Option Investor
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Daily Newsletter, Thursday, 02/24/2000

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The Option Investor Newsletter         Thursday  2-24-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
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       2-24-2000           High     Low     Volume Advance Decline
DOW    10092.60 - 133.10 10248.10  9942.80 1,176,183k 1,037  1,995
Nasdaq  4617.65 +  67.32  4620.03  4495.20 1,944,048k 1,849  2,307
S&P-100  731.16 -   5.14   737.79   718.67    Totals  2,886  4,302
S&P-500 1353.43 -   7.26  1364.80  1329.88            40.2%  59.8%
$RUT     554.04 +   4.13   556.24   547.33
$TRAN   2380.30 -  39.98  2422.25  2367.89
VIX       27.32 +   1.06    29.30    26.33
Put/Call Ratio       .37
******************************************************************

Exam Time For the Dow, Will It Pass The 10K Test?

We've been expecting the Dow to test 10,000 for the first time 
since October and we got it today.  Despite a strong opening 
for the markets after yesterday's record close on the Nasdaq, 
the Dow Industrials appeared to have its heart set on touching 
the key 10,000 level.  Didn't take long either as the first 
test occurred by 11:00am EST.  After that initial bounce, it 
retested 10K two other times before giving way to the selling 
around 2:00pm.  So did we get a big collapse under 10K?  Nope, 
and it might not be likely despite the analysts that you hear 
on CNBC hitting the panic button.  A closer look at the numbers 
(and the most recent history of a Dow drop over 15%) may have 
you drawing a different, and better, conclusion than any panic-
stricken analyst on the Street.

The last time we saw a major sell-off over 15% was in the 
summer of 98.  We got a 10-12% dip last summer, but the last 
extended dip over 15% and longer than 5 weeks was two summers 
ago.  Take a look at the chart below.  Notice that 1998 dip 
did extend over 15%, but never more than 20%, and lasted 7 to 
8 weeks.  In the Dow's recent decline, we hit the 15% correction 
mark today around 9950 and are in the 6th week of the decline.  
The bottom from the 1998 dip was confirmed with four days 
where the Dow had major intraday dips only to bounce right back 
and create the tails on the candlestick charts.  Any similarity 
to today's bounce back?  The Dow broke 10,000 this afternoon 
and the bottom didn't fall out!  It's because we may have already 
witnessed the bulk of the downside to this market.  Again, it 
may take another week or so to build a base, but LEAPS, calendar 
spreads or selling puts should be the thinking here.  Not "sell 
it all, the world is ending."  Remember the words from yesterday's 
Wrap, "This is not real fear...missing an entry point is the 
only real fear on Wall Street right now."  A close look at 
the weekly bars for these two sell-offs look amazingly similar.


 

With that said, let's look at what is good on the Street and 
it is easy to find.  First, the OEX held solid at support at 
720 today.  This made for some very playable bounces.  The Nasdaq 
also showed incredible support and strength.  Can life really 
be that bad if we are closing at a new all-time high?  Just 
think what we might see when we get through this phase and head 
into earnings run-ups.  I shudder to think of the possibilities.  
The closest possible support for the Nasdaq was at 4500 and 
we got two textbook bounces, one in the morning and one in the 
afternoon.  I saw a lot of bargains on my screen in the Nasdaq 
today.  It was a good day for entry points.  The VIX is saying 
the same thing as it once again neared 30, topping at 29.23.  
Volume was good on both exchanges with the NYSE ringing up 
1.17 billion while the Nasdaq turned in nearly 2 billion shares.  
The Nasdaq closed at 4617.59, up 67.24.  The S&P ended at 
1353.43, -7.26, the Dow at 10092.63, -133.10 and the Russell 2000 
finished at 554.03, +4.12 and less than 5 points off a record 
close.


 


 

The only major economic report of the day was a non-event to 
the markets.  U.S. factory orders for manufactured goods fell 
in January by 1.3%.  That was in line with estimates which 
ranged from 0.0% to -2.0%.  This was the first decline since 
October for Durable goods, but it followed a sizzling 6.3% for 
the month of December.  The report helped the 30-year to rally 
slightly.  The yield was down to 6.06 before climbing to close 
at 6.12%  Tomorrow will produce some more important numbers with 
January existing home sales and current quarter GDP numbers.  
Home sales are expected to rise by 5 million homes and GDP is 
expected to rise by 3.0% to 3.5%.  

In the news, QCOM dipped today on word that China will postpone 
indefinitely the deployment of a mobile communications network 
that will feature CDMA technology from Qualcomm.  This story 
was reported by the WSJ and could just be a delay tactic by 
China to strengthen their position to enter the World Trade 
Organization (WTO).  QCOM closed at $139.69, down $7.19.

INTC helped support the Dow and moved the SOX to another all-
time high on word that Robertson Stephens raised their price 
target to $150 from $125.  They cited strong momentum that has 
carried over from January into February.  INTC sees typically 
slow growth in Q1, but Robertson Stephen's Managing Director 
and Senior Computer Systems Analyst Daniel Niles said "We 
believe the first quarter is off to the best start seen in the 
last several years."  INTC ended at $114.25, up $5.19, and the 
SOX index closed at 1063.70, up 56.21.

The SOX was the hot sector of the day, up over 5.5%.  Other 
winners include Internet, Computer Hardware and Brokers.  The 
losers were easier to find with Banks, Retail, Cyclicals, Gold, 
Healthcare and Utilities all heading lower.  You would think 
from watching the market that stocks losing ground were the 
name of the game today, but that is not the case.  There were 
lots of strong stocks on the Nasdaq including INSP +27.81, 
KANA +28.63, HGSI +26.38, RBAK +25.25, JDSU +22.50, BVSN +21.44, 
NTAP +21.19, and CRA +68.00.

Tomorrow should be more of the same.  Depending on the economic 
numbers released before the open, I wouldn't be surprised to 
see the Nasdaq charge out of the gates again.  Right now only 
2% of Nasdaq stocks are at or near 52-week lows versus 30% of 
all S&P 500 stocks.  This is a two-faced market right now and 
as long as you concentrate your positions on the Nasdaq or 
tech-related stocks, you should see movements and results 
similar to what you are used too.  The Dow will come back, but 
until it shows a good base with signs of life, we will leave 
it alone.  

Let the support lines in the charts above guide you for the 
Nasdaq and OEX.  A close below those lines will do a lot to 
reverse the sentiment in those markets.  On the Dow, we are 
looking at 9950 to 10,000 continuing to hold.  Worst case 
scenario may put the blue chips down near 9800.  If we don't 
hold these levels, then traders may start getting knots in 
their stomachs.  Just remember, there haven't been any major 
fundamental changes that would signal a long-term bear market.  
A good capitulation day is just what the doctor may prescribe 
to right this index and get us started on the journey back up.  
When in doubt, stay on the sidelines.  This market is full of 
opportunities every day, pick the one that is right for you.


Ryan Nelson
Asst. Editor


P.S.  Jim is at a management conference for the rest of the 
week.  He will be back at the helm on Tuesday.  Look For Kimo's 
recap of this week's trading, plus a look ahead to next week in 
the Sunday Market Wrap.    


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

Having an E.piphany
By  S.P. Brown

It's hard to believe that the Internet is old enough to start 
undergoing some industry rotation, but it is.  Not that long 
ago, investors were bidding the likes of front-end companies 
Yahoo! (YHOO), American Online (AOL), eToys (ETYS) and 
Amazon.com (AMZN) to the moon.  Nowadays, the aforementioned 
quartet is lucky to warrant even a dismissive glance.   

It took awhile, but investors have come to realize that 
the competition is only a mouse-click away for those companies 
on the front-end of the Internet.  What's more, the front-end 
is the easiest entry point into the e-commerce world, which 
means few business-to-consumer (B2C) companies lack for 
competition.  Truth is, operating in this highly 
competitive, zero-switching cost environment can lay even 
the best business models to waste.   

So where has the money gone that was once earmarked for the B2C
folks?  It hasn't left the Internet; it's just moved a few
steps off the firing-line to those companies that enable the
front-end guys to go about their business.

From a business perspective, moving to the back of the room 
makes sense.  Numerous studies by well-respected market 
research firms such as Forrester Research (FORR) and 
International Data Corp. (IDC) forecast that business-to-
business (B2B) e-commerce will generate anywhere from $1 to $3 
trillion in revenue by 2003, roughly 10 times the total revenue 
expected to be generated from B2C e-commerce. 

One Internet B2B market that has been white hot of late are for 
those products and services that enable B2C business to monitor 
and track their customers buying habits.  The company emerging 
as the leader in this industry is E.piphany (EPNY).  The 
company provides analytical software that gives companies an 
insight into their customers' habits, enabling them to 
personalize transactions, products, and services in e-commerce 
and traditional sales channels.  EPNY's software includes tools 
for reporting and analysis, distributed database marketing and 
e-commerce.  

EPNY provides its customer relationship management services via 
an Internet-based architecture.  Specifically, end-users can 
track, analyze and profile customers based on data from their 
Web-browsing activity, phone-calls, e-mails and virtually any 
point of contact with a corporation.  This ability to address 
all points of contact enables EPNY to address not only pure 
"dot.com" companies but also traditional brick-and-mortar 
companies that operate a Web site as an additional marketing 
conduit.

Though public only since last September (Yes, EPNY was one last 
year's hot Internet IPOs), EPNY has managed to secure a blue-
chip clientele.  Initial clients included software developer 
Autodesk (ADSK), brokerage firm Charles Schwab (SCH) and 
computer maker Hewlett-Packard (HWP). 

Furthermore, over the past few months, EPNY has expanded it's 
client base considerably.  Over the latest quarter ending 
December 31, the company announced it had snagged 18 new 
customers, including American Airlines (AMR), Xerox (XRX), 
Citigroup (C), GTE (GTE), Mitsubishi Motors and American 
Express (AXP).  And just last week, EPNY announced it had added 
Expedia (EXPE), Promotions.com (PRMO) and E-Stamps (ESTM) to 
its corporate stable.  

This swelling client base has done wonders for EPNY's top-line, 
and, let's face it, the top-line is probably the most important 
variable in valuing any new Internet company.  Here's how the
numbers shape out:  For the fourth-quarter ended December 31, 
EPNY reported revenues of $8.7 million, which represented a 521 
percent increase over revenues of $1.4 million reported in the 
fourth quarter of 1998.  On a sequential basis, revenue 
increased 63 percent from the third quarter of 1999.  What's 
more, the average selling price for the EPNY's software and 
services rose from $480,000 in the third-quarter to $510,000 in 
the fourth.  

Now a look at the bottom-line.  There's a reason nascent 
Internet companies aren't valued on earnings - there usually 
aren't any, and EPNY is no exception.  Excluding the 
amortization of stock-based compensation, net loss for the 
fourth-quarter was $5.6 million, or $0.24 per share, compared 
to a net loss of $3.5 million, or $1.00 of stock-based 
compensation, net loss for the 1999 fourth quarter was $6.3 
million, or $0.27 per share.  However, the recent quarterly 
loss was better than the Street had expected.  The consensus 
estimate was for a quarterly loss of $0.31 a share.

For the near future, many analysts expect EPNY to continue with
its high-octane growth.  The recent purchase of fellow consumer 
tracker RightPoint will help see to that.  The RightPoint
purchase basically makes EPNY the only provider of tracking
software that will allow companies to manage customer relations 
across all customer touch points.  Now, companies that use 
EPNY's software and services will be able to continuously
identify and differentiate customers, then customize and
personalize products, services and interactions based on their
customer's specific wants and needs.

Based on recent and expected performance, and EPNY's unique 
niche in the B2B e-commerce sector, Robertson Stephens recently
reiterated its buy rating on EPNY after the company beat the 
investment firm's revenue growth and EPS loss expectations.  
Based on revised estimates, Robertson Stephens is forecasting 
first-quarter 2000 revenues of $10.6 million, up from previous 
estimates of $7.1 million and for year 2000 revenues to come in 
at $55.2 million, up from an original estimate of $38.6 
million.  What's more, Robbie Stephens is revising its EPS 
estimates from a loss of $1.30 for the year to a loss of $0.76.   

One other investment bank sees nothing but blue skies ahead, 
too.  Merrill Lynch (MER) recently raised its target price to 
$210 per share, a 35 percent premium from current levels, based
on the positive quarterly surprise.  It seems the analysts at
MER had been calling for four-quarter revenues of $6.5 million
and a loss of $0.31 per share.  The investment bank is now
raising its calendar year 2000 revenue estimates to $55.3
million, up from $38.5 million, and it's raising its 2001
revenue estimates from $62 million to 100 million.  

As long as EPNY retains its lead in the consumer information 
market and keeps adding clients at its recent torrid pace, this 
is one Internet B2B company that just may live up to its hype
and already sky-high market valuation.  



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

As of Market Close - Thursday, February 24, 2000 

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

DOW Industrials   10,700  11,250  10,093    BEARISH   2.17
SPX S&P 500        1,400   1,450   1,353    BEARISH   2.18
OEX S&P 100          740     780     731    BEARISH   2.18
RUT Russell 2000     500     520     554    BULLISH   2.24  *
NDX NASD 100       3,800   4,000   4,253    BULLISH   2.24  *
MSH High Tech      1,850   2,000   2,047    BULLISH   2.24  *

XCI Hardware       1,300   1,460   1,527    BULLISH   2.24  *
CWX Software       1,200   1,470   1,541    BULLISH   2.24  *
SOX Semiconductor    800     900   1,064    BULLISH   2.24  *
NWX Networking       940   1,000   1,060    BULLISH   2.24  *
INX Internet         700     800     776    Neutral   1.06

BIX Banking          500     550     474    BEARISH  11.30
XBD Brokerage        400     450     426    Neutral  11.30
IUX Insurance        500     550     466    BEARISH  11.30

RLX Retail           950   1,000     772    BEARISH   1.28
DRG Drug             340     380     323    Neutral   1.28
HCX Healthcare       700     750     677    Neutral   1.28
XAL Airline          120     140     117    BEARISH   5.21
OIX Oil & Gas        280     315     241    BEARISH   1.27


Posture Alert
As the Dow momentarily broke below the infamous 10,000 mark, 
investors flocked to the safe-haven NASDAQ to get relief from 
those ever sliding blue-chips. Who would have ever thought that 
technology stocks would be the safe place to park your assets 
(at least temporarily)! With this most recent action, we have 
upgraded numerous technology sectors to BULLISH from Neutral. 
Leaders sectors Thursday include Semiconductors (+5.58%), 
Software (+3.44%), and Networking (+2.78%). 
     


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

Thursday, February 24, 2000

Going Below 10K!

The big board flirted with the magic number today, as it 
momentarily broke below this infamous number, while the NASDAQ 
continues on its steady pace by closing up another +67 points. The 
technology index continues to defy all expectations, and the bears 
are just left standing still and scratching their heads. 

One indicator that has been extremely consistent during the last 
couple of years has been the put/call ratio on the NASDAQ 100. 
This contrarian indictor of market sentiment has been extremely 
useful. Currently, the put/call ratio on the NDX (NASDAQ 100) 
stands just below 2.00. This is a very bearish number. However, 
when looking at the QQQ which trades on the American Stock 
Exchange, put buyers have been lining up all month. The put/call 
ratio for the QQQ (between 190-210) is above 5.0 (extremely 
bearish). This is extreme negative sentiment, and from a 
contrarian stance, has only helped fuel strength in the NASDAQ 
100. This negative sentiment continued today, as weakness in the 
Dow brought out the NASDAQ bears. Put buying continued to be 
aggressive at these highs, and as long as these bears continue to 
speculate rampantly in a market top (on the NASDAQ), we will most 
likely continue seeing higher highs!

Now, does the Dow close below 10k shortly? Technically, it 
shouldn't matter at all, because the Dow is an "old school" method 
for measuring market performance just like P/E ratios, and plus, 
the NASDAQ is where the action is at! However, from a sentiment 
standpoint, maintaining the magic 10k mark is important. The way 
our media pushes insignificant milestones is amazing, and the Dow 
breaking below 10k should just be that, however, when it did 
today, every media outlet couldn't resist hyping the event. Now, 
we don't think we will see a close below this mark, however, you 
should maintain a bit of caution should this event happen. Should 
this mark be violated on a close, the media can easily cause the 
millions of online investors to set their stop losses just a 
little bit tighter, which in turn, could cause the psychology and 
sentiment of this market environment to turn to the bearish side. 
But then again, maybe the NASDAQ just rallies for a couple hundred 
more points on this event! 

Pinnacle Capital Advisors


<
 


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 (JAN-14) on the NYSE is 
still very high, totaling 3,973,256,735 shares. The short interest 
on the Nasdaq rose another 2.11% in the latest figures, its fourth 
consecutive record, to 2,413,628,695 shares. 

Interest Rates (6.126):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.


Mixed Signs: 

Volatility Index (27.32):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great 
selling opportunity.

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                       (2/18)      (2/22)      (2/24)

Overhead Resistance (750-830)     2.16        3.15       3.32

OEX Close                       728.04      730.16     731.16

Underlying Support  (700-730)     5.63        7.10       2.80


What the Pinnacle Index is telling us:
Based on the most recent sentiment, we would not be surprised to see 
the OEX rally slightly. However, we believe that the index is most 
likely trading range bound. 


Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (2/18)          (2/22)           (2/24)

Puts               700 / 5,522      700 / 6,241      700 / 6,964
Calls              800 / 4,863      800 / 5,300      750 / 6,289
Put/Call Ratio         1.14            1.20             1.11




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 28, 2000    Bottom              29.09

February 24, 2000                       27



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

Daily Results

Index      Last    Tue    Wed     Thu    Week
Dow     10092.63  85.32 -79.11 -133.10 -126.89
Nasdaq   4617.65 -29.62 168.21   67.32  205.91
$OEX      731.16   3.06   4.72   -5.14    2.64
$SPX     1353.43   6.08   8.52   -7.26    7.34
$RUT      554.04  -4.73   8.96    4.13    8.36
$TRAN    2380.30  28.34 -38.86  -39.98  -50.50
$VIX       27.32  -0.90  -1.29    1.06   -1.13

Calls              Tue    Wed     Thu    Week

QLGC      146.00   4.50  19.81   10.69   35.00  Defies gravity
LHSP      115.97   9.38  22.50   -5.28   26.59  Not left behind
SEBL      139.88   7.31   7.75   10.25   25.31  Breakout City
VERT      221.00  -2.75  16.88    8.13   22.25  New, splitting
INKT      144.31   9.44   4.63    7.69   21.75  More money in
INSP      221.63  -4.00  -1.75   27.13   21.38  Gets fired up!
SEPR      184.50  -7.19  15.31    9.25   17.38  Dropped
EMLX      155.00   6.00   1.31    7.69   15.00  EMLX is popular
COMS       83.00   1.19   6.75    5.38   13.31  Continues ascent
CMGI      119.38  -3.63  15.44   -0.81   11.00  New, entry!
NEON       84.38   2.38  12.75   -4.38   10.75  Burning brightly
NSM        73.00   0.69   3.44    5.38    9.50  New, earnings
ENMD       75.13   7.00  -2.13    2.75    7.63  More good news
PHCM      144.25  -0.81  10.19   -2.75    6.63  Nice breakout!
ERICY      93.00   2.56   0.63    1.13    4.31  Plenty of news
IFCI       32.00  -1.13  -1.88    3.00    0.00  A fine finish?
COVD       84.63   0.13   3.00   -3.50   -0.38  Dropped
GLW       192.25  -3.31  -1.75    4.00   -1.06  On schedule
PCMS       22.00  -0.91   0.09   -0.25   -1.06  A rule is a rule
ESPI       12.31  -0.38  -0.69   -0.56   -1.63  Earnings date?
Q          47.38  -0.94  -1.38   -0.56   -2.06  Patience pays
ANAD      142.75  -9.88   1.75    4.63   -3.50  Offers entry
ISLD      108.31  -7.63  -0.25    0.81   -7.06  Dropped

Puts

MCOM       84.00  -3.81   1.31   -3.25   -5.75  Hang up shares
JNJ        72.16   1.19  -2.50   -3.97   -5.28  New all time low
KMG        42.00  -1.00  -0.69   -1.75   -3.44  Slip Slidin'
FD         32.44   1.19  -0.81   -1.75   -1.38  New, no interest
RHAT       70.50   0.13   0.38   -1.50   -1.00  On probation
PGR        55.50   1.00   0.06   -1.50   -0.44  Listen up!



