Option Investor
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Daily Newsletter, Thursday, 05/20/1999

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The Option Investor Newsletter         Thursday  5-20-99
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)
************************************************************
        5-20-99          High     Low      Volume   Advances Decline
DOW    10866.70 - 20.70 10946.10 10866.70   749.546k  1,727   1,207
Nasdaq  2542.20 - 35.20  2587.33  2542.23 1,003,000k  2,269   1,743 
S&P-100  675.20 -  3.76   681.71   675.20    Totals   3,996   2,950
S&P-500  133.88 -   .54   135.05   133.88             59.9%   40.1%
$RUT     448.02 +  1.88   450.97   446.14
$TRAN    785.70 -  5.93   794.27   784.97
VIX       26.26 +   .02    26.89    23.45
Put/Call Ratio .48      
*************************************************************

Market Rally Fades At The Close...What's Next?

The markets opened higher this morning and continued to climb
throughout most the day with new cash continuing to pour in
despite the threat of future interest rates hikes. For a while,
Greenspan's testimony to the House Banking Committee threatened
to reverse the bullish trend but most traders were influenced by
a Philadelphia Federal Reserve survey that indicated inflation
remains in check. Since Tuesday's FOMC meeting, the market has
struggled to break out of a narrow range as analysts and
investors continue to weigh the possibility of higher rates and
the negative impact they will have on corporate earnings. In
today's speech, Greenspan skirted the subject of inflation,
keeping his remarks focused on the global economy, but the deputy
head of the International Monetary Fund voiced his approval of
the activity, saying that the Fed should avoid raising interest
rates until there are signs that inflation is actually rising.

None of that early morning optimism was present later in the day
as stocks fell sharply in the last hour of trading. A wave of
institutional program trading dragged the market lower and also
accounted for much of the the late-day volatility. Worried
investors rotated funds from semiconductors and other high tech
stocks into utilities and smaller companies. IBM accounted for
most of the Dow's drop and some of that money probably fueled
the rally in small and mid-cap issues. It's obvious that smart
investors are broadening their portfolio base and the lower
priced stocks are expected to benefit from that rotation out of
the market leaders.

There were some big issues in the health and drug sectors that
rallied today. Merck moved higher on expectations it will win FDA
approval this week for the pain-killer Vioxx; and Warner-Lambert
and Schering-Plough both gained after rumors surfaced that the
drugmakers are in merger talks. In other merger news, Healtheon
soared $29 as it announced it will join with WebMD to create an
Internet-based health care services company. In the technology
complex, semiconductor equipment stocks suffered big losses after
an industry report showed that a key financial ratio; orders
booked to orders shipped, slipped significantly lower. Internet
stocks also dimmed, with most marquee names losing ground; AOL,
AMZN, EBAY and YHOO all moved downward as traders exited the high
risk positions. The only Internet highlight was the Nasdaq debut
of EToys. IPO shares of the online toy store soared from $20 to
$76 on its first day of trading.

Optimistic traders received today's governments reports as some
evidence that the U.S. economy is growing at a steady but not
'inflationary' pace. The Labor Department said the number of
Americans filing new claims for unemployment benefits fell by
12,000 last week to 299,000 and the Commerce Department said the
nation's deficit rose to a record high in March, led by a widening
gap with Japan. The U.S. trade deficit is now one-third higher
than the all-time record of $169.3 billion set last year as the
global financial crisis continues to disrupt America's trade
performance. Clinton has argued that the deficit represents a sign
of our economic strength and the U.S. must continue to provide
a market for crisis countries who are struggling to emerge from
deep recessions. Try to explain that concept to the American steel
worker!

Oil prices rebounded slightly from recent lows on Thursday even as
booming oil exports from territories of the former Soviet Union
undermined OPEC's supply restraints. Increasing Russian exports
have reversed the recent rally that vaulted prices up from historic
lows below $10 after world oil producers implemented March's supply
cut agreement. Industry analysts expected the disruptions in Iraq's
"oil-for-food" program to help efforts to reduce the supply quotas
but the U.N. Security Council agreed late on Wednesday to extend
sales for another six months without any changes to the current deal.
The rise in crude values early in the year left refined product
prices trailing, forcing refiners to cut back their operations and
recent data from industry experts shows producers still have plenty
of work to do to reduce the glut of spare oil present in world
supplies.

