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Daily Newsletter, Tuesday, 07/13/1999

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The Option Investor Newsletter         Tuesday  7-13-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        7-13-99          High     Low     Volume   Advances Decline
DOW    11175.02 - 25.96 11211.11 11085.10  737,913k  1,278   1,715
Nasdaq  2778.23 - 12.21  2782.25  2755.84  992,634k  1,771   2,184 
S&P-100  719.79 -  2.07   721.86   715.73   Totals   3,049   3,899
S&P-500 1393.56 -  5.54  1399.10  1386.84            43.9%   56.1%
$RUT     458.11 -  1.19   459.30   455.46
$TRAN   3405.60 - 26.29  3433.82  3401.87
VIX       20.23 +   .39    21.14    20.04
Put/Call Ratio      .58    
*************************************************************

Argentina up +4.5%, Dow/Nasdaq down!

One day after the leading presidential candidate in Argentina made
a remark about asking the pope to help Argentina get a one year
debt repayment moratorium, the Dow opened down -115 points but the
Argentine Merval Index was up +4.5%. Yes, I know he recanted his
remarks and downplayed the statements but the damage had already
been done. The comment rippled markets around the world bringing
back memories of last years Brazil debacle. 

The reason the result was so dramatic was the current state of
the Argentine economy. They are in a deep recession and the current
president has failed to enact need reforms. The country has been
rumored to be on the devaluation trail for some time. Currently
their currency is pegged to the U.S. dollar but could be changed 
after the election. Analysts and investors worldwide were afraid
that a post election Argentina could hold some surprises after
the flippant comment by the front runner. Latin American experts
do not think Argentina can afford to devalue since they need
outside investment and loans to keep the country afloat. Taking
their currency off the peg or devaluing would keep them from 
getting outside loans for a long time. In reality the reaction
was much ado about nothing but the impact was still the same.

The Dow opened down about -115 points after seeing the S&P futures
close down about -8.00. The banks and brokerages were hardest hit
but techs suffered also. The tech stocks were first to recover
but were still very tentative all day in front of Intel's earnings
tonight. With the market still resting (or struggling) from the
strong gains two weeks ago, we did not need another straw on our
backs. Sectors and stocks were spotty and recent market leaders
failed to pull out of the dumps. Only story stocks like Amazon,
who announced two new online stores for toys and electronics, 
were able to gain back lost ground. 


  


 


As you can see from these charts we remain locked into a solid 
range on both the Dow and Nasdaq. In reality we should have been
moving upward in advance of better than expected earnings.

Several factors are influencing the markets lethargy. One was
the Argentina thing. The next big worry was the Intel earnings
tonight and the PPI/CPI/Retail Sales Wednesday and Thursday.
No one wanted to make big bets in front of these possibly 
dangerous events.
 
Maybe Andy Grove, the CFO for Intel, should have gotten the pope 
to bless the earnings for Intel. Intel announced weaker than 
expected earnings after the bell with a +.51 cent actual instead
of the $.53 the street was expecting. The analysts were immediately
faced with a problem. Lower than expected earnings but sales were
almost $1 bln higher than expected. The Intel conference call was
very positive with Intel pounding the table about second half
expectations. Their product mix was strong with higher margin chips
offsetting the lower end of the product line. In total contradiction
to normal trends Intel dropped over -$2 after hours but quickly
bounced and recovered to finish only -.13 down. This would make 
you believe that the faithful were more focused on the $1.7 bln
in profits from $6.7 bln in sales than the actual earnings per 
share. Intel had already warned they would have a revenue shortfall
from last year and analysts were expecting only $5.93 bln. The
jump in sales and positive call indicate that maybe there will
be no punishment tomorrow.

Motorola however posted $.44 vs $.41, beating the street by $.03
but traded down -$1.50 after hours. Paine Webber beat the street
by +.08 and lost -.38. Phelps Dodge beat by +.02 and lost -1.25, 
International Paper beat by +.01 and lost -1.38. Merrill Lynch
beat the street by +.11 and closed up +1.19 on good comments
made by several analysts after the announcement. It just goes to
prove, "it's all in the call".

The market breaker tomorrow will be the PPI in the morning. It
has been trending down recently so a slightly larger number than
the expected +.1% could still be seen as a positive. A smaller
number could re-ignite the rally on lessening Fed rate fears but
a much larger number could be a killer. 

As if we did not have enough to worry about this week the CPI
numbers are due out Thursday morning. Just replace PPI with CPI
in the above paragraph to get the market outlook for Thursday.

The silver lining in the Argentina, Latin American problem is 
the result on the Fed. With instability in Latin America the
Fed would be hard pressed to raise rates again. Raising our
rates impacts their loan costs necessary for economic recovery
and would be politically incorrect.  

Because of the lagging market several market timers are calling
for a near term market top as early as Thursday and as late as
next week. The lack of earnings momentum is seen as investors
selling into every rally and lightening up their portfolios.
Several mentions of Y2K were heard today and it seems like they
are becoming more frequent. I would also caution our readers
that a down trend is possible as earnings wane and not to be
married to your positions.

Did anybody say to themselves today "If only I had sold when..."?
The market action at the open today should be a wakeup call for
taking a profit when one is available. I have vivid memories of
October 1997 and a market opening similar to this one. Futures
were lock limit down and options did not trade on most stocks
for 30-45 minutes. Well after they had dropped huge numbers.
Unlike today the market did not rebound on a false alarm. Had
this been a real problem the gap down at the open would have
only been a prelude for the rest of the day. Any profits would
be changed into large losses before you even had the chance to 
sell. Stop loss orders would be useless. Profits can be lost far
faster than gained and investors should always be aware of 
pending market/global/economic problems and step aside until the
clouds blow over.

Good Luck, sell too soon.


Jim Brown
Editor



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***************
Traders Corner
***************
On-line Brokerage Firms -- Part II
By Tom Gentile

"If your not on line, than your business is off-line" seems to be the 
topic of conversation at most brokerage firms these days. "Even the 
Johnny-come-lately's", such as Merrill Lynch and Smith Barney are 
plunging into Web World with their own brand of on line trading. But 
what about options traders? Can the savvy option spread trader find a 
home in this growing on line infrastructure? At first glance, you may 
think so, but look again.

Spread trading is growing in population, thanks in part to an 
ever-increasing trader base and volatility expansion in the markets. 
Day traders who have had enough, as well as short-term options traders 
are taking a second look to spread trading, as it becomes a more 
favorable avenue for investing or hedging equity portfolios. Spread 
trading involves spreading or crossing options with one another in 
hopes to reduce cost and risk of the options position, as well as 
slow down the day to day equity fluctuations in portfolios. Trading 
to most people is a high or an emotion. Take the emotion out of 
trading, and generally you will replace it with profits.

Lets look at an example of how a simple options spread can both reduce
your cost exposure and risk exposure in the market. Yahoo has options 
that trade on the CBOE, in various strike prices and expiration dates. 
On any particular day, the at-the-money calls for Yahoo with 30 days 
to expiration can run as high as 35 points to buy. Assuming that you 
are buying a Yahoo August 150-call option, Yahoo stock must be at 185 
or higher at expiration before you can realize a profit. Sometimes 
this can be far fetched for some stocks in terms of options premiums. 
By simply buying a spread, this trade can be drastically reduced in 
terms of cost, risk, and break-even. Let's assume that taking the 
trade above, you also decide to sell the Yahoo August 180 call, 
receiving 25 points for the sale. By entering this order as a spread, 
you no longer have a cost of 35 points, but a spread cost of 10 
points. Your risk is reduced by 2/3 and you still have profit 
potential of 20 points, up to 180. Profit potential is limited, which 
is the only problem with this spread. Although profits are 
limited, the limited risk in most cases clearly outweighs the limited 
rewards. This is due to the hedge that the option spreader has which 
cuts the directional risk of the position.

