The Option Investor Newsletter Thursday 2-17-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 2-17-2000 High Low Volume Advance Decline DOW 10514.60 - 46.80 10671.90 10454.60 1,037,945k 1,443 1,558 Nasdaq 4548.92 + 121.27 4553.14 4444.75 2,008,438k 2,335 1,880 S&P-100 752.19 - 2.01 761.19 747.13 Totals 3,778 3,438 S&P-500 1388.25 + 0.58 1399.88 1380.07 52.4% 47.6% $RUT 558.42 + 10.66 559.08 547.76 $TRAN 2470.36 + 15.57 2485.79 2454.79 VIX 25.07 - 0.03 26.00 24.45 Put/Call Ratio .49 ************************************************************* Strong Economy, High Productivity, Inflation Low. What's Wrong With This Picture? Nothing if you live in the real world. Alan Greenspan however lives in constant fear of the monster under his bed. While the Inflation Monster is about as hard to find as the Loch Ness Monster, Alan is sure it exists. If this was a movie it would be an X-File and he would be a very old Fox Mulder, always searching for the truth that is "out there." The truth started to raise its head this morning with a PPI that was lower than expected. Actually unchanged from last month. Falling tobacco prices offset higher energy prices to shock the markets into a brief rally with the Dow gaining over +100 points. The excitement was short lived with the equivalent of an earthquake rattling the markets almost immediately. The Greenspasm registered about a 5 on the Richer scale. The higher on the Richer scale the poorer investors will be from market drops. Greenspan said the Fed would have to be ever vigilant and continue raising rates to slow the runaway economy. Greenspan said the current economic factors were unprecedented in his 50 plus years of observing the markets. After he voiced repeatedly that the Fed would continue to raise rates aggressively until the economy cried uncle the Dow dropped from a +110 point gain to a -106 point loss. The Nasdaq however gave up most of its +50 point gain but recovered quickly to mount the charge to record territory again. The Dow still cannot mount a successful rally and the down trend that started on Jan 14th is still intact. In the last three weeks we have seen two oversold relief rallies of +300 points or more that turned into bear traps as the sellers over powered the buyers with strong volume. The materials stocks and the financial sector are still being singled out for selling as the threat of higher interest rates and the lure of tech stocks becomes a powerful double whammy. The banking index, BKX, closed at a new 52 week low with the insurance index, IUX, not far behind. The Greenspeak had no impact on the NASDAQ, which managed to soar to a new all time high on the strongest volume ever, over 2.1 bln shares. The tech stocks were joined by biotech's as important breakthroughs in medical technology pushed the major medical research stocks to strong double digit gains. The major biotech winners included MLNM +54 (a current play), and HGSI +29, AFFX +18. The more recognized names did well but finished off their highs. BGEN +8, JMED +9, CEPH +2.50. Are these stocks ever going to cool off? It has been a decade since the biotech's were this hot and it does show that the dot.com craze can be topped. The Nasdaq breakout today against the Dow trend needs to be confirmed on Friday with another good strong day in order to put to rest all the remaining bears. With the short interest so high on the Nasdaq you can bet there is some real concern at many trading desks tonight. With the money still pouring into the tech funds there appears to be no end in sight. Now don't you wish you had bought that last dip under 4300! That was only three days and 250 points ago! Ironically this same Thursday last year was the low point of the year for the Nasdaq ar 2260. We are up +100% since then and Nasdaq 5000 looks like a sure bet for this year. The bond managed to shake off the certainty of more rate hikes ahead and finished higher today with the yield at 6.22% Not only the Nasdaq and the bond but the S&P 500 also closed positive and broke with the Dow trend. The Nasdaq was not the only new record high today. The Russell-2000 soared another +10 points to another record and finished strong showing no signs of weakness. The small cap rally is a very bullish sign and as long as the Russell is on a roll the Nasdaq is likely to follow suit. Stock splits anyone? I can't remember a previous period where there were more stock splits than we have had recently. Hardly a day goes by without two or three. Today's high profile announcements included IMNX 3:1, BRCD 2:1, ADVS 2:1, AGIL 2:1, MEDI 3:1, ADIC 2:1, ELNT 2:1, NXLK 2:1, ADI 2:1. Four of these stocks saw their prices skyrocket on the announcement with IMNX +23, BRCD +28 after hours, AGIL +10, MEDI +12. No news? These companies made their own. It is official. Windows 2000 is now available for sale. With much fanfare and celebrity promos Microsoft pounded the table for their new operating system. They claim more than $250 million was spent in testing under different conditions to make this the most bug free software release ever. While Microsoft expects W2000 to be a strong contributor to their bottom line, they do not expect it to be all at once. This is a totally new program that will require a longer entry cycle. Still, you can expect a couple hundred million new users over the next few years. I wonder if they fixed the "blue screen of death" so prevalent in Win98? Michael Dell must be breathing easier. The conflicting comments on Win2000 are now history and they are firing out press releases almost hourly about computers immediately available with the new operating system. The selling on Dell stock also appears over with Dell advancing to $40.69 from $35 last week. This was enough to add almost $1 bln to Michael Dells net worth today. My Dell leaps are looking better every day. The market internals going forward are mixed. The advance/decline line on the NYSE is almost even despite the negative Dow. We are in correction mode on the Dow again. Many analysts feel there will be a retest of 10,000 next week. I am not that pessimistic. If the CPI is as benign as the PPI was this morning then we have no reason to stay on the sidelines. Next weeks economic reports are not going to move the market. Existing home sales and Durable Goods just don't measure up to the PPI/CPI impact. The Nasdaq has had 2.5 corrections in the last six weeks and each has had a higher low. As long as Greenspan does not pull a rate increase out of his hat just to show us he can back up his tough stance then there should be no potholes in our immediate future. Earnings are over and there is not going to be a lot of market moving news but we appear to be acting out a self fulfilling prophecy of double digit tech gains again this year. Money is flowing, techs are hot and the rally is spreading into other sectors. What more could you ask for? I know, I know. When everything is too good to be true, it probably is. There may be a stealth bomb out there somewhere but I don't see it today. Oil prices are falling and transports are starting to recover. If the financials could only shake off the coming rate hike on March 21st the Dow could at least break even. If the CPI tomorrow is benign we should be in good shape but Fridays still hold the possibility for profit taking as traders get flat for the weekend. Keep your fingers crossed and if you find that inflation monster under your bead, call Greenspan, he is out there somewhere! If you are totally board and want to read the text of Greenspan's speech, click here: http://www.bog.frb.fed.us/BoardDocs/HH/2000/February/Testimony.htm Trade smart, sell too soon. Jim Brown Editor We have had several requests for disclosure of current positions whenever I write articles mentioning specific stocks. I will list the stocks in which I have open positions from this point forward. Nothing should be construed as an endorsement either positive or negative for the stocks in my position list as I could be long short or spread at any time. My current positions include: AFFX, ANAD, ARX, BEAS, BVSN, CMDX, DITC, EMLX, ENZ, HGSI, INSP, ITWO, JMED, MSTR, PUMA, SILK, TIBX, TERN, LU, DELL, AMTD. *************************Advertisement**************************** Options Traders ! Mr. Stock's new online trading site has been designed for you. Trade spreads, straddles, covered writes, and stocks online. Get real-time market data throughout our site. Advanced options tools include volatility graphs, implied volatilities, and more. http://mojofarm.mediaplex.com/adserver/click_thru_request/565-58-1875-3 ****************************************************************** ****************************** OptionInvestor/Optionetics Spring Advanced Seminar Series ****************************** The spring dates for the OptionInvestor/Optionetics seminar series are approaching fast. This is the advanced seminar taught by George Fontanills and Tom Gentile. If you feel you need more option strategies in your trading arsenal like the Delta Neutral Straddles George is famous for then this seminar is for you. Remember, you can bring a friend for free and retake this seminar as many times as you want for free. The cost of the two day seminar is about what you would lose in only one trade. Invest it, don't lose it. Here are the spring dates: Feb 27/28 Los Angeles Mar 19/20 Chicago Mar 26/27 Dallas Apr 2/3 San Francisco For complete details http://www.OptionInvestor.com/seminar/ There is a 100% money back guarantee and you can take a friend for free. What else could you ask for? ********** STOCK NEWS ********** International Fibercom: This Thing Is On A Run By Matt Paolucci These days, the mere utterance of the words fiber-optic cable networking can grab the attention of just about anyone. The growth in this area is forecasted to increase by geometric amounts. http://members.OptionInvestor.com/stocknews/021700_1.asp ************** Market Posture ************** As of Market Close - Thursday, February 17, 2000 Key Benchmarks Broad Market Bearish/Bullish Last Posture/Since Alert **************************************************************** DOW Industrials 10,700 11,250 10,515 BEARISH 2.17 * SPX S&P 500 1,350 1,450 1,388 Neutral 2.01 OEX S&P 100 740 780 752 Neutral 2.01 RUT Russell 2000 500 540 558 BULLISH 2.17 * NDX NASD 100 3,575 4,090 4,125 BULLISH 2.17 * MSH High Tech 1,800 2,000 1,993 Neutral 2.11 XCI Hardware 1,300 1,525 1,504 Neutral 2.11 CWX Software 1,200 1,470 1,496 BULLISH 2.17 SOX Semiconductor 740 940 979 BULLISH 2.15 NWX Networking 900 1,020 1,060 BULLISH 2.17 * INX Internet 700 800 739 Neutral 1.06 BTK Biotech 420 500 658 BULLISH 2.15 NEW!! BIX Banking 550 690 497 BEARISH 11.30 XBD Brokerage 400 450 418 Neutral 11.30 IUX Insurance 550 600 508 BEARISH 11.30 RLX Retail 950 1,000 815 BEARISH 1.28 DRG Drug 340 380 337 Neutral 2.15 HCX Healthcare 700 750 705 Neutral 2.15 XAL Airline 160 180 121 BEARISH 5.21 OIX Oil & Gas 250 280 263 Neutral 2.15 **Posture Alert** Tale of two markets for the moment. After Nasdaq's surge into new territory, we have turned Bullish across select sectors. However, we remain Neutral/Bearish across several blue chip selectors including financials, Retail and Drugs. We have also added a new industry sector - Biotech - to our Market Posture feature after following recent investor interest. Take a special note of our key benchmarks for each index for they have been updated with the recent volatility. **************** Market Sentiment **************** Biotechology - Hot! Hot! Hot! By Pinnacle Capital Advisors With more and more money pouring into the hot Biotech, OptionInvestor.com will be adding the sector to our Market Posture and Sentiment coverage. As highlighted by the chart below, interest in the Biotech sector has been expanding, but this week the sector has taken off as investors have been pouring money into the new market niche News of an advance in the fight against AIDS helped trigger an explosive rally. Names like Protein Design Labs, Organogenesis, Human Genome Sciences and Millennium Pharmaceuticals have made precipitous moves this week. The Biotechnology Index is designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. The Index is equal-dollar weighted, designed to ensure that each of its component securities is represented in approximate equal dollar value. Today, the Biotech Index (BKT) includes 15 stocks including: Amgen Inc. (AMGN) IDEC Pharmaceuticals Corporation (IDPH) Bio-Technology General Corp. (BTGC) Immunex Corporation (IMNX) Biogen, Inc. (BGEN) Medimmune Inc. (MEDI) Cephalon, Inc. (CEPH) Millennium Pharmaceuticals, Inc. (MLNM) Chiron Corporation (CHIR) Organogenesis Inc. (ORG) COR Therapeutics, Inc. (CORR) Protein Design Labs, Inc. (PDLI) Genzyme Corporation (GENZ) Vertex Pharmaceuticals Inc. (VRTX) Gilead Sciences Inc. (GILD) Pinnacle Capital Advisors will be adding the hot index to our Market Posture tool together with our key benchmarks and current market posture. BULLISH Signs: Corporate Earnings: Major corporate earnings continue to come out strong and ahead of analyst expectations. Cash Flow: The cash that has been sitting on the sidelines has been put to use as of late, as record volumes for the major indexes have been shattered. Short Interest: From a contrarian stand, short interest on the NYSE is still very high, eclipsing 4 billion shares. The short interest on the Nasdaq is more than 2.4b shares. Mixed Signs: Interest Rates (6.247): Although the recent bond market rally has helped bring the current yield down near 6.0 last week, the long bond remains above 6.24. Volatility Index (25.10): A review of the VIX's daily chart suggests that the low 30's are an excellent buying opportunity, and the low 20's continue to be a great selling opportunity. The VIX peaked on an intraday basis Friday (2/11) at 28.4 before collapsing and closing at 24.52. This may serve as a potential reversal pattern and signal the end of the market's recent slide. BEARISH Signs: 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 Thurs Benchmark (2/11) (2/15) (2/17) Overhead Resistance (760-830) 2.16 3.72 4.25 OEX Close 752.04 763.06 752.19 Underlying Support (700-750) 5.63 5.30 6.50 What the Pinnacle Index is telling us: Overhead resistance is building and could stall a broad market advance. Peak Open Interest (OEX) Friday Tues Thurs Strike/Contracts (2/11) (2/15) (2/17) Puts 740 / 9,937 740 / 10,315 740 / 11,107 Calls 800 / 7,806 800 / 8,796 770 / 15,732 Put/Call Ratio 1.27 1.17 .70 Volatility Index Major Date Turning Point VIX October 97 Bottom 54.60 July 20, 1998 Top 16.88 October 8, 1998 Bottom 60.63 January 11, 1998 Top 26.38 March 4, 1999 Bottom 28.15 May 14, 1999 Top 25.01 July 16, 1999 Top 18.13 August 5, 1999 Bottom 32.12 October 15, 1999 Bottom 32.06 January 18, 2000 Top 21.09 February 11, 2000 26.98 February 15, 2000 24.98 February 17, 2000 25.10 Please view this in COURIER 10 font for alignment ************************************************* CHANGES THIS WEEK Daily Results Index Last Mon Tue Wed Thu Week Dow 10514.57 94.63 198.25 -156.68 -46.84 89.36 Nasdaq 4548.92 23.10 2.22 6.88 121.27 153.47 $OEX 752.19 4.76 6.26 -8.86 -2.01 0.15 $SPX 1388.25 2.82 12.11 12.11 0.58 27.62 $RUT 558.42 2.84 0.30 7.52 10.66 21.32 $TRAN 2470.36 31.15 -18.38 5.89 15.57 34.23 $VIX 25.07 -1.13 -1.18 0.49 -0.03 -1.85 Calls Mon Tue Wed Thu Week MLNM 314.56 3.59 1.66 42.75 54.06 102.06 Dropped SEPR 171.25 1.75 7.13 11.63 10.50 31.00 Wait for me! MUSE 236.50 -4.00 0.44 8.63 21.94 27.00 Split run BEAS 134.50 8.38 4.38 1.25 12.50 26.50 MOMENTUM GLW 191.06 14.25 -4.25 2.25 13.06 25.31 New ANAD 144.13 12.50 4.19 0.94 2.50 20.13 Unflappable IFCI 26.38 -0.38 4.50 0.44 5.56 10.13 Alert! INSP 201.00 9.19 0.06 -1.44 1.88 9.69 Splitting ISSX 97.38 2.13 0.88 3.06 2.44 8.50 New EMLX 132.06 -4.75 9.94 0.56 2.44 8.19 Channels TXN 143.00 -3.00 0.31 0.81 7.25 5.38 Finds feet SNDK 154.25 3.38 -1.44 -1.50 4.75 5.19 Better CLRN 111.00 15.00 -4.84 -13.47 8.06 4.75 Dances BCE 122.50 0.91 0.38 3.81 -0.63 4.47 Still value PCMS 22.28 0.78 2.72 -0.19 0.22 3.53 Options! COVD 85.50 0.13 0.19 -0.06 0.63 0.88 Builds base ISLD 115.00 -9.19 5.13 -4.94 9.75 0.75 On track! AMCC 230.25 -10.91 18.38 -12.13 4.88 0.22 Head fake LHSP 82.13 -2.06 4.06 -3.88 2.00 0.13 Solo driver CUBE 87.13 -0.06 2.06 -0.81 -1.25 -0.06 Leadership ASPT 65.91 -0.75 -0.03 0.88 -2.06 -1.97 Holds up ERICY 87.75 -3.69 -0.13 0.63 0.75 -2.44 Volume LLTC 102.25 2.63 -3.13 -3.25 0.50 -3.25 Dropped HYSL 45.31 -1.69 0.75 -1.44 -1.19 -3.56 Dropped Puts RHAT 75.19 -5.19 -3.44 -4.75 5.19 -8.19 Boing! VERT 208.25 -10.50 -5.50 9.00 2.25 -4.75 Dropped MRK 63.25 0.81 -0.44 -0.13 -2.25 -2.00 New KMG 47.81 -0.94 1.44 0.00 -0.81 -0.31 Slippery KRB 21.00 0.13 1.25 -0.19 -1.00 0.19 Economy GD 43.13 0.13 -0.25 0.25 1.56 1.69 Dropped JNJ 79.19 0.19 2.06 0.13 -0.63 1.75 Channel PGR 57.69 -1.88 3.81 1.00 0.75 3.69 Rally over? ************ WOMANS WORLD ************ There's A Time For Everything, Limit vs Market Orders By Renee White Today I am frustrated. I was frustrated yesterday too. I've been sitting on my hands, patiently waiting for a feeling of comfort, before entering any more plays. Until just recently, I have been 50-60% cash, deciding to trade lightly during these uncertain times. This week, I was ready to play. I will be traveling again soon, so I wanted to get a feel for the action this week, before jumping in for anything short term. Several things have been on my radar screen lately. I wanted to enter CSCO after their split announcement. I've wanted to add to my INSP position and I've been waiting to enter VERT once I felt the downhill slide was over. Last week, I decided on some biotech companies to enter in the downturn I anticipated this week, in addition to identifying some DOW companies for leaps, to help diversify my IRA. I was ready for another 10% Nasdaq correction and had my checkbook in hand. I've been watching the VIX, except for 1 1/2 hours I left on Friday which of course, is when it spiked! It has traded mid-range since then. Not only did I miss a good entry on the spike up in the VIX, that spike was also my exit on puts I had. All last week I had waited for that spike, then it occurs when I run an errand! Geee!! My week started Monday morning trying to get out of the puts I didn't exit Friday after putting in a late day limit order, which did not fill by the close. I knew I was probably toast, when I noticed afterwards that there was buying occurring in the final few minutes. Things were looking gloomy Monday and most of Tuesday. The positive close on Tuesday made me cautious, not excited. I checked all the charts and it looked like Nasdaq was trying to form the right shoulder of a possible head and shoulder pattern formation on a line/daily chart, from the previous week. It made me more cautious. By Wednesday, the pattern had broken though, never completing the formation. On the weakness Tuesday though, I was fortunate enough to enter CSCO on its dip and I added to my position in INSP. Initially, I did not know if these would hold, if Nasdaq did sell off, these would tank. But, so far so good. On to Vertical Net. Poor guy, he really fell off his bike after falling from the heights of 285 in late January, to a 190's skinned knee on Tuesday. I've been watching VERT and felt the slide was over by Tuesday. There is plenty of time to enter this play. It's still a little risky now, as it struggles to turn back up and start its climb going back through resistance. The gap up Wednesday looked like some risk takers had a little interest, so after it sold off a little later in the day, I put in my limit order. I waited. And waited. And moved up my limit a tiny bit. And waited. And waited. Well, you get the point. It closed up into the close as the market maker decided I was either going to buy him a beer or he wouldn't take my limit order that day. VERT had come down during the day, but not the options. Same thing today, gap up, put limit order in, sold off a little but again, didn't take my limit. It was at that time that I notice these options had absolutely no volume. What is no volume? My chart read VOLUME: 8 but I swear I couldn't find more than 3 trades! This time, those limit orders probably saved me. With the light market activity yesterday, I didn't think too much about it, but with 2 billion today, I knew something was wrong. Never chase an option, especially if it has no volume or low open interest. You will over pay just about every time. I'm glad I wasn't filled and will reevaluate my play before trying to re-enter. Yesterday, I had the impression everyone was asleep. The trading range was narrow and there was little buying activity positioning before the PPI and Greenspan's speech, like we have seen in the past. The volume left me concerned and the DOW still looked weak, so I decided to wait before entering more plays. Missed opportunity though, became my moaning pain due to the biotech sector. Last week, I identified several companies to watch, and hopefully get a good entry in the Nasdaq sell-off I was hoping for. Forget that!! These guys aren't resting at all. Waiting on the pullback caused me to miss an entry, during Nasdaq's Tuesday morning weakness, when they were marginally up. Since then, they have had 20-55 point gains every day. I felt like the little kid left on the shore, waving my arms, kicking and screaming watching all my friends on the party boat leave without me! MedImmune announced a 3:1 split earlier today and just now, I heard that Immunex announced a 3:1 split, up 21 after hours after +23 during the day!! And did you see the action on Millenium Pharmaceuticals this week? It was trading around 217 early in the week and today a high of 316 with strong buying into the close, +54 just today. Talk about crying in the soup line!! I think I'll go back to knitting. Let's see, is it knit one, pearl two? That is one HOT sector right now! This is one time that a market order would have done me just fine during Tuesday's, afternoon rally. This was the most painful mistake this week, after doing the homework last week. Did Jim Brown call that right Sunday, or what?! Tuesday was definitely the right entry. Unreal! Yesterday we heard the dirty on Doubleclick, but I was not expecting Michigan's Attorney General to accelerate its slide, before I could enter my put orders. Again, limit orders and they were only 1/8th off the ask when I entered them. I waited. And waited. And moved it up a little. And waited. Again, you know the story. This was a major news breaking announcement that I knew would cause the stock to immediately sell off. I should have entered a limit order at least at the ask. I never got filled. One thing I noticed though, even though Doubleclick came back a little bit after the shock had worn off, the put option premiums had inflated with the negative sentiment. When I first looked at the quotes, the February 87 1/2 puts were 1/8 X 3/8. If you had entered 50 contracts at 3/8 you would have been happy. Those puts