One strange bit of news emerged from the oil sector. Energy company
Enron is going to trade bandwidth, or communications capacity, as
a commodity. Most companies now sign multiyear contracts with major
telecommunications companies for access to a certain amount of
bandwidth but Enron's plan is to let customers reserve Internet
capacity, giving companies and other speculators the chance to trade
bandwidth through a standard contract. The trading of bandwidth will
change the industry by improving the provisioning and deployment of
communications infrastructure. The first contract would provide for
use of an Enron T-1 line, or digital transmission link, between New
York and Los Angeles. The second is for capacity on a faster DS2
line, between Washington and California. It seems technology has no
limits when traders are involved.

Fearless Friday forecast.

There are no major economic reports on Friday's agenda but stocks
may be influenced by the expiration of stock and index options,
the so-called double witching hour. The third Friday of the month
is the last opportunity for institutional traders to close out May
positions before the options expire worthless and that can lead to
large buy and sell orders, making prices move erratically. On the
positive side, the market seems to be established in a narrow
trading channel and sometimes these can last for weeks at a time.
Most investors are just waiting on the sidelines to see if there's
any more bullish economic news out there that would scare the Fed
into actually raising rates. As long as the fear of higher interest
rates remains in check, market leaders will continue to rebound and
move higher. On the negative side, when there is no good news, most
people tend to worry more about bad news. In addition, two popular
averages are forming some significant restistance at the top of the
recent trading range and today's last hour sell-off is unlike the
pattern of the last few days. Some analysts would say it confirms
the bearish technical outlook. Take a look at these two charts and
make your own decision...





My personal outlook; With futures currently flat (6:45pm EST), we
would expect a slightly negative opening; a continuation of the
downdraft from today's close. Tomorrow morning will set the stage
for the day as this new slump will have to be met by vigorous
buying from the market bulls. If this institutional interest fails
to materialize, look out below! Without any leadership (or news),
the usual upward bias of options expiration may not be enough to
lure investors out of their inflationary doldrums. Even with a
morning rally, I wouldn't expect a very strong session as traders
do not want to hold many positions going into the weekend. If you
must trade, avoid the impulse to buy the dip and wait for a solid,
confirmed trend before playing.

BUYING THE RIGHT OPTION...

The #1 goal for most option traders is correctly predicting
the future movement of the underlying stock or index. However,
once the decision to buy something has been made, the average
investor will have some difficulty determining which option to
buy or sell. To be a successful trader, you must be able to
select favorable option positions based on pricing and the time
horizon of your play. Using call options as an example, an
experienced speculator might purchase positions with only days
or hours remaining until expiration. In contrast, an investor
that uses fundamental analysis to make decisions would generally
buy long-term options or LEAPS. The majority of traders fall
somewhere in between, using technical analyis and market trends
to generate short-term signals for the purchase of 15 to 75 day
option positions.

After determining the correct time frame, you must still decide
which option to purchase. In most cases, your results will be
much better overall if you buy in or at-the-money options. If
the stock moves up at all, you will most likely profit whereas
an out-of-the money option might fall in value if that movement
is only moderate or takes some time to occur. Another concern is
the cost of time. As most of you know, the highest theoretical
time value occurs in the at-the-money option and it decreases
substantially the farther in the money we go. With in-the-money
options, you spend less for time. Another advantage of using an
in-the-money option is that it has a high delta. Delta measures
the rate of change in an option's price compared to a one point
movement in the underlying stock. That means an in-the-money
option will follow the movement of the underlying issue closely,
so even a small favorable change in the stock price will produce
a profit. Some traders avoid in-the-money options because they
are expensive but the truth is, the risk/reward ratio is better
than most other positions.

The last and most difficult concept in option pricing is implied
volatility. Many traders are completely unaware of the effects
of this pricing component on their position. They continually
overpay for options that are 'in demand' only to watch and wonder
as the premiums quickly fade. The inflated prices are usually
based on short-term potential such as mergers and aquisitions,
earnings reports or split announcements. Position traders thrive
on the disparities created by this effect, selling-off volatility
for low risk, short-term gains. Market-makers profit differently
but the concept is still the same; selling something for more
than it is worth and buying it back for less than it should cost.

The nice thing about trading in the 90's is that we have plenty
of low cost software and pricing models to help us choose the
right positions. The problem is, there is an overwhelming number
of products and services available to help today's investor. How
do you choose the right one? I can't list my favorites in this
article as we have affiliations with many of those companies, but
drop me a line sometime, and I will tell you with which of those
products I have had the most success.

Good Luck!

Ray Cummins

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

As of Market Close - Thursday, May 20, 1999 

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

DOW Industrials   10,500  11,000  10,867    BULLISH   5.14
SPX S&P 500        1,325   1,360   1,339    BULLISH   5.14         
OEX S&P 100          660     690     675    Neutral   4.29           
RUT Russell 2000     435     450     448    BULLISH   5.14

NDX NASD 100       2,100   2,250   2,140    Neutral   5.7   
MSH High Tech      1,000   1,100   1,052    Neutral   5.11                

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         900     920     894    Neutral   5.20 *                    
CWX Software         600     675     673    Neutral   4.22                   
SOX Semiconductor    390     420     415    Neutral   5.11             
NWX Networking       450     490     539    BULLISH   4.22                 
INX Internet         550     650     542    Neutral   5.20             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          700     720     675    BULLISH   5.18
XBD Brokerage        425     475     449    BULLISH   5.13              
IUX Insurance        630     660     657    BULLISH   5.11                   

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           900     970     876    BEARISH   4.29              
DRG Drug             390     425     372    BEARISH   4.29             
HCX Healthcare       780     850     761    BEARISH   4.29                      
XAL Airline          170     210     177    BULLISH   5.14      
OIX Oil & Gas        285     310     294    Neutral   5.13                         


Posture Alert

Broad Market retreating under profit taking pressure. We 
have turned Bearish again across Hardware and the Internet
after breaking below key benchmark levels. 

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

/members/marketposture


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

Thursday, May 20, 1999

Stay Down

After the S&P 100 and 500 failed to take out its prior high, we are 
still encouraging investors to stay bunkered down until the market 
retreats back from an overextended state.

As shown below, the key benchmark for the DJIA is 10,800.  The mark 
has been tested several times over the past two weeks should serve as 
an early warning sign should the DJIA close below this mark.


May Expiration Cycle
OEX OTM Call Analysis (Open Interest May 680-750)


Date                 Open Interest      Change %    


Friday, April 30            65,936        -       
Friday, May 7               89,736      +36.0% 
Friday, May 14              97,861      +48.4% 
Tuesday, May 18            109,613      +66.2% 

These indicators suggest that option speculators are betting that the
S&P 500 and 100 will climb to new heights.  This could still happen     
but if it doesn't, savvy investors have hedge strategies in place.


BULLISH Signs:
 

Mixed Signs:

Russell 2000: 
Could prove problematic from a technical standpoint if the Russell 2000 
fails at the 450 benchmark.  Although the index advanced above its prior 
high of 425-430 in January '99, the RUT 52-week high is 480 and a sell off 
from here could represent a failed rally (lower high) across a two year view. 

Investor Intelligence:  
As a contraian indicator, the percent of Bullish investors spiked 
from a week ago suggesting Bullish sentiment is picking up steam. 

Advance/Decline Line:
After recovering from its low on April 1st, the A/D line is beginning 
to flatten and roll over.  


BEARISH Signs:

Interest Rates:           
Trading ABOVE 200dma and 5.50 Benchmark (5.816%).

Market Volatility (VIX):  
Trading ABOVE its 50-day moving average (25.60) indicating the end 
of the recent bullish trend which began on March 5th.  

Pinnacle Index:  
After evaporating some late last week, the Index has surged to 5.5 
suggesting that option speculators are expecting the market to 
advance higher.

Peak Open Interest:  
The lowest in some time, the contraian put-call ratio clocking in 
at .67 suggesting bullish sentiment picking up steam.


OTM Call Analysis

As we move through May's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 680-750 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 680-750)


Date                 Open Interest      Change %    Alert


Friday, April 16            30,697          -
Friday, April 23            53,887       +75.5%      
Friday, April 30            65,936      +114.8%       
Friday, May 7               89,736      +192.3%     
Friday, May 14              97,861      +218.8%     
Tuesday, May 18            109,613      +257.0%     

Market Sentiment at a Glance


                                Friday     Tues      Thurs  
Indicator                       (5/14)     (5/18)     (5/20)Alert


Pinnacle Index (OEX):          


Overhead Resistance (680-700)      1.7       2.7        2.7 *
Underlying Support  (645-660)      3.2       3.2        3.2


Put/Call Ratios:


CBOE Total P/C Ratio               .6         .6         .6  
CBOE Equity P/C Ratio              .4         .4         .4
OEX P/C Ratio                     1.7        1.2        1.3



Peak Open Interest (OEX):


Puts                              650        600      650
Calls                             700        700      680
P/C Ratio                         .81        .67      .67 *

Market Volatility Index (VIX):	


CBOE VIX                        29.66      28.15     26.26   



Investors Intelligence:


Bullish                         56.9%       56.9%  *
Bearish                         31.0%       31.0%  *	



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                        (5/14)     (5/18)     (5/20)


               
Overhead Resistance (680-695)      1.7        2.7       2.7

OEX Close                       673.57     673.00    675.20
 
Underlying Support  (645-660)      3.2        3.2       3.2


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 holding at the OEX 645/660 level.


Put/Call Ratio 


                                Friday      Tues       Thurs
Strike/Contracts                 (5/14)     (5/18)     (5/20)


CBOE Total P/C Ratio               .67        .60        .55
CBOE Equity P/C Ratio              .43        .41        .38
OEX P/C Ratio                     2.44       1.18       1.29



Peak Open Interest (OEX)


                     Friday         Tues          Thurs
Strike/Contracts     (5/14)          (5/18)        (5/20)


Puts                 650 / 14,250    600 / 13,853    680 / 14,217
Calls                700 / 17,593    700 / 20,820    650 / 21,162 
Put/Call Ratio      .80              .67            .67



Market Volatility Index (VIX)


                    Major
Date                Turning Point       VIX


October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   

April 30, 1999                          26.07 
May 14, 1999                            29.66 
May 18, 1999                            28.15



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
March 4, 1999       Bottom            49.1        32.5


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     
April 28, 1999                        56.1        30.7     

May 5, 1999                           58.1        27.6     
May 12, 1999                          56.9        31.0     


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

Index     Last    Mon    Tue    Wed   Thur   Week
Dow    10866.74 -59.85 -16.52  50.44 -20.65 -46.58
Nasdaq  2542.23  33.98  -3.48  19.04 -35.17  14.37
$OEX     675.20   1.49  -2.05   5.95 - 3.76   1.63
$SPX    1338.83   1.69  -6.17  10.91 - 5.40   1.03
$RUT     448.02 - 1.78   1.10   3.69   1.88   4.89
$TRAN   3608.52- 15.22  -0.96 -70.96  29.32 -57.82
$VIX      26.26 - 1.42  -0.03  -1.97   0.02 - 3.40

Stock            Mon    Tue    Wed  Thur  Week

SWS       80.50 -0.94   4.56  12.25 -1.06 14.81 Support at $77-$81
VRSN     139.56  1.09  -0.41   4.00  6.81 11.49 Great strength
RMBS      86.13  0.63   4.25   1.63  4.75 11.26 Impressive
LXK      136.13  2.19   5.19   1.00  2.81 11.19 New, splits June 10th
BRCM      99.88 -2.81   7.63   1.09  0.41  6.32 Dominant
DRMD      15.94  0.38   0.56   1.38 -0.13  2.19 Consolidating
BA        44.63 -0.50   1.19   0.69  0.25  1.63 Outlook improving
KEA       30.13 -0.56  -0.81   2.38  0.13  1.14 Quiet Thursday
DLJ       73.56  1.38  -0.13   0.56 -1.00  0.81 Hovering
ASND      94.25  2.56  -1.81   1.50 -1.81  0.44 Light Volume
LVLT      84.25  3.94  -2.50   1.09 -2.84 -0.31 Dropped
CB        73.75 -1.00  -0.81  -0.50  1.94 -0.37 Heading higher
PEP       37.63 -0.56   0.13  -0.25  0.13 -0.55 Oscillating
SUNW      61.94  2.13  -0.94   0.69 -2.56 -0.68 Verify direction
ROK       61.00 -0.56   0.81  -1.31 -0.81 -1.87 Dropped
EMC      103.00 -2.50   2.63   1.00 -3.38 -2.25 Splits June 1st
COF      165.25  1.69  -4.56  -2.50  1.06 -4.31 Encouraging
NEON      42.88 -1.19  -1.94  -0.88 -2.13 -6.14 Dropped
IBM      232.88 -1.75   1.00  -2.63 -3.00 -6.38 Splits May 26th

Puts

TBFC      66.56 -6.75  -1.75 -10.75 -6.44-25.69 Use caution
FNM       67.25 -0.75  -2.06   0.56 -1.00 -3.25 Still weak
CHV       93.75  1.44  -3.25  -0.56  1.69 -0.68 Use caution
BVSN      46.00 -1.50   1.13  -0.25  0.13 -0.49 Drifting lower
VO        54.31  0.31  -1.63   0.44  1.19  0.31 Dropped
MOB       99.38  0.00  -1.69   1.69  1.38  1.38 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:
******

NEON $42.88 -2.13 (-6.12) NEON has shined as bright as coal 
this week so we are going to let it have some time off to 
recharge itself.  The stock continued its slide on Thursday
and has gone down every day this week.  The drop has been on
very anemic volume, but the stock is lacking strength in the
short term.  

ROK $61.00 -0.81 (-1.88) What began as a beautiful 
technical chart is now showing signs of rapid aging, 
especially at the close today.  By the way, yesterday 
didn't look so hot either, as ROK's descent was coupled 
with heavy volume.  The fact is ROK is looking like it's 
about to give up the ghost, even though there was a block 
trade of 500 K shares yesterday at $62.25.  Sector-wide, 
cyclicals are beginning to show some weakness too, and we 
don't want to be around for the obituary.  Accordingly, 
we're dropping this ROK as though it was a hot one!

LVLT $84.25 -2.84 (-0.31) Uh oh!  Where was that strong 
bounce off the 30 dma of $86?  We were playing this 
channeling stock as a call this week on the presumption 
that LVLT would advance back to $94.  It hasn't happened.  
In fact the stock has shown some weakness since GBLX/USW 
started stinkin' up the joint.  Today's overall closing 
weakness didn't bolster its case.  It's not that LVLT is a 
crummy company, far from it.  There are just better plays 
in which to deploy our capital.  Thus we're dropping LVLT 
tonight and will pick them back up if they make a clean 
break in either direction.



PUTS:
******

VO $54.31 +1.19 (+0.31)  Thursday morning VO made an unwavering
attempt to reach its 100 dma at $49. But an intense spike in 
volume around 11:00 am reversed its direction for the day.  The
stock closed up a fractional +0.44, yet saving still its position
just below the 50 dma at $54.00.  Today's behavior is for 
concern.  The stock opened higher and rallied for a positive 
close while the DOW went negative. Since the conditions are no
longer conducive to start a successful play, we're dropping VO 
from our put list. 

MOB $99.38 +1.38 (+1.38)  We added MOB as a put play along 
with CHV when the API report released earlier in the week 
showed a greater than expected increase in crude oil 
stockpiles.  Although most of the oils took a hit, MOB 
managed to rebound off of its 50 dma.  Hopefully you didn’t 
enter any positions since the downward confirmation never 
came.  MOB was up on both Wednesday and Thursday.  Although 
we feel the outlook for the oil sector is bleak, we are 
dropping MOB as a put for now.  



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

SUNW $61.94 -2.56 (-2.69) Friday will be a key day for SUNW.
The stock is just above its support in the $61.50 range and
closed at its low of the day on Thursday.  We got a bounce
on Wednesday off this level, so watch and wait for an ideal
time.  One positive on Thursday was the light volume.  It tells 
us no one was all that anxious to unload their position.  We
need to verify direction of the stock and the market before
buying new calls.  


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


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DISCLAIMER

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

The Option Investor Newsletter         Thursday  5-20-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

EMC $103.00 -3.38 (-.75) EMC had a bad day on Thursday, as it
gave up all its earlier weeks' gains.  The stock also was up over 
a dollar earlier in the day before giving in with the market
downturn.  EMC has a stock split coming up on June 1st and 
the stock could start a split run at any time.  EMC has some
support at $100 and this could provide a bounce.  Target shoot
this one for a better deal. 

