It seems CI is just consolidating,
but there are better plays then waiting for CI to perform.

F $64.00 +0.00 (-.88) We dropping Ford for not moving.  Ford
could be consolidating its recent gains, but why wait for a
non-mover when there are other good plays out there.  We will
keep an eye on Ford and if it breaks out of this phase, we
might possibly add it again.

MOB $100.31 +1.00 (-1.32)  Earlier in the week when XON 
reported "sharply lower first quarter earnings" and blamed 
low oil prices, investors bailed. (-Reuters)  XON drug the 
sector down and MOB fell -$5.19 in two days from sympathy
(of course MOB will move whatever direction XON does due 
to the merger pending between the two behemoths).  
On Thursday, MOB showed some signs of a turn around by 
finishing the day of trading up +$1.00 even after treading in 
the negative for most of the day.  The surge in the markets 
may have helped MOB come back.  However, MOB will announce 
its earnings sometime during the day tomorrow (on Friday 
April 23d).  We never recommend holding over the actual 
announcement.  If you have not sold yet, it looks like the
stock should open up tomorrow.  We are dropping MOB as a call.



PUTS:
******

SEPR $101.00 +3.19 (+7.00)  Yes, this stock has made gains 
for 3 straight days. But nonetheless, we still got our 16 point
spike downward on Monday.  It is just unfortunate it did not
continue its fall.  At the beginning of the week, SEPR was 
downgraded by Bear Stearns to "unattractive" and we expected 
such negative news to incite further losses.  The previous 
week, SEPR lost a whopping $23!  Since this trend is not 
continuing, we must drop it for better plays.

ATHM $145.44 +3.50 (+0.50)  ATHM was down 4 days last week 
(a total loss of -44.19) and continued to tumble another 
26 points this Monday.  With this in mind, the $26.50 it's 
advanced the past three days was a reasonable, but unwanted
adjustment.  This jump may be just a correction, but with 
present market conditions we can no longer recommend it as 
a put play.

VIA.B $43.03 +2.78 (+2.15)  This stock traded in a tight $2 
range at the beginning of the week. Because of this pattern, 
we recommended to our readers to wait and see which direction 
VIA.B would move before beginning a new play.  Well 
unfortunately, the stock had a positive break out today
and gained almost 3 points.  Due to this bullish warning sign, 
we're dropping VIA.B from our put list.

BGEN $107.88 +8.13 (+2.33)  We are dropping BGEN after it
came back with a vengeance on Thursday and is now positive 
for the week.  Though BGEN is in an area of resistance, it
has some momentum and has a 2-1 split coming up.  That is 
okay.  After picking it at $114, riding the drop to $90
wasn't bad.  Today just confirms why we play with stops.

CAH $66.56 -.25 (-.50)	Cardinal is still drifting lower as 
their scheduled earnings date of 4/21 has come and gone without
an announcement.  Companies that are not as widely covered can 
get away with this and claim they had never planned to report 
that day even if its published by Reuters and other major 
financial news sources.  Nevertheless we've seen lots of 
volatility for CAH including a drop to $64 today.  But late day 
rallies have wiped out the losses the last two trading days.  
This leaves us uneasy about Cardinal dropping further so we are 
dropping it as a put. 

COST $86.94 +2.81 (+5.25) Frustrating as it may seem, the 
drop from $81.69 to almost $76 on Monday failed to scare 
any more investors and no one is selling.  As you all know by 
now, cyclicals are out and the old leaders are back in.  And 
Costco falls in the latter category.  But that's why we use stop
losses.  The stock had moved down faster than the averages on 
Monday but we've seen a lot of buying in COST as investors are 
regaining confidence in the market and hunting for bargains.  
Whether or not it's a bargain at this level is questionable but 
it's much cheaper than it was two weeks ago and that's usually 
enough to spur buying interest.  At this point we can no longer
recommend starting COST as a new put play.      

WCOM $92.44 +2.69 (+7.69) With the strength in the Nasdaq since 
Tuesday, WCOM has regained its leadership role.  The stock closed 
firmly above its 10-dma and 50-dma.  This came at the right time 
for WCOM shareholders as the stock has been beaten up lately.  Its
amazing to see how one surprise in earnings to the upside (as in 
the case of IBM) has caused investors to forget that 7 out of 10 
earnings reports cause a stock to fall.  Earnings are set to be 
released soon and we will see if this rally WCOM is justified.  
Until then we are dropping WCOM from the put list.       

GTW $69.94 +3.94 (+5.75)  GTW reported 0.62 EPS after the 
market closed on Thursday.  They not only beat 0.48 from a 
year ago and First Call estimates of 0.60, but went on to 
match the whisper number.  Even though we weren't expecting 
impressive numbers for GTW, you should have closed your 
positions ahead of the announcements as we had recommended 
back on Tuesday.  If you had done so, the IBM/GTW rally 
wouldn't have affected you at all.  We are now dropping 
GTW as a put play.  

IBM $194.50 +22.63 (+24.12) Risk.  Risk.  Risk.  Wow!  What 
a blowout!  Nobody saw this coming as IBM completely 
desecrated earnings estimates of $1.41 by reporting $1.55 
after the close yesterday.  IBM single-handedly changed the 
tech stock landscape today for the better, but consequently 
is now a lousy put play, thus we are dropping it.  Although 
we are not ready to bring IBM back as a call just yet, 
we'll keep our eyes open on this one just in case.

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

AMZN $190.06 +10.81 (+0.06)  AMZN led the way as the internets 
bounced back.  The stock advanced over 28 points the past two 
days on very strong volume.  Now AMZN's overhead resistance is 
its 52 week high at $199.12, but it appears $191-192 is its 
true opposition.  The stock has bounced off this mark three 
times in the last two weeks.  Verify the direction before opening 
a new position.  And remember, the earnings run will come to 
a halt next week.  Amazon confirmed they will report on April 
28th after the bell.  We are expecting a split announcement.

CMGI $258.50 +11.75 (-2.38) CMGI has made up virtually all
of its earlier losses.  It seemed early on in the week that
the Internets had fallen out of favor, but with the strong
bounce the last few days, Internet plays have found favor
again.  IBM's earnings blowout hasn't hurt the situation
either.  CMGI did trade as high as $269 today, but came
down about $10.  Resistance is in the $300 range.  Target
shooting Internet stocks is usually a good strategy.

DCX $99.50 +1.44 (+2.56)  Earlier today (Thursday), Schroder 
& Co. raised its earnings estimates for DCX, kept their rating 
at a "buy," and set a 12 month price target of $111 for the 
company.  DCX is scheduled to announce their earnings next 
week on April 28th (as reported in an article by AP Online).  
Watch for DCX to pop it into gear and head higher on an 
earnings run.   If you decide to play DCX, remember that this 
is a shorter play since we never recommend holding over 
earnings.   



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



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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
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newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
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The Option Investor Newsletter         Thursday  4-22-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


Play Updates Continued 
**********************

UCL $39.38 +0.25 (-1.50)  Although UCL still seems to be 
consolidating its gains, the profit taking seems to be 
slowing.  On Tuesday the company fell -$1.75, on Wednesday 
it slumped -$0.56, and on Thursday it began its turn around 
by finishing +$0.25 after being in the red for most of the 
day.  UCL will report its earnings on 4/28 before the market 
opens and the recovery at the end of Thursday could prove to 
be an entry point.  

AOL  $148.56 +5.81 (+8.81) From Tuesday's update, "but 
until we get back over $133 convincingly". . . OK.  That 
was pretty convincing!  AOL has made a $20 comeback in the 
last 2 days as Internets and tech companies took back the 
stage (at least for now).  IBM only kicked in the after-
burner for the industry.  AOL will report earnings on April 
27 after the close and could announce a split again too.. 
Enough shares are available for a 3:2 split. A 2:1 would 
require shareholder  With all the splits taking place 
lately, it seems more and more likely from AOL.  Just so 
you know, Sprint filed to sell about $4 bln., or 28.8 mln. 
shares worth of AOL.  They hold a 3% interest in the 
company.  We don't read this as negative.  Sprint needs to 
arm its war chest to remain a contender in the new telecom 
era.  Confirm market direction before playing 