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

Profiting From Consolidation
By: Renee White

Have you ever tried to consciously play consolidation? I have. I 
realize that when I see that pattern intra-day on a stock that is 
on my watch list, I get excited, hyper-focus and my mouth starts 
watering. I start evaluating the market and studying charts. 

Usually, for a stock to be on my radar screen, it is due to one 
of these reasons: 
1.	it has either bounced off of a hard sell-off caused by no 
fundamental reason that would affect the integrity of the 
company or maybe right before the bounce if I'm really feeling 
aggressive 
2.	it appears to be ready for a break-out from an ascending 
triangle formation 
3.	it has pulled back again, after attempting to take out its 
overhead resistance several times 
4.	if I am expecting a stock split announcement soon 
5.	it is running into the split 
6.	if I am beginning to see a lot of articles and news, by 
diverse sources, discussing the company 
7.	Or, it is running into the earnings announcement date 

It was early November of last year when I consciously caught 
myself reacting to stocks that were consolidating. I've noticed 
that I tend to pay more attention to these patterns, right before 
the answer is soon to be known, from a Fed-itis attack.  This is 
the same period many of us have been playing aggressively, 
anticipating the results of a pertinent economic report, or 
interest rate announcement. With fear in the air, some traders 
have placed preliminary bets, anticipating a good report or 
acceptance of the interest rate increase we are likely to see. 
The thinking has been that once the news is known, buyers will 
emerge, so why wait if the bargain is now? These plays are very 
risky for sure, because if your instincts are wrong, your call 
premiums will turn to dust. It requires a good understanding of 
the overall market and sentiment, along with very close 
monitoring for signs of being wrong. 

Fear and uncertainty can be damaging times for "the markets" and 
any long positions. Fear causes profit-taking and sell-offs. 
However, after the pain frequently there are periods of 
consolidation where markets and the underlying, trade within a 
range during the extension of the uncertainty period. It is 
almost like all the buyers are lined up, not wanting to sell any 
more, but not quit sure it's time for an entry. Instead, they 
wait, they watch, they focus, carefully watching the next guy, 
making sure they are not left in the dust on the big move. 
Haven't you noticed those floor traders all seem about ready to 
have a heart attack belting out trades one minute and in a flash, 
they are all hushed in silence at the same time? These guys can 
act fast!

Nevertheless, they trade for other people's accounts and I trade 
for my own. I choose my own risks without the fear of being fired 
or loosing my bonus. I can be very conservative one day and 
incredibly aggressive the next. I love that independence and 
freedom. No one owns my trades but me. I have had contemporaries 
ask me time and time again to trade for them, but I have never 
seen a good reason why I should do that again. People always love 
you when you make them money, but most don't like paying when you 
blow a trade and lose money. Research time, market watching and 
practicing paper-trades must be paid for somehow because these 
are the precursors to successful trading. 

In any event, if I blow a trade, it may irritate me, but other 
than kick a tire, I accept it as the cost of doing business. 
Losing is part of the business of option trading. The important 
thing is that you win more than you lose and you cut your losses 
quickly. There is plenty of research that is required to stack 
the odds in your favor. When you become confident enough to pick 
your own trades, you are on your way to becoming a successful 
long-term option trader, that is when the intricacies of fine 
tuning your plays, takes on a new dimension. 

For instance, I had noticed the channeling of QQQ lately. From 
February 3 rd when it broke through its last resistance, until 
the break out Wednesday, QQQ has traded between 192  and roughly 
206. It's interesting to note also, that the 192  area, was the 
high on the first trading day of the year, January 3 rd, and we 
all remember what happened after that.  Last Tuesday I noticed 
that when Nasdaq sold off sharply, QQQ slightly penetrated its 
support and then rebounded. 

Tuesday morning had carry-over weakness from Friday's sell-off. 
With the morning Nasdaq sell-off carry-over from Friday, the 
VIX penetrating 30, knowing there was fear in the markets and 
Greenspan speaking again on Wednesday, I thought about this 
consolidation pattern. Two weeks ago, I had played the puts 
expecting a sell-off, but my entry proved to be a bit early and 
the VIX did not hit 20. Yesterday, I saw the Nasdaq sell-off 
with the VIX at 30, a buy signal for me and a potential reversal 
pattern which might explode to the upside if a surge of buying 
occurred after his testimony as I expected. I entered ITM QQQ 
calls March 186 for a little added cushion, on the weakness of 
fear, filling at 15  and 16. Fighting with my computer cost me 
a point, but I can't complain since the play worked beautifully 
with a QQQ breakout through the 206 resistance, closing Wednesday 
at an all time high of 208  after trading as high as 210 in the 
afternoon once Mr. Greenspan's question and answer period was 
over. This particular consolidation play gave me roughly a 
62% ROI in one day and 87% by today's close. Yep! Time for some 
more Cristal Champagne or a Jennifer Lopez dress! 

In addition, Wednesday during Mr. Greenspan's testimony, I 
noticed a lot of intra-day channeling in stocks on my watch list. 
Some seemed range bound for a couple of hours. Traders were 
conservatively waiting, watching and focusing. Since my market 
decision and game plan had already been determined the day 
before, I went shopping on these patterns and loaded up from my 
watch list. Like QQQ, these too proved to be nice plays with 
5 hour trades showing ROI up to 40.47% yesterday, 92 1/2% today. 

Keep in mind these plays are very risky. Instead of entering with 
heavy volume confirmation, I am entering during a lull. If my 
market assumption is wrong, it could cost me a lot since I tend 
to load up at these times. That is why I like to enter these 
trades, toward the end of the fear period, right before reality 
is known, ITM or ATM depending on the play. I always try to have 
as much back-up support in my favor as possible such as a high 
VIX, a broad market sell-off over several days to a strong 
support level and a clear calendar of major economic reports for 
a few days. I look for good leap plays at this time also. Try 
this on paper and see if it works for you. You may get an 
opportunity again, right before the next FOMC meeting in later 
March. 

Well, I'm going to take my winnings, along with my 4 new boxes 
of Thin Mint Girl Scout Cookies and go sit in a medical 
conference for a week in beautiful North Carolina. Enjoy the 
markets and I'll see you back March 7th. 



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

There is no Traders Corner article tonight.



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:
*****

SEPR $184.50 +9.25 (+17.38) It is with a heavy heart and a fat
wallet that we say goodbye to SEPR.  This has been an ideal
split play, taking off almost immediately after we picked it
last Tuesday at $149.  The weakness on Tuesday, gave us one
last opportunity to jump onboard before adding more than $24
in just the last 2 days.  Driven by strength in the Biotech
sector, new highs on the NASDAQ, and a 2:1 split, SEPR allowed
us to profit from the $30+ run in a little over a week.  The
split takes place tomorrow and in order to avoid the typical
post-split depression, we bid SEPR a fond farewell.

COVD $84.63 -3.50 (-0.38) Ok that's it.  It's time to let this
one go.  COVD finally broke out of its recent trading range late
yesterday morning, topping the $90 mark, making a high at $91.25.
Apparently investors couldn't believe their eyes and stepped in 
placing sell orders like there was no tomorrow.  The selling 
continued today, with COVD not only giving back all of the gains
made yesterday, but another 4.0%.  Depending on your entry point
and whether or not you were fast on the draw, COVD did give us
a chance for a good day trade yesterday.  Although we must play
the cards we're dealt, a day trade in COVD is not what we were
looking for.  Until the communications company can regain its
footing, and gain some momentum, we will look elsewhere for
our opportunities.  

ISLD $108.31 +0.81 (+7.06) Unfortunately ISLD has been trapped 
in a channel between $105 and $115 (at the uppermost levels) 
with only moderate volume to boot.  However earlier today, 
Merrill Lynch started new coverage on ISLD with a Near-Term 
Accumulate.  While Long-Term, analyst Thomas Watts recommended a 
Buy and issued a $125 price target.  Still no breakout!  Instead 
there was a fierce intraday battle between the buyers and 
sellers.  Volume levels were astronomical at 4.92 mln shares 
exchanging hands representing a quadruple increase over the ADV 
of 1.19 mln.  But ultimately ISLD settled just below the 10-dma 
($109.83) and just couldn't regain its spark.  There was even 
news that Digital Island was expected to reach a deal with Apple 
Computer regarding the deployment of Apple's QuickTime streaming 
media format on its servers.  Nonetheless, the bottom-line is 
ISLD's momentum has faded and we must exit the play.  


PUTS:
*****

No dropped puts this evening



********************
PLAY UPDATES - CALLS
********************

ENMD $75.13 +2.75 (+7.63) After the strong move in the past
week, ENMD was due to take a break.  To look at the chart, you
wouldn't know that the NASDAQ has been breaking out to new
highs.  Volume has dropped off significantly, trading near 
the daily average.  This looks like consolidation as investors 
wait for the moving averages to catch up and help propel shares
higher.  The good news continues to flow related to the
company's anti-cancer drugs and treatments.  On Wednesday, ENMD
announced the issuance of a broad patent, covering all
antiangiogenic fragments and methods of production for its
potent angiogenesis inhibitor, angiostatin protein.  ENMD now
has patent protection covering all forms of the angiostatin
molecule, whether used as a protein, peptide fragment, or gene
for delivery to a patient.  Support is solidifying near the $71
level, followed closely by the 5-dma at $70.38.  The range has
been fairly tight the past 2 days, as shares trade between $70
and $75 on moderate volume.  A bounce near support is buyable
if confirmed by increasing volume, but more conservative
investors may want to wait for a convincing penetration of
resistance at $75.