BRCM $99.88 +.41 (+6.32) Today BRCM set a new intra-day high of 
$105.25 before succumbing to the market's downward pull late in the 
day.  Investor interest in this sector was evident this week in the 
IPO of Redback Networks, a supplier of fast Internet access equipment.  
Redback tripled in its first day of trading.  
BRCM's major competitor, Level One (LEVL), is suffering somewhat 
from its coming merger, and BRCM is gaining market share at LEVL's 
expense, at least in the short term.  In particular, BRCM is seeing 
an increase in its contracts from CSCO.  (In the first 
quarter, CSCO bought about 13% of BRCM's products, with General 
Instruments and 3 Com accounting for 36% and 21%, respectively.)  
It looks like BRCM will remain the dominant player in the 
broadband field for the near future.  Just remember that this 
stock's trailing PE in now over 200 and it must continue to 
deliver the high growth rate its price is based on!

VRSN $139.56 +6.81(+10.81)  VRSN continues to show great 
strength in this market. It touched $144.88 today before market 
weakness pulled it down for a gain of "only" $6.81.  Its price is 
rising steadily and volume remains very high.  In addition, MACD 
is positive and momentum is building.  Bear Stearns initiated 
coverage Wednesday with an "attractive" rating.  VRSN splits 2:1 
May 31st.  Remember, this provider of Internet security products 
can be volatile.

CB $73.75 +1.94(-.38)  CB has had a few down days this week. 
But after dipping just below its 10 dma yesterday, CB finally 
headed higher again today.  Volume was on the high side of 
average and the stock closed not far off the day's high of 
$74.31, even as the market sold off late in the day.  Resistance 
is way up at $88.81, but support is down around $60.  No new 
news.

SWS $80.50 -1.06 (+14.81)  The momentum is soaring. 
Yesterday the stock's volume was quadruple its ADV.  SWS traded 
heavily throughout the day in the $75-78 range then rallied 
during the last hour of trading.  The stock captured a $12.25 
gain for the day and the 52-week high was elevated to $82.88. 
Today, the volume levels were even stronger than yesterday at 
over 10 times the norm.  SWS did open lower at $75.50 (offering a 
nice entry point), but soon picked up speed and climbed until 
early afternoon reaching a new height of $95.75.  After that, 
profit-takers zoomed in to take advantage of the run-up causing 
SWS to succumb to a slight overall loss.  If the past few days 
are any example of a future pattern, then support may be forming 
around $77-81.  Keep in mind that with such huge advances, the 
stock needs to consolidate at some point.  In other words, when 
the traders do come in to reap the rewards, the beating will be
strong and swift.  Keep your stop losses tight. 

ASND $94.25 -1.81 (+0.44) The volume has lightened up a little
the past two days dropping below 2 mln. shares traded.  This 
factor hasn't effected the stock as much as market sentiment. 
ASND advanced $1.50 yesterday and closed in the higher range of 
support at $96.06.  Today the stock opened strong and immediately 
strived to test resistance, but only got as far as $97.69.  ASND 
then settled in to trade steadily at around $96.50.  Then minutes 
before the bell and without any warning, ASND plunged almost 2 
points - yet another great example for putting stop losses in 
place to protect those profits!  The stock is still within its 
support range of $94-96, but now is positioned just below its 10 
dma.  Consider looking for a bounce off this mark on strong 
volume and, of course, confirm market direction before you begin 
a new play on ASND.          

COF $165.25 +1.06 (-4.31)  When the Fed announced its 
“tightened bias,” COF broke below its 30 dma of approximately 
$166.  In Tuesday’s write-up we advised picking your entry 
point carefully since we felt COF could continue to sell off 
on Wednesday, the day after the Fed meeting.  COF did as 
expected and fell another -$2.50.  However, the move up on 
Thursday was very encouraging.  COF exploded to as high as 
$170.19 in a market that remained cautious.  COF surged back 
above its 30 dma for most of the day.  However, it did lose 
some of those gains and finished trading up only +$1.06 as 
the markets fell back into negative territory by the market 
close.  If COF can head higher on Friday, it may be time to 
open some positions.  COF will split 3:1 on June 2nd.  COF’s 
rebound on Thursday may be the beginning of its split run.

BA $44.63 +0.25 (+1.63) On Wednesday, Dain Rauscher Wessels 
raised their rating on BA to a “strong buy,” up from a “buy.”  
They feel that BA has “considerable remaining upside due to 
an improving fundamental outlook.”(-Reuters)  Dain Rauscher 
Wessels believes that the worst is most likely over for BA 
due to the fact that the outlook in Asia is improving and 
since BA has resolved production problems.  The positive 
comments only aided BA’s ascent.  After the slight setback 
on Monday, BA has consistently moved higher.  However, BA 
could have some near-term resistance around $45.50. 

PEP $37.63 +0.13 (-0.56)  Pepsi continues to oscillate between 
$37 and $38.  Our ace card has now been played.  Star Wars 
has opened.  If it is popular with viewers, PEP could see 
increased revenues since it owns the exclusive rights to use 
Star Wars characters on its products.  On Wednesday, PEP 
introduced the “Marfalump” character, a tie-in to the Star 
Wars movie.  Marfalump will star in television commercials 
and extend PEP’s “Joy of Cola” campaign.  We feel that Pepsi 
has the opportunity to head higher.  However, we would like 
to see it break above $38 before we suggest opening any 
new positions.   

KEA $30.13 +0.13 (+1.13)  On Wednesday, KEA made an explosive 
move to the upside considering the fact that it is usually a 
slow mover.  It added +$2.38 in trading.  On Thursday, KEA 
was quiet.  For most of the day it was stuck at $30.00.  By 
the end of trading, it posted a mere +$0.13 gain.  We suggest 
setting your stop losses tight in case KEA falls back in 
trading.  You can always by it back cheaper as it begins 
its next run.  No new news.  

DLJ $73.56 -1.00 (+0.81)  The markets have been relatively 
quiet throughout trading on Wednesday and Thursday.  Investors 
are still a little skeptical and volumes have been depressed.  
DLJ could use a little boost in investor enthusiasm to help 
it move higher.  DLJ has been using baby steps to creep higher 
this week.  But for the most part, it has been hovering right 
around its 30 dma.  Near the end of trading on Thursday, it 
dropped pretty dramatically as the markets turned red.  This 
could be a warning sign for things to come tomorrow.  Set your 
stop losses tight if already playing DLJ.  Otherwise, watch 
for the markets to rebound and wait for DLJ to break to the 
upside again before hopping in.    

IBM $232.88 -3.00 (-6.37) IBM is the equivalent of trying 
to bail water in a rainstorm. . . rain courtesy of the 
market.  IBM is due to split 2:1 on May 26 and has received 
new price targets of $260-$280.  We've been expecting IBM 
to make a move in front of that date.  Nonetheless, we've 
cautioned that with a recent run-up in price, we could get 
some profit taking and/or consolidation.  It seems to be 
happening now.  Technicals, while still positive are 
showing signs of tiring.  Wait for a good entry, meaning 
volume and a rise over $240.  Or target shoot on weakness. 
Exercise caution and confirm market direction before 
playing.  (Remember those stops too.)

RMBS $86.13 +4.75 (+11.25) While hardware and chip stocks 
took a nosedive today, RMBS put on an impressive show.  
Volume was more than twice the average as it moved up 
smartly by $4.75.  It's looking like investors are buying 
the idea that Intel will adopt the technology into its new 
chipsets.  The chart looks great.  Keep in mind that the 
higher the rise, the more susceptible to profit taking a 
stock becomes.  To that end, keep your stops in place and 
confirm the direction of the market before starting a new 
play.

DRMD $15.94 -0.13 (+2.19) Looks can be deceiving.  DRMD was 
looking great since we picked it Tuesday.  Yesterday, DRMD 
notched up $1.44 on heavy volume and exploded all the way 
to $18 this morning on even heavier volume - an overall 
good sign.  However, DRMD drifted throughout the day on 
lackluster activity until the end of the day where it met 
some heavy selling pressure, erasing all of today's gains 
to end with a small loss.  Treat today's activity with 
caution, but don't let it scare you.  Frankly, after 7 
straight days  of gains, it's due for a breather.  No 
matter, DRMD still has a strong-looking and technically 
positively chart.  Today showed us an example of why we use 
stops - we don't want to give back all that profit.  Wait 
for the market to go in your favor before starting a new 
play.


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PICK NEWS - PUTS
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TBFC $66.56 -6.44 (-25.69) On Tuesday, we advised caution as
the stock was resting on support at its 50-dma.  Apparently
support was the wrong word to use.  The stock traded higher
for a few hours on Wednesday before coming unglued and shedding
over 10 points.  There was no bounce today either as the selling
continued and the stock ended down near its low of the day.  
We've seen the financials come under fire this week due to rate 
concerns.  Telebanc also had to endure a "sell" rating, but again 
we urge caution on new plays as a stock split lingers in the 
near future.  Momentum can change in an instant.  Tighten your
stops to protect profits but let the stock continue dropping 
until any signs of recovery appear.  Not for the weak-hearted.
 
CHV $93.75 +1.69 (-0.69) Earlier in the week, the API report 
indicated that crude oil stockpiles were greater than 
expected.  The major oils initially slumped but now appear to 
be rebounding.  Since dropping a combined -$3.81 from trading 
on Tuesday and Wednesday, CHV made a comeback of +1.69 on 
Thursday.  It is now hovering at its 50 dma.   As we had 
mentioned in Tuesday's write-up, the wild card was the 
market's reaction to the mixed reports between the oil and 
gas numbers.  So far, investors haven't panicked.  However, 
the fact remains that there is an abundance of crude.  For 
now, use caution with this play.  Wait for CHV to fall off 
of its 50 dma before initiating any new plays. 

FNM $67.25 -1.00 (-3.25) Nothing has changed with FNM.  The
stock continued its drop to the lower end of its channel.  We
are now very close to a reversal point.  The reversal price
has been around $66 in the past, but make sure we see a bounce
off this level before buying calls.  This seems to be an ideal
time for the stock to reverse as the worry over interest rates
could decrease over time.



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NEW CALL PLAYS 
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LXK - Lexmark International $136.13 +2.81 (+11.19)

Lexmark has good peripheral vision.  LXK is a leading maker of
computer printers and related products, which generate more 
than 80% of its sales.  Its printer line includes laser printers 
(designed primarily for corporate networks and desktops) and
ink-jet printers (for home and business use).  Unlike many of 
its competitors, Lexmark develops and manufactures its own 
desktop laser printers, which results in fast product cycle 
times.  The company also makes supplies for IBM and other 
name-brand printers and typewriters.  LXK products are sold
in more than 15,000 retail outlets in more than 150 countries.

LXK has been on a tear and we like the fact that a stock 
split is coming up on June 10th.  LXK continues to benefit
from the computer age as it gains market share in the printer
arena.  Recent product enhancements in different cartridges
have gained nice reviews.  LXK is in new high territory and
the sky’s the limit.  Be aware of profit taking with such
large gains this week.  We sure like the fact that LXK gained 
almost $3 today when the market tanked.  

Only news on LXK is the continued development of its products
and the value the consumer sees in them.  LXK has a growth 
rate of close to 30%.  Watch for a nice entry point by target
shooting.

BUY CALL JUN-135 LXK-FG OI= 69 at $10.13 SL= 7.75
BUY CALL JUN-140 LXK-FH OI=119 at $ 7.75 SL= 5.25
BUY CALL JUL-135 LXK-GG OI=  1 at $14.13 SL=11.00
BUY CALL JUL-140 LXK-GH OI=  2 at $11.88 SL= 9.00
(Wait for OI in July strikes)

Picked on May 20th at $136.13    PE = 32
Change since picked  +$  0.00    52 week low =$ 19.38 
Analysts Ratings    4-4-1-0-0    52 week high=$137.75
Last earnings 04/19  est 0.88    actual 0.96 
Next earnings 07-19  est 0.98    versus 0.75
Average daily volume = 568 K
Chart = http://quote.yahoo.com/q?s=LXK&d=3m


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NEW PUT PLAYS 
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NONE TODAY


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COMBINATION PLAYS   
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NONE TODAY


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