Option Investor
Newsletter

Daily Newsletter, Tuesday, 11/16/1999

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter         Tuesday  11-16-99
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)
******************************************************************
       11-16-99            High     Low    Volume Advances Decline
DOW    10932.30 + 171.50 10937.80 10757.40   942,260k 1,787  1,256
NASDAQ  3293.05 +  73.51  3295.52  3219.54 1,470,038k 2,244  1,810
S&P-100  742.89 +  14.13   743.16   729.23    Totals  4,031  3,066
S&P-500 1420.03 +  25.64  1420.36  1395.62            56.7%  43.3%
$RUT     456.88 +   3.91   456.88   452.97
$TRAN   3099.67 +  35.01  3102.47  3063.08
VIX       21.42 -   1.43    23.54    21.16
Put/Call Ratio       .50
*************************************************************

Ready, Set, Hike!

Just another boring lazy day on Wall Street, until 2:17 PM ET. 
Yes, the Fed used their "get out of trouble free" card and took 
advantage of the strongly bullish market to raise both the Fed
Funds rate and the Discount rate by +.25% each. The raise was
accompanied by some statements that had traders running in circles
and the Dow traded in a 175 point range after the announcement.

Immediately after the news the Dow spiked up to almost 10900 or
+135 points. Then the actual wording of the release was made
public and the Dow dropped as low as 10758 or -3 points in less
than five minutes. After analyzing the release traders felt that
in spite of some frank words, the Fed was probably on hold until
next year. The markets started recovering almost immediately and
the Dow made an incredible run to close at 10933. This was the
first close over 10900 since Sept-14th.


 

The Dow finally broke out of its trading range and pierced the 
10800 barrier. Can resistance become support intraday? Sure looks
like it here with the afternoon pull back stopping dead on 10800
before the rebound. 


 

The NASDAQ also soared to yet another record and closed near the
3300 level at 3295. This NASDAQ run is incredible and it appears
as though it will never stop. The NASDAQ is up over well over 50%
for the year. The only other year the numbers came even close was
1991 with a +56.8% gain. Traders are becoming very concerned. In
reality the NASDAQ is up over 68.9% in the last twelve months.
The Dow only +19.9 and the S&P +22%. I think traders are not
taking into consideration that the new Internet economy is driven
by NASDAQ stocks. Old paradigms do not apply. Eventually this
soaring growth will slow but not as long as the Internet is
exploding. After making those bullish comments I will point 
out on the chart below that we are at the top of the regression 
channel and could see a real pull back at any time.  


 


The big news of course was the Fed meeting and the rate hike. 
It appears the Fed bears have gone back into hibernation for the
winter. They did all the damage they could do with the hike on
both rates. They did revert the bias back to neutral although this
is basically meaningless. The language they used gave some comfort
to some traders. Things like "final take back of previous easing"
would sound like a posture away from future rate hikes.  Today's
rate hike, coupled with the two previous hikes, should "markedly
diminish" the inflation risk going forward. But the Fed always
talks with a forked tongue and finished the release with the
following warning. "This expansion of activity continues in
excess of the economy's growth potential" and there are "a 
persistence of risks to sustainable growth" which means they will
take steps in the future to slow the growth below the current
+5% rate. You know Alan did not want the markets to rocket
forward and that verbal anchor was all he had left to use. Most
analysts are now looking at March as the next rate hike. In 
reality the Fed did the best thing for the markets. By raising
the rates now it takes out the possibility of a rate hike in
December and gives us 3-4 months without a major rate hike 
problem.

The interest rate sensitive stocks soared on the news. This is
normally contrary to the event. Rate hikes normally drive down
financial stocks but the outlook for no hikes in four months
has put a calm over the markets. JPM +3.88, MER +5.13, MWD +6.19,
AMTD +4.56.

The volume on the NASDAQ was very high again but today will not
go down in the record books. About 15 min before the close the
NASDAQ experienced a technical break down and about ten minutes
of trades were either delayed or lost. Traders were unable to
get executions during that period.

According to all indicators, the market is now in overbought mode.
All the news is good and there is no bad news expected. All the 
arrows are green. This should worry most traders. When everything 
is too good too be true, you should start looking over your 
shoulder. The next challenge is the CPI tomorrow and after raising 
the rates today the Fed is out of ammo should the CPI come in much 
higher than expected. The Industrial Production this morning did come 
in much higher than expected but it was a non-event. Bonds initially
soared with yields dropping under 6.0% temporarily but then rising
again to 6.6%. Seems they were not convinced. $25 oil is going to
continue to impact inflation but it is being ignored. Up volume 
has been substantially stronger than down volume and the advance 
decline line is improving.

Several Dow stocks soared to new highs or very close to a new high.
GE $139.44 +4.13, C $58.19 +2.13, MMM $101.13 +3.69, JNJ $106 +2.63.
Stocks were splitting like popcorn today led by some high flying
Internets. ARBA 2:1 $215.56 +6.63, JNPR 3:1 $328 +45, BEAS 2:1 
$72.50 +1.38, NTAP 2:1 $103.50 +13.56, ATML 2:1 $46.50  +2.44, and
NTRS 2:1 $101.25 +2.56.  The S&P set a new closing high at 1420.03. 
The old high was set back on July 19th. 

So what should we expect now? I am being cautious. The VIX dropped
to 21.42 at the close which could indicate an overbought condition
and imminent profit taking. I am out of the market except for some
OEX puts I bought at the close. With the Dow up +400 points from
Friday's low and the NASDAQ up +500 points since Halloween, without
a pause to refresh, we are over due for trouble. I am afraid we 
could have a "buy the rumor, sell the news" event later this week.
The CPI report tomorrow could be the trigger for this but in reality
I think it would have to be very bad to cause any trouble. The
market is in rally mode and is showing no weakness. Until it does
we should ride the trend. There is money coming into the market
from all directions. A rumor reported on CNBC at the close had
one European money management firm buying the S&P to the tune of
$1 billion. That is a person I would not want to play poker with.
Until we do get another buying opportunity I am going to be very
careful about my entry points and get out quickly. It seemed like
every stock I looked at today had spiked $8-15 in the last couple
of days and those gains have to hold before we buy them.

Good Luck, Sell Too Soon.

Jim Brown
Editor



**********
STOCK NEWS
**********

Welcome to Our World
By  S.P. Brown

American and Chinese negotiators reached a landmark agreement 
Monday that will open the economy of China, the world's most 
populous nation, to foreign competitors and will also make it 
a full partner in the world's trading system.  

After nearly a week of intense negotiations, U.S. trade 
representative, Charlene Barshefsky, and her Chinese 
counterpart, Shi Guangsheng, signed papers at 3:50 p.m. that 
marks China's emergence from an economic backwater to a global 
trading powerhouse.  

/members/stocknews/111699_1.asp



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

As of Market Close - Tuesday, November 16, 1999 

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

DOW Industrials   10,750  11,320  10,932    Neutral  11.12
SPX S&P 500        1,315   1,385   1,420    BULLISH  11.12
OEX S&P 100          675     725     743    BULLISH  11.12
RUT Russell 2000     425     445     457    BULLISH  11.12
NDX NASD 100       2,320   2,520   2,940    BULLISH  10.28
MSH High Tech      1,120   1,250   1,494    BULLISH  10.28

XCI Hardware       1,000   1,095   1,117    BULLISH  11.11
CWX Software         770     800   1,088    BULLISH   9.03
SOX Semiconductor    475     525     644    BULLISH  10.29
NWX Networking       550     615     762    BULLISH  10.28
INX Internet         495     525     580    BULLISH  11.05

BIX Banking          645     690     686    Neutral  10.28
XBD Brokerage        395     450     485    BULLISH  11.12
IUX Insurance        610     650     647    Neutral  11.09

RLX Retail           875     910     924    BULLISH  11.12
DRG Drug             375     390     395    BULLISH  11.04
HCX Healthcare       750     790     784    Neutral  11.09
XAL Airline          180     190     152    BEARISH   5.21
OIX Oil & Gas        285     305     311    BULLISH  11.16  *

 
Posture Alert    
The market continues on its tear, even though interest rates were 
propped up again today. The Nasdaq continues to surge, and even 
caused a lock-up near the end of trading today on record-breaking 
volume. The posture board is now becoming predominately Bullish, 
and with Tuesday's action, we have upped Oil & Gas to join the 
rest of the party.   



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

Tuesday, November 16, 1999

Buy On Rumor, Buy On News!

So once again, the Fabulous Fed raised rates again. Shortly after 
the news, the market rallied, then sold off, then rallied again 
and never looked back. The buy-the-rumor, sell-the-news adage was 
tossed out of the window. The Bulls continue on with their monster-
buying spree, scooping up anything and everything in its path, and 
leaving the bears lying in the dust.

Volume continues on its surge, especially on the Nasdaq where 
Tuesday brought on another top 5 record breaker. Everything that 
we have mentioned the last several weeks would point for this 
rally to continue on for the rest of the week. However, here at 
Pinnacle, we believe the probability of profit taking is due very 
shortly. At the end of this week we have November options 
expiration.  Currently, there are too many stocks that have come 
to far, too fast. Speculators are now betting across-the-board 
that out-of-the-money, November strikes, will be in the money in 
the next couple of days. This may have been true last week, but 
those jumping on now seem to be a little late to the party. We are 
still extremely bullish, but are currently a little more cautious 
for a pullback in the market. 

We had mentioned in Sunday's letter that there was a 50% chance of 
the OEX hitting 745 during the next 10 sessions. Well, it closed 
near 743 today, which is pretty close to our mark. However, when 
reviewing the Pinnacle Index numbers for the OEX, it seems that we 
may be hitting resistance very soon. The PI for the OEX 740-750 is 
extremely bullish, indicating we may have a short-term sell-off 
after hitting this range. However, this number can change very 
quickly, especially if the put buyers come running into the 
market. But based on today's closing, the chance for profit taking 
has increased dramatically.

And finally, Applied Materials is due out with their numbers 
Wednesday. Currently, the street is looking for earnings of $.63, 
with a whisper number of $.67. The Pinnacle Index for AMAT is 
1.60, which would indicate low sentiment, and from a contrarian 
standpoint, may indicate a rally in the stock after numbers. Also, 
the amount of shares that are currently short on AMAT is roughly 
7.5 million, so you can imagine the potential strength of a rally 
if the shorts get squeezed or run for cover! The only negative is 
that the whisper number is 4 cents higher that what is published, 
which raises the expectation bar slightly. Only time will only 
tell if buy-the-rumor, buy-the-news applies to AMAT as it does to 
interest rates.
 

BULLISH Signs: 

Cash Flow:
The amount of money being poured into this market is phenomenal. 
The trading volumes on the exchanges is a good example of this, 
as well as last weeks 2 IPO's of UPS and CHTR which brought in 
over $10 billion in new money. 

Volume:
There is an old saying, that volume precedes price, and it 
couldn't be better exemplified that the last two weeks.

Short Interest:
Short interest for the Nasdaq is at an all-time high, and 
increased over 5% from the preceding month.

Bears have quick triggers:
After being beaten up for many years, bears are quick to 
run & hide, and will cover short positions in a flash.

Earnings: 
The results are in and the quarter ended up solid!

Investor Intelligence:  
As a contrarian indicator, we may have witnessed the bottom in 
pessimism, and should this prove right, this market has a lot more 
upside in the months ahead.

Interest Rates:
The yield on the 30-yr Treasury is now safely off the 52-wk high, 
and is getting close to being under the 6% benchmark, which is a 
key psychological number.

Advance/Decline Line:
The A/D line is looking significantly better than the past 6 
months.


Mixed Signs: None.


BEARISH Signs: 

Volatility Index (21.42):
The VIX continues to prove that the low 20's have been a good exit 
point. The low close for the VIX was on July 16, when it closed at 
18.13, so should its current level not hold, we could be in for 
more upside in the market.


OTM Call Analysis

As we move closer to the November expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 680-780 among 
option speculators. As we have been documenting, excessive out-of-
the-money (OTM) call may serve as overhead resistance.


November Expiration Cycle
OEX OTM Call Analysis (Open Interest November 680-780)
Date                 Open Interest     Change %    Alert

Friday, October 15        39,072          -
Friday, October 22        61,250       +56.8%
Friday, October 29        75,022       +92.0%
Friday, November 05       89,143      +128.1%
Friday, November 12       94,610      +142.1%

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.

 
OEX Pinnacle Index              Friday      Tues
Benchmark                       (11/12)    (11/16)

Overhead Resistance (740-750)    N/A         14.56

OEX Close                       731.12      742.89

Underlying Support (720-735)     N/A          2.25


What the Pinnacle Index is telling us:
We have now broken through the upside that we have referred to in 
the past, and we may see a slight continuation to 745, but 
resistance is building and profit taking seems more imminent.



Put/Call Ratio                  Friday     Tues
Strike/Contracts                (11/12)   (11/16)


CBOE Total P/C Ratio             .68        .69
CBOE Equity P/C Ratio            .51        .36
OEX P/C Ratio                   1.53       1.57


Peak Open Interest (OEX) Friday           Tues
Strike/Contracts         (11/12)          (11/16)

Puts                    700 / 12,420     700 / 14,304
Calls                   740 / 10,728     740 /  8,814
Put/Call Ratio            1.16             1.62


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 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 

October 15, 1999    Bottom?             32.06

November 16, 1999                       21.42 


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

Oct. 13, 1999           Bottom?           39.2        37.5

November 11, 1999                         44.4        35.9



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

Daily Results

Index       Last    Mon   Tue   Week
Dow      10932.33  -8.57171.58 163.01
Nasdaq    3293.05  -1.61 73.51  71.90
$OEX       742.89  -2.33 14.13  11.80
$SPX      1420.03  -1.65 25.64  23.99
$RUT       456.88   3.28  3.91   7.19
$TRAN     3099.67 -24.97 35.07  10.10
$VIX        21.42   1.17 -1.43  -0.26

Calls               Mon   Tue   Week

YHOO       212.56   8.06  7.56  15.63  New, back above $200 at last
VRTS       130.94   4.06 10.81  14.88  You gotta love stock splits
SFE        125.25   4.00  8.75  12.75  Our homework has paid off!
AOL        159.94   2.94  9.88  11.00  So far, all is golden...
CMVT       130.75   1.88  7.63   9.50  Can you feel the excitement
SUNW       126.63   0.19  7.13   7.31  You need sunglasses for this
SNE        180.94   2.56  1.88   4.44  Sony continues to rock on!
NT          76.69   2.44  1.69   4.13  A voracious appetite for NT
LVLT        77.88   0.63  3.31   3.94  Pattern remains consistent
JPM        142.50  -0.94  4.13   3.19  New, return of financials
NOK        125.38  -2.06  5.19   3.13  Nokia answers our call!
BVSN        89.19   0.88 -0.19   0.69  Analyst reiterates Strong Buy
CNCX        34.38   0.44  0.25   0.69  We remain positive on CNCX
AAPL        91.19  -1.19  1.75   0.56  AAPL still has what it takes
TMX         99.31   0.19 -0.88   0.31  Consolidating but splitting
LSCC        45.13  -1.22  1.34   0.13  Regains positive momentum
EMC         82.31  -1.81  2.06  -0.38  Recovers from a stubbed toe
LSI         64.00  -1.94  0.44  -1.50  Down week for the Semis
SLR         84.75  -2.19 -0.94  -3.13  SLR offers entry points
MXIM        84.13  -2.81 -0.44  -3.25  MXIM is at a crucial point
QLGC       118.44  -4.00 -4.00  -8.00  Dropped, iffy but gone
EMLX       171.50  -8.13 -0.38  -8.50  Dropped, time to harvest $$ 

Puts

NKE         44.31   1.19 -3.00  -1.81  New, seems to have tired feet
CSC         62.00  -0.06 -1.56  -1.63  Downgrade sends CSC downtown
EL          41.81  -0.75 -0.81  -1.56  New, not looking too pretty
RMDY        37.75   2.31 -0.88   1.44  RMDY still below 10-dma
TXT         73.56   2.69  1.94   4.63  Dropped, ARGH! turned on us
MSTR        93.25   3.13  7.50  10.63  Dropped, recovered




FREE TRIAL READERS
******************
If you like the results you have been receiving we 
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may 
subscribe at any time but your subscription will not 
start until your free trial is over.

To subscribe you may go to our website at 

www.OptionInvestor.com

and click on "subscribe" to use our secure credit 
card server or you may simply send an email to

 "subscribe@OptionInvestor.com" 

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the 
information over the phone.

