Option Investor
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Daily Newsletter, Tuesday, 01/18/2000

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Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       1-18-2000           High     Low     Volume Advance Decline
DOW    11560.70 - 162.30 11720.10 11546.40 1,023,849k 1,290  1,795
Nasdaq  4130.81 +  66.54  4148.00  4053.21 1,579,191k 2,468  1,797
S&P-100  795.68 -   1.84   800.85   791.02    Totals  3,758  3,592
S&P-500 1455.14 -  10.01  1465.15  1451.30            51.1%  48.9%
$RUT     513.46 +   5.90   513.46   506.20
$TRAN   2853.61 -  38.02  2893.31  2838.18
VIX       23.31 -   1.47    23.86    22.40
Put/Call Ratio       .44
*************************************************************

Merger mania fails to hold up the market

Interest rates and oil prices weighed heavy on the Dow but the
Nasdaq shrugged them off and soared +66 points. The bonds sank
again and yields hit 6.75% with only two weeks left before the 
Fed meeting. The 6.75% yield is the highest since summer of 1997
and shows no signs of easing. The oil prices hit new highs of 
$28.85 per bbl and the severe cold snap in the northeast is
threatening to push them even higher. The difference between
the Nasdaq and the Dow was as different as night and day.


 


 

The Dow suffered under the weight of the financial stocks and
the interest rate drag. Financial stocks took a dive and the
outlook for a direction change is slim. JPM -4.69, AXP -7.94,
GE -3.00 all dropped with the bond market. Even the mega-merger
of Glaxo and SmithKline could not prop up the sagging Dow.

The Nasdaq however caught fire on the news that JDSU was buying
competitor ETEK for $15 bln in stock. Last week it was America 
Online (AOL) bringing media conglomerate Time Warner (TWX) into 
the fold.  This week it's JDS Uniphase (JDSU) doing the same to 
E-Tek Dynamics (ETEK).  In a deal valued at $15 billion, JDSU, 
the world's No. 1 maker of fiber-optic equipment parts will 
exchange 1.1 of its shares for each share of ETEK, another major 
player in the fiber optic world.  The acquisition gives JDS 
Uniphase more of the capacity it needs to meet the insatiable 
demand for optical equipment.  Based on Friday's closing prices, 
the deal amounts to a premium of more than 50 percent for ETEK 
shareholders. Market reaction was decidedly bullish for both 
stocks. JDSU finished the session up $3.50 at $195.69, while 
ETEK rocketed ahead $42.50 to close at $178.38. The tech 
sector was not up across the board but the gainers were enough 
to push the Nasdaq within .35 of a new record high.

Nasdaq leader MSFT gained +3.06 in regular trading before
posting earnings after the close. MSFT beat the street with
$.47 vs estimates of $.42 but the street was not happy due
to a +$.04 gain on sale of investments included in this number.
The revenue numbers came in on the low end of estimates at
$6.1 bln and in keeping with tradition they warned about
possible earnings challenges in the next two quarters. MSFT
said there was softness in purchases by corporate customers
in the fourth quarter and there was concern going forward.

Data communications chip-maker, Broadcom Corp. (BRCM) also 
blew ahead today in anticipation of waxing the analysts.  The 
stock closed at $328.50, up $33.25 or 11.3 percent.  BRCM 
reported after the bell that profits rose by 360 percent and 
sales more than doubled.  The company reported net income of 
$36.9 million, or $0.31 cents a share, for the fourth quarter 
compared with profits of $8 million, or $0.07 cents, a year 
ago.  The First Call consensus estimate was for $0.27.

Another stock making noise during the trading session was 
Network Solutions (NSOL).  A courtroom victory was the 
catalyst for this stock moving forward.  NSOL is a registrar 
of Internet addresses with the suffixes .com, .org, .net and 
.edu.  As many Web-surfers know, these addresses make 
navigating the vast expanses of cyberspace a manageable 
affair.  NSOL's exclusive registrar franchise was challenged 
in a 1997 lawsuit filed by people who had registered Internet 
domain names through the company.  The suit claimed, among 
other things, that the registration fees were excessive and 
amounted to an unconstitutional tax.  The U.S. Supreme Court 
rejected the challenge.  In response to the positive ruling, 
NSOL advanced $42.56, or nearly 18%, to close at $280.31.

The Dow drop today was due even if the oil and interest rates
were not higher. After several days of records and a +700
point gain since Jan-7th it was due for a pullback. The real 
test for both indexes will be tomorrow. Super Tuesday is now
over and the earnings excitement is starting to wane. The
major banks reported outstanding earnings this morning but
it did not help their stock prices today. The tech biggies
are almost done with reporting. INTC, MSFT, Nasdaq and Dow
leaders, have announced and are likely to start giving back
some of the recent gains. YHOO, the leading Internet stock,
announced and the buzz is now gone for the Internet sector.

Volume was heavy in both the NYSE and NASDAQ markets.  A total 
of 1.02 billion shares traded on the NYSE while 1.56 billion 
changed hands on the NASDAQ Stock Market.  Losers edged ahead 
of winners by 18 to 13 on the Big Board, while winners bested  
losers on the NASDAQ 25 to 18. 

The outlook for the the markets is cloudy. There are no
economic reports of importance this week and with earnings
rapidly losing the attention of traders there is a strong
possibility the markets will flounder. The Nasdaq has had
trouble penetrating the 4100 level and after sprinting ahead
today it must hold those gains to protect the rally. The
Dow dropped below the previous resistance at 10600. Both
indexes are fighting an uphill battle. As I reported on 
Sunday, February 1st has proven to be a pivotal point in the
past and the news coming out in advance of the Fed meeting
is not helping.

After beating the street MSFT is trading down -$3.00 in 
after hours and BRCM who also beat estimates and announced
a 2:1 split is trading down -$16 as well. DCLK beat estimates
as well with a +150% increase in earnings but lost -$8.00 in 
after hours trading. When leaders are being beat up this bad 
after record results it shows how volatile the internals of 
the market really are. Traders do not want to hold for any 
length of time. They are afraid of the market strength. 

S&P Futures are down -4.70 and Nasdaq futures are down -46.00.
The Asian markets opened lower in response to the Dow drop
and the rising interest rates. There is a lot of darkness
left before morning but the prospects for Wednesday are not
looking bright. Several online brokers are scheduled to report
tomorrow and report larger losses than in the past. This is
not the kind of news traders want to hear. IBM, AOL, APPL,
AMD, EGRP, AMTD are all scheduled for Wednesday.

Good Luck, Sell too Soon

Jim Brown 
Editor


*****************
SEMINAR QUESTIONS
*****************

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strategy is right for you in every situation. You will learn
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This is intensive instruction with real time, real life examples.
We will use live examples and study real plays as they occur.

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

BCE Inc., Hidden Treasure Of The North (NYSE: BCE)
By Bill Gamble

BCE Inc. is truly a hidden treasure of the north. The company
holds Canada's national telephone company, Bell Canada, and a
broad array of telecommunication and Internet related businesses.
BCE has been compared to other Internet holding companies like
CMGI, SFE and ICGE. However, it has two major differences, its
businesses are profitable and it trades at a substantial discount
to these other industry leaders.

http://members.OptionInvestor.com/stocknews/011800_1.asp




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

As of Market Close - Tuesday, January 18, 2000 

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

DOW Industrials   11,000  11,350  11,561    BULLISH   1.13
SPX S&P 500        1,340   1,400   1,455    BULLISH  12.03
OEX S&P 100          700     750     796    BULLISH  12.03
RUT Russell 2000     430     450     513    BULLISH  11.12
NDX NASD 100       3,200   3,800   3,758    Neutral   1.06
MSH High Tech      1,650   1,900   1,848    Neutral   1.06

XCI Hardware       1,300   1,350   1,437    BULLISH   1.14
CWX Software       1,210   1,420   1,352    Neutral   1.07
SOX Semiconductor    640     660     803    BULLISH  12.21
NWX Networking       820     900     884    Neutral   1.07
INX Internet         665     800     729    Neutral   1.06

BIX Banking          645     690     542    BEARISH  11.30
XBD Brokerage        410     450     439    Neutral  11.30
IUX Insurance        625     650     590    BEARISH  11.30

RLX Retail           900     935     975    BULLISH  11.23
DRG Drug             380     400     361    BEARISH  12.07
HCX Healthcare       760     790     739    BEARISH  12.07
XAL Airline          180     190     141    BEARISH   5.21
OIX Oil & Gas        280     315     294    Neutral   1.06

Posture Alert    
Tuesday's trading was anything but usual, as the Dow retraced 
-162 points while the Nasdaq continues on its course with a 
+66 point gain. Leading sectors include the Internet (+2.50%), 
Software (+1.44%), and the Nasdaq 100 (+1.43%). Sectors trending 
to the downside Tuesday include Insurance (-3.91%), Drug (-3.58%), 
and Banking (-3.50%). Several sectors that are getting close to 
previous failed highs include the Nasdaq 100, Morgan Stanley High 
Tech, Software, Networking, and Brokerage. We will be monitoring 
these sectors closely, to see if we get higher highs or another 
failed rally. There are no current changes in posture. 



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

Tuesday, January 18, 2000

Anything can Happen!

Just when you thought the Dow was making progress it gets hit for 
-162 points on the heels of solid corporate earnings. The 30-year 
Treasury was weak again today, which easily could be put to blame; 
however, technology shares shrugged off this little inconvenience 
as the Nasdaq gained +66 points. So far, the year 2000 will go 
down as the year where anything can happen, and does! 

Corporate earnings are starting to flow out like water, and the 
results so far have been stellar. Tonight after the close, the 
software king (Microsoft) announced earnings that beat 
expectations across the board. However, when we looked at the 
news flash we saw how earnings increased 22% and revenues 
increased 18%. Following Microsoft for, as many years as we have, 
you really have to start questioning valuation when you see revenue 
and earning increases of 18% & 22%, when the stock is trading with 
a P/E of 75. Yes, we know, no one cares about P/E's anymore. Its 
buy high, and sell higher. However, the start of this year has 
witnessed mass carnage to higher P/E stocks with reckless 
abandon. Will this trend continue, and has Microsoft gotten to 
big where their growth rates just aren't as impressive as 
previous years? Time will tell on these issues, but for the mean 
time, we're just happy that they beat expectations!    

We are still closely watching the stocks highlighted in our 
Sunday's Great Expectations article, however, with no trading on 
Monday, there weren't any significant changes to mention. However, 
looking at the S&P 100, major overhead lies at the 800 benchmark. 
This level is witness to the greatest open interest in calls, and 
will serve as major resistance in the near-term. January options 
expire this week, and with the massive overhead, we find the 
probabilities of seeing a major move above this benchmark 
decreasing significantly. The Pinnacle Index for the OEX between 
800 and 820 actually increased since Friday, which is indicating 
that call speculators are betting on a good move over the next 
several days. Obviously, in the year where anything can happen, 
this benchmark (800) may be taken out easily tomorrow, however, 
we would bet against scenario.    


BULLISH Signs: 

Corporate Earnings:
Major corporate earnings are coming out left and right, and so far, 
it looks to be another very solid quarter!

Cash Flow:
The cash that has been sitting on the sidelines was put to use 
Friday, as the NYSE traded 1.22 billion and the Nasdaq traded 
1.63 billion.


Mixed Signs:

Volatility Index (23.31):
The VIX proved continues to prove that the low 30's are an 
excellent buying opportunity, and the high teens continue to 
be a great selling opportunity. 

BEARISH Signs:

Interest Rates (6.688%):
The yield continues to break new highs, with the next stop being 
6.75-7.00%. The market has already priced a 25 basis point 
increase this February, however the market is also pricing in a 
30% chance of a 50 basis point hike.

Valuation:
Low price to earnings stocks have been a safe haven so far in 2000, 
while high P/E stocks have gotten blistered. Is value coming back 
into play?
 
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.


The Power of Sentiment Analysis

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

 
Pinnacle Index OEX              Friday      Tues
Benchmark                       (1/14)     (1/18)

Overhead Resistance (800-820)     7.82      8.67

OEX Close                       797.52    795.68

Underlying Support  (770-790)     1.20      1.38


What the Pinnacle Index is telling us:
Based on January 18, direct overhead is heavy and has increased as 
well. We will need to see put buyers coming in to help take this 
index out. Underlying support is light but slowly gaining strength. 


Put/Call Ratio                  Friday     Tues
Strike/Contracts                (1/14)    (1/18)

CBOE Total P/C Ratio             .42       .44
CBOE Equity P/C Ratio            .31       .35
OEX P/C Ratio                   1.83       .83


Peak Open Interest (OEX)
                     Friday           Tues  
Strike/Contracts     (1/14)           (1/18)

Puts                700 / 10,484     750 / 11,862
Calls               800 / 22,600     800 / 22,217
Put/Call Ratio        0.46             0.53



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

Daily Results

Index     Last     Tue    Week
Dow    11560.72 -162.26 -162.26
Nasdaq  4130.81   66.54   66.54
$OEX     795.68   -1.84   -1.84
$SPX    1455.14  -10.01  -10.01
$RUT     513.46    5.90    5.90
$TRAN   2853.61  -38.02  -38.02
$VIX      23.31   -1.47   -1.47

Calls              Tue    Week

NTAP     118.13   24.44   24.69  Catalyst? Who knows, who cares
EXDS     124.00   18.00   18.00  Teaming up with Foundry!
MSTR     241.38   13.44   13.44  MSTR was one of today's winners!
HGSI     194.13    9.50    9.50  Our split run continues!
GMST      84.38    7.56    7.56  One of the days strongest techs
LSI       79.25    6.50    6.50  Oh what a new rating can do!
AFFX     192.75    6.00    6.00  The buying could accelerate!
LVLT      92.06    5.31    5.31  Should continue to show strength
NOK      184.06    5.13    5.13  A possible buying opportunity?
TQNT     134.75    4.75    4.75  TQNT harpoons the bears!
VOD       57.50    4.63    4.63  New, solid technical breakout
SEPR     130.25    4.13    4.13  Exhibits good positive momentum
MFNX      61.00    3.88    3.88  Exceptionally strong volume
JDSU     195.69    3.50    3.50  We must pay homage to JDSU!
EMC      112.03    2.78    2.78  Like a moth to the flame
AMGN      69.06    0.75    0.75  Not a bad day for Amgen!
ANAD      72.06   -0.94   -0.94  Resembles power freight train
VIGN     198.25   -2.69   -2.69  Don't be fooled by a tame day
ADI       98.50   -2.88   -2.88  Still a strong performer!
CMVT     144.38   -3.94   -3.94  Recovers a bit into the close
INTU      76.75   -4.63   -4.63  INTU is on a short leash!

Puts

CMGI     116.31   -5.63   -5.63  Defying the Nasdaq
WCOM      44.50   -2.06   -2.06  Gets no help from big funds
IIJI      84.00   -1.50   -1.50  Is looking rather inviting
SBC       41.13   -0.88   -0.88  Play develops in fine fashion!
FD        47.94    0.06    0.06  FD looks for some direction
CHINA     81.50    4.00    4.00  Dropped, a game of ping pong
ISLD      82.00    4.88    4.88  Deserved a little relief
ICGE     138.75    5.25    5.25  A little late day rollover



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

IT'S HARD TO FIGHT MOTHER NATURE or the direction of the wind.

Sometimes I think it is so weird when I write about something, 
then read a very similar message in Jim's column. One could think 
it is planned, but it never is. I guess when we have been in the 
market long enough; we all end up learning the same painful 
lessons. In Sunday's article, Jim discussed the typical downturn 
during the month of February in recent years. I discussed the 
familiar volatility prior to a market top, which caused me to go 
to cash. That familiarity came from reviewing my account and trade 
performance during a similar period last year. In my 1999 review, 
I noticed that from the end of January till the end of February, 
my account dropped 17%. It had actually been down as low as 22% 
in mid month. 

Looking at 1998, I saw a different situation. The market again 
was soft during this same period, but I was playing Pfizer 
because Viagra was soon to come to the market. My background 
in medicine just set the stage for that lucky home run! Other 
core holdings in my account were down during this period. In 
general, December & January are typically market friendly months 
while February is not. This is why I planned to exit the markets 
before this February, until the dust settled. I saw no reason 
trying to play against the historical trend. 

Basically, markets have cycles. If you get an opportunity to see 
the 50-year chart showing on average, which months typically 
perform well and which months don't, you will understand my point. 
On average, certain times of the year are just better than others 
for trading, while others are historically weak. These cycles may 
be due to holidays, vacations, economic cycles, earnings, etc. 

As Jim says all the time, you can't fight the general trend. You 
may have a good stock with good potential, but if the trend is 
with a downward bias, the odds are against you. Sure, some can 
trade through it. Are you that knowledgeable? As I reviewed my 
trading records against the cycles, I could see that in general, 
trying to play against the wind was wasted effort. For me, that's 
another area that needs improvement. An extended down draft can 
ruin any good play! Add in a little fear from the day traders 
and you get rapid evaporation of your option premiums in the near 
month. That definitely upsets the feathers of an option trader. 

You know how it is; you never really learn the lesson when someone 
else is losing money. Somehow, it just seems to make more sense 
when it's our own loss. After studying my trades from last year, 
it is easy for me to see that not only did my account dropped 
during this period, but so did the whole market. Like you, I don't 
like to lose money. "Can't Fight Mother Nature", so the saying 
goes. So, why even try? This is why when I saw the January sell 
off starting early this year, I just moved into cash. 

For all the new players who have just recently began using charts, 
it is important to remember to view things a little differently 
during this period. When the market is flying high and running 
wild, it is easy to focus ones attention on intra-day charts. 
During those times, the market is more forgiving of those unaware 
of the daily patterns on the daily charts. But during a downtrend, 
it becomes imperative that you view your plays thoroughly, both 
intra-day and with the daily charts. In fact I would say, 
ESPECIALLY the daily charts. 

It is during slow down trending periods when previous support 
levels will be broken. Once broken, the integrity of the stock's 
recent performance starts coming into question. This is when 
increased selling occurs. The patterns can be seen more clearly 
on a daily chart. Sure, one could pick up the stock on the intra 
day low by watching the intra day charts, but if the stock is 
trailing downward for the week, that intra day low will become 
yesterday's high. That is NOT a way to buy a gold watch! There 
are charting patterns that are indicative of a continued downward 
bias, just as a breakdown in your indicators (moving averages) 
can alert you to a possible continued sell offs. Violating the 50 
& 200 dma are psychological pivot points in many traders minds and 
many times the downward motion increases at that time.

Another point I would like to make is determining a downdraft 
when there appears to be positive days every other day. Again, 
don't be fooled by the positive reading on the CNBC ticker. All 
you care about is if the wind is against your particular trade 
or not. If you want a better idea, again look at the daily chart 
pattern of the NASDAQ, the DOW and the sector your play is in. 
You may be surprised to see that they are starting to stair-step 
downwards, yet with a blip up every couple of days. Sometimes 
sell offs are subtle, sometimes they are not. Do you see a 
general sell off pattern in your sector? If so, and you own 
February options, you may want to dump them because time value 
will start decaying much faster now. I tend to exit weak plays 
the expiration before, especially if I think continued weakness 
is possible.

Due to my travel plans and my need to catch up with my 
professional medical duties, I felt February was a good time 
to take a trading rest. I'm also planning the same thing for 
this summer, due to the typical summer sell off. I realized that 
if I had just exited during these times, then returned when the 
market was healthier and in my favor, I would have been a much 
happier person. It wasn't hard for me to decide, would I rather 
spend the money having fun, or spend the money on losing trades. 
You can decide for yourself, but until the pattern changes, I'm 
not fighting Mother Nature. I'd rather spend it, than lose it!
Just think if I'm wrong, I should at least get some good entries.

Renee White 
Contact Support


PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

No dropped calls today.


PUTS:
*****

CHINA $81.50 +4.00 (+4.00) Watching CHINA trade the past two 
weeks has been like watching a ping pong game, back and forth.  
Up to $85, back down to $75.  Strong resistance met by strong 
support.  Unfortunately, that isn't real conducive to a good 
put play.  Well-timed entry points have allowed for profits, 
but not enough to convince us to keep this play.  In truth, a 
stock that holds at support as strong as CHINA has held at $75 
typically means the bottom is forming.  Today's better than 
average volume backs that theory.  So we will let it go for 
now, but any break below $75 on good volume would be worth a 
second look.  Also, news out late today for CHINA that they 
are busy opening new offices in China will help to solidify 
investor sentiment that rapid growth is continuing.



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

AMGN $69.06 +0.75 (+0.75) Not a bad day for Amgen, but we sure 
would have liked to have seen it crack that $70 resistance by 
more than an eighth.  Important note:  Amgen's earnings will 
be reported after the close of Jan 25th, not Jan 20th as had 
been reported previously in these pages.  It is not unusual for 
companies to change their earnings dates.  We will do our best to 
keep you updated on any changes.  The Biotech's were very strong 
today as they continue to become comfortable in their leadership 
role.  We will continue to give AMGN the benefit of the doubt 
and give it a chance to start moving back into new high ground.  
Resistance is at $70.13, followed by the old high of $72.69.  If 
the stock can trade through those levels then the earnings rally 
could be strong.  If the stock sells off a little look at the 
mid to low $60's as possible entry points due to support.

AFFX $192.75 +6.00 (+6.00) If you had been able to watch AFFX 
closely today you might have been able to get a good entry point 
after the gap up and subsequent selloff during amateur hour.  If 
you did not get in, do not worry.  AFFX is developing a very 
bullish right triangle formation.  If the pattern is confirmed 
by a convincing breakout into new highs then buying could really 
accelerate.  A strong close above $200 could entice the stock 
into a longer-term move to $250.  As we have mentioned before, 
Human Genome Project stocks are looking to become a new 
leadership group for aggressive momentum investors and AFFX 
could prove to be one of their favorites.  As always be careful 
with this extremely volatile stock.  Try and stay disciplined 
and use your stops and be conscious of your risk tolerance.  
Support levels are at today's low of $179.50 and then $163.

TQNT $134.75 +4.75 (+4.75) The way TriQuint is harpooning bears 
these days they might as well change their name to "Trident".  
TQNT was once again a leader in the Semiconductor and wireless 
communications groups despite a small drop in the SOX.  It took 
the stock a little while to get going this morning, but then it 
took out Friday's high.  Unfortunately, there was not much follow 
through.  The pullback into the close was not that surprising and 
the stock enjoys a strong uptrend.  The pullback was possibly due 
to short-term traders not wanting to be long tech going into 
MSFT's earnings.  If this theory is true, then look for TQNT to 
continue its rally tomorrow.  If the stock decides to pause, then  
you can find support at $128.50, followed by $126.  If today's 
action is any indication then very aggressive traders may want 
to buy small pullbacks and sell breakouts when they slow down.

MSTR $241.38 +13.44 (+13.44) It was a mixed day for Internet 
stocks in general, but MicroStrategy was one of the winners, 
definitely a good sign.  Could today's rally have anything to 
do with the conclusion of a two week inter-company pow-wow and 
strategy conference yesterday?  It is just idle speculation, but 
maybe all of that brainstorming ignited a little enthusiasm. 
Either way the chart still looks great, albeit we would have 
liked to have seen more volume today.  Today's rally confirms 
that we have found good support at $218 which may be of interest 
for put sellers.  Be careful trading this stock.  It seems that 
the first half hour of trading produces the high for the day.  
Therefore, "chasing" would probably be inadvisable.  (Probably 
good advise for trading any stock.)  A close above $250, today's 
high, could rekindle excitement in this stock and drive it 
higher.  A pullback to $230 also may prove to be a possible entry 
point for a bullish position.  MSTR announced three new clients 
for its Strategy.com Network.  They are Stocksystem.com, 
Wealthcast.com and Green Mountain Asset Management.

GMST $84.38 +7.56 (+7.56) Gemstar was one of the strongest tech 
stocks out there today.  It opened higher and kept gathering 
strength all day to close $0.88 off of its high.  Indicators are 
showing that GMST may be a little overbought up here and it may 
need to consolidate a little before going even higher.  On the 
other hand, as OI subscribers are very aware, stocks can trade 
in "overbought" conditions for a long time.  A gap up might be a 
good profit-taking opportunity, looking to get long again about 
halfway back in the uptrend in the mid $70's.  Some traders might 
be more comfortable using trailing stops to lock in profits. 
Either way, it looks as if we may have a winner on our hands, 
so good luck!  And trade with a plan.  Some of today's rally 
can be attributed to GMST's announced acquisition of two eBook 
companies, NuvoMedia and SoftBook Press.  These properties 
should compliment GMST's media presence on top of the planned 
merger with TV Guide. 

ADI $98.50 -2.88 (-2.88) Despite the late-day drop, ADI was in 
fact a strong performer, especially considering the -162 point 
loss on the DOW.  The stock flirted with Friday's new 52-week 
high ($101.94) and traded consistently above $98.  The 5-dma has 
risen to $95.55 and this would be a solid entry point; however 
near-term support appears to be emerging at $98 and $100.  
Therefore it's more likely you'll have to look intraday to get a 
position in this momentum play.  ABN Amro once again reiterated 
a Buy rating for ADI and upped the price target to $120 from 
$100.  In other news, Analog Devices and Virata Corp (VRTA) 
announced the joint development of a reference design kit for 
Asymmetric Digital Subscribers Line (ADSL) customer premises 
equipment (CPE) devices.  Competitive rival, Silicon 
Laboratories, announced it has filed a law suit against ADI 
alleging misappropriation of trade secrets and patent 
infringement in regard to its Direct Access Arrangement (DAA) 
solutions.  Earnings have been confirmed for February 16th, 
before the bell.

INTU $76.75 -4.63 (-4.63) The slip under near-term support at 
$80 and its failure to stay above the 5-dma (now at $78.33) is 
disappointing.  Volatility was certainly expected for this 
momentum play, however INTU lacked any significant upward 
movement today and this is somewhat bearish.  If the stock 
breaks the 10-dma (now at 75.83) we'll quickly exit the play 
and move on.  So let's put INTU on a short leash for now.  
Switchboard Inc, an Internet directory subsidiary of 
Banyan Worldwide (BNYN), and Intuit announced a partnership 
to enhance Site Builder web sites.  According to the terms 
Switchboard will add Site Builder to its local merchant network 
as well as provide future content and services to Site Builder 
customers.

ANAD $72.06 -0.94 (-0.94) ANAD is resembling a powerful freight 
train that stops for nothing in its path.  Mid-way through the 
session ANAD crushed overhead resistance at $73 and powered 
upward to $73.88, setting another all-time high.  Today there 
were not any analyst recommendations or company events that 
drove ANAD into new territory.  Nonetheless the chart just keeps 
looking better and better.  This momentum is carrying the stock 
right into its earnings date confirmed for January 28th, before 
the bell.  Keep that date in mind.  OIN never recommends holding 
over an earnings' report.

LVLT $92.06 +5.31 (+5.31) Congrats to the traders who got in 
on this play early morning (after amateur hour of course!) 
and reaped some quick profits.  Right from the start LVLT 
definitively bounced off an intraday low of $84.75 and made a 
beeline upward confirming it could easily hold short-term 
support at $85 and $86.  Conceivably, LVLT should show strength 
above $90 as it moves toward its earnings' date confirmed for 
February 3rd, before the bell.  Now if there's a correction we 
wouldn't want to see LVLT dip much below the 5-dma (now at 
$85.50).  Today Level3 and Convergys (CVG), an outsource 
business support systems company, inked a deal which will 
link CVG's online billing and customer services to Level 3's 
Internet network.  

CMVT $144.38 -3.94 (-3.94) CMVT didn't have such a great start
to the week, dropping almost $4 during amateur hour.  After
putting in a base near $144, buyers managed to push the price
back up to the $149 level, retesting the highs from Friday.
The buying volume just wasn't there to push through and the
bears came out of the woodwork, driving the volume up and
the price down.  Fortunately, support held at $144, and CMVT
managed to recover a bit into the close.  Going forward, we
would like to see this support level hold, and a bounce here
on increasing volume would make for a good entry.  In the event
of more investor nervousness, we could see prices dip as low
as $140 (10-dma), and a bounce here is also tradable.  Below
that, stand aside as you don't want to try and catch the
falling knife.  More conservative traders may want to wait
for CMVT to move convincingly through the resistance that
has developed at $149.  In the news today, CMVT announced
that it has inked a distribution deal with Teloquent
Communications.  Teloquent will be offering recording and
monitoring solutions from CMVT as part of its call center
solutions for enterprise, branch office and work-at-home
environments.  

EMC $112.03 +2.78 (+2.78) Like a moth to a flame, EMC seems
attracted to the $112 level.  Although it moved up nicely from
the open, our play stubbed its toe again as it approached the
$116 resistance level and it was downhill from there for the
rest of the day.  The bears brought EMC back to earth, limiting
the days gains to a little under $3.  On slightly less than
average volume, the battle between the buyers and sellers
continues with support and resistance now set at $112 and
$116 respectively.  Stronger support exists at $108 (the site
of the 10-dma), and a pullback and a bounce here would provide
a very nice entry into the earnings run which should commence
any day now.  More conservative investors may want to wait for
EMC to break through resistance at $116 before opening new
positions.  Continuing to demonstrate why they are the market
leader in storage applications, EMC announced today the
immediate availability of the EMC Fibre Channel Interface kit
for AIX.  This new kit enables servers running IBM's AIX
operating system to connect via switched Fibre Channel into
an EMC Enterprise Storage Network (ESN).  

VIGN $198.25 -2.69 (-2.69) Where have all the buyers gone?
After the wild gyrations last week, investors showed muted
interest in VIGN today.  Except for a blip up during the first
few minutes, shares traded in a narrow $4 range all day,
shaving off $$2.69 by the close on about half the average daily
trading volume.  Support looks to be building in the $195-197
area, with the 5-dma at $195.38.  Stronger support appears in
the form of the 10-dma at $185, but with earnings approaching
sometime soon (the company has still not released the date),
we would consider a dip to this level to be a gift.  VIGN
continues to bump into resistance at $206, and more conservative
traders may want to wait for the return of volume to push prices
convincingly through this level.  Don't be fooled by today's 
tame action, as this is still a volatile internet and wide 
price swings can occur intraday.  With that in mind, don't forget 
to keep your stops in place.  Today VIGN announced a strategic
alliance with R.R. Donnelley Online Services in which VIGN's
StoryServer 4 software will be a core component of RR.
Donnelley's ePublish platform, a compilation of best-of-class
Internet technologies that helps magazines maximize their Web
presence. 



********************************************
PICK NEWS - CALLS - CONTINUED IN SECTION TWO
********************************************



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This newsletter is a publication dedicated to the education 
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The Option Investor Newsletter         Tuesday 1-18-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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

HGSI $194.13 +9.50 (+9.50) Our split run continued today as
HGSI gained +9.50 on the first day back.  Genomics and HGSI
has been in the news lately as well and continues to attract
investors attention.  In the past couple of weeks HGSI signed
a major deal with Abgenix(ABGX), a leading player in the 
antibody field.  HGSI intends to take information derived from
genomics programs and then apply Abgenix's antibody technology
platform to create antibody drugs.  HGSI gapped higher at 
the open and then retreated to $183, before regaining its 
composure to climb to a new high of $194.25.  A real positive 
for our play was the fact the intraday level of support at $183
held.  If you have a position in HGSI, move your stops up to 
protect profits.  If you are considering adding to or initiating
a new play look for continue strength as an opportunity to join
in.  Another area of support would be found at $189 and a bounce
off that level would be positive as well.

SEPR $130.25 +4.13 (+4.13) SEPR continued to attract investors
attention, and their buy orders Tuesday.  SEPR saw $4.13 added 
to the price of their stock today.  A bit concerning was the 
light volume at 362K.  SEPR jumped up at the open, and fell back 
to the $126 area, when traders began to build support for the 
Biotech company, bidding the price higher.  The momentum
continued into the close, with SEPR heading towards its high
of the day of $131.19.  Ken Kam, manager of the Medical 
Specialist Fund, listed SEPR as one of his favorites.  In
commenting on SEPR, AMGN and MEDI, Kam said these companies will
provide better research for new drugs.  Our earnings run, is
exhibiting good momentum, but with the light volume today,
we may see a bit of a pullback.  If so, a bounce off $129
or $126 would provide a good entry point.  SEPR does not report
earnings until Jan 28th, so we still have time for this play to
develop.

LSI $79.25 +6.50 (+6.50) It's amazing at times what a brokers
rating can do to influence the price of a company's stock.  
Many times it depends on which broker, and which firm comments
on the future of a company.  This morning before the open, Dan
Niles, Robertson Stephens Managing Director and Senior 
Semiconductor analyst reiterated his Strong Buy rating on LSI.
Niles went on to say he was projecting a $90 price target for 
LSI, and estimated over 100% earnings per share growth from 
1999 to 2000.  It couldn't have come at a better time for our 
play.  LSI did gap up over $5 at the open, and headed higher 
making a new high at $80.50 before settling at $79.25.  If you 
are looking for an entry point to this play, the $79 did 
provide intraday support for LSI, and a bounce off that area 
would provide the opportunity we are looking for.  Should we 
see a pullback, be patient an wait for intraday support to 
build, prior to entering a new play.  LSI reports earnings 
Jan 25th after the close, so this will be a play you would 
want to exit by the close of business next Tuesday.   

NOK $178.88 -5.13 (-5.13) As we noted in Sunday's write-up, the 
breakout over $180 on low volume might retrace if the market gets 
rough.  Not that the market got rough, but MOT announced earnings 
today and only beat estimates by a penny while growing sales by 
"only" 13% over last year.  Frankly, that's lousy given the 
incredible growth of handset business, which conveyed to 
investors that maybe NOK sales wouldn't be so hot either.  We 
disagree with that analysis based on current demand for handsets 
and NOK's announcement that sales are exceeding even their lofty 
demands.  Despite previous reports to the contrary, NOK is 
probably putting the hurt on MOT more than MOT would like 
investors to believe (speculation, ours).  Technically, a quick 
peek at the chart shows a pennant forming over the last two weeks 
on slowing volume, which usually portends a breakout - we think 
to the upside, given the nearness of earnings on February 1 after 
the bell and the potential of a split announcement too.  Support 
is good at $175, and strong at $170.  Consider today's weakness 
on MOT's misfortune as a buying opportunity.  For the more 
conservative, target shoot your way in, or wait for strong 
volume and a positive price move for the best entry.

JDSU $195.69 +3.50 (+3.50) First, let us all bow toward San Jose 
California, the home of JDSU, and pay homage for having the 
foresight to consolidate what would otherwise remain an able, 
scrappy, yet smaller competitor.  Then take a bow to other 
traders all over the world for having the belief that JDSU is 
worth more money since announcing its offer to buy ETEK late last 
night.  For those who missed it, JDSU agreed to buy ETEK in a 
stock deal valued at about $15 bln.  The ratio is 1.1 JDSU shares 
for every 1 ETEK share.  While there may be some Federal Trade 
Commission hurdles to clear in the merger, it is a rare 
occurrence that the acquiring company goes up in value.  
Apparently, the market loves this deal, and we don't blame them.  
Keeping up with demand is biggest hurdle in the business, and 
ETEK, along with the OCLI acquisition can insure that demand is 
satisfied through economies of scale, according to JDSU's CEO, 
Kevin Kalkhoven.  JDSU looks just like Intel did 15 years ago - 
the dominant player in a growing industry with a big market lead 
in what is becoming a branded product.  While JDSU traded as much 
as $14 over last week's close, much of the gain was given back at 
the end of the day, but still managed to close with a $3.50 gain 
on 2.5 times the ADV of 4.6 mln shares.  A nice gain with big 
volume and earnings on tap for January 26 is a win, and looks 
good for the future.  Support is strong at $180, but was found 
today at $185.  If old resistance becomes new support, we may 
have found a new level at $195 today.  Don't bet the farm on the 
latter though, or chase it up the chart.  With volatile swings in 
the NASDAQ, not to mention a close at a previous high, the NASDAQ 
could go either way, taking JDSU with it.  While it looks like 
JDSU is on fire, we think target shooting still yields the best 
entry.  With big premiums, selling naked puts on the dips or 
using Jim's covered short straddle can yield excellent returns.

EXDS $124.00 +18.00 (+18.00) Wow!  Whatta day!  Yes, there was 
news today.  EXDS is teaming up with Foundry Networks (FDRY) to 
speed up clients' connections by a factor of ten times with 
FDRY's gigabit Ethernet switches.  Nothing like a little 
bandwidth expansion to goose the price.  Also in the news, EXDS 
is teaming up with Nomura Research to develop consulting and Web 
hosting services in attempts to expand the Japanese market.  
These two items alone shouldn't account for an $18 move.  We 
don't know the real reason for the jump.  However, we do know 
that volume was over two times the ADV of 3.7 mln shares, telling 
us that demand for the issue is strong.  Perhaps, it's money 
coming off the sidelines for an earnings run (scheduled January 
26 after the bell), or a possible split announcement then too.  
Careful though.  The nearest support following today's $110 
breakout is at $113.  Since nothing goes up forever in a straight 
line, expect some intraday profit-taking along the way, and be 
prepared to buy those dips.  Of course, if the overall market 
exhibits huge gravitational pull, no amount of EXDS rocketry is 
going get it into orbit.  Be like NASA Control and wait for 
another launch time.

MFNX $61.00 +3.88 (+3.88) BRRRR!  We got the cold shoulder this 
morning from MFNX's IR department.  When asked for a specific 
earnings date, they declined an answer and said to call back in 
February.  Thanks for the help!  While they are not likely to 
report in January, it could happen any darn time they feel like 
it in the first two weeks of February (Zack's has a tentative 
earnings date of February 7).  Making things even tougher, they 
have reported during market hours for the last two quarters.  All 
frustration aside, volume remains exceptionally strong at 45% 
over the ADV today, showing us strong buying interest.  Part of 
the reason may be the emerging possibility of MFNX's transmitting 
up to 2000 channels within a single strand of fiber, creating 
ubiquitous, cheap bandwidth for all in its service areas - that's 
up to 8 petabits per second, or the total average traffic 
covering the entire globe as recently as 1997.  Anyway, 
technically, this is nosebleed territory, with the nearest 
support at the 10-dma, way back there at $51.39.  While we fully 
expect MFNX to be at a higher price by earnings (whenever it is), 
there will be bumps along the way.  With seven consecutive days 
of gains, now is not the time to buy everything in sight.  Wait 
for the dips, (hopefully a big intraday selloff followed by a 
strong bounce) for an entry.  Also be forewarned that MFNX is 
really temperamental, and subject to violent moves for no 
apparent reason (think Tasmanian Devil) - something we expect 
from a company with little concern for disseminating news.  
Nonetheless, we like the gains and the chart is strong.  While 
nowhere near a guaranty, over $52, they could also announce 
another split. 

NTAP $118.38 +24.69 (+24.69) What happened to the price of NTAP
shares today?  Well, we will tell you.  It ended the day $24.69
higher than where it began.  The volume supporting the move was
strong at over 3.7 million shares.  What left some investors 
scratching their heads, was there was no company specific news
today, that would have moved the stock in such a fashion.  The
Nasdaq saw investors return to some old favorites today in the
technology sector.  PSIX a company in the networking sector,
with NTAP, announced a 2:1 for stock split, and did receive a 
reiteration of a Buy recommendation from analysts at Robertson 
Stephens.  Traders may have viewed these comments as, whatever 
they can do, NTAP can do better.  CSCO, PSIX, and NTAP all 
finished the day with solid gains, but NTAP was clearly the 
leader of the group, gaining over 26% for the session.  NTAP
opened $4.19 higher and continued to climb higher into the close, 
setting a new high of $120, in the last 5 minutes of the day.  
If you entered this play early in the day, congratulations.  If 
not, intraday support for NTAP is now found at $115, $110 and 
$107.  If traders take some money off the table, look for bounces 
off support as an entry point for this play.



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

ICGE $138.75 +5.25 (+5.25) We are keeping ICGE as a play and   
this is why.  Sure they closed up today, but the stock rolling 
over late in the day was a positive factor.  ICGE had some 
good news about a corporate position they filled and the Nasdaq 
had another up day, but these factors are short-term.  Today's 
highs would have been a great entering point since they never 
broke resistance, just bounced around it.  ICGE will now have 
a challenge rallying above resistance at $145.  Support is 
still at $130, but once that support is broken then the next 
stop is at $120, the 50-dma mark.  On the flip side, be cautious 
and cover yourselves if ICGE does break that resistance level.  
It looks like ICGE is making a good effort to rally, but the 
sector is weakening with CMGI dropping again today.  The good 
news they had was Ms. Coleman, who used to be CEO of BAAN, 
was officially named a managing director of operations and 
brings 3 years experience with her.  

IIJI $84.00 -1.50 (-1.50) IIJI offered us a wide trading range 
today, bouncing off the support of $80 but that's exactly why 
it's called support.  The bounce brought IIJI right back to 
resistance from the recent downtrend line.  So expect IIJI to 
hang out at $80 for a little while, maybe even making bounces, 
but once support is broken it should be all down hill until 
the next support level of $66.  We did not come close to the 
upper resistance of the 10-dma at $95.75 and that level is 
looking farther and farther away.  So jumping in at around 
today's close looks inviting, just confirm the bounce off of 
resistance first.  Another thing to look at is IIJI was down 
even though the Nasdaq was up, a good reason to believe that 
traders are still bearish.  There was no major news effecting
our play.

WCOM $44.50 -2.06 (-2.06) WCOM got no help from the big funds
today as Fidelity Investments flagship Magellan fund added Exxon
and Texas Instruments to its top 10 holdings, knocking out MCI
Worldcom.  WCOM did have some positive press, successfully
completing the first live commercial trial of Nortel Networks
(NT) next-generation  of optical networking equipment.
Demonstrating the capability to carry a Terabit per second over
a single fiber, this test will likely be far more helpful to
NT than WCOM.  The over-riding fundamental issues here continue
to be concern over the financial impact of the pending merger
with Sprint and long-distance rate wars with AT&T.  Technically
looking weak again, WCOM has given back most of the gains from
last week and $46 (10-dma) looks to be providing good resistance
going forward.  Support will exist at the 52-week low ($42.56),
set last Tuesday when WCOM traded below $41 for the first time
in over a year.  Don't chase this one down - wait for WCOM to
come up for air and test resistance again before initiating
new positions.

FD $47.88 +0.06 (+0.06) A quiet day for FD today, given the
news that came out on Friday.  Announcing a doubling of their
internet-related spending (up to $150-200 million) didn't sit
well with FD and they responded by lopping $3.38 off of the
share price.  The company held a press conference to try and
assuage investor concerns, stating that the increased spending
will not adversely affect revenues for the fiscal year beginning
volume returned to normal levels and FD couldn't move through
$48. This level has provided good support over the past month
and may now act as resistance.  With trading volume on Friday's
drop at roughly 4 times the ADV, today's lack of interest would
seem to indicate there is not an abundance of investors willing
to buy at these levels.  Conversely, the drop in volume tells
us there is not a rush for the exits.  With the lack of
direction in today's trading, we need to exercise caution.
Look for a drop through $47 on increasing volume before
opening new positions.  Beyond that, FD looks to have
long-term support at $45, $43, and $40.50.  Adding further
downside pressure will be the loss of retail veteran, Russell
Stravitz.  Leaving his position as Chairman and CEO of the
$2.2 billion Rich's/Lazuras/Goldsmith's subsidiary of FD,
Mr. Stravitz is moving to Nexchange, a four-year old Internet
marketer.  Does this say anything in regard to his feelings
about FD's internet strategy?  You be the judge.

SBC $41.13 -0.88 (-0.88) Our put play in SBC is developing in
fine fashion.  After bouncing up to it's 10-dma at $43.19, 
traders entered the market sending SBC south.  SBC closed down
-0.88 today which, may not be considered by some to be a big 
deal.  However when you consider SBC fell about $2 from its high
of the day, on volume of 9.8 million, that gives this play more 
credence.  We said Sunday, we wanted to see how SBC reacted to 
any rallies that might come.  At this point the rallies haven't
held, and intraday charts appear weak.  At this point we aren't 
anticipating the bottom to fall out of the company's stock but 
we do believe there may be one more move south before SBC is 
able to form a bottom.  If you entered this play on the decline 
from the resistance, keep your stops in place in case traders
try to mount an earnings rally.  SBC reports earnings Jan 25th 
at 10:00am EST.  Further weakness should be viewed as a chance
to join in on this play.

CMGI $116.31 -5.63 (-5.63) On more than double the ADV, CMGI 
clearly slipped under recent support at $120 leaving the 30-dma 
($123.04) merely as a dot in the rearview mirror.  Now so far so 
good, but since CMGI is a volatile Internet always be prepared 
for a reversal.  In other words, CMGI needs your undivided 
attention.  If you're using stops watch out for wild intraday 
swings that could inadvertently knock you out of the play.  
After all we're still betting on a retracement back towards the 
50-dma ($99.20).  Today CMGI announced another acquisition.  
This time it's Green Witch, LLC, a leader of open source 
Internet radio broadcast solutions.  Financial terms were not 
available.

ISLD $82.00 +4.88 (+4.88) Today ISLD proved to be a nice 
intraday play with an almost six-point spread.  On the upside 
resistance seems to be now more in-line with $82 than $80.  
Granted we're anticipating ISLD to fill in the gap from 
December's sharp rise, but first be aware that there's 
opposition at the near-term bottom support of $76.  Shifting 
gears, take a look at a chart with a 5-dma line and you can see 
how this technical indicator has acted as overhead opposition on 
ISLD's descent.  Therefore it's reasonable to assume that you 
can use this as an entry or stop gauge along with your own risk 
criteria.  There was nothing newsworthy surrounding Digital 
Island to report that would have effected trading.



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

VOD - Vodaphone Airtouch $57.50 +4.63 (+4.63)

Formed when the UK's Vodaphone Group bought US wireless
provider AirTouch Communications in 1999, VOD operates mobile
phone networks offering voice messaging, paging, and data
services.  With the most mobile phone subscribers in the world,
(31 million and rising), VOD is a giant in the world of wireless
phones, holding the #1 position in the UK and the #2 position
in the US.  The company continues to expand at aggressive pace,
having agreed to combine with US wireless carrier Bell Atlantic,
and still pursuing its takeover bid for Germany's Mannesman.

Yes, it's back!  For those of you that have been with us awhile,
you'll remember we've had VOD as a play recently on speculation
about the outcome of the seemingly never-ending merger battle
between VOD and Germany's Mannesman.  It looks as though VOD
may be getting the upper hand, making a convincing argument
in a published letter to Mannesman shareholders today
(see below).  VOD has been struggling for months to
convincingly break through the $52 resistance level.  This
tug-of-war has actually provided a nice, tradeable $5-7 range,
cycling from high to low and back again every 3-4 weeks.  We
knew it would eventually break out and late Friday and today
seems to have done the trick.  Today's move, on 1.5 times the
ADV, followed a familiar pattern for this ADR.  The open is
usually a gap, and the direction of the gap usually determines
the direction for the rest of the day.  There are 2 possible
entry strategies; wait for the gap up and then jump on board,
or for those with a lower risk tolerance, wait for a pullback
to support.  Support now looks to be the old resistance near
$52, a level we would like to see hold going forward.  Use
caution trading this issue as a stock that gaps at the open
can run right over your stops if the move is strong.  Keep
that in mind when evaluating your risk profile.

Continuing its full-court press to acquire Germany's Mannesman,
VOD today published a letter to Mannesman shareholders detailing
the real choice they have to make before the VOD offer closes
on February 7.  The letter details the greater strength the
combined company will enjoy and that the growth rate will be
greater than what they can expect for Mannesman's go-it-alone
strategy.  Addressing each of the concerns raised by Mannesman,
VOD shows that many of them do not hold water, most notably
the issue of demerging of Orange in the process of the proposed
merger.  VOD has a rational plan for this stage and shows that
Mannesman management's arguments don't hold water.

BUY CALL FEB-50 VOD-BJ OI=3689 at $8.50 SL=6.50
BUY CALL FEB-55*VOD-BK OI= 865 at $5.13 SL=3.25
BUY CALL APR-55 VOD-DK OI=2033 at $7.50 SL=5.75
BUY CALL APR-60 VOD-DL OI= 412 at $5.25 SL=3.50
BUY CALL APR-65 VOD-DM OI= 149 at $3.50 SL=1.75

Picked on Jan 18th at    $57.50    P/E = N/A
Change since picked       +0.00    52-week high=$58.00
Analysts Ratings      4-3-2-0-0    52-week low =$33.15
Last earnings N/A
Next earnings N/A
Average Daily Volume = 3.59 mln
Chart = http://quote.yahoo.com/q?s=VOD&d=3m




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

No new put plays today.



*********************
PLAY OF THE DAY - PUT
*********************

WCOM - MCI Worldcom $44.50 -2.06 (-2.06)

MCI Worldcom is a telecommunications giant, providing consumers
and businesses with local, long distance, Internet, data, and
international communications services.  Included in the
company's products and services are switched and dedicated 
long distance and local products, dedicated and dial-up 
Internet access, wireless services, 800 services, calling 
cards, and debit cards.

Sunday's Write Up

Survey said?  Entry Point!  The question we posed on Thursday,
after seeing WCOM recover from a low of $40.75 was, "Has WCOM
found a bottom or is this a good entry point?".  The answer
was clear by the close on Friday, as WCOM opened up at $49 and
slid downhill all day for a loss of $2.94 from the high of the
day.  Volume was still heavy at more than double the ADV,
indicating the weakness we have been focusing on is alive and
well.  The source of that weakness is the seemingly endless
saga of the merger with Sprint.  Adding further downside
pressure is the announcement by AT&T on Thursday that they
are lowering their key long-distance rate, a move WCOM will
have to counter.  This will continue to pressure the company's
revenues and therefore the stock price.  Look to enter new
positions on continued weakness or a bounce off of the 10-dma,
now at $47.50.  Selling volume has been strong throughout this
drop, so confirm that it continues to support any continuation
of the downward move 

The latest salvo in the battle between the local phone companies
and the large Telecoms was launched on Friday.  In response to
the AOL and Time Warner merger, the Small Business Survival
Committee is urging Congress to reject legislation currently
before the House of Representatives. The bill would grant 
local phone monopolies an exemption from the 1996 Federal
Telecommunications Act, which prevents them from offering
long-distance service to their local phone customers.  Also 
on Friday, WCOM was named as the 'unnamed creditor' that has 
agreed to swap part of a $30 million for a 19 percent stake 
in Able Telecom, a builder of communications networks. 

Tuesday's Write Up

WCOM got no help from the big funds today as Fidelity Investments 
flagship Magellan fund added Exxon and Texas Instruments to its 
top 10 holdings, knocking out MCI Worldcom.  WCOM did have some 
positive press, successfully completing the first live commercial 
trial of Nortel Networks (NT) next-generation  of optical 
networking equipment.  Demonstrating the capability to carry 
a Terabit per second over a single fiber, this test will likely 
be far more helpful to NT than WCOM.  The over-riding fundamental 
issues here continue to be concern over the financial impact of 
the pending merger with Sprint and long-distance rate wars with 
AT&T.  Technically looking weak again, WCOM has given back most 
of the gains from last week and $46 (10-dma) looks to be 
providing good resistance going forward.  Support will exist 
at the 52-week low ($42.56), set last Tuesday when WCOM traded 
below $41 for the first time in over a year.  Don't chase this 
one down - wait for WCOM to come up for air and test resistance 
again before initiating new positions.

BUY PUT FEB-50 LDQ-NJ OI=1698 at $6.75 SL=5.00
BUY PUT FEB-45*LDQ-NI OI=5362 at $3.00 SL=1.50
BUY PUT MAR-50 LDQ-OJ OI=1642 at $7.38 SL=5.50
BUY PUT MAR-45 LDQ-OI OI=5626 at $5.00 SL=3.25

Average Daily Volume = 14.24 mln
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m




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

Inflation Signals Tumble Blue-Chips..

Tuesday, January 18

The majority of Dow components fell lower today as bond yields
surged to recent highs. Fortunately, a rally in market-leading
technology issues propelled the Nasdaq to another near-record
close. The composite of technology companies rose 66 points to
4,130, just short of the all-time closing high set on January 3.
The Dow industrial average was off 162 points at 11,560 and the
S&P 500 index lost almost 10 points to finish at 1,455. Falling
issues outpaced advancers 1795 to 1290 and the benchmark long
bond dropped 20/32 to yield 6.74%.

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

Biovail   BVF    APR85C/F100C    $10.00   debit   bull-call
Emulex    EMLX   FEB100-CC       $95.00   C/B     covered-combo
Emulex    EMLX   FEB95-NP        $92.50   C/B     covered-combo
Splash    SPLH   FEB7C/FEB10C    $2.00    debit   bull-call
Tekelec   TKLC   FEB17C/FEB22C   $4.12    debit   bull-call

Emulex was the our big winner and just as the chart suggested,
the stock rallied for an incredible $20 gain during the session.
The opportunity to play it at our strike was short-lived but if
you bought stock near the open (in anticipation of playing the
position), you were happily rewarded with higher call option
premiums a few minutes later. Our cost basis is based on quotes
observed (simultaneously) in the first few minutes of trading.
All of the other issues offered favorable entry opportunities at
some point during the day.

Portfolio plays:

Technology stocks dominated the leader-board in our portfolio
today and two of our newest plays were at the top of the heap.
Exodus (EXDS) rose $18 to a recent high near $124 after the
company announced plans to offer its online customers 10 times
faster connections with the new Gigabit Ethernet service. Exodus
has teamed with Foundry Networks to provide the Gigabit Ethernet
service throughout its global network of Internet Data Centers.
Officials at EXDS say the product is necessary to support the
growth of bandwidth-intensive activity over the Internet. The
other surprise in today's session was our new combination play on
Emulex (EMLX). EMLX's $20 move came on a lack of significant news
but traders suggest the positive earnings reports among industry
competitors and the possibility of another stock split are having
a bullish effect on the issue. A number of other stocks moved
higher on positive announcements and although the near-term trend
is favorable, the market is expected to experience a period of
consolidation following the earnings season.
 
Among the soft sectors in Tuesday's session were financial and
pharmaceutical stocks. In the technology group, networking issues
moved higher while the chip companies were thwarted by losses in
Motorola (MOT). Motorola fell almost $7 to $143 after reporting
solid revenues and stronger-than-expected quarterly results. The
telecom sector was less affected by the move and our top performer
was the long-term play on Vodaphone (VOD). The stock rose another
$4 to close at a new high near $57. Our bullish LEAPS/CC's spread
is profitable after just one month and the move to February is an
easy one with little downside risk at the $50 strike (new support).

A number of our small issues climbed in individual rallies and the
leaders in this group were Geron (GERN) and Silicon Valley Group
(SVGI). Geron added almost $2 to end at $19.62 after the company
announced that Pharmacia & Upjohn has decided to extend its drug
discovery collaboration with Geron. The pact extends the research
and compound selection period to March 2002 and Geron will receive
additional research funding as part of this extension. Our recent
bullish offering has now profited in both the initial calendar
spread and the adjusted diagonal position. Silicon Valley Group
rallied $1.81 to $25 on expectations of favorable earnings. The
stock has moved up almost $10 since our initial recommendation
last month and the position has provided numerous opportunities
for profit. Key Energy Group (KEG) is worth mentioning. The issue
moved up $0.62 to just above our sold strike at $7.50. The bullish
spread; JUL7C/FEB7C is profitable at the current price but will
lose potential as the stock moves higher. Monitor the issue for
further upside movement and adjust the position as necessary.

One of our new straddles broke the mold today. LHS group (LHSG)
gained almost $3 on momentum from a recent telecom pact in the
far east. LHS and their global partner Alcatel have signed an
agreement to pursue wireless and wireline opportunities in China.
The companies will assemble a joint dedicated team in Shanghai
to address new opportunities in that country. Our debit straddle
offered a $2.00 profit on $6.75 invested after just one month in
play. Other recent winners, Jones Pharmaceuticals (JMED) and
Univision (UVN) continue to offer excellent exit opportunities.
JMED is trading near a 100% profit and UVN is returning 40% on
the initial $14.75 invested just a few weeks ago.

Questions & comments on spreads/combos to Contact Support



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

Over the past few weeks, I have received a number of questions
about the concept of selling time in Covered-Calls on LEAPS and
Calendar Spreads.

The premise in this low risk strategy is simple; time will erode
the value of the near-term option at a faster rate than it will
the far-term option. Using this concept, it is possible to
establish a directional (bullish) bias, constructing aggressive
out-of-the-money positions to take advantage of upward movement
and short-term option disparities. As the stock price nears the
sold strike price, theoretical value increases in both options
but the time premium falls in the short position, adjusting the
spread differential in your favor. When this occurs, it is often 
possible to close the position early for a profit; if the stock
advances in a reasonably stable manner. That is why the original
pricing disparity is so important; it can make the position
profitable as the options return to theoretical value.

To the average trader, it would appear that this technique can't
lose. One would simply buy the longer-term option and sell the
shorter-term option. As both time values decayed, the spread
would gain value. In reality, it's rarely that easy because the
underlying stock does not remain constant. The success of this 
conservative strategy hinges on the fact that most of the losses
will be small and the profits from other calendar positions will
overcome those losses. One of the benefits of this type of spread
is the risk is limited to the original debit spent to establish
the position and thus the trader is always aware of the potential
loss.

There are advantages to participating in short-term positions but
it is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value. Ideally, the spreader would like to have the stock finish
just below the sold strike when the near-term option expires. If
the short options are in-the-money at expiration, he will have
to buy them back to preserve the long-term position. If that case,
the short call will shrink to parity, providing an opportunity to 
purchase the option with little or no time value premium.

There are a number of excellent books on the subject and I prefer
two of the bibles of option trading: Option Volatility & Pricing:
Advanced Trading Strategies and Techniques by Sheldon Natenberg
and Options: A Strategic Investment by Lawrence McMillan, both
available in the OIN bookstore.

Here are three calendar spread plays, based on the current price
or trading range of the underlying issue and the recent technical 
history or trend. The probability of profit from these positions
is higher than other plays in the same strategy, based on pricing
disparities in the option premiums. News and market sentiment will
have an effect on these issues so review each play individually
and make your own decision about the future outcome of the
position.

****

GLM - Global Marine  $19.31     *** Oil Sector Rally ***

Global Marine provides offshore drilling services on a day-rate
basis and offshore drilling management services on a turn-key
basis. Their domestic offshore contract drilling operations are
conducted by Global Marine Drilling Company, and international
operations are conducted by Global Marine International. They
have a fleet of offshore drilling rigs; cantilevered jack-ups,
semi-submersibles, one moored drill ship and one dynamically
positioned drill ship. The company provides drilling management
services through a number of subsidiaries and offers services as
general contractors; with planning, engineering and management
services beyond the scope of its traditional contract drilling.

Oil and energy stocks continued to climb on Tuesday as oil prices 
increased on speculation that OPEC could extend supply cuts. The
idea that OPEC might extend the current limitations beyond April
has caused a number of analysts to raise their expectations for
the industry. Demand for fuel oil has also moved higher as a cold
snap in the Northeast continues to plague homeowners and
businesses with rising heating costs. Even with the high oil and
gas prices, the sector has yet to recover fully from the long-term
slump and some industry experts suggest there is still substantial
upside potential in the group.

Today Global Marine reported sharply lower profits for the fourth 
quarter, citing last year's weak oil prices, but said OPEC output 
restraints and gradually higher premiums are expected to fuel new 
exploration this year. Global presented a favorable outlook for
the future saying it expected current higher oil prices to spur
new capital investment.

A pre-earnings rally has boosted the stock price in the past few
days but some traders say the rise may also be attributed to new
merger speculation. GLM discounted the likelihood of a deal with
another drilling company but said it would continue to look at
small acquisitions. A short-term consolidation is certainly in
order after the recent rally and a small disparity in option
pricing offers a favorable opportunity to speculate on the stock
movement for one week.


PLAY (conservative - bullish/calendar spread):

BUY  CALL FEB-20 GLM-BD OI=24   A=$1.18
SELL CALL JAN-20 GLM-AD OI=5158 B=$0.31
INITIAL NET DEBIT TARGET=$0.75 TARGET ROI=20%

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


****

PDE - Pride International  $17.25    *** Sector Rally ***

Pride International provides contract drilling and related
services in offshore and international markets, operating a
global fleet of 308 rigs. The company provides services for
large multinational oil and gas companies, government-owned
oil and gas companies and independent operators. PDE also
operates an offshore fleet in Venezuela, and has operations
in Colombia, Bolivia and Argentina including land-based rigs
in North Africa, the Middle East and Pakistan.
 
Oil prices peaked at record levels last week, boosting the
majority of issues in the group to recent highs. Improving
revenues are expected to augment the drilling industry's
capital spending thus increasing the need for offshore rigs.
PDE is expected to benefit from developments in the Gulf of
Mexico and Africa as well as in Brazil where Petrobras, the
state run monopoly has opened its waters to outside investment.

We are going to begin this position with a short-term neutral
outlook, using the premium from the January call to reduce the
overall price of the April option. The recent failed rally area
near $18 may provide just enough resistance to allow our spread
to roll into February (this Friday) with favorable upside
potential at a reasonable cost basis.
 

PLAY (conservative - bullish/calendar spread):

BUY  CALL APR-17.50 PDE-DW OI=384 A=$2.19
SELL CALL JAN-17.50 PDE-AW OI=505 B=$0.31
INITIAL NET DEBIT TARGET=$1.62 TARGET ROI=50%

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


****

AG -Agco  $13.88     *** Second Time Around ***

AGCO manufactures and sells a range of agricultural equipment
and related replacement parts including tractors, combines,
hay tools, and forage equipment and implements. AG participates
in all segments of the tractor market and uses the replacement
parts business as a source of revenue and profitability for both
the company and its dealers. Their products are marketed under
a number of brand names including Massey Ferguson, Fendt, AGCO
Allis, Gleaner, Hesston, White, Landini, White-New Idea, Black
Machine, AGCOSTAR, Glencoe, Tye, Farmhand, Ideal, and Deutz.

Earnings season is upon us and although the majority of heavy
machinery makers are expected to report declines in the quarter,
analysts expect a industry rebound later this year. A number of
farm equipment firms have been hammered in recent months by low
commodity prices and to offset the slack demand, they reduced
production of new equipment. With dealer inventories at all-time
lows, production and sales are expected to climb in the coming
months.

Agco has a unique chart and always provides good option premiums
for those interested in speculating on a low cost cyclical issue.
Last time around, we jumped in a bit late but now it appears we
have the right combination of trend and premiums for a low-risk
position.


PLAY (conservative - bullish /calendar spread):

BUY  CALL MAY-15 AG-EC OI=211 A=$1.56
SELL CALL FEB-15 AG-BC OI=273 B=$0.62
INITIAL NET DEBIT TARGET=$0.75 TARGET ROI=50%

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




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

DISCLAIMER

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