LHSP $115.97 -5.28 (+26.59) Not wanting to be left behind, LHSP
jumped aboard the NASDAQ freight train yesterday and posted a
new 52-week high ($126.50) on more than triple the ADV.  Profit-
taking ensued this morning, before volume subsided and support
began to solidify near $114.50.  Action was light for the
remainder of the day, as investors appeared to be trying to
catch their breath.  The stock is being fueled by a continuous
stream of product announcements and industry alliances, not to
mention anticipation of the upcoming 2-for 1 stock split.
Continuing to expand its dominance in speech and linguistics
technology, LHSP announced Wednesday that it is demonstrating
a new hands free system for the automobile that employs voice
activated dialing.  Developed in conjunction with Cellport
Systems, the new system is safer, more convenient and more
intuitive for drivers.  Then today SwiftTouch Corporation
announced that it has licensed technologies from LHSP to enable
voice access to secure, Web-based personal information.  By
integrating LHSP's multi-language technologies with the Web and
advanced synchronization, SwiftTouch will be the first to offer
mobile professionals a solution to access their contacts,
schedules, and mission critical data whenever they need it.
If this move is to continue upwards, there will need to be a 
pick in the volume level.  If we see this, consider entries 
on a bounce near support and enjoy the ride.

NEON $84.38 -4.38 (+10.75) Still burning brightly, NEON
launched through the $90 level yesterday during the record
NASDAQ move.  After yesterday's upside move of more than $12
on more than double the ADV, it was natural to see some profit-
taking today.  Giving back $4.38 of yesterday's gain on less
than average volume puts NEON stock in an attractive position.
Still very strong technically, NEON is well above its 5-dma,
which is clear down at $78.50.  Intraday support is forming
at $83, followed by the 5-dma.  Continuing to be driven by
frequent product announcements and alliances, NEON should
continue to power higher.  The company announced today that
TheStreet.com has selected NEON technology to deliver highly
personalized stock and news alerts to subscribers of its
upcoming commentary site, RealMoney.com.  NEON's e-business
infrastructure platform will be used to provide extensive,
highly customized information to subscribers based on nothing
more than the information itself.  Going forward, a bounce
near $83 is buyable if the buying volume picks up again.
Use caution though, as investors may need a little more time
to digest yesterday's strong move.

QLGC $146.00 +10.69 (+35.00) Investors in QLGC are challenging 
the law of gravity as they continue to throw cash at the 
top-tier technology stocks.  Each day this week has yielded 
a new 52-week high.  Today saw QLGC kissing the $150 
level mid-day, before finally succumbing to a bit of profit-
taking.  This is turning into a serious momentum play with 
very strong volume.  Yesterday volume hit 1.7 million and 
today ended just shy of 2 million shares, swamping the daily 
average of 843 K.  Positive news continues to flow and is being
reflected in the strong investor demand for shares of QLGC.  
On Wednesday, QLGC announced that its QLA2200 Series Fibre 
Channel adapters are the first and only Fibre Channel adapters 
to have achieved compliance with Microsoft's PC99 test, 
ensuring compatibility with Microsoft's new Windows 2000 
operating system in both workstation and server environments.  
Support is building near $140, followed by $133.  Intraday 
dips are buyable, as long as the bounce is supported by a 
return of buying volume.  Given the strength this week though, 
you may have to be content with buying a breakout above the 
$150 level, where QLGC found resistance today.

ERICY $93.00 +1.13 (+4.31) ERICY traded up to another new 52-
week high of $93.50 today and managed a close just fifty cents 
shy of this level.  ERICY has tested and held support right 
around $91 several times throughout the last week.  In addition,
ERICY's 5-dma ($90.50) and 10-dma ($89.50) are working to play 
back up when needed.  There is not a lack of news out there for 
ERICY, some of which we will be going into more detail about 
in Sunday's write up (barring any unforeseen circumstances that 
may end our play).  Yesterday, Robertson Stephens initiated 
coverage on ERICY with a Buy rating.  In the news today, ERICY 
is unveiling several new products at the CeBit trade show, 
which began today and will continue through March 1.  One of 
the featured items is called a Screen Phone, which is a 
wireless communications device for the home that allows users 
to surf the net, use the phone and catch up on e-mails, all 
from the comfort of their sofa.  ERICY's close near the high 
looks to have positioned us well heading in to finish the week.  
For new entries, it is probably best to try and target shoot 
your way in on the intraday pullbacks.

IFCI $32.00 +3.00 (+0.00) IFCI looks to be working toward a 
fine finish to this earnings run.  IFCI gapped up $1.50 this 
morning, which was an impressive move because this moved IFCI 
right through the $30 level.  Now that we are back on the right
side of $30, look for this level to provide support to finish 
this run.  At this point, if IFCI trades back through, it may 
be an indication to close out your positions.  We were pleased 
to see IFCI close on $32, a level it flirted around with 
throughout the day.  Going forward, IFCI may encounter resistance 
at $35 (all time high is $35.25).  Not only is IFCI benefiting 
from an earnings run, there were a few pieces of news thrown 
in to fuel the fire.  This morning, it was announced that 
International FiberCom's wireless solutions division, AeroComm, 
was awarded a contract, which is valued at over $5 million from 
Bell Atlantic Mobile.  IFCI was also given a boost today by FS 
Van Kasper, who initiated coverage of IFCI with a Buy rating.  
As you may know, we will be dropping IFCI from our play list 
on Sunday because IFCI is set to announce earnings on Tuesday. 

INSP $221.63 +27.13 (+21.38) This Internet rocket finally got  
fired up again!  And I bet the aggressive players are certainly 
wagging their tails in glee!  Today INSP made stellar gains of 
$32.25, or 16.6% at its peak.  Trading volume also backed the 
breakout at more than double the ADV, which is a very bullish 
indication that there is more upside to come.  Currently there 
is no opposition except to move through today's new 52-week high
of $226.75.  This feat shouldn't be too hard to achieve as we're 
anticipating a powerful run ahead of the 2:1 stock split on 
March 15th.  Firm support is still down near the converging 10-
dma ($199.61) and the 5-dma ($202.63) technicals.  However $210 
and then later on $215, held up very well in today's session.  
In the news yesterday, INSP's Saraide.com, a US-based mobile 
Internet services group, inked a deal with Philips Electronics 
to provide them with new services for voice-operated wireless 
phones.

INKT $144.31 +7.69 (+21.75) Well more money poured into INKT 
today and that's a good thing!  Our infrastructure stock powered 
upward into new territory for the fourth consecutive session and 
set the latest in a string of all-time highs at $144.50, the 
intraday pinnacle.  Bullishly it closed just mere cents from 
this mark and volume was strong on the incline.  Typically you'd 
have expected near-term support to form at the old resistance of 
$130.  However this hasn't held true for INKT.  Looking at the 
past two days of trading, short-term support is at $138, then 
lower at $135 and $134 both far exceeding the lagging 10-dma 
($122.70).  But don't be fooled, the vicinity of the 5-dma 
($131.73) still provides a more realistic support level in the 
event of a strong pullback.  In other words, there's quite a 
bit of room to tumble so be prepared for the volatility in these 
markets.  There was some news today.  Inktomi announced an 
agreement with Apple Computer to extend the Inktomi Traffic 
Server content delivery platform to support Apple's QuickTime 
technology.  The integration will provide enhanced streaming 
media over the Internet.


***********************************************
PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO
***********************************************


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

The Option Investor Newsletter         Thursday  2-24-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


********************************
PLAY UPDATES - CALLS - CONTINUED
********************************

EMLX $155.00 +7.69 (+15.00) EMLX continued a recent pattern the
past two days of jumping up at the open, declining until midday
and then gaining strength into the close.  Although the volume
has been a bit light compared to what we've seen recently,
we are very pleased with the moves so far this week.  EMLX has
added $15.00 for the week, and the chat rooms are still 
buzzing concerning a possible split announcement.  EMLX did
split back in late December, and its in the area where the 
last split was announced.  We have seen or heard nothing from 
company regarding a potential split, and believe the current 
move in the stock is based simply on the basic strength of 
the company and its fibre channel technology.  Remember EMLX 
is popular with the institutions and with the selling seen 
in the broader markets the money must go somewhere.  EMLX did 
announce today that the Emulex LightPulse(TM) LP8000 host bus 
adapter has been approved by StorageTek for use with its 9840 
fibre channel tape drive system.  Although the trend for EMLX 
points higher, support is found at $155, $150 and $147.  A 
bounce off any of those levels would provide a good point to 
either add to existing or enter new positions. 

PCMS $22.00 -0.25 (-1.06) A rule is a rule.  For those of you 
that may have entered in the first fifteen minutes of trading 
today, you can see why we suggest staying away from the first 
hour of trading.  PCMS spiked up to its high of the day at 
$23.38, and promptly fell out of bed as the major indices began 
to sell off.  The $20 area of support we mentioned Tuesday 
provided a great point to enter a new play.  It really looks as 
though PCMS is experiencing some profit taking and a bit of 
consolidation, although the $20 level should hold.  The strength 
seen late in the day, in PCMS does boost our confidence as well.  
The volume for PCMS picked up somewhat today, with 1.5 million 
shares changing hands.  A spike in volume at the low of $20.50 
would indicate at least a temporary bottom.  For PCMS to get back 
on track we will now look for new buyers to enter.  As we 
mentioned Tuesday, PCMS has intraday levels of support and 
resistance about every $0.50, so set your stops and targets 
according to your own risk tolerance.