MFNX $74.75 +7.88 (+8.00) Our comment from Tuesday 
following Monday's nearly $10 sell-off, "Yesterday sure 
was painful."  Today we add, "No pain, no gain."  
Wednesday, MFNX piled on almost $5, followed by almost $8 
today.  This sector is again looking strong on the heels of 
news that Germany's telecom powerhouse will purchase 
Italy's telecom powerhouse with their combined forces 
picking the U.S. as their next point of expansion.  QWST, a 
competitor of MFNX's announced a split today, which follows 
their announcement earlier in the week that BellSouth would 
take a 10% interest in QWST causing investors to speculate 
on who's next.  MFNX splits 2:1 May 18 and reports earnings 
around the same time.  They won't set an exact date until 
after May 1.  Earlier this week MFNX announced their first 
customer in Texas, Allegiance Telecom.  No terms were 
disclosed.  Technically, though still in the negative part 
of the chart, indicators have turned up sharply and should 
quickly cross positive, market willing.  Confirm market 
direction before playing.

DELL $41.88 +3.44 (+6.44) Two-four-six-eight!  Who do we 
appreciate?! IBM!  IBM!  Yea!  Nobody, including us 
expected IBM to completely obliterate earnings estimate the 
way they did.  The news carried the whole market upward 
today.  Dell was a great beneficiary and sympathy play 
(today's play of the day) on that news.  Dell will be the 
last of the big-cap techs to report, and will lead the 
sector into the light. IBM made Dell's job much easier.  If 
you tried to get in the play this morning, unfortunately 
the $2 gap up at the open kept you from any stellar 1-day 
gains.  Anyway, Dell reports earnings May 18 and should 
give us a great run up to that date.  No need to rush in.  
Wait for the pull back.  Dips are buyable.  Confirm market 
direction first.



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

AMGN $62.81 -1.19 (-4.00) We see again that earnings above 
First Call estimates doesn't always translate into gains 
for the stock.  Amgen did beat estimates after the close 
Tuesday and proceed to drop 5 points on Wednesday.  The 
drop was helped along by a downgrade from Morgan Stanley 
to  neutral from outperform.  Most of the concern stems 
from dropping development of at least two promising drugs.  
Amgen's pipeline was thought to be one of their strengths 
and validation for a lofty P/E.  AMGN moved right up to 
their 50-dma on Tuesday and was denied passage which confirms 
the technical downtrend.  Lack of a bounce following Wednesday's 
drop even with an upgrade from A.G. Edwards is another reason 
we see more downside in the stock.   

ELN $66.00 +2.00 (+5.50) "Caution" is the word of the day 
on this stock.  It's been down for 6, now up for 3.  The 
advance on Tuesday was purely market pressure, but yesterday 
the company had some positive press.  Elan announced the 
clinical trials on their new drug, NeuroBloc, achieved 
significant success.  Now, how long this tidbit of news will 
effect the stock is unknown.  Technically, ELN is 
positioned below its 200 dma which is at about $69 and the 
MACD indicator is still showing a bearish downtick. But 
confirm a declining direction before beginning a new play.

NSOL $83.44 -8.56 (-6.31) We mentioned on Tuesday that the 
short-term bad news was played out and to look for a 
technical bounce and we got it Wednesday as the stock reversed
all of its losses for the week.  We also suggested you tighten
down the stops, which should have you locking in a nice profit.  
But don't be fooled by the big rise.  It was a technical move 
fueled by their earnings release.  They beat estimates by .03 
cents.  The stock opened at 102 1/2 Thursday and dropped all 
the way back to negative territory on the day.  A more than 27 
point intraday move.  They haven't closed above their 50-dma 
and only recovered 50% of the sell off from the last two weeks.  
The future is uncertain and its not the kind of stock Internet 
investors are looking to hold.  Especially now that there are 
five companies lined up to compete with NSOL in the Internet
registry game (and AOL is one of them).

DLJ $76.56 -0.31 (-2.82)  DLJ showed weakness by the end of 
trading on Thursday.  The markets surged to record levels yet 
again and DLJ somehow finished the day in the red.  This is a 
bearish sign for DLJ.  DLJ could easily fall back to its 30 
dma especially if the markets pull back on Friday.  Look for 
DLJ to head lower but make sure to follow your plays closely 
and use your stop losses accordingly.    

RMBS $57.63 -6.13 (-8.12)  As we predicted on Tuesday, 
excessive losses can sometimes be followed by a slight 
rebound.  RMBS did exactly as we expected.  It popped up on 
Wednesday.  Hopefully you set those stop losses as we had 
suggested.  But if for some reason you weren't stopped out, 
RMBS gave you another chance on Thursday.  RMBS continued its 
downhill rampage by shedding another -$6.13.  Again, we want 
to warn you to use your stop losses.  The big dip on Thursday 
could be followed by a slight bounce so be sure to protect 
your profits by using those ever so important stops.  

SCH $120.81 +2.81 (+6.00)  Even though SCH has added +$18.81 
in the past three days of trading and announced a 2:1 stock 
split, we are keeping SCH as a put play.  We feel that SCH 
will resume its downhill trend and that investors will 
temporarily forget about the split since SCH stuck a 2 month
fuse on it with an ex-date in July.  We are expecting another 
pull back due to the fact that it has been up big in the past 
three days.  Plus, Fidelity may provide some new competition 
for SCH.  On Monday, the company will "begin a hard core push 
of its online brokerage business in hopes of ousting Charles 
Schwab Corp." (-Reuters) 

EGRP $96.00 -2.50 (-3.44)  EGRP almost got dropped today as 
the internets and techs staged another big 2-day gain.  The 
thing is that on-line brokers didn't participate in today's 
action, even as Schwab announced a 2:1 split.  What really 
kept EGRP on the put list was its $4 drop on increased 
volume just before the close.  Again there is nothing to 
hold EGRP up following its earnings.  Yes, they received an 
upgrade from Pacific Crest Securities to "strong buy" 
yesterday, but the professionals telegraphed their intent 
to sell at today's close.  This is still a HIGH-RISK 
play!!!  Gun-slinging action hero types can make a killing 
on the fluctuations, but conservative investors should stay 
away from this one.  Confirm market direction before
playing.

AMTD $120.63 -8.19 (+32.75) Same story, different stock.  
Yesterday was a real barnburner as AMTD tacked on $19.  
Today, despite a tech and Internet resurgence, AMTD took an 
$8 nosedive.  Like EGRP, there is nothing left to hold the 
price up after the euphoria of the earnings run-up.  Even a 
Schwab 2:1 split couldn't put wind in the sales.  The pros 
were unloading their positions too at the close (finishing 
down $8) as volume picked up and the price dropped another 
$3 in the last half hour of trading.  This is still an 
extremely risky play but it is fraught with negative 
technical indicators and no sign of a turn-around near.  
Confirm market direction before playing and use stops.

MSFT $84.94 +2.94 (+3.94) Though MSFT beat earnings 
estimates by $0.03, it certainly pales in comparison to 
IBM's incredible upside surprise.  MSFT's sequential 
revenue growth going forward will not be that great in 
comparison to its past.  Analysts estimate that there is a 
corporate "lockdown" on new hardware and software spending 
until next year.  The thinking here is that corporate IT 
chiefs have already spent their $$$ to combat the Y2K 
problem and won't be spending any more soon.  This will 
adversely affect MSFT revenues.  In addition, today's 
action showed sellers stepped to the plate to unload every 
time the price hit $85.  Check out the daily chart.  
Today's ride on IBM's coattails only gave us a better 
buying opportunity.  Confirm market direction before 
playing.



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

ANF - Abercrombie & Fitch $95.38 +3.31 (+5.63)

Trading on its century-old name, ANF sells men's and women's 
casual clothes and accessories -- quite a change from the old 
days, when the company focused on outdoor sporting goods and 
clothing, and Ernest Hemingway and Theodore Roosevelt donned 
ANF gear while on safaris.  With more than 180 US stores, the 
company targets college students as its primary market. A&F
searches for a college-aged sales staff and places large 
posters of frolicking twentysomething models on its walls. 
As a result, many ANF stores resemble a scene out of Beverly 
Hills, 90210. (from Hoovers)

ANF has had a nice three day run after BancBoston raised its
earning estimate and reiterated a buy on the 20th.  Earnings
are due in mid-May and there is a possibility of a stock
split announcement.  This should lead to a nice pre-earnings
run.  ANF has plenty of shares to do a split and also has a
shareholder meeting coming up in May.  

The only news to report was the analyst earnings raise.  This
looks to be a great play, but watch for possible profit taking 
on Friday (as a possible entry point). 