closed at 1 3/8 giving you a profit of $5000 from an $1,875 investment and I bet you a nickel it will gap down tomorrow raising that one day profit much higher!! I think this was my dumbest mistake this week! This definitely should have been either a higher limit order or a market order. Normally, if I can catch the trade immediately on the really bad or good news, I don't challenge the price. I've been very conservative the last several weeks. I've had other professional responsibilities to deal with and I did not want to be risky during February with its history of being weak. Unfortunately, when I put my brakes on and converted to conservatism, evidently I became a little too set in my ways! I feel like I've lost major money all week, by being too cheap on my entries. My picks were good, but without an entry it doesn't make you any money. Oh well, another day, another week, another play. I'll be traveling again soon, so maybe it just wasn't meant to be...but it still leaves me frustrated! Renee White Contact Support ************** TRADERS CORNER ************** Running On Empty: The Highway 101 Portfolio By Janar Wasito Let me tell you about my day. One of the best things that happened is that I discovered a Jackson Brown CD in my Jeep's center compartment. Call him an existentialist. Call me crazy. So, I pull out from my San Francisco apartment about noon, headed downtown to run -- not walk -- away from my old broker, Fidelity, which calculates the margin requirements on spreads by regarding the short leg as naked. I hit my bank, into which I have wired all the liquid funds. After wrangling with the manager regarding the availability of funds, I cut two cashiers checks. One I walk into the Schwab (SCH) office. The other I walk into the Mr. Stock office. I picked those two because they rank high in options order capability in Fontanills's latest book, Trade Options Online. I sit and talk to the SCH rep about the stand alone software, and a charitable trust that I want to do. I am going to structure that trust myself. After all, I am a third year law student. I am going to fund it using some YHOO and CSCO that I bought in 98, and I am going to trade in it as the trustee, and I am going to use it to fund projects like putting that Mexican school online. I am going to use Mr. Stock to really learn the advanced spread strategies. Mr. Stock is in the same city block as Preferred Trade, and both firms are located in the same city block as the Pacific options exchange (PACX). No wonder these firms know the business -- their principals are former floor traders, and the genesis of the firms are in clearing stock for option traders putting on and taking off hedge positions. Then I am on the road, southbound on 101... Looking out at the road rushing under my wheels Looking back at the years gone by like so many summer fields In '65, I was 17, running up 101 I don't know where I am running now, I'm just running on Running on empty, Running blind Running into the sun But I am running behind I am thinking, as I drive south on 101, that you could make a pretty good portfolio out of the companies that I am driving past. Begin with SCH, lots of good stuff going on there with recent mergers. Then Seibel Systems (SEBL), a business database information service gaining wide acceptance. Then Oracle (ORCL), which will get hot again sometime this year. Liberate (LBRT) has been moving. There's Insweb, don't know if it is public yet. Crossroads over by the airport -- that's a company that some of the newsletter picks have interests in. Down by the airport, I grab my cell phone, and I reserve a flight to Paris. Fares are cheap, got some friends heading over. I am burnt. Gotta do what you can just to keep your love alive... In '69, I was 21, and I called the road my own I don't know when that road turned out to be the road I'm on Running on... running on empty I am driving southbound still. There's @Home (ATHM), as I get closer to Stanford -- its been cold, so stay away from that one for now. I turn off at University Avenue, headed to class, which I will probably be late to. If I continued south on 101, the list would just get better. Nokia (NOK) recently set up a campus down by Great America. Off of that exit, you'll find Verisign (VRSN), where I went to a biz dev meeting last year, when, in my second year of law school, I was working with the 25 year old, snowboarding CEO of a dot com start up. And you will find Healtheon (HLTH), Jim Clark's 3d billion dollar start up. Further south, near San Jose, Intel (INTC) buildings populate (polute?) the landscape, and Atmel (ATML) sits off to one side of the freeway in its own campus. Everyone I know, everywhere I go People need some reason to believe I don't know about anyone but me If it takes all night, that will be alright If I can get through this mile before I leave So, now I am in my Chinese Legal Institutions Class at Stanford. It is a perspectives requirement, but I am actually enjoying it because of the first hand stories of the scholarly professor who has spent half of his life prowling around China. In the class, I scribble notes for a start up idea that I am figuring out some way to hand in as a term paper because I have been booted out of The Art & The Law Class because there wasn't enough space. Oh well, too bad, so sad. After class, I go upstairs, shoot the breeze with a corporations professor who was a White House scholar -- and he is asking ME about what I think about a start up idea. My advisor for another term paper (another thinly disquised start up idea) walks down the hall, two students in tow. I dash out to give the rough draft to the former SEC commissioner, and tell him he'll love the part about how Sand Hill Road is the new City on a Hill to an updated version of the Massachusetts Bay Colony, the original Internet start up. (The Mass Bay Colony was a joint stock company in the era of South Seas Madness, and other such popular delusions of crowds.) After schmoozing a bit at the school, I am off to Fry's Electronics, where I pick up tech gear like other people pick up fruit and vegetables at a supermarket. Tonight, I am looking for a PC Card Ethernet adapter that won't break off, and I am psyched to find a Xircom adapter without that annoying, easily breakable dongle. I rip the package open, and fool around with the gear like a manic shopper squeezing a cantaloupe. Out the door, I grab the latest Wired. Cool article about shopping bots, which are related to the start up I worked on. Then I hit the road, northbound this time on 280, which has adopted this horrible reverse rush hour where all the San Francisco residents commute to the Silicon Valley suburbs for their day jobs. I want to work from my house with a DSL line! To heck with that drive. Give me a house in Napa. I drive past the Ski Chalets on Sand Hill Road, whose venture capital residents get stock at prices we public investors will never dream off. How about some YHOO at $.02, thanks. Over the golf course, down in the heart of 3000 Sand Hill is the start up venture finance company I worked for before starting law school. They are getting set to go public. Damn, and I had an offer to work there for a year with stock. Ah well, the education will serve me in better stead. I will try to get some of that one. Over there is the law firm I worked at for a summer -- they have a better portfolio of low priced stock in hot companies than you can dream of. Over there is where I pitched that idea for our start up to a top tier VC -- which would you rather graduate with, a high GPA or a high net worth? The market is the greatest teacher, and in this microcosm, the key is getting in the middle of deals. Looking out at the road rushing under my wheels I don't know how to tell you all just how crazy this life feels Look around for the friends that used to pull me through Looking into their eyes, I see them running too Jeff was our student body president in my San Francisco high school, which I graduated from in 1987. He went to Stanford and took wind surfing classes while I froze my butt off in my first winter at Harvard. Now, he is the CEO of a company that just got $85 million in venture funding -- a sure sign that they will be hitting the public markets soon. TJ, the smartest guy in the class, who wanted to study Physics and Theology because "the higher you go in each, the closer they get together," is working for Jeff. Now, the only universe that TJ is studying is filled with the five digit symbols for mutual funds. DaveD got Broadcom stock options 50 plus points ago (post split), which makes him an accredited investor under Regulation D of the 1933 Securities Act. FredM has been clearing restricted stock transactions for an SF investment bank since the mid 1990s. He recently bought a $2 million dollar house overlooking the Golden Gate. Colin -- who was our high school quarterback and threw every pass like he was providing a target for a trap shooting range -- just got done clerking for the Supreme Court. He's back out here somewhere. DaveB, one of my best friends from high school, and maybe the best athlete in our class, is working on his MBA out in Michigan ("I needed a school with a real football team"), and we are plotting on a start up of our own. We chat for free using Microsoft Net Meeting. He'll be in the back of class with his lap top. I will be in the back of class. We'll be YHOO chatting back and forth -- hey, how about that China.com put at 7 7/8 bid on the PACX. Nah, take it for 7 3/4 on the AMEX. Right click on qcharts, set up the shot in Preferred, pull the trigger. You get that one, Dave? Yeah, I got it. Hold on, the professor is asking me a question. The professor says that the efficient market hypothesis says that only monkeys and idiots can make money in the stock market. I wonder whether I should tell him I just made $1500? Those are my high school classmates. Running into the sun I'd love to stick around, but I am running behind You know I don't even know what I am hoping to find I get in the door a little after 8 pm. Roundtrip done. Grab my workout gear and head down to the Yuppie Boxing- Spinning Gym in the Marina. Guys taking off their boxing wraps are talking about how MSFT always negotiates hard. A guy with a British Accent, MBA Challenge for Charity T-shirt, and a Goldman Sachs gym bag is putting his gear away as I warm up. My boxing coach would be outraged at the slackers trying to imitate a boxing workout. A workout partner from Hotjobs.com comes up to the boxing room, and after a few rounds on the heavy bag, we do a series of drills that Tommy taught us back in college. Slip a punch, weave, throw a left hook, then a straight right. My heart rate monitor is maxed out, and my heart rate level is too high, but it is a great work out. Between drills, I explain to him that the fact that earnings per share are becoming more negative year over year are not the only thing that Wall Street looks at. I promise him that I'll email him a list of stocks to watch. We do a few drills where we circle the same bag hitting the exact opposite punches. Hooks, then right hooks. In a mindless, mind freeing cadence, I think about what an unreal day it has been. And that is every day. And at the end of the day, or at the end of the lifetime, a dying man will not regret what he did. He will regret what he didn't do. Hence, my own personal ethos -- Ivy League College followed by the US Marines. Teaching (the best thing I did in my life). Law School followed by Lord knows what. Lead the crowd a merry chase and see if they can follow. Go for it. You fail, so what? The Jesuits who taught me theology in college would call it existentialism. Soren Kirkegaard call your office. By the way, I have come to a conclusion regarding trading strategies -- half calendar spreads using LEAPs and short term options which I sell against them every month; half bull spreads -- evenly split between debit (45 day+) and credit (30 day or less) spreads. Those strategies respectively replace my LT Stock holdings and straight call plays. The way to go is to use the OptionInvestor.com Call Picks but then construct your own bull spreads. Missed some trades this week, but now I have the right brokers to play the game the way that I want to. Good Luck Janar Wasito 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: ***** HYSL $45.31 -1.19 (-3.56) It looks like this ship may be sinking. We thought that HYSL might be offering us some potential entry points, but apparently, it had something else in mind. HYSL has continued to head south and we have seen the volume increasing to back the descent. Not a good sign for a call play. HYSL did manage to make a weak bounce from $44 today however, HYSL has been tagging lower highs for the past three sessions. Basically, HYSL is sending us all of the signals to abandon ship, and therefore, that is exactly what we are doing. Too many other fish in the sea swimming in the right direction. LLTC $102.25 +0.50 (-3.25) We are not dropping LLTC as a call play because there is anything particularly wrong or negative about the stock. It is just that we feel our capital could be better used elsewhere. Technically, we lost a little interest in LLTC when it dropped below $100 intraday. Despite the fact that the stock rallied back above this level it appears to us that since LLTC broke below the low end of its recent trading range the stock seems more likely to take a look at $95 before making a new high. A pullback and consolidation in the mid $90's could provide a good entry point for long term investors. It appears that for now there are some better immediate investment opportunities in the semiconductor industry. MLNM $314.56 +54.06 (+102.06) We won't get into the goose and gander theory again, but if you have a position in, or have been following MLNM, you undoubtedly have heard that HGSI patented a gene considered key to HIV infection Wednesday. That sent the Biotech index soaring to new highs, along with most of the companies in the sector that have anything to do with genomics. Oh, by the way if you do hold a position in MLNM, we would say congratulations are in order as well. Depending on your entry point you are enjoying an unbelievable return in the past two days. MLNM soared $96.81 in the past two sessions. We aren't going to wear out our welcome in this play, so we are going to simply say thank you and walk away. PUTS: ***** VERT $208.25 +2.25 (-4.75) Did you tighten your stops as we suggested? We mentioned on Tuesday that we were in bonus territory and from that point on anything below $200 was icing on your cake. Hopefully, you had a small cake to ice. VERT gapped up nearly $2 on Wednesday and just kept going up from there to close the session at $206. Today, VERT continued to climb until it found resistance at its 10-dma of $216. There may still be some room to play VERT on the downside, however, the risk/reward factor just is not appealing enough for us to continue to hold a spot open for it on our put play list. It delivered the drop to $200 that we were looking for when we initiated this play and therefore we are content to step back from this one at this point. Remember, the closer we get to the split in March, the more likely VERT will climb. GD $43.13 +1.56 (+1.69) GD sure is a stubborn stock. Day after day they bounced off that $41.50 level, but never fully broke it. It looks like they have made up their minds that they won't break it either - at least not anytime soon - case in point, they closed points above resistance today. The last couple of days they have been hanging out, trying not to dip any lower. That's ok. We can find other stocks that will do more than stubbornly hang out at the same price. So we are getting rid of our play on GD. Dropping lower than they have for years was to much to ask of them and, like the industry they are in, they defend themselves well. ******************** PLAY UPDATES - CALLS ******************** ERICY $87.75 +0.75 (-2.44) A good indication as to the strength of the momentum backing a stock's move is the volume level. If you take a look at the recent trading for ERICY, you will see big volume on the days that ERICY posted a gain. This is something that we love to see. You may have noticed that ERICY has been struggling a bit around the $88 level. ERICY looks to be caught in a battle of the daily moving averages. ERICY's 5 and 10-dmas have nearly converged. The 5-dma, which seems to be providing some support, is at $87.50 and the resistant 10-dma is at $88. As you can see, ERICY is snuggly sandwiched between the two. We are betting that ERICY has the momentum backing it to push it through $88 and will soon be relying on both of these levels for support. ERICY has some additional support at $87 if needed. IFCI $26.38 +5.56 (+10.13) We introduced IFCI to our call play list earlier today with a Trading Alert at 12:30pm EST. Since then, IFCI traded up to a new 52-week high of $27.69 and posted volume nearly six times the daily average. Not to mention the option volume! The March-20 contracts posted volume over 2,300. Will IFCI make it through $30 tomorrow? IFCI tried to establish some support at $26, $25 and $22 on its way up. Should IFCI pullback, watch for these levels to catch and take advantage for possible new points of entry. And the story gets better still. We didn't mention earlier the fact that IFCI will be announcing earnings on February 29th after the close, so we may benefit from a nice earnings run as well. Congrats to all who got in early on this trading alert. MUSE $236.50 +21.94 (+27.00) It certainly seems like the split run has begun in earnest for the shares of MUSE. The 2-for-1 split will occur next Wednesday and with a new high convincingly made today, look for MUSE to continue its rally as long as the NASDAQ stays strong. We had good volume today at close to two times the ADV. There was plenty of news the past two days to help account for the strength in the stock. Yesterday, ICG Communications, one of the industry's fastest- growing infrastructure service providers, announced that they are expanding their use of MUSE's Netcool suite of software to include their entire national network. Today it was announced that MUSE will expand its presence in the New World Ecosystem program established by Cisco Systems. The program is a community of technology partners working together to enable service providers to rapidly develop and deploy innovative telecommunications services. Any press linking a company to the highly respected and influential CSCO is usually met with investor enthusiasm, and that was certainly the case today. Today's rally saw the shares of MUSE break out of a nice flag pattern. Indications are that MUSE could be testing $250 very quickly, perhaps tomorrow as long as the CPI comes out benign. When trading a stock that has made a very nice move like MUSE, do not be afraid to utilize a trailing stop strategy to lock in profits. CUBE $87.13 -1.25 (-0.06) It has been a little surprising that C-Cube has not been able to go up the past two days with the NASDAQ staging a huge rally and a very strong earnings report from industry leader AMAT. (It should be noted that AMAT is a semiconductor tools company and C-Cube is a semiconductor manufacturer. Amat is still a significant component of the SOX Index). In fact, if you take out AMAT, the SOX has kind of cooled off the past two days with the bulk of momentum chasing cash going after the Human Genome Project stocks. We are not yet concerned that the leadership position of semiconductor stocks in general is in jeopordy, it just seems like they are taking a break. We still believe that a close above $90 on CUBE could give the stock enough of a boost to carry it to the significant price point resistance level of $100. *********************************************** PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO *********************************************** =========================Advertisement========================== Have you got an idea for a financial website? Need help getting started? Technical support? Funding? We will help you turn your idea into a reality. Don't sit on your idea until somebody beats you to the punch. Do you have a website now that is not succeeding like you think it can? 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The Option Investor Newsletter Thursday 2-17-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. ***************************ADVERTISEMENT************************* Bring the Markets Home! ~ InvestIN.com http://www.investinoptions.com Is your broker limiting your options? Can you enter stop and stop loss orders on options? Options Trading with InvestIN.com is available for all accounts. Ranging from IRA's to Direct-Access accounts. Option Stop loss orders accepted. Streaming real time option quotes available with direct access accounts. InvestIN.com has your OPTIONS. Call Toll Free 1-800-327-1883. http://www.investinoptions.com ***************************************************************** ******************************** PLAY UPDATES - CALLS - CONTINUED ******************************** ISLD $115.00 +9.75 (+0.75) The volume was back on track today and ISLD tacked on $9.75, or 9.3%! Over 1.27 mln shares exchanged hands compared to the stock's ADV at 1.17 mln and the lower levels from the beginning of the week. This is a great indication that the momentum will start to snowball and drive up the share price. Yesterday, ISLD repeatedly bounced off $104 and $105, but couldn't crack the short-term opposition at $112. No matter, this volatility offered a variety of entry points into this play whose overhead resistance is just points away at $118.13 (Monday's intraday high). The clear breakout today powered ISLD even higher. It established a higher level of near-term support at $110, which is also in-line with the 5-dma ($109.95). If you want to start a new position or add positions for that matter, the $110 level is a good entry on the climb while lower at $105 is more solid on a slight pullback. Remember this is a pure momentum play so trading volume needs to stay intact on the ascent. INSP $201.00 +1.88 (+9.69) On Monday, INSP initially set another all-time high at $208 during early morning trading. Following a natural course, it then became a victim of the profit-takers. INSP was cut down to a low of $188.63 on Tuesday before the bulls bid the share price back over $200. However, the stock is still in consolidation mode as it trades primarily between $195 and $200. We're anticipating that INSP will regain its momentum as the split date draws closer. INSP is splitting its stock 2:1 on March 15th. If this HIGH-RISK Internet play meets your risk portfolio, then consider this period of consolidation as a playing field of entries. Watch for volume to return to levels upwards of the ADV (1.7 mln) for added confirmation. ASPT $65.91 -2.06 (-1.97) Unfortunately there hasn't been an earth-shattering event to pop ASPT out of this dry period. The momentum has tapered off a bit this week while the stock finds its footing at these higher share prices. In consideration of the economic events of this week and some stocks experiencing major sell-offs, ASPT is holding up well. Near-term support is sandwiched at $66 between the 10-dma ($65.20) and the 5-dma ($67.19) which isn't a bad place to roost. Honestly though, we need to see a move through $68 followed by a break above the $70 hurdle. This would confirm that the powerful momentum that rocketed ASPT up from the $50 level just this month hasn't fizzled. COVD $85.50 +0.63 (+0.88) The good news for our play in COVD is it hasn't headed south. Unfortunately it hasn't moved much higher. Other than a brief move early this afternoon, COVD has traded in a $2 range for most of the past two sessions. At this point the lack of movement may not be all that bad, as COVD is building a good base with $84.38 providing support. If you have a current position in COVD, keep that level in mind. A move though that area, especially if it is accompanied by solid volume may be a good point to place your stops. Wednesday Dan Ross, an analyst at Sanders Morris Munday initiated new coverage of COVD with a Strong Buy rating. Ross is certainly optimistic with his price target, coming in at $140. While we tend to agree with Mr. Ross the coverage did little to move the price of COVD's stock, at least in the last two days. Although we believe COVD has a bight future in the near term, we will need to see new buyers enter for COVD to regain its momentum. BEAS $134.50 +12.50 (+26.50) Momentum check anyone? We mentioned Tuesday that sometimes there is just no stopping momentum. That has proven to be the case in BEAS. Our earnings run exploded again right out of the gate this morning. By mid-afternoon BEAS had hit a new high at $143.13. Traders began to take some money off the table, but the e-commerce company finished the day with a 10% gain. Early this morning BEAS announced it had signed a multi-year, multi-million dollar contract with KPN Royal Dutch Telecom. Under the terms of the deal BEAS has agreed to deliver its e-commerce transactions solutions to enable KPN to integrate many of its heterogeneous internal systems. Our suggestions for BEAS, are move your stops up. BEAS formed support at $134 on an intraday basis, with the next level seen at $125. Time is beginning run out on our play. If the momentum continues, we would certainly enter a new position, but be prepared to close it by Tuesday, as BEAS is scheduled to report earnings after the close. EMLX $132.06 +2.44 (+8.19) If you look at the chart on EMLX, you'll see EMLX continues to form a nice channel higher. EMLX made another step Wednesday to the $140 target previously mentioned. Our only concern was the volume was a bit light as traders began to put some money in their pocket, after hitting $135. EMLX still finished the session with a small gain. Today EMLX added another $2.44 but the volume was on the light side again. Intraday charts show an ascending triangle formation beginning to appear, which could lead to a breakout to higher prices. Again we are very satisfied with the moves seen so far this week, but we would like to see more volume to support the current moves. EMLX is forming a base near the $130 area and a bounce off that level, accompanied by good volume would be a nice entry point for a new play or additional positions. Not much news in the past couple of days, so rely on support, resistance and volume to guide you in this play. PCMS $22.28 +0.22 (+3.53) After hitting a high at $22.50 at the open Wednesday, PCMS has spent the past two days catching its breath. The volume has lightened up as well. Well, let's just say its fallen back into its normal range. One place the volume and volatility hasn't lightened up is at the options exchanges. Options volume in PCMS jumped, especially in the March and May 20 calls. A lead market maker at the Pacific Exchange said "It seems like a lot of call buying" going on in PCMS. Apparently many traders saw the great potential in PCMS and jumped into a solid play. Although PCMS spent most of the past two days consolidating, we expect the momentum to continue. As far as support and resistance is concerned, $21.88 has provided a good base while a breakout over $22.50 would confirm another move to the upside. CLRN $111.00 +8.06 (+4.75) Dancing between the raindrops, CLRN just barely avoided making it onto our drop list. With yesterday's large drop, the bears pushed the price down through both the $110 and $105 support levels, producing a close near the low of the day. The bulls finally woke up today near the $100 support level, and helped CLRN turn on a dime to punch through the $105 and $110 levels which were violated yesterday. Volume the last 2 days has been a little over average, but nothing to write home about. Particularly encouraging today was CLRN's ability to close above $110, possibly re-establishing that level as support. We are still waiting on news of the outcome of Tuesday's shareholder meeting where one issue was whether to increase the authorized shares from 50 to 200 million. At any rate, it seems clear that a split announcement could be on the horizon and just the idea may continue to drive shares higher. Yesterday, Edward Jackson at Piper Jaffray raised his price target from $115 to $140 and reiterated his Strong Buy rating. Going forward, look for a renewed bounce near $110 to trigger your entry into new positions. Mild resistance exists at $113 and more conservative traders may want to wait for a break above this level before committing. LHSP $82.06 +2.00 (+0.13) Like a solo driver stuck in Friday night traffic, LHSP is sitting near $82, watching with envy as others zip by in the commuter lane. Volume has been about 20% above the daily average, but the struggle between buyers and sellers is dead even. The move up has been motivated by the strong earnings announcement last week, accompanied by a 2-for-1 split. Shareholder approval will be required and the date has not been set, but the news underscores the company's positive outlook for the future. There is still plenty of positive press about their new handheld device, which uses voice input to allow users to send and receive email, browse the web and conduct e-commerce transactions. Basing the architecture on the hot Linux operating system will likely elicit continued good will from the investment community. After such a strong move, it makes sense that LHSP needs to pause to catch its breath. Support at $80 is still intact, backed up by $75, and aggressive investors can consider initiating new positions on a bounce near these levels. However, we would prefer to see a convincing breakout above $85 before jumping onboard. SNDK $154.25 +4.75 (+5.19) That's a little better. SNDK finally managed to break through to a new high today, touching $159.50 mid-day, before fading into the close. At least we finally saw a decent volume day with over 1.1 million shares trading hands. With investors returning in force to the NASDAQ today, SNDK reaped the rewards by closing at a new high of $154.25. The $152 level is shaping up as new support, with the 5-dma close behind at $151.25. With today's surge into new territory, resistance has moved up to the neighborhood of $159. Remember the real motivation for a continued move upwards is the pending split on February 22nd. Based on today's increase in volume, investors may be waking up and preparing for a final surge. With the split occurring next Tuesday, we will be dropping SNDK this weekend, consistent with our 'never hold over a split' rule. New positions can be considered on a bounce near $152 or a breakout above $160 - just remember time is running out, and any run higher will have to be quick. TXN $143.00 +7.25 (+5.38) After finding its feet near $130 on Tuesday, TXN has recovered nicely, with an especially nice performance today. Gaining over $7 on the day, the real excitement came in the final 30 minutes. With a surge of buying volume, TXN tacked on an additional $3.50 to close near the high of the day. Continuing to toot its own horn and crow about the pivotal role in the broadband access markets being played by the silicon providers, TXN kicked off the High Speed Access Summit in Dallas today. As the world leader in Digital Signal Processors and Analog Circuits, TXN expects continued strong business growth driven by the incessant demand for both wireless and broadband communications solutions. With a revival of the $137-138 support level, TXN looks ready to run to new highs. The next target will be the 52-week high at $145, set last Thursday. Look for another bounce near $137 or a continued move upwards to provide your entry. More conservative players may want to wait for a convincing move above $145 before jumping on board. SEPR $171.25 +10.50 (+31.00) Wait for me! Just barely pausing after amateur hour on Wednesday to allow new entries, SEPR has been on a tear the past two days. Driven by positive press and impressive gains in the rest of the Biotech sector, SEPR has added more than $10 on triple the ADV both yesterday and today. Don't forget, SEPR is also on a split run, with the effective date, next Friday, the 25th, approaching rapidly. The strong demand for anything that promises to extend our lives and enhance our health continues to be amazing. Today's move represents a very convincing break to new highs and SEPR is now in blue-sky territory. Expect resistance to come in round numbers like $180 and $190. With the rapid move up, mild support is now found at $169.50 and then $165. To find strong support, look all the way down to $155, but given the short fuse on our play, a test of this level would give us concern over its viability. New positions can be considered on either a bounce at the mild support levels listed above or a break to new highs. Just remember, after the last two days, there is a lot of profit already built into this play. Use caution, and if you have open positions, keep your stops in place. BCE $122.50 -0.63 (+4.47) Investors still value BCE at just $13 bln after netting out the value of BCE's 39% stake in Nortel (NT). We are in this play to capture BCE's value once investors realize that the Canadian phone giant is worth more than 1.3 times sales and 3.7 times earnings, again net of NT's value. At least it should still rise in parity with NT, as NT moves up the chart. Helping in that department, NT just won a WDM system contract from Metromedia Fiber Network (MFNX), a previous customer of Lucent for the same product. While reiterating a Strong Buy rating, CSFB also noted their belief that Qwest (Q) would deploy Qtera's (newly acquired division of NT's) long haul solution in 2000, thus benefiting NT as well. Support remains at $117 and has since shown resilience at $122.50. Yes, the price moved over $122 and held, though unfortunately not in the textbook breakout style that we had hoped. Even so, what's good for NT is good for BCE. Target shoot dips, watch for volume (more is better than less) and keep your eye on NT for direction. AMCC $230.25 +4.88 (+0.22) Just when we thought it was safe to get back in the water, that volume we saw from Tuesday's intraday low turned out to be a head fake. Still, $220 proves to be a strong point of support for this optical semiconductor manufacturer. With volume falling back to slightly above the ADV today, the daily move was a bit directionless and did not follow the NASDAQ pattern over the last few days. There has been no news either. Resistance is at $24, then $235, then $230. Anybody see a small pattern emerging? Like a small series of lower highs? While it doesn't mean the play is over, it should cause us to exercise some caution before entering a new play. Lower highs with decreasing volume may mean that buyers are turning elsewhere after the recent runup. Then again, maybe it's just a breather. Those of you with profits may want to tighten up your stops so you can keep 'em. Otherwise, we need to look for dips coupled with a volume increase after a bounce intraday for the best entry. ANAD $144.13 +2.50 (+20.13) Talk about unflappable. Aside from a one-hour dip yesterday morning to $137, ANAD has remained solidly above $140 support, yet bumps its head on $145. Though it's only a three-day pattern, the lows are getting higher as the resistance remains constant at $145. As long as volume doesn't fall below the ADV, ANAD could get a breakout. However all bets are off if NASDAQ can't sustain today's rally. Potentially, it could find $130 again if things get nasty. Looking for something that might turn up the heat on ANAD going forward? How about that 3:2 split coming up on February 29 (ex-date is March 1)? Until then, buying intraday dips (target shooting) to $141 might give the best entry. We hesitate to aim much lower since dips generally aren't that much deeper than $3. Other than a Strong buy rating from Cruttenden-Roth and a new price target of $200, there isn't much news - just plain old momentum in a hot sector. ******************* PLAY UPDATES - PUTS ******************* KMG $47.81 -0.81 (-0.31) Alright, we are going to try and keep this one a little shorter today. KMG is a story play and the story behind it has been all over the news this week. Oil crisis. Need we say more? Though the oil service stocks did manage somewhat of a rally this week, it looks as though investors are again feeling a little leery of taking on any new positions in this potentially slippery sector. The news this week has really worked to make a near-term correction in oil prices seem not only likely, but inevitable. KMG is looking up at a barrelful of resistance, the first of which is directly overhead at $48 (5-dma) and the next at $48.75 (10-dma). KMG has managed to dig up a bit of support right around $47.50 so watch for KMG to trade through this level to confirm the next move down. PGR $57.69 +0.75 (+3.69) Overall selling among the Big Board leaders seems to lead to a little buying in the beaten down stocks like PGR. The mini-rally for PGR could end soon. We noted in Tuesday's report that throughout the devastating downtrend in the shares of PGR the stock has managed a few small rallies that can last a couple of days. Hopefully this little rally is almost over and the stock will soon resume its downtrend. The small rally is probably still due to the CSFB upgrade to Strong Buy that came out on Tuesday. It is our opinion that CSFB is trying to catch a falling knife. Sure, there is probably some value in the shares of PGR down here, but stocks are driven by cash flow. As long as it looks like rates are going to continue going up, and Greenspan gave us no indication today that they are not, it looks like financial stocks, in general, will continue to be under pressure. RHAT $75.19 +5.19 (-8.19) Boing! After a good start on this new put play we got a bit of a bounce today in RHAT. Our guess is that some of the excitement that led to the rally today has to do with the release of Windows 2000 today. Since Linux is one of the few competitors of Windows, any media coverage of Windows gets people thinking about the alternatives. Some of the rally today may be attributed to the anticipation of what the CEO of Red Hat might say after the close during an interview on CNBC. Well, nothing new was really said. The CEO mentioned his company's continuing attempts to increase Linux's presence in the server market and various other objectives that are already pretty well known. One interesting part of the interview came at the end when the CEO gave a very curt response to a question about his personal selling of the stock and the huge amount of stock that will be becoming available for insider selling in the coming months. Perhaps the most interesting thing to come out of the interview was the immediate downside action in after- hours trading in the stock right after the interview concluded. We will see if the selling continues tomorrow. A break below today's low of $70 would indicate to us that RHAT could be back on its way to lower prices. JNJ $79.19 -0.63 (+1.75) Since Tuesday the stock has been struggling to rise above the 10-dma ($80.06), which is a good sign that the technical indicator is acting as strong resistance. Yet, at the same time, $79 is near-term support. This tight channel is frustrating. There's good news in that yesterday's upgrade by CSFB didn't entice investors to rush out and buy JNJ. Ann Barber raised JNJ to a Buy from a Hold citing "the stock is attractively valued at discounts to the market and its peer group". CSFB also issued a $95 price target. With the CPI data coming out tomorrow and in light of today's late afternoon slump, we're keeping JNJ on the list. Be careful and use stops to protect your capital. Our bets are that another day of negative sentiment may ignite a descending breakout. We need to see JNJ slide back under the 5-dma ($78.75) and break the $77 mark once again. KRB $21.00 -1.00 (+0.19) Something's hanging over the heads of KRB traders. The economy. It has been doing too well, too long and we all know what that means. In order to stop inflation interest rates must rise. We also all know that those handy little cards we carry around in our wallets are tied to interest rates (especially when we get those monthly bills). KRB, or if you have a credit card it is better known as MBNA, will feel the effects of a correction in the economy. We are still waiting for $21 support to break for new plays. Resistance is from the 10-dma at $22. ************** NEW CALL PLAYS ************** ISSX - ISS Group, Inc. $97.38 +2.44 (+8.50 this week) ISS is a leading global provider of security management solutions for e-business. Major products include SAFEsuite security software and ePatrol managed security services and strategic consulting and education services. Through these products and services, ISS helps clients protect digital assets and helps to ensure the availability, confidentiality and integrity of computer systems and information critical to e-business. ISS' lifecycle e-business security management solutions protect more than 5,000 customers including 21 of the 25 largest U.S. commercial banks, 9 of the 10 largest telecommunications companies and over 35 government agencies. The recent attacks on Internet based companies such as E-Trade and Yahoo! have sent a collective chill through the industry. The concerns over this potentially devastating development have reached all the way to the FBI, the head of the Justice Department and it has even been commented upon by the President. In the past few days several of the executives of ISS have been invited to help brainstorm new protection ideas with some of our highest government officials. All of this has to be good for business and, at the very least, it gives ISS a higher profile as a security leader. If you are in the spotlight, investors sometimes take notice. Not only have investors taken notice but they have also been bidding up shares ever since this latest crisis began. The current rally has seen the stock rise over 17 points. ISSX shares are fast approaching the very important psychological price point of $100. A close above that price and the stock could very easily stage a more substantial rally. A trade above today's high of $98.25 could take the stock there very quickly. If we are weak tomorrow due to profit-taking or a negative CPI number, it might be profitable to try and pick up the stock near support levels of $92, or if we get a big selloff maybe even as low as $80 although the second support level seems unlikely to be reached in the short-term. It was announced today that ISS will be able to support the Windows 2000 computing platform and that it has made its main product, the SAFEsuite System Scanner 4.0, immediately available for Windows 2000 Professional and Windows 2000 Server software systems. BUY CALL MAR- 90*ISU-CR OI=119 at $15.50 SL=12.00 BUY CALL MAR- 95 ISU-CS OI= 8 at $12.50 SL= 9.75 low OI BUY CALL MAR-100 ISU-CT OI= 24 at $10.25 SL= 7.50 BUY CALL APR- 95 ISU-DS OI= 5 at $17.38 SL=13.50 low OI BUY CALL APR-100 ISU-DT OI= 48 at $15.25 SL=11.75 Picked on Feb 17th at $97.38 P/E = 558 Change since picked +0.00 52-week high=$98.25 Analysts Ratings 4-6-0-0-0 52-week low =$20.00 Last earnings 01/00 est= 0.05 actual= 0.05 Next earnings 04-27 est= 0.06 versus= 0.04 Average Daily Volume = 829 K /charts/charts.asp?symbol=ISSX **** GLW - Corning Inc. $191.06 +13.06 (+25.31 this week) Corning is a premier provider of optical fiber, cable, and photonic products for the telecommunications industry; high- performance glass for computers, television screens, and other information display applications; advanced optical materials for the semiconductor industry and the scientific community; ceramic substrates for the automotive industry; specialized polymer products for biotechnology applications; and other advanced materials and technologies. Pots and pans (housewares) have been a division of Borden since their sale in April 1998. Corning (GLW) is taking aim at JDS Uniphase (JDSU) as a leader in the photonics revolution. While their market cap isn't quite there yet by comparison, their revenue growth in the optical communications business is spurring the recent price surge, as investors learn that they are not a cookware company any longer, but in fact a producer of over half the world's supply of fiber optic cable. With their recent purchases of Oak Industries, Siecor and Optix (OPTX), they have become a powerhouse of optical subsystem assemblies for the industry, with the capacity and financing to compete with JDSU (though JDSU will not suffer for this - there is enough business to go around) in the big tent. Earnings came in last quarter with a 6% surprise ($0.03 better than analyst estimates of $0.50). Technically, support is hard to find when you are sprinting to new highs. However, solid support appears at $175 (maybe a good target to shoot at?). The 10-dma, which provides good technical support is $172. In today's trading though, $185 held up well. Volume is on the rise too. GLW hasn't split since 1992 and is due, however they will need shareholder approval to authorize more shares to pull off even a 2:1. If history is any indication, they should be filing a proxy and notifying shareholders within the next 2 weeks of the shareholders meeting typically held in April. We'll let you know when the news is out. To summarize: Optical component maker with JDSU panache; strong momentum, split candidate. Though maintaining their Outperform rating, Gruntal and Co. raised their near-term price target from $176 to $200 (none too soon) and from $203 to $235 on a long-term basis, which accounts for the Oak Industries and Siecor purchase. GLW's purchase of Optix (OPTX) is unaccounted for in Gruntal's rating. BUY CALL MAR-180 GRJ-CP OI=143 at $23.38 SL=18.25 BUY CALL MAR-190*GRJ-CR OI=532 at $18.50 SL=14.50 BUY CALL MAR-200 GRJ-CT OI=274 at $14.25 SL=11.25 BUY CALL MAY-190 GRJ-ER OI= 32 at $31.38 SL=24.50 low OI BUY CALL MAY-200 GRJ-ET OI=198 at $26.88 SL=21.00 Picked on Feb 02nd at $191.06 P/E = 91 Change since picked +0.00 52-week high=$192.50 Analysts Ratings 7-6-0-0-0 52-week low =$ 47.69 Last earnings 01/00 est= 0.48 actual= 0.51 Next earnings 04-24 est= 0.47 versus= 0.36 Average Daily Volume = 3.46 mln /charts/charts.asp?symbol=GLW ************* NEW PUT PLAYS ************* MRK - Merck & Co $$63.25 -2.25 (-2.81 for the week) Merck is a research-driven pharmaceutical company that develops, manufactures, and markets a broad range of human and animal health products. They are the #1 industry leader in the US and #2 worldwide. Some of its more prominent drugs include Zocor and Meycaor (cholesterol drugs), Pepcid (an anti-ulcerant), top-selling hypertension drugs, Vasotec and Prinivil, and more recently the AIDS medication, Crixivan. The drug maker also provides pharmaceutical benefit services through Merck-Medco Managed Care which it sells to corporations, labor unions, and insurance companies. When it comes to e-commerce Merck won't be left behind either. The company has formed an alliance with CVS to market drugs online. A downturn in the broad markets last week coupled with its own looming patent expirations and it's no surprise why Merck is leading the pack of DOW Blue Chips towards new 52-week lows. In an influential article last Wednesday, WSJ put a big emphasis on the fact that five of Merck's leading drugs will soon lose their patents and this will ultimately make the drug maker very vulnerable to competition from generics. The targeted drugs are cholesterol fighter Mevacor, hypertension treatments Vasotec and Prinivil, and ulcer drugs Prilosec and Pepcid. Investors obviously take to heart what they read in the revered WSJ. MRK fell $10.19, or 13.5% in just three days. At that point, OIN needed to see if MRK could break that historical bottom support at $64 and $65 before adding it to our put list. Patiently we waited for confirmation and we're rewarded in today's session. MRK made a definitive descent to $63.25! The stock is now closing in on its 52-week low of $60.94, which was set way back on August 11th of 1999! An intraday bounce off the 5-dma ($65.14) is a solid entry into this "Blue-Chips Are Out & Techs Are In" put play. Although remember that a negative market sentiment is an important factor to consider. Essentially there is no support south of the current level so watch out for prudent buyers stepping up to the plate. On the Analyst front, Sutro & Co is no longer recommending a Buy on MRK. Last Thursday they downgraded MRK a Hold rating. BUY PUT MAR-70 MRK-ON OI= 866 at $7.38 SL=5.75 BUY PUT MAR-65*MRK-OM OI=1201 at $3.75 SL=2.25 BUY PUT MAR-60 MRK-OL OI= 141 at $1.50 SL=0.75 Average Daily Volume = 5.30 mln /charts/charts.asp?symbol=MRK ********************** PLAY OF THE DAY - CALL ********************** ANAD - Anadigics $144.13 +2.50 (+20.13 this week) Anadigics designs and manufactures radio frequency integrated circuit (RFIC) solutions for growing broadband and wireless communications markets (broadband, cable, fiber optic and PCS). The company's innovative high frequency RFICs enable manufacturers of communications equipment to enhance overall system performance, manufacturing cost, and time to market. By utilizing state-of-the-art manufacturing processes for its RFICs, ANAD achieves the high-volume, and cost-effective products required by leading companies in its targeted high- growth communications markets. ANAD was the first GaAs (Gallium Arsenide) IC manufacturer to receive ISO 9001 certification. Sunday's Write Up With wireless broadband, cable, fiber and the need for hardware to support it growing by leaps and bounds, the market continues to validate this sector as the next great frontier. So how is this important to ANAD? They make the high frequency radio circuitry that makes the transmission possible. How's business? Glad you asked. They announced a 38% earnings surprise on January 28 with the stock trading at about $77. No post earnings depression here. The issue has zoomed ahead its current price of $124 with not even a day of breathing time. That came to an end on Friday and also gave us what may be an entry point. Though it spiked up to $129 during the first five minutes of amateur hour, it immediately spiked back down to its low of the day of $116.75. From there, the rest of Friday's chart is a thing of beauty with a steady ascent all the way back to $124 - this while the rest of the market was headed the other way. Talk about bucking a headwind! With volume as strong as it was at the close, it looked like a continuation of Thursday's closing breakout. ANAD has wobbly support at $122, pretty strong support at $117, and stronger support yet at $110. Target shoot to your comfort level, or let volume fill the issue to carry it convincingly over $125. Since earnings, pullbacks have been limited to only about $5, that may be all the break we get for a good entry. But a correcting technology market (AKA NASDAQ) could make it worse. You'll have to make your own judgement call on this one. Recent price gains and lack of OI make these inherently risky. No we haven't forgotten about the split announced with earnings on January 28. The ratio is 3:2 and is just over two weeks away on February 29, with March 1 as the execution date. With maybe a breather or two, we are looking for the split run to continue through that date, though maybe not at as strong a pace as in the last two weeks. Tuesday's Write Up Yeah Baby! Apparently having figured out a way to defy gravity, ANAD moved up smartly yesterday and dropped a measly $0.50 below yesterday's stellar close during today's pre-lunch shellacking. With the exception of a $1 loss on Friday, ANAD has not seen a down day since January 28 when it traded at $75. It doesn't have to fall back very far to reach support. Gap ups at the open just provide a new technical benchmark, which ANAD seems all too willing to conquer. Support levels have thus moved up to $135 (nice bounce) and $140 (cruise control without selling pressure). With volume over twice the ADV yesterday and today, buyers (most probably growth fund money) are in control. Remember too that ANAD splits 3:2 on February 29, with an ex- date of March 1. That can only help. We look for the price to keep moving up accordingly, even though ANAD is bumping its head on resistance at $144. Of course that's expected when setting a new high every day. A bit of news may be driving the price too: ANAD announced today that they received an order for 10 mln RF switches from "one of largest U.S. based wireless handset manufacturers" (duh, maybe Motorola) to be used in dual mode phones. Thursday's Write Up Talk about unflappable. Aside from a one-hour dip yesterday morning to $137, ANAD has remained solidly above $140 support, yet bumps its head on $145. Though it's only a three-day pattern, the lows are getting higher as the resistance remains constant at $145. As long as volume doesn't fall below the ADV, ANAD could get a breakout. However all bets are off if NASDAQ can't sustain today's rally. Potentially, it could find $130 again if things get nasty. Looking for something that might turn up the heat on ANAD going forward? How about that 3:2 split coming up on February 29 (ex-date is March 1)? Until then, buying intraday dips (target shooting) to $141 might give the best entry. We hesitate to aim much lower since dips generally aren't that much deeper than $3. Other than a Strong buy rating from Cruttenden-Roth and a new price target of $200, there isn't much news - just plain old momentum in a hot sector. BUY CALL MAR-130 AUZ-CF OI= 29 at $25.38 SL=19.75 BUY CALL MAR-135*AUZ-CG OI= 95 at $22.50 SL=17.50 BUY CALL MAR-140 AUZ-CH OI= 55 at $19.88 SL=15.50 BUY CALL MAR-145 AUZ-CI OI= 52 at $17.50 SL=13.50 BUY CALL MAR-150 AUZ-CJ OI= 22 at $15.13 SL=11.75 Picked on Feb 13th at $124.00 P/E = 478 Change since picked +20.13 52-week high=$149.25 Analysts Ratings 3-2-1-0-0 52-week low =$ 13.00 Last earnings 01/00 est= 0.16 actual= 0.22 surprise=38% Next earnings 04-28 est= 0.20 versus= 0.08 Average Daily Volume = 431 K /charts/charts.asp?symbol=ANAD ************************ COMBOS/SPREADS/STRADDLES ************************ Greenspan's Hawkish Comments Bury The Dow.. Wednesday, February 16 Blue-chip stocks sank Wednesday as traders moved to the sidelines ahead of Fed Chairman Alan Greenspan's Humphrey-Hawkins testimony. The Dow Industrials lost 156 points to end at 10,561 while the Nasdaq Composite Index edged-up over 5 points to 4,427. The S&P 500 Index slipped 14 points to 1,387. Declining issues trounced advances 17 to 12 with over 1 billion shares traded on the NYSE. There were 56 stocks at new highs and 147 at new lows. The long bond was down 7/32, with the yield rising to 6.26%. Tuesday's new plays (positions/opening prices/strategy): Voicestream VSTR MAR110C/M130C $17.00 debit bull-call Iona (PLC) IONA MAR45P/MAR50P $0.62 credit bull-put Compuware CPWR MAR20C/MAR22C $0.00 debit bull-call Voicestream was quite active during the session and our new position traded as low as $16.00 debit, a large discount from the suggested price. In contrast, the Compuware spread was significantly more expensive than the target listed in Tuesday's section and the speculative position was less attractive at the inflated cost. Although we did not open a position on the issue, it will be monitored over the next few days for another favorable entry point. Portfolio plays: Industrial issues slumped again today as reports regarding the potential for inflation tempered the recent blue-chip recovery. Investors were anticipating the upcoming data on wholesale and retail prices which should provide clues to the Fed's monetary policy. Analysts say the rise in housing starts indicates the economy may be growing at an unhealthy rate, further increasing the likelihood of a future rate hike. Although the Fed does not meet until March, Greenspan's testimony on Thursday is expected to offer clues on how aggressive the Fed will be about raising rates. The were only a few sectors that made favorable moves in today's session. Biotechnology, software, semiconductor and oil issues rallied while retail, banking and other interest-rate-sensitive stocks slipped lower. The big winners in the spreads section were Aspect Development (ASDV) with a $15 move to $115 and Adobe Systems (ADBE), which jumped $10 to a new all-time high at $100. BCE Inc. (BCE), Helix (HELX), Siebel Systems (SEBL), and Tekelec (TKLC) also participated in the technology rally. Our portfolio had little activity as the majority of February positions have been closed to protect gains or prevent losses. However, there were a number of longer-term issues that enjoyed bullish activity. Unisys (UIS) moved up $3.31 to $33.50 after computing products company Compaq (CPQ) agreed to use their Cellular Multi-Processing architecture for the new 32-processor platforms. The systems, which will be marketed under the Compaq ProLiant server name are expected to generate about $400 million in revenues over a two-year period for Unisys. The rally offered the perfect opportunity to transition to the March options in our long-term diagonal spread; APR22C/FEB30C. The new position is APR22C/MAR30C at a cost of $2.50. Marketing Services Group (MSGI) rose $3 in the afternoon session, ending at a recent high near $28. The rebound came after a brief post-earnings dip and provided another chance to roll-out to next month's options. The current position is MAY12C/MAR22C at a cost of $5.75. There were some excellent rallies in the small-cap group. Cirrus (CRUS) moved up $1.00 to $18.68 on the heels of the semiconductor rally. Our new calendar spread is a candidate for early exit after just one week and the position will have to be closed or adjusted if the issue moves much higher. e.spire rose $1 after the company announced it has been awarded more than $16 million in a reciprocal compensation collection actions against BellSouth and GTE Florida. The move pushed our speculative, short-term calendar spread to a profitable position and the new diagonal play is now trading near the maximum profit price. Any further upside movement will allow both positions to be closed for favorable profits. Other notable performers were ESC Medical (ESCM), up $1.31 to $12.25; Recoton (RCOT), with a $1.38 rally to $13.38; and Onhealth Network (ONHN), which spiked $1.50 to close at $11.50. Boston Communications (BCGI) and 3dfx (TDFX), two recently bullish issues also enjoyed excellent sessions. Thursday, February 17 Blue-chip stocks slid lower on speculation that interest rates may have to rise to contain inflation. The Dow Jones Industrials recovered from early losses to close 46 points lower at 10,514. The Nasdaq composite index rose 121 points to 4,548 on record volume of more than 2 billion shares. It was the Nasdaq's first close above the 4,500 mark, a new record high. The S&P 500 Index remained relatively unchanged at 1,388. Declining issues topped advances 15 to 14 on over 1 billion shares traded on the NYSE. The 30-year bond price ended sharply higher, up 19/32 while its yield fell to 6.22%. Portfolio plays: Technology stocks came roaring back Thursday after Fed Chairman Greenspan's comments on higher interest rates drove Investors away from blue-chip issues. A number of market-leading stocks in our portfolio moved higher with the rally. The top performers were Corning (GLW) with a $13 spike to $190, and Siebel Systems (SEBL) which added another $9 to close at a new all-time high near $116. Small-cap telecom and semiconductors also participated in the bullish session and a number of our new positions are trading near maximum profit. Cirrus (CRUS) climbed another $2 to end at $22.75 and our bullish calendar spread provided $0.62 profit on $0.88 invested for just two weeks. Traders that want to stay in the issue until the long option (JUN-$20) expires will have to make an upside adjustment. e.spire (ESPI) romped $1.56 to end at $12.75 after announcing that its construction subsidiary, ACSI Network Technologies, has won a contract to provide PSINet (PSIX) with local area fiber-optic networks in Atlanta and Miami. Under the terms of the agreement, ACSI NT will provide PSINet with a combination of long-term fiber leases and design, construction and delivery of new fiber-optic networks in both cities. The move boosted our short-term calendar spread to a $1.12 credit on $0.62 invested for just one week. Now that's a great play! The long-term diagonal position is also trading near maximum profit and will need to be adjusted to profit from further upside moves. Other notable issues were ESC Medical (ESCM), up $1.18 to $13.43 in a second consecutive day of gains and Tera Computers (TERA), which bounced nicely off the 50 dma, recovering to a recent high near $8. The two remaining speculative positions offered favorable exits today. BMC Software (BMCS) added $1.25 to finish at $43 and the bullish diagonal spread; MAR40C/FEB45C, was easily closed at the maximum credit of $5.00. Advanced Fiber (AFCI) rallied back to the $50 mark and the bullish position; MAR40C/FEB50C provided a $3 return on $8.75 invested for just two weeks. Only Chris-Craft (CCN), Marshall and Isley (MI) and Pfizer (PFE), which were all previously closed to limit losses, failed to yield a profit. The new position on Compuware (CPWR), which fell to $23.38 has yet to offer a debit near the original target of $1.38-$1.50. However, we may get a new entry opportunity in tomorrow's volatile session. Questions & comments on spreads/combos to Click here to email Ray Cummins ********* NEW PLAYS ********* The demand for bullish positions continues as a number of readers have requested in-the-money debit and conservative credit spreads. **** NTPA - Netopia $76.50 *** A New Range? *** Netopia develops, markets and supports products and services that enable organizations to establish their presence on the Internet. The company offers Website services and collaboration software and plug-and-play, high-speed, multi-user Internet connectivity solutions. Their products are designed for users in personal businesses, branch offices of multi-national corporations, home offices, schools or other small organizations that may not have access to sophisticated technical support. The Netopia Virtual Office software platform enables web users to create customized, interactive Websites. Netopia's Internet Connectivity Solutions offer high-speed digital and analog Internet Routers that enable cost-effective, simple Internet connectivity for individual users and workgroups, and service programs to assist customers with connecting to the Internet. Timbuktu Pro Collaboration Software is multi-platform remote control and file transfer software for workgroups and remote workers. We favor the technicals on this issue but Wednesday's fundamental upgrade didn't hurt. Hambrecht and Company, an online investment bank, increased its 12-month price target for Netopia from $70 to $100. The move was based on Netopia's string of recent contract wins in the DSL router market, their comparatively attractive valuation and the projected growth of DSL. The analyst reported that NTPA offers strong upside investment potential and its new agreements with Concentric Network and Fastpoint Communications underscore a number of future growth opportunities. Analysts at Warburg Dillon Read back that opinion with a BUY rating, based on the performance of the industry and NTPA's future upside potential. We agree with the outlook and this position should provide a relatively conservative method to participate in any future share value growth. PLAY (conservative - bullish/debit spread): BUY CALL MAR-50 NQD-CJ OI=107 A=$27.25 SELL CALL MAR-65 NQD-CM OI=84 B=$13.75 INITIAL NET DEBIT TARGET=$13.25-$13.50 ROI(max)=12% Chart = /charts/charts.asp?symbol=NTPA **** ITVU - Intervu $139.00 *** A Formidable Team! *** InterVU provides Website owners and content publishers with feature-rich, cost-effective services for the delivery of streaming, live and on-demand video and audio content over the Internet. InterVU's streaming media services allow web users to view news, sports and other events from around the world, listen to live radio broadcasts, watch and listen to specialized content not widely available on television or radio, hear live earnings reports, accompanied by a graphical presentation, view a movie trailer before purchasing a movie ticket, videotape or DVD and watch music videos or listen to songs on demand. InterVU has also developed a suite of services that automate the publishing, distribution and programming of video and audio content. Early this month, Akamai Technologies (AKAM) announced plans to merge with Intervu in a $2.8 billion stock deal. AKAM's business is building faster web sites with leading-edge technology. With the addition of ITVU's products, they will become a full service provider in virtually every type of online content. Together, the combined company will have a leading market share with over 1,000 of the Web's most popular sites. Of course the deal is subject to approval by shareholders and regulators but most experts believe it will eventually be approved. Another big announcement occurred this week as Akamai reported it has entered an alliance to connect its servers within the network of Internet media company America Online (AOL). AKAM is placing its servers within the American Online network to boost the speed and reliability of their services. Under the agreement, Akamai, whose customers include CNN, Yahoo, Martha Stewart Living and the Motley Fool, will make payments to AOL based on its future revenue stream. The combination of the Internet's most advanced video presentation specialist and the leading web-page enhancement company should ultimately produce a winner. ITVU's recent technical support near $100 and the bullish upside potential provide the basis for a favorable, low risk spread. Traders who want a higher return may consider selling the $105 option against the long ($90) position. PLAY (conservative - bullish credit spread): BUY PUT MAR-90 QYU-OR OI=8 A=$1.25 SELL PUT MAR-100 QYU-OT OI=17 B=$2.38 INITIAL NET CREDIT TARGET=$1.25 ROI(max)=14% Chart = /charts/charts.asp?symbol=ITVU **** ISSX - Iss Group $97.38 *** Hot Sector! *** ISSX, through Internet Security Systems, provides monitoring, detection and response software that protects the security and integrity of enterprise information systems. Their SAFEsuite family of products is designed to enforce information risk management automatically in distributed computing environments. ISS's products use an innovative Adaptive Network Security approach that entails continuous security risk monitoring, detection and response to develop and enforce an active network security policy. Products within the SAFEsuite family include Internet Scanner, System Scanner, Database Scanner, RealSecure and SafeSuite Decisions. In addition, ISS offers professional services that deliver comprehensive network and web security solutions to customers. ISS has licensed its network security solutions to over 3,000 organizations worldwide, including firms in the Global 2000, government agencies and major universities. The recent series of attacks against several popular web-sites has brought the group of Internet Security Companies to the the attention of most investors. Now the sector speculation is running rampant and leading issues in the industry are performing very well. Our outlook for this stock is bullish based on the favorable fundamental and technical outlook. The majority of analysts tracking the company agree with our opinion. This week, Robinson Humphrey reiterated their BUY rating on ISSX with a target price of $120, based on favorable quarterly earnings and solid growth in revenues. Goldman Sachs recently reiterated a MARKET OUTPERFORM rating based on ISSX's quarterly revenues and EPS. Warburg Dillon Read also favors the company's improving growth opportunities from the Netrex acquisition. PLAY (conservative - bullish/credit spread): BUY PUT MAR-70 ISU-ON OI=20 A=$1.43 SELL PUT MAR-75 ISU-OO OI=29 B=$2.12 INITIAL NET CREDIT TARGET=$0.68-$0.75 ROI(max)=17% Chart = /charts/charts.asp?symbol=ISSX =========================Advertisement========================== Have you got an idea for a financial website? Need help getting started? Technical support? Funding? We will help you turn your idea into a reality. Don't sit on your idea until somebody beats you to the punch. Do you have a website now that is not succeeding like you think it can? Let us help you achieve faster results with our proven techniques. Sunset Investment Group has the knowledge and the financial capabilities to turn your ideas into reality. Contact us for a confidential interview. 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