COMS $83.00 +5.38 (+13.31) Investors jumped into COMS with both
feet the past two days.  During past two sessions, COMS has 
seen over 17% added to the price of its stock.  Actually COMS 
has made a new high in each of the past two sessions.  Today 
the only thing that stopped COMS from continuing its ascent 
was the closing bell.  The interest seen in IPO's this month 
has been very encouraging.  Again we point out that our play 
on COMS, is more a play on the upcoming IPO of its subsidiary, 
Palm.  Speaking of interest in COMS, this could be just the 
beginning of a move to more new highs as over 31.7 million 
shares have changed hands in the past two sessions.  Not even 
some related news concerning Alcatel's $7.1 billion deal with
Newbridge Networks could dampen investors enthusiasm for 
jumping into COMS.  In the past 3Com has relied heavily on 
Newbridge to fill holes in its high-end strategy for 
telecommunications carriers and Internet Services providers.
The merger between Alcatel and Newbridge could eliminate that
revenue stream for COMS, as Alcatel sells data networking 
equipment that competes with 3Com.  Given that kind of news, 
the move the past two days is even more impressive.  Support 
for COMS is seen at $80 and $77, and would provide a good
entry point for our play if we see any pullback or profit taking
  
Q $47.38 -0.56 (-2.06) Q has spent the first three days of the
week drifting lower.  The old saying that patience is a 
virtue, may apply to our play in Qwest.  For those that waited
patiently this week may have found a very nice entry point to our
play.  We mentioned Tuesday that Qwest had support at $47 and $46.
Shortly after amateur hour, Q hit $46.25 when buyers stepped in.
With the Dow and Nasdaq deteriorating investors were stepping
up to the plate and putting money into Qwest stock.  Qwest is 
not a high riding fast moving stock, but it did manage to pare
down most of its losses by closing to just $0.56, which is very
positive for our new play.  The volume was a bit light, but again,
the fact we saw buyers step in with the major indices falling
supports this view.  Another positive for our play came in
the form of a company press release announcing the completion
a German fiber optic ring, connecting 16 German cities in a 
1678 mile route.  Qwest and joint venture partner KPNQwest 
invested $219 million in the project and is the first data
communications company to complete a German ring.

ANAD $142.75 +4.63 (-3.50) As we noted on Tuesday night, we 
wanted to see $136 hold before taking new positions.  It did not.  
But we did get a tremendous selloff, then bounce on Wednesday 
morning from $127.  Hopefully, you were able to take advantage of 
the rebound for a good entry.  Technically, the ascending pennant 
is still forming.  However, the volume has been descending 
slightly all week, though it remains just over the ADV of 431 K 
shares.  10-dma support is at $137.50, which provided excellent 
support today, and should make an attractive target at which to 
shoot.  $140 also provides some weaker support.  As long as the 
DOW doesn't pull the NASDAQ down with it, ANAD should continue to 
move up with the index (NASDAQ, that is).  It also never hurts 
when a major brokerage, Paine Webber in this case, initiates 
coverage by lumping you into its top 10 new picks (JDSU and BRCM 
among the noted).  February 29 after the close, ANAD will execute 
a 2:1 split too.  While there isn't enough volume to really make
ANAD cook, the split could add more impetus.  Volatility reigns, 
so keep your stop loss orders in place to protect your profits.

GLW $192.25 +4.00 (-1.06) OK, right on schedule.  GLW filed their 
proxy with the SEC notifying shareholders of the annual meeting 
to be held on April 27.  Any guesses as to what's on the agenda?  
Right - an item to increase the authorized shares from 500 mln to 
1.2 bln.  Can you say official split candidate?  Great!  However, 
with over 60 days to go, that won't affect this play much right 
now.  GLW appears to be giving us a small consolidation 
following Monday's spurt to $198.  The good news is that $186 
seems to be holding nicely through the last two days of 
turbulence.  It doesn't hurt either that their competitor, JDSU, 
is on everyone's buy list, which makes GLW a great sympathy play.  
However, until the volume picks up again we may be range-bound 
between $186 and $195 - still plenty of room to make money 
intraday.  If things get really ugly, the 10-dma, which has 
provided great support since mid-January stands at $182.38, and 
also make a strong low-end target for entry.  If you get or 
already got a great fill, be sure to protect your profits with 
trailing stops so you don't have to give them back. 

PHCM $144.25 -2.75 (+6.63) WOW!  Nice breakout yesterday - too 
bad it couldn't follow through with more today.  Still, following 
a $10 move up yesterday, that PHCM held up this well today is 
testimony to its strength, especially since volume fell back 
substantially today from it's previous levels.  The low volume is 
a good sign when the price is heading down.  Typically, a stock 
will move down temporarily to test its breakout, which means we 
could have seen $140 today, but support held well at $143.  
However, if the market turns sour tomorrow, PHCM could yet see 
$140.  With wireless broadband growing like a weed and PHCM 
setting the WAP standard, this would make an excellent entry 
point.  Just make sure technology issues aren't joining the sour 
mood.  If you are a bit more risk tolerant, feel free to nibble 
at a bounce off $143.  With earnings way off in April and another 
split announcement likely anytime soon, PHCM is going to have to 
rely on contract wins (read that, good excuse for a press 
release) to keep the price moving upward if it's to break $149 
resistance.  It did just that by announcing yesterday that it's 
licensed its browser for use in mobile phones in Asia and Europe.

SEBL $139.88 +10.25 (+25.31) History was wrong (see Tuesday's new 
call section).  SEBL never even got close to $118 for what we 
thought would make a good entry on a pullback to the center of 
the ascending channel.  SEBL was in Breakout City today on volume 
exceeding the ADV by 53%.  While it touched $130 at its low 
point, support could be found at $132, and more prominently at 
$136 intraday.  Of course, solid support is pretty hard to find 
when an issue is tacking on 18% in four days.  Our caution from 
Tuesday still stands though.  With such a strong break from the 
ascending channel, we can't help but think there will be some 
pullback tomorrow from profit takers doing their jobs well, and 
not wanting to carry a position through the weekend.  The channel 
ranges from $108-$127.  While it's possible that SEBL could pull 
back into that range, that's a lot for this high flyer to give 
up.  Even the 10-dma (traditionally good support) is only at $115.  
Target shoot to your level of risk tolerance, and let volume 
(huge volume) be your guide.  Also, be sure you protect with 
stops that which you have already earned.  SEBL promises to 
volatile even if it is in an up trend.  Can one broker upgrade 
get a stock to move that much?  Not usually.  But it sure didn't 
hurt when Prudential upgraded SEBL to Strong Buy from Buy today. 
SEBL is also a split candidate even though they will need 
shareholder approval to effect anything greater than a 3:2.

ESPI $12.31 -0.56 (-1.63) ESPI has taken a reprieve and is 
perched between the 10-dma ($11.90) and the 5-dma ($13.10).  
This in of itself isn't too bad.  On a brighter note, the volume 
correspondingly tapered off on the downdraft indicating the 
stock isn't suffering from panic selling just some mild 
consolidation.  It also came to light today that we likely have 
more time to play this earnings run that we previously 
anticipated.  Therefore, this downdraft may prove an excellent 
opportunity to open positions.  Initially ESPI was expected to 
report on February 28th.  However, Investor Relations is now 
planning to give a press release over the next few days to 
confirm a definite earnings date.  Good news also came way after 
the bell today. ESPI announced it had signed a commitment letter 
with Honeywell International for $50 in Equity funding.  This 
commitment coupled with previous commitments from Greenwich 
Street Capital Partners and the Huff Alternative Income Fund 
bring the total of new equity financing to $175 mln.  e.Spire 
Communications' Chairman, William R. Huff, remarked, "This $175 
million of financing and the associated additional financing 
available under the various credit facilities should dispel any 
doubts about e.spire's ability to raise the capital needed to 
complete its business plan".  He further added that "we are 
excited about e.spire's prospects as it transitions from network 
construction to building profitability in its core and other 
businesses". 



*******************
PLAY UPDATES - PUTS
*******************

PGR $55.50 -1.50 (-0.44)  Alright listen up!  We are keeping 
this play but it might not be for much longer.  How PGR performs 
for us tomorrow will most likely determine PGR's fate.  We would 
like to see PGR trade through and close below the $55 level to 
confirm continuing negative momentum.  PGR has tested and held 
support at this level several times now, and we do not recommend 
initiating new positions until we see a breakthrough.  Should 
PGR trade through $55, watch for strong volume to validate the 
move.  PGR is sitting directly underneath its 10-dma, which is 
currently at $55.75.  This will also be an important factor in
determining the future of this play.  Should PGR manage to 
breakthrough here and reclaim the 10-dma as support, it may be 
a good indication that PGR has found it's bottom.  On Wednesday, 
Advest initiated coverage of PGR with a Market Perform on 
however, the news seemed to have little impact on the shares.  
With all of these factors in mind, it is important to exercise 
caution going forward.   Be sure to tighten up your stops to 
protect profits against a possible trend reversal.

RHAT $70.50 -1.50 (-1.00) Is RHAT trying to establish a base?  
Though we did see a nice drop today, RHAT still managed to test 
and hold support at $70 throughout the day.  So why are still 
playing RHAT?  First of all, RHAT did trade through the $70 
level on Tuesday, and we think it is possible that RHAT may do 
so again.  Secondly, RHAT has yet to find the momentum to help 
it breakthrough its 10-dma, which is all the way up at $75.  
Thirdly, though RHAT's volume was slightly under the daily 
average, it did not miss by much, which leads us to believe 
that there are still plenty of RHAT sellers out there.  For 
these reasons, RHAT has managed to claim at least one more 
day on our play list.  If RHAT doesn't make a definitive move 
through $70, we will probably be dropping it.

KMG $42.00 -1.75 (-3.44) In the words of Paul Simon, KMG is 
"Slip Slidin' Away".  In looking at the last week of intraday 
charts for KMG, we can't help but smile.  KMG is posting a 
picture perfect downward trend.  KMG opens at the high and 
steadily declines for the remainder of the session.  Each 
day, the previous day's support level becomes a new level of
resistance and the volume backing this decline remains strong.  
We can also add weak relative strength to our list of reasons 
that we are happy with KMG.  The oil service stocks fared well
in today's session, with the OSX up nearly 4 points for the 
day, and yet KMG was unable to participate and instead posted 
the biggest loss of its week so far.  KMG found resistance at 
$42 throughout the day, and managed to close smack dab at this 
level, and though we don't expect this level to provide very 
solid support, we will want to see KMG drop below to confirm 
continuing momentum.  Your best bet for new entries is to enter 
toward the earlier part of the session.  Unlike the above 
referenced song, KMG may not be near it's destination, though
it is doing a fine job of helping us to reach ours. 

MCOM $84.00 -3.25 (-5.75) Investors continued to hang up their 
shares of MCOM on a day that saw the Nasdaq up over 67 points 
and big gains for many of the telecoms.  In other words, MCOM
demonstrated some weak relative strength against today's market.  
MCOM spent the majority of the day trading between $82, which 
managed to provide solid support for the day, and $84.  We are 
also approaching a solid looking level of pre-established 
support at $80, and it will be very important to exercise 
caution the closer we get.  Use those stops!  As you know, 
volume can be a valuable way to gauge the force of the momentum 
backing a move, and frankly, MCOM is lacking.  One other 
important point to note in regards to volume, was the fact that 
once MCOM bounced from $82 near the close, we saw the volume 
level pick up, which is indicative of some interested buyers 
out there.  We are keeping a close eye on this, and if you are 
playing MCOM, we recommend that you do so as well.  If you are 
looking to enter a new put position on MCOM, you will want to 
watch for MCOM to trade under $84 backed by strong volume.   

JNJ $72.16 -3.97 (-5.28) The interest rate concerns are 
spreading like wild fire throughout the markets!  The fear has 
pushed the DOW below 10,000 and JNJ can't help but to lose more 
ground!  Yesterday and today the stock shed $6.47, or 8.2% 
clearly putting it below the formidable $77 mark.  Now let's not 
get too giddy.  Remember this is simply a sector play.  There 
isn't anything news specific to drive JNJ down further.  So 
let's keep stops in place to protect against a rash of value 
hunters moving in for a bargain.  As of today JNJ set a new all-
time low at $72!


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

VERT - VerticalNet, Inc. $221.00 +8.13 (+22.25 this week)

VerticalNet owns and operates 55 industry-specific Web sites 
designed as online business-to-business communities, known as 
vertical trade communities.  These vertical trade communities 
provide users with comprehensive sources of information, 
interaction and e-commerce.  They are grouped into the following 
industry sectors: ADVANCED TECHNOLOGIES, COMMUNICATIONS, 
ENVIRONMENTAL, FOOD AND PACKAGING, FOODSERVICE AND HOSPITALITY, 
HEALTHCARE/SCIENCE, MANUFACTURING AND METALS, PROCESS, PUBLIC 
SECTOR, SERVICE, TEXTILES AND APPAREL.  Additionally, VerticalNet 
provides auctions, catalogs, bookstores, career services and 
other e-commerce capabilities horizontally across its communities 
with sites like Industry Deals.com, IT CareerHub.com, LabX.com, 
Professional Store.com. VerticalNet's NECX Exchange provides an 
exchange for the electronic components industry. 

If the market were a smorgasbord (and it is), B2B issues would be 
dessert.  For your dining pleasure, We have cake; we have icing.  
The cake is that VERT finally appears to have put in a technical 
bottom.  Though VERT had found short term support around $195, 
the longer term trend was at $200, the figure from which VERT 
gapped open four weeks ago and has since been falling back - call 
it 100% retracement.  For the last two days, volume has turned up 
to reflect a 30-45% increase over the ADV.  That has helped to 
drive the price up $25 in the same period.  Volume makes for a 
good compass, and it's pointing north.  $209, $212, and to a 
lesser extent, $220 may provide some intraday support.  VERT also 
popped above its 10-dma for the first time in over three weeks, a 
powerful technical indicator.  We look for the gains to continue 
next week, however perhaps with brief pause.  With such a strong 
rise, profit takers could pay a visit tomorrow.  Target shoot to 
your own level of risk tolerance.  What about the frosting?  
Aside from a 29% earnings surprise on February 1, VERT also 
announced a 2:1 split payable on March 31 after the close.  That 
should help boost the shares eventually back over its all-time 
high of $289.56.  There's plenty of room to run, and lots of 
time.  For you risk takers whose life is uncertain, this is one 
case where it's OK to eat dessert first!

In the news, VERT has been upgraded three times during the last 
week and a half.  Today, Goldman Sachs initiated coverage with an 
uninspiring Market Outperform.  The week previous to last, Sand 
Bros. upgraded from Neutral to Buy, and USB Piper Jaffrey 
initiated coverage with a Strong Buy rating.  Even Better, 
Honeywell and Microsoft announced they would collaborate to 
accelerate the growth of Myplant.com, an e-commerce hub for 
manufacturing industries.  Who provides the software to enable 
trading directly from the site?  Microsoft alliance partner, 
VERT, or course.

BUY CALL MAR-210 ERW-CB OI=194 at $29.38 SL=23.00
BUY CALL MAR-220 ERW-CD OI=274 at $24.63 SL=19.25
BUY CALL MAR-230*URE-CF OI=547 at $20.38 SL=16.00
BUY CALL APR-220 ERW-DD OI=223 at $38.25 SL=29.75
BUY CALL APR-230 ERW-DF OI=195 at $34.13 SL=26.75

Picked on Feb 24th at  $221.00     P/E = N/A
Change since picked      +0.00     52-week high=$289.56
Analysts Ratings     4-6-3-0-0     52-week low =$ 17.50
Last earnings 02/00  est=-0.36     actual=-0.28
Next earnings 05-02  est=-0.45     versus=-0.19
Average Daily Volume = 1.4 mln
/charts/charts.asp?symbol=VERT

****

CMGI - CMG Information Services $119.06 -0.81 (+11.00 this week) 

CMGI invests in, develops, and integrates advanced Internet, 
interactive, and database management technologies.  The 
company's venture capital arm is called @Ventures and boasts a 
portfolio of over 30 Internet companies such as Lycos and Raging 
Bull.  One of the more prominent additions to its portfolio is a 
83% acquisition of the search engine, Alta Vista.  The majority 
of CMGI's revenues (80%) is derived from fulfillment and mailing 
list services. 

Entry points! Entry points! CMGI is a prime candidate for a 
stellar earnings run going into March.  The company last 
reported its earnings on December 15th.  Now take a look at a 
three-month chart and notice the strong uptrend prior to the 
release.  We're anticipating a repeat performance and want to 
alert our readers.  If you're interested in an early entry, the 
next few days may prove to be the time.  Another player, The 
Internet Cap Group (ICGE), reported poor earnings after the bell 
today.  In after-hours trading ICGE plummeted over $10.  
Inevitably this could drag the sector down in the short-term and 
thus, we'll be rewarded with entry points into a potentially 
profitable earnings play.  CMGI has confirmed it will report 
on Thursday, March 9th so this will be a relatively quick play.  
Please make sure you're out of any positions before then.  It is 
UNKNOWN at what time during the day they'll announce and you 
don't want to be caught in a post-earnings' sell-off!  Currently 
near-term support is at $114 and $115, but firmer at $110.  So 
an entry in this range is relatively solid.  If you're 
more of a conservative, then wait for the first line of 
opposition at $120 to be shattered.

Just yesterday US Bancorp Piper Jaffray reiterated a Strong Buy 
recommendation for CMGI, but offered no other comments.  In 
other news, AltaVista, a media and commerce network company 
majority owned by CMGI, reported Internet traffic continues to 
climb with a record 54 million unique users worldwide visiting 
its network of sites.

BUY CALL MAR-115 GCD-CC OI=3372 at $11.25 SL= 9.00
BUY CALL MAR-120*GCD-CD OI=5361 at $ 9.13 SL= 6.75
BUY CALL MAR-125 GCD-CE OI=3549 at $ 7.00 SL= 5.25
BUY CALL APR-120 GCD-DD OI= 225 at $15.50 SL=12.00
BUY CALL APR-125 GCD-DE OI= 150 at $13.38 SL=10.75
BUY CALL APR-135 GCD-DF OI= 333 at $11.75 SL= 9.25

Picked on Feb 24th at   $119.06    P/E = 91
Change since picked       +0.00    52-week high=$163.50
Analysts Ratings      4-7-0-0-0    52-week low =$ 26.94
Last earnings 12/99   est=-0.72    actual=-1.08
Next earnings 03-09   est=-1.32    versus= 0.07
Average Daily Volume = 6.73 mln
http://www.optioinvestor.com/charts.charts.asp?symbol=CMGI

****

NSM - National Semiconductor $73.00 +5.38 (+9.50 this week)

National Semiconductor combines leading edge analog and digital
technologies to create highly integrated solutions for the 
information age.  They are developing the next generation 
microchip, called a system-on-a-chip, which will combine a
microprocessor and logic and memory components in a single
unit.  These products will be used in Internet appliances and
set-top boxes.  No longer in the PC processor market, NSM has 
switched its focus to integrated circuits that are used in
communications devices, networking equipment and automobiles.
The majority of the NSM's revenues come from outside the 
U.S. with 60% of its sales in Asia and Europe.  NSM does 
business with some big names including Lucent, Compaq, Samsung
and Siemens.

Until Wednesday, NSM spent most of February in a fairly narrow 
trading range.  Well that's not the case any more.  This morning
NSM announced an alignment with Microsoft, to provide the 
hardware platform and enabling technology for the new MSN-based
Web companions.  Web companions are designed to offer consumers
a simple and fun way to browse the Internet, communicate with 
others and shop online.  The semiconductor industry was one of 
the few that seemed to ignore the nasty mood in the broader 
markets today, and NSM helped lead the way.  NSM tacked on almost
8.0% today after adding breaking out of its recent trading range 
yesterday.  NSM found its way to our list of plays as it appears
to be setting up for a great earnings run.  The company is 
scheduled to report earnings March 9th.  The last few quarters
NSM has beat analysts estimate quite handily, and it looks as 
though they may be on track for a repeat performance this quarter.
Today's move was on strong volume, nearly three times the ADV 
which suggests there is more room to the upside ahead.  NSM has 
received positive comments recently from analysts with a projected 
price target of $80. Technically NSM has support just under $72 
and $68, although given the strength of today's move, we may not 
see $68 for a while.  If we do see a pullback or some profit-
taking, use those points as a guide.

In a company press release yesterday, NSM announced that NEC
Corporation is using the first generation National chipset 
solution for use in prototypes of the world's first Bluetooth 
interoperable notebook PC's with a built-in antenna, which NEC
is displaying at the CeBit 2000.  

BUY CALL MAR-60 NSM-CL OI=3049 at $15.75 SL=12.25
BUY CALL MAR-65 NSM-CM OI=1570 at $11.63 SL= 9.00
BUY CALL MAR-70*NSM-CN OI=1897 at $ 8.00 SL= 6.25
BUY CALL MAR-75 NSM-CO OI=1579 at $ 5.88 SL= 4.25
BUY CALL APR-70 NSM-DN OI= 140 at $11.50 SL= 9.00

SELL PUT MAR-65 NSM-OM OI=  93 at $ 2.50 SL=4.00
(See risks of selling puts in play legend)

Picked on Feb 24th at    $73.00    PE = N/A
Change since picked       +0.00    52 week high=$74.00
Analysts Ratings      9-8-2-0-0    52 week low =$ 8.88
Last earnings 12/99   est= 0.26    actual= 0.37 
Next earnings 03-09   est= 0.45    versus=-0.16
Average daily volume = 1.81 mln
/charts/charts.asp?symbol=NSM



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

FD - Federated Department Stores $32.44 -1.75 (-1.38 this week)

Better late than never, FD is trying to leave the comfort of
its luxurious brick and mortar walls.  The company is the
largest upscale retailer in the U.S., with over 400 stores in
33 states.  In addition to its flagship chains, Macy's and
Bloomingdale's, the company runs six regional chains, Lazuras,
The Bon Marche, Burdines, Stern's, Rich's, and Goldsmith's.
Attempting to capitalize on consumer demand for online shopping,
FD is increasing it's focus on catalog (Macy's by Mail and
Bloomingdale's by Mail) and internet (Macys.com) sales.

Plagued by the lack of interest for any stock symbol with less
than four letters, FD has been in a continuous downtrend since
the second week of January.  Rising interest rates and investors'
desire for double-digit growth numbers continues to pressure the
stock.  Joining the ever-growing list of NYSE stocks at new lows,
FD hit a new 52-week low today of $31.63, its lowest level since
January...of 1997.  Even posting stronger than expected earnings
yesterday didn't provide any support for FD.  The stock has only
posted one close above the 5-dma, (currently at $34) in the past
3 weeks and that was 6 days ago.  Adding insult to injury was the
earnings releases today from JC Penney and Gap Stores, neither of
which was received particularly well.  FD is likely being lumped
in with the weaker retailers, so look for the weakness to
continue.  The 5-dma should provide upside resistance, so
consider entries as the stock moves up to this level and then
rolls over.  If the price moves down from today's level, don't
fight the tape - go ahead and jump on the bandwagon.

BUY PUT MAR-40 FD-OH OI=20 at $6.25 SL=4.50
BUY PUT MAR-35*FD-OG OI=59 at $2.38 SL=1.25

Average Daily Volume = 1.21 mln
/charts/charts.asp?symbol=FD 



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

IFCI - International Fibercom $32.00 +3.00 (+0.00)

International FiberCom is a leading provider of a wide range 
of engineering, development and maintenance services for fiber 
optic, broadband networks, public telephone networks, local 
and wide area networks and specialized wireless applications.  
With a number of recent strategic acquisitions that complement 
and enhance existing services and products, International 
FiberCom has positioned itself as a "one-stop shop" for the 
telecom and cable TV industries.

Sunday's Write Up

When we said "Welcome to the big leagues" to IFCI last Thursday, 
we weren't kidding.  It turned out to be a fantastic finish to 
the week for IFCI.  If you were playing IFCI, you probably 
couldn't help but keep a close eye on the action, but please 
allow us to indulge in a brief recap.  As you may know, we 
welcomed IFCI to our call play list last Thursday with a 
morning Trading Alert.  IFCI finished Thursday's session up 
$5.56 and posted some very impressive volume, not only for the 
stock, but in the options contracts as well.  Friday, things 
just kept getting better as IFCI traded up to a new all time 
high of $34.50.  Nearly 11 million shares traded hands on Friday, 
which is over 7 times the daily average.  Alright, enough of 
our patting ourselves on the back, but we do hope you are 
enjoying the ride so far.  IFCI looks to have established some 
rather solid looking support at $30, which it tested several 
times on Friday.  This will be an important near-term level.  
We want to see this level to continue to hold to confirm the 
momentum that pushed IFCI through.  We have one week left to 
be in this play, as earnings are scheduled to be announced on 
the 29th.  Be sure to keep your stops tight on the way up.

As we mentioned, earnings are on the 29th, which could prove 
to be a nice catalyst to keep up IFCI's positive momentum next 
week.  The only other news out there was an article released 
on Thursday afternoon reporting the increased volume and value 
of the IFCI options, particularly the March 20 calls.  But 
the article stated they weren't sure why.  Doesn't it feel 
good to be ahead of the game?

Tuesday's Write Up

IFCI held up very well in today's down market and managed to 
tag yet another new high of $35.25.  We saw a few profit-takers 
emerge on to the scene early today, dragging the stock down to 
$28.50.  The buyers quickly came to the rescue and brought IFCI 
back up.  IFCI tested the recently established support level
at $30, which held nicely throughout today.  Should IFCI reclaim 
its positive direction tomorrow, the current level may serve well 
for new entries if you are looking to play the remainder of this
earnings run.  As we have mentioned before, IFCI is set to 
announce earnings on February 29th and therefore, we have less 
then a week left of this play.  Enjoy!

Thursday's Write Up

IFCI looks to be working toward a fine finish to this earnings 
run.  IFCI gapped up $1.50 this morning, which was an impressive
move because this moved IFCI right through the $30 level.  
Now that we are back on the right side of $30, look for this
level to provide support to finish this run.  At this point, 
if IFCI trades back through, it may be an indication to close 
out your positions.  We were pleased to see IFCI close on $32, 
a level it flirted around with throughout the day.  Going 
forward, IFCI may encounter resistance at $35 (all time high is 
$35.25).  Not only is IFCI benefiting from an earnings run, there 
were a few pieces of news thrown in to fuel the fire.  This 
morning, it was announced that International FiberCom's wireless
solutions division, AeroComm, was awarded a contract, which is 
valued at over $5 million from Bell Atlantic Mobile.  IFCI was 
also given a boost today by FS Van Kasper, who initiated coverage 
of IFCI with a Buy rating.  As you may know, we will be dropping 
IFCI from our play list on Sunday because IFCI is set to announce 
earnings on Tuesday. 

BUY CALL MAR-25*IQD-CE OI=2590 at $8.38 SL=6.25
BUY CALL MAR-30 IQD-CF OI=1063 at $5.75 SL=4.00
BUY CALL MAR-35 IQD-CG OI=1753 at $3.38 SL=1.75
BUY CALL APR-30 IQD-DF OI=  53 at $7.75 SL=5.75
BUY CALL APR-35 IQD-DG OI= 131 at $6.00 SL=4.25 

Picked on Feb 17th at    $22.00    P/E = 100	
Change since picked      +10.00    52-week high=$34.50
Analysts Ratings      0-1-0-0-0    52-week low =$ 4.50
Last earnings 11/99   est=  N/A    actual= 0.02
Next earnings 02-29   est= 0.06    versus= 0.12
Average Daily Volume = 1.80 mln
/charts/charts.asp?symbol=IFCI


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***************************************************************** 



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

Nasdaq Soars as Dow Tumbles..

Wednesday, February 23

Investors traded their classic stocks for new technology issues in
today's session, driving the Nasdaq to a new, all-time high.  The
high-flying index recorded its best day ever, climbing 168 points
to close at 4,550.  The blue-chip industrial average dropped 79
points to end at 10,225.  The S&P 500 Index finished up 8 points
at 1,360.  On the NYSE, 979 million traded with decliners leading
advancers 1,756 to 1,235.  There were 46 stocks at new highs and
219 issues at new lows.  The 30-year Treasury bond slipped 15/32,
pushing the yield to 6.12%.


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

Theragenics   TGX   JUN10C/MAR15C   $4.00   debit   diagonal
Echostar      DISH  MAR80C/MAR90C   $9.00   debit   bull-call
IDT Corp.     IDTC  MAR22C/MAR30C   $5.38   debit   bull-call

Wednesday's session provided a number of big winners and our top
performer was Echostar.  Unfortunately, the issue gapped open and
never looked back.  The best observed debit (available near the
open) was above our target entry but with the reduced risk, the
return was tolerable.  The stock eventually closed $20 higher.
IDTC also made a sharp move at the open, falling almost $2 in the
first few minutes of trading.  Our position was initiated at a
slightly better than expected debit.


Portfolio plays:

Technology stocks ended at record levels today as money continued
to flow into the leading momentum issues.  Internet and biotech
companies dominated the headlines while traditional stocks came
under pressure from inflation concerns.  Industrial, finance and
retail issues burdened the market despite a late rally after Fed
Chief Alan Greenspan said monetary policy is not aimed at keeping
stock prices in check.  Analysts expect the Fed to raise interest
rates to brake the economy and but anxieties escalated last week
after Greenspan said the stock market was the reason the economy
has seen such strong demand.  Needless to say, today's commentary
from the Humphrey Hawkins testimony was interesting.  Greenspan
alluded to what he described as the "New Economy", and his views,
like many young economists, is that the old standards for gauging
the market no longer apply.  He said that productivity is higher
than in the past due to better technology and the key is whether
the advances will eventually become profitable enough to justify
the valuations being enjoyed by these companies.

Our portfolio enjoyed a number of significant rallies and a few
of this month's positions are already trading at maximum return.
The BEAS play from Sunday was notable as it offered a minimum of
$1.25 profit for just one day in the bullish credit spread.  The
biggest gainer of the session was Network Solutions (NSOL) which
finished up $37 at $298, almost $90 above our sold strike.  Other
notable big-caps included InterVu (ITVU), climbing $8 to $143 and
Netopia (NTPA) with a $5 rally to end at $82.  The were also some
new winners in the small-cap group.  Integrated Silicon Solutions
(ISSI) led the pack, gaining $2.50 to close at $23.94 and numerous
other issues made favorable moves.  The surprise of the session
was LHS Group (LHSG) with a $2.50 move to $46.  The overall credit
for the April straddle is now $21.00, a 300% return for 2 months.
Fortunately, the recent rally in technology stocks has benefited
the majority of portfolio positions and with the current contempt
for industrial stocks, there is little data to suggest any change
is forthcoming.


Thursday, February 24

The composite of technology stocks closed at a record high in
today's session while industrial stocks fell to perilous levels.
The Dow ended down 133 points at 10,092 and the S&P 500 was down
7 points at 1,353.  Meanwhile the Nasdaq rose 67 points to 4617.
Volume on the Big Board reached 1.1 billion shares, with declines
outpacing advances 2-to-1.  The benchmark 30-year Treasury fell
5/32, bid at 101 15/32, pushing its yield up to 6.13.

Portfolio plays:

Today's session was much like Wednesday's, a blue-chip rout with
investors swapping their classic stocks for high-flying technology
issues.  Our portfolio was no different and the list of winners
included a number of well-known companies.  The most active stock
in recent sessions has been Network Solutions (NSOL) and today the
issue rallied $31 to end at a new all-time high near $330.  Other
big movers included: Ariba (ARBA), up $13 to $253; InterVu (ITVU),
up $10 to $154; and MRV Communications (MRVC), which spiked $15 to
$116.  Cabletron (CS) was the biggest surprise, climbing $7 to a
new 52-week high at $43 after the networking device maker said it
secured $200 million in funding from technology investment firm
Silver Lake Partners.  The $200 million will be divided among CS
and its four subsidiary companies; Riverstone, Enterasys, GNTS,
and Aprisma.  The money is intended to fuel the expansion of the
new companies in their target markets including service provider,
e-business enterprise, professional services and infrastructure
management. 

Integrated Silicon Solutions (ISSI) again dominated the small-cap
group with a $2.75 move to $26.  Our new diagonal position is
well above the maximum profit price in less than 1 week.  Valence
(VLNC) also made a favorable move, climbing $2.75 to end at $32.
There has been some question as to how well that company would
perform after earnings, since it has rallied almost 500% in just
a few months.  The other leaders in the low-priced issues were
Boston Communications (BCGI) with a $1 gain to close at $11 and
Duramed (DRMD), with a $1.12 rally to end at $12.75.  Both of
these positions are comfortably profitable.  No adjustments were
made during the session and with the incredible technology rally
boosting the majority of portfolio plays, there has been little
need for astute position management.

Questions & comments on spreads/combos to Click here to email Ray Cummins


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

Janar's articles must be well read as I have been overwhelmed by
the number of requests for conservative spreads.  Today we will
examine a group of bullish issues that offer favorable credit
positions.  Each of these plays are based on the current price or
trading range of the underlying stock and the recent technical
history or trend.  Current news and market sentiment will have an
effect on these issues.  Please review each play individually and
make your own decision about the future outcome of the position.

****

MACR - Macromedia  $84.00   *** On The Rebound! ***

Macromedia develops and distributes original technologies and
innovative software tools, servers and services to a range of
customers including developers, consumers and large corporate
accounts. Their software products and technologies are focused
on maximizing opportunities in three key areas: Web Publishing,
Web Learning, and Shockwave.com.  Macromedia's family of Web
Publishing products works together as a complete solution to
streamline Web workflow from concept to design, development to
production.  Macromedia's Attain Enterprise Learning System is
an integrated enterprise-wide solution for managing the online
learning process from planning, producing, administering, and
delivering curricula, to tracking, storing, and reporting the
learner's progress from any browser, anywhere in the world.
Their new consumer business, shockwave.com, intends to release
various new products and services in the coming months.

Macromedia reported excellent earnings in January, benefiting
from the strength of its core-software business and upside in
the company's e-Business initiative.  The momentum in their
software business is expected to continue with additional product
announcements throughout the coming year.  The Shockwave.com
spin-off will also add to the bullish speculation on the company.
U.S. Bancorp Piper Jaffray Managing Director and Senior Internet 
Software Infrastructure Analyst Hany M. Nada recently raised his
estimates and reiterated a STRONG BUY on Macromedia, and analysts
at Bear Stearns reiterated their positive outlook, noting that
the company will likely position Dreamweaver software as a full
platform for E-commerce.  We simply favor the strong, technical
reversal and the recent support near the sold strike price.


PLAY (conservative - bullish/credit spread):

BUY  PUT MAR-65 MRQ-OM OI=36 A=$1.12
SELL PUT MAR-70 MRQ-ON OI=68 B=$1.68
INITIAL NET CREDIT TARGET=$0.62-$0.68 ROI(max)=14%

Chart =
/charts/charts.asp?symbol=MACR

****

EXDS - Exodus  $136.31   *** Break-Out! ***

Exodus Communications provides Internet system and network
management solutions for enterprises with mission-critical
Internet operations.  Their solutions include Internet Data
Centers, network services and managed services, which together
provide the high performance, scalability and expertise that
enterprises need to optimize their Internet operations.  Exodus
delivers its services from geographically distributed, Internet
Data Centers with un-interruptible power supplies and back-up
generators, fire suppression, raised floors, HVAC, separate
cooling zones, seismically braced racks, and around-the-clock
operations with high levels of physical security.  The company
offers a number of different applications to meet any customer's
needs.

Internet Infrastructure is a dominant market group and Exodus
is one of the sector leaders.  The fundamental outlook for the
company is excellent and a number of brokerages have high ratings
on the issue.  Most recently, Paine Webber reiterated a BUY rating
after Exodus announced plans to acquire the Professional Services
Division of NETwork Security Solutions.  Goldman Sachs has Exodus
on their recommend list and Deutsche Banc Alex Brown offered a
STRONG BUY rating in early February based on exceptional quarterly
earnings and strong customer growth.  Merrill Lynch also rates the
company favorably, based on their outstanding growth potential.

Once again, we simply favor the bullish chart pattern and the
technical support above the sold strike price.

 
PLAY (conservative - bullish/credit spread):

BUY  PUT MAR-105 DUB-OA OI=1411 A=$1.88
SELL PUT MAR-110 DUB-OB OI=1274 B=$2.43
INITIAL NET CREDIT TARGET=$0.62-$0.68 ROI(max)=14%

Chart =
/charts/charts.asp?symbol=EXDS

****

PLCM - Polycom  $89.25   *** On The Move! ***

Polycom develops, manufactures and markets teleconferencing
products.  They market audio, video and data conferencing
products to facilitate communication over long distances.
Their flagship product SoundStation is an audio conferencing
system that operates over ordinary telephone lines.  It is
designed to operate with telephone systems around the globe and
Polycom has obtained regulatory approval for SoundStation's use
in 32 countries.  Marketed under the name ShowStation, Polycom's
data conferencing products provide a cost-effective method for
two or more users that are separated by a distance to view,
discuss, edit and annotate paper or electronic documents and
data.  Their ViewStation provides a complete suite of video
conferencing products.  Polycom also sells the Lucent multipoint
conferencing unit product (MCU) through its reseller channel,
which provides connectability for large videoconference calls.

This is simply another bullish issue in a hot sector.  From a
analyst's viewpoint, the company is performing well with solid
quarterly and fiscal year-end results that exceeded the Street
consensus.  Wedbush Morgan recently reiterated a STRONG BUY on
the issue and although the February rally made be overextended,
there is little chance the trend will reverse significantly.


PLAY (conservative - bullish/credit spread):

BUY  PUT MAR-70 QHD-ON OI=21 A=$0.68
SELL PUT MAR-75 QHD-OO OI=8  B=$1.25
INITIAL NET CREDIT TARGET=$0.62-$0.68 ROI(max)=14%

Chart =
/charts/charts.asp?symbol=PLCM

****

MNMD - Minimed  $91.00   *** Moving On Up? ***

MiniMed designs, develops, manufactures and markets advanced
microinfusion systems for delivery of a variety of drugs
primarily focusing on diabetes management.  They sell external
insulin pumps and related disposables, which are designed to
deliver small quantities of prescribed insulin in a controlled,
programmable profile.  The programmable external insulin pumps
are thin and lightweight and designed to be worn under the
patient's clothing, and not interfere with normal activities.
The company also has developed an implantable pump, which has
been utilized only for insulin delivery.  MiniMed also plans to
diversify its drug delivery programs, to expand the market for
insulin pumps, and to diversify into disease management and the
distribution of additional diabetes products. In addition, they
expect to enhance their current products.

The only recent news concerns the commercial European approval
of MNMD's next generation implantable insulin pump.  This pump,
which is manufactured by an affiliated company, contains several
technology improvements, such as increased memory and battery
life, and it is lighter in weight than its predecessor.  European
sales will be limited until the specially formulated implantable
pump insulin, manufactured by Aventis, is approved for commercial
use.  Neither the implantable pump nor the insulin are approved
for marketing in the U.S. but Hambrecht & Quist believes Minimed
is a BUY as all of their projects are on schedule.  Ing Baring
Furman Selz also rates MNMD a STRONG BUY, based on explosive
quarterly earnings results.  SG Cowen reports the massive sales
infusion in the fourth quarter was far ahead of estimates and US
Clearing recently reiterated a BUY rating with a target of $97.

The move above a recent trading range is interesting and if all
else fails, at least there will be a number of well-known
brokerages trying to support the issue.


PLAY (conservative - bullish/credit spread):

BUY  PUT MAR-70 MAQ-ON OI=24 A=$0.75
SELL PUT MAR-75 MAQ-OO OI=34 B=$1.31
INITIAL NET CREDIT TARGET=$0.62-$0.68 ROI(max)=14%

Chart =
/charts/charts.asp?symbol=MNMD


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