Option Investor

Daily Newsletter, Wednesday, 12/22/1999

Printer friendly version
The Option Investor Newsletter         Wednesday  12-22-99
Copyright 1998, All rights reserved.
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage
MARKET WRAP  (view in courier font for table alignment)
        12-22-99           High     Low     Volume Advance Decline
DOW    11203.60 +  3.10 11260.20 11181.90   852,865k 1,417   1,692
Nasdaq  3937.30 + 26.15  3948.48  3878.06 1,465,279k 1,914   2,254
S&P-100  781.92 +  3.06   784.39   776.71    Totals  3,331   3,946
S&P-500 1435.99 +  2.56  1440.02  1429.05            45.7%   54.3%
$RUT     478.51 +  2.72   478.51   474.14
$TRAN   2848.42 + 11.92  2848.42  2819.94
VIX       23.12 -  0.32    24.31    22.53
Put/Call Ratio      .48

Investors Begin Filling Their Stockings.....

Investors began their last minute shopping this afternoon, 
filling their Christmas stockings with an unusual group of 
items.  Today it was stocks in the drug, biotechnology, and 
healthcare sectors.  The Nasdaq finished +37 points for 
the session and is now just 63 points shy of 4000.  Will we
see Nasdaq 4000 before year 2000?  Many of the analysts think
so.  Several market pundits today called for the major indices 
to rally into the first week of the new year, followed by a 
15 to 20 percent correction.  As we've said the rally at the 
Nasdaq has been a narrow technology rally.

The bulls have been looking for quite some time for anything 
else to energize the markets.  They believe that for the bull
to continue we will need to see a widening in the breadth.  
Today it was an odd assortment of issues that led the way.  
Aetna(AET) gained +3.56 to close at $54.69, Kroger(KR)added
+0.94 to $17.63, Newell Rubbermaid picked up +1.75 to finish 
at $30.56, Bristol Myers(BMY)jumped +3.06 to $63.19, while 
Goodyear Tire & Rubber increased +1.69 to $27.19 and TJX moved
+1.25 for a 7 percent gain to close at $18.63.  All of these 
stocks added 5 percent or better for the session.  Investors seem 
to be bottom fishing, looking for stocks that have been beaten up
and show some promise.  Granted this is only one day but if it 
continues this could be the start of a widening in breadth, 
which would be a welcome sight.

The Dow gave back most of its earlier gains but did manage to 
keep its nose in positive territory.  The 30 industrials
ended the +3.06 to finish the day at 11203.60.  Up volume 
outpaced down volume, but the breadth was negative with declining
issues ahead of advancers by a 17 to 14 margin.  Yesterday's
whipping boy Eastman Kodak(EK) turned in an impressive performance 
rising over 8 percent to close at $62.06, on the news that a
new CFO would join the team.  Investors showed their support for
Procter & Gamble(PG) after yesterday's court victory concerning 
false advertising.  Shares of PG gained +4.50 to $109.00.  Drug
maker Merck(MRK) put the brakes on its recent decline with a 
bounce up to $67.19 gaining +1.12 for the session.  Lucent
Technologies(LU) showed up as the most heavily traded issue
today, losing -3.25 to $76.25 on volume of 24.8 million.  Lucent 
reported a sharp decline in back-logged orders.  Investors seemed
concerned that sales may be slowing.  All in all, a relatively
quiet day at the NYSE.

