Option Investor

Daily Newsletter, Thursday, 12/16/1999

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The Option Investor Newsletter         Thursday 12-16-99
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)
       12-16-99           High     Low     Volume  Advance Decline
DOW    11244.90 + 19.60 11244.90 11124.40 1,070,310k 1,454   1,629
Nasdaq  3715.06 + 93.11  3715.25  3621.95 1,424,908k 2,107   2,045
S&P-100  775.70 +  4.87   775.70   764.64    Totals  3,561   3,674
S&P-500 1423.11 +  5.59  1423.11  1408.35            49.2%   50.8%
$RUT     465.26 +  3.94   465.26   461.32
$TRAN   2933.01 +  1.97  2933.01  2909.58
VIX       24.88 +  1.52    25.58    22.82
Put/Call Ratio      .46

You can breathe now!

Did you hear it? The collective exhale as the market resumed its
upward advance from Tuesday's low was clearly audible. In fact
Denver Colorado, where OIN is located, has had winds up to 77 MPH
on both Wednesday and Thursday. Do you suppose it was related?
We all held our breath after the big drop on Tuesday but all the
anxiety was for nothing. After a quick -4.7% drop from the Monday
high, the Nasdaq is off setting records again. Two major factors
were the blowout earnings and 2:1 stock split by CMGI and the
rally by Microsoft after announcing they were delivering Windows
2000. It never hurts to have a couple of market moving news events
when the market is unsure of the next direction. CMGI soared today
as high as $240 but closed ONLY +22 at $221.56. Microsoft rallied
for the second day in a row on the Windows news with a +$5.19 gain.

Remember this chart from Tuesday night? I was expecting the 
Nasdaq to test 3520 again.


Here is the same chart two days later. Support held and we are
off to the races again. The Dow also tested previous support
at 11150 and actually traded several points blow that level
for a few minutes this afternoon. When the bounce came, it was
strong and with the help of the record setting Nasdaq, the Dow
is now likely to test the upper resistance range again tomorrow.



Another factor credited for the rally this afternoon was the
Year 2000 outlook from Abbey Joseph Cohen. She is expecting
another good year but not a great year. Her year end 2000
targets are 12,300 for the Dow and 1585 for the S&P-500. It
was after her lengthy interview on CNBC that the market did 
firm and start moving upward. I do not apply much credence to
her market moving ability. A perennial bull who peppers her
forecasts with numerous cautions, Ms. Cohen is a stalwart
in the bullish community but not a leader. If she turned
bearish it would be a major news event and a market mover
but just another choreographed bullish statement today did 
not give me the uncontrollable urge to buy.

The NYSE turned in another billion-share day marking only
the second time in history that the exchange traded over
1 billion shares three days in a row. The last was in April
when we had a +1300 point rally. That we closed up on strong
volume is a good sign normally but the breadth on the NYSE
was still negative. Unusually strong volume three days in 
a row with decliners beating advancers is not the kind of
foundation you want for a rally. The rally is still being
carried by the few big caps in the Dow while the broader
market is still slipping. 

The bond market rally from last week is history. After the
weekly jobs numbers were posted this morning, showing the
smallest number of new filers for unemployment since 1973,
and an increasing trade deficit, the bond yields soared to
a high of 6.4%. Last weeks forecast by many analysts of sub 
6% yields this week are rapidly being replaced by whispers
of +7% yields soon. While many are leery of the Fed meeting
next week, almost no one expects an interest rate hike. 
Alan Greenspan is too political to tank the market during
Christmas week. However the next Fed meeting after Y2K is
going to be a market mover for sure. Oil closed near $27 a 
barrel today and that will eventually impact inflation and
influence the Fed.'s movement.

Tomorrow is a triple witching options expiration day and 
we have probably already benefited with the rally today. 
Many analysts however are pointing to Friday as the "last"
trading day of this year. Many funds are planning a lock
down for the next two weeks and volume is likely to set
records on the low side instead of the high side. With very
low volume we are likely to see either giant volatility
swings or a EKG flat line of a market gone to sleep. I put
my two cents on the side of the big swings. The funds may
go into hibernation but greed is alive and well. Day trading
is also alive and well and there are likely to be many news 
events and Y2K rumors to move the markets.

The undercurrent of sellers as indicated by the advance
decline line is undoubtedly cautious Y2K investors moving
to the sidelines. We will not know if this is going to turn
into a flood until after the options expiration tomorrow.
Monday should be the key. If we can maintain positive Dow
and Nasdaq momentum even with the negative breadth then we
probably will not see any big moves. Only ten trading days
remain between now and Y2K so any move to the sidelines will
have to start very soon. I am not saying that half of the
investors are going to panic sell. If anything maybe only
2-3% may step aside. Still 3% would be a large number in 
shares and dollars and could swing the markets several
hundred points. Personally I would love to see a several
hundred point drop between now and Y2K. It would make the
Jan 3rd rally that much more explosive. There would be less
fear of profit taking and more confidence moving into the
January earnings period. I am stockpiling cash in my account
just in case we get another buying opportunity.

A reader sent the following expanded symbols. Send us yours.

JDSU = J(ust) D(on't) S(ell) U(niphase) 
QCOM = Q(uick) C(ash) O(n) M(oves)

Good Luck, Sell Too Soon.

Jim Brown


Microsoft Delivers a Solar Plexus Punch
By  S.P. Brown

In the "reports of my death are greatly exaggerated" category, 
software titan Microsoft (MSFT) let the world know yesterday 
that it is indeed alive and kicking.  On Wednesday, the 
Redmond, Washington-based company announced it has released 
the final version of its newest operating system, Windows 
2000, to its manufacturing facilities.  Retail sales for the 
next-generation of Windows are set to begin on February 17.


Market Posture

As of Market Close - Thursday, December 16, 1999 

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

DOW Industrials   10,750  11,320  11,245    Neutral  11.12
SPX S&P 500        1,340   1,400   1,419    BULLISH  12.03
OEX S&P 100          700     750     772    BULLISH  12.03
RUT Russell 2000     430     450     465    BULLISH  11.12
NDX NASD 100       2,650   3,150   3,332    BULLISH  12.03
MSH High Tech      1,340   1,630   1,735    BULLISH  12.03

XCI Hardware       1,075   1,160   1,308    BULLISH  11.11
CWX Software       1,000   1,160   1,317    BULLISH   9.03
SOX Semiconductor    570     660     631    Neutral  12.10
NWX Networking       650     800     853    BULLISH  12.03
INX Internet         525     675     751    BULLISH  12.07

BIX Banking          645     690     554    BEARISH  11.30
XBD Brokerage        395     450     417    Neutral  11.30
IUX Insurance        625     650     593    BEARISH  11.30

RLX Retail           875     910     993    BULLISH  11.23
DRG Drug             375     395     352    BEARISH  12.07
HCX Healthcare       750     790     701    BEARISH  12.07
XAL Airline          180     190     149    BEARISH   5.21
OIX Oil & Gas        285     315     301    Neutral  11.23

Posture Alert    
Technology stocks ignored the sell off in the bond market and 
continued marching on, as the Nasdaq closed up +2.57% for another 
all-time high! Sectors that outperformed Thursday include 
Semiconductors (+4.13%), which also bounced nicely off of its 
50-day moving average, Hardware (+2.89%), and the Nasdaq 100 
(+2.88%). Losers today included Healthcare (-2.16%), Banking 
(-1.84%), and Drugs (-1.78%). There are no current changes in 

Market Sentiment 

Thursday December 16, 1999

Negative Sentiment Continues!

The Nasdaq continues on its unprecedented run and closed at new 
highs once again today. Technology shares got a lift from the 
strength in Microsoft and a solid earnings quarter for CMGI. These 
record highs seem even more improbable, given the face of higher 
yields in the bond market. Now granted, who wants to own a 30-year 
Treasury yielding 6.4% annually when you could own AOL for the 
decade and have a return of 79,500%! We know what we want to 

The matter of fact with the 30-year Treasury is how quickly the 
sentiment can change. Granted, we saw nice buying in select 
issues today, but what happens when the bond breaks new highs. The 
sentiment can change quickly, and if we see the bond break above 
6.4%, watch out! Remember, equities drop twice as fast as opposed 
to when they rise, so continue with a bit of caution and watch the 
bond, even though many people are ignoring it. All you have to do 
is remember how quickly the market dropped several months ago when 
interest rates became an issue. The last thing any investor wants 
is buying at the top when interest rates become a predominate 
force in the market.  

Now on to more positive issue, we continue to see put buying in 
the Nasdaq 100. As you know, this sector has been a phenomenal 
performer this year and continues to rise. The major element that 
we have witnessed during this big bull-run in the NDX has been 
consistent put buying. At every major benchmark, put buyers have 
stepped up to the plate. This mentality of trying to call a market 
top still continues, and was felt yesterday when several strikes 
(puts) doubled their open interest, overnight! This was a very 
bearish position, and from a contrarian stance, it signaled more 
upside for the NDX. The Nasdaq 100 also trades as a stock on the 
American Exchange, under the symbol QQQ. We have mentioned in 
past letters about the high short interest on this issue, but if 
you were to go to the CBOE's option montage and enter QQQ, you 
would see open interest that significantly favors the puts. This 
trend has been very consistent this entire year, and until the put 
buyers throw in the towel and stop making purchases, we believe 
upside in this sector will continue! The day we see calls 
dominating the puts of the Nasdaq 100, and short interest 
decreasing dramatically, is the day we run the opposite direction. 
Short interest for the latest ending month is due out soon, and 
hopefully the negative sentiment continues.


Cash Flow:
The amount of money being poured into this market continues to be  
Strong, as evidenced by this last week's record IPO's. 

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.

News events continue to squeeze the shorts, as lately evidenced by 
Yahoo's incredible run up in stock price.

Mixed Signs:

Volatility Index (23.17):
Once again, the VIX presaged a near-term market top, when it 
bounced off of 20. It is now safely off of the lows, however, a 
break through its 50dma may signal more downside in the market.


Interest Rates (6.384%):
The yield on the 30-yr Treasury is back into dangerous territory, 
and could cause a precipitous sell-off should we see new 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. However, we 
did see a slight downtick in sentiment this last week.

Energy Prices:
With the rapid rise in crude oil, everything from manufacturing to 
transportation will be affected by higher costs. These higher 
costs will be felt 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%
Friday, December 10       86,405      +138.9%

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                       (12/10)     (12/14)    (12/16)

Overhead Resistance (770-800)    14.51       3.96       6.47
Overhead Resistance (750-765)      .85        .68        .58

OEX Close                       763.49     758.62     772.06

Underlying Support (730-745)      3.01       3.51       6.55

What the Pinnacle Index is telling us:
Based on 12/16, current overhead (770-800) is heavy, so we would 
be surprised to see a major break above 780 this week.

Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (12/10)    (12/14)    (12/16)

CBOE Total P/C Ratio             .45         .40        .46
CBOE Equity P/C Ratio            .35         .32        .36
OEX P/C Ratio                   1.44        1.42       1.40

Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (12/10)          (12/14)          (12/16)

Puts                 750 / 14,912     750 / 14,349    750 / 12,811
Calls                780 / 13,427     780 / 12,491    780 / 12,964
Put/Call Ratio         1.11              1.15           .99

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
December 16, 1999                       23.17

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 24, 1999                     53.0        28.7
December 10, 1999                     51.7        29.3

Please view this in COURIER 10 font for alignment

Daily Results

Index      Last   Mon    Tue    Wed    Thu   Week
Dow     11244.89-32.11 -32.42  65.15  19.57  20.19
Nasdaq   3715.06 37.93 -86.51  50.29  93.11  94.82
$OEX      772.06 -0.36  -4.51   8.57   4.87   8.57
$SPX     1418.78 -1.82 -12.05  10.02   5.59   1.74
$RUT      465.26  3.67  -7.63  -1.43   3.94  -1.45
$TRAN    2921.51 21.04  12.90  10.66   1.97  46.57
$VIX       23.17  2.68   0.87  -1.11  -0.19   2.25

Calls             Mon    Tue    Wed    Thu   Week

QCOM      439.25 26.06   3.69   1.94  16.06  47.75  Great week!
NSOL      248.00-10.50   0.81   6.94  34.06  31.31  What a start
BVSN      131.69 23.00  -7.00   4.75   3.94  24.69  New
NXLK       71.38  5.13  -2.56   5.25  -0.56   7.25  Up nicely
TTN        35.00  0.81  -0.56   3.63   2.63   6.50  New
JDSU      249.88-10.19 -14.19   8.75  21.25   5.63  Great day!
VRTS      113.00 -1.50  -4.81   5.44   4.81   3.94  Buyers swoop
NT         90.00  0.69  -0.88   0.56   1.38   1.75  Groovin'!
STM       137.81 -1.69  -7.75  -0.63  11.06   1.00  Soars high
ARBA      237.50 -2.25  -0.25 -10.25  13.50   0.75  Dropped
GE        147.63  0.75   1.06  -4.38   3.19   0.63  Splitting?
INKT      168.31 10.50 -17.19   5.19   2.06   0.56  Slow and sure
CLS        86.63  3.81  -8.94  -2.50   7.50  -0.13  Jumping!
VOD        49.00 -0.50  -0.38  -0.06   1.44  -0.38  Better day
NTAP      152.94  6.75   3.38 -11.06   0.00  -0.94  Split-run
TMX       108.44 -2.38  -2.56   0.81   2.44  -1.69  Momentum!
NOK       164.00 -1.50  -7.56  -5.00   9.00  -5.06  Recovers
MACR       81.00 -2.81  -2.19  -3.00   2.13  -5.88  On support
DCLK      189.69  2.50 -16.69  -1.06   8.94  -6.31  #1 pick!
SUNW       74.94 -1.44  -4.88  -2.13   1.50  -6.94  Sunny day
AOL        86.00  2.31  -5.50  -1.31  -3.63  -8.13  AOL & WMT?


KIDE       35.44 -2.19  -4.50  -0.88  -1.69  -9.25  Close at low
ETYS       39.94  0.81   0.56  -4.44  -2.13  -5.19  Fun put play
GT         28.13 -0.19  -0.44  -0.06   0.00  -0.63  Thanks 5-dma!
GILD       39.06  1.00  -1.31   0.81  -0.44   0.06  Taking a nap


Tonight, I wanted to discuss a few charting techniques and an 
indicator I use called Directional Movement. First though, a 
few thoughts on future Blow & Go stocks and a little more on 
the QCOM and YHOO strategies.

I've been asked what companies I am watching for use with a 
future Blow & Go play. I expect a melt up in the markets in 
early January, followed by what could be a nasty period of 
profit taking. I hope I am wrong about that, but once all the 
money from end of year, bonuses and sidelined money from Y2K 
have been reinvested, many will be ready to take profits from 
this massive tech run up since the end of October. Except for 
a few strong plays here & there, at this time I plan on sitting 
out late January & February.

If a strong pull back occurs, I will be looking for entries 
on companies that I want to hold in my core account. Remember, 
I look for stock on strong companies which I can get for "free". 
At this time, these are some of the companies that will be on 
my radar screen.


I will exercise a few profitable contracts in QCOM, YHOO and 
SUNW in January, to receive my "free" shares from their recent 
run up. Also, I am holding April DCLK and January CMGI which 
may give me two more opportunities. Otherwise, I used my IRA 
account to buy leaps for Blow & Go, at the market bottom in 
October. I did this so I would not be distracted with trying 
to "trade" this account through Y2K, choosing to focus instead 
on my personal accounts. In the IRA, I buy leaps when bad news 
hits good companies or in sell off periods. I hold 2001 or 2002 
As you will notice, several of these had bad news events since 
this summer, which made options/leaps very cheap. 

A follow-up to my last minute OTM QCOM purchase on Tuesday at 
the close. Having been out of the market without news, charts 
and account information since the previous Friday afternoon, 
I was very anxious to play. Usually, on a sell off day, I am 
looking for entry points. The QCOM purchase was more of a gut 
call, due to the strength of QCOM that day in the face of a 
broader market sell off. It was a risky purchase at best, but 
I am up 4 points. I expect these to continue to climb from here. 

I told you that I would be looking for a YHOO entry on Wednesday. 
What a lucky call!!! YHOO sold off big time and hit a 317-ish dip, 
which it had not seen since the post S&P inclusion sell off last 
Wednesday. (see chart below) That was a GREAT entry!! Having a 
great entry though, means you have to execute the trade. When I 
tried to place the order, I found that I had some glitches in my 
newly loaded software programs, in my new computer. Talk about 
frustrating!! I basically got filled in the 320 area, which I 
can't complain. 

In the chart below, notice the congestion right around the 315-320 
area on Wednesday December 8th. This is where YHOO bounced after 
the sell off, the day after inclusion in the S&P. That told me 
that was a strong support level, because the run up had been so 
strong. Most likely, if it were to sell off further, it would 
have happened on that day or the next. So when YHOO visited that 
neighborhood again, I assumed it was bringing me a present!! That 
is called a good entry point and what Jim means when he says "Don't 
chase it. Let it come to you." Notice that the contracts I forced 
myself to sell at the high last Friday (as I panicked with my hard 
drive crash), proved to be another lucky move. Also, the larger 
blue lines on both sides of the price movement are called the 
Bollinger Bands. Notice the general sell off and buying that 
occurs as it touches the top and lower bands. To me, this is 
better seen on a 1 and 5 minute chart, but you get the point.


My personal feelings are that YHOO will experience more volatility 
between now and AFTER January 1st, when it should stabilize to take 
off for its earnings run...and pre split announcement run. Prior to 
January, I think a lot of people will be "trading" YHOO, meaning 
it is a candidate for sell offs and profit taking, followed by 
quick buying opportunities. This is how I am playing it, which 
is why I sold some January contracts today, to buy CMGI in the 
afternoon drop. 

One of the indicators that I use with my charting service is 
called Directional Movement (DM). The Directional Movement System 
helps determine if a security is "trending." Developed by Welles 
Wilder, the basic directional movement trading system involves 
comparing the 14-day +DI ("Directional Indicator") and the 14-day 
-DI. This can be done by plotting the two indicators on top of 
each other or by subtracting the +DI from the -DI. Wilder suggests 
buying when the +DI rises above the -DI and selling when the +DI 
falls below the -DI. He uses this system on other type of plays 
but I have found it helpful if I change the settings from the 14 
DI, to a more sensitive period particular for the stock I am 
following. It helps me to time intra-day and intra-hour trades. 
The heavier line is a slower smoothing line and is a longer 
duration study period.  

Knowing I was hunting for a YHOO entry yesterday, I changed my 
parameters to capture fast price movement, against a short term 
pricing history. For this example, let's say I used 3 and 7. 
This allowed me to capture the post S&P sell off period without 
getting skewed by the fast run up prior to the close last Tuesday. 
Since I already knew the support level shown in the above chart, 
I was using the intra-day chart to give me timing signal for entry 
at that level. Notice the green line crossing up through the red 
line right after 11:00 am on Wednesday. That is when I tried to 
enter my order. That is called a bounce up and since it at last 
weeks support, I felt sure it was a good entry point. The chart 
and indicators proved me right.


I use different indicators with different graphs for different 
reasons. It totally depends on the play and what I am trying to 
accomplish. I am not a technician. I've just developed my own 
system which works for me and I am continually fine tuning it. 
There are times when these indicators tell me to do one thing, 
but then I do the complete opposite. Technicians never do that. 
I do this because to me, technical analysis is based on past
history, whereas my gut is more sensitive to events I know that 
are soon to occur in the future. Also, because I am a woman, I 
have the right to change my mind. ;-)

Good Trading!!



An Osmotic Technical Point of View
Hello.... my name is Harrison....I am a Stockaholic

Ok, I took my own advice that I posted in my article on Sunday 
and pushed myself away from this fabulous feast of a market. As 
I had liquidated 99% of my holdings by Monday, the dessert came 
in the form of an 80 point drop in the NASDAQ. There were some 
great short term retracements in there too.

My revelation and consternation came about shortly after I had 
told all of my trading buddies that I was done trading for the 
rest of the week and that I was not going to even turn on the 
computers. I did not care since I did not have any positions to 
concern myself with. I was going to take it easy this week! Well, 
that lasted for all of 15 hours.

It started innocently enough with a phone call from a friend who 
wanted to talk about Apple's nice little drop. I had played Apple 
short in the teens and had watched it blow through 104 and now it 
was down around 92. Yes, it was a nice little short term correction 
and with the premium in the calls, it appears that there are quite 
a few people that think it must be heading north. What positions 
was I playing today, she asked? None, I am taking a vacation this 
week. No plays for me, no sir, not this week.

Well, yes Apple does look like it is good for at least 5 points 
short term. Maybe, the play would be to just by the stock and see 
if it runs. Then look at doing good old covered calls north of 97. 
There are some juicy premiums in the calls and as an added benefit, 
no more capital gains this year.

Hmmm, it does look good here, maybe, I could pick up a few hundred 
shares and sell the Jan 100 calls. They are at $7 now and still $8 
dollars out of the money. Hmm, possibly $15+ on $46 on margin for 
one month, that equates to 32.6% return in one month. Heck, a lot 
of the big boys don't do that in a year, tempting! Apple just might 
be the dessert I was waiting for.

So, now I have a small position in Apple. No biggy. Still on 
vacation. No need to watch the market. Uh oh, another phone call 
from another trading buddy. "Harrison, look at Mr. Softy (MSFT)." 
Wow, what a nice break out. Looks like it could really run from 
here. Nice support. Man those 2002 leaps look like a buy here! 
Missed the run last time. Hmmm, they do look good! Well, maybe 
just 5 contracts..... this position won't need baby sitting.

At the close and 6 positions later, it hit me. I am a stockaholic! 
I just can't help myself. But, I guess it could be worse. I could 
be blowing money and smell bad, instead of making money and still 
retaining fairly decent grooming habits. I wonder if they have 
Stockaholics Anonymous meetings? Do you think that I could pick up 
any charting pointers there?

Happy Trading



Time on Target

Earlier this year, I was in a job interview with a firm in San 
Diego. Out one side of the high rise, I could look south towards 
the city, the harbor, and Coronado, where, as a Marine Lieutenant, 
I spent many a weekend getting away from my base at Twentynine 
Palms, 200 miles into the Mojave Desert. To the east, I looked 
out on Miramar Naval Air Station, where F/A-18s and F-14s were 
taking off to conduct air combat manuevers (read: dog fights) as
part of the Top Gun training program. I knew those aircraft well 
from serving as a Rifle Company Fire Support Coordinator. We would 
ride around in the high desert, and perch on a cliff overlooking 
some long dead tank that served as a training target. The artillery 
forward observers would set up their radios while a Marine Captain/ 
Pilot would make contact with the aircraft off in the distance. 
We would set up a "time on target" mission, in which the artillery 
marked the target with a white phosperous round 30 second before 
the appointed time hack, and the "fast movers" would streak in 
upside down to acquire the mark, roll over, and drop bombs on the 
mark. The idea was to get good at these procedures so that amidst 
chaos, it would be second nature. A few Recon Marines with a radio, 
trapped on a roof during the Battle of Khafgi during the Gulf War, 
used similar procedures to destroy the better part of an Iraqi 
mechanized regiment that had attempted a preemptive attack on the 
Saudi border town on the eve of the ground war.

A year after that interview, I now recall the view to the west 
towards the ocean from that La Jolla office tower. Near the ocean, 
a cluster of white buildings nestled near the University of 
California campus -- the headquarters of Qualcomm. I recall 
talking to an interviewer about the importance of CDMA technology, 
since QCOM was an important client of the firm. A few weeks later, 
I would get my first CDMA phone. Over the past year, like a F/A-18 
climbing on afterburner, QCOM has streaked into the stratosphere. 
But, upon further analysis, I tend to think that it is still very 
early in its ascent. In the past few days, I have read about a CDMA
deal in China, a glowing report on the quality of Globalstar satellite
phone handsets using CDMA technology, set top boxes using CDMA, 
delivery of movies to theaters using CDMA, and a trial run of 2000 
wireless lap top computers using CDMA. Since I am writing this 
article from a coffee shop over looking the Golden Gate (family 
owned since 1937, great minestrone!) on a wireless modem equipped 
laptop (on which I have watched an awesome close!), I am well 
aware of the potential for the adoption of such devices.

The potential for adoption of cell phone handsets with CDMA alone 
is staggering. On Tuesday night, while thinking over the importance 
of the Nasdaq's precipitous decline over a late night meal in a 
Chinese restaurant, I started reading The Gorilla Game, which 
argued that the dynamic effects of the adoption of a standard 
(eg, Windows) could drive a company's price (eg, MSFT, 1989 - 1998) 
far faster than any usual metrics of stock valuation. In short, 
that cluster of white buildings at the southern end of the Pacific 
seaboard could represent an opportunity similar to another 
nondescript cluster of buildings at the northern end of the West
Coast up in Redmond, Washington. All of this thinking, along with 
the fact that I am getting fatigued by trading and am making bad 
decisions, has lead me to set up one final "time on target" mission 
in my 1999 option trading. The simple plan is to put all of my 
remaining ST Options capital into QCOM January Calls, and to let 
them ride through Jan 3 or 4. 

Sound audacious? Sound risky? It sure is. The stock is trading 
at 423, with a PE north of 300. By any normal metrics, the stock 
is grossly overvalued. But this is not a normal time. Fundamental 
to my decision is that both the Fed and financial institutions 
are pumping liquidity into the market to avoid any glitches in 
the face of Y2K. We had a dip Wednesday, and it was met by buying. 
I believe other dips will be too as individual mutual fund managers 
cannot afford to be underinvested in the face of a likely January
rally. Add to this the wall of worry that Y2K represents. Yes, 
hospital records, financial records, and voting records in small 
countries will be lost. By in large, things will work in the 
United States. When they do, even more money will flood the 
markets on the first few days of the New Year. And, on the eve 
of the new millennium, Qualcomm is audaciously splitting its 
stock 4:1. If it is at $500 by then, shares at $125 will seem
cheap. My options (and I already hold January contracts and as 
well as a Jan02 LEAP position) will split 4:1. Normally, it is 
wise to exit plays before a split, but this time, I will probably 
hold over the split because of the unprecedented power of a 4:1, 
the real wall of worry that Y2K represents, and the recent 
post-split performance of stocks like SUNW, VRSN, and CMGI after 
splits. Finally, I want to heavy barrel this play now because of 
the upcoming shareholder meeting on 12/20, which will also confirm 
the split date, and may be a good venue to announce the sale of the
handset division. Working against me, of course, will be time decay 
on options with enormous premiums. I will buy in the money, so at 
least a good chunk of the value is represented by intrinsic value. 
If, however, QCOM starts to run into its split, I should see a 
pretty good delta in the appreciation of my plays. 

My trading this week has been fair to poor (though, as I revise 
this piece after the close on Thursday, my profit/loss is 
absolutely rockin', largely due to QCOM and a renewed NOK!). 
There have been 3 terrific entries into the December Rally 
(11/30 - 12/1; 12/9; and 12/15). I absolutely crushed the first 
one, but, in retrospect it was because I was fresh, coming off of
a week and a half Thanksgiving break. I entered plays too early 
on 12/8, in part because I had held a QCOM play over from the 
first entry, and I was distracted. I also made a undisciplined 
entry into call plays on JDSU, AOL, and INKT on 12/14, again, a 
day too early. One potential lesson to draw from this is to have 
a bias to be in cash (ie, sell too soon) so that you can make 
sound decisions for your next entry. Based on the overall market
conditions, and my assumptions about a continued Christmas/ New 
Years liquidity driven rally, I am taking a highly risky course 
of action. I am staying in all of my plays, and adding all of my 
remaining capital to the QCOM Jan play also. I expect some 
volatility, but I also expect a steady run up to the 4:1 split. 
JDSU and INKT are also splitting right before the New Year. Of 
course, all of my plays have not been bad. I bought 100 SCH Jan45 
Calls for 1.5 last Thursday on a report about trading volumes. I 
sold those contracts at 2.25 on Monday. I bought MSFT Jan100 Calls 
at 5.75 (thanks, Preferred Trade, for a clutch fill on that one) 
on the breakout above its all time high of 100 3/4 yesterday, and 
sold half of the position for 8.125 today, and will hold the other 
half for a January earnings run. 

On the downside, my NOK Jan160 position has crumbled with the 
stock bouncing off of 150 today after a several day decline. 
NOK, too, may benefit from the QCOM situation, especially if it 
aquires the handset division (Thus, though, NOK is bouncing back 
nicely). By January, I expect a pretty strong rebound for NOK, 
a company that one analyst noted may become the largest PC 
manufacturer in a few years. In my LT Stock Portfolio, I bought 
QCOM Jan02 410 LEAPS, GSTRF Jan02 30 LEAPS, NOK Jan02 200 LEAPS 
(Roth IRA) to augment my purchases of CSCO and GE Jan 02 LEAPS
earlier in November/ December. I'll take some 25 - 50% profits 
on part of my positions with limit sells and will put that cash 
to work when I dial back into the markets on December 29. 

Anyway, the mission is called in and the fast movers are running. 
Now, I just need to get a good view and get ready for the fireworks.

Janar Joseph Wasito

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.


ARBA $237.50 +13.50 (+0.75) Yes, we are ending our play on ARBA, 
though the story certainly isn't over.  ARBA found itself being 
a very hot topic on Wednesday as it was announced that ARBA was 
in talks to acquire Tradex Technologies in an estimated $1.86 bln
stock swap.  The union of these two companies has investors 
excited, as the business-to-business market just keeps getting 
hotter.  This news, combined with the final leg of the split-run,
helped propel ARBA to a high of $242.63 for the day.  Shares of 
ARBA will be splitting tomorrow, which is why we recommended 
closing out your positions before the close today, however, 
this is one for your radar screens going forward.  


No dropped put plays today.

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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
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The newsletter staff makes every effort to provide timely 
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delivery times due to factors beyond our control.
The Option Investor Newsletter         Thursday 12-16-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


GE $147.63 +3.19 (+0.19) Who ever heard of selling the news two 
days before it even happens?  That seems to be at least part 
of the explanation for the poor action in the shares of GE 
yesterday.  On a day when the Dow shot up 65 points it was 
discouraging to see GE drop 2.5 points.  As we have previously 
reported, GE's board is meeting tomorrow to discuss, among 
other things, splitting the stock.  Weakness in the stock may 
be indicative of less confidence in the possibility of a split.  
Jack Welch, CEO of GE has had two opportunities this week to 
"leak" the news of a split during meetings with analysts.  His 
lips have been sealed.  The fact that GE closed yesterday more 
than 3 points above its intraday low was encouraging.  Taking 
out the previous day's low was discouraging.  Today's action 
in the shares of GE was much improved.  After trading just below 
yesterday's low, GE rallied the rest of the day to get back 
close to even for the week.  Keep those stops in.  Although we 
may get a "pop" in the stock tomorrow with a split announcement, 
it nevertheless seems that the momentum is slowing.  A drop 
below today's low of $143.75 could lead to consolidation between 
$135 and $140.  So be careful about putting on any new positions 
until GE can trade through its high of $149.88.

NXLK $71.38 -0.56 (+7.25) Nextlink seems to be building a 
short-term wedge (higher-lows and lower-highs) at the $70 
level.  It traded up nicely for us topping out at just under 
$72 yesterday before selling off.  Today's rally fell short of 
yesterday's high.  A close tomorrow around the strike price of 
$70 seems likely for expiration.  The trend is still intact 
to the upside.  $69.25 would be a good entry point for new 
positions.  Major support remains at the $65 area.  If a 
wedge does develop, stay observant.  Wedges can result in big 
price moves in either direction.  We will keep you posted.  A 
break above $72 could result in some quick gains for traders 
so keep an eye out for that as well.  There has not been any 
significant news in the past two days for NXLK.

CLS $86.63 +7.50 (-0.13) Celestica has been jumping all over 
the place the past two days as investors engage in a classic 
tug-of-war.  Some feel that Solectron's recently revealed 
problems could hold true for others in the sector.  Other 
investors think the quick sell-off in CLS is a buying 
opportunity for the split on December 22nd.  The stock traded 
below the key support level of $80 yesterday and immediately 
dropped to $75.  Today's rally of $7.50 would have been more 
impressive with more volume.  Today's volume was less than half 
of the volume of the previous two day's trading.  Because of 
this fact, you may want to use caution in entering new trades 
just yet.  On the downside, $80 is still a key pivot point for 
the stock and it should be watched carefully.

STM $137.81 +11.06 (+1.00) The recent pullback in Semiconductor
stocks like STM was said to be a good buying opportunity.  That
was CORRECT!! On the back of positive comments for the overall 
sector and specifically the "Chips".  Analyst believe revenue 
growth for the sector will exceed the high end of the forecast 
for next year.  The $SOX index finally saw some daylight, up 
today 25 points.  Shares of STM remained close to $127 level
during yesterday's volatile session, bouncing off a low of the
day of $123, before closing at $126.75.  This mornings analyst
comments had the shares soaring out of the gate to open at $135, 
and got stronger during the trading day, reaching a high of 
$140.88, before closing at $138.81, which is a closing high for
the year.  The volume and price surges got stronger at the end
of the session as money rotated into STM, and the stocks in the
sector with a vengeance.  Going forward protect any gains with
trailing stops, look for higher-highs over the near term.  We 
remain bullish at current levels and would consider new entry 
points at this level. 

MACR $81.00 +2.13 (-5.88) MACR's trading pattern has remained
predictable, but seems to be getting weaker technically.  In
the midst of yesterday's sell-off in the shares, and then 
technical bounce off of the lows $75.75, MACR participated in 
the comeback, but we did not see the regular 4 to 5 point 
surges after weakness.  It took two trading days to recover from 
Wednesday's sell-off.  The two day trading range $75.75-$82.88.  
This was a normal one day range.  In defense, MACR's chart 
pattern seems to be setting up for another leg up, but we need 
to see more volume.  Without the pick up in volume, the stock may 
begin to rollover.  We are bullish, but cautious going forward 
and look to tighten up stops.  

DCLK $189.69 +8.94 (-6.31) DCLK was a number one pick of Net
analyst "Vik Mehta" at the Goldman Sachs 2000 outlook conference.
He is bullish going forward on the company as they increase there
leadership position in the online Ad space.  DCLK was on fire 
today with the rest of the Cyber shares.  The profit-taking of 
previous sessions provided another trading opportunity.  The 
trading range for the last two sessions has been $174-$190. 
Another volatile ride, but there were a number of target- 
shooting opportunities for those traders with nerves of steel.  
Today's close was positive, closing near the high end of the 
range.  Above the $190 level continues to look attractive.  The
first level of resistance is $196, and then again at $198.50.
Above these levels would be another breakout towards the current
52-week highs of $209.38.  With the ever present volatility in 
DCLK, any pullback near the $181 level should hold in current
market conditions.  There is major support near $174.  The moves 
will only be enhanced during tomorrow's trading session, due to 
triple- witching Friday.  

INKT $168.31 +2.06 (+0.56) Slowly but surely INKT edged back 
off support ($160) gaining a little over $7 in the past two 
trading sessions.  Volume was a bit sluggish on the recovery, 
however INKT still remains above the 10-dma ($164.33) and this 
is a good sign.  There's about two weeks left to play this split 
run.  We're anticipating momentum to get revved up as the 
paydate approaches so look for increased volume to forecast a 
strong breakout.  INKT is expected to split on or about December 
30th.  Be prepared to have any open positions closed out by 
then to avoid post-split depression. 

TMX $108.44 +2.44 (-1.69) TMX started moving on Wednesday, 
fueled by a resurgence in the Mexican bank stocks.  Traders 
cited the Mexican Budget approval and a separate $505 mln World 
Bank loan for the re-capitalization of Mexico's banking system 
as major factors in the rally.  Gains extended into today's 
session on the tails of a strong tech sector.  TMX managed 
to peak at $109 bring it back into striking distance of last 
Friday's all-time high at $110.50.  Look for increased trading 
activity to propel TMX through resistance.  Support remains firm 
at $105 above the 10-dma ($104.04).  Remember there's a 2:1 
stock split in the future on February 1st. 

NTAP $152.94 +0.00 (-0.94) After adding NTAP Tuesday evening, 
we saw the sector fall in sympathy with Cisco (CSCO), a leading 
networking company.  CSCO announced on Wednesday that it 
"expects that in the future our net sales may grow at a slower 
rate than experienced in previous periods" and this put a dark 
cloud over NTAP's split party.  Consequently NTAP returned to 
the $150 range (firm support) and played Ping-Pong off the 10-
dma ($152.08).  Still the stock managed to break $160 during 
amateur hour today.  There's only two trading sessions left to 
play this split run so remember if your going to play, make it 
quick.  All positions should be closed by the end of trading 
on Monday as NTAP goes ex-div on Tuesday.

AOL $86.00 -3.63 (-5.50) Following a strong opening today, AOL 
steadily succumbed to selling pressure and hunkered back down to 
the 10-dma ($85.66).  Below is firmer support at $80-82, but an 
entry at this level could be risky.  That is because we would 
really expect the $85 support to hold if AOL were to remain on 
the call list.  Look for a strong bounce to confirm momentum.  
The big news today was the cross marketing deal between AOL 
and Wal-Mart (WMT).  Together they announced a broad range of 
initiatives including a co-branded ISP.  The deal was received 
well by analysts.  Lehman Bros reiterated a Buy recommendation 
and DLJ gave AOL a Top Pick rating.  Both firms issued a $100
target price.

NSOL $248.00 +34.06 (+29.25) Wow, what a start to our brand new 
play in NSOL.  In the past two days traders have bid the price 
of NSOL stock over $41 higher.  NSOL made a new high at $251
just before the close of business Thursday.  Investors continued
to poor money into the tech sector today.  News hit the market
Monday that NSOL was among a new group of stocks to join the 
Nasdaq 100 index.  NSOL will join that select group at the 
beginning of trading Monday.  In addition NSOL will also be
included in the Nasdaq 100 tracking stocks, which includes
securities representing ownership in the Nasdaq-100 Trust.
The $4 billion Trust holds a portfolio of equity securities
that compose the Nasdaq-100 index.  As for our play, NSOL 
gave us an opportunity to jump on board yesterday afternoon.  
Hopefully if you joined in you either enjoyed a great profit 
or have moved your trailing stops up along the way.  NSOL now 
has several levels of intraday support, with the first being 
$245 followed by $239 and $230.  If we see a pullback followed
by a bounce off these areas, it would provide a good entry 
point or allow to add to existing positions.  As always, assess 
your risk profile prior to entering any new play.

VOD $49.38 +1.44 (-0.38) The telecom sector had a better day 
today and so did VOD.  Nothing really new on the Mannesmann saga.  
Shares of VOD picked up +1.44 on lighter than average volume.
Our play in VOD is struggling, but on the bright side, hasn't
gone in the tank.  We are still waiting for a point to re-enter 
our play.  After falling to a support level of $47.50 on 
Wednesday, VOD did bounce back today, but still has closed under
its 10-dma at $50.09.  VOD is the kind of stock that can explode
on a moment's notice or crumble do to lack of buyers and news.
Today VOD had a bit of both.  The big news for VOD was that they
offered a share swap for a 30.5 percent stake in Airtel.  Under
the offer VOD would swap 5.5 percent of its stock, for Banco
Santander Central Hispanp's 30.5 percent stake in Airtel.  If 
the Spanish bank accepts the offer it would give Vodafone a 
51 percent state in Airtel.  Patience will be the key for VOD, 
as this play will need more time to develop.  We would look for
a breakout over $50 on solid volume as an opportunity to buy

VRTS $113.00 +4.81 (+3.94) VRTS fell out of bed at the open 
Wednesday and rebounded just as quickly.  In the first 30 minutes
of Wednesday's session VRTS hit $96.88 and the buyers swooped
in bargain hunting.  We are sticking with our play in VRTS as 
the volume was heavy with 3.3 million shares traded Wednesday 
and nearly 4.5 million exchanging hands today.  Another reason 
we like VRTS is it broke out above resistance at $110 and appears 
to be headed higher.  The software index(CWX) took off again 
today as well after catching its breath for the last week.  The 
Nasdaq tech stocks and Internet stocks continued to be the story 
for investors again today.  Technically VRTS bounced off its 
10-dma this morning at $106.54 and got stronger as the day went 
on.  If you were in a play and got stopped out Wednesday we 
would hope you gave VRTS another chance.  Intra-day support 
for VRTS is seen at $110 and a bounce from that level would be 
another opportunity to enter a new play or add to existing 

NT $90.00 +1.38 (+1.75) NT didn't offer a favorable response 
yesterday to news that it would acquire Qtera, a company 
designing a technology to increase the distance an optical signal 
must travel before regeneration is necessary.  In fact it took a 
dip into the $85 range (garage sale) before rebounding yesterday.  
Today while reaching as high as $92.44, it fell back but still 
managed a close at a new high of $90.  Though volume was 10% over 
the ADV of 4.29 mln shares, it remains significantly below that 
of the last five trading days, giving us pause for concern.  Of 
course, we'll take any gain we can get.  Mild support is at $87; 
stronger support remains at $85; a breakout occurs at $94 as long 
as the volume is strong, say over 5 mln shares.  Since it's at 
the upper end of its trading range, we prefer to see a pullback 
to $87 or even $85 before taking a position.  If the pullback is 
on light volume, that's much the better.  If the pullback comes 
on heavy volume, get out of the way and avoid catching a falling 
knife.  That would indicate genuine selling effort, not just 
lack of buyers.  NT is a split candidate and we'll look for an 
announcement tentatively on January 25 (perhaps before but not 
as likely)

NOK $164.00 +9.00 (-4.00) Support at $155 turned to vapor as NOK 
gapped down yesterday to the $150 level in the first 20 minutes 
of trading.  That's the trouble with ADRs.  In a gapping 
situation, the market skips right over your targeted stop leaving 
you in a losing position.  Fortunately, NOK rebounded nicely for 
the rest of yesterday and all of today.  Today's $9 gain was 
greatly appreciated.  While it occurred on volume that exceeded 
the ADV by 8%, that is substantially lower then eight of the last 
nine trading days.  Come to think of it, that high volume on down 
or sideways days indicates some distribution by money mangers or 
profit-taking, which builds a base for another move up.  Since  
NOK is right at the edge of low end of its former trading channel, 
we expect further moves from here to be up.  A stable move back 
over $167.50 (its 10-dma) with volume would sure make us more 
comfortable though.  If you want to buy dips, there are a bunch 
of congested targets to hit: $161, $160, $159, $157, $154, and 
$150.  Check your charts and pick what's most comfortable for 
your own risk profile.  To us, $157 looks like the lowest point 
of "practical", but still runs the risk of being too low for a 
fill in the future if NOK moves up from here.  Funds still love 
the 30-40% growth rate projection and increasing margins coupled 
with the expectation of selling 1 bln handsets by the end of 
2002, a year ahead of schedule.  NOK is a split candidate, but 
we have heard nothing further of a BOD meeting.  Barring the 
surprise announcement, look for it around earnings tentatively 
scheduled January 20th.

QCOM $439.25 +16.06 (+47.75) What a great move leading into the 
4:1 split tentatively scheduled for December 30th, subject to 
shareholder approval on the 20th.   While we've made a ton of 
money from this play, the overall market is looking a bit 
jaundiced with a very narrow selection of leaders.  That said, 
QCOM has been moving up, but on steadily decreasing volume over 
the last 3 days.  Today's volume was only 63% of the ADV and 
doesn't have us convinced completely that QCOM will explode from 
here.  Be on the lookout for more profit-taking.  If you still 
want to play, support is hard to find in the recent congestion, 
but seems pretty strong in $5 increments from $405-$415.  If you 
want to target shoot, start there.  If you can assume a bit more 
risk, support is a bit less strong at $425, then $432.  Let 
QCOM's volume and the health of the market be your guide.  We 
might suggest standing aside if the overall market is headed 
south.  Even QCOM can't buck that kind of headwind for long.  To 
be fair, remember too that QCOM has stated their intent to sell 
their handset division by year end.  We think the December 20th 
meeting is a likely time to name the buyer (our hunch is Nokia), 
which could propel QCOM upward a few more $$$ by itself.

JDSU $249.88 +21.25 (+5.63) Headline reads, "Reprobate Escapes 
Expulsion".  Since being put on double secret probation Tuesday 
night, JDSU has changed its behavior - but not without one last 
temper tantrum to $210 first thing Wednesday morning, wherein the 
recovery to $220 was swift.  It skipped along most of the day at 
$222.  For those waiting for a buying opportunity, yesterday was 
it on the morning dip to $210 or in the afternoon on the strong 
volume close at $228.  The trend continued today all the way to 
$249.88, but volume was a little light compared to previous 
sessions.  Still it was over the ADV by 38%, giving us nothing to 
worry about.  What's the hubbub about anyway?  Simple a 2:1 split 
scheduled December 29th, which will begin trading at the split 
price on December 30th.  By the way, on that date, JDSU will have 
a symbol change to JDSUV (lawyers' first choice in 4-wheel drive? 
- just kidding).  Make a note so you don't lose track of it after 
the split.  Support is at $220, $225 and $236.  Though milder, 
there's some at the $244 level also.  Target shoot to your 
comfort level; just make sure the market is in your favor and 
JDSU's volume is high when it starts back up.  Otherwise you'll 
want to see a break over $263 with strong volume.

SUNW $74.94 +1.50 (-6.94) Well, SUNW is proof positive that 
retracement of 75% is sometimes not enough.  How about 100%?  
That was SUNW's story yesterday as it took a dip to $70.75, 
violating solid support at $72.  SUNW gave us a nice rebound 
today, but if you look closely, it actually closed slightly below 
today's gap up opening price.  Has the SUNW gone cold?  While 
news that Microsoft's Windows 2000 server platform to be released 
in February may get some widespread adoption while sending some 
chills into SUNW's revenue stream, SUNW is getting creative in 
finding new channels of distribution in the on-line auction 
business by offering its severs online to entrepreneurs starting 
their next dotcom business.  Yes, MSFT is stealing some of SUNW's 
thunder, but SUNW still has strong growth prospects.  Historical 
support is at $75; the 10-dma is at $76.  If your risk profile 
allows you to target shoot, then great.  However, our preference 
would be to see SUNW get back over $76 before taking a position.  
The SUNW still has spots; look for increased activity (volume) 
and a cooperative market.


ETYS $39.94 -2.13 (-5.19) ETYS isn't having any fun this week
but put players are.  After investors digested and rejected the
Goldman Sachs upgrade on Monday, shares of the toy e-tailor
have headed south all week.  On Wednesday, ETYS dropped through
the $46 support level and never looked back.  Shares fell all
the way to support at $40 on more than double the ADV of 2.2
million shares before a minor recovery near the close.  This
morning the $40 support level again attracted ETYS like a
9-year old to a Pokemon display.  For the rest of the session,
buyers tried valiantly, but couldn't push prices above this
level, turning it from support into resistance.  Well below all
of its moving averages, ETYS looks ready to take a run at its
next support of $36.  Wait for confirmation of further weakness
with a bounce below $40 before opening new positions.  If the
broad markets weaken, we may get a run toward $28.50, the
52-week low.  For those of you with profits on the table, don't
forget to tighten up those stops.

KIDE $35.44 -1.69 (-9.25) Apparently, the KIDE investors have 
a shorter attention span than the many worldwide Pokemon fans. 
KIDE tried to make a run up at the open of Wednesday's session 
but to no avail as it quickly found resistance at $41.75.  KIDE
fell into a steady decline for the remainder of the day, taking
back another $0.88.  Today, KIDE continued right where it had 
left off, moving down to just under $35.50 in early trading. 
This level managed to hold KIDE throughout the session.  
Previously, support at this level has been weak at best however 
it is something to keep an eye on.  KIDE closed right at the low 
of the day, a good indication heading into tomorrow.  KIDE also 
had good volume backing today's decline, an indication of plenty 
of willing investors looking to drop their KIDE off.  KIDE looks 
to have some rather formidable resistance forming as it's 10 and 
100-dma's are working to converge right around $44.  Being that 
we are approaching a good deal of support, a new entry will most 
likely only be beneficial on another intra-day rally backed by 
holding resistance.  As always USE YOUR STOPS! 

GT $28.13 +0.00 (-0.63) Thank you 5-dma!  GT's 5-dma, which is
currently $28.50, has done a wonderful job of holding GT down.  
On the other side of the coin, $28 has managed to hold GT up 
throughout the last two sessions.  This may very well be the 
bottom for GT but until we see some consistent trading above 
current resistance levels and a reclamation of lost support 
backed by good volume, we are not convinced that GT is reversing 
its trend.  As we mentioned, immediate resistance is at $28.50 
with further resistance at $29.50 (10-dma) and $30, so keep an 
eye on these levels.  Until we have confirmation of direction, 
it is probably best to hold off on entering new plays.  If you 
are already in, it may be time to consider taking your profits.  

GILD $39.06 -0.44 (+0.06) Nothing is really going on for the 
shares of Gilead Sciences.  Every little rally is met with 
selling.  Any selling is met with a rally.  Therefore, we are 
right were we started.  Current and new put positions are still 
recommended at these levels because the down trend is still 
intact.  Biotechs in general have done well the past two days 
but GILD has done nothing.  That fact bodes well for put 
holders.  There has not been any news the past two days.  The 
range for the stock is $38.50 to $40.13.  If it trades above 
the range be careful of your stops.  If it trades below the 
range you could add to your puts.  We still look see potential 
for GILD to drop into the low $30 range.


BVSN - Broadvision $131.69 +3.31 (+24.31 this week)

Broadvision provides integrated software application systems.  
These systems enable users to create applications for marketing
and selling their services on the World Wide Web.  Broadvision's
software is designed as a platform to conduct e-commerce 
transactions, offer online financial services, and deliver 
information to customers.  Their One-to-One software enables 
venders to tailor their marketing efforts directly to each 
visitor based on a set of business rules.  Thus making it 
easier for both parties to interact.

Momentum is the name of the game for the e-business world and 
BVSN looks to be a team captain.  Broadvision began the month 
of December at a mere $92.69, which was $39 dollars ago as of 
the close today ($24 of this can be attributed to the last week 
alone).  Broadvision traded up to new 52-week high of $135 on 
Monday.  After going a few rounds with the profit-takers, BVSN 
looks to have its eye on breaking through resistance at $131 
and reaching for another new high.  BVSN traded up to $134.25 
toward the end of today's session, backed by strong volume, both 
good indications heading into tomorrow.  The overall volume level 
for BVSN has been very high this last week due to BVSN's recent 
addition to the NASDAQ 100.  Because of this, we have seen a 
good deal of institutional buying.  Broadvision has support at 
$125, $120, and the 10-dma at $115.  BVSN has more resistance 
at the 52-week high of $135.  Being that BVSN does a nice job 
of providing a wide intra-day trading ranges on a fairly regular 
basis, i.e., $9.25 today, look for your potential points of 
entry on the intra-day pullbacks backed by holding support.  
BVSN split 3:1 in late October but it looks to already be in 
need of another.  They have the shares to do it, but the timing 
of an announcement will be more difficult to predict.  We will 
keep you updated on anything we find regarding a split.

Broadvision was recently added to the NASDAQ 100.  BVSN will 
also be a part of the NASDAQ 100 Tracking Stock Index, which 
will be traded on the AMEX under symbol QQQ.  On Monday, BVSN 
announced that Sears (S) is using Broadvision's One-To-One 
Retail Commerce(TM) to launch their new Tool Territory on 

BUY CALL JAN-125 BDV-AE OI=533 at $21.38 SL=16.50
BUY CALL JAN-130*BDV-AF OI=294 at $18.88 SL=14.75
BUY CALL JAN-135 BDV-AG OI=207 at $16.50 SL=12.75

Picked on Dec 16th at   $131.69     P/E = 852
Change since picked       +0.00     52-week high=$135.00             
Analysts Ratings     5-16-2-0-0     52-week low =$  9.00                 
Last earning 10/99    est= 0.04     actual= 0.05                            
Next earning 01-27    est= 0.06     versus= 0.03                            
Average Daily Volume = 1.90 mln
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m


TTN - Titan Corporation $35.00 +2.63 (+6.50 this week)

The Titan Corporation is a leading provider and integrator 
of state-of-the-art information technology, satellite 
communications systems and services, and medical product 
sterilization and food pasteurization products and services, 
for commercial and government customers worldwide.  Titan has 
made substantial changes recently by moving from a defense 
communications company to an information systems and services 

Huge news from the USDA creates a mighty giant move for Titan!  
On Tuesday, the USDA approved an irradiation technology to kill 
deadly bacteria on raw ground beef, steaks and pork chops.  
Because of this announcement, Titan said that it will now 
be able to utilize its patented and FDA approved SureBeam 
technology that destroys food-borne pathogens in seconds.  
Titan's new electronic food pasteurization facility will 
immediately begin pasteurizing meat as a result of the USDA 
announcement.  Earlier this year, Titan entered into several 
multi-year agreements with most of the nation's major poultry 
and meat providers.  Most of these agreements are exclusive, 
and cover approximately more than 75% of the nation's ground 
beef production and half of the nation's poultry production.  
It is a great coup for Titan and it should and has tickled the 
stomachs of the investing public.  Titan did not give any 
indication as to how much impact this news item will have on 
profits and earnings.  After the announcement shares of TTN 
took off up over 3.5 points.  Today, TTN had a nice follow 
through up another $2.63 and settling $1.50 below the intra-day 
high.  Volume has been very big the past two days.  Despite 
being a little bit over bought, TTN could plow further ahead 
over the next few days if it can trade above $36.50, which 
would be a good place to buy calls for very aggressive traders.  
It is possible a little patience will pay off and a bullish 
position can be placed after the stock pulls back to and 
successfully tests the $30 level before making its next 

Other news items concerning Titan include an announced 
acquisition of Internet commerce company, Assist Cornerstone 
Technologies through Titan's e-business solutions subsidiary 
Cayenta.com.  Assist's technology provides a complete front to 
back-end solution to companies focused on conducting business 
over the Internet.  Titan also recently announced the 
acquisition of Advanced Communication Systems, Inc., a leading 
government information technology services company.

BUY CALL JAN-30*TTN-AF OI=2846 at $7.13 SL=5.25
BUY CALL JAN-35 TTN-AG OI= 463 at $4.25 SL=2.50
BUY CALL JAN-40 TTN-AH OI=   0 at $2.38 SL=1.00

Picked on Dec 16th at  $35.00    P/E = 67
Change since picked     +0.00    52-week high=$36.50
Analysts Ratings    5-0-0-0-0    52-week low =$ 4.75 
Last earnings 11/99 est= 0.13    actual= 0.13
Next earnings 02-17 est= 0.15    versus= 0.13
Average daily volume =  670 K
Chart = http://quote.yahoo.com/q?s=TTN&d=3m


No new put plays for today.


VRTS - VERITAS Software $113.00 +4.81 (+3.94 this week)

The world's largest maker of storage management software is 
located in Mountain View, California.  VERITAS supplies 
enterprise data storage management solutions and provides 
advanced storage management software for open systems
environments.  Other VRTS products offer centralized 
administration with a high degree of automation.  They also 
make backup software and cluster management tools.  VRTS has 
partnered with the likes of Hewlett-Packard, Microsoft and 
other manufacturers, all of which have licensed and bundled 
VERITAS products with their operating systems.  

Sunday's Write Up

The software index continues to make its way higher and VRTS is 
certainly doing its part to help lead the way.  VRTS got a boost
Thursday when it announced its software used to backup data on 
computer systems is being shipped with Red Hat Inc.'s Linux 6.1
Deluxe product.  These days anything connected to Linux seems to 
move.  Shares of VRTS gapped up over $11 to open at $116 Thursday 
morning.  By midday VRTS dropped back to a low of $102.88 amidst
some profit-taking.  VRTS finished the day +3.44 and tacked on 
another $1.13 on Friday.   The software sector continues to be 
hot.  Friday the software index helped lead the Nasdaq higher
gaining 2.7%.  As one analyst said recently, VRTS is becoming the 
"gorilla vendor" as the software market explodes.  Speaking of 
analysts, Tuesday, Michael Stanek from Lehman Brothers initiated 
coverage of VRTS, with a Buy rating.  His twelve month target for 
VRTS came in at $140 per share.  Wednesday analysts at SG Cowen 
reiterated a Strong Buy rating of the software company.  Most 
feel that despite recent losses brought on by acquisitions Veritas'
business is a long term one, since the increased reliance on 
database storage by corporations isn't going away.  VRTS settled 
the week in the middle of an intraday trading range between $105 
and $110.  The next area of support for VRTS lies at $100, near 
its 10-dma of $101.95.  Should we see further profit-taking a 
bounce off $105 with solid volume could provide a good entry 
point.  If VRTS moves higher, a breakout above $110 would also 
provide a good point of entry.  

Thursday's Write Up

VRTS fell out of bed at the open Wednesday and rebounded just 
as quickly.  In the first 30 minutes of Wednesday's session VRTS 
hit $96.88 and the buyers swooped in bargain hunting.  We are 
sticking with our play in VRTS as the volume was heavy with 3.3 
million shares traded Wednesday and nearly 4.5 million exchanging 
hands today.  Another reason we like VRTS is it broke out above
resistance at $110 and appears to be headed higher.  The software 
index(CWX) took off again today as well after catching its breath 
for the last week.  The Nasdaq tech stocks and Internet stocks
continued to be the story for investors again today.  Technically 
VRTS bounced off its 10-dma this morning at $106.54 and got 
stronger as the day went on.  If you were in a play and got 
stopped out Wednesday we would hope you gave VRTS another chance.
Intra-day support for VRTS is seen at $110 and a bounce from that 
level would be another opportunity to enter a new play or add to 
existing positions.  

BUY CALL JAN-110*VUQ-AB OI=652 at $16.50 SL=12.75 
BUY CALL JAN-115 VUQ-AC OI= 39 at $14.38 SL=11.25 low OI
BUY CALL JAN-120 VUQ-AD OI=689 at $12.50 SL= 9.75

Picked on Dec 12th at   $109.06    P/E = N/A
Change since picked       +3.94    52-week high=$116.00
Analysts Ratings     6-15-2-0-0    52-week low =$ 17.53
Last earnings 10/99   est= 0.14    actual= 0.11 surprise=+27.3%
Next earnings 01-13   est= 0.15    versus= 0.08
Average daily volume = 2.46 mln
Chart = http://quote.yahoo.com/q?s=VRTS&d=3m


Technology Issues Lead The Way..

Wednesday, December 15

A pair of technology giants led the market higher during a day of
rising bond yields that pressured other sectors. The Dow closed up
65 points at 11,225 and the Nasdaq index climbed 50 points to end
at 3,621. The S&P 500 index closed up 9 points at 1,413. Declining
issues led advances by a margin of 16 to 14 on heavy volume of one
billion shares on the NYSE. New lows outpaced new highs 465 to 49.
The long bond was off 11/32 with the yield at 6.33%.

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

Navistar        NAV    JAN40C/DEC45C   $4.62   debit   diagonal
Navistar        NAV    JUL35C/JAN45C   $9.06   debit   diagonal
Applied Graph.  AGTX   JUN7C/JAN10C    $2.31   debit   diagonal 
Bid.com         BIDS   MAY7C/JAN7C     $0.62   debit   calendar

Our new group of spread candidates was an active lot on Wednesday
morning with Bid.com and Navistar both falling at the open while
Applied Graphics waited in the wings, gathering momentum for a
run to $10. AGTX's mediocre movement in the first thirty minutes
allowed plenty of time for a favorable entry and the stock closed
up $1.12 for the day. BIDS and NAV also offered position-opening
debits near our target prices.

Portfolio plays:

Market-leading technology issues moved higher today with PC and
semiconductor stocks topping the headlines. Positive corporate
news and strength in the cyclical arena helped many blue chips
rally from yesterday's sell-off but financial issues continued
to suffer from rising bond yields. The majority of larger-cap
companies in our portfolio participated in the move and Motorola
(MOT) was the top performer. Shares of the telecom issue rose $10
to $130 after SoundView initiated coverage of the company with a
"strong buy" rating and a target price of $175. Oil stocks climbed
higher with rising crude prices and Exxon-Mobil (XOM), the world's
largest oil company recovered from recent losses to finish at $83.
Exxon-Mobil also said it plans to cut 16,000 jobs as it moves to
reduce costs following the completion of its $82 billion merger.
Auto giant General Motors (GM) rose to $71 after announcing plans
to domestic creditors of South Korea's ailing Daewoo Motor to buy
a number of the company's auto-making plants overseas. Other long
term issues performed well during the session including Johnson &
Johnson (JNJ), Medtronics (MDT), Proctor & Gamble (PG) and the
recently battered Solectron (SLR). MDT is one of the few remaining
roll-out candidates and we used the small rally to move to January
options in the LEAPS/CC's play. The new position is LJAN37C/JAN40C
at $4.25 debit. Our (neutral) calendar spread on United Airlines
(UAL) was also rolled into January with a $3.25 credit for the $75
call option. The new cost basis is $6.75 for the LJAN75C/JAN75C.
Sun Microsystems (SUNW) was our final adjustment in the LEAPS/CC's
section and the credit for the move to JAN-$70 options was $2.50.

Smaller technology stocks rallied during the session and our key
performers included Peoplesoft (PSFT), Network Associates (NETA),
and Proxymed (PILL). Both of the PSFT positions are now profitable
and the bullish NETA spread is now trading at maximum profit. The
recent upside movement by PILL has created increased interest in
the call options and we used the activity to reduce our debit in
the APR15/JAN15C calendar spread to $1.00. There are a number of
other long-term plays that require adjustments to January and we
will post the new prices on those positions in Tuesday's summary.

One of the biggest surprises in our portfolio came after Verity
Systems (VRTY) disappointed Wall Street analysts, posting second
quarter earnings of $0.09 per share, short of analysts' estimates
of $0.12. The stock was punished with a fury, losing $23 to close
at $26.12. Our position was a bullish credit spread at $42.50 and
while the play was comfortably OTM on Tuesday, it caught many of
us completely off guard. Traders who neglected to close the play
early (locking in profits) were confronted with extremely limited
exit opportunities during the morning session. A pre-opening gap
bypassed trade stops and inflated Bid/Ask spreads prevented any
loss-limiting roll-outs. The best play available was simply the
morning's technical bounce, good for a $2.50 profit in the first
hour of trading. This position provided a meaningful (expensive)
lesson for sure!

While on the subject of losers, we decided to assess the portfolio
for other plays that may warrant early exits. Delta and Pine Land
(DLP) is probably the most closely watched issue in this section
as we have three active plays on the merger candidate. Two of our
positions are bearish (and profitable) but the speculative credit
strangle is down slightly after today's session. For those of you
in the loss-limiting mode, the play could have been closed for a
$0.38 debit but in this case our plan is to take possession of the
stock (if required) and sell covered-calls to recover any losses.
A perfect learning experience for new readers and as many of you
know, our credit strangles are generally weighted to the downside
for this exact type of outcome. In the case of Delta and Pine Land,
the current probability for a Monsanto merger is very low but if
MTC were to exit the deal, DLP would receive almost $80 million.
The fundamental share value of the company is about $20 and other
companies may be interested in acquiring Delta. The future merger
speculation will continue for months and the option premiums will
be favorable for any premium selling strategies.

A few other issues have fallen significantly since our original
positions were offered and we have closed those with unfavorable
short-term outlooks. These include Revlon (REV), JAN7C/JAN10C bull
call spread at $1.00 credit; LG&E Energy (LGE), the MAR22C/DEC22C
calendar spread at $0.38 credit; and Fortune Brands (FO), the one
week speculative volatility play. Fortune may eventually offer a
profit but the near-term outlook for the stock was very bearish
and rather than hold for a possible small gain, we chose to exit
the long position with a small loss. Another candidate for early
adjustment is American International Group (AIG), our new bullish
big-cap issue. The diagonal position; JAN104C/DEC115C can be moved
to a debit spread at the JAN-$110 strike for $4.62 debit. The new
position; JAN104C/JAN110C has further downside margin and a small
profit potential.

Thursday, December 16

U.S. equities moved higher as the Nasdaq rocketed to a new record
on bullish news from leading technology companies. The composite
index rose 93 points to 3,715 while the Dow climbed 19 points to
close at 11,244. The S&P 500 stock index ended 5 points higher at
1,418. In the broader market, declining issues led advances 16 to
14 on heavy volume of more than one billion shares the NYSE. Once
again, new lows outpaced new highs by a margin of 416 to 62. The
30-year treasury bond was off 27/32 with the yield at a two-year
high of 6.39%.

Portfolio plays:

Today's session provided some incredible big-cap rallies but the
most unusual move came from our new bottom-fishing issue; Cendant
(CD). The stock price moved up $6 after Liberty Media (LGM) said
they would acquire 18 million shares of the company, representing
a 2.5% stake, and two-year warrants to purchase 29 million shares
of stock at $23 per share; which could more than double Liberty's
stake if exercised. The alliance is aimed at developing Internet
and cable content with Cendant's travel, mortgage, real estate
and membership businesses. Our bullish debit spread is now $6 ITM
and can be closed near maximum profit. InterVu (ITVU) was another
big mover in the portfolio with a $16 rally to close at a new all
time high near $95. The company was recently granted a patent for
the delivery of audio, video, graphics, text, and other computer
data over the Internet. Another technology issue, Etek Dynamics
(ETEK) had a nice rally during the session, climbing $7 with the
booming chip sector. This issue has moved up $20 since our bullish
credit-spread was opened in late November.

Many of our small-cap issues were neglected in today's trading but
we did have a few favorable roll-out opportunities. Geron (GERN)
rallied to a midday high near $12.50 and the move to a JAN-$12.50
option provided a $1.00 credit for our new position; MAR12C/JAN12C.
Cabletron Systems (CS) has been quietly climbing higher with the
telecom issues and today's move above $26 prompted our adjustment
to the January options. Our new long-term spread is LJAN15C/JAN22C
at $5.75 debit. Youth Networks (NETS) has consolidated from recent
gains and today's slump provided a great opportunity to roll-out
to next month's options. Our (bullish) diagonal position is now a
FEB22C/JAN25C at $0.62 debit. Other issues in the hot-box include
Autoweb (AWEB), Bell Atlantic (BELL), Delta And Pine Land (DLP),
Micron (MUEI), Navistar (NAV), Southwest Banc (SWBT), 3dfx (TDFX),
Unisys (UIS), and Zoltek (ZOLT).

Friday will be exciting as investors move to lock-in profits and
option traders unwind (and roll forward) to next month's plays.
We have a number of adjustments to make before expiration and the
volatility should provide an excellent opportunity to boost our
potential profit in many of the current positions. A summary of
December results along with the complete list of portfolio plays
will be posted in next Tuesday's edition of the OIN.

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


Today we received two requests for plays on specific issues. The
candidates that were submitted appear to have some promise for
those of you that are bullish in the telecom or electronics
sectors. The decision to offer these plays is based on the
current price or trading range of the underlying issue and the
recent technical history or trend. News and market sentiment
will have an effect on these issues so review each position
individually and make your own decision about the future outcome
of the play.


SPOT - Panamsat  $49.68     *** Readers Request ***

PanAmSat is one of the world's largest commercial provider of
global satellite-based communications services. The Company is
a leading provider of satellite capacity for television program
distribution to network, cable and other redistribution sources
in the United States, Latin America, Africa, south Asia and the
Asia-Pacific region. PanAmSat's global network of satellites
provide state-of-the-art video distribution and telecom services
for customers worldwide.

Today's $3 move to a new 52-week high indicates that the issue
is garnering interest as it surges above a recent consolidation
pattern. We favor the long-term growth potential and the positive
divergence from the 200 and 50-day moving average lines. A strong
up-trend is intact and the move is gaining momentum on increasing
volume during the accumulation phase. The stock has posted large
gains in the past month and the trend may continue now that the
price is above recent resistance. A pair of favorable positions
are offered, based on your risk/reward outlook.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL FEB-45 OQO-BI OI=179 A=$8.00
SELL CALL JAN-50 OQO-AJ OI=108 B=$3.75

- Short-term Position -

PLAY (aggressive - bullish/debit spread):

BUY  CALL JAN-45 OQO-AI OI=43  A=$6.88
SELL CALL JAN-50 OQO-AJ OI=108 B=$3.75
INITIAL NET DEBITR TARGET=$3.00 ROI(max)=66% B/E=$48.00

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


RCOT - Recoton  $7.50     *** Reader's Request ***

Recoton is a worldwide producer of consumer electronics for many
after-market applications. Their products are primarily sold to 
retailers and original equipment manufacturers. Its diverse line
includes speakers, a complete line of car audio products: 900 MHZ
and various other wireless technology products; and other highly
functional accessories for audio, auto, camcorder, video game,
cellular and standard telephone, home office, personal computer, 
multimedia, music, and video products.

There appears to be some long-term potential in this issue but a
consolidation is in order after the recent gap-up to the $8 range.
Our outlook for the company and industry is favorable and a small
disparity in option premiums will allow us to open this position
at discount.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL MAY-5.00 ROQ-EA OI=49 A=$3.12
SELL CALL JAN-7.50 ROQ-AU OI=20 B=$0.81

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

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See Disclaimer in section one


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.

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