Placing online options spreads hasn't been easy for the typical 
options spreader. Until recently, the only way to place a spread 
order online was to leg into the position. Legging into a position, 
is accomplished by entering option buy and sell orders outright on 
separate tickets. The big problem with this is that if you want to 
get fills by legging into spreads, you normally have to enter market 
orders on both sides of the spread. Option spreaders know that 
legging into positions opens up a window of risk, especially in a 
fast market. There is also the element of slippage, due to entering 
market orders on each side of the spread. Online firms that offer 
true option spread entries allow the option spread trader the 
ability to get the entire order done on one ticket, eliminating the 
directional risk of legging, as well as the slippage that comes with 
market orders.

While there are hundreds of online brokerage firms in existence, as 
of this writing there are currently four that offer true spread 
trading. Wall Street Access, Ameritrade, WallStreet Electronica, 
and AccuTrade. Each of these online firms has an order screen that 
specifies the spread options strategies that are available. These 
firms truly offer more than just cheap commissions. Although cheap 
commissions lure traders to brokerage houses in droves, the firms 
with a vision for the future realize that flexibility of order 
placement and speed of execution will become the most important 
thing to an online trader.

Tom Gentile is a full time trader and Chief Options Strategiest to 
Optionetics and George Fontanills.



***************
Market Posture
***************
As of Market Close - Tuesday, July 13, 1999 

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

DOW Industrials   10,500  11,000  11,175    BULLISH   7.01
SPX S&P 500        1,315   1,355   1,394    BULLISH   7.01
OEX S&P 100          660     690     720    BULLISH   6.29
RUT Russell 2000     390     450     458    BULLISH   6.29

NDX NASD 100       2,110   2,220   2,374    BULLISH   6.29
MSH High Tech      1,010   1,080   1,208    BULLISH   6.19

XCI Hardware         900     950   1,046    BULLISH   6.17
CWX Software         675     700     795    BULLSIH   6.17
SOX Semiconductor    410     425     504    BULLISH   6.10
NWX Networking       525     545     593    BULLISH   6.25
INX Internet         500     510     529    BULLISH   7.01

BIX Banking          680     720     698    Neutral   6.29
XBD Brokerage        410     425     431    BULLISH   7.01
IUX Insurance        645     660     650    Neutral   6.29

RLX Retail           900     910     935    BULLISH   6.29
DRG Drug             370     400     374    Neutral   7.01
HCX Healthcare       750     800     768    Neutral   7.01
XAL Airline          180     190     168    BEARISH   5.21
OIX Oil & Gas        285     310     308    Neutral   5.13



Posture Alert
The broad market made a late-day rally attempt but came short of 
closing at any new highs. The 30-yr Treasury continued its rally 
thanks to Argentina, but it was not enough to spark an equity rally. 
Even with the equity markets taking a breather these last couple of 
days, the posture board remains predominately bullish.

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


/members/marketposture





****************
Market Sentiment 
****************
Tuesday, July 13, 1999 


The Pinnacle Index!

Below is a list of equities and our Pinnacle Index for those 
particular stocks. What we look for are liquid stocks/options that 
garner a lot of interest from the investment community. Most of the 
issues are high tech, and are thus more aggressive. We then filter 
out many of the equities, only to show stocks with excessive optimism
or pessimism. From a contrarian standpoint (a high number is a good 
indication of extreme optimism, and a low number is a good indication
of extreme pessimism) you should buy when its low, and sell when its
high. For example, below you can see that Motorolla has a Pinnacle 
Index of 7.0 and 14.7 at the 100 and 105 level, respectively. This 
is extremely bullish, and would indicate that Motorolla would have 
a tough time breaking 100, let alone getting up to 105 and holding 
above this mark. It does start to show support at 95, with strong 
support at 90, however. Intel is bearish at 62.5 and 65 (1.4/1.8), 
but extremely bullish at 70, clocking in at 14.22. This would suggest 
strong overhead resistance at 70 and good support in the 62.5 and 65 
area. close tonight so we will be interested in how this numbers 
hold up.     


Stock      Symbol    Strike Price       Pinnacle Index
      
Motorolla   MOT      95 / 100 / 105     2.8 / 7.0 / 14.7 *
Intel       INTC     62.5 / 65 / 70     1.4 / 1.8 / 14.2 * 
Pairgain    PAIR     10 / 12.5 / 15     2.1 / 9.2 / 14.8 *
Apple Comp. AAPL     47.5 / 50 / 55     1.3 / 5.3 /  1.3
Altera      ALTR     35 / 40 / 45       1.6 / 1.1 /  1.3
Gillette    G        40 / 45 / 50        .7 / 2.0 /   .3
Rambus      RMBS     85 / 90 / 95        .4 /  .7 /  1.2
E-Trade     EGRP     35 / 37.5 / 40      .9 /  .9 /  3.0
Amazon      AMZN    125 / 130 / 135     1.5 / 3.4 / 12.8 *
IBM         IBM     130 / 135 / 140     1.9 / 2.1 /  1.4
Gateway     GTW      65 / 70 / 75       2.0 / 2.2 /  1.0
Lucent Tech LU       70 / 75 / 80       3.5 / 13.7/ 37.0 *
Microsoft   MSFT     90 / 95 / 100      3.4 / 9.9 / 51.0 *
Sun Micro   SUNW     70 / 75 / 80       4.7 / 13.0/ 99.0 *
Tellabs     TLAB     65 / 70 / 75       1.4 / 2.1 / 19.0 *
Schwab      SCH      50 / 55 / 60       1.3 / 6.5 / 14.5 *


This list will be expanded on Thursday.



 


 



 


Bullish Signs:


Interest Rates:
The 30-yr Treasury is beginning to retrace back under the key 6% 
level.

Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors decreased 
by over 3% and the percent of Bearish investors increased by 2%.

Russell 2000: 
Trending above both moving average, and also above key 450 benchmark.




Mixed Signs:

Market Posture:
Several indexes are showing signs of a potential rollover, including 
the Dow, OEX, networking, software, and semiconductors.

Advance/Decline Line:
After checking up last week, the A/D line is beginning 
to roll over and could prove Bearish if decliners out pace 
advancers in the week ahead. 

 

BEARISH Signs:
  
 
Peak Open Interest:  
The contraian put-call ratio clocking in at .5 suggesting bullish
sentiment picking up steam.






OTM Call Analysis

As we move through July'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.


July Expiration Cycle
OEX OTM Call Analysis (Open Interest July 680-750)
Date                 Open Interest     Change %    Alert

Friday, June 19           35,225        -
Friday, June 25           63,342        +79.8%
Friday, July 02           87,833       +149.3%
Friday, July 09           99,855       +283.5%


Market Sentiment at a Glance     Friday     Tues
Indicator                        (7/09)    (7/13)
************************************************

Pinnacle Index (OEX):          

                    
Overhead Resistance (720-750)      7.9       6.1
Underlying Support  (685-710)      1.3       1.9
                    (650-710)      2.1       2.7

Put/Call Ratios:

CBOE Total P/C Ratio                .5        .5
CBOE Equity P/C Ratio               .4        .4
OEX P/C Ratio                      1.5       1.2


Peak Open Interest (OEX):

Puts                              600        680
Calls                             730        725
P/C Ratio                          1.01       1.08

Market Volatility Index (VIX):	

CBOE VIX                          19.09      20.46



Investors Intelligence:

Bullish                         52.60%
Bearish                         27.20%


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
Benchmark                        (7/09)    (7/13)

Overhead Resistance (720-750)    7.9         6.1

OEX Close                        722.68    719.79
 
Underlying Support  (685-710)    1.3
                    (650-710)    2.1

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 725/750 level 
while the underlying support is holding at the OEX 685/710 level.

 

Put/Call Ratio                  Friday     Tues
Strike/Contracts                (7/09)    (7/13)

CBOE Total P/C Ratio             .54       .55
CBOE Equity P/C Ratio            .40       .42
OEX P/C Ratio                   1.48      1.15


Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (7/09)           (7/13)         (7/15)

Puts                 600 / 12,089     680 / 12,503
Calls                730 / 11,917     725 / 11,571
Put/Call Ratio       1.01             1.08



 


 






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   
May 14, 1999        Top                 25.01 

July 13, 1999                           20.46  *



 


 




Investors Intelligence 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 07, 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 05, 1999                          58.1        27.6     
May 12, 1999                          56.9        31.0     
May 19, 1999                          60.9        28.7      
May 26, 1999                          61.6        27.7 
June 2, 1999                          61.6        27.7  
June 10, 1999                         58.3        28.7  
June 16, 1999                         58.8        26.3 
June 24, 1999                         57.5        26.5  
June 30, 1999                         55.8        25.7  
July 07, 1999                         52.6        27.2  *



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


Index   Last        Mon    Tue   Week
Dow      11175.02   7.28 -25.96 -18.68
Nasdaq    2778.23  -2.63 -12.21 -14.84
$OEX       719.79  -1.02  -2.07  -3.09
$SPX      1393.56  -4.18  -5.54  -9.72
$RUT       458.11   4.55  -1.19   3.36
$TRAN     3405.60   4.57 -26.29 -21.72
$VIX        20.23   0.75   0.39   1.14

Calls               Mon    Tue   Week

SNE        118.06   3.13   0.56   3.69  It keeps going and going
NXTL        52.81   1.44   1.38   2.82  Earnings on Thursday
HWP        109.31   0.44   2.19   2.63  CSFB raised estimates
VRIO        77.00   0.09   2.16   2.25  Monday breakout
LU          72.69   1.63  -0.88   0.75  Time for an earnings run
GTW         68.31   2.13  -1.44   0.69  New, entry point!
SUNW        73.50   2.25  -1.69   0.56  New highs on Monday
IBM        137.88   0.44   0.06   0.50  Still hitting new highs
MSFT        93.63   0.94  -0.56   0.38  Confirm upward movement
TMCS        35.25   1.38  -1.00   0.38  New deal to drive sales
VISX        89.69   1.06  -0.88   0.18  Dropped, reports tomorrow
TXN        146.31   1.19  -1.44  -0.25  Split candidate 
ABOV        43.38   0.25  -0.63  -0.38  July 23 is earnings
NT          89.69   1.75  -2.13  -0.38  Dropped, profit-taking
DELL        42.25   0.81  -1.38  -0.57  SG Cowan raises target
EXDS       135.50   3.44  -4.31  -0.87  Extremely volatile!
INTC        65.38  -0.81  -0.06  -0.87  Dropped, earnings today
BBY         74.88  -0.31  -0.81  -1.12  Wait for a bounce
NXLK        91.75   4.72  -5.97  -1.25  Possible takeover target
NOK         92.63  -1.50  -0.31  -1.81  Strong Motorola earnings
CSCO        65.25  -1.44  -0.38  -1.82  More consolidation
COST        83.88  -1.38  -0.69  -2.07  Waiting for direction
SONE        46.06  -0.38  -1.81  -2.19  Bounce off 50-dma?
SLR         69.56  -1.44  -0.94  -2.38  Support at $68
ITVU        49.00   1.63  -4.13  -2.50  Dropped, wait for bounce
DRIV        32.56  -2.06  -0.63  -2.69  Earnings on the 21st
MSPG        48.25  -2.25  -0.63  -2.88  Waiting for news
AOL        125.13  -5.94   2.81  -3.13  Big swing on Tuesday
BRCM       140.50   0.63  -3.88  -3.25  Look for any Intel effect
QCOM       144.38  -1.31  -3.06  -4.37  Outlook is still good
VOD        202.25  -0.38  -4.50  -4.88  Is a bounce coming?
RNWK        86.75  -4.88  -0.75  -5.63  Strong technical picture
DCLK        96.50  -8.94   2.50  -6.44  Buyout of Netgravity
CMGI       113.88  -8.19   1.06  -7.13  Short-term bottom?
INKT       125.56  -8.00  -6.44 -14.44  Dropped, earnings time

Puts

IMNX       115.75  -6.75   3.50  -3.25  Bounced off 100-dma today
YHOO       156.94  -9.75   6.69  -3.06  Dropped, successful play
WPI         35.25  -0.75   0.06  -0.69  Volume is increasing
FDX         47.88   0.19  -0.81  -0.63  Oil prices remain high
JCP         45.00   0.25  -0.69  -0.44  Resting on support
SAPE        50.25   2.50   0.00   2.50  Wait for break of $50




****************
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:
******

INTC $65.38 -0.06 (-0.87)  Intel reported earnings after 
the bell today.  Your positions should've been closed out 
prior to the announcement since stocks generally decline 
after an earnings' report no matter what the perspective.  
Intel came in with lower than expected results of .51 
versus .53 p/s (First Call's consensus).
On the flip side, their conference call was quite positive 
and INTC is up in after-hours trading (so was YHOO and 
they still fell $30), nevertheless, INTC must be dropped 
from our call list now that earnings have come.




 
***** 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 
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The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter         Tuesday  7-13-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


Drops Continued:

INKT $125.56 -6.44 (-14.44)  This play was cut short, very 
short.  Earnings are due tomorrow so that in itself is 
reason to be out of any positions.  But the kicker came 
yesterday when Inktomi announced they were filing 
registration statements with the SEC for a public offering 
of 3.3 mln. shares of common stock which will bring shares 
outstanding to 51.57 mln.  INKT fell $8 on the news and the 
descent continued into today's trading.   INKT is a "Thank 
goodness for stop losses" example.  INKT made #1 on the 
drop list.

ITVU $49.00 -4.13 (-2.50)  We are dropping ITVU after it
fell substantially today.  Though the stock gained on Monday, 
we feel further profit taking might take place after the severity
of the drop on Tuesday.  The fall was on lower than average 
volume, but was pretty substantial considering there isn't any 
news to account for the drop.  Sometimes plays just don't workout 
and this, unfortunately, is one of them.  

NT $89.68 -2.12 (-0.37) It's time to let NT go for now.  Profit
taking set in yesterday late in the day.  NT hit $92.81 and 
promptly began to fall, making a low of $90.50 for the session
before recovering.  The pulled back continued today.  While we 
believe NT will probably get back on track, even prior to 
earnings, which are scheduled to be released July 27th, it 
looks like NT may have some more consolidating to do.  NT has 
been a good play since we picked it at $79.94.  Look for it
again when it begins a new trend.

VISX $89.69 -.88 (+.19) We are dropping VISX because it reports 
earnings after the close tomorrow, and we never recommend holding 
over earnings. We had expected a nice rise in the stock's price 
today, but news from Argentina got in the way (overseas weakness
makes investors worry over high P/E stocks). That cloud of 
worry may hang over the stock tomorrow as well. Even though 
that news doused our hopes for a final few points today, VISX 
has still risen $4.56 in the 6 trading days since we added it. 
Plan to be out of VISX options by the close tomorrow.



******
PUTS:
******

YHOO $156.94 +6.69 (-3.06)  We're dropping YHOO today and 
ending this play on a good note.   First we had picked up 
YHOO as a call play back in June.  It had a very successful 
earnings' run with over $40 in profits!  Then on July 7th 
(the day before earnings), when YHOO was at $175.13, we 
switched to a put play to take advantage of YHOO's 
historical after-earnings' decline.  This morning, we 
believe YHOO hit its relative bottom when it dipped to 
$145.  After an overall $30 decline and two analysts 
starting new "buy" ratings on YHOO today it's time to cut 
our ties and move on.   



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

NXTL $52.81 +1.38 (+2.81)  NXTL advanced almost another $3 
as it approaches its earnings' date this Thursday.  On 
Monday, Gerald Klauer Mattison reiterated their "buy" 
rating on NXTL and set a 12-month target price at $65.  New 
highs were reached during intraday trading on both days. 
The 52-week high is now at $53.94.  The gains on strong 
volume is a bullish indicator.  Nevertheless, we never 
recommend holding any call positions over the announcement.

HWP $109.31 +2.19 (+2.62)  HWP is packing some power as it 
climbs even higher this week.  For the 4th consecutive 
trading day, this stock has reached new heights.  The 
latest new high was hit during an afternoon rally today 
and now stands at $109.75.  However, the volume has been 
slightly less than average.   Yesterday, HWP was awarded a 
$100 mln., 3-year computer deal with Rockwell, a world 
leader in electronic controls and communications.  Rockwell 
is primarily buying higher-end Vectra desktops ($1000-1700 
each) from HP.  Considering the sluggish PC market, this is 
a big catch for the company.  Today, CSFB announced they 
raised their 1999 fiscal numbers for HWP to $3.55 from 3.45 
and but kept their "buy" rating.   HWP is definitely a 
split candidate.  It last split 2:1 in July of 1996 when it 
was in the $80-85 range.  There are plenty of shares 
authorized for another split.  With earnings expected on 
August 16th, the possibility of a split announcement around 
that time just keeps getting more promising.  

VRIO $77.00 +2.16 (+2.25)  VRIO broke its overhead 
resistance on Monday!  The stock broke through the $78 
opposition (now its former 52-week high) during a big run-
up mid-morning and peaked at $78.75.  Of course, profit-
takers didn't stay on the sidelines for very long and VRIO 
only managed to hang onto a fractional gain by the close.  
The trading volume was strong again today and the stock 
tacked on a couple more points but couldn't pop over $78 
again.  There's more good news for Verio stockholders.   
Today the company announced they acquired privately held, 
digitalNATION for $100 mln. in cash.  This acquisition 
further strengthens their leading position in this red hot 
Web hosting business.  VRIO has made gains for 5 straight 
days so please watch out for consolidation!  Remember 
stocks move in cycles.  Use stops for protection.  

NXLK $91.75 -5.99 (-1.25)  After gaining $11 on Thursday 
and Friday, NXLK surged again on Monday.  It added on 
another $4.75 and set its newest 52-week high at $98.44 by 
mid-afternoon.   The gains have been great since NXLK left 
its old support ($75-78) last Tuesday; so of course some 
consolidation is expected.   Today was a case in point.  
The stock opened at $96.13, but then settled into a 
narrower trading range around $92-94 for most of the day.  
This may be a good entry point, but a conservative player 
will wait for upward confirmation before beginning a new 
play.  Earnings are due in a couple of weeks on July 30th.  

DCLK $96.50 +2.50 (-6.44) DCLK, along with the rest of the 
Internets, tanked on Monday thanks to Infoseek.  You might 
have trouble seeing the connection at first glance but it 
has to do with the premium paid by Disney for Infoseek.  The 
reason that most Internet issues trade for such high values 
is they have potential to either make money in the future 
or may be bought out for a premium tomorrow.  Well, the 
premium paid by Disney was lower than expected and may be 
an indication of future premiums paid for Internet stocks.  
But on Tuesday DCLK was the acquirer as they announced the 
purchase of Netgravity.  This is an attempt to strength 
their hold as one of the top advertising firms on the Web.  
DCLK rebounded today and looks poised to move back above 
$100, market willing.  This pullback may be the entry point 
you were looking for.

AOL $125.13 +2.81 (-3.13) AOL suffered a serious bout of 
profit-taking at the open on Tuesday.  The stock dropped to 
$117 within minutes of the opening.  But if you blinked, you 
missed a great entry point because the stock instantly turned 
around and ended higher on the day.  In fact, the last hour 
produced a strong rally in the stock.  The volume has picked 
up again today and we should expect an active play right up 
earnings next week.  AOL also has a stake in today’s hot 
IPO of China.com, which is supposedly the AOL of China (Well
not really, but China.com would like to think so).  This 
will help add a few dollars to AOL’s balance sheet as the 
China.com IPO surged over 200%.  The rest of the week will 
depend on the two key reports due out starting tomorrow.  
We have the PPI announced Wednesday and the more important 
CPI out on Thursday.  Look for quick plays and expect lots 
of volatility.       

SUNW $73.50 -1.69 (+0.56) With just over one week left until 
earnings, Sun is off and running.  On Monday, they announced 
that their SPARC Ultra engine boards are 33% faster than the 
competition.  This helped SUNW continue their breakout and 
move to a new high of $76.44.  The China.com IPO was released 
today to an incredible reception.  This should also please 
shareholders in SUNW since the company has a stake in the 
new company.  We did see the stock move lower with the market 
today but it also rebounded late in the day as well.  Look 
for the PPI and CPI to move the market and SUNW will probably 
move with the market but remember earnings are just over a 
week away.  This should keep the momentum leaning to the 
upside.  

TMCS $35.25 -1.00 (+.38)  After gaining $1.38 on Monday, TMCS 
gave back some profits on Tuesday after six straight days of 
gains.  The stock has been trending up since late June and has 
shown strong volume on up days and light volume on down days.  
On today's drop, volume was about 2/3's of normal.  TMCS announced 
Monday the company has hired E-Dialog to develop a series of 
customized digital direct marketing campaigns.  This will enable 
TMCS to build sophisticated customer profiles and establish 
target messaging to help drive sales.  

CMGI $113.88 +1.06 (-7.12)  CMGI took a serious hit on Monday
with most of the Internet sector, but bounced back a bit on
Tuesday.  The Internet sector dropped substantially on Monday
as investors took profits and didn't approve of the Disney/
Infoseek partnership.  On Tuesday, CMGI came right down to its
50-dma and bounced up, closing over $5 off of its low of the day.
We are keeping CMGI as a call play for the simple fact that
we think it has bottomed for the short term.  The 50-dma provided
nice support today and unless some negative news surfaces, we
feel CMGI is positioned to rise in the coming weeks.  

DRIV $32.56 -.63 (-2.69) DRIV was another Internet stock to 
lose substantial ground on Monday, as the stock lost over $2.00.
Tuesday saw DRIV lose further ground, but close about a dollar
above its intraday low.  DRIV has solid support at $29, though
it doesn't seem this will come into play.  DRIV has resistance
at $35 and we would like to see the stock break this level on
strong volume.  The last three days have been below average
volume for DRIV.  Digital River announced on Monday that they
are buying Tech Squared, a seller of mid- to high-end 
microcomputer hardware and software.  On Tuesday, DRIV inked
an online delivery agreement with Traveling Software, the
company that develops LapLink.  We like DRIV going forward with
earnings on the 21st, but watch for an intraday drop to get in.

VOD $202.25 -4.50 (-4.88) VOD has lost ground this week on 
decreasing volume.  The stock is now just $3 above its 50-dma
which has been support.  A bounce off this mark intraday would
be a good buying opportunity.  We continue to like VOD because
of a 4-1 split announcement we expect at its annual meeting on
July 21.  VOD was dropped by many investors this week as many
UK investors sold Telecom's in search of cyclicals.  VOD has
a tendency to channel up and down and with four straight down
days, seems poised to start back up.

LU $72.69 -.88 (+.75)  LU traded down slightly on Tuesday, but
gained a $1.63 on Monday.  LU has earnings coming up on the
22nd of July, and a run is likely.  LU set another 52 week high
on Monday as the stock reached a price of $73.94.  LU showed 
very little activity today as volume was low and the trading 
range was from just $71.94 to $72.75.  LU announced today that 
its elemedia software venture arm, will be the first software
vendor to offer its H.323 Version 2 gatekeeper platform to 
industry developers and OEM vendors free of charge.  The $72
level is the strongest near term support, but we feel LU will
trade higher from here as its earnings date approaches.

SONE $46.06 -1.81 (-2.19)  SONE has had problems getting anything
positive going this week.  After dropping slightly on Monday,
SONE proceeded to fall another $1.81 on Tuesday.  The stock is
still above its 50-dma of $42.50, and it has earnings in a few
weeks.  Watch for a bounce off of its 50-dma as a buying
opportunity.  If PPI and CPI numbers are non-inflationary,
we feel we will see SONE make a run into earnings.

SNE $118.06 +.56 (+3.68) Sony is like that little rabbit, it
just keeps going and going and going.  We mentioned earlier
this month that SNE has a habit of jumping up and either
working higher for the rest of the day or moving sideways
for the balance of the session.  SNE is up $3.68 for the
week already.  It appears as though the economic recovery
may be for real, as most of the Japanese electronic stocks
have been moving high recently.  SNE and Time Warner will 
team up to buy online and video retailer CDNow Inc. and 
combine it with their Columbia House music club.  Move
your stops up on SNE and enjoy the ride.

SLR $69.56 -0.94 (-2.38) SLR popped up first thing Monday morning
and then went south.  SLR opened $1.00 higher, and moved to 
an intraday and 52 week high of $73.25.  That's when the bears
decided that was enough for now.  SLR fell $3.00 to a low of 
$70.25 closing down $1.44 for the day.  The selling continued
throughout the session today although with not so much momentum
behind it.  Support is in the $68.00 range for now and volume on
the decline has been about average. If this support level holds
we would view any bounce as another potential buying opportunity.
Before initiating any new play however, as always confirm the 
market direction and volume.

COST $83.88 -0.68 (-2.06) As we said Sunday pick your entry point
on positive confirmation.  So far this week there hasn't been any 
positive direction.  We also said support is in the $83.00-$84.00
area.  Watch and see if COST holds in this area. If it holds and
we get a bounce, THEN could be the time to consider a play.
Volume on this decline has been very light, about half the norm.
This leads us to believe that this pullback is just that.  The 
industry is still strong and nothing has changed as far as
the company in the last two days. No real news on the company
at this time, so keep your eye on COST and wait for a bounce,
with good volume supporting it.

ABOV $43.38 -0.62 (-0.37) ABOV moved higher Monday on average 
volume of 1.4 mln. shares.  Today it really seemed like there was 
just not much interest in the stock.  Since June 30th ABOV
has moved from its low of $34.00 to its high yesterday of
$45.25.  Today’s move down appears to be profit taking.  We
would like to see the $42.00 area hold as support and then a
move back up with good volume before considering a new play
on ABOV.  Earnings are scheduled to be announced July 23,
which leaves us plenty of time for the earnings run.  We will
be patient and allow the market to dictate our next move on
AboveNet.

RNWK $86.75 -.75 (-5.63)  RNWK suffered a loss of $4.88 
yesterday in profit-taking, and dropped an additional $.75 
today. It has corrected back to its 10 dma, from which we expect 
to see a bounce. Technically it still looks strong, but the 
deal with Disney and SEEK helped clip the wings of some of the 
high-flying stocks, such as RNWK.  RNWK had risen sharply in 
recent days on new products and a deal with Microsoft. With a 
little correction under its belt, this stock is ready to head 
higher in a run toward its earnings announcement, which will 
be July 20th, after the close. Remember that Internet stocks 
carry extra risk, especially with a couple of financial reports 
due out this week and with foreign market concerns.

IBM $137.00 -.81 (-.38) Although IBM is off $.38 on the week 
so far, it set a new all-time high yesterday and followed that 
up with ANOTHER all-time high today of $139.19. A new high in 
6 of the last 7 trading sessions ain't bad!  In the news: 
Germany's NSE Software AG has entered an agreement with IBM 
to develop software for the financial services industry. 
Yesterday, IBM finally agreed to buy Sequent Computer Systems 
Inc for $18/share. The deal had been much discussed in the 
news, and will help IBM strengthen its server offerings.  Also, 
yesterday, Deutsche Banc Alex. Brown reiterated a "strong buy" 
rating on the stock.  With earnings due out in 6 days, IBM 
is looking strong.  Big Blue reports earnings Monday, July 19th.

NOK $92.63 -.31 (-1.81) Nokia has been slipping over the 
last few sessions. The last time it corrected was nearly three 
weeks ago, and it spent a few days consolidating before it 
headed up again. It has now moved below its 10 dma, but it did 
that during its last correction, too, just before it resumed 
climbing. If it behaves in a similar manner this time, it may 
be ready to head up soon. Last week, a sympathy move on 
Ericcson's sudden CEO loss helped send NOK lower. However, 
news tonight from Motorola may send it higher. Motorola just 
reported earnings of $.44, $.03 ahead of estimates. Its 
earnings growth resulted from increasing chip sales and strong 
growth in the wireless phone market. Nokia has made sympathy 
moves down on news from Ericsson in the past. Only after the 
initial knee-jerk reaction did investors realize that fierce 
competition from Nokia was at least in part responsible for 
Ericsson's troubles. Nokia still has 6 trading sessions in this 
country before it reports earnings. It will report Thursday, 
June 22nd, before the opening bell. If you are looking 
to enter options on NOK, wait for it to start up again.

BBY $74.88 -.81 (-1.12)  In Sunday's letter, we suggested 
that profit taking may not be completely over, and sure enough, 
the stock has lost a bit more this week. It had run up about 
$15.00 after it was added to the S&P 500 on June 28th, without 
pausing to catch its breath along the way, so it was due for 
some consolidation. The fact that volume was average to strong 
on 2 of the 4 down days is a bit concerning, but the profit 
takers need to be shaken out before the stock can move higher. 
Wait for an entry. A negative CPI report could hurt this high 
growth retail stock. Meanwhile, BBY Internet division just got 
some competition, as Amazon.com Electronics was launched.

BRCM $140.50 -3.88 (-3.25) BRCM set a big new high just after 
the open yesterday of $149.50, but couldn't hold onto it. It 
ended a volatile day with a gain of only $.38. Today it lost 
$3.88, but traded as high as $146.75. Technically the stock 
still looks good and it continues to ride along its 10 dma. 
We were a bit concerned when Intel's earnings came in somewhat 
low, though. They put a good spin on things in the conference 
call, however, so the chip sector could escape unscathed. BRCM 
is in a different niche within the chip sector, anyway. Its 
products are associated more with communications, the Internet, 
and networking than they are with computers. BRCM reports 
earnings on July 21st, after the close. BRCM is a volatile 
stock that may suffer if investors fret about inflation and 
overseas markets.

TXN $146.31 -1.44 (-0.25) TXN will report earnings on July 20 
(company confirmed) and is also a split candidate.  Their last 
split (2:1) was in November 1997 at about $100.  They do not 
currently have enough shares to make it happen and have yet to 
issue a proxy statement to shareholders for approval.  As we 
noted Sunday, TXN has come a long way in a hurry and may take a 
week off on the way to earnings.  The chart is confirming a 
flattening out, as is the price change yesterday and today.  We 
also noted that there were probably a few more points to squeeze 
out, but keep your stops set to protect profits from market 
disaster (you know, alarming PPI/CPI, poor reaction to INTC 
earnings, etc.).  Otherwise target shoot into a position, or 
confirm that volume is coming into the stock again before you 
start a new play. (Also, Efficient Networks, in which TXN owns 
13%, launches its IPO on Thursday - tail won't wag dog here.  
Even so, nothing wrong with vitamin supplements even if you are 
healthy.)

MSFT $93.63 -0.56 (+0.38) Tap, tap, tap, tap. . .we're still 
waiting for that earnings run.  INTC's weak earnings report today 
won't help things much tomorrow.  Earnings are July 19 (company 
confirmed), 1 trading day following expiration of July contracts.  
Support of $92 is holding nicely, but MSFT needs to get the lead 
out (with volume) if it's going to get through $95 (its previous 
all-time high and current resistance).  OI is still heavy at $95-
$100 level, telling us that there is still some money to be 
earned on this.  However, if you get in, try to be out sometime 
before Monday morning so you don't commit the eighth deadly sin 
of holding over earnings.  We'll be dropping this play in 
Sunday's upcoming letter.  4 trading day left, but don't get in 
until you know your exit and confirm upward movement.

QCOM $144.38 -3.06 (-4.37) Related to the announcement that QCOM 
would join the S&P 500, QCOM announced they would sell 4 mln. 
shares of stock.  Investors didn't check the facts and ran QCOM 
in the wrong direction in what we think is a knee-jerk reaction.  
First of all, with 130 mln. shares in float 4 mln. shares amounts 
to a 3% dilution - no big deal on this growth stock.  Second and 
most importantly, those shares are 100% subscribed by index funds 
who would otherwise have to go to the open market get them, thus 
driving up the price in a hurry from sellers demanding a premium 
-yes, that means we miss out on price spike.  Even so, we can't 
get our hands on these shares anyway, so it won't dilute the 
trading float since index funds are not in the business of 
selling.  Actually, this is pretty smart of QCOM, as it limits 
day-trader-induced volatility and keeps all of us focused 
squarely on earnings and the possibility of a split.  Besides, 
its highly unlikely these shares would have been issued if 
management felt there would be any kind of an earnings shortfall 
(by default, that would force funds into the open market, thus 
supporting the price).  It really telegraphs management's faith 
in the future.  Clearing the smoke away, this looks like a buying 
opportunity if your risk profile allows it.  Remember, this play 
carries a lot of risk.  Keep your eyes open. Earnings are 
Tuesday, July 20, at approx. 1:30 p.m. PST (company confirmed).  
There is a strong likelihood of a 2:1 split, if history is any 
indication.

CSCO $65.25 -0.38 (-1.81) "CSCO doesn't report earnings until 
August 10 (company confirmed), so it may take another week of 
consolidation before it finds its legs."  Remember that from 
Sunday?  $66.50 support proved to be short-lived too, as CSCO got 
caught in the market downdraft yesterday and today.  If there's 
any good news, it's that CSCO dug itself out of the sub-$65 hole 
in last 2 hours of today's trading, though volume was average at 
about 14.8 mln. shares.  Nothing in the news, just a good old-
fashioned consolidation, which will most likely affect CSCO until 
volume returns, which then will be our signal to take a position.  
Of course, confirm market direction before starting a new play.

MSPG $48.25 -0.63 (-2.88) Last week, MSPG cancelled an analyst 
meeting scheduled for this week, citing ongoing talks of a new 
relationship (read that, "merger/acquisition").  At least that 
was the rumor.  Our words form Sunday, "The Euphoria may have 
further worn off by Monday. . . If the rumor loses speed, the 
stock may suffer.  If there's a buzz around the issue, volume 
will be the key to taking a position."  The rumor lost speed... 
.no buzz. . .no volume.  We hope you waited to take a position.  
Earnings are 2 weeks away, tentatively set for July 22 (per 
Zack's).  The company's own Web site says that a date has yet to 
be published.  We'll let you know when we find out.  Anyway, this 
has nonetheless turned into an earnings play (with any merger 
viewed as gravy), but we need to see the volume come back into 
MSPG before taking a new position.  If ELNK (reports earnings 
tomorrow) is an indicator for MSPG, MSPG could move in sympathy. 
Since MSPG has been down during the last 3 days, we could see a 
reversal tomorrow anyway (despite ELNK), market willing.  This is 
a tricky play.  It may not start its own earnings run until next 
week.  Needless to say, it carries a higher degree of risk.  
Confirm market direction first.

DELL $42.25 -1.38 (-0.56) First thing Monday morning, SG Cowan 
gets on the Dell bandwagon by upgrading from buy to strong buy 
and sets a new price target of $55.  Dell reached as high as $44 
with strong volume on the news yesterday, but pulled back to 
$43.63 at the close.  Today, it gave back $1.38.  If you check 
the chart, you will see strong resistance over the last 6 mos. at 
$45.  So many people got "stuck" with this stuff at $45, that 
just to break even makes them happy.  Thus, when the price nears 
$45, the weary sell into strength knocking the price back down.  
A reminder from Sunday, "plan your entry and wait to get it.  You 
won't be missing any earnings run, since earnings won't be 
announced until August 18 (company confirmed).  The closest 
support is $40, after that, $37.  Plan your entry based on your 
own risk profile.  The point is to wait for it, not chase it.  

EXDS $135.50 -4.31 (-0.88) If you had to leave your screen every 
day, not much happened.  But if you were watching, wow!  What a 
ride!  Yesterday, EXDS touched $146, a $10 gain from its Friday 
close.  Unfortunately, it didn't hold, but still closed up almost 
$4 for the day.  Today?  Different story. . .down $4.31.  
Fortunately, it was probably just profit taking since volume was 
only 60% of normal.  Support is still at $134, where it bounced 
today on 2 occasions.  If tomorrow is a good day market-wide, 
EXDS could resume its upward trend.  Earnings are scheduled July 
21 after the close (company confirmed).  Despite the yo-yo 
effect, the technical chart is still quite strong, and EXDS still 
has a good story in a strong sector (see Sunday's write-up).  
Note that this play carries lots of risk, thanks to high 
volatility.  It's not for the conservative investor types.  
Target shoot your entry for intra-day dips and know your exit 
before you start a new play.  Looking good, market willing.




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


SAPE $50.25 +0.00 (+2.50) Sapient hasn’t generated much 
excitement this week as the stock is searching for a bottom.  
This is understandable after the losses experienced the past 
couple of weeks.  The stock had a big spike down after rumors 
they would miss their 2Q earning estimates.  We continue to 
like the downside potential for SAPE based on the lack of 
support but we need to confirm the trend first.  Right now 
the stock appears to be basing at $50.  Any signs of a break 
down from here would be a signal to open new plays.  

JCP $45.00 -0.69 (-0.44) We are at a critical point in our 
play of JCP.  The stock has moved below all moving averages 
since the announcement of lousy same-store sales for June 
except for the 200-dma.  It is sitting right on that level 
and is trading sideways.  We want to see a break of support 
before opening any new plays.  Any signs of a bottoming will 
encourage institutions and investors to invest so the sooner 
the break the better.  If you are involved with the play, 
tighten up your stops to trigger on any positive bounce.
There has been no news to report this week either.

WPI $35.25 +0.06 (-0.69) Concerns for WPI has been hurting 
the company’s stock again this week.  The bigger concern for 
WPI may be that volume is picking up as the decline increases.  
That is one of the more bearish signals when you get a down 
move on strong volume.  There hasn’t been any new news but 
it appears investors are not willing to wait until the Aug. 08 
earnings to hear the real news.  This recent crisis started 
last week when rumors of missing the estimate surfaced.  Keep 
your stops set in case of a reversal.

IMNX $115.75 +3.50 (-3.25) Sometimes the weekend does a lot 
to alleviate selling pressure in a stock and then there are 
the other times.  This is one of the other times.  Investors 
picked up right where they left off in beating the stock 
lower on Monday.  The stock did rebound on Tuesday thanks 
to a strong earnings report from Amgen but it was only able 
to recoup half of Monday’s loss.  So we see more downside 
ahead before any sustained rally.  On Tuesday, IMNX bounced 
off the 100-dma at $105 but nothing moves in a straight line.
IMNX could retest that low again soon. 

FDX $47.88 -.81 (-.12) FDX made a slight gain yesterday, but 
resumed its descent today, as crude oil moved back above 
$20/barrel, sending the Dow Transport index moved lower. As 
long as oil prices remain higher than they have been in the 
last year and a half, airlines may continue to struggle. FDX 
has mild support around $45 with stronger support around $40. 
No new news specific to FDX







**********

SEE DISCLAIMER IN SECTION ONE

**********





The Option Investor Newsletter         Tuesday  7-13-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.



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


GTW Gateway $68.31 -1.44 (+.68)

Gateway is #2 in the direct marketing of PCs in the U.S.
second only to Dell, Gateway is unique in their marketing
approach.  Computer users may order by phone, or on the Web. 
GTW makes desktops, portable PC's, PCTV's, and servers.

GTW hit a 52 week high of $84.50 in late February.  Since that
time it has been trending lower, however it has been forming a 
base since late May, bottoming around $57.00.  Since the 1st part
of July GTW has began to find some strength.  Volume has been 
picking up, and the industry has been picking up as well.
Earnings for GTW are scheduled to be released July 22 and its
appears GTW could be setting up for a nice earnings run.  Gateway
looks as though they will at least meet or beat their earnings 
estimates of $0.55 per share.  Technically, MACD turned positive
within the last four days, and stochastics are coming out of the
hole as well.  The 100 dma is just below today's low of 66.37, 
which we believe should provide good support for GTW.

With PC prices tumbling, PC makers are calculating ways of 
getting and keeping new customers.  Gateway has reportedly been 
talking with Earthlink Network Inc., among other Internet Service 
Providers.  A new management team at Gateway recently introduced 
personal computer leases for consumers that incorporate its 
Gateway.net Internet access.  In the last three months subscribers 
more than doubled to over 400,000.   

BUY CALL AUG-65 GTW-HM OI=1037 at $6.88 SL=5.25
BUY CALL AUG-70*GTW-HN OI=1086 at $4.25 SL=2.50
BUY CALL AUG-75 GTW-HO OI= 369 at $2.50 SL=1.25
BUY CALL SEP-70 GTW-IN OI=1796 at $6.00 SL=4.25

Picked on July 13,  at  $68.31   PE 30
Change since picked    +$ 0.00   52 week high=$84.50 
Analysts’ ratings    7-8-6-1-0   52 week low =$36.13
Last earnings   3/99 est  0.60   actual 0.62 surprise=+3%
Next earnings  07-22 est  0.55   versus 0.38 
Average daily volume  1.35 mln.
Chart = http://quote.yahoo.com/q?s=gtw&d=3m



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

none today




***************
PLAY OF THE DAY
***************
AOL - America Online $125.13 +2.81 (-3.13 this week)

Sunday's Write up

America Online is the world’s leading provider of Internet 
and online services.  It currently has over 17 million 
subscribers between its two divisions, America Online and 
CompuServe.  AOL Interactive Services product group operates 
the company's America Online service & manages the AOL Instant 
Messenger service, the AOL.COM Web site, and AOL NetFind.  In 
1999 it purchased Netscape Communications which brought the 
popular Navigator Web browser and the Netcenter Internet 
portal to AOL. That’s not the only purchase this year either.  
In May they bought MovieFone Incorporated to add to an already 
commanding list of services.

After a brief pullback Friday morning AOL rallied back with 
the market to close higher once again.  Internets in general 
were relatively flat on Friday but investors were anxious to 
jump in near the close.  This is because the earnings run is 
now in full swing.  AOL is set to report after the close on 
July 22, with and expectation of 0.11 cents.  They are also 
a possible stock split candidate.  We mentioned on Thursday 
that there are not enough shares currently authorized to do 
a 2-for-1 split but they may consider either a shareholder 
meeting to authorize more shares or do a 3-for-2.  Either way 
we are including them as a split candidate due to past history 
of such announcements in this price range.  Look for momentum 
to continue this week as most investors still consider the 
stock cheap relative to its 52-week high which is still over 
$45 away at $175.50.  Plus entry points are becoming extremely 
important now that premiums are inflating due to recent 
enthusiasm.  Refer to Thursday’s write up if you would like 
more information on our play of AOL. 

There was an article out after the close Friday indicating 
which Web sites were the most popular for Internet users for 
the week ending June 28.  Once again AOL was on the top for 
users and advertisers.  We bring this up because it was after 
the close in case you missed it and also it should be an 
indication that all is well heading into earnings. 

Tuesday’s Write up

AOL suffered a serious bout of profit-taking at the open on 
Tuesday.  The stock dropped to $117 within minutes of the 
opening.  But if you blinked, you missed a great entry point 
because the stock instantly turned around and ended higher 
on the day.  In fact, the last hour produced a strong rally 
in the stock.  The volume has picked up again today and we 
should expect an active play right up earnings next week.  
AOL also has a stake in today’s hot IPO of China.com, which 
is supposedly the AOL of China (Well not really, but China.com 
would like to think so).  This will help add a few dollars 
to AOL’s balance sheet as the China.com IPO surged over 200%.  
The rest of the week will depend on the two key reports due 
out starting tomorrow.  We have the PPI announced Wednesday 
and the more important CPI out on Thursday.  Look for quick 
plays and expect lots of volatility.

Comments

We are making AOL our play of the day due to its strong 
rally to end the day.  It sharply outperformed most other 
stocks in the final hour.  Most of the excitement stems 
from the upcoming earnings announcement which is only a 
week away.
  
BUY CALL AUG-120 AOO-HD OI= 7090 at $13.88 SL=11.25 
BUY CALL AUG-125*AOO-HE OI=11992 at $11.38 SL= 9.00 
BUY CALL AUG-130 AOO-HF OI= 7714 at $ 9.00 SL= 6.75 
BUY CALL AUG-135 AOO-HG OI= 5289 at $ 7.38 SL= 5.75 
BUY CALL OCT-135 AOO-JG OI= 5548 at $13.50 SL=11.00 

Picked on July 08th at  $127.69     P/E = 153
Change since picked       -2.56     52-week high=$175.50 
Analysts Ratings    24-12-1-0-0     52-week low =$ 17.25 
Last earnings 04/99    est= .09     actual= .11 
Next earnings 07/22    est= .11     versus= .06 
Average Daily Volume = 12.75 mln




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


Markets Fall On Latin American Woes...

U.S. stocks closed lower on Tuesday as earnings optimism failed
to overshadow the growing uncertainty from Argentina's economic
problems. 

Monday, July 12

U.S. markets ended mixed Monday as investors cashed in profits
while waiting for the flood of corporate results later this week.
The Dow managed a small gain of 7 points, finishing at a new high
of 11,200 after a late-day rally. The Nasdaq index was off just
slightly at 2,790. The S&P 500 index was down 4 points at 1,399.
In the broader market, decliners led advances 1,631 to 1,371 on
active volume of 664 million shares on the NYSE. The 30-year U.S.
Treasury bond's price rose 1-1/4 points, with the yield slumping
to 5.91%.

Sunday's new plays (positions/prices):

Corporate Express  CEXP  OCT10C/AUG10C  $0.38  debit
Orion Capital      OC    AUG40C/JUL40C  $0.00  debit
Western Wireless   WWCA  AUG22C/AUG25C  $2.00  debit
World Color Press  WRC   AUG22C/AUG30C  $0.00  debit
Diamond Tech       DTPI  AUG22C/AUG25C  $0.00  debit

It seems like all of our plays were in the news. Among the big
movers, Orion Capital (OC) rose almost $7 at the open when Royal
& Sun Alliance Insurance Group of the U.K. agreed to buy OC for
$50 per share. The volatility play was unavailable. World Color
Press (WRC) was up $5 in early morning trading after the company
agreed to be acquired by Quebecor Printing of Canada. Once again,
the play was unavailable due to the change in stock price. The
calendar spread on Corporate Express traded at or below the
suggested entry price and after the market closed, there was a
rumor about a possible merger announcement. Western Wireless
(WWCA) was hovering around $30 during the morning session and
the quote on the August debit position moved to a low of $2.12
with a fairly wide bid/ask spread. No trades were made in the
position but it appears that a price of $2.00 would have been
a reasonable expectation to open the play. Diamond Tech (DITP)
was a unique position because the quotes held up all day and yet
there were no trades. Without the time to investigate, we will
just assume that the quotes were in error; no play was opened.

Portfolio plays:

Continuing with stocks/plays that were 'in-the-news'. Sequent
Computer (SQNT) agreed to be acquired by International Business
Machines in an $810 million transaction in which Sequent holders
are being offered $18 per share in cash. The August play can now
be closed at $2.25 credit, a $0.75 profit for one week. General
Motors (GM) managed a small gain despite news that a California
jury ordered the auto maker to pay $4.9 billion to six people who
were burned when their car exploded in an accident. One of our
long-term issues, Tommy Hilfinger (TOM) split 2-for-1 today. The
new position is based on $37.50 strike prices. General Electric
(GE) continued to fall after the recent earnings announcement.
A successful roll-out to the August $110 strike (short position)
in our bullish diagonal spread is a current priority. Halliburton
(HAL) made a nice move today, climbing over $1, probably on news
that Oilfield services giant Schlumberger was spinning off its
marine drilling business, and merging it with Transocean Offshore
(RIG) to create the world's biggest offshore driller. In the big
downers category; American Online (AOL) dropped $6 and Earthlink
(ELNK) fell $7 as profit taking consumed many of the larger
Internet issues.

We have started to roll forward some of the calendar spreads to
August. Today's adjustments and the new positions/prices;

Ensco (ESV)       SEP22C/AUG22C  $0.38  debit
HealthSouth (HRC) SEP15C/AUG15C  $0.19  credit
Unocal (UCL)      OCT45C/AUG45C  $0.38  credit
 
Tuesday, July 13

U.S. stocks closed lower on Tuesday as earnings optimism failed
to overshadow the growing uncertainty from Argentina's economic
problems. Analysts are worried that another crisis could occur
in Latin America and investors promptly sold stocks of financial
services companies whose profits could be hurt by problems in
that region. The Dow was down 25 points to 11,175 and the Nasdaq
composite index finished 12 points lower at 2,778. In the broader
market, declining issues led advances 1,715  to 1,278 on active
volume of 733 million shares on the NYSE.

Portfolio plays:

Merger news continues to dominate our portfolio. Buhrmann NV just
announced the acquisition of Corporate Express (CEXP), creating
the world's largest distributor of office supplies. The Dutch
company will pay $9.70 for each share of Corporate Express. Most
stockholders believe that is less than the company's true value
but for now, it appears the merger will be approved. C-Cube made
another nice move today, rallying $1.62 on earnings speculation.
The neutral time-spread was closed last Friday for a $1 profit.
Intel (INTC) reported second quarter earnings that were just
below expectations, but said it expected a strong second-half of
the year. We will watch our short-term calendar spread closely
in tomorrow's trading and make the necessary changes as we move
into next month's positions. Merrill Lynch (MER) posted a record
$673 million in the second quarter, up 22% from a year-ago. The
results soundly beat analysts' expectations and maybe that will
boost our slumping LEAPS/covered-calls play.

General Electric was one of our adjustments today. We bought the
July $110 call and sold the August $110 call for a credit of
$2.12. The new position is SEP105C/AUG110C at a debit of $4.38.
The spread might perform better if the $115 call was sold, to
allow further upside movement, but we have locked in a profit
at $110 or higher. Implied volatility and volume stayed firm in
options on Titanium Metals (TIE) as the stock price rose $0.50
to just above $11. The debit on the October position should be
reduced by at least $1.12 as we move into the August options on
Wednesday or Thursday. Other plays (new positions/prices) that
we rolled-forward include;

3 Com Corp (COMS)      OCT25C/AUG25C  $0.12  credit
Ralston Purina (RAL)   SEP30C/AUG30C  $0.62  credit
Dupont (DD)            JAN70C/AUG70C  $3.38  debit
EMC Corp (EMC)         OCT65C/AUG65C  $0.50  debit
Proctor & Gamble (PG)  JAN100/AUG90C  $0.25  credit

I am often asked to suggest brokers that are familiar with
combos/spreads. Here are two highly recommended OIN affiliates
that I know personally:

Robert J Ogilvie, ROP
Baxter, Banks, & Smith, Ltd.
rjogil@aol.com

Andrew Aronson
LaSalle St. Securities
andrewoption@hotmail.com

Good Luck!
******************************************************************
				- NEW PLAYS -
******************************************************************
CSCO - Cisco Systems  $65.25     *** On The Move ***

Cisco Systems is the worldwide leader in networking for the
Internet. Cisco products include routers, LAN and ATM switches,
dial-up access servers and network management software. These
products, integrated by IOS software, link geographically
dispersed LANs, WANs and IBM networks.

In recent news, Cisco Systems and Microsoft announced they have
extended their joint development agreement for the Microsoft®
Active Directory(TM) directory service in Windows® 2000 Server.
In its collaboration with Microsoft, Cisco is developing the
Networking Services for Active Directory (CNS/AD), built on the
Microsoft Active Directory platform. CNS/AD, the world's first
truly directory-enabled networking solution, enables Cisco's
service provider and enterprise customers to offer personalized
intelligent network services.

That is the type of leading edge product development that will
propel CSCO revenues upward into the year 2000. Analysts seem
to agree with the positive outlook. Last month, CSCO had these
brokerages in their corner:

6/18/99 First Boston reiterates 'Strong Buy', 6/18/99 SG Cowen
reiterates 'Strong Buy'; target $70, 6/17/99 Morgan Stanley
Dean Witter reiterates 'Strong buy'; target $67.50, 6/15/99
Josepthal & Co. reiterates 'Buy' based on a meeting with the
IR director, and comments that the quarter is on track.

This slew of upgrades and revised forecasts has driven the
stock price above resistance at $60 and it should use that
area as support for an earnings run into mid-August. There
may be a better 'bullish' position at the $60 - $70 spread
but we will choose the maximum downside protection while
still preserving a small profit in the event of an upside
break-out.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL OCT-55 CYQ-JK OI=10067 A=$13.25
SELL CALL AUG-65 CYQ-HM OI=15783 B=$4.12
INITIAL NET DEBIT TARGET=$8.87 TARGET ROI=40%

Note: In this type of diagonal spread, we are reducing the net
cost of the long-term option with the credit from the sale of
the nearer-term option. If the near term call expires worthless,
we may decide to hold the long-term position for future profits
or sell a September call to further reduce our debit. There are
many other ways to exit this type of position and you should
review those techniques with your broker prior to entering the
play.

Chart = http://quote.yahoo.com/q?s=CSCO&d=3m
******************************************************************
SLR - Solectron Corp.  $69.56     *** Another Try ***

Solectron is an independent provider of customized manufacturing
services to electronics original equipment manufacturers (OEMs).
The company provides a wide variety of manufacturing services to
the industry. The company provides integrated solutions that span
the entire product life cycle; from pre-production planning and
design, to manufacturing, distribution and end-of-life product
service and support, for the world's leading electronics OEMs.
Solectron offers its customers competitive outsourcing advantages
such as access to advanced manufacturing technologies, shortened
product time-to-market, reduced cost of production and effective
asset utilization. The company has received hundreds of quality
and service awards from its customers in addition to the Malcolm
Baldrige National Quality Award. Solectron is the first company
to win the Baldrige Award for Manufacturing twice in the 11-year
history of the national program.

In mid-June, Solectron announced record sales for the 3rd quarter
of fiscal 1999. Revenues increased 68% from the third quarter of
fiscal 1998 to $2.2 billion for fiscal 1999. Net income for the
quarter was up 53% from the third quarter of fiscal 1998 to $75.7
million for fiscal 1999. Earnings per share were also higher for
this quarter; $0.29 compared to $0.20 for the third quarter of
last year.

This record-breaking quarter is based in part on the new shift
toward outsourcing by customers requiring fully-integrated and
optimized supply-chain solutions and the company is continuing to
invest in initiatives intended to globally integrate their design,
product development, manufacturing, distribution and support
services offerings. 

Deutsche Banc Alex Brown agrees with the positive outlook and
recently it initiated coverage of Solectron with a Buy rating.
We just like the bullish technical trend and this week's small
consolidation may allow us another favorable entry point.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL OCT-60 SLR-JL OI=70  A=$12.75
SELL CALL AUG-70 SLR-HH OI=225 B=$4.37
INITIAL NET DEBIT TARGET=$8.12 TARGET ROI=50%

Chart = http://quote.yahoo.com/q?s=SLR&d=3m
******************************************************************
NETA - Network Associates  $19.50     *** Volatility Play ***

Network Associates is dedicated to providing leading enterprise
network security and management software. AVERT (Anti-Virus
Emergency Response Team), the anti-virus research division of
NAI Labs, currently employs more than 85 virus researchers and
maintains labs on five continents worldwide. In addition to
studying new and existing security threats, AVERT serves as a
global resource for virus information and provides rapid support
for emergencies worldwide. Current virus alerts are also issued
to customers from Network Associates, the leader in anti-virus
detection and cleaning technology.

The stock price has moved up $3 in two days causing volume and
implied volatility to increase in the short-term call options.
The new interest may be based on the quarterly earnings report
expected next week or today's after-hours announcement that
NETA and ISS Group have resolved their patent litigation and no
material adverse effect on either parties' business or financial
condition will result from the proceedings.

In either case, some excellent disparities exist for conservative
or aggressive positions.

PLAY (conservative - bullish/debit spread):

BUY  CALL AUG-15.00 CQM-HC OI=1668 A=$5.12
SELL CALL AUG-17.50 CQM-HW OI=2524 B=$3.12
INITIAL NET DEBIT TARGET=$1.87 ROI(max)=33% B/E=16.87

PLAY (aggressive - neutral/time spread):

BUY  CALL SEP-20 CQM-ID OI=4361 A=$2.93
SELL CALL JUL-20 CQM-GD OI=110  B=$0.50
INITIAL NET DEBIT TARGET=$2.31 TARGET ROI=25%

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



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