BUY CALL MAY- 95*ANF-ES OI=778 at $5.88 SL=4.00
BUY CALL MAY-100 ANF-ET OI=423 at $4.00 SL=2.50
BUY CALL JUN- 95 ANF-FS OI=  9 at $8.88 SL=6.50 
BUY CALL JUN-100 ANF-FT OI=  0 at $6.38 SL=4.25 (wait for OI)
(June Calls are fairly new)

Picked on Apr.22nd at  $95.38   PE = 38
Change since picked   +$ 0.00   52 week low =$ 29.50
Analysts' ratings  10-5-1-0-0   52 week high=$101.50
Last earnings 01/99 est. 0.96   actual 1.12 
Next earnings 05-11 est  0.17   versus 0.12
Average daily volume = 502 K
Chart = http://quote.yahoo.com/q?s=ANF=3m

******

WMT  Wal-Mart $50.06 +1.31 (+2.56 this wk)(-3.88)

Wal-Mart is the leading discount retailer in the world, with 
a presence in all 50 states, as well as Canada, Mexico, Asia,
Latin America, and Europe. In addition to discount department
stores, it operates the #2 grocery chain, behind Kroger's, 
and Sam's clubs, which is the #2 warehouse chain. This retail 
giant's market capitalization is $182.3 billion.

WMT split 2:1 back on April 19th.  It succumbed to a
short period of "post split depression" and is now recovering 
nicely.  We are adding it as a call to catch its earnings 
run.  The company will report on May 11th (First Call).  
After an outstanding fourth quarter, Wal-Mart is continuing 
with strong numbers in the current quarter, too.  February 
net sales were up 17.7% year over year and same store sales 
increased 10.3% over last year.  March sales look even 
better. Same store sales increased 11.3% while total sales 
were up 18.3%.  What do all these percentages add up to?  
We feel they add up to a great earnings run!

News:  WMT may soon enter a hostile bidding war over ASDA, 
one of the United Kingdom's biggest supermarket chains.  
ASDA agreed to merge with Kingfisher in a 6.0 billion pounds 
merger but there is talk that WMT may enter as a 
counter-bidder for ASDA.

BUY CALL MAY-50*WMT-EJ OI=13450 at $2.63 SL=1.25
BUY CALL MAY-55 WMT-EK OI= 3719 at $0.88 SL=0.00
BUY CALL JUN-50 WMT-FJ OI=10264 at $3.63 SL=1.75
BUY CALL JUN-55 WMT-FK OI= 5598 at $1.63 SL=1.00

Picked on April 22nd at $50.06    PE = 49  
Change since picked     +$0.00    52 week low =$24.09
Analysts' ratings   7-10-5-0-0    52 week high=$53.41
Last earnings 12/98 est 0.66   actual 0.70  
Next earnings 05-11 est 0.44   versus 0.37
Average daily volume = 6.69 mln
Chart = http://quote.yahoo.com/q?s=WMT&d=3m

******

SUNW - Sun Microsystems $63.44 +3.93(-1.69 this wk)(-7.62)

With world headquarters in Palo Alto, California, Sun 
Microsystems, Inc. has been described as "the last 
standing, fully integrated computing company adding its own 
value at the chip, OS and systems level." (John Doerr, 
Kleiner Perkins, quoted in Fortune, October 13, 1997). In 
an industry characterized by red ink and fierce 
competition, Sun has averaged double digit growth over the 
last several years and has one of the strongest balance 
sheets in the industry, with nearly $1 billion cash in the 
bank. Sun is the leading provider of network computing 
systems including workstations, servers, and thin clients. 

It's back!  We're now through the post-split depression, 
which nearly put SUNW in the morgue.  Fortunately, the last 
3 days, particularly today following IBM's earnings news, 
SUNW came resoundingly back to life and appears ready for 
another ascent, market willing.  SUNW was up almost $4 
today, most of it coming from the huge gap up at the 
opening bell.  Though technical indicators are still in 
negative territory, they have turned upward sharply wherein 
we expect they will cross to the positive very quickly.  
SUNW is showing really great strength.  As always, confirm 
market direction before playing and remember your stops for 
those bad days.

In the news, Chairman and founder of Sun, Scott McNealy has 
stepped aside as acting President to promote Ed Zander, 
Sun's current head of 7 different market divisions, to the 
position.  McNealy will remain as chairman and CEO.  Word 
is that McNealy didn't want him replacing Eckhard Pfeiffer 
at Compaq or Lew Platt at HP.  Both Zander and McNealy deny 
the suspicions.  We don't care as long as Sun continues to 
execute and keeps showing us an upside surprise next time.

BUY CALL MAY-60 SUQ-EL OI=4968 at $6.13 SL=4.25
BUY CALL MAY-65*SUQ-EM OI=6404 at $3.63 SL=1.75
BUY CALL JUN-60 SUQ-FL OI= 725 at $7.88 SL=6.25
BUY CALL JUN-65 SUQ-FM OI= 272 at $5.25 SL=3.50

Picked on April 22 at $63.44          PE = 46
Change since picked    +0.00          52 week low =$19.19
Analysts Ratings 13-12-5-0-0          52 week high=$72.50
Last earnings   04/99 est .35  actual .35 
Next earnings   07-16 est .47  versus .37
Average Daily Volume = 16.0 mln.
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m

****

PFE - Pfizer $128.31 +4.94 (+1.25)

Pfizer Inc is a research-based global pharmaceutical company 
that discovers, develops, manufactures and markets innovative 
medicines for humans and animals. Its three $1 billion plus 
drugs include Norvasc for hypertension and angina; Zoloft, a 
leading anti-depressant; and Zithromax, a highly prescribed 
anti-biotic. Other successful Pfizer drugs that we all know 
include: Viagra, Lipitor, and Celebrex. Pfizer employs nearly 
50,000 people on 6 continents.

Pfizer rose almost $5.00 today after its shareholders authorized 
more stock shares and approved their much heralded 3:1 split 
today. The split will be payable June 30th to shareholders 
of record June 2nd. PFE has had long split runs prior to its 
previous splits and a 3:1 split often gives a more powerful run 
than the more common 2:1. This could be the start of a climb 
toward the high it set on April 12th of $150.13.  While normally
we probably wouldn't play a split so far away, we feel that our 
only downside is recent support at $120.

At its annual meeting, Pfizer's chairman was very upbeat, saying 
the company "has never been stronger" as it celebrates its 150 
year anniversary.  In 1998, it moved up in the pharmaceutical 
world from #11 to #2 and is growing faster than the rest of the 
industry. With 180 research projects currently in discovery and 
development, PFE is maintaining a good pipeline that guarantees 
future profits. Drug stocks in general appear to be due for more 
investor rotation into their sector on the heels of good earnings.
PFE is a co-promoter of Searle's Celebrex, the first of the cox-2 
inhibitors to be approved and it is now on track to sell even 
faster than PFE's Viagra. (WE are all getting older and developing 
those aches and pains.) Also, PFE's new drug, Tikosyn, for 
arrhythmia, is close to FDA approval. 

BUY CALL MAY-125 PFE-EE OI=1228 at $7.63 SL=5.75
BUY CALL MAY-130 PFE-EF OI=3002 at $5.00 SL=3.25
BUY CALL MAY-135 PFE-EG OI=2127 at $3.13 SL=1.50
BUY CALL JUN-130 PFE-FF OI=4306 at $7.38 SL=5.50
BUY CALL JUN-135*PFE-FG OI=4845 at $5.38 SL=3.50

Picked on Apr 22nd at $128.31   PE = 45
Change since picked   +$ 0.00   52 week low =$ 86.00
Analysts Ratings  13-3-14-0-0   52 week high=$150.13
Last earnings 03/99 est 0.62    actual 0.62 surprise=+0%
Next earnings 07-09 est 0.51    versus 0.46
Average daily volume = 2.66 mln
Chart = http://quote.yahoo.com/q?s=pfe&d=3m




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

NDB - National Discount Brokers $52.50 -7.56 (+2.50 this wk)

NDB is a holding company engaged in NYSE and AMEX specialist 
activities and also offers online retail brokerage trading.  
They are a national trading firm with offices all over the 
country that acts as market makers for some 3400 different 
NASDAQ and OTC stocks.  Through their division Triak, they 
offer deep-discount trading for individual investors.  This 
part of the business has been put in the forefront as the 
online trading war heats up.

The new craze in day trading during the past year has been to 
trade the company your trading with.  We've seen the online 
brokers group re-ignite in the month on April as companies come 
forth to tell us about the number of new accounts they opened.  
This is most of what investors are looking to hear about in the 
earnings report since many of these companies don't yet have 
earnings.  NDB has gone along for the ride with wild swings up 
and down.  With most major firms already out with earnings, the 
momentum is leaving the group.  We expect NDB to fall back in 
line with a sustainable valuation.  The 50-dma will provide 
support in the low $30 range.  The stock has no other support 
due to its rapid ascent. 

BUY PUT MAY 55 NDB-QK OI= 78 at $11.38 SL=8.75
BUY PUT MAY 50*NDB-QJ OI=234 at $ 7.88 SL=5.75

Average Daily Volume = 1.23 mln

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

******

MU - Micron Technologies $36.94 -4.56 (-8.44)

MU designs, develops, manufactures, and markets semiconductor 
memory products, personal computers and custom complex printed 
circuit boards, memory module and system level assemblies.

Micron has been on a downward spiral since hitting $80.56 on 
Feb. 4th of this year. Today MU was downgraded from "strong buy" 
to "long-term attractive" by Daniel Niles of BancBoston Robertson 
Stephens, and it lost another 7% on nearly triple its normal 
volume. If Tom Kurlak, the former chip analyst at Merrill Lynch 
had made the downgrade, we might have thought it was time to buy 
the stock again. But Dan Niles is usually right on the money, so 
we think the stock has further to fall. Niles lowered his 3rd 
quarter for MU to $.07 from $.23 and his 1999 estimate to $.24 
from $.75. BancBoston said it was thought that DRAM chip prices 
would firm after the Japanese fiscal year end, but instead, they 
kept dropping and are now in the low $7 range. Niles expects to 
be "more bullish around August." That gives option investors 
plenty of time to play MU as a put. Caution: today's heavy 
volume may have exhausted the immediate supply of sell orders, 
so confirm the stock's direction before playing.

BUY PUT MAY-35 MU-QG OI= 889 at $2.25 SL=1.00
BUY PUT MAY-40*MU-QH OI=2829 at $5.25 SL=3.25

Average daily volume = 5.03 mln

Chart = 



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

The Rally Continues...

Thursday, April 22

The Dow climbed to its 10th record finish this month on IBM's
blockbuster earnings, finishing up 145 points at 10,727. Big Blue
said that its first-quarter earnings jumped 40%, well above Wall
Street's estimates. The Nasdaq index followed the group, closing
72 points higher at 2,561. In the broad market, advancing issues
led declines by 4 to 3 on active volume of 924 million shares on
the New York Stock Exchange.

Portfolio plays:

We have had lots of activity in the spreads portfolio this week
with the market rebounding from its lows on Monday but I am still
recovering from the time spent at the option trading seminar. A
short synopsis of the weekly positions will be published in the
Sunday newsletter and then we will start exploring the techniques
and adjustments that were discussed at the workshop.

I had some more requests for calendar spreads (volatility plays)
so that's what we will focus on today. Most time spreads involve
the sale of one option and the purchase of a more distant option,
both with the same strike price. The basic strategy implies a
NEUTRAL philosophy based on the fact that TIME will erode the
value of the near-term option at a faster rate than it will the
far-term option. Each month, after the previous short position
expires (or is repurchased), we will sell a new position to
reduce the cost-basis of our long term option.

Good Luck!

**********
NEW PLAYS
**********
CNTO - Centocor  $43.00     *** Merger Rumors ***

Centocor makes therapeutic and diagnostic drugs for cancer,
cardiovascular problems, and other diseases. The company has
some products that are already approved for sale in the US;
ReoPro prevents blood clots during angioplasty, Remicade treats
the bowel disorder Crohn's disease (and possibly rheumatoid
arthritis), and Panorex treats cancer. Centocor's drug Avakine
is also in the final testing stages and the company owns the
marketing rights for Retavase, a cardiovascular drug developed
by Roche Holding. Centocor is selling its oncology diagnostics
business to focus on therapeutics.

Centocor stock rose more 20% on Wednesday afternoon, with new
speculation that it's a takeover target and an upgrade from a
industry analyst. Some say Johnson & Johnson is looking into
acquisitions in this sector, and apparently, Centocor has also
been talking to a few companies. Eli Lilly & Co. is a potential
candidate because it's the marketing partner for ReoPro(R) and
with Centocor's market capitalization of almost $3 billion, the
purchase would be dilutive to anyone but Lilly.

On Wednesday, one analyst raised his rating on Centocor stock
to a "strong buy" with a one-year price target of $55 based on
sales of Remicade and a positive growth rate. The company also
appears to be the most undervalued top-tier biotech stock.

Most experts expressed skepticism about the impending merger so
we will take a favorable speculative position with a long-term
call option and hope the stock continues to trade in its current
range for atleast the next few weeks.

PLAY (speculative/calendar spread):

BUY  CALL JUL-45 COQ-GI OI=1251 A=$3.87
SELL CALL MAY-45 COQ-EI OI=2305 B=$1.93
INITIAL NET DEBIT TARGET=$1.75 TARGET ROI=50%

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

****

WLA - Warner lambert  $69.31     *** Sector Rebound! ***

Warner-Lambert produces a well known group of consumer products
including Listerine, Clorets, and Certs. They also make the drug
Zantac for heartburn remedy, a topical antibiotic Neosporin, the
cold remedy Sudafed, and Efferdent denture-cleaning products. It
also makes Schick razors and Trident, Dentyne, and Chiclets gum.
Warner-Lambert's Parke-Davis and Goedecke pharmaceuticals make
analgesics, anesthetics, and hemostatic agents along with the
diabetes treatment (Rezulin) and cholesterol drugs. The company
gets half of its sales from outside the US and it is expanding
the pipeline with the purchase of Agouron.

The drug sector has rebounded well since the early part of the
week and today's announcement by PFE of a 3:1 split should help
the rally continue through Friday. However, an FDA panel voted
today to back SmithKline Beecham's Avandia to treat adult-onset,
or Type II, diabetes and agreed with SmithKline Beecham that
Avandia did not appear to cause significant liver problems like
those associated with rival drug Rezulin made by Warner-Lambert.
Warner-Lambert and the FDA said Rezulin has been linked to 28
cases of death from liver failure. This ceratainly doesn't help
WLA in that area of drug development.

We like the long-term channel near $70 and the opportunity to
gain a small advantage by entering this play as the stock nears
a recent technical resistance.

BUY  CALL JUL-70 WLA-GN OI= A=$4.87
SELL CALL MAY-70 WLA-EN OI= B=$2.68
INITIAL NET DEBIT TARGET=$2.00 TARGET ROI=50%

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

****

CSCO - Cisco  $113.06     *** Long-term Play ***

Cisco is the leading supplier of products that link LANs and WANs
and they control two-thirds of the market for routers (which help
direct information on a network) and is also a major maker of LAN
switches. Other products include dial-up access and other network
management software. Cisco is also using acquisitions to broaden
its product line and is licensing products to widen the influence
of its Cisco Internetwork Operating System (Cisco IOS) software in
hopes of making it an industry standard. Strategic relationships
with the industry's biggest players including Alcatel, Microsoft,
and U S WEST, are boosting Cisco's influence on the networking
industry. they are listed as one of the core holdings in the White
Oak Growth Fund. A "USA Today" All Star fund that has beat the
S&P 500 average five of the last seven years.

The importance of data networking continues for many businesses,
universities, and governments and those without the faster, most
reliable networks are at a serious technological disadvantage.
The leading industries demand the best networking capabilities
and older equipment makers like Lucent are scrambling to acquire
data technologies. Meanwhile, Cisco has become the standard for
hardware to upgrade these outdated networks. As more companies
realize the demands on the horizon, they will have to upgrade
their backbone and infrastructure. Cisco will be the company to
provide that service.

We cover CSCO regularly in the OIN and the long term outlook is
favorable. However, the stock is still somewhat range-bound with
a technical top near $115 and this will be a good place to enter
the position as the stock nears that resistance. Try to use any
Friday morning bounce to increase the price on the sold call.

PLAY (conservative/calendar spread):

BUY  CALL OCT-115 CYQ-JC OI=783  A=$15.38
SELL CALL MAY-115 CYQ-EC OI=8326 B=$5.00
INITIAL NET DEBIT TARGET=$10.00 TARGET ROI=75%

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



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