The Nasdaq recovered from a rough morning after Corel(CORL)
fell out of bed.  The software maker warned it will likely post
a bigger loss in the 4th quarter than Wall Street was expecting.
Corel fell 29 percent to $13.19.  Red Hat, the Linux darling
sank -20.19 to $236.88 in sympathy.  3Com(COMS) was the drag
at the Nasdaq today.  The network equipment company lost almost
9 percent to close at $48.44 after it warned that a seasonal 
downturn and worries about Y2K might hurt 3rd quarter profits.
Some of the Internet and software stocks helped pull the Nasdaq
out of the hole and push it to a new record.  Oracle(ORCL) jumped
+7.38 despite a downgrade from Edward Jones on valuation concerns.
Yahoo(YHOO) continued its climb, adding +13.75, Broadcom(BRCM)
picked up +24.13 to $254, Redback Networks(RBAK) gained over 17 
percent to $162 after analysts at Raymond James initiated coverage
of the company with a Buy rating, and Tuesday's momentum in 
Commerce One carried over into today with (CMRC) gaining +70.00
to close at $550.  Overall the breadth at the Nasdaq was negative
with the number of declining stocks leading the advancing issues 
at a rate of 22 to 19.  The negative breadth continues to be of 
little concern to traders as it's some of the high-flying issues
that continue to carry the Nasdaq to new high closes.  Volume 
continued to be fairly strong for a holiday week with 1.4 billion 
exchanging hands as the Nasdaq closed +26.15 at 3937.30.

After the closing bell Microsoft(MSFT) announced Greg Maffei, 
the company's CFO was leaving in early January to run a Canadian
Telecom company.  Shares of MSFT were down $3 in after hours
trading.  Communications equipment company Qualcomm saw the
price of their stock fall another $2 in the after hours market,
after announcing the sale of its CDMA consumer phone business
to Kyocera Corp, a Japanese company.  QCOM ended the day session
-11.50 at $485.44.  Investors bid the price of Gemstar 
International(GMST) over $9 higher in the after-market when the 
technology company announced it will join the Nasdaq 100 index
January 3rd.  Gemstar will replace Qwest Communications.

The economic data released this morning reinforced the
most recent report on third quarter gross domestic product.  
GDP rose at a 5.7 percent rate according to the third and final 
estimate by the Commerce Department.  The figure was revised
upward from its previous reading of 5.5 percent.  Most analysts
had expected the GDP to remain unchanged.  Inflation remained
tame according to today's report.  The GDP price deflator, a
measure of price increases followed by many traders, grew at a
1.1 percent annual rate in the third quarter, the same as 
previously reported.  That number is lower than the increases
of 1.4 percent in the second quarter and 2 percent in the first.
Consumers continue to spend.  Consumer spending which accounts 
for two-thirds of overall economic activity, rose at a 4.9 percent 
annual rate in the third quarter.  A figure of 4.6 percent had 
been previously reported.  The 30-year bond finished a quiet day 
with a gain of +6/32 to yield 6.44 percent.  

After the FOMC meeting yesterday, the Fed all but guaranteed a 
rate increase in the coming weeks.  Greenspan's decision to leave
rates alone and not adjust the bias going into Y2k, will 
give the markets the go ahead to end the year on a positive note
and even begin the year on the upside.  Remember we are not quite
out of warnings season yet and there may be a few surprises around
the bend, as today with Corel and 3Coms.  Tomorrow should be a 
quiet day, with most traders squaring positions going in to the
holidays.  After the close of business tomorrow, spend time with
your family and friends.  The markets will be there Monday and for
a long time to come.

Randy Frey
Research Analyst


Oracle and Boeing Explore E-Commerce Venture
By Cindy Christ

An electronic-commerce venture may be on the wing for Oracle
Corp.(ORCL) and Boeing Co.(BA).

The Wall Street Journal said Wednesday the two are in early
talks to build an electronic marketplace linking Boeing and
possibly other aircraft makers with companies supplying parts
and services.

By bringing its supply chain online, Boeing hopes to cut
purchasing costs and paperwork, improve efficiency, and speed
up its manufacturing process.

Experts estimate that businesses can spend more than 50
percent of their revenues purchasing goods and services.
Reducing these costs has a direct and positive impact on the
bottom line.

The move follows similar ventures recently forged in the auto
business between Ford Motor Co. (F) and database software
maker Oracle, and between General Motors (GM) and Internet
software provider Commerce One (CMRC).

AutoXchange, the Ford venture, will create the world's first
automotive online supply chain network, integrating Ford's $80
billion procurement budget with more than 30,000 suppliers and
$300 billion extended supply chain.

In addition to saving Ford billions of dollars a year,
AutoXchange will become the world's largest business-to
-business electronic network, extending Ford's core business
into the exploding e-commerce arena.