You may also fax the information to: 303-797-1333


DISCLAIMER
**********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.
The Option Investor Newsletter         Tuesday  11-16-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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:
*****

QLGC $118.44 -4.00 (-8.00) We were looking for an opportunity to
buy calls when we selected QLGC to our play list.  All of the
reasons we added QLGC are still very viable reasons to consider
a play in QLGC, except for one.  QLGC fell out of bed the past 
two days.  It is still a very real possibility they could 
announce a stock split.  The semiconductor sector has began to 
consolidate a bit since reaching new highs last Friday.  QLGC
fell a little further than we expected as the $116 area appeared
as though it should provide good support.  QLGC dropped like a 
rock shortly before noon ET to a low of $111.50.  The volume on
the decline was nearly twice the norm at 1.33 mln., which does
not bode well for our play either.  It did manage to climb back
above the $116 mark to close at $118.44.  It is looking somewhat
"iffy" at this point.  QLGC could continue to rebound and provide
some very good buying opportunities, but for now with so many
other solid plays available we will drop QLGC from our list.

EMLX $171.50 -0.38 (-8.50) Shares this week continued to 
sell-off, reaching prices as low as $168.88, the stock is
beginning to rollover.  Profit-taking was inevitable in 
this stock, a stock that we have seen go up over 50 points.
With the shares giving back over 8 points on Monday, and
then down again today fractionally, we have chosen to close
this one out for now.  The market is still waiting for the
announcement of the stock split date, that will be announced
on Thursday to get some direction.  Traders decided to take
profits ahead of this announcement.  The stock firmed up at
our previously mentioned support levels $170-$171, but showed
no signs of going through resistance at the $185 level.  The 
risk reward is no longer in our favor near term.  We want 
to take our money off the table for now, but will keep the 
stock on the radar screen, and assess the stock again on 
Thursday.  We possibly could see a bounce after the split 
date announcement.


PUTS:
*****

TXT $73.56 +1.94 (+4.63) ARGH, TXT gave us a head fake last 
Friday and decided to break above $70 this week.  As you know, 
we were waiting for a roll over off resistance at $70 to 
confirm our trend.  It looked like a good entry on Friday as 
it started to sink again, breaking below $69 but it didn't 
last.  Instead, it jumped on Monday and went right past our 
resistance.  This is probably the company stepping in to buy 
back their shares to support the stock.  They said this was 
in the works when TXT management released a statement last 
Wednesday saying there is nothing materially wrong at the 
company but who knew they would keep their word.  That is 
usually a hollow threat by companies to try and stop the 
carnage being inflicted to their stock.  Needless to say, we 
now get the picture and will look elsewhere for put plays.

MSTR $93.25 +7.50 (+10.63) Ouch! MicroStrategy gapped up at 
the open, indicating an end to the recent profit-taking and a 
return of the positive momentum, which has propelled MSTR up 
from $14.69 within the last year.  Of course, there is still 
the psychological resistance level looming ahead at $100, but 
the recent decline may have weeded out enough of the profit-
takers responsible for pulling MSTR back when it traded above 
$100.  Merrill Lynch also helped to douse our play on 
MicroStrategy with an increase of the price target from $90 
to $105.  Scott and Stringfellow also initiated coverage 
today with a long-term Buy.



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

MXIM $84.00 -0.56 (-3.25) Our play in MXIM is at a crucial point
as the stock is beginning to taper off and consolidate.  We have 
the stockholders meeting still scheduled for Thursday and a vote
to increase the number of authorized shares from 240M to 480M.
Traders bid the price of MXIM stock higher first thing Monday
morning only to see it slip back to the $83 support level.
Technically, that was the third time MXIM has approached the 
$87.88 area and fallen back.  If we don't see MXIM continue the 
bounce from today's low of $83.13, and continue solid gains 
to take out the previous highs, we could begin to see our play 
deteriorate as the next levels of support on an intraday basis
are near the $79-$80 area.  As we mentioned at the beginning 
of our play in MXIM, major support on a daily basis is back 
at $76.  With the FED decision in and the stockholders meeting 
two days away, we will look for another opportunity to 
re-establish positions in our play.  Aggressive traders could
target shoot at these levels, but should keep your stops near 
today's low.  If MXIM continues to slide we would stand aside 
and wait for any announcement that may come out of the 
stockholders meeting in reference to a stock split.

EMC $82.31 +2.06 (-0.38) The computer hardware index continues
its pattern of higher-highs and higher-lows or in other words, 
it is trending higher very nicely.  EMC stubbed its toe a little 
yesterday, but regained its composure today.  We are looking for 
EMC to continue to trend higher as well.  We added EMC Sunday 
mainly for the momentum that the stock has exhibited recently.
We saw shares of EMC slide yesterday and into today until the 
end of the FOMC meeting when the FED announced their decision.  
EMC did not participate in the knee-jerk reaction of declining 
and recovery that we saw in the broader markets.  It did slip 
to a low of $80.06 and began to climb higher into the close, 
recouping most of Monday's decline.  In considering a new play 
in EMC, we will need to see the strength continue with solid 
volume supporting it.  Volume the past two days has been on the 
light side.  Another area we would look for is at $80.  If EMC 
is going to remain a viable call play we would like to see 
those levels show strong support on any declines from here.  As 
with any position, consider the potential rewards and risks 
prior to entering.

LSCC $45.06 +1.28 (+0.13) Lattice seems to have regained some 
positive momentum after stalling for a few days.  Monday's 
session provided some room for entry as LSCC took back just 
over a dollar.  Today, LSCC's higher-lows, good move up over 
$45 at the end of the day and a close near the high, are  
good indications heading into tomorrow's session.  LSCC 
also demonstrated good relative strength against its sector 
companions.  $48, the 52-week high, still serves as light 
resistance and LSCC looks to be trending steadily toward that 
level.  LSCC has held well at $44, which could continue to 
serve as support.  Being that $48 is not providing formidable
resistance, we see this current level as a good possible 
entry point.   

CMVT $130.75 +7.63 (+9.50) Can't you just feel the excitement 
as well as the volume returning to CMVT?  The volume has been 
returning to average or better which is what we would expect 
as CMVT nears its earnings date on Nov 30th.  Today was a great 
day to play CMVT.  It had a steady trend going for most of 
the day, including right through the Fed announcement.  We 
got the breakout of $130 that we were looking for too.  That 
was the old 52-week high set last week but we've seen the 
higher-lows setting in and CMVT tracking upward with pullbacks 
to the 10-dma (currently at $120.50) so we felt a break above 
$130 was coming.  From here your guess is as good as ours.  
We aren't in the business of picking tops but rather finding 
good entry points and letting the momentum run.  Tomorrow will 
be interesting to see if CMVT wants to bounce at $130 and go 
for another upside move.  If not, we see support at $128 and 
again at $124.  That might take a bit of market weakness to 
reach down to those prices though.  Let's watch the $130 level 
and see what kind of bounce we get.  It could be enough to 
justify a new play.  

SNE $180.94 +1.88 (+4.44) Sony rocks on!  Sony tagged another 
new 52-week high of $181.50 while posting some very impressive 
volume.  $180 held Sony throughout the day and as we mentioned 
in Sunday's write up, will now be serving as psychological 
support.  The only downside to this stellar play is finding 
an entry point!  It is best to wait for any gaps down on 
weakness overseas as your chance to jump on board.  However, 
should your risk tolerance allow you to do so, you may just 
want to catch this train now and hang on for the ride since 
there are so many bullish indicators in regards to SNE's 
continuing momentum.  Sony announced on Tuesday, that they 
have entered into an agreement with Microsoft to allow 
interoperability between their products.  Sony Portable 
Players will be able to support Windows Media.  As Sony 
continues to trade up to new highs on a seemingly daily 
basis, it is imperative that you continue to use your stops 
to protect your profits.

AOL $159.94 +9.88 (+11.00) So far this week, all is golden.  
Good news is swirling and whispers of an e-commerce alliance 
with Wal-Mart have been heard.  The stock is again climbing 
ahead of the 2:1 stock split next week tacking on $11.00, or 
7.4% in just two days.  Yesterday America Online opened its 
online shopping service, Shop AOL, for the holidays and 
introduced several new features such as a special tool bar, 
holiday gift guide, and an "electronic wallet" deemed the AOL 
Quick Checkout.  Today the company launched America Online 
Brazil as the newest member of its global community in 
cooperation with Cisneros Group of Companies, one of Latin 
America's top communication organizations.  Rumors of a 
partnership with Wal-Mart were first sparked by analyst Gary 
Balter of DLJ.  In a memo he stated "we believe that Wal-Mart 
is having discussions with AOL regarding an agreement along 
the lines of the MSFT (alliance with) Tandy".  All this news 
and the bullish market today were major factors in the $9.88 
advance today.  Plus ING Barings started coverage with a Buy 
rating and issued a 12-month price target of $180-185, which 
surpasses the stock's 52-week record of $175.50 set last April.  
Remember, plan to be out of AOL by Friday's close to avoid 
any post-split depression.  AOL splits 2:1 on Monday. 

AAPL $91.19 +1.75 (+0.56) AAPL barely stayed afloat of its 
10-dma ($89.44) yesterday slipping $1.19 in front of the FOMC 
meeting.  The stock fared much better today with a $1.75 bounce, 
however, the volume remained low at 2.08 mln shares versus its 
ADV of 6.03 mln.  Pumped up trading activity would certainly 
give us better evidence of a charge toward the so far intangible 
$100 mark.  Support is firmly established at $88 and again, we 
would be more comfortable if AAPL surged upward to demonstrate 
that this news-driven momentum play still has what it takes to 
propel its share price to new heights.  Analyst Jonathon Ross 
from ABN AMRO said today he believes that "no PC maker is 
better positioned with consumers to take advantage of large 
opportunities in the emerging device and home networking 
markets" and started new coverage for AAPL with an Outperform 
rating and a $115 price target.  

SLR $84.75 -0.94 (-3.13) Under normal trading activity, SLR has 
been a victim of profit-taking since Friday.  Recall the stock 
had been steadily setting new 52-weeks highs since it announced 
it was acquiring two manufacturing units from Ericsson AB to 
boost its capacity on November 2nd.  Therefore this consolidation 
is not unusual.  Last week was filled with positive comments 
and Buy reiterations so the bullish sentiment is intact.  This 
pullback offers entry points for traders whom choose not to 
wait for a confirming bounce off this mark.  Near-term support 
is established at $85 just above the 10-dma (now at $83.41) 
with overhead opposition at $90, which is the latest record 
high hit last Thursday.   

TMX $99.31 -0.88 (+0.31) Despite the Fed watch yesterday, TMX 
powered upward.  The ADR price peaked at $100.88 flirting with 
its overhead resistance at $102.50, the 52-week high hit during 
last Thursday's opening minutes.  Now take a look at a two-month 
chart and you can see the strong climb originating at the end of 
October.  Take notice of the spike on November 11th which 
followed the Board of Director's announcement of a proposed 2:1 
stock split.  This proposal is our main catalyst for this call 
play and not withholding the renewed interest in Latin American 
issues - Telmex stock is a bellwether in the Latin telecoms 
sector.  Volume remains moderate as TMX succumbs to profit- 
taking and consolidates safely above support at its 10-dma 
($97.41).  Remember a dip below this technical indicator should 
put you on alert.

LVLT $77.88 +3.31 (+3.94) Our trading pattern remained consistent 
on Monday with our last update when we described the trading 
volatility.  Hopefully you got in and out for a quick trade 
yesterday or you were brave and held over the interest rate 
announcement.  Both decisions would have fared well.  Yesterday 
and today had the shares trading in a range that was perfect 
for a quick trade.  Monday's low was $73.63 and Monday's high 
was $77.  Tuesday's low is $74.50 and Tuesday's high is at $78.  
We had mapped out a possible strategy to use if you wanted to 
trade LVLT and it has worked once again.  Also we looked for 
higher prices above the $74.44 level and we got those price 
surges, hitting a high today of $78 before settling in to close 
at $77.88.  Going forward look for more of the same and use 
trailing stops to protect gains, this stock has big pullbacks.  
Current resistance is at $80 and it should be an easy target 
from here barring a collapse in the markets.  Look for trading 
support to firm up for a bounce at the $74.25 level if we get 
a pullback. 

SUNW $126.63 +7.13 (+7.31) On Fed day, the day we find out 
the decision on interest rates, the Nasdaq did not disappoint 
us, hitting another record high.  With the Techs shrugging off 
any jitters and SUNW, significantly outperforming, tacking on 
over $7 today on strong volume.  The news has been the catalyst 
for this stock and the split run that we were looking for is 
well on its way.  The stock has been showing overbought signs 
for a few trading days, but traders are not willing to give up 
the momentum and we continue to hit new highs, today hitting 
$127.75 as traders and investors seem to be willing to pay any 
price for the shares.  In the news today, SUNW announced a 
continued commitment and market growth in the High Performance 
Computing market.  SUNW is driving the adoption of HPC.  Also
a number of new products were introduced today at the Cartes
99 conference, as Sun's Java Card technology extends its 
industry leadership.  Looking forward we have to keep stops
tight in this position, but flexible enough to jump back in
when the stock bounces back.  Short-term support in case of
profit-taking would be at the $119.50 level.  Protect your
gains!!!  If prices continue to surge, look to ride the 
momentum above today's high $127.75 on strong overall market
movement.

CNCX $34.38 +0.25 (+0.69) We still remain positive on the
shares of CNCX, trading this week as high as $35.25, reaching
this level both Monday and Tuesday.  The minor breakout remains
in place and we still look for a better breakout going forward
although we might consolidate for a day or so.  We need to see
the volume catch up with the technical relative strength.  It 
was reported today that CNCX was one of the nations fastest
growing technology companies.  Looking for higher revenues 
going forward.  This is bullish for the stock.  Also SBC 
Communications agreed today to sell CNCX high speed Internet
services around the country.  Continue to use any pullbacks 
above the $32 level as a buying opportunity, only if the 
stock bounces off of that level.  The stock seems to be 
cruising, with some of the other small cap Internet stocks.  
Be cautious but bullish at these levels, we could possibly 
see a pullback, unless the good news continues to be feed the 
market about the company.  Keep trailing stops tight to protect 
any of the short term gains.  Strong volume will be the key 
going forward.  

LSI $64.00 +0.44 (-1.50) The shares of LSI have consolidated
nicely over the last two days in a semiconductor sector that
has consolidated as a group, the semiconductor index closed
the day at 643.62 which is down for the week 12.48 points.
This sector is always volatile, but the story going forward
is positive as we look for worldwide sales to continue to 
increase, and for prices for "Semiconductor Chips" to 
continue to be priced up.  LSI today announced that it is 
the first company to achieve Gold ASIC support partnership
status for its Direct Rambus ASIC cell.  This recognition
assures customers that LSI Logic is a proven choice for 
ASIC solutions.  Going forward look for shares to firm
up at these levels, with short-term support at the $61.75 
level, this is a possible trading buy on a bounce.  Wait
for a new high to the upside above $65.50 before entering
a new position, this will confirm the buying interest at
higher prices.   

BVSN $89.19 -0.19 (+0.69) Hmmm...running out of steam?  BVSN 
has seemed to hit the wall at $92 both yesterday and today, while 
volume was falling back from lofty levels closer to its ADV of 
1.5 mln shares.  Technically, this is cause for concern and may 
signify that it's about time for a breather.  That it did not 
participate in today's rally or show any substantial volume with 
the rest of the NASDAQ is not inspiring either.  Nonetheless, 
SoundView reiterated its Strong Buy rating following yesterday's 
announcement of a partnership with Siebel, and today's 
announcement of an alliance with Novell.  While it found support 
at $86 today, the next level down is at $80.  $86 should hold 
with any flat lining or consolidation throughout the market.  
However, a strong profit-taking day or 2 (or worse, scary CPI 
figures tomorrow) will take the loft out of the sails.  Wait 
for the breakout over $92 with volume.  Or target shoot between 
$80-$86 commensurate with your risk tolerance

NT $76.69 +1.69 (+4.13) Interest rate hike?  What interest rate 
hike?  After gapping open, NT remained flat in trading all day 
long.  Interest rate news had zero effect - just the volume 
increased, indicating funds still have a voracious appetite for 
this stuff.  While we don't think you should make an entry at 
any price, as long as volume remains strong, the little price 
dips intraday are buyable.  However, waiting until mid-day will 
usually yield the best entry.  Just confirm the market direction 
first should it wake up with a hangover from a 14-day binge 
following the Al's "raise the rate" inspired party.  Support is 
at $76 today and $73 yesterday.  Last Friday was $70.  If you 
are going to target shoot, take your pick, but don't count on 
a fill at $70 unless there is some big damage to the overall 
market (in which case you may want to sit out anyway).

SFE $125.25 +8.75 (+12.75) Finally, the homework pays off.  We 
noted that higher-lows converging with resistance of $120 was 
setting SFE up for the breakout.  Sure enough, we found little 
bits of support at $114 and $117 on the rebound, only to see SFE 
bump its head on $120 minutes before the FED's announcement.  
After the rate hike notice hit, SFE cranked up the volume and 
powered right through $120 to set a new all-time high.  Closing 
on a high note, the move should continue as long as volume 
remains intact and the market wants to party.  While we've noted 
them as a possible splitter, the last one to actually occur was 
back in 1996 (2:1) in the $60 range.  SFE has been above $60 for 
most of the year and still no announcement.  If you are holding 
your breath, you'll want to keep breathing for now.  They have 
100 mln authorized shares with only 37 mln outstanding, so they 
have the ability to split 2:1 again, but seem to lack the will.  
Next earnings date, which would also be a likely split 
announcement date, is not until February.  If the theory that 
old resistance becomes new support holds water, $120 is the new 
support level.  Blue sky smiling at SFE - nothing but blue sky 
does it see.  Nonetheless, use a trailing stop to protect your 
profits - today was a big move subject to some back-filling.

VRTS $130.94 +10.31 (+14.88) Wow!  Gotta love those stock splits, 
even the 3:2 variety.  VRTS splits after the close on Friday, 
which means split price trading begins on Monday morning.  There 
are still three days left to make the play, though Thursday will 
be the last opportunity for a write-up (yes, a drop - veterans 
know we never recommend holding through earnings before an 
event).  VRTS has performed well and set another all-time high 
today on 25% extra volume, which kicked in immediately after the 
FED announcement.  Support until blast-off was in the $123 range.  
Support yesterday was $119; $112 last Friday.  That's a huge 
range and subject to profit taking, especially if the overall 
market leads that march following 14 days of NASDAQ partying.  
The 10-dma provides good support, but that's a moving target 
when talking about gains like this.  If you play, buy the dips 
and use trailing stops for any gains.  It may get ugly if the 
market claims "hangover".

NOK $125.38 +5.19 (+3.13) "Confirmation of the breakout would 
be bounce off $119".  Remember that from Sunday?  Almost like 
clockwork, NOK tested $119 yesterday and again near the open this 
morning, where NOK rose to $122 by lunch.  After the interest 
rate hike announcement, volume filled the sails and this ship 
left the harbor for new highs (all the way to $127).  If volume 
remains and the market cooperates, NOK should continue to rise.  
The chart looks great with the 10-dma providing support.  While 
not a splitter yet, NOK would be in split announcement territory 
around $130-$140 (we'll keep an eye on that, but they'll 
definitely need to authorize more shares).  Anyway, support is 
at $119.  Keep a trailing stop set so the grim profit reaper 
doesn't take it all back.  Dips look buyable - just remember 
to confirm market direction.  Other than an equipment supply 
agreement in Mexico, there is no fresh news.


*****************************
SEE DISCLAIMER IN SECTION ONE




The Option Investor Newsletter        Tuesday  11-16-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

RMDY $37.75 -0.88 (+1.44) One of our favorite short-term 
indicators is the 10-dma and RMDY managed to successfully 
close below it both days this week despite the small bounce.  
We will continue to watch the 10-dma on RMDY which is now at 
$38.75.  Any close over this price should signal your stops 
to take you out of the play.  Otherwise, we will continue to 
use the bounces as entry points.  In reality, with the news 
that RMDY had this week, you would have expected more strength.  
On Monday, they announced new product solutions for e-Business 
technology.  On Tuesday, RMDY was named to two lists as one 
of the top 500 fastest growing businesses.  But despite all 
the good press, the trend continues lower.  The is resistance 
is from the 10-dma and support at $36.  This $36 level is the 
one we are hoping to crack to really turn this play profitable.  
Keep your stops set in case RMDY trades above $40.

CSC $62.00 -1.56 (-1.63) A downgrade has sent Computer Sciences 
downtown.  Soundview Tech downgraded CSC from a Strong Buy to a 
Buy.  The expected earnings targets were reduced as well.  On 
Monday, CSC closed just pennies shy of Friday's close indicating 
some uncertainty amongst investors.  The downgrade seemed to be
the deciding factor as CSC, which was making a nice move up 
this morning, made a turn and began heading south mid-day.  CSC 
is rapidly approaching it's next support level of $60 and 
therefore it may be wise to wait and see if that level is going 
to hold before entering a new play.  As we mentioned in Sunday's 
write up, the next support will be around $58.  On Monday, CSC 
announced the addition of three new customers, to its list of 
business to business e-commerce clients.  They also announced 
that they had been awarded a $61 million contract by FEMA for 
their continuing to support the governments National Flood 
Insurance Program (NFIP).  


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

YHOO - Yahoo! Inc $212.56 +7.56 (+15.63 for the week)   

Yahoo! Inc is a global Internet media company that offers an 
online guide to web navigation, plus a branded network of 
comprehensive information, communication services, and 
shopping access to millions of users daily.  Over 32 mln 
users visit the Web site each month.  Yahoo! operates in the 
black with the bulk of its revenues derived from advertisements 
commissioned by its list of about 3800 clients.

Yes, the Feds raised interest rates by 25 basis points with a 
neutral bias, but the scare is over and the bulls are charging 
ahead in what some are calling an overbought market.  YHOO 
didn't even wait for Greenspan to spew his sentiment.  Instead 
it jumped $8.06 yesterday in a straight up climb starting the 
week off with an e-holiday bang! It seems once the stock broke 
near-term resistance at $203 (intraday high last Thursday) the 
investor enthusiasm caught wind and took off.  The gains 
extended into today backed by an even stronger Internet sector.  
YHOO added another $7.56 to the share price by the close with 
volume at about 75% of its norm.  Be aware too that to this 
price level YHOO is definitely a split candidate!  Yahoo 
usually announces a stock split when the share price is in the 
$200 to $220 range and here we are!  Earnings are still down the 
road only expected mid-January; therefore this play is based 
on recent momentum driven by the prospects of an exciting 
e-holiday season and the potential of a stock split announcement.  
Support is at $195 in the proximity of the 10-dma ($194.34).  
This level is a solid point of entry, although unless we are 
afforded a volatile slide to this bottom its more realistic to 
target shoot intraday in the $205 range which likely could 
evolve as near-term support.  

In the news today, Yahoo! Internet Life magazine is holding its 
first annual Online Film Festival this Spring.  Their goal is 
magnify the importance of film via the Internet.  Yahoo! has 
deals with online and offline communities including Amazon.com 
and Roger Ebert to help promote this event. 

BUY CALL DEC-200 YHV-LT OI=2645 at $21.50 SL=16.75
BUY CALL DEC-210*YMM-LB OI=2268 at $15.50 SL=12.00
BUY CALL DEC-220 YMM-LD OI=1446 at $11.13 SL= 8.75
BUY CALL JAN-210 YMM-AB OI=4139 at $23.75 SL=18.50
BUY CALL JAN-220 YMM-AD OI=6858 at $19.13 SL=15.00

Picked on Aug 15th at   $212.56    P/E = 990
Change since picked       +0.00    52 week high=$244.00
Analysts Ratings     13-7-4-0-0    52 week low =$  9.69
Last earnings 09/99   est= 0.09    actual= 0.14 surprise=+55.6%
Next earnings 01-12   est= 0.15    versus= 0.07
Average Daily Volume = 7.98 mln
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m

****

JPM - J.P. Morgan $142.50 +4.13 (+3.19 this week)

The competition in their industry can be fierce.  J.P. Morgan
goes head to head with some other well known names in the 
banking and investment business including Deutsche Bank
Goldman Sachs and Merrill Lynch.  JPM is one of the top 
international banks in the world.  They offer a wide variety 
of banking and investment services.  JPM in the process of 
reinventing itself by making the transition to investment 
banking from the traditional commercial bank.  More than half 
of their sales come from outside the United States.  In the 
consumer market JPM hold a 45% stake in American Century 
Investments, which offers a variety of mutual funds.

When you look at the broker ratings, it may not seem too 
impressive but when you look at the stock, you can see why we 
added JPM to our list of calls.  The Banking Sector has had a 
tough go of it since early summer with the FED and interest
rate worries hanging over the market.  Don't look now but JPM 
is less than $6 from its 52-week high.  After reporting better 
than expected Q3 earnings in the middle of October JPM and  
many of the major stocks in the Banking sector began to repair
the damage done to the price of their stocks.  On Oct 15th 
shares of JPM were trading near the $105 level.  JPM has put 
in a great run closing today at $142.50.  With the FED meeting
out of the way, and the return to a neutral bias, investors and 
traders added many of the financial and banking stocks to their 
portfolio by days end.  The thinking is we may not have the FED
in the headlines for the near-term and traders may be able to
begin to focus on earnings.  With the increase in interest rates
out of the way, the banking sector picked up almost 2% today 
and appears to be heading higher.  Today's breakout over $140 
on strong volume cinched this play for us.  In the event of a 
pullback, support for JPM lies in the $140 area and then again 
at $136 from the 10-dma.  In considering a new play, look for 
continued momentum in the price of JPM stock and the banking 
sector.  We have the CPI numbers out in the morning so it
may a good idea to let the market digest that report before 
entering a new play.  As always consider your risk profile 
prior placing a new position on the books.

In other news, JPM said Tuesday afternoon is raising its prime
lending rate to 8.50 percent from 8.25 effective Wednesday
morning.  JPM also announced that ebookers.com, a U.K. based 
online discount travel agent, commenced a sponsored American 
depositary receipt (ADR) program on the Nasdaq ticker(EBKR)in 
conjunction with it's $70 million IPO.

BUY CALL DEC-135 JPM-LG OI=1679 at $10.25 SL=7.50
BUY CALL DEC-140*JPM-LH OI= 838 at $ 7.25 SL=5.50
BUY CALL DEC-145 JPM-LI OI=3211 at $ 5.00 SL=3.25
BUY CALL DEC-150 JPM-LJ OI= 703 at $ 3.06 SL=1.50

Picked on Nov 16th at   $142.50    P/E = 17
Change since picked       +0.00    52 week high=$147.81
Analysts Ratings     1-3-10-0-1    52 week low =$ 96.56
Last earnings 10/99   est= 2.22    actual= 2.16 surprise=+2.8%
Next earnings 01-18   est= 1.93    versus=-0.42
Average daily volume = 1.21 mln
Chart = http://quote.yahoo.com/q?s=JPM&d=3m


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

NKE - Nike Inc $44.31 -3.00 (-1.81 this week)

Nike is the world's leading designer and marketer of authentic 
athletic footwear, apparel, equipment and accessories for a 
wide variety of sports and fitness activities.  They are the 
number one shoe company in the world and control more than 
45% of the US athletic shoe market.  Nike is headquartered in 
Beaverton, OR and sells to over 110 countries and online.  If 
you have a teenager, then you probably already know about 
Nike and their trendy styles of shoes including the famous 
Air Jordan model.  

A booming economy and robust sales of goods in the U.S.?  Don't 
tell that to Nike.  They have been struggling for the past 
couple years as kids turn from tennis shoes to more stylish 
Timberlands and Doc Martens.  Not to mention, Michael Jordan 
retired from pro basketball.  He single-handedly put Nike on 
the map.  But these events are older news and not the basis 
for our put play.  The reason we are looking to buy puts is 
due to sector weakness, slowing retail sales and more analyst 
downgrades.  One of the downgrades came yesterday as FS Van 
Kasper downgraded NKE from a Strong Buy to a Buy.  Why they 
were ever a Strong Buy is beyond us.  This goes along with 
Goldman Sachs who downgraded NKE earlier this month from the 
Recommended list to a Market Outperform.  They were quoted as 
saying that evidence has been mounting in recent weeks that 
the long hoped for turnaround in the athletic products category 
is less robust than we expected.  It is not good when analysts 
tell you to search for short-term investments elsewhere.  The 
technical picture isn't any better either.  The Goldman Sachs 
downgrade triggered an already weak looking stock to fall out 
of bed from $54.  On Monday, NKE tried to rally only to roll 
over off resistance at the 10-dma at $47.50.  Now that we are 
under support at $45, we expect smooth sailing to $40.  This 
is where the next support lies.  Use the bounces off the 10-dma 
as a potential entry point.  Volume should start picking up 
as we approach earnings on Dec 12th.  Another factor to keep 
in mind.   

BUY PUT DEC-50*NKE-XJ OI=599 at $6.13 SL=4.25
BUY PUT DEC-45 NKE-XI OI=278 at $2.25 SL=1.00

Average Daily Volume = 1.08 mln
Chart = http://quote.yahoo.com/q?s=NKE&d=3m

****

EL - Estee Lauder $41.81 -0.81 (-1.56 this week)

The Estée Lauder Companies Inc. is one of the world's leading
manufacturers and marketers of quality skin care, makeup, 
fragrance and hair care products.  The Company's products 
are sold in over 100 countries and territories under well-
recognized brand names, including Estée Lauder, Aramis, 
Clinique, Prescriptives, Origins, Bobbi Brown essentials, 
Tommy Hilfiger, jane, Donna Karan and Aveda.  Estée Lauder 
was founded in 1946 in New York City. 

Things just aren't looking so pretty as of late for Estee 
Lauder as today EL sunk to a new six-week low of $41.25.  EL 
has been trending steadily downward since mid-October and 
aside from a brief rally last Thursday, has been hitting lower 
lows on a seemingly daily basis.  EL is fast approaching it's 
52-week low of $35.50, a level EL has not seen since last 
December.  EL broke through it's 10-dma at the beginning of 
November and has only re-visited it once since.  Currently EL 
is trading over $2 below it's 10-dma.  EL has some support 
at $39 and should it breakthrough this level, EL should be 
cleared for a fall to the year low, $35.50.  EL was held back 
at $42 for the majority of trading Tuesday and should this 
resistance continue to hold, a new entry is feasible at this 
level.  Of course, confirm direction before entering.  EL has 
also seen some recent insider selling, another possibly bearish 
indication to pressure the stock lower.  Don't expect any 
monster moves from this play but planned entries and exits 
have the makings of a profitable play due to the low premium 
involved.

BUY PUT DEC-45*EL-XI OI=352 at $3.25 SL=1.50
BUY PUT DEC-40 EL-XH OI= 25 at $1.06 SL=0.00 High Risk!

Average Daily Volume = 518 K
Chart = http://quote.yahoo.com/q?s=EL&d=3m



**********************
PLAY OF THE DAY - CALL
**********************

LVLT - Level 3 Communications $77.88 +3.31 (+3.94 this week)

Level 3 Communications, Inc. is a communications and 
Information services company that is building the first 
upgradeable international network optimized for Internet
protocol technology.  The Level 3 network combines local, 
long distance, and undersea networks, connecting customers 
end-to-end across the U.S. and in Europe and Asia.  The 
company expects to complete its planned network construction 
in phases beginning in the first quarter of 2001. 

Sunday's Write Up

LVLT's story this week remained consistent with previous 
patterns from the last two weeks that we have been providing
coverage of the stock.  Lets review, the charts have told
us that volatility is the name of the game, with a tug of 
war between buyers and sellers, and then buyers and sellers.
I repeated buyers and sellers on purpose that wasn't a typo.
Each time the prices surge, the stock pulls back to fill the
gap, and then starts its way up again to new highs.  On 11/9
the shares surged and then pulled back on 11/10, retraced
slightly on 11/11, and then 11/12 came all the way back to 
close at a weekly high at the high end of the trading range.
This is a classic stock to trade, a stock we can get in and 
out of with small tradable gains.  Remember past performance 
is no guarantee of future results, but you get the picture.  
Wait for the stock to pullback to support or ride the upward 
momentum when you see developing price surges.  Looking ahead, 
movement above $74.44 should push the stock a lot higher.  
Possibly to the June highs.  Another possible entry point 
could be on a pullback near the $70 level.

In the news, LVLT announced that it launched communications 
Services in the Miami metropolitan area.  They are building
the first international network fully optimized for Internet
Protocol technology.

Tuesday's Write Up

Our trading pattern remained consistent on Monday with our last 
update when we described the trading volatility.  Hopefully you 
got in and out for a quick trade yesterday or you were brave 
and held over the interest rate announcement.  Both decisions 
would have fared well.  Yesterday and today had the shares 
trading in a range that was perfect for a quick trade.  Monday's 
low was $73.63 and Monday's high was $77.  Tuesday's low is 
$74.50 and Tuesday's high is at $78.  We had mapped out a 
possible strategy to use if you wanted to trade LVLT and it has 
worked once again.  Also we looked for higher prices above the 
$74.44 level and we got those price surges, hitting a high 
today of $78 before settling in to close at $77.88.  Going 
forward look for more of the same and use trailing stops to 
protect gains, this stock has big pullbacks.  Current 
resistance is at $80 and it should be an easy target from here 
barring a collapse in the markets.  Look for trading support 
to firm up for a bounce at the $74.25 level if we get a 
pullback. 

BUY CALL DEC-70*QHN-LN OI=1291 at $10.06 SL=7.50
BUY CALL DEC-75 QHN-LO OI=1451 at $ 7.00 SL=5.25
BUY CALL JAN-70 QHN-AN OI= 593 at $12.13 SL=9.50
BUY CALL JAN-75 QHN-AO OI=  93 at $ 9.31 SL=7.00 low OI

Picked on Oct 28th  at   $68.63     P/E = N/A
Change since picked       +9.25     52-week high=$100.13
Analyst Ratings       5-3-1-0-0     52-week low =$ 32.75
Last earnings 10/22  est= -0.51     actual= -0.43
Next earnings 02-18  est= -0.65     versus= -0.11
Average daily volume = 1.80 mln 
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m  



************************
COMBOS/SPREADS/STRADDLES
************************

Stocks Rally Even As Interest Rates Rise..

Monday, November 15,

U.S. markets traded in a small range Monday as investors awaited
the Federal Reserve's decision on whether to raise interest rates.
The Dow closed down 8 points at 10,760 while the Nasdaq Composite
finished relatively unchanged at 3,219. The S&P 500 also finished
near its opening numbers at 1,394. Advancing issues led declines
16 to 14 on active volume of more than 793 million shares on the
NYSE. The 30-year Treasury bond rose 5/32, lowering the yield to
6.03%.

Sunday's new plays (positions/opening prices/strategy):
 
Ameritrade     AMTD  JAN21C/DEC25C   $2.88   debit   diagonal 
Mellon Bank    MEL   DEC37C/DEC40C   $1.38   debit   bull-call
TD Waterhouse  TWE   DEC12C/DEC15C   $2.12   debit   bull-call
C.R. Bard      BCR   DEC60C/NOV60C   $1.88   debit   calendar

Monday was exciting right from the start as shares of Internet
stockbrokers T.D. Waterhouse Group and Ameritrade shares rose
after Charles Schwab (SCH) said they will combine the companies
to form an online investment bank to handle new share offerings.
In addition to the three online brokers, who together have access
to more than half of all U.S. online customers and assets, three
venture capital firms are becoming partners in the bank. Our new
plays on these issues were radically changed by the news and the
opening prices were far less favorable than originally quoted.

Mellon Bank (MEL) did not participate in the brokerage rally and
the stock price fell back significantly from Friday's gains. The
target price for the (bullish) debit-spread spread was available
and this position traded as low as $1.25. C.R. Bard offered the
best opportunity of the day, opening $0.75 lower with the price
for the neutral calendar spread at $1.88. The discounted entry
lasted less than 15 minutes as market-makers adjusted the quotes
to remove the disparity. This position will need to be monitored
closely as it has the potential to move $3-$5 in either direction
on very short notice.

Portfolio plays:

Traders moved to the sidelines with their recent profits but most
remained bullish one day before the Fed's policy-setting meeting
on interest rates. Analysts said they were expecting one of two
outcomes; rates unchanged with a tightening bias or an increase
of 25 basis points and a shift to a neutral monetary bias. Most
investors are betting the FOMC will not raise rates, but instead
will merely keep its tightening bias to show it's ready to raise
in the future. Many economists support this outcome based on the
fact that our current economy is being led by technology-driven
advances in productivity, which allows for growth without a rise
in inflation.

Monday's market offered lots of news and activity in our spreads
portfolio. Most of the big moves came on earnings and new merger 
announcements. Financial and business information service company
Data Broadcasting (DBCC) announced a merger with Financial Times
group, part of global media company Pearson PLC. This gives the
Financial Times group a 32% stake in MarketWatch.com. They plan
to transfer ownership of FTAM to DBCC in exchange for a 60% stake
in the combined business. The value of the shares to be exchanged
is more than $800 million. The speculation on DBCC's future ended
with the news announcement and we decided to close the play with
a small profit ($0.38) from the bullish position. As we commented
on Friday, Multex.com (MLTX) was our new issue to watch and stock
jumped almost $3 in morning trading after a Piper Jaffray analyst
told clients that several key operating metrics suggest now is the
time to buy stock in the financial information provider. He also
said the pipeline for new service contracts is very strong and it
is likely that positive announcements will occur in coming weeks.
The new rating (and $31 price target) drove the issue right from
the open and the best opportunity to move to a bullish spread was
in the first few minutes of trading or at the end of the session.
The new position is MAY17C/DEC20C at a debit of $3.00, and we will
plan to close the position early (while there is still time value
in the short position) in order to prevent early exercise and an
upside loss.

There were rallies in many of the lower priced stocks, providing
favorable exit opportunities. IDT Corporation (IDTC) moved up $3
at midday, allowing our bullish debit spread (DEC17C/DEC22C) to
be closed for a $1.12 profit. This previously slumping issue has
shown some signs of strength over the past few days and thus our
may be premature. Zoltek (ZOLT) continued to rally on the bullish
breakout from last week and we opted to adjust our neutral spread
into a diagonal position with a move into December (call) options.
The ZOLT market is thinly traded and the roll-up was costly, with
an additional $2.00 debit to our current position. The new spread
position offers no protection from upside losses and there is no
guarantee the stock will hold in the current range after earnings
are announced. Echelon (ELON), one of our newest positions, moved 
another $0.75 to finish at $11.00. This is the upper limit of the
profit area and appropriate (bullish) adjustments will have to be
made if the stock continues higher before the Friday expiration.
Another small-cap issue, Coyote Network Systems (CYOE) reported
its financial results for the second quarter of fiscal year 2000.
The revenue was less than outstanding at $17,923,000 compared to
$22,357,000 for the same period last year. The loss for the past
six months was $0.25 per share compared with a loss of $0.17 per
share last year. Based on the lackluster announcement and the way
the company described future plans, we decided to close the play
for existing profits. The position traded as high as $1.88 credit
during the morning session.

Even in the midst of the small-cap rally, some of our issues are
failing to perform as expected. It is very important to learn to
manage losses correctly and in this arena, we are woefully inept.
Our calendar position in Proxymed (PILL) could have been closed
for a favorable profit earlier this month but the bearish issue
has fallen $2 in the last ten days. The decision to exit now with
a small loss or hold (roll-forward) for the possibility of future
gains is a difficult one. Those of you that didn't close the play
when a profit was available should consider a move to the DEC-$15
options at a credit of $0.25-$0.31, reducing the overall cost of
the long position (APR15C) to approximately $1.31; well below the
value of the option. Pacific Gateway (PGEX) continues to decline
and our bullish January position is falling further into the red.
The decision to close for a loss or hold for recovery is upon us.
The opportunity to roll-forward, selling the DEC-$20 option, will
leave the position (JAN15C/DEC20C) with a debit of $5.50. Again,
this maneuver offers no upside protection but the current loss is
reduced and you may be able to eventually exit for a profit, if
the stock price rebounds gradually into December. The choice is
a hard to make but in most cases, waiting for a play to recover
is more costly than moving existing capital to a new position.

The last of our fading stars is Apollo Group (APOL). Once again,
the play could have been closed for a small profit in weeks past
but for those of you holding the bullish spread, a "break-even"
exit may be your last opportunity to close the play favorably.
Today's move to the bottom of a recent range offers little hope
that the issue will recover significantly in the next few days.

Tuesday, November 16

Markets surged with the Federal Reserve's decision to increase
interest rates 25 basis points, giving equities room to rally
into the new year. The Dow rocketed 171 points to at 10,932.
The Nasdaq composite index jumped 73 points to close at a new
record of 3,293 and the S&P 500 index also ended at a new high
of 1,420. In the broader market, advancers outpaced declines 17
to 12 with 940 million shares traded on the NYSE.

Portfolio plays:

U.S. stocks rallied again Tuesday as investors looked beyond the
Federal Reserve's interest-rate decision, while technology and
brokerage sectors propelled the market to recent highs. Many of
our portfolio issues participated in the rally and the small to
mid-cap issues continued to dominate the top leader board. Our
newest position, Ameritrade, (AMTD) gained $4.31 to $30.50 with
the finance sector rally and Netbank (NTBK) wasn't far behind,
rising $4.50 to $30.88. Brokerage takeover candidate Multex.com
(MCOM) gained another $2.62 to close at a recent high near $24.
Other stocks like Aware (AWRE), Global Crossing (GBLX), Nvidia
(NVDA), Network Associates (NETA) and Peoplesoft (PSFT) all had
significant rallies and each of these technology positions have
produced favorable profits.

In the large-cap issues, Sun Microsystems (SUNW) continues to
dominate the hardware sector, up $7 to a new high near $126. The
pre-split rally is in full force and the question is "Where can
we enter now?" Our long-term (LEAPS/CC"s) position is (short) at
the $105 strike and although it is profitable, we wonder what it
would be like to have just owned the calls. Johnson and Johnson
(JNJ) and Medtronics (MDT) also made solid gains and Cabletron
(CS) is starting to build support for a new rally from the $20
range. Gemstar (GMST), Pixar (PIXR) and Bell Atlantic (BEL) all
moved higher and Monsanto (MTC), a recent take-over candidate,
climbed $1.62 to finish near the top of a recent trading range
near $46.50.

Excite@home (ATHM), one of our readers request plays appears to
be making a stand near $45 but the time value in the short-term
position is eroding quickly. Those of you in the November play
should consider closing the long option for a small loss before
it expires worthless. The long-term (diagonal) spread has fared
much better and the DEC-$50 options are trading near $2.50 bid,
bringing the overall price of the position (JAN40C/DEC50C) to
$5.50. The long option can also be sold for the current credit,
offering a small profit of $0.75 to close the position.

There are a few more adjustments to make as we approach Friday's
expiration and we will keep you posted on the new positions and
prices for December. Currently, the spreads/combos portfolio is
enjoying one of the best months since inception (only because we
are hopelessly bullish) and a list of the current plays will be
posted in next Tuesday's edition.

Straddles:

Technology and Internet stocks have enjoyed recent bullish moves
and one of the Optionetics straddles came bouncing back from last
week's lows. Ebay (EBAY) moved up $5.43 today, bringing the call
option to a credit near $18. That price offers a much better exit
(almost at break-even) for those of you that closed each position
on an individual basis; an alternate we suggested two weeks ago.
Donaldson, Lufkin and Jenrette (DLJ) moved closer to the upside
profit range in Tuesday's session, climbing almost $4 to close at
$57. As we said in Sunday's issue, DLJ may be the first straddle
to profit on both sides of the position, reaching the upside and
downside profit points prior to expiration.

Sunday's new plays (positions/opening prices/strategy):

Lycos   LCOS   JAN70C/JAN70P   $14.62   debit   straddle

Our new Internet position was quite active in Monday's session,
moving up $2 in the first few minutes. The market-makers didn't
wait long to inflate the prices and the target was available for
a short period, early in the session. In Tuesday's market rally,
the stock price retreated, allowing another entry at (and below)
the suggested price.

Questions & comments on spreads/combos to ray@OptionInvestor.com

**********
NEW PLAYS 
**********

With the incredible rally over the past few weeks, many analysts
would suggest that the market is due for correction. Rather than
look for bearish issues in a predominantly bullish trend, it may
be preferable to search for the favorable group or sector that
will benefit from a rotation out-of the big-cap issues.

As communications and wireless data technologies enable a new
era of connectivity through the Internet, telecommunications
equipment stocks will continue to offer excellent investment
opportunities. Small-cap stocks in this group have been on the
move recently, particularly companies that provide equipment for
networks and wireless enabling technologies. As the demand for 
terrestrial and wireless infrastructure grows, issues in this
industry will prosper. Here are two favorable candidates, one
conservative and one aggressive, for your review.

****

TUTS - Tut Systems  $41.31     *** Copper Wire Masters ***

Tut Systems designs, develops & markets advanced communications
products which enable high-speed data access over the copper
infrastructure of telephone companies, as well as the copper
telephone wires in homes, businesses and other buildings. These
products incorporate Tut's proprietary FastCopper technology in
a cost-effective, scalable and easy to deploy solution that can
exploit the underutilized bandwidth of copper telephone wires.

Tut Systems reported quarterly results above analyst estimates
with increasing customer growth and units per customer. One of
the leading industry analysts recently reiterated coverage of
TUTS with a "Buy" rating, based on the probability of upside
revenues and earnings surprises as the broadband access market
expands over the next few years.

Robertson Stephens Managing Director and Senior Communications, 
Networking Analyst Paul Johnson recently reported on the growth
in the DSL equipment market, saying the sector is expanding in
an exponential manner; up 169% since last year. He believes the
access of next generation networks will become the next growth
opportunity in the industry and broadband is the remaining piece
of the puzzle. TUTS has emerged as one of the leading vendors in
multi-tenant, broadband-access using the traditional industry
infrastructure and should have the opportunity to fully exploit
the market's development.

PLAY (very conservative - bullish/debit spread):

BUY  CALL FEB-20 QSS-BD OI=20 A=$21.88
SELL CALL FEB-25 QSS-BE OI=69 B=$17.38
INITIAL NET DEBIT TARGET=$4.38 ROI(max)=14% B/E=$24.38

- OR - 

PLAY (very conservative - bullish/debit spread):

BUY  CALL FEB-17.50 QSS-BW OI=3  A=$24.12
SELL CALL FEB-25.00 QSS-BE OI=69 B=$17.38
INITIAL NET DEBIT TARGET=$6.62 ROI(max)=13% B/E=$24.12

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

****

ABTE - Able Telecom  $10.81   *** Speculation Only ***

Able Telecom provides specialized communication services and
products relating to engineering, installation and maintenance
of communication networks, primarily for telecommunications and
traffic management systems. Telecommunication service activities
the installation and maintenance of centralized office switching 
equipment, coaxial and fiber optic cable, wireless networks and
all facets of plant engineering and construction.

Able is growing both in structure and revenues as it acquires new
companies in the communication industry. They recently purchased
Southern Aluminum & Steel Corporation and Specialty Electronic
Systems to supplement the Able Transportation Services division.
SASCO and SES are both experts in their fields and new customers
use their knowledge early in project development. The strategy is
to capitalize on their working relationships, providing a smooth 
progression from design through engineering and construction to
eventual completion. Management expects that these two businesses 
together will provide revenues in excess of $15 million in the
first year of operations.

The recent rally has come with little or no news and for that
reason, the play is aggressive in the short-term and requires
reasonable due-diligence. The spread offers a favorable low-cost 
opportunity with plenty of time for success and the front-month
premium disparity provides a small discount, increasing the
probability of a profitable outcome.

PLAY (speculative - bullish/calendar spread):

BUY  CALL MAR-12.50 QZB-CB OI=475 A=$2.62
SELL CALL DEC-12.50 QZB-LB OI=198 B=$1.50
INITIAL NET DEBIT TARGET=$1.00 TARGET ROI=50%

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


***************
TECHNICALS ONLY
***************

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy. Current news and market
sentiment will have an effect on these positions so review each
play individually and make your own decision about the future
outcome of the stock price.

****

PSFT - Peoplesoft  $17.81     *** Ready To Go! ***   

Peoplesoft develops, markets and supports client/server-based
business application software products, including distribution,
financial and human resource management systems. They provide
services such as maintenance, training, consulting and support.
Customers consist primarily of medium/large sized corporations,
higher education institutions and government agencies.

The recent bottom near $14 has provided an excellent base for
this well-known issue to begin a meaningful rally. A series of
positive divergences have formed and the institutional interest
is supporting the current move. PSFT has climbed almost 10% in
three days and it may be somewhat overbought however, the trend
is intact and our cost-basis near $14 is very conservative.
  
PLAY (very conservative - bullish/covered-call):

BUY STOCK - PSFT  ASK=$17.81  
SELL CALL JAN-15 PQA-AC OI=2156 B=$3.75
RETURN CALLED = 14% (margin)  COST BASIS = $14.06

To supplement the ROI for this position, we suggest..

PLAY (very conservative - bullish/debit spread): 

BUY  CALL JAN-12.50 PQA-AV OI=883  A=$5.88
SELL CALL JAN-15.00 PQA-AC OI=2156 B=$3.75
INITIAL NET DEBIT TARGET=$2.00 ROI(max)=25%

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

****

CYCH - Cybercash Incorporated  $11.88   *** Up, Up, And Away! ***

CyberCash is a world leader in e-commerce technologies and
services, enabling commerce across the entire market spectrum
from electronics retailing environments to the Internet. CYCH
provides a complete line of software products and services
allowing merchants, billers, financial institutions and
consumers to conduct secure transactions and other e-commerce
functions using the broadest array of popular payment forms.

Another of the current Internet rallies that is poised for a
move to previous highs. The base and crouch were adequate for
a sustained run to the recent consolidation area near $15 and
a pause at this price should allow us to parlay the opening
position into a successful directional spread (near the middle
to end of the December expiration period).

PLAY (aggressive - bullish/calendar spread):

BUY  CALL MAR-15 KBQ-CC OI=175 A=$1.68
SELL CALL DEC-15 KBQ-LC OI=168 B=$0.50
INITIAL NET DEBIT TARGET=$1.00 TARGET ROI=50%

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



************
See Disclaimer in section one
************

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives