Option Investor
Newsletter

Daily Newsletter, Thursday, 12/09/1999

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The Option Investor Newsletter         Thursday  12-9-99
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)
************************************************************
        12-9-99            High     Low    Volume Advances Decline
DOW    11134.80 +  66.70 11204.20 11054.70 1,116,721k 1,221  1,859
Nasdaq  3594.17 +   8.09  3647.55  3514.91 1,780,217k 1,820  2,349
S&P-100  757.39 +   3.28   762.08   749.17    Totals  3,041  4,208
S&P-500 1408.11 +   4.23  1418.46  1391.50            41.9%  58.1%
$RUT     464.90 -   3.94   471.76   460.52
$TRAN   2824.78 -  56.89  2890.86  2813.77
VIX       22.38 -   0.24    23.95    21.84
Put/Call Ratio       .41
*************************************************************

Was that profit taking I saw this week?

You had to look close but if you read between the closes there
was a lot of profit taking and it may be all we get. Yesterday's
drop of -.84 on the Nasdaq was almost a non-event. The Nasdaq
dropped after a surge at the open and recovered to almost close
positive but the market breadth was just too strong to overcome.
The Nasdaq failure to set another record high and three days of 
losses by the Dow energized the buyers and the markets gapped open 
strongly today. The rally was short lived as traders sold into 
the rally in an attempt to take profits in light of the recent 
weak internals. 


 


 


 

Not everyone was convinced as buyers waiting in the wings
came off the bench and rushed to buy stocks that they missed
in the last drop a week ago. The Dow finally broke out again
after three days of profit taking and rotation out of some
Dow stocks with negative stories. After posting three days
of -61, -118, -38 losses the Dow managed to add +66 points 
and close almost +100 points over strong support at 11050.
When you consider this was on top of an almost -$5 drop by
IBM, it was impressive. An IBM official only confirmed they 
were on track to meet the lowered estimates given in October. 
He also gave another Y2K warning that they may see some first 
quarter impacts from the late 4Q Y2K freeze. They are looking 
for a banner 2Q next year and they expect all of 2000 to be 
a very good year.

The Nasdaq set another record high today on the heaviest
volume day ever (1.8 bln). The heavy volume on the downside 
this morning was met by strong buying in the afternoon as 
traders tried to make up for the previous missed opportunities.
Everybody wants to wait for a real correction, something
in the neighborhood of -10%, but it is just not happening.
Cash is building up in the funds as they try to wait for
a new opportunity but the tech market is just not cooperating.
In a report out yesterday some funds have cash positions as
large as 18% with most around 12%. This is a huge pile of
cash across all funds and there are large underlying orders
just under the market waiting for any dip.

What is readily apparent is a very simple fact. Nobody is
leaving. Nobody is moving to cash to store under their
mattress for Y2K. Funds are not selling to lock in profits
as many expected. Fund managers questioned about this, point
to the huge profits and huge tax consequences. If they only
wait until January to sell, they can put off the tax problem 
for a full year. If the market continues to rally next year
then they can pay the taxes with next years earnings. If 
the year is bad then the losses would offset some of the 
1999 gains. It is a win-win situation. Here is the next
quandary. They are now faced with putting the excess cash
into the market now, with no pullback in sight, or letting
it accumulate on the sidelines for a pullback that may
never come. If tech stocks soar another 20% in the 60 days
and then pull back 10% to correct then waiting was not the
correct play. Almost everyone expects the market to soar
in January once the Y2K event is over and not being invested
now may mean you give up 10%-20% to funds that are fully
invested. Some funds take in $10-25 million dollars every 
day and the heavy end of year contributions will swell this
number by 200%-300%. Imagine the fund managers problem. 
Hundreds of millions of dollars to invest but everything 
is already at nosebleed heights. It is easy to say wait but
if the market train really has left the station then it
will be their bonuses for 2000 they will be kissing goodbye
instead of their competitors.

On the downside, if there is one, if the PPI is bearish
tomorrow then some analysts expect the Fed to change their
bias to tighten at the 12/21 FOMC meeting. This would put
the brakes on the rampant speculation with a dose of Fed
reality. The PPI is expected to show an increase of +0.2%
compared with Octobers decrease of -0.1% in prices. High
oil prices are expected to have an impact but the increased
productivity we saw earlier in the week may mute this factor.

Even with the recovery today by both the major indexes the
breadth was still very bad. On the NYSE there were 96 new
highs to 279 new lows. Advancers lost to decliners on the 
NYSE 2:3 and on the Nasdaq 3:4. Closing ticks on the NYSE
were slightly bearish at -363. Yes, there was a rebound 
today but all eyes are on the PPI on Friday. A bad number
would have to be very bad to blunt the optimism in the 
markets but bad numbers do show up when you least expect
them. 

What to do tomorrow? If the number is positive then wait
until after amateur hour and look to open positions for 
January/February. This should be the last major hurdle
for the year. The CPI is next week but with PPI prices 
down last month it should not be a problem. Retail prices 
normally follow producer prices.

Money is still flowing into the market but that does not
make the market indestructible. Pick your entry points
carefully and be prepared to leave quickly if things turn
around.

Good Luck, Sell Too Soon.

Jim Brown
Editor



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

Tyco Tumbles on News of SEC Probe
By Cindy Christ

Where there's smoke, there's fire.

Since mid-October, there's been plenty of smoke surrounding
shares of Tyco International Ltd. after a Dallas-based
newsletter and The New York Times questioned its accounting
methods.

On Thursday, flames erupted under shares of the Bermuda-based
conglomerate when it revealed the Securities and Exchange
Commission would conduct an inquiry relating to charges and
reserves taken in connection with its acquisitions.

/members/stocknews/120999_1.asp



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

As of Market Close - Thursday, December 9, 1999 

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

DOW Industrials   10,750  11,320  11,135    Neutral  11.12
SPX S&P 500        1,340   1,400   1,408    BULLISH  12.03
OEX S&P 100          700     750     757    BULLISH  12.03
RUT Russell 2000     430     450     465    BULLISH  11.12
NDX NASD 100       2,650   3,150   3,167    BULLISH  12.03
MSH High Tech      1,340   1,630   1,710    BULLISH  12.03

XCI Hardware       1,075   1,160   1,239    BULLISH  11.11
CWX Software       1,000   1,160   1,241    BULLISH   9.03
SOX Semiconductor    560     640     642    BULLISH  12.07
NWX Networking       650     800     831    BULLISH  12.03
INX Internet         525     675     763    BULLISH  12.07

BIX Banking          645     690     574    BEARISH  11.30
XBD Brokerage        395     450     437    Neutral  11.30
IUX Insurance        625     650     611    BEARISH  11.30

RLX Retail           875     910     932    BULLISH  11.23
DRG Drug             375     395     358    Neutral  11.30
HCX Healthcare       750     790     709    Neutral  11.09
XAL Airline          180     190     144    BEARISH   5.21
OIX Oil & Gas        285     315     298    Neutral  11.23


Posture Alert    

The Linux craze continued to sweep the market Thursday, as the 
Nasdaq closed up again on record breaking volume. The swing from 
intra-day high to low was very extreme, but the bulls continue on 
their victory march. Leaders Thursday include Internet (+4.20%), 
Retail (+3.13%), and Brokerage (+1.90%). Losing sectors included 
Semiconductors (-2.81%), Airlines (-1.99%), and Software (-1.64%). 
There are no current changes in posture.   



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

Thursday December 9, 1999

Tug of War!

The major indexes continued to the upside Thursday, with the 
Nasdaq breaking new ground on record volume. The violent swing by 
the major technology index was swift and severe, causing many 
investors and traders alike to close out positions, only to find 
them reverse later in the day, perhaps numerous times. This is a 
strong sign that the bears and bears are battling for the 
short-term control of this market, with neither really winning 
today's battle. 

We will most likely continue to witness such volatility in the 
near future, and with option expiration next week, we will most 
likely see some severe moves in many individual equities. Looking 
at some of the major indexes, many market technicians are calling 
for a near term correction or retracement from the highs. It is 
very hard to argue against this analogy with many of the indexes 
trading in stratospheric territory, however, we still see 
significant upside in the month ahead. What investors have to do 
is be choosier, and pick the sectors that are gaining momentum, 
not losing steam (i.e. Internet Index +4% today). To see the 
Nasdaq continue on its tear is becoming a more unlikely event, but 
to see individual sectors outperform the market is becoming the 
likelier scenario.

The one thing that bothers us from a technical standpoint was 
Wednesday's poor closing, combined with the fact that the Nasdaq 
was not able to hold onto the big gains from Thursday morning. 
This could spell trouble for the bulls on the short term, but 
tomorrow's trading will be key in determining short-term 
direction.

On the flip side, from a sentiment standpoint, we are witnessing 
significant put buying on some of the major indexes such as the 
OEX. This negative sentiment continues to fuel support for the 
market, and any pull back in the market continues to be met with 
buying pressure. This is a very healthy sign for all you bulls. 
Now, to dissect the put buying even further, we looked for the 
largest open interest on the S&P 100, and that happens to be the 
DEC-750 Put. The open interest stands at 13,492, which is a large 
number of contracts. What this means from a sentiment standpoint 
is that the 750 benchmark should have good support. Obviously, 
today's trading supports that theory, as the OEX traded at 749.17 
before closing just above 757. We continue to view this level as 
good support, and view 770-780 as heavy overhead, since this level 
seems to show the most call speculation. Until the statistics 
change, this tug of war will most likely continue until next 
week's option expiration. 


BULLISH Signs: 

Cash Flow:
The amount of money being poured into this market continues to be  
strong. 

Short Interest:
Short interest for the Nasdaq is at an all-time high, and 
increased another 1.4% from October. Short interest on the New 
York Stock Exchange rose 72,007,030 shares in the month ending 
Nov. 15 to a total of 4,061,057,060 shares.

S-Squeeze:
News events continue to squeeze the shorts, as lately evidenced by 
Yahoo's incredible run as well as Amazon's latest jump.


Mixed Signs:

Volatility Index (22.38):
The VIX is trading once again near its previous lows. Another 
quick reversal at this benchmark will likely presage an 
intermediate top. 


BEARISH Signs:
 
Interest Rates:
The yield on the 30-yr Treasury broke support, and may soon hit 
52-week highs.

Advance/Decline Line:
The A/D line's continual break does not serve the best interests 
of the overall market.

Investor Intelligence:  
The rapid change from bearish to bullish sentiment has been too 
great, and may indicate a near term top in the market.

Energy Prices:
With the rapid rise in crude oil, everything from manufacturing to 
transportation will be affected by higher costs. These higher cost 
will be felt more 1-2 quarters out, and could put pressure on 
profit margins.


OTM Call Analysis

As we move closer to the December expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 720-810 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%


December Expiration Cycle
OEX OTM Call Analysis (Open Interest December 720-810)
Date                 Open Interest     Change %    Alert

Friday, November 19       36,165          -
Friday, November 26       55,598       +53.7%
Friday, December 03       66,323       +83.4%


The Power of Sentiment Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

 
Pinnacle Index OEX              Friday      Tues       Thurs
Benchmark                       (12/3)     (12/7)     (12/9)

Overhead Resistance (770-800)    35.30      9.14       13.43
Overhead Resistance (750-765)     N/A       0.76        0.79

OEX Close                       767.48    756.11      757.39

Underlying Support (730-745)      1.65      2.43        2.91


What the Pinnacle Index is telling us:
Based on 12/7, overhead resistance (750-765) is very light, while 
and underlying support is building strength.


Put/Call Ratio 
                                Friday     Tues       Thurs
Strike/Contracts                (12/3)    (12/7)      (12/9)

CBOE Total P/C Ratio             .52       .51         .41
CBOE Equity P/C Ratio            .38       .42         .36
OEX P/C Ratio                   1.67      1.38        1.54


Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (12/3)          (12/7)          (12/9)

Puts                 750 / 9,697     750 / 11,174    750 / 13,492
Calls                750 / 8,315     780 /  8,466    780 / 12,779
Put/Call Ratio         1.16            1.32             1.06


Market Volatility Index (VIX)
                    Major
Date                Turning Point       VIX

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Top                 25.01 

July 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 
October 15, 1999    Bottom              32.06
 
December 9, 1999                        22.38


Investors Intelligence Survey
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish

October 97          Bottom            22.0        48.3       
July 20, 1998       Top               52.0        24.0         
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top               58.3        30.0
March 4, 1999       Bottom            49.1        32.5

Oct. 13, 1999       Bottom?           39.2        37.5

November 18, 1999                     52.1        29.9
November 26, 1999                     53.0        28.7



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

Daily Results

Index      Last    Mon     Tue    Wed    Thu    Week
Dow     11134.79 -61.17 -118.36 -38.53  66.67 -151.39
Nasdaq   3594.17  25.38   40.91  -0.84   8.09   73.54
$OEX      757.39  -4.73   -6.65  -1.99   3.28  -10.09
$SPX     1408.11  -9.96  -14.17  -5.29   4.23  -25.19
$RUT      464.90   1.17   -0.05   3.14  -3.94    0.32
$TRAN    2824.78 -23.28  -19.36  -4.49 -56.89 -104.02
$VIX       22.38   0.24    0.32   1.24  -0.24    1.56

Calls              Mon     Tue    Wed    Thu    Week

CMGI      197.75   7.94   10.06  11.00   8.69   37.69 Great week!
DCLK      197.00   8.88    5.88  12.75   0.13   27.63 New
INKT      166.94  13.00    5.69   4.31  -1.06   21.94 New
BRCM      226.31  13.75    3.00   0.50   1.31   18.56 Broad scope
NOK       171.25  19.94   -4.19   0.56  -3.50   12.81 Profit-taking
GMST      128.50   5.06    6.31   4.63  -4.63   11.38 Splitting
QCOM      395.00  10.31    4.13  -9.63   5.75   10.56 Momentum!
AOL        86.00   2.63   -1.25  -0.88   4.69    7.88 AOL jumps
GE        143.56   1.25    1.25   3.00   2.31    7.31 New
MACR       82.38   4.06   -3.44   8.75  -3.63    5.75 52-wk high
USWB       51.69   2.00    1.88   1.69  -0.06    5.50 Nice chart
STM       136.00   5.50    0.88  -0.50  -1.25    4.63 Bucks trend
SNE       186.75  -2.00    2.50  -3.19   6.31    3.63 Cranks it up
PRGN       84.38  10.75   -1.63  -0.63  -5.13    3.38 Above support
NT         82.50   3.94    0.13  -0.69  -1.91    1.47 NT buying?
VOD        50.75   3.63   -0.25  -2.63   0.19    1.31 Entry point?
ANSR       34.38  -0.50   -1.38   1.69   1.06    0.88 ANSR climbs
EMC        95.06  -1.25    0.25   0.50  -0.84   -0.19 Consolidates
SDLI      182.00  15.50   -4.75  -2.75  -9.00   -1.00 Profit-taking
TIF        77.94   0.06    1.50  -0.19  -3.13   -1.75 Dropped
MXIM       90.50   2.63    0.34  -4.28  -0.50   -1.81 Good relative
JDSU      240.38   3.25    5.31 -12.75  -6.63  -10.81 Comes back
HGSI      114.00  -5.69    2.38  -8.50  -3.50  -15.31 Dropped
VISX       54.63   0.38  -36.13   4.69  -2.06  -33.13 Dropped

Puts

GT         28.25  -1.44   -1.06  -1.69  -0.38   -4.56 Limbo winner
KIDE       45.00  -3.81    2.50  -2.25  -1.00   -4.56 KIDE slides
PGR        74.88  -1.75   -1.75  -3.06   2.88   -3.69 Square one
JCI        51.94   0.81   -4.00   2.63   0.06   -0.50 Rally??
EK         61.00   1.19    0.06  -0.88   0.50    0.88 Stubborn!
BOW        49.94   0.00    0.19   0.50   1.25    1.94 Dropped


************
WOMANS WORLD
************

Did You Find An Entry Point?

Congratulations, to all of you who played a successful YHOO 
earlier this week. I received lots of emails with similar 
questions. I'll answer some of them here. But first, did you 
see any good entry points today??? 

As I mentioned last time, I was hoping for a softer market on 
Wednesday or Thursday this week, in order to find a good entry 
for QCOM and perhaps YHOO. I expect QCOM to start moving next 
week, in anticipation of the meeting on Decemer 20th, to approve 
a 4:1 stock split. I was hoping to be given a nice entry 
opportunity, during the pre-PPI anxiety period. With YHOO, I 
expected profit taking and a lull on Wednesday, but I did not 
know how long this would last. I assumed that the players 
familiar with YHOO would take profits, forcing a sell off, and 
then jump back in as soon as they saw their next door neighbors 
buying again. This of course, is in anticipation of a stock split 
announcement, which could occur on or before their earnings in 
early January. 

Qualcomm gave us a beautiful entry today, trading down to 
279 1/2. I was able to grab my options at about the 281 area. 
It closed at 295. Let me share with you how I thought through 
this decision.
 
Qcom gapped down at the open on Wednesday and hovered for 45 
minutes before going to the high of day in the next 45 minutes. 
From there it rolled over, drifting downward without ever being 
able to take out the early morning high. When I'm wanting to buy 
something, I watch the movement in the morning first using my 5 
min chart and charting indicators. I am watching the rolling 
action of the stock to see if each high, is higher than the last 
high or if each low is lower (or higher) than the previous low. 
This gives me an indication how the afternoon will play out. 
Nothing is exact, but this is an important pattern to become 
familiar with because it can help you decide if you should buy 
today, or wait for tomorrow. By early lunch, the chart tells me 
if the stock is struggling that day, or if each low point is 
getting higher...indicating if I continue to wait, I may be paying 
more for the stock in the afternoon.  Yesterday, Qcom looked 
weak to me, having a hard time pushing higher. I was in a buying 
mood but I wanted a good entry. I delayed my purchase to 
re-evaluate it again Thursday, anticipating continued weakness 
due to the PPI on Friday. 

Wednesday night, I prepared by writing down the 5 and 10-dma 
along with the option symbols I needed to watch. On rare 
occasions since announcing the 4:1 stock split, QCOM has given 
us buying opportunities at the 10-dma, as announced by OIN in 
a rare ALERT message. I loaded my option symbols into my Qcharts, 
so at the right time, I could execute quickly thru my Preferred 
Trade account. Today after opening at 400, I doubted I would be 
given an opportunity to buy at the 10 dma which was around 381. 
I didn't think it would go that low. Just in case, I set my alert 
alarms at 382, so I wouldn't miss it. The gift came when QCOM hit 
its 10 dma once again, then slightly dipped below it to 379 1/2. 
Buyers rushed to the free beer and ran it up to 395. By then, I 
had already purchased my January positions for the split play 
and a few high risk December OTM calls that were just really so 
cheap, I couldn't resist. I was a happy camper by waiting till 
today to make my trades.

As for YHOO, I tell you, if Yhoo's chart was an EKG strip, I 
would have pronounced it dead yesterday!!! That 5 min chart 
barely bleeped. Remember what I said about channeling? It's 
usually a sign that a breakout, either up or down, is fixing 
to occur. Well, I hope you weren't scratching your head 
examining the rocket boosters on the launch pad when it 
decided to blast off from its 312 1/16 lows about 1:30 pm. 
It was fast and furious!!! Congratulations to everyone who 
realized that price was getting close to YHOO's  5-dma. It 
appeared that all the neighbors had gone to lunch together 
and realized each other were planning on buying back in, 
after lunch.   Did you grab a ride?? 

Other than these two entries, I tried hard to grab JDSU when 
it went down to 235. I'll be watching it for further weakness 
tomorrow since it is below its 10 dma. It should open weaker. 
This sure looks like a good entry to me, with the split coming 
at the end of the month, but it is possible a better entry 
could surface. I don't want to get distracted from my two main 
plays (YHOO & QCOM), but with the gains from Tuesday, its hard 
not to catch something that is just thrown at you. I had a 
limit order set, but I was not filled. Also, Tyco caught my 
attention due to its huge sell off. Could that be a little over 
done you think??? A lot of distractions are out there, but 
focusing will reward me.

Although I feel comfortable with my entry points today, there 
is significant risk with these plays. The PPI number is due in 
the morning. If this upsets the market severely, in particularly 
YHOO and QCOM, I will exit to the sidelines for a few hours, 
till things calm down. I would be surprised to get a better 
entry than today, but NASDAQ is so overextended, that at any 
time, it could use any excuse to exhale its hot air. I just 
want to make sure that if that happens, my premiums don't go 
with it!! I would have felt safer, if NASDAQ had closed lower 
today. We needed that. But since it roared back, I feel a little 
more at risk. Nevertheless, with good entry points, I have more 
protection and I will not fight the trend. 

See you at the party. I hear QCOM and YHOO are double dating!!!

To answer a few emails:

Hi, Renee: I should get $200,000 profit from yhoo run yesterday, 
But I lost half of it since I sold too late.  Could you tell me 
where do you get the bollinger band; MACD; stochastics chart? 
how much it cost? Thanks. Yphe

Congratulations on the profits you kept!!! There is more to come. 
I use a service by Quote.com called Qcharts. I pay about $80.00/mo 
for NYSE, NASDAQ and option quotes with all charts. The indicators 
you mentioned, come with the charting service and can be added to 
your charts as you like. I have no idea how I traded options 
successfully for 2 1/2 years before ever having real time quotes 
& charts!! The expense is not in the $80.00 per month. The expense 
is in NOT having it and picking poor entry points!! 

*****

Do you have a minimum amount of contracts you buy at a time in 
each position? Do you have a period of time you won't buy?  That 
is, say in the month of December, is there a time you will no 
longer buy December options? Dina

Hi Dina! No, the minimum amount tends to depend on how strongly I 
feel about my position and how much money I have available at that 
moment. Sometimes I scale in to a position if better entry points 
come along, so the number of contracts grow. Sometimes, the premiums 
are so high, that I may not be able to afford a lot at one time 
(Qcom), but the trade is very profitable nonetheless. No, I do not 
have a period of time I will not trade. I believe risk tolerance is 
individual. Day trading options is hard and you need to know what 
you are doing. I occasionally trade intra day at volatile times when 
the volume is high. But for a beginner, I think this is dangerous 
and higher risk than necessary. 

*****

I live in Las Vegas, NV-can you recommend some great brokerages 
well versed in option trading?  Also, can you give us the names 
of some outstanding books dealing with you style of research & 
trading?  Thank you. Steve 

Steve, I only trade online. I am unfamiliar with brokerage groups 
that can help you with your positions. As for books, this subject 
came up a lot in my emails. Personally, the way I study is this, 
I decide what I want to learn. Then I go to my favorite library 
or mega bookstore and pull out 10+ books that have chapters on my 
subject. I peruse that chapter in each book in order to get a 
general perspective by different authors. Some books will soak in 
better to my pea brain, than others. If one really strikes me, I 
buy it for reference. I have always studied this way because I 
realized if the same points come up, over and over again by 
different authors, there must be something to it. 

*****

One other point that came up a lot. Yes there is a difference in 
trading full time and part time. It can affect your trades and 
opportunities tremendously. Don't beat yourself up, if you are 
working full time. Develop a system that works for you. I have 
only been trading full time since January 1999, but I've traded 
for several years.

Renee
renee@OptionInvestor.com



**************
TRADERS CORNER
**************

Getting Caught With My Pants Up

In One Up On Wall Street, Peter Lynch describes his feeling of 
being fully invested when the stock market is rallying as getting 
caught with his pants up. That's how I feel on Thursday morning, 
as I watch the market rally yet again, perhaps establishing a 
trading range of 11100 to 11400 on the DOW, and adding yet more 
unbelievable gains to the NASDAQ. (In fairness to Mr. Lynch, in 
the same book, he also argues that options should be outlawed!) 
A few weeks ago, I described my "Christmas Stocking," and, right 
on schedule, like popcorn kernels in a skillet, the options are 
beginning to pop. In fact, I've had to take profits early on a 
few contracts, to lock in gains which I plan on using to boost 
my LT Stock Portfolio with LEAP plays:

YHOO Jan 220. Bought at 25, sold at 108. Had to take that off 
the table after the SP move. 

SUNW Jan 62.5 (post split). Bought at 6.5, sold at 20 3/8. I held 
it over the split, since my strategy with my stocking stuffer plays 
was to hold until Jan 1. But when SUNW continued to move up after 
the split, and then further up this morning, I recognized that I 
was pushing my luck, and took a very large profit, put it back in 
cash, and am waiting for an entry into some AOL Jan contracts, or, 
perhaps will just wait to dollar cost average the money into LEAP 
plays on weakness in the New Year. And oh boy, can we expect some 
weakness after the New Years euphoria has worn off. I might not
be buying calls again until March. 

AMZN Jan95. Bought at 10 in October (!) on the strength of an 
SP Brown column regarding eChristmas. Held through ups, downs, 
Jeff "Who Needs Profits" Bezos, some recovery in November. This 
morning, an upgrade and price target of 160. AMZN moves 20 points 
on strong volume. Now, the contract is at 20, and I am holding 
them, a much happier man. I hold the contracts in my Roth IRA, 
which, by the way, is a great place to trade aggressively.

On balance, the strategy of holding these Jan calls until Y2K has 
been mixed. SCH is weaker than I expected, but, with all that 
trading volume, some analyst will start the cockroaches stampeding 
with upgrades in a few weeks; ditto with EGRP. My SNE play is 
positive, especially after this morning's nice move up; Playstation2, 
anyone? GTW has been crucified, but now with the news regarding the 
leadership change out, perhaps the stock has put in a bottom and 
will start moving up with strong Holiday sales. Finally, my NOK 
Jan 135s have been a huge success, with over a 200% return since 
late Nov, when I stuffed the Christmas Stocking; when the Telecom
sector gets the QCOM 4:1 injection in a week, I expect NOK to move 
in sympathy, perhaps over 200 by Jan. My plays in YHOO and SUNW 
alone have "paid for" the rest of my plays, so, essentially, SCH, 
EGRP, GTW, and NOK are "free plays." At this point, I anticipate 
letting them run until Jan 1.

In my ST Option Portfolio, I have been taking profits this week. 
On Monday, I sold NOK Dec 140s on the strong gap up at 30, having 
bought them at 6.5 the previous week. I missed an extra 5 points 
on the contract, but with a profit of 460%, I can't complain, and 
the stock rolled over after its high on Monday anyway. I also sold 
JDSU Jan Calls for a 50% profit on Monday; AOL Jan 70 and Jan 80 
calls for a net profit when the stock looked to be basing around 
80, instead of moving; and SNE Jan Calls for a slight profit.
I decided to hold QCOM Jan 380 Calls because of the upcoming 4:1 
split, and the newsletter's Sunday write up, which indicated a 
"graphical convergence" coming at about Dec 9 & 10. Without any 
kind of TA expertise, I finally figured out what this might mean 
by doodling in qcharts: draw one line at 400, draw another 
connecting QCOM's higher lows since hitting 400 on about Nov 12, 
and those two lines converge at about Dec 9 & 10. On the strength
of this analysis, I have been buying more QCOM Jan 390 calls when 
QCOM dips to 390. I have also been buying NOK Dec 160 and Jan 160 
Calls when NOK dips below 170. I opened a JDSU Jan 250 play 
yesterday, but was stopped out when the stock dipped below 240 
this morning. Overall, I benefitted from a early week break to 
gather my perspective, before beginning a new round of plays
on Wednesday. 

The market looks overextended, and could react negatively to any 
less than positive news. But, at the same time, this is the time 
of year to make money. I have a friend in grad school who has an 
MBA and spent 5 years at a Wall Street firm trading a S&P 500 
basket. He has been setting up a bearish futures play since late 
November, initiated it, and took a small loss last week. Then he 
called me and said, how can this continue? What is going on?
I shrugged, figured as long as I was making money I was happy, 
and promptly subscribed him to a two week trial to the newsletter!

Janar Joseph Wasito
janar@OptionInvestor.com



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:
*****

VISX $54.63 -2.06 (-33.13) We had our bounce on Wednesday and now 
it is time for us to let VISX rest in peace, for now anyway.  We 
still believe that VISX is a good company and continues to possess 
the fundamental traits we like to see for a play, but we think it 
is going to be a while before VISX can fully recover technically 
from Tuesday's plummet.  VISX's legs are just too shaky to make 
the risk of continuing this play worthwhile.  Also the resistance 
at $60 which we mentioned did hold strong on both Wednesday and 
Thursday.  

HGSI $114.00 -3.50 (-15.31) The past two days, despite valiant 
efforts to bounce, HGSI could not hold support.  Perhaps we 
underestimated the possible influence of the upcoming convertible 
debt offering.  As we mentioned in Tuesday's report the debt 
offering could provide competition for dollars looking to invest 
in the company.  The offering is set for December 14th.  If a 
rally ensues after the offering, we may take another look at 
HGSI.  On top of that possible negative influence, it seems 
that profit-taking has been hitting most of the favorites of 
the Biotech world.  With HGSI being hit harder than most of 
the others in the sector, we feel that this negative relative 
strength makes us unable to continue a call play on HGSI.

TIF $77.94 -3.13 (-1.75) We had been cautiously bullish on the
shares of Tiffany & Co., because of the average volume.  We 
continued to see the shares hit higher highs, but their was
no major push in the volume, this is a cautious indication.  
All it would take is a push from the sell side to see the 
bottom fall out with no major buying support to hold the highs.  
That is exactly what we got this afternoon.  After hitting 
another 52-week high of $83, the stock began to sell-off 
gradually.  All of the buyers had bought, so there was no  
tug of war effect between buyers and sellers.  The carnage did 
not stop until the stock closed at $77.94.  We will choose to 
walk away from the shares of TIF at current levels.  Tight 
stops over the course of this play proved profitable. 


PUTS:
*****

BOW $49.94 +1.25 (+1.94) It looks like Bowater's shares are 
making a major bottom down here in the $48-$50 range.  Without 
a strong short term downtrend, we feel it would not be prudent 
to continue to hold puts on BOW.  There has not been any major 
news to warrant any huge amounts of buying in BOW.  It does 
seem that the selling in the shares has abated for now and is 
unlikely that BOW will be making any new lows in the immediate 
future.



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

BRCM $226.31 +1.31 (+18.56) Broadcom had a broad scope today, 
offering a trading range of over $20.  BRCM reached up to tag 
yet another new all-time high of $234.88 within the first hour 
of trading.  Then the sell-off began, pulling BRCM down to a 
low of $214.63 for the day.  If you were able to keep an eye on 
BRCM today, we had some nice points of entry granted mid-day as 
the profit-takers emerged.  The new high now serves as the 
ultimate resistance.  BRCM has support at it's 10-dma, which 
is currently at $225.  The 5 and 30-dmas are converging at 
$221.50, which could provide some solid support going forward.  
Time your entries on the profit-taking dips.  On Monday, BRCM 
unveiled a new tuning chip right along side of rival Conexant 
Inc.  Broadcom's new chip is said to be smaller, cost less and 
allow for more than one tuner to be used in a device.  Today,
Schroder and Co. initiated coverage of BRCM with an Outperform 
rating.

SNE $186.75 +6.31 (+3.63) "Crank it to 11, blow another speaker" 
(Citizen King)  Sony cranked it up, gapping up slightly at the 
open and quickly traded up to a high of $189.  SNE continually 
found resistance at this level and traded the majority of the 
session in the neighborhood of $187.50.  Aside from the high 
today, we see formidable resistance at the level of $190.  Sony 
has support at it's 10-dma of $185.00 and further support at 
$180, which has held Sony up solidly for the last 3 sessions.   
Your best bet for a new entry is either waiting for a down day 
(with support levels firmly holding) or an intra-day dip.  But 
be cautious ahead of Monday's ever important Tankan report from 
the Bank of Japan.  This may cause big swings depending on 
there findings related to the current status of the economy.  

AOL $86.00 +4.94 (+7.88) Today AOL shares jumped to $87.50 on 
a spike of volume during the last hours of trading.  After 
channeling this week between $78 and $82 it now appears we may 
see a break through $87.75, the all-time high.  Earlier in the 
day, Wit Capital reiterated a Buy recommendation and issued a 12 
to 18-month price target of $105.  In the holiday spirit, AOL 
announced a new "concierge" shopping service to make gift-giving 
easier this season with its 'At Your Service' on Shop@AOL.  The 
service gives shoppers direct access to over 50 AOL merchants 
with alerts to companies offering free shipping, gift wrapping, 
and bonus gifts.  Our play is based on the anticipation of a 
holiday run-up and today's bounce may be the precursor.  In the 
news yesterday, Telescan announced a three-year deal to add its 
stock screening and portfolio analysis tools to AOL's personal 
finance channel.  And AOL is at war again.  This time with 
AT&T's WorldNet Internet who tried to give its 1.8 mln 
subscribers Instant Messaging access to not only AOL, but also 
to rival Microsoft (MSFT).  AT&T subscribers were quickly 
rejected from AIM system yesterday.

ANSR $34.38 +1.06 (+0.88) Another analyst put out a good word 
for ANSR this week.  Yesterday Salomon Smith Barney started new 
coverage on the stock with a Buy rating.  In response ANSR 
climbed $1.69, or 5.3%.  However until ANSR surged last minute 
today, we saw more consolidation at what's now evolved as near-
term support ($31.50 to $32).  Again this isn't unusual after 
such lofty gains (46.5%) last week.  The rising 10-dma ($29.82) 
continues to trail behind and this is a bullish sign.  If 
today's last minute spike extends into tomorrow's session then 
we'll face opposition at $36.63, the May 1998 high.  This 
momentum play is powered by the strong Internet sector and 
good technicals.  

PRGN $84.38 -5.13 (+3.38) Profit-taking was the name of the 
game on the Nasdaq today and PRGN was on its short list.  PRGN 
was brought down a notch, but remains well above the first level 
of support at $80 and the 10-dma ($80.03).  Trading volume 
continued to be active but at only about 50% above the norm in 
today's session.  Remember this is a pure momentum play and 
the broad market played a major role in today's pullback.  
Ultimately the downdraft effectively offered a multitude of 
entries below the recent $87 to $90 consolidation range.  In the 
news yesterday, Peregrine announced its GetIt! solution suite, 
self-service applications for Internet Procurement.  Separately 
the company announced an alliance partnership with Commerce One 
to integrate its GetResources! (the 1st application in GetIt!) 
to allow for direct connection to Commerce One's MarketSite, 
the global trading portal; thus promoting real-time transaction 
capabilities.  Some other vendors who've signed GetResources! 
agreements include Compaq Computers, Office Depot, Dell, and 
IBM Global Services.

STM $136.00 -1.25 (+4.63) STM continues to buck the overall 
negative trend being established in the $SOX index, with some 
help from a continuation of good news being reported about the 
company.  The $SOX Semiconductor Index gave us a serious head 
fake today, in early trading the index was up over 8 points, 
only to drop and trade near the lows for the rest of the 
session, closing the day down $18.52 points.  STM mirrored 
the trading pattern today by the $SOX with a nice bounce in 
the early going that saw the shares gap open at a new high 
of $145 and began to sell off.  Conservative or Aggressive 
traders should have been able to take advantage of the 
activity in the shares of STM.  We continue to remain positive 
on the stock, the uptrend is still firmly in place, the $134 
support level continues to hold, and this round of profit-
taking looks to have provided us another buying opportunity at 
current levels.  Be cautious, but bullish, going forward.  Wait 
for the market direction to confirm, and then look to target 
shoot your way back in if support levels hold. 

MACR $82.38 -3.63 (+5.75) MACR's trading pattern remains 
consistent.  This morning the shares hit another 52-week high 
of $87.50 in early trading, on the back of a $8.75 point gain 
on Wednesday, once again profit-takers stepped up and took some 
gains off the table.  The sell-off today was helped by overall 
volatility in the Nasdaq.  Looking at the charts it seems the
sellers ran out of steam after a pullback to $79.13, the shares
bounced from the lows to close at $82.38.  We might note that 
MACR is heavily in play this week with numerous deals, alliances,
and presentations, we should continue to see good tradeable 
opportunities.  Target shoot your way in on weakness, with tight
stops after positions have been taken.  We like the stock at
current levels $82.38, any pullbacks would be even better 
above $79.      



******************************
CALLS 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 
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buy or sell securities presented. All investors should consult 
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The newsletter staff makes every effort to provide timely 
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delivery times due to factors beyond our control.

The Option Investor Newsletter          Thursday  12-9-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


*****************
CALLS CONTINUED
*****************

USWB $51.69 -0.06 (+5.50) The spotlight continues to shine 
bright on the Internet advertising companies.  Agency.com 
which just went public, ended yesterday's trading session up 
192%.  This is one of the latest companies to go public
in this hot business-to-business Internet sector.  USWB which
is a feature player in the space, traded at another new high 
today at $53.81 on average volume.  Most Internet companies
traded off of the highs today as the profit takers stepped
in, lightening up on positions ahead of tomorrow's PPI numbers.
USWB closed the day at $51.69, on strictly profit-taking, 
nothing major.  The chart pattern is very favorable, the stair 
case formation is signaling higher-highs going forward, today's 
dip has provided us another entry point.  We like USWB at
current levels.  Look for a swing to one end of the trading 
range($48.50-$53.81) tomorrow morning depending upon how the 
economic data is digested.  Let the intra-day volatility help
you find an entry point.  Take profits according to risk 
tolerance.

CMGI $197.75 +8.69 (+37.69) Since last Friday CMGI has moved up 
27% in four days.  That used to be a considered a big move.
We'll take it, as our play has provided us with an opportunity
to take some money off the table.  After picking up $11 Wednesday,
CMGI gapped up over $10 higher at the open this morning.  The
Internet company made a new high at $204 in the first 30 minutes 
of trading.  Traders put on the brakes and began to rake in some
profits.  Buy lunch time CMGI had traded as low as $175.50 and
began to bounce back.  Depending on you risk tolerance you could 
have jumped back in as CMGI began to climb back out of the hole.
CMGI finish the day +8.69.  Intraday the $188 level held, as CMGI
made its way back late in the day.  Most analysts seem to believe
the intraday sell-off in the tech heavy Nasdaq was more technical
than anything as buyers jumped back in.  Our view for CMGI has
not changed.  We would wait for the market to digest the PPI
numbers in the morning prior to entering any new positions.  
Although we aren't expecting any big surprises in PPI numbers, 
a bad report and we could see the selling resume.

GMST $128.50 -4.63 (+11.38) It could be that our split run play 
is about to run out of gas.  After hitting a new high of 138.25
Wednesday, the bears have grabbed hold of this stock and began 
to have their way.  GMST splits 2:1 Monday after the close.  If
you didn't take your profits yesterday or today, we would suggest
that you begin to do so.  The $127 area has provided support so
far, but GMST is beginning to look a little weak, so we would
not allow the money to slip through you fingers.  We do have two
trading days prior to the split and the gunslingers may want to 
see if we get one last bounce.  If that's the case please keep
your stops close.   

EMC $95.06 -0.85 (-0.19) Our play in EMC is stuck in a sideways
consolidation mode.  The tech sell-off this morning took shares
of EMC to its low of $93.56.  This area has provided support all
week.  The next challenge is for EMC is to pull itself out of 
this narrow range and move higher.  We have PPI numbers in the 
morning.  A positive report could provide the strength get EMC
back on track.  A negative report and the party could be over,
at least for the time being.  On an intraday basis it would 
appear as though EMC is giving us a good point to either enter
a new play or add to existing positions.  If EMC breaks the 
$93.50 area we would get out of the way until the dust settles.
The volume this week has been on the light side, giving no real
clues as to which way the breakout will be.  If you still have
a position, in EMC on the books, keep your stops close. 

VOD $50.75 +0.19 (+1.31) Shares of VOD are setting up to give us
another entry point.  If you missed the first one early in the 
week, we may have another opportunity at hand.  The one fly in
the ointment still concerns the Mannesmann.  Company executives 
are still fighting the hostile takeover bid from VOD which is 
now estimated to be $141 billion euros.  Mannesman said Wednesday 
in a statement the all-share offer by VOD was the "wrong strategy, 
wrong price, wrong path".  Some see this as an attempt to get
VOD to continue to up the price.  As for our play we would look
for further moves higher as a chance to jump on board a good
call play.  VOD has been a bit sluggish and could stand to make
up some ground with others in the telecom industry.  Intraday 
support for VOD now sits just above $50.  If VOD breaks that 
support area we would stand aside for the time being.  It's
10-dma is at $49.56 which could provide support as well.

MXIM $90.50 -0.50 (-1.81) Well, after 5 straight up days, you 
start to expect a pullback and we've had two days of them now.  
The stock was weak on Wednesday, experiencing a decline of 
almost 4%.  We saw some of the same weakness today, with shares 
falling to test the 10-dma at $89.  The good news is the fact 
the stock came back in the afternoon after bouncing off the 
10-dma and closed above $90.  One other thing to keep in mind, 
the Semiconductor index (SOX) was down by as much as 5% today 
and closed down over 3%, so MXIM actually looked good for the 
day.  Volume was good both days.  Support is the 10-dma at 
$90.50 and resistance is at $95. 

NT $82.50 -1.91 (+2.31) Whew!  How about that hair-curling 
selloff this morning?  If you missed it, NT opened at $85.50, 
which by the way is proving to be formidable resistance this 
week, then sold off to $81.38 by mid-day.  It looked like 
Judgement Day since the NASDAQ had fallen 115 points during the 
same period - we all thought we were in for it.  We can't tell 
you exactly why, but the cash and the confidence returned late in 
the session to plant NT right back at support of $82.50 at the 
close - Roadrunner escapes from Coyote again.  Though eclipsed by 
the action, the real news is important.  NT is reported to be in 
acquisition talks with Florida-based Qtera, a maker of optical 
networking equipment.  They are developing a technology to make 
optical lines carry signals further without regeneration.  The 
price could be as high as $3.8 bln.  While analysts are yelping 
that it's too high since NT could develop the product themselves, 
the fact is engineering talent is hard to come by, and 
development would take at least six months...better to be first 
to market.  For you target shooters, consider aiming at $81.50, 
or picking some off at current support of $82.50.  More 
conservative types may want confirmation of a breakout over 
$85.50.  Volume remains strong, but a dip below $80 sets NT up 
to test $77.

NOK $171.25 -3.50 (+15.19) Lingering good feelings following 
multiple upgrades permeate the air around NOK.  It's also 
comforting to know that Janus Funds own 6.5% of the company (as 
of December 7), its largest shareholder.  It's not surprising 
then to see NOK remain fairly stable, albeit on huge volume, 
in today's turbulent tech action.  Despite some investor 
apprehension that the Ericsson/Microsoft wireless browser 
agreement might outflank NOK, NOK found support in the $168 
range.  While this is above the ascending channel established in 
November and should throw a yellow caution flag, NOK also has a 
habit of basing a few days, then bumping up a level.  With new 
price targets galore over $220, history says tomorrow should be 
an up day, especially since buying volume has swelled into the 
issue in the last five days.  That is not an endorsement to 
forget about due diligence.  We still need a workable plan and a 
willing market.  Support is in the $168-$170 range.  Resistance 
is $177.  You can target shoot or wait for the breakout with 
volume.

QCOM $395.00 +5.75 (+10.56) We could whine about the pullback 
from the breakout on Monday, but we knew QCOM was slightly weak 
because the volume wasn't up to its usual levels.  Nonetheless, 
we're not going to reverse our stance on volume requirements on 
a $400 stock - it's necessary and we need to see it.  We shouldn't 
be giving a stock a pass on that issue just because the price got 
high in a hurry.  That said, $390 and $385 support was broken on 
the way down to $380 today.  That tested an "old" level of 
support from last week.  If you recognized that on the chart and 
acted on the strong bounce, you made a perfect entry and a lot of 
money on the rebound.  While we may be in for more turbulence, 
QCOM isn't finished yet.  It's volume remains low as it 
consolidates in the $390-$400 range in anticipation of making 
a strong run (we expect with increased volume) into the 
shareholders' meeting, where we expect the 4:1 split to be 
approved and new share authorized.  An added bonus (likely we 
think) would be the disclosure that QCOM has found a buyer for 
their handset business - what a perfect time to announce!  We 
hasten to add that the higher lows of support and continuing 
resistance over $400 are really packing the powder for an 
explosive breakout as soon as volume returns.  Target shoot to 
level of comfort for the best entry or wait for the real breakout 
with volume.

JDSU $240.38 -3.63 (+10.81) JDSU is proving to be a real channel 
changer, causing the screen to get fuzzy and blurred.  Ever see 
the movie titled Dr. Strangelove?  Slim Pickens, in good cowboy 
fashion, rode the H-bomb out of the belly of a B-52 bomber.  You 
can imagine the ending.  If you were in a JDSU play, you can 
probably visualize the ending here too - at least you could this 
morning as JDSU plunged to $228 (old support level).  The good 
news is we saw JDSU bounce hard off $228 for an impressive day-
end gain - a textbook rebound and great entry point if you 
happened to catch it.  While the lows are still getting higher, 
they have re-established a slower ascending pennant (hence the 
"channel changer").  While we anticipate a breakout moving toward 
JDSU's Dec 30th split date, it looks to be a little slower in 
getting here than we originally thought.  One thing to keep your 
eye on though is the volume.  It has been steadily increasing 
this week as the price has been falling.  That indicates some 
distribution or profit-taking.  Even so, we fully expect JDSU to 
mount a serious run back over $273 before the split.  But current 
price and volume tell us there may be a rough ride getting there.  
Target shoot ruthlessly at support ($221, $227, $233, and $240) 
for your best entry.  Gauge the market before making your entry 
and protect your position with stops if the trade goes against 
you.

SDLI $182.00 -9.00 (-1.00) Ouch!  Gotta chalk it up to profit- 
taking.  So much for the pennant breakout.  Just be grateful the 
volume remains well below the ADV, indicating nobody's in a hurry 
to unload.  Apparently that renewed trader chat suggesting SDLI 
and ETEK would make fine merger candidates for each other, and a 
better competitor to JDSU isn't rubbing off on the stock price.  
Too bad, but as we'd noted Friday, these two aren't as 
universally loved as JDSU, making it a bit more risky than other 
issues in the same industry.  No matter, SDLI still has a good 
story to tell on its own - it can't produce optical components 
fast enough to satisfy all the demand and is still growing like 
a weed as a major provider of optical equipment in the photonic 
revolution.  Support is solid at $180, though today's bounce came 
at $181.  After that?  Look for $160, but let's hope it never 
gets there.  You know what to do to protect your self - set a 
stop under $180 if SDLI should break south from here.  We are 
still looking for a breakout of the pennant.  Resistance is at 
$190, then $201.  Use these for support if the price moves up.


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

KIDE $45.00 -1.00 (-4.56) Perhaps KIDE should take a few of the 
new Rexall Pokemon vitamins!  On Wednesday, Rexall (RXSD) 
announced that they were going to begin manufacturing and 
distributing new Pokemon vitamins early next year.  Apparently 
this news did nothing to impress investors!  KIDE did try and 
make another bounce, this time about $2.50 over the 100-dma, but 
again this bounce was small and even shorter in duration then 
the last.  The beautiful thing about these mini-bounces is the 
opportunity for entry points!  KIDE is just pennies above the 
5-dma, which could provide some support in tomorrows session.  
KIDE has some immediate resistance at its 10-dma of $45.50.  The 
100-dma which has been providing the springboard for KIDE's 
bounces so far this week is now at $51.50.  Therefore, this 
level has become resistance rather than support.  Watch for the 
bounces met and held by resistance for possible entry points.  

GT $28.25 -0.38 (-4.56) "How low can you go?'  GT would be the 
winner of any limbo contest, as each day it proves that it 
can and will go lower.  We mentioned a bit of a "bounce" in 
Tuesday's write up.  This was an unimpressive display on such 
a strong psychological number as $30.  Wednesday, GT gapped down 
at the open and encountered resistance at $30.  GT rescinded for
the remainder of the session, closing just over $28.50.  Today, 
GT finished snugly sandwiched between the 5 and 10-dma.  It is 
important to exercise caution at this point.  Should GT manage 
a breakthrough of the 10-dma, which is currently at $28.50, it 
would be wise to hold off on entering any new plays until we 
see a reclamation of negative momentum.  The 5-dma of $28 could 
provide some support, so watch for some trading below this level 
backed by good volume.

EK $61.00 +0.50 (+0.88) Kodak has been stubborn in its attempts 
to break down for us.  The stock managed to drop a little 
yesterday on no news.  Surprisingly, Kodak opened higher 
Wednesday, despite closing on its low print of the day on 
Tuesday.  Fortunately for put holders there was very little 
follow through to the upside, and Kodak managed to close lower 
just above its low for the day.  In news today, Kodak announced 
an expansion of their share buy back program.  The company will 
allocate another $200 million to the program on top of the 
$700 already allocated.  Share buyback programs are usually a 
positive event for the share price of the company.  Not only 
does it increase buying in the stock, but also helps the 
earnings profile of the company by reducing the shares 
outstanding resulting in a more favorable P/E ratio.  The only 
question is when the company actually starts buying the stock.  
The CFO will attempt to buy the stock at the best price possible. 
If the CFO determines that the stock could succumb to more 
market pressure then he will wait.  Today's announcement only 
managed to move the stock up a half of a point.  EK closed 
today right in the middle of its trading range between $60.25-
$62.19 despite opening up almost a point.  Overall, a pretty 
neutral day.  Keep a look out for EK if it trades either above 
resistance at $62.50 or breaks support of $60. 

PGR $74.88 +2.88 (-3.69) What a great start for our put play 
of the day.  Progressive opened down on Wednesday by only $0.38, 
offering an excellent opportunity for put buyers to enter a 
position for the subsequent selloff.  PGR managed to drop over 
three points from its opening price, closing only $0.13 above its 
high.  The late selloff on the NYSE hit the laggard stocks, like 
PGR, particularly hard.  That is the good news, now the bad news.  
On Thursday PGR regained almost all of its losses from Wednesday. 
The volume was lighter today then the volume during yesterday's 
selloff.  However the bounce today was significant.  That means 
we are back to square one.  The downtrend is still intact and 
you can hold current positions.  Be wary of your stops and be 
very cautious if PGR starts trading above $77.50 which is the 
10-dma.

JCI $51.94 +0.06 (-0.50) JCI continued its attempts to rally off 
of Tuesday's low of $49.  Although the bounce off of $49 was a 
bit discouraging there was not much momentum as the stock has 
only caught back about three points of its recent losses and is 
still down for the week.  We would like to see the $49 support 
taken out soon to avoid the possibility that the recent rally 
is an attempt to consolidate the shares and to attempt to form 
a bottom.  The biggest selling influence on JCI has been tax-
loss selling and general end-of-the-year window dressing.  If 
investors are done with these activities then early bird value 
investors could start snapping up shares.  In the news, JCI 
announced that its Integrated Facilities Management Division 
reached an agreement with Xerox to manage its headquarters 
property.  Terms of the contract were not announced but the high 
visibility of receiving a contract from a name like Xerox does 
not hurt.  Resistance is the 10-dma at $53.  If JCI should 
rally through resistance we will be exiting this position.



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

INKT - Inktomi Corp $166.94 +1.06 (+21.94 this week)

Inktomi develops the world's most scalable software for the 
world's fastest-moving software environment: the Internet.  The 
company's core technology underpins products for the Internet 
infrastructure that contribute to network performance, 
scalability and efficiency.  Inktomi technology paves the 
way for emerging opportunities in online commerce, media and 
communications by enabling the Internet to intelligently 
accommodate more users and data traffic. Inktomi developed the 
search engine that runs such popular portals as HotBot, NBC's 
Snap, Yahoo!, and the Disney Internet Guide.

INKT is a pure and simple split run.  On December 3rd, the Board 
of Directors announced a 2:1 stock split payable on or about 
December 30th.  The company has 300 mln shares authorized and 
50 mln outstanding.  Therefore there are plenty of shares 
available for the split.  INKT share prices surged last Friday 
on the news.  This week the momentum remained intact as the 
stock stretched into new territory.  Yesterday INKT hit $179.88 
setting the most recent new high.  The profit-taking on the 
Nasdaq today was a blessing as it pulled INKT back into an entry 
range.  Near-term support is at $160.  An intraday dip to this 
level like we saw today would be a solid entry, but we may not 
be afforded this luxury if the market rages on.  Plus today 
INKT received a Strong Buy recommendation from Thomas Weisel 
Partners. 

In other news this week, Inktomi and Sun MicroSystems (SUNW) 
agreed to invest $26 mln in Digital Island, a company that 
provides high-speed data network services for Internet 
businesses.  This strategic alliance provides leadership in 
the content distribution industry.

***December contracts expire in 2 weeks***

BUY CALL DEC-160 KYQ-LL OI= 715 at $12.88 SL= 9.50
BUY CALL DEC-170 KYQ-LN OI= 648 at $ 7.63 SL= 6.00
BUY CALL DEC-180 KYQ-LP OI=1972 at $ 4.88 SL= 3.25
BUY CALL JAN-170*KYQ-AN OI= 221 at $19.50 SL=15.25
BUY CALL JAN-180 KYQ-AP OI= 345 at $15.63 SL=12.25

Picked on Dec 9th at    $166.94    P/E = N/A
Change since picked       +0.00    52-week high=$179.88
Analysts Ratings      7-7-3-0-0    52-week low =$ 51.31
Last earnings 10/99   est=-0.10    actual=-0.09 surprise=+10.0%
Next earnings 01-14   est=-0.08    versus=-0.14
Average Daily Volume = 1.96 mln
Chart = http://quote.yahoo.com/q?s=INKT&d=3m

****

DCLK - DoubleClick $197.00 +0.13 (+27.63 this week)

DoubleClick is a leading provider of comprehensive global
Internet advertising solutions for marketers and Web publishers.
Combining technology and media expertise, DoubleClick centralizes
planning, execution, control, tracking and reporting for online
media campaigns.  The online advertising firm offers a targeted
delivery of ads using its patented DART technology.  DART 
measures Ad effectiveness and Web traffic.  DoubleClick has
Global headquarters in New York City and maintains offices 
in 32 other major cities around the world.

DCLK is rolling on rumors that it may be splitting its stock 
in the near future.  Looking at history for the company, they 
last announced a 2:1 stock split in April.  At this time the 
shares were trading at $180, while the shares now currently sit 
at the $197 level, off of recent 52-week highs of $209.38.  
These  type of rumors can be bullish for the shares of DCLK 
and traders are bidding up the stock.  This week the stock has 
been up almost 30 points, WOW!!.  Today was a trading day of 
dramatic swings.  Take a look at the trading range on DCLK, 
$183.75-$209.38, that is a $25.63 point swing.  Enter this 
stock with caution, the volatility is enormous.  With the 
favorable outlook in the overall Internet software and services 
sector, and DCLK specifically, as well as the split rumors that 
are surfacing, we are bullish on DCLK at current levels.  We 
believe, going forward, there will be new highs over the near-
term, but the ride is going to be volatile.  It might not be a 
bad idea to keep a close eye on the shares of DCLK.  The trading 
pattern should allow you to find a good entry point after the 
direction of the stock has been confirmed intraday.  Trade this 
stock according to your risk tolerance.  There is good support 
near $190, and then again at $183.  A major breakout should 
come if the split rumors are confirmed, or if buyers push the 
stock above $209.50.  

In recent news, Raymond James initiated coverage on the shares 
of DCLK with an Accumulate rating and another firm, Fletcher 
& Faraday, added the stock to its buy list.

***December contracts expire in 2 weeks***

BUY CALL DEC-195 TDU-LS OI= 316 at $12.50 SL=10.00
BUY CALL DEC-200*TDU-LT OI= 966 at $10.00 SL= 7.50
BUY CALL JAN-200 TDU-AT OI= 829 at $22.88 SL=19.63
BUY CALL JAN-220 QTD-AD OI= 126 at $15.63 SL=12.38

Picked on Dec 9th  at   $197.00    P/E = N/A
Change since picked       +0.00    52-week high=$209.38
Analyst Ratings      11-7-1-0-0    52-week low =$ 16.00
Last earnings 10/99  est= -0.14    actual= -0.13
Next earnings 01-19  est= -0.10    versus= -0.13
Average daily volume =  2.7 mln 
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m

****

GE - General Electric $143.56 +2.31 (+7.31 this wk)

One of the most profitable companies in the world, General 
Electric has been able to make money in all kinds of different 
industries.  The company is engaged in developing, marketing 
and manufacturing of a wide variety of products involved in 
generation, transmission, distribution and utilization of 
electricity and other goods.  It produces aircraft engines,
transportation equipment such as locomotives, appliances (both 
kitchen and laundry equipment), lighting, generators and 
turbines, nuclear reactors, medical imaging equipment, and 
plastics.  GE is also a large player in the financial services 
field as well as information services.  With ownership of NBC, 
General Electric is one of the largest broadcasters in the 
world.  With this diversity and reach, it is no wonder 
they count their profits in the billions.

GE owns a piece of just about everything and everybody seems to 
own at least a little piece of GE.  Maybe that is an exaggeration 
but it certainly seems that way.  So why our interest in GE? 
Profits, we hope.  The biggest news item influencing our 
decision to profile GE is one that has not happened yet.  The 
board of directors are meeting on December 17th.  There is 
rampant speculation that they will announce a split.  From a low 
of $94 in January, GE's stock has not looked back.  Why not cap 
off a great year in the stock market by splitting the largest 
company.  The real speculation is whether they will split 2:1 
or 3:1.  It would make sense for them to split 3-for-1.  Why not 
just get it over with and split 3-for-1 and reduce the expense 
of future splits.  Of course there are other reasons for our 
interest in GE calls.  They have typically announced good news 
during the month of December.  Also since July, GE's stock has 
broken above six double tops.  The last double top it broke above 
resulted in a quick move of 10 points.  Yesterday, GE broke above 
a double top at $140.  A healthy move is possible due to both 
fundamental and technical factors.  It is making new highs right 
now so there is very little overhead resistance.  Support is at 
the recent breakout point, $141.  

In other news, as Tom Brokaw might say, GE was named the world's
most respected company for the second straight year in a 
worldwide survey of chief executive officers conducted for 
the Financial Times.  GE Chief Executive Officer Jack Welch 
was selected as the world's most respected business leader in 
the survey.  On Tuesday, GE received a $1.98 billion Air Force 
engine contract.  And finally, in the holiday spirit, last night 
the National Christmas Tree in Washington was switched on by 
President Clinton to reveal 70,000 GE lights. (I told you they 
are everywhere!)

***December contracts expire in 2 weeks***

BUY CALL DEC-140 GE-LH OI=18689 at $ 4.50 SL=2.75
BUY CALL JAN-135 GE-AG OI= 3222 at $11.88 SL=9.50
BUY CALL JAN-140*GE-AH OI= 5592 at $ 8.50 SL=6.50
BUY CALL JAN-145 GE-AI OI= 5319 at $ 5.50 SL=3.75
BUY CALL JAN-150 GE-AU OI= 4729 at $ 3.63 SL=1.75

Picked on Dec 9th at    $143.56    P/E = 46
Change since picked       +0.00    52-week high=$144.94
Analysts Ratings     9-10-1-0-0    52-week low =$ 86.19 
Last earnings 10/99   est= 0.79    actual= 0.80 
Next earnings 01-20   est= 0.92    versus= 0.80
Average Daily Volume = 4.96 mln 
Chart = http://quote.yahoo.com/q?s=GE&d=3m



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

No new puts today.



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

INKT - Inktomi Corp $166.94 1.06 (+21.94)

Inktomi develops the world's most scalable software for the 
world's fastest-moving software environment: the Internet.  The 
company's core technology underpins products for the Internet 
infrastructure that contribute to network performance, 
scalability and efficiency.  Inktomi technology paves the 
way for emerging opportunities in online commerce, media and 
communications by enabling the Internet to intelligently 
accommodate more users and data traffic. Inktomi developed the 
search engine that runs such popular portals as HotBot, NBC's 
Snap, Yahoo!, and the Disney Internet Guide.

INKT is a pure and simple split run.  On December 3rd, the Board 
of Directors announced a 2:1 stock split payable on or about 
December 30th.  The company has 300 mln shares authorized and 
50 mln outstanding.  Therefore there are plenty of shares 
available for the split.  INKT share prices surged last Friday 
on the news.  This week the momentum remained intact as the 
stock stretched into new territory.  Yesterday INKT hit $179.88 
setting the most recent new high.  The profit-taking on the 
Nasdaq today was a blessing as it pulled INKT back into an entry 
range.  Near-term support is at $160.  An intraday dip to this 
level like we saw today would be a solid entry, but we may not 
be afforded this luxury if the market rages on.  Plus today 
INKT received a Strong Buy recommendation from Thomas Weisel 
Partners. 

In other news this week, Inktomi and Sun MicroSystems (SUNW) 
agreed to invest $26 mln in Digital Island, a company that 
provides high-speed data network services for Internet 
businesses.  This strategic alliance provides leadership in 
the content distribution industry.

***December contracts expire in 2 weeks***

BUY CALL DEC-160 KYQ-LL OI= 715 at $12.88 SL= 9.50
BUY CALL DEC-170 KYQ-LN OI= 648 at $ 7.63 SL= 6.00
BUY CALL DEC-180 KYQ-LP OI=1972 at $ 4.88 SL= 3.25
BUY CALL JAN-170*KYQ-AN OI= 221 at $19.50 SL=15.25
BUY CALL JAN-180 KYQ-AP OI= 345 at $15.63 SL=12.25

Picked on Dec 9th at    $166.94    P/E = N/A
Change since picked       +0.00    52-week high=$179.88
Analysts Ratings      7-7-3-0-0    52-week low =$ 51.31
Last earnings 10/99   est=-0.10    actual=-0.09 surprise=+10.0%
Next earnings 01-14   est=-0.08    versus=-0.14
Average Daily Volume = 1.96 mln
Chart = http://quote.yahoo.com/q?s=INKT&d=3m



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

The Dream Continues..

Wednesday, December 8

Blue-chips stocks continued to suffer from profit-taking while
leading technology issues held Nasdaq losses to a minimum. The
Dow Jones Industrial Average dropped 38 points to end at 11068
while the S&P 500 stock index slid 5 points to 1403. The Nasdaq
composite finished the day relatively unchanged at 3586 after a
morning rally to a new all-time high. Overall market breadth was
again negative with declining issues outpacing gainers 3-to-2 on
heavy volume on the NYSE. Yields on the 30-year Treasury moved
up three basis points to 6.23% percent as prices fell 13/32. The
two-year treasury finished down fractionally at 99-27/32 with a
yield of 5.96%.

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

Cendant     CD     JAN12C/JAN17C   $4.06    debit   bull-call  
Cohu        COHU   FEB25C/DEC30C   $4.88    debit   diagonal  
SBC Comm.   SBC    LJAN40/JAN55C   $15.00   debit   LEAPS/CC's

All three of our new candidates offered favorable entry prices
during today's session. The only position that wasn't available
(on a simultaneous order basis) was the bullish calendar spread
on Cendant. CD opened higher and closed finished up $0.50 at $19.
Both COHU and SBC fell during the day with better-than-expected
prices available in both spreads.

Portfolio plays:

Internet stocks dominated the market in today's session and our
leading portfolio issue was Lycos (LCOS), up $10.43 to close at
$77. Shares of the Web portal surged after Jefferies raised its
price target and reiterated a 'buy' rating on the stock. They
cited better-than-expected fundamentals for the upgraded target.
The stock is rated a 'buy' or 'strong buy' by 19 of 21 analysts
following the issue. Lycos is currently a play candidate in both
the Spreads/Combos and Straddles sections. Our bull-call spread
is now $20 ITM and the JAN-$70 straddle offered a $10.00 profit
during the session. With the Internet stocks running rampant,
this issue should move higher with any market strength. Another
Internet issue that led the secondary stocks today was CyberCash
(CYCH). The share price moved up $1.50 to close near $11 and the
rally offered a great opportunity to roll-out to January in the
neutral calendar spread. Our new position, MAR15C/JAN15C has a
debit of $0.75. One small-cap issue that has quietly been on the
rebound is Silicon Graphics (SGI). The current (neutral) spread
offers two possible adjustments depending on your future outlook
for the issue. A conservative adjustment would involve a roll-out
to the Jan-$10 options, lowering the overall debit in the spread
to $0.31. A investor with a bullish outlook would transition to
the diagonal position (FEB10C/JAN12C) for an additional debit of
$0.50, leaving the overall cost near $1.43. This move would allow
$1.06 of upside potential, in the event the issue rallies further.

The recent volatility has benefitted a number of our long-term
positions and the straddle we commented on Tuesday, Williams Co.
(WMB) moved up to $9.62 credit during the session. Cullen Frost
Bankers (CFR) has also departed a recent trading channel to the
downside and the straddle is now profitable. The current trend
should continue to the next support level near $25. C.R. Bard
(BCR) broke-down through a short-term support area near $51 and
it appears that the stock could fall to the mid-$40 range. Our
bearish debit spread is profitable with the stock below $56. The
recent credit strangle on CYGN did not materialize but it turns
out that was a good thing as the stock has managed to remain in
the $17-$18 range after the FDA advisory committee approved their
glucose monitoring device.

Many of our recent picks have suffered from profit-taking after
the recent rally. Most of the issues will rebound as the market
moves higher in coming months but the key to success in spread
strategies is position management. With this underlying goal in
mind, we decided to execute roll-outs on a few of our calendar
positions to January while the time premium is high. The first
candidate in the group is Priceline.com (PCLN). The (bullish)
diagonal spread could be moved to a January debit position for
a credit of $6.00, leaving us with a JAN50C/JAN60C at a cost of
$6.88. That brings the break-even down to $56.88 for the spread.
Delta And Pine Land (DLP) provides another excellent example.
Our new (bearish) diagonal spread is doing very well and we can
also increase the probability of profit on the neutral position
by moving to the JAN-$30 Put. The current spread, FEB30P/DEC30P
has a cost basis of $1.25. A roll to the January option reduces
the price of spread to $0.62 and allows us to widen the profit
range for the issue. Loral Space (LOR) is also moving lower as
the technology sector rallies but we can substantially increase
the downside margin with a move to January. The credit for the
transition to JAN-$20 calls (on the short side) is $0.56-$0.62.
Toys-R-Us is the last, noticeably bearish issue in the small-cap
calendar spread group. Fortunately, the spread has offered many
favorable exits over the past few weeks. As it stands, the play
ends in January so the only option is to close the long position
for the remaining profit ($0.75) and move to the next candidate.
     
Johnson & Johnson (JNJ) has been falling almost daily and it was
a prime candidate for adjustment. The move to January $100-calls
offered a $1.50 credit against the cost of the long-term (LEAPS)
position. The current spread is LJAN100C/JAN100C at $3.12 debit.
Sun Microsystems (SUNW) rocketed to a new high in the post-split
buying frenzy that surprised even the most bullish supporters of
the stock. Some analysts suggested the move was based on window
dressing purchases by fund managers. In any case, we'll wait for
the next pull-back before making a move to a higher strike price.
Adobe Systems (ADBE) made a $7 recovery today after slumping to
support near $60. The company announced some powerful e-commerce
and dynamic data modules for their Internet publishing software.
The product enables designers to create dynamic sites with one
familiar authoring tool (providing both page design and database
binding directly within the program) allowing Web teams to focus
on more complex programming tasks. If only they could design new
products to support their flagging share value.

Thursday, December 9

U.S. stocks rallied at the close, pushing all three major indices
into positive territory. The Dow Jones Industrial's led the market
with a 66 point climb to end at 11,134. The Nasdaq composite index
closed at a new record high of 3,594 while the S&P 500 index rose
4 points to 1,408. Trading volume on the Nasdaq set a record with
1.8 	billion shares exchanged. Market breadth was negative in heavy
trading on the NYSE with declining issues leading advancers 3 to 2.
The bellwether 30-year U.S. Treasury bond rose 5/32 to yield 6.22%.

Portfolio plays:

The incredible Lycos (LCOS) rally continued during the morning
session as the stock price rocketed to an all-time high at $92.
Our current straddle position topped-out at $33 credit, a $19
gain on the one month play and both January (bullish) spreads
are now significantly profitable. MessageMedia (MESG) rallied
almost $5 in early trading to a midday high near $19.50 after
Cisco Systems (CSCO) announced that MessageMedia would provide
outbound and inbound e-messaging services for Cisco customers,
resellers and partners worldwide. Cisco selected MessageMedia
for its scalable e-mail solutions and its customer relationship
management expertise. All of our recent plays on the issue were
based on speculation of an upcoming announcement and it appears
the rumors were accurate. Youth Networks (NETS) was another big
winner, bounding $3.88 to close at $29. Rumors for this company
suggest that Disney is planning to purchase 10% of NETS at $45
and create links to their current websites (Disney/Seek along
with Go Network/NETS and MYBYTES.com). Network Associates (NETA)
rallied $3 to finish at $25 after announcing a three year pact
with Dunn Computer Corporation. Dunn specializes in new network
design, implementation and integration solutions.
 
Online brokers rallied again as E*Trade Group (EGRP), Ameritrade
(AMTD) and TD Waterhouse (TWE) rebounded from yesterday's slump.
All three issues made favorable moves and EGRP led the pack with
a $3.25 spike. Ameritrade's climb puts the stock price exactly at
the sold strike; the maximum profit area for our bullish diagonal
spread. Another of today's favorable online financial stocks was
Net@Bank (NTBK). Our current spread (JAN22C/DEC25C) can be closed
for a profit of $0.62 but there is another alternative. A move to
the JAN-$25 call would increase the downside margin significantly
while providing a reasonable profit in the event the stock price
rallies during the next six weeks. The new (bull-call) position
would be JAN22C/JAN25C at a cost of $0.50. Internet retail stocks 
continue to perform well and Shop-At-Home (SATH) gapped to $13.50
during the morning session. The move allowed a favorable roll-out
to January options in our (bullish) calendar spread. The current
position is FEB15C/JAN15C at a debit of $0.38.

Zoltek (ZOLT) continues to lose ground in a post-earnings dip and
the question is where will technical support halt the downtrend.
A move to the $10 area offers the perfect opportunity for a roll
to the January options but for now, the issue has yet to find any
support in the current slide. Cendant (CD) also back-tracked in
today's session offering a new entry point in our (bullish) debit
spread at $3.88. The recent consolidation area near $17-$18 will
offer some downside support in the event of a small correction.

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


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

This week I received more requests for conservative, long-term
plays on small-cap issues. The majority of our spread plays on
lower-priced stocks are performing well and the trend should
continue as investors transition to new growth prospects in the
new year. These plays are based on the current price and trading
range of the underlying issue along with their recent technical
history. Market sentiment and upcoming news or events will have
an effect on these positions so review each play and make your
own decision about the future outcome of the stock price.

****

KM - Kmart  $10.00     *** Not Much Room Below! ***

Kmart is one of the world's largest mass merchandise retailers.
They operate in the general merchandise retailing industry with
locations in each of the 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam. Kmart has 2,177 retail stores and the
well-known Super-K Centers are located across the United States.

The Christmas season is off to a great start as cash continues to
flow generously during the first week of December. U.S. shoppers
encouraged by low unemployment, free-flowing consumer credit and
a good economy, showed few signs of reining in holiday spending.
Brick-and-mortar retailers continued to report solid sales gains
despite projections for a sharp increase in online shopping this
holiday season and last week, adjusted retail sales were up 4.5%
from year ago levels.

Retailers continue to be very pleased and highly optimistic about
the seasonal revenues with the strong U.S. economy contributing
to an increase in consumer spending. Kmart expects heavy shopping
over the Thanksgiving weekend to help December results and sales
from consolidated operations for the past three quarters were up
up almost 7% from a year earlier. With the recent slump in share
value and favorable option pricing, this position offers a high
probability of success with relatively low risk.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JUN-7.50  KM-FU OI=654   A=$3.38
SELL CALL JAN-10.00 KM-AB OI=11757 B=$1.06
INITIAL NET DEBIT TARGET=$2.12 TARGET ROI=50%

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

****

PTX - Pillowtex  $5.38     *** On The Rebound? ***

Pillowtex is a leading North American designer, manufacturer and
marketer of bed pillows, blankets, mattress pads and comforters.
They also offer complimentary bedroom textile furnishings such as
comforter covers, featherbeds, pillows and protectors, bedspreads,
synthetic comforters, shams, dust ruffles and window treatments.
PTX remains one of the top single-source supplier to retailers
for top-of-the-bed home textile furnishings, with an assortment
of products across multiple price points.

It's been a long, bumpy road to recovery for this much-maligned
industry leader and it appears that a rebound may finally be in
the making. This week, PTX management published a very in-depth
report concerning their financial condition and future outlook.
All of statements appeared positive and the company continues to
achieve new goals in the current business plan.

We favor the new trend in the technical history and the low risk
outlook for the position.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL MAY-5.00 PTX-EA OI=764 A=$1.88
SELL CALL JAN-7.50 PTX-AU OI=15  B=$0.38
INITIAL NET DEBIT TARGET=$1.31 TARGET ROI=50%

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


**************
MOMENTUM PLAYS
**************

QWST - Qwest Communications  $38.06   *** Moving On Up! ***

Qwest Communications is a leader in reliable and secure broadband
internet-based data, including voice and image communications for 
businesses and consumers. The Qwest Macro Capacity Fiber Network,
designed with the newest optical networking, will span more than
18,500 route miles in the United States when completed and Qwest
also has a pan-European venture with Dutch telecom company KPN,
to build and operate a high-capacity fiber optic network.

Today, Warburg Dillon Read raised its price target on Qwest to
$55, based on the potential value of its recent accomplishments.
Other brokerages support the view including Salomon Smith Barney
with a "buy" rating, US Clearing / Piper Jaffray with a "strong
buy" rating, and Morgan Stanley Dean Witter with a "strong buy"
rating. The upgrades focus on QWST becoming a global leader with
several undervalued assets that should stimulate stronger growth
and expected future positive surprises.

We agree with the outlook and both spread positions are based on 
favorable option pricing disparities and bullish technical trends.

PLAY (conservative - bullish/debit spread): 

BUY  CALL JAN-30.00 QWA-AF OI=6979  A=$8.62
SELL CALL JAN-35.00 QWA-AG OI=13983 B=$4.62
INITIAL NET DEBIT TARGET=$3.75 ROI(max)=33% B/E=$33.75

For speculative, short-term traders..

PLAY (aggressive - bullish/debit spread):

BUY  CALL DEC-35.00 QWA-LG OI=10491 A=$
SELL CALL DEC-37.50 QWA-LU OI=10858 B=$
INITIAL NET DEBIT TARGET=$1.88 ROI(max)=32% B/E=$36.88

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



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