Ford and Oracle plan to monetize red-hot investor interest in
B2B e-commerce ventures by taking AutoXchange public within
12 to 18 months.

GM's venture, TradeXchange, is expected to generate revenues
of $3 to $5 billion within the next five years.  GM buys about
$87 billion in goods a year through its main vendors, and
about $500 billion through its supply chain.

Analysts say these partnerships could revolutionize the
emerging business-to-business electronic commerce industry, as
well as the automakers' old-line manufacturing systems.

According to market research firm Dataquest, if Ford and GM
succeed in bringing their offline supply chains to the Web, 
e-commerce could explode from $200 billion this year to $1
trillion within three years.

Ford and GM also could see a huge surge in revenues, estimated
at $1 billion within 18 months and $4 to $5 billion in four to
five years.

By teaming with Oracle, Boeing hopes to bring the same
synergies and expanded business opportunities to aircraft
manufacturing that Ford and GM are linking to automaking.

Some analysts are looking at these industrial age businesses
as a value play on B2B e-commerce.

In a December research report to clients, Warburg Dillon Read
analyst Saul Rubin said Ford and GM would benefit from
significant "first mover" status into e-commerce, adding as
much as $7 to Ford share value and $15 to GM.

While Boeing may not control the massive supply chain or serve
a customer base equal to Ford or GM, with 31,000 suppliers and
a need for more than 3 million parts, it could dominate a
sizeable e-commerce network of its own. 

In related news, GATX Capital said Wednesday it had ordered 
five next-generation 737-800s and two 757-200s from Boeing,
bringing GATX orders for the next-generation 737 to 20.
Delivery of the newly ordered airplanes will begin in 2000 and
continue through 2001.

In addition, SG Cowen raised its rating Wednesday on Boeing
shares to "Buy" from "Neutral." 

Cowen analysts said that Boeing is a turnaround play
benefiting from a positive change in corporate culture,
improving production performance, rising military business 
and strong cash flow.

Analysts noted that economic recovery in Asia and a shift in
demand toward high-margin, wide-body planes bode well for
higher revenue prospects in 2001 and improve the chances of
increased profits in 2000-2001.

This year defense and space orders should account for close to
50 percent of 1999 operating profit for the aerospace giant,
with healthy growth potential as work ramps on a new program,
Cowen said. 

Cowen also raised its 2000-2001 earnings per share estimates
to $2.40 and $2.85 per share, saying there's a good chance the
company will beat earnings estimates for the fourth quarter

At the close Wednesday, Boeing shares were up $0.69, or 1.8
percent, at $39.38 after trading as high as $39.94 intraday.

Shares in Oracle rose $7.38, or 7.6 percent, to $105.06
despite a downgrade from Edward Jones.  Based on valuation, 
the broker lowered its rating on ORCL to "Buy" from "Strong 

"We continue to feel Oracle is well positioned to capitalize
on what we feel will be a post-Y2K spending boom in enterprise
software, but at current prices the stock is getting much
closer to being fully valued," said analyst Art Russell,
also noting ORCL shares have surged 258 percent year to date.

"After being under-appreciated relative to their role in this
new age for the past couple of years, investors have jumped
head first on to the ORCL bandwagon.  New money should dollar
cost average," he added.


BVSN - Broadvision $143.00 +6.88 (+14.00 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.

Sunday's Write Up

We began playing BVSN on Thursday because we thought that BVSN 
was poised to break through its newly set 52-week high of $135.  
Breakthrough it did!  BVSN traded all the way up to $139.88 the 
very next day!  BVSN spent the majority of Friday's session 
flirting with $137.50 before the rather voracious profit-takers 
moved in for the kill near the end of the day, dragging BVSN all 
the way down to close at $129.  This is just the kind of 
opportunity we like to see on a solid call play.  A quick sell-
off backed by holding support and a reclamation of positive 
momentum.  BVSN is resting on support of its 5-dma of $128.50.  
This level should evolve into nice support and we look for it 
to continue doing so in the future.  BVSN made a nice bounce 
here on Friday and closed on the road to recovery.  This could 
be a good area to make a new entry should BVSN continue Monday 
where it left off.  BVSN has additional support at $120, if 
needed.  BVSN may encounter some resistance at $130, though 
the resistance is the new 52-week high.  Watch for established 
support to hold and a continued reclamation of BVSN's positive 
momentum run.  Also, remember to take advantage of BVSN's wide 
intra-day trading ranges for possible entry points.

There is no new news that we believe will really have an affect
the share price.  BVSN makes an occasional appearance in an 
article related to the booming business-to-business industry, 
which never hurts.  We are still keeping our ears open to catch 
any news on the possibility of a split (we mentioned in last 
Thursday's write up that BVSN does have enough shares authorized 
for another split).

Tuesday's Write Up

Broadvision took back $3 during Monday's session, finding 
resistance at $135 in the first half of the session and $130 
late day.  Today, BVSN made a good move up in the morning, 
hitting its head at $135 once again, and quickly pulling back 
to revisit resistance at $130.  BVSN found some legs to make 
another run, finally managing a breakthrough and a close above 
$135 at the end of the session.  The $135 level has been 
providing formidable resistance for the last two sessions and 
we view today's finish as a good indication of BVSN's 
continuing positive momentum run.  BVSN has near term support 
at $130, which is currently BVSN's 5-dma.  BVSN has additional 
support at $125 and $120.  BVSN really wants to run and we 
believe it will do so, particularly as we approach earnings on 
January 18th (unconfirmed).  Make your entries on the pullbacks.
Broadvision was ranked number one on Barron's Best Internet 
Companies list in the December 20 issue, citing BVSN as the 
best performer amongst its peers, such as America Online, 
Yahoo!, and Amazon.com.  

BUY CALL JAN-135 BDV-AG OI=867 at $23.00 SL=18.00
BUY CALL JAN-140*BDV-AH OI=315 at $20.50 SL=16.00
BUY CALL JAN-145 BDV-AI OI=118 at $18.13 SL=14.00
BUY CALL JAN-150 BDV-AJ OI= 42 at $16.13 SL=12.50
BUY CALL JAN-155 BDV-AK OI=  0 at $14.25 SL=11.00 Wait for OI

SELL PUT JAN-115 BDV-MH OI=409 at $ 7.00 SL=10.00
(See risks of selling puts in the play legend)

Picked on Dec 16th at   $131.69     P/E = 907
Change since picked      +11.31     52-week high=$146.00             
Analysts Ratings     5-16-2-0-0     52-week low =$  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 = 1.99 mln
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m

Y2K Renewal Offer!!!

Announcing the cheapest renewal rate available! $24.91 mo*

Long time readers know that each December we offer our 
subscribers an extra value package as a thank you for their 
support. The package this year contains (2) of our Y2K Option 
Expiration Calendar Mousepads and the Millennium Edition of 
the Stock Traders Almanac, a $50 value.  You will receive two 
mousepads, one for home and another for the office so you have 
no excuse for not knowing those expiration dates and strike 
price codes. We are also giving away the Millennium Edition 
of the Stock Traders Almanac by Yale Hirsch. This almanac has 
thousands of facts, tips and hard information that a trader 
cannot live without. Just one of these facts can pay for the 
newsletter subscription for the entire year and there are 
thousands of them.  This is the serious stock traders bible. 

And the offer is.....Renew your subscription in December at the 
annual rate and receive (2) Y2K Option Expiration Calendar Mousepads 
and the Millennium Edition of the almanac for FREE. This package 
has a $50 value. Added to the savings you receive on an annual 
subscription over the monthly rate and it is like getting over 
four months of the newsletter for free. A $180 value. This lowers
the actual price of the newsletter to only $24.91 per month for
an annual subscription. The supply of almanacs is limited so 
don't delay. Click here for more info.


Tired of waiting on trades to execute? 
Does your broker offer Stop Losses on Options?  

Trade instantly with Stop Losses at Preferred Capital Markets
Stop Losses based on the option price or the stock price.
Move your trading into the next millineum with Preferred Capital

Anything else is too slow!



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

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

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

To subscribe you may go to our website at 


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


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

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


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


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

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

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

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives