The Option Investor Newsletter Sunday 2-27-2000 1 of 5 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 2-25 WE 2-18 WE 2-11 WE 2-4 DOW 9862.12 -357.40 10219.52 -205.29 10425.21 -538.59 +224.93 Nasdaq 4590.50 +178.76 4411.74 + 16.29 4395.45 +151.31 +357.07 S&P-100 719.78 - 8.74 728.52 - 23.52 752.04 - 23.47 + 37.47 S&P-500 1333.36 - 12.73 1346.09 - 41.03 1387.12 - 37.25 + 64.21 RUT 556.74 + 11.06 545.68 + 8.58 537.10 + 11.58 + 20.90 TRAN 2351.26 - 79.54 2430.80 - 5.33 2436.13 -172.83 + 27.21 VIX 29.08 + 0.63 28.45 + 1.53 26.92 + 3.99 - 6.16 Put/Call .41 .63 .59 .45 ****************************************************************** A World of Change I don't know about you, but is anyone else just a little tired of hearing about the "old economy" versus the "new economy". Come on media people; we got it already. Unfortunately, those two ideas, old economy versus new economy are affecting the market in very big ways. Now, just to spare everyone from reading yet another commentary inundated with those two terms, I'm going to substitute "old economy" with "old world" and "new economy" with "new world". Sounds nice, doesn't it. We are all adventurers at heart. Otherwise we wouldn't be taking charge of our own financial future as we strive to find the next successful trade. It probably doesn't sound very nice no matter what you call it if you were trading Dow stocks on Friday. Trading was ugly from the word go and the venerable index struggled for a whole 90 minutes (11:30 to 1:00pm) with support at 10,000. Investors were relieved to hear the closing bell since it called an end to an ugly week on the NYSE. However, by the time the smoke cleared, the Dow Jones Industrial Average had crossed not one, but two lines in the sand. The milestone of Dow 10,000 was bad enough, but the index broke through 9900 in the last half hour of trading before closing at 9878. The damage was a 230 point loss. This marked the fourth Friday out of the last five Fridays that the Dow has lost over 200 points. Clearly the bulls are not willing to hold over the weekend and the bears are more than happy to take advantage of that fact. If you remember the wrap on Tuesday, we were very suspicious of the bounce on the Dow and suspected it to be the third in a series of bear traps. chart of bear traps As traders saw the Dow index close below the psychological level of 10,000, you could almost see the fear in some of their minds. Is this the beginning of the end? No one really knows; but this wouldn't be the first time someone wrote the epitaph for this bull market a little prematurely. At the end of this month, next Tuesday, we will have marked our 107th month for the longest expansion in history. A normal economic expansion is closer to 43 to 50 months long. How can we not expect a few bumps in the road with a journey this long. If we survive next month, the 108th month, this bull market will be nine years old. Technology has not only extended the life span of humans, but of the business cycle as well. The question is, can technology stop the cardiac arrest that is affecting the "old world" stocks. The markets have put on a pretty frantic run the last 10 to 12 months but the Dow appears out of breath. It was 10 months ago last April that the Dow last closed under 10,000. Since that time the Nasdaq has gained about 80%. In comparison, the Dow is down almost 16% from its Jan. 14th closing high of 11,722 versus the Nasdaq's 13% gain for the new millennium. According to Markethistory.com, the Nasdaq has outperformed the Dow by over 40% in the last few months. This is the widest divergence in the history of the two indices. Many are concerned that a divergence this size only spells trouble and it will likely correct and painfully so. (more on this later) chart of the Dow versus the Nasdaq Trading activity on both exchanges was hectic. The NYSE saw over 1 billion shares traded while the Nasdaq exchanged more than 1.8 billion. Breadth was negative and combined advancers lost to decliners: 3103 to 4030. The overall trend between the two could be seen in new 52 week lows to new 52 week highs. The NYSE had 46 new highs and 192 new lows while the Nasdaq glowed with 280 new highs and 92 new lows. The broader markets reflected the Dow's bearish stance with the OEX falling 11.38 to 719.78, the SPX fell 20 to 1333.36, even the Nasdaq gave up a few points to fall 27.15 to 4590.50. The only shining star among the major indices was the Russell 2000. The RUT gained 2.70 to 556.74. Last week Jim discussed where the Dow 30 stocks were and how they could affect the valuation of the DJIA. Without going into the same detail, I want to point out that several stocks in the Dow still remain weak and a reversal is not yet imminent. Actually, I've reduced this study to an informal poll. How many of the Dow 30 stocks are at or near their 52 week lows? 10. How many of the Dow 30 are turning over? 8. How many have given us a technical breakdown (this week)? 4. How many are just plain crashing? 4. This gives us a total of 26. Now, one more question. How many of the Dow 30 stocks are under their 200 dma? Answer: 22. Needless to say, we are not looking at a very healthy picture as the majority of these "old world" stocks are being left by investors for the "new world" performance stocks. Why would you buy and hold IP for two years and loose 20% when you could buy stocks like CMRC or ARBA (B2B companies) and make 20% in one (CMRC) or two (ARBA) days ? Hmmmmm? I'm waiting for an answer... Exactly, you wouldn't. chart of IP versus ARBA "But wait, maybe this is just an over reaction to the GDP and housing starts that came out on Friday", cries the diehard Dow fan. It is a possibility, but looking back now, Friday's results seem inevitable. Economists were looking to revise 1999's 4Q GDP up from 5.8% to 6.5% and when it came out to an unexpected 6.9% investors reacted. This is almost twice what the Fed chairman Greenspan would like to see economy grow at. The last time the economy was near the 7% growth rate was when it hit 7.2% back in the 4Q of 1987. Everyone should know what happened in 1987. You don't? Okay, here's a hint. It happened on a Monday but that is all I'm going to help you with. The unexpected GDP results renewed interest rate fears. You've probably heard that a dozen times this weekend but ask yourself why? Everyone expects Greenspan to raise rates again at the next FOMC meeting on March 21st and probably again at the June meeting. However, if the economy is too strong, investors worry that he may be tempted to raise by 50 basis points or worse - a possible surprise rate hike before the next scheduled meeting. Fortunately, we still have two factors on our side. Number one, inflation remains in check. The GDP price deflator, one of the inflation gauges the Fed watches, only rose at a 2% annual rate inline with estimates. Number two, the Fed governor's previous string of rate hikes may be having their intended effect. The National Association of Realtors reported a 10.7% decline in home sales for January. This was the largest monthly slow down in over three years. Most economists agree that Alan's last four rate hikes will prevent Q1 of 2000 from outpacing the end of 1999. Now, how do we apply this to our trading next week? We are probably looking at two scenarios. Scenario one, the weak stocks drag the strong stocks down with them. The Dow has corrected almost 16% from its high and we are firmly in correction territory. Investor sentiment is wary for the Dow and this may be the beginning of a bear cycle for the index. Not surprisingly, many of the non-tech sectors have corrected as much or even more. Many of the cyclical stocks are down over 20% in the last eight weeks (definite bear market here). One thought among the bearish camp is that we can't experience the bottom or reversal we are looking for until the strong stocks pull back and correct as well. This is a possibility as the true impact on investors' sense of confidence with the Dow closing under 10,000 may not be fully known for days. It was a little bit disturbing for some market pundits to note that several of the Nasdaq mega-caps, like MSFT, WCOM, DELL, SUNW, CSCO, were all down for the day. Technically, the market can correct in a couple of ways. We can experience a short, sharp, high volume washout across all the sectors or we can suffer through a softer but extended round of consolidation. At the moment, neither appear to be more popular than the other, but if I had my choice I'd prefer fast and sharp. It's just like getting punished as a kid. Don't give me the two-hour lecture and then spank me. Just spank me and get it over with. Scenario two: The dual market continues. While not the only spokesperson for this belief system, Banc of America analyst, John Zimmerman, feels that this divergence between the Dow and the Nasdaq will continue for the next several quarters. Investors doing their homework can see that it is almost a dollar for dollar move between the two "worlds". For every dollar investors take out of "old world" stocks in the Dow and on the NYSE they are buying a dollar of "new world" stocks on the Nasdaq. Somewhere, somehow, someone has infiltrated the mind of the masses and convinced them that high-growth tech stocks are insulated from the dangers of higher interest rates. While this may hold true for the short term, old-school traders have no doubt that even the old rules will catch up to the Nasdaq some day. The challenge is that "some day" never seems to appear. Scenario two is not perfect. If the dual market continues, we are likely to see extremely short sharp corrections within individual sectors as stocks suffer the usual sector rotation. Furthermore, scenario two will continue to benefit from the enormous amount of liquidity for Nasdaq stocks. Sure, we've already mentioned that traders are taking money out of the "old world" stocks. So are a lot of institutions. For some funds, if a stock drops below its 200 dma, they have to sell. Even worse for the "old world" stocks is that value funds have been left in the dust by their high-growth tech fund brethren. Last week, Jim mentioned how several have ceased to exist or are being phased out and merged. This leaves no one to pick up these "bargains" in the "old world" sectors. If you are long these equities, you don't want to be asking yourself, "how low can they go?" On the other hand, look at the tech fund managers. Each month you have umpteen million dollars coming in and you are not allowed to sit on it very long. You're going to have to put it to work somewhere and the best place is the Nasdaq (or the Russell 2000). Now you're faced with the dilemma to purchase a bunch of tech stocks that you think are overbought and too expensive. To make matters worse, you are competing with hundreds of other fund managers for the same issues. No wonder some of these stocks climb 30 points in a day. Reality is likely to be some combination of the two scenarios above. Interest rates will remain an issue. Fortunately, some market commentators feel that the last rate hike will be in June. Why? Because the Fed is likely to remain inactive when the political process heats up next fall. The bad news is politics isn't the only thing heating up. Oil prices continue to surge and April crude closed over $30 a barrel on Friday. The 13-month trend in oil prices does not appear to be abating. We do have a few events to look for next week. 3Com is expected to IPO their much anticipated palm pilot unit late in the week. There has been so much excitement over this IPO it is liable to be a winner. On Wednesday we have the NAPM report. This should come out around 10:00 a.m. ET and could have market moving consequences. Economists will be watching as the report details several sub-indices that are leading economic indicators. Plus on Friday we have the big one. Before the bell, the Employment report will hold everyone's attention. If unemployment falls under 4.0% the markets may overreact. Actually, if unemployment falls to 3.9% it will be the first time since 1970. Also on the agenda for next week are a few earnings reports. Some of the larger companies reporting are: for Monday, Protein Design Labs (one of the recent biotech rockets); for Wednesday, Tiffany, TJX, and Michael's stores; and for Thursday, Verio, Staples, and Costco. As long as we have our eyes open for the big events, don't forget to watch the charts. We mentioned earlier that a close under 10,000 could preclude a move to 9300 or 9000. However, the Dow's next support level looks like 9650. Dow 9650 was an early top in Jan. 1999 and a subsequent bottom in March of 1999. chart on the Dow. What is a little unnerving is the Dow's close under its 20 month moving average. This does not paint a strong technical picture. chart on the Dow The OEX is looking ugly as well. Currently it sits just above its 200 dma at 716. A breakdown from here could herald a run to 700. chart on the OEX The S&P 500 (SPX) is worse. We've already broken through the 200 dma and have tried three times to close above it - all to no avail. Friday's close was ominous and 1300 could be a psychological support level. chart on the SPX On the other hand, the Russell 2000 looks very strong. Think of its as the broad market for the Nasdaq. The small cap index is up over 10% for the year. 560 is resistance. chart of the RUT.X In my final comments, I would consider doing a little soul searching if I owned any of the Dow or "old world" stocks. Besides being extremely oversold, nothing precludes this correction from turning truly bearish. One question I would ask myself was, "why didn't have I have a stop loss?" Then I wouldn't be asking myself if this was the time to sell and I'd be sitting in cash looking for the next trade. The Dow struggled with 10,000 and lost. Where the Dow goes from here is anyone's guess. However, and more importantly, how much importance should I assign an index that tracks 30 stocks? Just as many long time traders are questioning their use of the 30 year bond as the benchmark (and considering switching to the 10 year bond), many investors are turning towards the Nasdaq as their new beacon to lighting their way in this "new world". To repeat the warning from last week, if the Dow breaks 10,000 we should just move to the sidelines to watch. It never hurts to be in cash because it gives you choices and freedom to watch the market without the heartache. It is better to not trade at all than force yourself to trade in a bad market. It is possible we'll see a relief rally in the Dow but if it closes above 10,000 I'll be surprised. I'm more inclined to watch the Nasdaq for any reaction to the Dow's breakdown than watch the Dow. The Nasdaq is where the action is and my bullish nature is voting for scenario two. Sell too soon. Kimo Contributing Editor *********** JIM'S PLAYS *********** There will be no Jim's Plays article tonight. ********** Stock News ********** LookSmart Jumps on Bullish Comments By Cindy Christ Investors gave LookSmart Ltd. (LOOK) more than a passing glance Friday after U.S. Bancorp Piper Jaffray issued bullish comments on the San Francisco-based Internet search engine and media directory firm. LOOK shares surged more than 11 percent to an intraday high of $43.42 after analyst Safa Rashtchy launched coverage with a "strong buy" rating and $94 price target, based on a multiple of 48 times his 2001 revenue estimate of $168 million. "In our view, the demand for total-navigation platforms is accelerating rapidly, as web-sites are moving beyond search, and marketers are increasingly relying on 'web-guides' to acquire and maintain customers," said Rashtchy in a research note to clients. Rashtchy said LookSmart's recent advertising deals with Time Warner (TWX), Sony (SNE) and Amazon.com (AMZN) are indications of its "market leading" position. Rashtchy outlined four reasons for his recommendation. At recent levels, LookSmart trades at about 19 times 2001 revenues, or a 60 percent discount to other Internet infrastructure providers like Inktomi (INKT), BroadVision (BVSN) and DoubleClick (DCLK), he said. The company also sports gross margins of 85 percent from its "write once, publish many times," approach and has expanding revenue sources. And with an audience of 45 million in the United States and an additional 31 million internationally, LookSmart also has the critical mass to attract large advertisers. LookSmart was launched in 1996 with funding from Reader's Digest, which still owns 11 percent of the company. In 1999, LookSmart posted sales of $48.9 million, up nearly 456 percent from the previous year. Net loss was $64.7 million. LookSmart distributes content in about 60,000 subject categories through multiple channels, including a global network of 220 Internet Service Providers, major Web sites and portals such as Netscape, MSN, Excite@Home and AltaVista. Rivals include No. 1 Internet Service Provider America Online (AOL) as well as Lycos (LCOS) and Yahoo! (YHOO). The company's unique, but labor intensive business model deploys about 200 editors who review Web sites to ensure relevance and filter out hate or pornography content. According to Media Metrix, LookSmart has recently been leading Internet portals in traffic growth, achieving a 112 percent growth rate between December 1998 and July 1999. Down Under, LookSmart is even more popular, where it's ranked the largest search and directory site and the second largest Web site in Australia, according to Internet research company IMR Worldwide. This month LookSmart applied to list a portion of its stock on the Australian Stock Exchange (ASX). If approved, shares will come from existing shareholders. Shares in LookSmart closed up Friday $2.75, or 7.1 percent, at $41.75 on more than six times average daily volume. ******* Ask OIN ******* Fear Is High, Is It Time To Buy?? By Ryan Nelson The talk on the Street is of the Dow, but should that discourage you from playing the Nasdaq? We are going to look at some of the stocks you requested which call the Nasdaq home. We already know what the Dow Industrial stocks look like...52-week lows or worse. That doesn't mean their aren't great plays on the Nasdaq or Russell 2000 though. I was talking with another financial newsletter editor this week and oddly enough, we kept going over what a successful week of trading it had been. Don't listen to the financial shows and publications that are painting a picture of carnage on Wall Street. That is a one-sided story. In truth, a lot of money leaving the Dow isn't necessarily leaving the stock market, but just switching to other stocks. Like California in 1849, there's gold in these hills. Just as long as you are searching in the right hills, that is! Let's jump to the charts and pan out the winners from the fool's gold. ---------------------------- Liberate - LBRT If you get a chance, I'd love to hear what you guys have to say about Liberate (LBRT). They've just finished up their secondary offering, and it looks like a pretty wild ride to me. They also just started trading options a few weeks ago, so maybe there are some plays here? thanks, russ Wild ride is right. That typically happens when a company does a secondary offering. They are diluting the stock, which is negative, but it can be tough deciding whether to get out, go short, buy puts, etc. The timing is even more difficult. Some like to play the anticipation of the secondary as traders sell because they fear more selling. Others wait for the day of the offering thinking the new shares may be sold and further depress the stock. Others sit back and wait for a day or two after the offering in search of entry points. Thus, you have the backdrop for some wild swings. Why not take advantage of it with some options? I took a hard look at LBRT for adding it to the put play list and didn't pull the trigger. I'm now glad I didn't because it held up pretty well on Friday. I wish I could see a play here to take advantage of the volatility, but all I see now is high risk/limited reward. $120 appears to be the top, $80 the bottom and we are right in the middle. Because of the erratic behavior of traders in secondary offering situations that I listed above, I am going to the sidelines on this one. Too many better plays available. I tell you one thing though, If LBRT does sell off down to the trend line or the $80 support level, I would be much more tempted to pick up some calls on the bounce. That's the thing about secondary offerings, it is usually good for an entry point on an already uptrending stock. It causes a short-term decline then rebounds but, I would want to see it hold at support and bounce first. ---------------------------- Riding the Fiberoptic wave I personally do think the stock (IFCI)has a lot of momentum, but I am not sure if I should add more of this stock to my portfolio. What do you suggest? Any advise will be a great help Thanks Deepak. Ah, the great stock unknown stock that has been thrust into the spotlight with the fiberoptic revolution. It is amazing to see how momentum can take over a sector. I have been watching this stock for 2 years sit between $6 and $9 with absolutely no investor interest until this year. It is amazing what a new millennium can change. Good question, Deepak. I love playing this stock and I will show you the way I have been trading it for the past two weeks. You can see from the chart below that a well placed trend line can dictate the buy times for IFCI. The dips have been on light volume and the surge on strong volume. That is why I have confidence to buy the dips. But would I add more to my positions? Probably not. They have earnings due out on Tuesday and I don't think they will justify the current price. This stock has already more than tripled this year. If they had some great technology to drive analysts to drooling over future earnings projections than maybe, but they dig ditches for the cable. There are no royalty payments for years to come from this business. So I would be leery. I don't plan on playing it again anytime soon. Also, once the earnings come out, the high premiums will deflate and you will get caught there too. I know you are referring to the stock, but keep in mind the excitement will lessen unless they blow away earnings. This has been a great play recently, and will be again in the future, but I am expecting a period of consolidation. ---------------------------- The King of the Internet Would you please forecast on CMGI for the year 2000 ??? Thanks, hdho Where CMGI may end up this year is anyone's guess and will probably be dictated by the overall Nasdaq sentiment, but since we just added it as a call play, I would love to show you why. CMGI is a great company in my book. When they were lingering around $80 (pre-split) last September and October, that was a great bargain. Due to a spectacular earnings report, CMGI took off, more than tripling their stock price. We've seen a little consolidation now that the excitement of the split has worn off. I had been watching this one closely because they report earnings on the 9th of March and figure it will have an earnings run after last quarter's great numbers. It looks like it began on Wednesday. We added it for the Thursday newsletter because the market dips couldn't really pull the stock down. Friday gave an even better entry after ICGE (a sector mate) reported terrible numbers. That is ok, CMGI probably had a few sellers because of it, but that is definitely an ICGE problem that I won't go in to detail on (I would be here all day talking about how over-valued they are). Anyway, CMGI held up good on Friday with the ICGE weakness and the market retreat. Not to mention the $2 jump in the final ten minutes. I think that was traders starting to jump on board for next move. It still has resistance at $120 and $125, but after that it should be smooth sailing. ---------------------------- Good Luck to all and don't forget to send in the symbols for any stock you want analyzed. Send those requests to Contact Support ---------------------------- DISCLAIMER: This column 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 Ask the Analyst 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 its accuracy. ************** Market Posture ************** As of Market Close - Friday, February 25, 2000 Key Benchmarks Broad Market Bearish/Bullish Last Posture/Since Alert DOW Industrials 10,700 11,250 9,862 BEARISH 2.17 SPX S&P 500 1,400 1,450 1,333 BEARISH 2.18 OEX S&P 100 740 780 720 BEARISH 2.18 RUT Russell 2000 500 520 557 BULLISH 2.24 NDX NASD 100 3,800 4,000 4,179 BULLISH 2.24 MSH High Tech 1,850 2,000 2,002 BULLISH 2.24 XCI Hardware 1,300 1,460 1,498 BULLISH 2.24 CWX Software 1,200 1,470 1,503 BULLISH 2.24 SOX Semiconductor 800 900 1,032 BULLISH 2.24 NWX Networking 940 1,000 1,067 BULLISH 2.24 INX Internet 700 800 762 Neutral 1.06 BIX Banking 500 550 471 BEARISH 11.30 XBD Brokerage 400 450 419 Neutral 11.30 IUX Insurance 500 550 464 BEARISH 11.30 RLX Retail 950 1,000 777 BEARISH 1.28 DRG Drug 340 380 318 BEARISH 2.18 HCX Healthcare 700 750 663 BEARISH 2.18 XAL Airline 120 140 117 BEARISH 5.21 OIX Oil & Gas 280 315 242 BEARISH 1.27 ***Posture Alert*** The market divergence continues, as the Dow closed below the 10k mark in unfavorable fashion. This is the first time in 10 months that the Dow has closed below this infamous mark, and with Friday's close, is now down about 17% off of the highs. Sectors leading the downside pressure include Semiconductors (-2.98%), Software (-2.46%), the Dow (-2.28%) and Healthcare (-2.16%). There are no current changes in posture. ****************** Market Sentiment ****************** Sunday, February 27, 2000 Potential Reversals? So the Dow finally did it (closed below 10k), and of all things, it had to happen on a Friday so that every financial publication under the sun can hype the mystical event all weekend long. In honor of this extraordinary feat, we won't discuss this close at all. What we are going to talk about are three of the worst sectors to have owned during the last year, and the potential of catching a reversal. Catching a reversal can put some big gains in your pocket, no matter whether you are playing the long or the short. (See Market Sentiment 2/20/00 & 2/22/00 for more key information on reversals.) Three sectors that Pinnacle Capital has been bearish on since May 1999, are the Airline, Banking, and Insurance sectors. (You can check the Market Posture section for confirmation of dates and pricing.) These 3 sectors have been brutalized during this time-span, losing 36%, 33%, and 31% respectively. If you played the short side when we went bearish on these sectors, then you are a happy camper and have put in solid returns! These three sectors are currently at key levels, each not seen since October of 1998, which was a bad month for all. As you can see by the charts below, these sectors gave clear reversal signals during that month, and the performance of those sectors during the next three months were astounding. After witnessing a clear reversal, the Insurance sector rebounded 36% during the next 12 weeks, while the Banking sector returned a stellar 50%, and the Airline sector reported the best of all, jumping 55%. October of 1998: Close as of 2/25/00: Banking (BIX) 471.86 471.34 Insurance (IUX) 459.39 464.17 Airline (XAL) 112.69 117.08 Now don't get us wrong, we are not recommending purchasing these sectors just yet. Until we get confirmation, we are still bearish on these under-performing sectors. However, reversals can happen quickly, and hopefully, by highlighting the potential for a reversal and past performances, we all may benefit should this scenario occur. Now to put things in perspective, these 3 indexes haven't closed at these levels since October of 1998. The Dow hit a low of 7,467 (9,862 now) during this time frame, and the NASDAQ was as low as 1,357 (as opposed to 4590 currently). So should the media bears put some fear into this market in the upcoming week, and we continue to see a sell-off, we will then be looking for overbought sectors (technology) showing signs of key reversals to the downside! 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 (6.153): The current yield is now safely off of 52-week highs and is temporarily out of the danger zone. Mixed Signs: Volatility Index (28.88): 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. With the VIX at almost 29, we are getting closer to a potential buying 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. Investor Expectations: More and more investors are now expecting high double-digit growth if not triple-digit expansion in their portfolios. This extreme positive sentiment could help fuel a future selloff in technology shares. 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 Benchmark (2/25) Overhead Resistance (755-800) 3.28 Overhead Resistance (730-750) 1.15 OEX Close 719.78 Underlying Support (700-720) 5.70 Underlying Support (650-695) 8.11 What the Pinnacle Index is telling us: Based on the most recent sentiment, support for the OEX is building dramatically, and direct overhead is light, which would indicate that we may be in for a slight rally this week. Put/Call Ratio Friday Strike/Contracts (2/25) CBOE Total P/C Ratio .41 CBOE Equity P/C Ratio .36 OEX P/C Ratio 1.19 Peak Open Interest (OEX) Friday Strike/Contracts (2/25) Puts 700 / 7,704 Calls 800 / 7,965 Put/Call Ratio 0.97 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 25, 2000 28.88 ************* COMING EVENTS ************* For the week of February 28th, 2000 Monday Personal Income Jan Forecast: 0.7% Previous: 0.3% PCE Jan Forecast: 0.4% Previous: 0.8% Tuesday Chicago PMI Feb Forecast: 55.6% Previous: 55.6% Consumer Confidence Feb Forecast: 143.5% Previous: 144.7% Wednesday NAPM Index Feb Forecast: 56.3% Previous: 56.3% Construction Spending Jan Forecast: 0.3% Previous: 2.0% Auto Sales Feb Forecast: 7.2M Previous: 7.3M Truck Sales Feb Forecast: 7.6M Previous: 7.6M Thursday Initial Claims 02/26 Forecast: 280K Previous: 278K New Home Sales Jan Forecast: 880K Previous: 900K Leading Indicators Jan Forecast: 0.2% Previous: 0.4% Friday Nonfarm Payrolls Feb Forecast: 235K Previous: 387K Unemployment Rate Feb Forecast: 4.0% Previous: 4.0% Hourly Earnings Feb Forecast: 0.3% Previous: 0.4% Average Workweek Feb Forecast: 34.6 Previous: 34.6 Factory Orders Jan Forecast: -0.6% Previous: 3.3% NAPM Services Feb Forecast: -- Previous: 52.2% Michigan Sentiment Feb Forecast: 111.2 Previous: 111.2 Week of 3/06 3/7 Productivity-Rev. - Q4 3/7 Consumer Credit - Jan 3/8 Fed Beige Book 3/9 Initial Claims - 03/04 3/9 Wholesale Inventories - Jan **************************Advertisement************************* Have you got an idea for a financial website? 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The Option Investor Newsletter 2-27-2000 Sunday 2 of 5 ************* WOMAN'S WORLD ************* Don't Give Up On Treasuries By: Mary Redmond IFCI seemed like a breath of fresh spring air after a miserable winter. Even the carnage of Dow 10K didn't ruin the nice run up from 25 last week. I bought it last Thursday at 28, and I couldn't bear to sell it when I should have at 34, so I held it all this week until Thursday and sold at 32.5. When it started moving back up again on Friday I couldn't resist buying back in at 35.5. I think this one could double or triple this year, but there might be an even better entry point next week after earnings. This stock has just hit the one billion market cap level, which is the level at which institutions start taking notice, and you know what happens then. When CMGI dropped below key support of 110 on Tuesday I figured I could sell at a loss and buy back cheaper or buy puts and make a quick profit on the way down .I opted for the latter. I sold my puts when CMGI hit 103, when the Dow was 10100 and the VIX was 30 I doubt the stock would drop below 100 unless there was a severe downturn in tech stocks. The puts helped to make up for the loss on the stock, and I didn't feel so bad about getting into the stock too early for March earnings. It recuperated on Wednesday and reached a high of over 120, possibly on the news about Chemdex and the AOL upgrade. The volume has increased over the last few days perhaps because investors are expecting solid earnings in March. Qwest seems to be stuck in a rut near 47.50 after the nice run up it had from 40 the last couple of weeks. I think the 2002 Leaps are still a bargain at 16.5 because I think Qwest could easily hit 70 this year. How many two year leaps on high speed Internet access companies do you see trading under 30 or 40? Not many. Remember I wrote last week that over 35% of the cash that went into mutual funds the prior week went into European funds? Is this one of the reasons that Deutsche telecom, France telecom, British telecom, Ericsson and Nokia rallied early this week? European funds are considered safer than Asian and Latin American funds, and there are fewer European growth stocks to buy. After the Humphrey Hawkins testimony on Wednesday I bought Ericy March 90 calls when the stock was 91 and sold them the next day when the stock hit 93. I was annoyed on Friday when the stock hit 97, but I don't feel completely comfortable hanging on to short term options when the Dow can't stage a decent rally. I know the future is tech stocks, but mankind can't progress on technology alone. We need financials, pharmaceuticals, industrials, and cyclicals to rally as well. Anyone think that the folks at Dow Jones may be feeling a little left out of the party these days? Do you realize if they hadn't included Intel, Microsoft, HD and SBC in the Dow and kept GT and the others the Dow could have been well below its current level? My guess is that the Dow Jones average may be reshuffled again this year. According to AMG data services, for the week ending Feb 23, inflows into mutual funds totaled 3.8 billion, less than half of the flows in the prior two weeks. Over 2 billion went into tech funds, approximately 1.6 billion went into health care and biotech. Large cap equity index funds showed outflows of 150 million. I guess very few people want to buy S & P and Dow index funds anymore. Year to date fund inflows total 65.62 billion, with over 25% going into technology funds. You would have had to have been in a cave the last couple of weeks to have not heard the news about the Treasury's buyback program. We have the luxury of a budge surplus for the first time in decades as the baby boomers and their successful companies have been flooding the coffers of the US Treasury with cash. The Treasury dept has initiated a program of buying back previously issued government bonds. It was first announced that the 30 year bond would be retired, and after the bond market went haywire the Treasury Secretary stated that the debt would be retired all along the entirety of the yield curve. This has been one of the factors which has pushed down the yield on the 30 year bond from 6.75 several weeks ago to under 6.10 this week. A number of questions have been raised about this topic and its implications on the financial markets, and particularly the issue as to whether this negates the effect of the Federal Reserve's interest rate increases. In fact, this question was raised at the Humphrey Hawkins testimony. The answer given by Chairman Greenspan was that the Treasury buyback has not negated the interest rate hikes of the last several months. However, falling yields on the 30 year Treasury can potentially complicate monetary policy as short term rates may need to rise by even more to cool potential inflationary pressures. The US is not alone in its budget surplus. In fact, a number of wealthy industrial countries are enjoying a budget surplus., including Norway, Ireland, Denmark and Sweden. The real issue for the Fed and the Treasury is what should happen if the U.S. government were actually to become free of the necessity of raising money through issuing debt instruments. This scenario is not likely. In fact, it is impossible to predict how much the cost of future medicare needs are going to be because you can't predict what new medical technology will be invented in the future, and how much as yet undiscovered cures will cost. It is estimated that the US medicare population will double from 40 million to 80 million over the next ten years. In addition, it is difficult to precisely predict future needs of the education, military, and other government departments. In addition, the thirty year US Treasury bond serves an essential function in the U.S financial markets in addition to foreign financial markets. The 30 year Treasury rate is used as a benchmark in pricing corporate, state and municipal bonds as well as influencing the price of derivatives like options and also foreign currency prices. If the government bond market dried up corporates and municipals would be more difficult to price and investors would demand higher rates. How can you price a 30 year municipal bond when there is no 30 year Treasury bond? Foreign countries' bonds are also priced using the US 30 year Treasury as a benchmark. The options market could potentially be thrown into a turmoil without a benchmark for a short-term risk free rate. This is because call and put ratios are priced on a conversion ratio, which is theoretically a risk free profit. A conversion means buying stock and a put, and writing a covered call. Whenever this yields more profit than the short term rate of borrowing money arbitrageurs will come in and execute. But the short- term rate is based on the long term rate. Without risk free long term rates short term rates could rise, adversely affecting option prices. Many pension funds as well as the Social Security trust fund hold the majority of their assets in long term bonds. This is essential for the survival of the social security fund. It is too risky to place any corporate bond into the social security fund, because corporations cannot guarantee payments or repayment of principal. Investing social security money in the market has the potential to cause dangerous instability in the market and depletion of the fund. Many foreign countries require that a percentage of their pension money is invested in US government securities, and many foreign exchange reserves are held in US Treasury bonds. We may not realize on a day to day basis the extent to which the US Treasury bond influences our trading, but it maintains an essential function in the global financial markets. *************** TRADERS CORNER *************** Good Trades and waiting for the Dotted Duck By: Harrison Frolick Whew! What a week, the Dow is biting the dust and certain NASDAQ stocks are taking off. Although this should not be that big of a revelation to OIN readers. You have choice between a company that is growing 15% per year, or one that is growing 50% or even 100% a year. Pretty simple stuff! Not much deduction really, although the talking heads will have you think otherwise. Actually ,I am happy to see the Dow tanking. It might just give the powers that be a minute to pause before they try to adjust the markets again. Doubtful, but hey, everyone can dream. The only thing that I really see on the horizon that could hurt the economy is oil prices. Why in heavens name we do not bring one tenth of the of time, money and effort that our government has brought to bear on anti-trust suits over the last few years against our very own US companies i.e. Microsoft and IBM instead of the absolutely proven injurious monopoly of the oil cartel is beyond me. But, I am not going there today. What I wanted to pass along for perusal is MCRL - Micrel Inc. They manufacture high bandwidth analog devices. Keep it on the radar. Can everyone say ETEK at a premium? The premium for ETEK appears to be firmly in place at the moment compared to JDSU. JDSU was around $256 and ETEK at $259. There is still about $20 sloshing around to picked up from this merger. For those of you that picked up the FNY DF the April 230 Calls that I mentioned previously, you are now up well over 100%. I know that I have made this observation before but, I think that is worth re-telling as it keeps popping up in all of my business transactions these days, not just trading. When you get into a trade correctly, you never feel uneasy about it because, it does exactly what it is supposed to do without any psychic effort on your part. When you do your homework and get the charting right, these trades are profitable from day one. It is then only a matter of when to pull your profits out. This goes for most business transactions as well. For me at least, my most profitable deals are effortless and I do not expend hardly any effort on them. While the bad deals and trades seem to suck an extraordinary energy out of you. What happens is that by not being patient in getting into the trade, you spend far more time on it afterward than it would have taken to do it right before you go into it. If you really did your homework, often as not you probably would not be in the trade in the first place. Now a lesson I learned about patience from duck hunting. Rubber ones! Have you ever been to a fair or carnival where you see all of those little yellow rubber ducks going around in circle in a big tank filled with water? If you have not, here is the scoop. Certain ducks have dots on them and they hand you a 2 foot long stick with magnet on the end of about 2 feet of string. The ducks have magnets on them too. You are supposed to catch the duck using your magnet. Sounds easy in principle but, let me tell you, there are a lot of those ducks in there and they whiz by oh so fast. In my years of rubber duck observations I would say that 1 in less than 500 participants catch the fiercely coveted dotted duck and then hardly ever on the first try! Well, the first time that I was exposed to this phenomena was many moons ago on my first date with a very lovely girl that I desperately wanted to impress. She just happened to mention that she thought that a certain fuzzy toy was pretty darn cute, didn't I think? I do so like intelligent women! My male hunter/provider instinct kicked into overdrive right then and there at the duck tank. Watch out spotted duck, you are mine. So I ponied up the 50 cents for 5 tries (hey, this was several decades ago, I figure that 50 cents back then was like $3 bucks now). Well, 5 minutes, $3 bucks, and 30 tries later, no spotted duck! I only had another $2 bucks left if I still wanted to take her to the movies and get popcorn and pop. OK I said to myself, you can do this! I knew that it could be done as I had just witnessed a little 3-year old girl walk over and snag one on here first try (beginners luck). After observing for a few minutes and feeling my dates watchful amused gaze, I had a plan! Rather than chasing the spotted duck, I would wait for him to come to me. So, I so carefully used both hands to steady my dangling magnet and braced myself against the railing (I highly suggest that you use this stance) . And waited, 30 seconds and 200 ducks passed, 1 minute 400 ducks, I know this is going to work! 2 minutes and 800 ducks later the dotted duck passed directly under my magnet and whamo I had him. $1.50 later my date had 4 of the cute fuzzy critters and I could tell that she was very impressed. Right then and there I learned a lesson that I still carry with me. It's this, by having a plan and being patient, the actual execution of the deed becomes easy and fun! So, wait for the charts to give you a screaming buy signal, and if you like a stock, follow it and look for that signal to get in. They always give you one sooner or later and then jump on it. Then, this game becomes a lot easier and you will find that it will become very profitable too. You will wonder how you bungled along before, I know I do. It can be truly amazing. I suggest that you chart the picks that OIN has given you today and go make some money. Then you too can go after the dotted duck yourself! Remember, wait for the duck! Happy Trading! ******************* TRADING CLUB UPDATE ******************* Sunday, February 27, 2000 THE OPTION INVESTOR TRADING CLUBS CAN BE FOUND ALL OVER THE WORLD!!! Visit the trading club message boards and see what others have to say: http://boards.OptionInvestor.com/tradersclubs/ UPDATE FROM THE UNITED KINGDOM ******************************* The UK Options Club now has 30 interested UK traders on the email list. We held our second meeting on Sunday 20th February in sunny Swindon. One of the members of the group has offices that are being converted into a dedicated 'Trading room' for 4-6 active traders. We will be able to use these facilities for future meetings and, as seems to be the tradition with OIN clubs, we'll meet on the Sunday following Options expiration Friday. The vision of those who were able to attend the meeting was definitely toward full time trading. Who wants to work for some grumpy old boss!!! However, the focus was strongly towards doing this in a methodical and logical way. Most of those present, presented some of their own methods and ideas they felt would add to the knowledge of the group and generate discussion. The cry we use, to keep our feet on the ground is "we're still babies at this!" Meaning that we're at a very early learning stage and find out as much as possible, always checking out sources of information to make sure they're valid. Two items unique to our situation are understanding our UK tax liabilities as they relate to holding and trading and account in America, and understanding the whole economic/political cycles in the USA. We trade US Options because of the trading facilities and availability of information on US companies is far better, and cheaper than for the UK. Many of us started mid 1999 so we haven't been through a full year of Greenspan even! However, the Option Investor Newsletter is invaluable in explaining which upcoming economic/political events we should be aware of. We had some very useful presentations on dealing with UK taxes from trading, basic technical analysis focusing on 50 & 200 dma's and support/resistance levels, and discussions on trading strategies. There is massive interest and momentum generated within our group, so we are going to meet monthly from now on - probably meeting in a dedicated trading room.... how cool is that! Happy trading all....regards, Charles Saldanha - Contact Support If you would be interested in meeting regularly with other investors, drop us a line at Visit@OptionInvestor.com or Contact Support LAST WEEKS CHANGE FOR THIS WEEKS PICKS: *************************************** Daily Results Index Last Week Dow 9862.12 -357.40 Nasdaq 4590.50 178.76 $OEX 719.78 -8.74 $SPX 1333.36 -12.73 $RUT 556.74 11.06 $TRAN 2351.26 -79.54 $VIX 28.88 0.43 Calls Week QLGC 145.25 34.25 QLGC still looking technically strong VERT 225.75 27.00 Could be poised for strong open Monday INSP 225.31 25.06 Second stock split of the new year SEBL 138.38 23.81 SEBL's pattern remains strong INKT 145.13 22.56 Constant flow of news pumps up stock LHSP 108.22 18.84 LHSP continues making giant strides EMLX 157.13 17.13 Emulex has formed classic channel PHCM 153.00 15.38 PHCM offers us a nice performance NEON 85.56 11.94 Does more than just glow brightly COMS 80.69 11.00 COMS could be ready to break loose! CMGI 117.50 9.13 Are you interested in an early entry? ERICY 97.63 8.94 ERICY has it's eye on the $100 level AFCI 57.44 8.69 New, buyers nibbling on AFCI shares ENMD 76.13 8.63 New 52-week high every day last week CHKP 205.63 7.44 New, breaks through $200 with volume ATML 43.19 5.19 New, hot sector, hot stock NSM 68.00 4.50 May be offering a good entry point IFCI 36.00 4.00 Dropped, earnings Tuesday morning ANAD 146.88 0.63 ANAD splits 3:2 on February 29th PCMS 22.63 -0.44 Several factors influencing movement ESPI 12.75 -1.19 Dropped, putting ESPI out to pasture Q 46.69 -2.75 Dropped, simply not going our way GLW 187.88 -5.50 Is there a consolidation at hand? Puts MCOM 76.38 -13.38 Friday was a great day for our play JNJ 70.50 -6.25 JNJ just can't help but lose footing KMG 40.75 -4.69 Has fallen and can't seem to get up RHAT 68.38 -3.13 A thank you to Linux for more downside LLY 56.69 -1.81 New, shares of LLY not feeling well PGR 54.56 -1.38 Lack of attention could push PGR down FD 33.13 -1.25 FD weakness seems likely to continue STOCKS ADDED TO THE PICK LIST ***************************** Calls AFCI - Advanced Fibre Communications ATML - Atmel Corporation CHKP - Check Point Software Puts LLY - Eli Lilly *************************** PICKS WE DROPPED THIS WEEK *************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ESPI $12.75 (-1.19) We're putting ESPI out to pasture this weekend. In the simplest terms, it's putting us all to sleep. On Thursday the company reported great news that it has signed a commitment letter with Honeywell International for $50 mln in equity funding and then on Friday, Ladenburg Thalmann & Co reiterated at Strong Buy and issued a $17 price target. In defiance of these news events and the upcoming earnings report, ESPI is still stuck between its 10-dma ($12.09) and 5-dma ($13.09). It's quite possible ESPI could come back to life after the company's press release announcing a conclusive earnings' date, but we're exiting this play for more productive opportunities. IFCI $36.00 (+4.00) How was that for a grand finale? Since we are bidding farewell to IFCI, let us take a look back to see just how far we have come. When we first initiated this call play on February 17th, IFCI was trading at a mere $22. We recommended the MAR-20 calls, which were trading at $4.38. Here we are, just over one week later. IFCI has traded as high as $38.25 and those MAR-20 contracts made it all the way up to $18 during Friday's session. Not bad, if we do say so ourselves. Unfortunately, it is time for us to bid this stellar performer farewell, as IFCI is set to announce earnings on Tuesday before the open. It is important that you close out all open positions before Monday's close to avoid falling victim to a post-earnings depression. We hope you enjoyed the ride. Q $46.69 (-2.75) The favorable views from analysts and the potentially bright out look for the company really haven't changed. Since being added last weekend, Qwest shares have spent most of the time drifting lower. The last time we checked it is very difficult to make a profit buying calls when your stock moves lower. Any minor buying spurts this week were met by traders wanting to sell. After beginning a bounce late in the day Thursday, Qwest popped up to $48 at the open Friday morning. Sellers entered the arena again, pushing Qwest down for the balance of the session. On the bright side, $46.50 held as the low of the day. Unfortunately Qwest finished the day near its low, which doesn't paint a pretty picture for Monday. It's possible Qwest is going to bounce from here, or could be forming a base at the current levels. For now, the fact is, Qwest simply in not going our way, so we will move on. PUTS No dropped puts. STOCK SPLIT CANDIDATES *********************** PHCM - Phone.com GLW - Corning Inc. SEBL - Siebel Systems CHKP - CheckPoint Software EMLX - Emulex QLGC - QLogic Corporation Split candidates that are not current plays CHINA - China.com EMC - EMC Corporation CMVT - Comverse Technology TERN - Terayon Comm STOCKS WITH UPCOMING SPLITS **************************** We don't list all splits available, only those we feel may have play possibilities. Symbol - Stock Splits/Date MGG - MGM Grand 2:1 02-25-00 ex-date 02-28 SEPR - Sepracor 2:1 02-25-00 ex-date 02-28 GSPN - Globespan 3:1 02-25-00 ex-date 02-28 SILI - Siliconix 3:1 02-28-00 ex-date 02-29 NSOL - Network Solution 2:1 02-28-00 ex-date 02-29 DS - Dallas Semi 2:1 02-28-00 ex-date 02-29 SDLI - SDL Inc 2:1 02-29-00 ex-date 03-01 GTLL - Global Tech 3:2 02-29-00 ex-date 03-01 TMPW - TMP Worldwide 2:1 02-29-00 ex-date 03-01 WEBT - WebTrends 2:1 02-29-00 ex-date 03-01 ANAD - Anadigics 3:2 02-29-00 ex-date 03-01 MMPT - Modem Media 2:1 03-01-00 ex-date 03-02 ONXS - Onyx Soft 2:1 03-01-00 ex-date 03-02 JMED - Jones Pharma 3:2 03-01-00 ex-date 03-02 DSPG - DSP Group 2:1 03-01-00 ex-date 03-02 KILN - Kirlin Holding 2:1 03-01-00 ex-date 03-02 WCII - Winstar 3:2 03-02-00 ex-date 03-03 VRTS - Veritas 3:2 03-03-00 ex-date 03-04 XLA - Xcelera 2:1 03-03-00 ex-date 03-04 SLR - Solectron 2:1 03-08-00 ex-date 03-09 BFRE - Be Free 2:1 03-08-00 ex-date 03-09 JDSU - JDS Uniphase 2:1 03-10-00 ex-date 03-13 ASDV - Aspect Dev 2:1 03-10-00 ex-date 03-13 SDLI - SDL Inc 2:1 03-13-00 ex-date 03-14 BVSN - Broadvision 3:1 03-13-00 ex-date 03-14 ADIC - Advanced Digital 2:1 03-13-00 ex-date 03-14 ADVS - Advent Software 2:1 03-13-00 ex-date 03-14 ALLR - Allaire Corp 2:1 03-14-00 ex-date 03-15 BRCD - Brocade 2:1 03-14-00 ex-date 03-15 AJG - Arthur Gallagher 2:1 03-15-00 ex-date 03-16 OTTR - Otter Tail Pwr 2:1 03-15-00 ex-date 03-16 WLSN - Wilson Leather 3:2 03-15-00 ex-date 03-16 AMAT - Applied Materials2:1 03-15-00 ex-date 03-16 ADI - Analog Devices 2:1 03-15-00 ex-date 03-16 AGIL - Agile Software 2:1 03-16-00 ex-date 03-17 LRCX - Lam Research 3:1 03-16-00 ex-date 03-17 MVSN - Macrovision 2:1 03-17-00 ex-date 03-20 CPTL - CTC Comm 3:2 03-17-00 ex-date 03-20 TLGD - Tollgrade Comm 2:1 03-20-00 ex-date 03-21 IMNX - Immunex Corp 3:1 03-20-00 ex-date 03-21 EVRC - Evercel Inc 2:1 03-21-00 ex-date 03-22 PUMA - Puma Tech Inc 2:1 03-22-00 ex-date 03-23 SANM - Sanmina 2:1 03-22-00 ex-date 03-23 CSCO - Cisco 2:1 03-22-00 ex-date 03-23 WON - Westwood One 2:1 03-22-00 ex-date 03-23 NTAP - Network Appliance2:1 03-22-00 ex-date 03-23 NSOL - Network Solution 2:1 03-23-00 ex-date 03-24 TEVA - Teva Pharma 2:1 03-24-00 ex-date 03-27 PCLE - Pinnacle Systems 2:1 03-24-00 ex-date 03-27 HAUP - Hauppauge Digitl 2:1 03-24-00 ex-date 03-27 JWG - JWGenesis 3:2 03-24-00 ex-date 03-27 KCP - Kenneth Cole 3:2 03-27-00 ex-date 03-28 LLTC - Linear Tech 2:1 03-27-00 ex-date 03-28 VERT - VerticalNet 2:1 03-31-00 ex-date 04-03 RADS - Radiant Systems 3:2 03-31-00 ex-date 04-03 RMD - ResMed Inc 2:1 03-31-00 ex-date 04-03 SBL - Symbol Tech 3:2 04-05-00 ex-date 04-06 HDI - Harley Davidson 2:1 04-07-00 ex-date 04-10 AHAA - Alpha Industries 2:1 04-19-00 ex=date 04-20 ELNT - Elantec Semi 2:1 04-21-00 ex-date 04-24 GE - General Elec 3:1 04-26-00 shareholder mtg CYSV - Cysive Inc 2:1 05-08-00 ex-date 05-09 AXP - American Exprs 3:1 05-10-00 ex-date 05-11 SNE - Sony Corp 2:1 05-19-00 ex-date 05-22 CXR - Cox Radio 3:1 05-19-00 ex-date 05-22 MEDI - Medimmune 3:1 06-02-00 ex-date 06-05 NXTL - Nextel Comm 2:1 06-06-00 ex-date 06-07 AA - Alcoa 2:1 06-09-00 ex-date 06-12 NXLK - Nextlink 2:1 06-15-00 ex-date 06-16 For a complete list of all the coming splits check out the "split calendar" on the side of the online edition newsletter page. ******************** THE PLAYS OF THE DAY ******************** With all the great plays each week we can never decide on just one so take your pick. Call plays of the day: ********************** CHKP - Check Point Software $205.63 (+7.44) See details in sector list Chart = /charts.asp?symbol=CHKP **** VERT - VerticalNet, Inc. $225.75 (+27.00) See details in sector list Chart = /charts.asp?symbol=VERT **** ANAD - Anadigics $146.88 (+0.63)(+22.25)(+23.97) See details in sector list Chart = /charts.asp?symbol=ANAD ************* DEFINITIONS ************* SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. TP/P= True premium or Time premium RRR = Risk/Reward/Ratio ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume MTD = Move to double - amount stock must move to double option price in one week. ONE WEEK MOVE ONLY ! Numbers within ( ) are the amount of change for the week. Numbers within ( ) may be designated with PxW, like P3W, prior 3 weeks The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. *********** CALLS PLAYS *********** Hardware *********** COMS - 3Com Corp. $80.69 (+11.00)(+7.38) 3com is a broad-based supplier of local area network(LAN) and wide area network(WAN) systems. They are the world's second largest maker of computer networking products. COMS personal connectivity unit focuses on modems and cards for connecting to the Internet and other networks. They also make network infrastructure gear and network management software. In an attempt to refocus on networking, 3com is spinning off its Palm subsidiary, which makes the Palm electronic organizer and licenses Palm technology. Our play in COMS could be ready to break loose. Palm, a subsidiary of COMS, is scheduled for its IPO this week. The widely anticipated IPO of Palm is expected to price 23 million shares, with a price range of $14-$16. Investors that don't have the luxury of being able to participate directly in the IPO, have another advantage. They can buy shares of COM, and be able to have their cake and eat it to, so to speak. Traders that buy 3Com stock will also be eligible to own shares of Palm. The company will initially retain a 93% stake in Palm, though it plans to distribute its Palm shares to 3Com investors. In checking with the investor relations department at COMS, we only were able to get that the IPO, was expected to price during the week of Feb 28th. COMS held up pretty well for most of the day Friday. After dropping to a support level at $80, COMS exploded to a new high at $84.25 only to succumb to the pressures seen in the broader markets late in the day. Although the volume was about average Tuesday, investors showed their approval of the upcoming IPO, bidding shares of COMS higher on nearly twice its ADV for the balance of the week. With the long-awaited IPO of Palm, finally in sight, we expect shares of COMS to continue its recent momentum. A look at the technical picture shows $80 and $76 as support levels for COMS, with the 5-dma sitting at $76.38. Further proof of Palm's popularity in the market place, was evidenced this week at the CeBIT 2000 conference in Germany. Greg Rhine, vice president of world wide sales for Palm, said 230 large corporations in the U.S. have opted for Palm-based systems, and over 30 corporate users are exclusively based on Palm technology. Palm already claims a 70 percent share of its market worldwide. BUY CALL MAR-70 THQ-CO OI=8508 at $11.88 SL= 9.25 BUY CALL MAR-75*THQ-CP OI=6929 at $ 9.50 SL= 7.25 BUY CALL MAR-80 THQ-CQ OI=9079 at $ 7.50 SL= 5.75 BUY CALL APR-75 THQ-DO OI=3133 at $14.88 SL=11.50 BUY CALL APR-80 THQ-DP OI=1330 at $12.50 SL= 9.75 SELL PUT MAR-70 THQ-ON OI=2762 at $ 4.25 SL= 6.00 (See risks of selling puts in play legend) Picked on Feb 20th at $69.69 PE = 59 Change since picked +11.00 52-week high=$84.25 Analysts Ratings 5-8-18-0-0 52-week low =$20.00 Last earnings 12/99 est= 0.34 actual= 0.37 Next earnings 03-21 est= 0.25 versus=-0.24 Average daily volume = 9.38 mln /charts/charts.asp?symbol=COMS ************* SEMICONDUCTOR ************* NSM - National Semiconductor $68.00 (+4.50) 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. After a setting new a high Thursday, NSM fell prey to profit- taking Friday. NSM did give back a bit more than we would like to have seen, but may also may be setting up to give us a very good entry point for our play. NSM gapped down Friday at the open and drifted lower for most of the session dropping to an intraday support level of $68 in the last fifteen minutes of the session. Technically there are minor support levels down at $66 and $64, but we believe this may be a case of nothing more than profit taking from this week's strong advance. After adding over 16% in four days, NSM was due for some profit-taking. Volume Friday would support that view, as only 1.8 million shares changed hands. Other programmable device makers suffered through a tough session Friday as well, with ALTR, AMAT and MOT all giving back recent gains. At this point, we believe the decline was due to the confusion in the broader markets and the lack of buyers willing to step in, not a negative view of NSM. Our original opinion of NSM and the near term prospects have not changed. Analysts have been positive on NSM as well. Last Friday, analysts at Gerard Klauer reiterated their Buy rating on the semiconductor company. Our immediate interest in NSM is for an earnings run. NSM is due to report earnings March 9th, and are on track to come in well ahead of last year. We would wait and see the mood of traders, when they return to work Monday, before jumping into a new play on NSM, but we do we do believe NSM will regain its footing and move higher into earnings. Thursday National Semiconductor announced its entry into the GSM wireless telephone market with an integrated radio transceiver for GSM cellular telephony at the CeBit 2000 conference in Germany. They also disclosed their strategy for future product development of wireless applications ranging from cellular phones to other portable electronics such as mobile computers, personal digital assistants, portable printers and faxes. BUY CALL MAR-60 NSM-CL OI=3125 at $11.13 SL=8.75 BUY CALL MAR-65 NSM-CM OI=1470 at $ 7.63 SL=5.75 BUY CALL MAR-70 NSM-CN OI=1858 at $ 5.25 SL=3.50 BUY CALL MAR-75 NSM-CO OI=1785 at $ 3.50 SL=1.75 BUY CALL APR-70*NSM-DN OI= 149 at $ 8.50 SL=6.50 SELL PUT MAR-60 NSM-OL OI= 685 at $ 2.19 SL=3.75 (See risks of selling puts in play legend) Picked on Feb 24th at $72.72 PE = N/A Change since picked -4.72 52-week high=$74.00 Analysts Ratings 9-9-2-0-0 52-week low =$ 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 = 2.48 mln /charts/charts.asp?symbol=NSM **** QLGC - QLogic Corporation $145.25 (+34.25)(+10.97) Somebody has to make the equipment that lets your computer talk to all its peripheral equipment, and QLGC does it well. A leading designer and supplier of semiconductor and board-level input/output (I/O) management products, QLGC has been providing SCSI-based connectivity solutions to this market sector for over 12 years. QLGC's I/O products provide a high performance interface between computer systems and their attached data storage peripherals, such as hard disk and tape drives, removable disk drives and RAID (redundant array of independent disks) subsystems. Building a better mousetrap has certainly worked for QLGC. The company's leading-edge I/O products are in high demand and the result has been gratifying. Defying gravity for the most of the week, QLGC took full advantage of the surge in the NASDAQ, posting an almost $20 gain on Wednesday. Volume was heavy all week, finally declining to about 50% over the ADV as the stock began to consolidate on Friday. Demand for its products coupled with compatibility with the newest technology (see news below) is a formidable combination and investors have been taking notice. Although still technically strong, the stock is now almost $15 above its 5-dma ($130.50), and looks a bit top-heavy. We would expect some consolidation of its recent gains before heading higher. Support is forming near $145, followed by $140, and a bounce at either of these levels would make for an attractive entry point. On a strong momentum play such as QLGC, strong volume will be the key to a continued move upwards. If the bulls remain in control next week, consider jumping on board if the price breaks through resistance at $155. Extending their penetration into the Storage Area Network (SAN) market, QLGC announced on Friday that its ISP2100A processor is now shipping in the new StorageTek 9840 Fibre Channel Tape Drive, the first native Fibre Channel tape drive in the industry. The ISP2100A is a fully autonomous device, capable of managing multiple I/O operations and associated data transfers from start to finish withou host intervention. 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. BUY CALL MAR-145*QOV-CI OI= 17 at $13.63 SL=11.00 BUY CALL MAR-150 QOV-CJ OI= 0 at $11.38 SL= 9.00 Fri's vol=80 BUY CALL MAR-155 QOV-CK OI= 0 at $ 9.38 SL= 7.00 Fri's vol=38 BUY CALL APR-150 QOV-DJ OI= 0 at $19.75 SL=15.50 Wait for OI BUY CALL APR-155 QOV-DK OI= 0 at $17.63 SL=13.75 Wait for OI SELL PUT MAR-130 QOV-OF OI= 48 at $ 5.63 SL= 7.50 (See risks of selling puts in play legend) Picked on Feb 22nd at $115.50 P/E = 229 Change since picked +29.75 52-week high=$154.94 Analysts Ratings 3-3-0-0-0 52-week low =$ 11.63 Last earnings 01/00 est= 0.36 actual= 0.40 Next earnings 04-19 est= 0.20 versus= 0.11 Average Daily Volume = 845 K /charts/charts.asp?symbol=QLGC **** ATML - Atmel Corporation $43.19 (+5.19) Founded in 1984, Atmel Corporation is headquartered in San Jose, California with manufacturing facilities in Colorado Springs, Colorado; Nantes and Rousset, France and Heilbronn, Germany. Atmel designs, manufactures and markets on a worldwide basis advanced logic, mixed-signal, non-volatile memory, and RF semiconductors. Atmel is also a leading provider of system level integration semiconductor solutions using advanced CMOS, BiCMOS, BiPolar and SiGe process technologies. ATML is taking the bull by its horns and riding to a higher ground. Shares of ATML hit a new 52-week high on Friday. Trading in uncharted territory, shares are at the highest they have ever traded. Trading volume on Friday showed that investors were ready to jump aboard once it broke out over resistance at $41.63. ATML had almost 3 times their average volume. Looking at the sector, it continues to stay hot with the $SOX hitting a new high on Thursday before succumbing to market weakness. Semiconductors are in favor with new word this week that demand may be exceeding already high expectations. Financial analysts are predicting ATML will see higher earnings this year and next. They also say ATML will grow at a higher rate than the markets. Great news for those already aboard and a good enticer for those thinking about joining. Support at $41could be tested in market weakness, but it is more likely the Semiconductor stocks will move higher before they go lower. Deciding when to jump on will be up to each investor and their risk level. In the news, ATML is strengthening their position as a supplier of single-chip solutions. Creating a partnership with Aplio to provide a total system solution enabling manufacturers to launch Internet Phones, E-mail and MP3 Appliances at a low cost and short time to market. BUY CALL MAR-35 AQT-CG OI=8315 at $9.13 SL=6.75 BUY CALL MAR-40 AQT-CH OI=2646 at $5.25 SL=3.25 BUY CALL MAR-45*AQT-CI OI= 980 at $2.44 SL=1.25 BUY CALL APR-45 AQT-DI OI= 0 at $5.13 SL=3.25 Fri's vol=193 Picked on Feb 25th at $43.19 P/E= 108 Change since picked +0.00 52-week high=$41.63 Analysts Ratings 7-5-2-0-0 52-week low =$ 7.50 Last earnings 01/00 est= 0.13 actual= 0.16 Next earnings 04-24 est= 0.17 versus= N/A Average Daily Volume = 3.88 mln /charts/charts.asp?symbol=ATML ******** BIO-TECH ******** ENMD - EntreMed Inc. $76.13 (+8.63)(+18.94) EntreMed, a leader in the field of angiogenesis research and development, develops drugs that inhibit the abnormal growth of new blood vessels associated with cancer, rheumatoid arthritis, macular degeneration, and other diseases. New blood vessel growth is detrimental in these diseases because it nourishes the disease causing cells. ENMD has developed two compounds, Angiostatin and Endostatin, which have successfully blocked blood vessel growth in tumors. The company is working on a drug delivery system based on a blood-cell permeation device and has received permission to make the controversial drug Thalidomide, used for treating AIDS-related cancer. Millions of Americans are praying for better drugs to treat, inhibit, and even prevent cancer. ENMD is trying hard to answer their prayers and is providing new hope. With a virtual patent-based lock up on all forms of the angiostatin molecule, (see news below), ENMD could be just getting warmed up as a serious player in the red hot Biotech sector. Moving up steadily, the stock hit a new-52-week high every day last week. Using the 5-dma (currently at $73.13) as support, ENMD is benefiting from its own product and patent announcements as well as the strength in the NASDAQ and the Biotech sector. Although new highs were posted all week, the declining volume gives us cause for concern. The week opened with a strong move to the upside on double the ADV, but volume had dropped off to only 75% of the ADV by Friday. Investors may be just taking a breather, but it looks like ENMD may need to consolidate its gains before heading higher. Although the play is still technically strong, any momentum play will stagnate in the absence of strong buying volume. Below the 5-dma, support is forming at $72, followed by $70. With resistance moving up daily, the number to beat is now $78, and conservative investors will want to wait for a convincing breakout before opening new positions. Dips to support are buyable, but only if the buyers come back to life and drive volume north of the daily average. 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. BUY CALL MAR-75*QMA-CO OI=92 at $11.25 SL= 9.00 BUY CALL MAR-80 QMA-CP OI= 0 at $ 9.13 SL= 6.75 Wait for OI! BUY CALL MAR-85 QMA-CQ OI= 0 at $ 7.00 SL= 5.25 Wait for OI! BUY CALL APR-80 QMA-DP OI= 3 at $18.63 SL=14.50 low OI BUY CALL APR-85 QMA-DQ OI=15 at $16.75 SL=13.00 SELL PUT MAR-65 QMA-OM OI=55 at $ 4.75 SL= 6.50 (See risks of selling puts in play legend) Picked on Feb 20th at $67.50 P/E = N/A Change since picked +8.63 52-week high=$78.25 Analysts Ratings 0-1-0-0-0 52-week low =$17.75 Last earnings 11/99 est=-0.81 actual=-0.48 Next earnings 03-22 est=-0.44 versus=-0.35 Average Daily Volume = 438 K /charts/charts.asp?symbol=ENMD ******************************** CALLS CONTINUED IN SECTION THREE ******************************** **************************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. Email contact information to Contact Support **************************************************************** **************************** SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter 2-27-2000 Sunday 3 of 5 *************** CALLS CONTINUED *************** Internet ******** NEON - New Era of Networks $85.56 (+11.94)(+16.88) Delivering e-business and enterprise application integration solutions, NEON is the leader in providing packaged solutions that successfully integrate legacy applications, client/server and Web-based applications. Proving that the old and new can successfully coexist, NEON counts large banks and financial institutions like Chase Manhattan and Merrill Lynch among the long list of companies that use its proprietary software technology to integrate business information on incompatible databases and operating systems. Through partnerships, internal growth, and acquisitions, NEON serves some 800 clients worldwide in the healthcare, insurance, telecommunications, travel and manufacturing industries. Glowing brightly is one thing, but on Wednesday it looked like NEON might burn out as the stock surged $20, (that's 27% for those of you keeping score) on just over double the average daily volume. It was therefore no surprise to see NEON give up some of those gains and consolidate for the remainder of the week. The drop in volume was encouraging, especially on Friday, with only about 25% of the ADV. The lows over the past 3 days are gradually moving up, creating support near $83. Additional support can be found at the site of the 5-dma, currently at $81.50. After NEON's ballistic run on Wednesday, resistance is clear up at $93. The move on Wednesday was driven by the incredible strength on the NASDAQ and the continuing stream of news releases from the company (see below). As with any momentum play, volume will be the key - if the buyers come back in force, NEON could very quickly charge to new highs. Both Thursday and Friday produced inside days, creating a nice short pennant, that should see a breakout on Monday or Tuesday. Entries can be considered on a breakout above $87 or a bounce from the $83 support level. The company announced Thursday 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. Coming to light Tuesday, was news that Commerce One MarketSite Direct Material Services will use NEON e-business integration technology to offer flexible, expanded communication between Commerce One partners and connectivity with advanced planning and scheduling systems. BUY CALL MAR-85*QNO-CQ OI= 78 at $ 9.13 SL= 6.75 BUY CALL MAR-90 QNO-CR OI=228 at $ 6.88 SL= 5.00 BUY CALL APR-90 QNO-DR OI= 58 at $13.00 SL=10.50 BUY CALL APR-95 QNO-DS OI= 34 at $11.00 SL= 8.75 SELL PUT MAR-70 QNO-ON OI=46 at $2.38 SL=4.00 (See risks of selling puts in play legend) Picked on Feb 20th at $73.63 P/E = N/A Change since picked +11.94 52-week high=$93.25 Analysts Ratings 2-5-1-0-0 52-week low =$12.19 Last earnings 01/00 est=-0.03 actual= 0.00 Next earnings 04-26 est= 0.01 versus= 0.11 Average Daily Volume = 1.01 mln /charts/charts.asp?symbol=NEON **** SEBL - Siebel Systems, Inc. $138.38 (+23.81) Siebel Systems, Inc. is the world's leading provider of eBusiness applications software. Siebel Systems provides an integrated family of eBusiness application software enabling multi-channel sales, marketing and customer service systems to be deployed over the web, call centers, field, reseller channels, retail and dealer networks. Siebel Systems' sales and service facilities are deployed locally in more than 28 countries. SEBL broke out of its ascending channel this week prompting us to remark Thursday that despite its strength, there could be a pullback on Friday from profit takers. Sure enough, SEBL dropped nearly $5 in the final hour of trading. Not to worry - it still closed above the old channel, setting a new all-time high in the process, though volume was not that strong. Other than its momentum and relative strength, why play it in the first place? In short, strong sentiment that began with blowout earnings in late January ($0.19 vs. $0.15 estimates). On the chart, you can see the channel breakout at $130. We had fully expected a pullback into the channel, and to some extent it's still possible. However, with its strength on Friday, despite the small loss for the day, the pattern remains strong and we would expect the trend to continue, assuming no tech market meltdowns. Intraday support occurs at $140 (when it gets back there again), $138, $136 and not much else until $130. The 10-dma is way back at $119. However, given the meteoric rise, the average will lag reality for a short while; thus we think $130 will hold in all, but a worst case scenario. Target shoot where your risk tolerance allows. SEBL is also a split candidate again at these prices, although shareholders will have to authorize more shares if anything greater than a 3:2 is announced. Their last split was a 2:1 announced in August, 1999 at $67. SEBL received a Prudential upgrade (think Joe Battapaglia) from Buy to Strong Buy this week BUY CALL MAR-135*SGW-CG OI= 80 at $11.88 SL= 9.50 BUY CALL MAR-140 SGW-CH OI=526 at $ 8.88 SL= 6.75 BUY CALL MAR-145 SGW-CI OI= 25 at $ 6.88 SL= 5.25 BUY CALL APR-140 SGW-DH OI=206 at $15.38 SL=12.00 BUY CALL APR-145 SGW-DI OI= 1 at $13.00 SL=10.50 low OI Picked on Feb 22nd at $121.88 P/E = 259 Change since picked +16.50 52-week high=$144.25 Analysts Ratings 9-5-0-0-1 52-week low =$ 15.75 Last earnings 01/00 est= 0.15 actual= 0.19 Next earnings 04-25 est= 0.14 versus= 0.10 Average Daily Volume = 3.4 mln /charts/charts.asp?symbol=SEBL **** VERT - VerticalNet, Inc. $225.75 (+27.00) 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. There are two reasons to make this play. The first is that VERT, under the theory of "old resistance equals new support", VERT found a technical bottom at $200 (old resistance) after a big run to $289 in late January. Since then, VERT has retraced the move 100%, and began a new move back up beginning last Wednesday. On Friday, VERT couldn't hold the ascent and fell from $234 to close at $225.75. The good news is that it bounced from a $221 low with a burst of volume only 15 minutes before the close. That could spell a nice opening on Monday. Support is thin, but can be found at $213 and $221 intraday - $225 if you are an aggressive technician. Volume fell back slightly on Friday, but remained 15% above the ADV. The second reason is that VERT, along with a 29% earnings surprise announced a 2:1 stock split Payable on March 31 after the close. While it won't affect the immediate price movement too much, just know that there's room to run (all-time high is $289.56) and plenty of time to get your entry. The option premiums have big spreads, so don't buy or sell these with a market order. Wait for your price. With no news on Friday, Thursday's news still holds. VERT has been upgraded three times during the last week and a half. Thursday, 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=249 at $33.25 SL=26.00 BUY CALL MAR-220 ERW-CD OI=347 at $28.13 SL=22.00 BUY CALL MAR-230*URE-CF OI=567 at $24.00 SL=18.75 BUY CALL APR-220 ERW-DD OI=275 at $41.88 SL=32.50 BUY CALL APR-230 URE-DF OI=215 at $38.38 SL=30.00 Picked on Feb 24th at $221.00 P/E = N/A Change since picked +4.75 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 $117.50 (+9.13) 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. If you're interested in an early entry into a potential earnings run, then the next few trading sessions may prove to be the time. We believe CMGI is a prime candidate for a stellar earnings run going into March. Essentially we're anticipating a repeat performance of last quarter's upswing prior to the company's earnings' release. For visual confirmation, take a look at a three-month chart and notice the strong moves before December 15th. After adding CMGI on Thursday, Friday effectively provided a variety of entry points. CMGI's flat activity was most likely due to the fact that another big player in the sector, The Internet Cap Group (ICGE), reported poor earnings the previous evening. This news dragged others down too and ultimately may have affected the sector on Friday. CMGI consistently bounced off $114 and $115 during the past two days establishing a strong near-term support level. Of course it's firmer at the 10-dma at $113.50 in the event of a correction. If you're more of a conservative and an early entry doesn't fit your risk portfolio, then wait for CMGI to crack the first line of opposition at $120. Keep this in mind as you plan your strategy, CMGI is confirmed to report on Thursday, March 9th. Therefore this is a relatively quick play with only 8 days to trade. It's very important that you're out of any positions before March 9th. At this point, it's UNKNOWN at what time during the day they'll announce and you don't want to be caught in a post-earnings' sell-off! CEO David Wetherall announced on Friday that CMGI's iCast Corp, an online music and entertainment unit, will start giving away software that allows users to listen to radio via the Internet. The software can be downloaded from iCast or other CMGI-owned sites. 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. And mid-week, US Bancorp Piper Jaffray reiterated a Strong Buy recommendation for CMGI, but offered no other comments. BUY CALL MAR-115 GCD-CC OI=3901 at $13.25 SL=10.75 BUY CALL MAR-120 GCD-CD OI=5445 at $10.88 SL= 8.75 BUY CALL MAR-125*GCD-CE OI=3919 at $ 8.75 SL= 6.75 BUY CALL APR-120 GCD-DD OI= 323 at $16.38 SL=12.75 BUY CALL APR-125 GCD-DE OI= 185 at $14.25 SL=11.25 BUY CALL APR-130 GCD-DF OI= 396 at $13.00 SL=10.50 Picked on Feb 24th at $119.06 P/E = 91 Change since picked -1.56 52-week high=$163.50 Analysts Ratings 5-5-0-0-0 52-week low =$ 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 = 6.72 mln http://www.optioinvestor.com/charts.charts.asp?symbol=CMGI **** INKT - Inktomi Corp $145.13 (+22.56) Inktomi develops the world's most scalable software for the world's fastest-moving software environment: the Internet. The company's core technology underpins products for the Internet infrastructure that contribute to network performance, scalability and efficiency. Inktomi technology paves the way for emerging opportunities in online commerce, media and communications by enabling the Internet to intelligently accommodate more users and data traffic. Inktomi developed the search engine that runs such popular portals as HotBot, NBC's Snap, Yahoo!, and the Disney Internet Guide. The constant flow of news tooting consistent Web growth is pumping up the infrastructure stocks. Recently Media Metrix reported that the number of monthly unique visitors accessing the Internet has increased by 15%. Since last Friday the money has been flowing into INKT. So much that the share price has risen by a whopping 18.4%, or $22.56 in just a week's time. There's obviously no doubt INKT is on the top of investors' buy lists. The first inkling that INKT was taking off came on the 18th. It made a strong move through stubborn resistance at $120 and tagged $128.50 intraday. The momentum breakout was in direct correlation with new coverage out by Dain Rauscher Wessels. Analyst Stephen Sigmond rated INKT a Strong Buy and issued a $190 12-month price target that day. He cited that "Inktomi is still in the early stages of a massive growth opportunity, and we believe the company should represent a core holding for investors in the Internet infrastructure sector". In response to this eloquent comment, INKT has made five consecutive moves into new territory. The record now stands at Friday's intraday high of $148.25. Short-term support is at $143 and $145, while $138 and $140 are a bit more firm. Now let's consider a couple of issues at hand. First it'll be natural for INKT to consolidate at some point so be prepared for a downdraft; and second, at these heights there's quite a lot of room to fall. The 5-dma ($136.53) represents the first step down followed by a big on to the 10-dma ($125.88); and note this technical is below the stock's old resistance of $130! So again be prepared and know your tolerance for risk. Pay close attention to the stock's direction and market sentiment before opening any positions. Honestly this type of play needs your undivided attention. It is not for the faint of heart. In volatile markets, using stops on Internets is difficult because the wild intraday swings could inadvertently stop you out of profits. Within the industry there was the news that SBC Communications (SBC) will purchase Sterling Commerce (SE), a Net infrastructure firm, for $3.9 bln in an all cash deal on the expectation that all roads lead to conducting business online. This sentiment bodes well for INKT who makes the software that accommodates Web traffic! Inktomi also announced an agreement with Apple Computer to extend the Inktomi TrafficServer content delivery platform to support Apple's QuickTime technology. The integration will provide enhanced streaming media over the Internet. BUY CALL MAR-135 KYQ-CG OI= 325 at $17.50 SL=13.75 BUY CALL MAR-140 KYQ-CH OI= 837 at $14.50 SL=11.50 BUY CALL MAR-145*KYQ-CI OI=1368 at $12.13 SL= 9.50 BUY CALL MAR-155 KYQ-CK OI= 0 at $ 7.38 SL= 5.75 New Strike BUY CALL APR-140 KYQ-DH OI= 197 at $21.00 SL=16.50 BUY CALL APR-145 KYQ-DI OI=1192 at $18.75 SL=14.75 Picked on Feb 22nd at $132.00 P/E = N/A Change since picked +13.13 52-week high=$148.25 Analysts Ratings 7-5-2-0-0 52-week low =$ 28.13 Last earnings 12/99 est=-0.04 actual=-0.02 Next earnings 04-17 est=-0.02 versus=-0.07 Average Daily Volume = 2.32 mln /charts/charts.asp?symbol=INKT **** INSP - InfoSpace.com Inc $225.31 (+25.06)(+8.94)(+41.19) InfoSpace.com provides content and commerce solutions for Web sites and Internet appliances. Their focus is on content such as yellow pages, maps, classified ads, real-time stock quotes, sports and other information. InfoSpace.com has 100+ online customers including the likes of American Online and Microsoft. Founder and CEO, Naveen Jain, has a 38% stake while Acorn Ventures owns 12% of the company. InfoSpace.com is a company whose share price has increased more than 40-fold since its $15 IPO in December 1998. But in the present moment, we're more excited that it's splitting its stock 2:1 for the second time this year! On January 31st the company's BoD announced the second 2:1 stock split - earlier, on January 4th, INSP just had a 100% stock dividend. However, the upcoming split is still subject to shareholders' approval. A vote to increase authorized share from 200 mln to 900 mln is expected soon by written consent. Although currently appears to be enough shares available with only 48.2 mln issued. Currently there's only a little more than two weeks left to trade this split run. INSP is scheduled to split its stock 2:1 payable on March 15th. For the new readers, let me back up a bit. After OIN initially picked up INKT on February 10th, it went into a period of consolidation and traded in a narrow channel primarily between $195 and $200. The more aggressive traders used this lull to jump in the game. Of course they were betting on an eventual breakout, but this was a big risk considering the volatile markets. As it turned out they were amply rewarded on Thursday. INSP rocketed upward $32.25, or 16.6% at its intraday peak. The stock closed strong with volume backing up the spike at more than double the ADV. Sure enough there was more upside to come on Friday. INSP set another 52- week record ($231) and managed to keep $3.69 in gains following some minor profit taking near the close. Note "profit-taking" as a key word. Beware of traders taking some chips off the table. $225 is short-term support, then $215 on the deeper dips. If INSP ever dips to the latter mark, then use this as an entry point, but only after confirming upward bounces. Although it's quite possible you may have to target shoot on the climb as the split date approaches. InfoSpace.com announced that it won the patent for commerce infrastructure services on the Internet and wireless devices. This patent encompasses private label commerce solutions for tracking purchases, services, and information on the Internet and wireless devices. Also in the news this week was INSP's Saraide.com, a US-based mobile Internet services group. The company recently inked a deal with Philips Electronics to provide them with new services for voice-operated wireless phones. BUY CALL MAR-210 FHY-CB OI=296 at $31.75 SL=24.75 BUY CALL MAR-220*FHY-CD OI=631 at $26.88 SL=21.00 BUY CALL MAR-230 FHY-CF OI=449 at $22.75 SL=17.75 BUY CALL APR-220 FHY-DD OI= 43 at $42.13 SL=32.75 BUY CALL APR-230 FHY-DF OI=188 at $37.75 SL=29.50 Picked on Feb 10th at $191.50 P/E = N/A Change since picked +33.81 52-week high=$231.00 Analysts Ratings 6-3-0-0-0 52-week low =$ 10.00 Last earnings 12/99 est= 0.00 actual= 0.09 Next earnings 05-01 est=-0.12 versus=-0.01 Average Daily Volume = 1.76 mln /charts/charts.asp?symbol=INSP **** PHCM - Phone.com $153.00 (+15.38)(+16.50) Unwire your phone for the Internet! Phone.com, Inc. is a leading provider of software and services that enable the delivery of Internet-based information services to mass-market wireless telephones. Using its software, wireless subscribers have access to Internet and corporate intranet-based services, including Email, news, stocks, weather, travel and sports. In addition, subscribers have access via their wireless telephones to network operators' intranet-based telephony services, which may include over-the-air activation, call management, billing history information, pricing plan subscription and voice message management. We added PHCM to our list last week in anticipation of a breakout over the post split trading range of $110-$140. Our catalyst that convinced us of the breakout was a substantial increase in volume. That usually means institutions are at the feeding trough. If you entered the play on that basis, your were not disappointed as PHCM continued its strong volume (2.3 times the ADV on Friday) to not only break out over $142 on Wednesday, but break through its next level of resistance at $149 on Friday. Even better was that major volume flooded the issue in the last hour on Friday driving the price up $5 while the rest of the market struggled. In fact, B of A Securities Growth Fund manager, John Zimmerman noted in a CBS MarketWatch interview that they had recently purchased PHCM for the portfolio. Anyway, as the leader in the Wireless Application Protocol (WAP), PHCM is now free to test $155, then $170 as long as volume continues strong. We think it will get there based on patterns of accumulation. Support is at $147 intraday, while the 10-dma is way back at $132. Using the "old resistance equals new support" theory, look for $149 to provide a measure of support too, though that won't be nearly as strong. Despite it's success, PHCM is still a volatile issue and isn't for the weak stomached. Choose your entry to suit your risk and remember that recently, pullbacks have been limited to about $2, so don't be greedy. News that could affect PHCM's share price came from the lips of Oracle founder, Larry Ellison, who announced that OracleMobile would enter the fray with a competing product. It appears to have had no effect yet, but could if it gets traction in winning some contracts away from PHCM - not immediately likely, but possible. One contract Larry won't get...last week PHCM entered an interoperability testing agreement with Mitsubishi Electric. BUY CALL MAR-140 UMC-CH OI=646 at $19.88 SL=15.50 BUY CALL MAR-150*UMC-CJ OI=946 at $14.38 SL=11.25 BUY CALL MAR-160 UMC-CL OI=816 at $10.50 SL= 8.00 BUY CALL APR-150 UMC-DJ OI=261 at $25.50 SL=20.00 BUY CALL APR-160 UMC-DL OI=247 at $21.13 SL=16.50 SELL PUT MAR-130 UMC-OF OI=149 at $ 2.75 SL= 4.50 (See risks of selling puts in play legend) Picked on Feb 20th at $137.63 P/E = N/A Change since picked +15.38 52-week high=$175.00 Analysts Ratings 3-3-0-0-0 52-week low =$ 16.13 Last earnings 01/00 est= -0.17 actual= -0.08 Next earnings 04-20 est= -0.16 versus= -0.50 Average Daily Volume = 2.06 mln /charts/charts.asp?symbol=PHCM ********* SOFTWARE ********* CHKP - Check Point Software $205.63 (+7.44) Check Point Software has laid claim on being the best in the business at securing the Internet. Their Secure Virtual Network (SVN) architecture provides the infrastructure that enables secure and reliable Internet communications. It's FireWall-1 verifies remote users, controls access and blocks viruses and other unwanted Web content, while VPN-1 will allow companies to set up virtual private networks for secure internal and remote communications. CheckPoint markets its products through manufacturers and resellers including Sun Microsystems. The recent rash of cyber attacks may have put one of our newest additions to our play list in the limelight. Actually there are several reasons we find CHKP so attractive at this time. Friday, Mark Anderson, Vice President at Renaissance Investment Management spoke very highly of CHKP in an interview, reviewing his investment strategies. He mentioned that CHKP was their top performing position in 1999, having gained over 333%, saying they still have CHKP rated a Buy. Investors are focused on evaluating and trying to differentiate which business models will succeed and CHKP certainly comes in near the top of the list. Other news that moved CHKP to front of the class came this week when, CHKP announced it had joined an alliance with several other company's to help protect websites and corporate networks from cyber attacks. CHKP's Cyber Attack Defense System, coupled with other partners solutions will lead the way against preventing more attacks. With the broader markets in a destructive mode, traders seemed to be looking for anything positive to move into, and CHKP was not only a safe place to be Friday, but a very profitable place as well. CHKP broke through the $200 level that had been a holding the stock back for the past four sessions. The momentum behind the move was strong with 1.68 million shares traded, over twice the ADV. With that kind of support behind a move we would look for the momentum to continue. CHKP now has strong support at $200, with minor support sitting at $195. Any pullback to $200 would be considered a good point to target shoot entry into a new position. Otherwise, jump on if the momentum suits you. CheckPoint announced Wednesday that is working with Intel to scale it Secure Virtual Network(SVN) architecture to a full 64-bit implementation that supports the Intel Itanium processor. Computers using the powerful Itanium process will now take full advantage of CHKP's solutions for comprehensive Internet security. BUY CALL MAR-200*YKE-CT OI=320 at $20.13 SL=15.75 BUY CALL MAR-210 YKE-CB OI=503 at $15.88 SL=12.25 BUY CALL MAR-220 YKE-CU OI= 0 at $11.75 SL= 9.25 Wait for OI BUY CALL APR-200 YKE-DT OI= 63 at $31.88 SL=25.00 SELL PUT MAR-180 YKE-OP OI=120 at $ 5.25 SL= 7.00 (See risks of selling puts in play legend) Picked on Feb 27th at $205.63 P/E = 177 Change since picked +0.00 52-week high=$208.50 Analysts Ratings 8-6-2-0-0 52-week low =$ 11.50 Last earnings 01/00 est=0.32 actual=0.35 Next earnings 04-18 est=0.35 versus=0.25 Average Daily Volume = 778 K /charts/charts.asp?symbol=CHKP ******* Telecom ******* ANAD - Anadigics $146.88 (+0.63)(+22.25)(+23.97) 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. ANAD is near the end of its split run. On Tuesday, February 29th after the close, ANAD will undergo a 3:2 split to begin split adjusted trading on March 1st. Thus, we will exit the play in Tuesday night's write-up instead of today's since there could be some amateur hour enthusiasm into which to sell on Wednesday following the split. The more conservative can plan an exit on Monday or Tuesday. Technically, the ascending pennant is still forming, indicating that there could be a breakout to a new high sparked by the split. The only glitch we see here is that volume has fallen back to merely average (ADV = 435K). Unless volume kicks it up a notch into or after the split, the potential breakout may turn to vapor. At this time, you may want to consider moving your stops up to take you out on any weakness, and move your stops up on any strength (trailing stop) to capture the maximum profit before the split. If we are lucky, we'll get an enthusiastic open on Wednesday that will likely peter out by days end. $138 and $142 offer good support figures. There's even a bit of intraday support at $146, though the 10-dma is at $139.73. Just be sure to set your stops so you don't lose money on any market or stock weakness. While news won't likely affect the outcome of the play, it is helpful to know that Paine Webber published it's Recommended list last week which included ANAD among other standouts like JDSU, RFMD, and PMCS. They also began testing a new gallium arsenide (GaAs) amplifier chip in GSM handsets (Nokia, maybe?), but that doesn't mean "huge contract" yet. BUY CALL MAR-140*AUZ-CH OI=202 at $20.50 SL=16.00 BUY CALL MAR-145 AUZ-CI OI=317 at $17.75 SL=14.00 BUY CALL MAR-150 AUZ-CJ OI=145 at $15.63 SL=12.25 BUY CALL APR-145 AUZ-DI OI= 28 at $27.13 SL=21.25 BUY CALL APR-150 AUZ-DJ OI= 85 at $25.00 SL=19.50 Picked on Feb 13th at $124.00 P/E = 952 Change since picked +22.88 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 = 435 K /charts/charts.asp?symbol=ANAD **** GLW - Corning Inc. $187.81 (-5.50)(+27.88)(+25.31) 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. GLW sputtered this week and we debated internally whether or not to keep it in the lineup. We're keeping it for now, but the play is running on fumes. Fundamentally, having shed its skin as a casserole dish maker in favor of the hot optical equipment manufacturing field, GLW has quickly become an able competitor of JDSU and SDLI. That alone helps insure their future success as long as they don't all of a sudden forget how to make fiber optic cable. While GLW just became a split candidate as a result of a shareholder meeting (April 27) agenda item to increase the number of authorize shares from 500 mln to 1.2 bln, there are some trouble spots. Earning aren't until the week of April 17 and the split (assuming it's announced then) will take even longer - both too far away to matter in the play right now. Second, volume has fallen sequentially over the last six trading days, trading just 1.4 mln shares on Friday compared to the ADV of 2.4 mln. We won't see a breakout with that lack of buying interest. The good news is that the $185-$186 range is proving to be good support as the volume falls indicating a consolidation is at hand. Assuming the market doesn't crater on us and we begin to see a recovery in the DJIA, GLW should move strongly in unison, though we don't know just exactly on which day that will happen. Until the market tone improves or GLW gives us an "event" to anticipate, it could flat-line a bit longer. Don't despair though. This may be a good put selling or LEAP buying opportunity. If you still intend to buy straight calls, the 10-dma offers solid support at $184, while $185-$186 has held nicely intraday. Pick your entry to mesh with your risk tolerance. Moody's reaffirmed GLW's long term debt rating last week. They noted, "the ratings confirmation reflects Corning's improving profitability and cash flows, solid margins, global leadership position in optical fiber and cable, and the expectation that supply/demand factors for optical fiber and liquid crystal displays will provide steady growth opportunities in the near- to-intermediate term." BUY CALL MAR-180*GRJ-CP OI= 181 at $18.88 SL=14.25 BUY CALL MAR-190 GRJ-CR OI= 331 at $16.00 SL=12.50 BUY CALL MAR-200 GRJ-CT OI=1007 at $13.50 SL=10.75 BUY CALL APR-190 GRJ-DR OI= 76 at $23.25 SL=18.00 BUY CALL APR-200 GRJ-DT OI= 318 at $19.25 SL=15.00 SELL PUT MAR-170 GRJ-ON OI= 602 at $ 5.63 SL= 7.50 (See risks of selling puts in play legend) Picked on Feb 17th at $191.06 P/E = 99 Change since picked -3.25 52-week high=$198.06 Analysts Ratings 7-6-0-0-0 52-week low =$ 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 = 2.35 mln /charts/charts.asp?symbol=GLW **** ERICY - LM Ericsson Telephone $97.63 (+8.94)(-1.50) Ericsson is a world-leading supplier in the fast-growing and dynamic telecommunications and data communications industry, offering advanced communications solutions for mobile and fixed networks, as well as consumer products. Ericsson is a total solutions supplier for all customer segments: network operators and service providers, enterprises and consumers. Ericsson has more than 100,000 employees, representation in 140 countries and clearly the world's largest customer base in the telecommunications field. Can you say MOMENTUM? ERICY certainly picked up the pace for us on Friday, gaining $4.63 for the day with volume over two times the daily average. ERICY seems to have its eye on the $100 level and it may not be long before we see ERICY make a break for it. After all, ERICY was only $0.56 away on Friday. ERICY looks to have support at it's 5-dma, which is currently at $92.50. This is backed by a level of support at $92, a level that ERICY tested and held last Thursday. In addition, we see a rather solid looking level of support at $90, where ERICY established a bit of a base mid-week before continuing its ascent. As you may well know, the $100 level can prove to be a bit of a challenge for any momentum run and we may see investors sell their positions to lock in profits. If this occurs, watch for the above referenced support levels to hold and take advantage of any bouts of profit taking for possible points of entry. ERICY continues to strut its stuff at the CeBit trade show, which is currently taking place in Hanover, Germany. ERICY has unveiled several new products, including its new mobile Portal solution for mobile network operators and the new Ericsson Screen Phone. The trade show will continue through March 1st. Ericsson announced late on Thursday that the total sales from its Bluetooth unit may be above 45 million units in 2001. It is the Bluetooth wireless technology that ERICY is using in its cable-free handset. On Friday, ERICY made a presentation in Beijing supporting its third generation (3G) mobile technology. ERICY stated that they are committed to cooperate with Chinese institutes to promote 3G technology in China. And then of course there is the pending 4:1 stock split, which is expected to occur in May. Though this is still a ways off, the appeal of a 4:1 may have buyers stepping up to the plate already. And finally, we thought this story was worth mentioning just in case you needed a good laugh to start your week. Last Thursday morning, two managers from Ericcson staged a mock kidnapping and robbery/hijacking on a chartered bus in Greece, which was apparently carrying 25 Ericcson employees. The two managers asked the travel agency to go along with the plan and stop the bus as part of a "training exercise". The two men had empty machine guns and when they entered onto the bus, they staged a fake kidnapping of an employee who was in on the plan. The ironic part of the story is that a passing tourist saw what was happening and used a cellular phone to call the police. Luckily, no one was hurt and those arrested have been released. BUY CALL MAR- 85 RQC-CQ OI=1305 at $15.00 SL=11.75 BUY CALL MAR- 90 RQC-CR OI=2546 at $11.13 SL= 8.75 BUY CALL MAR- 95*RQC-CS OI=1436 at $ 7.88 SL= 6.00 BUY CALL MAR-100 RQC-CT OI=2723 at $ 5.25 SL= 3.50 BUY CALL APR-100 RQC-DT OI=1130 at $ 8.63 SL= 6.50 SELL PUT MAR- 90 RQC-OR OI= 408 at $ 2.44 SL= 4.00 (See risks of selling puts in play legend) Picked on Feb 15th at $86.38 P/E = 127 Change since picked +11.25 52-week high=$99.44 Analysts Ratings 8-11-4-0-0 52-week low =$20.50 Last earnings 01/00 est= 0.32 actual= 0.36 Next earnings 04-28 est= 0.17 versus= 0.04 Average Daily Volume = 5.12 mln http://OptionInvestor.com/charts/charts.asp?symbol=ERICY **** EMLX - Emulex Corp. $157.13 (+17.13)(+16.13)(+15.88) Emulex Corp is a leading developer and supplier of fibre channel technology, an ANSI standard communications interface that delivers unprecedented bandwidth, connectivity and reliability networking applications. They design three types of connectivity products: network access servers, print servers and high-speed fibre channel products. They sell their products worldwide to OEM and end users, through other distribution channels including value-added resellers, systems integrators and others. This probably sounds like a broken record, but for the third Friday in a row, EMLX continued to provide a safe haven for investors looking for somewhere to put their money. As before, there was wide spread selling going on in the broader markets, and EMLX managed to end the day on the right side of the ledger. EMLX has formed a classic channel moving higher, since late January. Out of the last nineteen trading days, EMLX has had only four days where it finished the session in the red. This week investors added over $17 to the price of EMLX stock, finishing in the plus column each day. A quick look at the volume shows the numbers declined in each session as well. What does all this mean for our play? It means for EMLX to continue to move higher, we are going to need to see new money enter somewhere along the lines, or we may begin to see some profit taking and consolidation set in. Remember stocks rarely move in a straight line. We are by no means suggesting that EMLX won't continue to move higher, simply pointing out the use of a well placed trailing stop, is always a prudent move in a profitable play. Technically, EMLX has several levels of intraday support at $155, $150 and $145. The 5-dma has followed the bottom of the channel quite nicely and is sitting at $149.09. Our suggestions for EMLX? Assess your risk profile and set your stops accordingly. If EMLX continues to move higher, jump on board, but check the volume behind the move prior to placing your order. Friday EMLX announced support for Hewlett-Packard's Open Storage Area Networking(SAN) Initiative. EMLX also announced they were partnering with Eurologic Systems, Finisar and Seagate Technology to demonstrate a 2Gb/s fibre channel SAN solution at CeBIT 2000 in Germany this week. this demonstration will highlight the performance capabilities of upcoming fibre channel data rates. BUY CALL MAR-150*UEL-CJ OI=184 at $20.75 SL=16.25 BUY CALL MAR-155 UEL-CK OI= 10 at $17.88 SL=14.00 BUY CALL MAR-160 UEL-CL OI=407 at $13.75 SL=10.75 BUY CALL APR-150 UEL-DJ OI=154 at $30.00 SL=23.50 SELL PUT MAR-140 UEL-OH OI=103 at $ 6.63 SL= 9.00 (See risks of selling puts in play legend) Picked on Feb 13th at $123.88 P/E = 286 Change since picked +33.25 52-week high=$170.25 Analysts Ratings 3-4-0-0-0 52-week low =$ 6.63 Last earnings 01/00 est=0.14 actual=0.23 Next earnings 04-25 est=0.17 versus=0.05 Average daily volume = 1.02 mln /charts/charts.asp?symbol=EMLX **** PCMS - P-COM Inc $22.63 (-0.44)(+4.31)(-0.31) Their company logo says they are the Leading Supplier of telecom distribution equipment and services for end user access to the World-Wide Network. The company's products are based on common system architecture and are designed to carry various combinations of voice, data and video traffic and to be easily configurable based on the needs of its customers. PCMS contracts out the majority of its manufacturing, and also provides related software and networking support. Most of PCMS's revenues come from outside the United States. Our play in P-COM may have several factors influencing recent moves. There has been little company specific news come out, so PCMS has been left to swim with the sharks. After making a new high last Friday, PCMS spent most of the week consolidating. Other than Thursday's move down to $20.50, PCMS has seen very little in the way of buying or selling, trading for the most part in a fairly narrow range. The fact that PCMS didn't join the ranks of stocks getting kicked around Friday, supports our play for now. With the major indices loosing up to 2.0% Friday, PCMS gained just under 3.0%. Remember part of our interest in PCMS is that it is a less expensive stock, yet in percentage terms, offers a chance for a great return, on the money invested. At this point what we see happening with PCMS is a lack of interest more than anything else. Investors that own stock in the company aren't motivated to sell. With the mood in the broad markets so negative, those same investors aren't quite ready to back up the truck and load up on shares of PCMS either. Volume for the week averaged just 66% of the ADV for PCMS. So we sit and wait. A move back through $22.75 accompanied by better than average volume would suggest PCMS is back on track. A decline back through $21.75 would indicate it may be time to look elsewhere or at least take some money off the table. As we mentioned earlier not much in the way of news for PCMS this week, but a check of the open interest in the options shows the Mar 20 calls did decline a bit, yet the OI in the Mar 25 calls and May options increased. If we see a change of attitude in the broader markets, investors that added PCMS options to their portfolio may be rewarded quite nicely. BUY CALL MAR-20 PQP-CD OI=3339 at $3.88 SL=2.25 BUY CALL MAR-25 PQP-CE OI=1279 at $1.56 SL=0.75 BUY CALL MAY-20 PQP-ED OI=1384 at $6.25 SL=4.50 BUY CALL MAY-25*PQP-EE OI= 640 at $4.13 SL=2.50 Picked on Feb 13th at $18.75 PE = N/A Change since picked +3.88 52-week high=$23.88 Analysts Ratings 3-5-2-0-0 52-week low =$ 3.69 Last earnings 01/00 est=-0.10 actual=-0.10 Next earnings 04-27 est=-0.04 versus=-0.27 Average daily volume = 2.09 mln /charts/charts.asp?symbol=PCMS **** AFCI - Advanced Fibre Communications $57.44 (+8.69) Advanced Fibre Communications develops, manufactures, and supports the Universal Modular Carrier 1000 (UMC), a multi- feature digital local-loop carrier system. This product enables telecommunications providers to deliver voice, video, and data on wireline or wireless systems to smaller line-sized markets. Global clients include Alltel, Sprint, France Telecom, and Cable & Wireless Panama. Investors came back from a long weekend and started nibbling on the shares of AFCI. There was a recent BoD meeting and perhaps this sparked the bullish charge. What we do know for sure is that analysts are backing up the company. Recently on February 17th, Platinum Equities started new coverage with a Strong Buy recommendation. Then in the midst of the powerful run-up, USB Piper Jaffray reiterated a Strong Buy and WR Hambrecht reiterated a Market Outperform rating on Friday. The latter firm also issued a $60 price target. News or events that drive a stock are certainly important, but it appears AFCI is experiencing more of a pure momentum rally. In just three swift trading sessions, AFCI was lifted off support at $45 and propelled upward almost 25%. The stock is now smidgen below its 52-week high at $58.63. AFCI just missed setting a new record by a fraction on Friday. Therefore this tells us the stock is at a true resistance level. The 5-dma ($51.28) and the 10-dma ($50.70) certainly represent firmer support, but $57 was a strong support intraday on Friday. Basically if AFCI is going to continue to charge it'll easily shatter the resistance and climb into new territory. Watch for this confirmation (after amateur hour of course!); then look for intraday bottoms to get an entry. The more cautious will want to wait for a definitive pullback before entering this HIGH-RISK momentum play. On Thursday, Fujitsu Telecommunications Europe, the leading supplier of high performance telecommunications solutions in the UK, announced it inked a deal with AFCI to integrated AFC's Next Generation Digital Loop Carrier products into Fujitsu's Multi-Service Access systems. ***Currently these are the highest strikes available*** BUY CALL MAR-50 AQF-CJ OI=5221 at $ 9.00 SL= 6.75 BUY CALL MAR-55 AQF-CK OI=1955 at $ 5.75 SL= 4.00 BUY CALL MAR-60 AQF-CL OI= 874 at $ 3.50 SL= 1.75 BUY CALL APR-50 AQF-DJ OI= 149 at $12.38 SL=10.00 BUY CALL APR-55*AQF-DK OI= 487 at $ 9.63 SL= 7.50 Picked on Feb 27th at $57.44 P/E = 19 Change since picked +0.00 52-week high=$58.63 Analysts Ratings 4-8-1-0-0 52-week low =$ 6.75 Last earnings 12/99 est= 0.09 actual= 0.10 Next earnings 04-20 est= 0.07 versus= 0.04 Average daily volume = 1.86 mln /charts/charts.asp?symbol=AFCI ********************************* CALLS - CONTINUED IN SECTION FOUR ********************************* **************************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. Email contact information to Contact Support **************************************************************** ******************************* CALLS CONTINUED IN SECTION FOUR ******************************* SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter 2-27-2000 Sunday 4 of 5 ***************** CALLS - CONTINUED ***************** Miscellaneous ************* LHSP - Lernout & Hauspie $108.22 (+18.84)(+7.38)(+21.38) On the cutting edge of interfacing man to his machines, LHSP is the world's leading provider of speech and language technology products and services. Included in the company's broad array of products and services are the following; speech recognition for more than 15 languages (another 20 are on the way), digital speech and music compression, language translation, text-to-speech, Web-based translations, and dictation of continuous speech. LHSP is collaborating with Microsoft (who owns 7% of LHSP) on its own speech recognition interface. Forget E.F. Hutton! When LHSP speaks, investors listen. Driving technology toward the nirvana of reliable voice communication to computers (large and small), LHSP continues to make giant strides in that direction. With frequent new product announcements and industry alliances, the company is right at the cutting edge of the drive to provide us with direct voice access to all of our business and personal information. After breaking out of its consolidation near $80, LHSP has been on a tear, jumping sharply on Wednesday's news announcement (see below). Adding over $22 on almost 4 times the ADV, it is no wonder investors decided to take some profits during the remainder of the week. Support is forming at $105, just above the top of Wednesday's gap up, and based on the pattern of consolidation, resistance will likely be felt as LHSP tries to push back up through $115. Stronger support appears at the psychologically important $100 level, but LHSP may not get there unless the NASDAQ has an identity crisis, and starts thinking it is the DOW. The decline in share price on Thursday and Friday looks to be nothing more than profit- taking, as volume declined to below the daily average. Part of the motivation for LHSP's strength is the company's announcement of a 2-for-1 split with earnings on February 9th. If buyers return on Monday, look to open new positions on a bounce from the $105 support level. Further weakness could provide a very appealing entry near $100, but remember that volume is the key - its absence indicates a lack of conviction. Continuing to expand its dominance in speech and linguistics technology, LHSP announced Wednesday that it is demonstrating a new hands free system for the automobiles that employ voice activated dialing. Developed in conjunction with Cellport Systems, the new system is safer, more convenient and more intuitive for drivers. Then Thursday 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. For you longer-term option traders, beginning on Monday, both the PHLX and CBOE will begin trading 2001 and 2002 LEAPS on LHSP. BUY CALL MAR-105 XQL-CA OI= 29 at $11.63 SL= 9.25 BUY CALL MAR-110*XQL-CB OI= 93 at $ 9.00 SL= 6.75 BUY CALL MAR-115 XQL-CC OI= 46 at $ 7.13 SL= 5.25 BUY CALL APR-110 XQL-DB OI= 0 at $14.13 SL=11.25 BUY CALL APR-115 XQL-DC OI=128 at $12.00 SL= 9.50 SELL PUT MAR- 90 XQL-OR OI= 72 at $ 2.75 SL= 4.50 (See risks of selling puts in play legend) Picked on Feb 12th at $82.00 P/E = 164 Change since picked +26.22 52-week high=$126.50 Analysts Ratings 1-1-1-0-0 52-week low =$ 25.75 Last earnings 02/00 est= 0.20 actual= 0.22 Next earnings 05-10 est= 0.16 versus= 0.12 Average Daily Volume = 882 K /charts/charts.asp?symbol=LHSP ********************** LEAPS by Mark Phillips ********************** As the divergence between the DOW and the NASDAQ continues, the VIX is getting rather chummy with the 30 level. Recall that a VIX reading in the low 30s typically represents a good buying opportunity. Over the past 3 weeks, the index has marched steadily upwards, posting higher-highs and higher-lows. With Tuesday's move as high as 30.69, and Friday's close at 29.08, some attractive buying opportunities could be just around the corner. Along with the Leap of the Week (MSFT), look how some of our plays (IBM, GE) have dropped to attractive entry (support) levels. We finally saw some life in the LU play this week; could this be the beginning of the long-awaited recovery, or is it just a head fake? Only time will tell. Keep an eye (maybe two) on the VIX this week, as a solid move above 30 could give you that attractive entry point you've been so patiently waiting for. Current Plays SYMBOL SINCE LEAPS SYMBOL PICKED CURRENT RETURN EMC 11/07/99 JAN-2001 $ 80 ZOH-AP $15.38 $53.00 244.60% JAN-2002 $ 90 WUE-AR $19.00 $56.88 199.37% GPS 11/07/99 JAN-2001 $ 40 ZGS-AH $ 5.75 $13.63 137.04% JAN-2002 $ 45 WGS-AI $ 7.88 $15.63 98.35% IBM 11/07/99 JAN-2001 $100 ZIB-AT $13.63 $21.25 55.91% JAN-2002 $110 WIB-AB $16.50 $25.63 55.33% LU 11/14/99 JAN-2001 $ 80 ZEU-AP $12.88 $ 5.75 -55.36% JAN-2002 $ 90 WEU-AR $16.13 $ 9.75 -39.55% CSCO 11/14/99 JAN-2001 $ 80 ZCY-AP $19.13 $61.13 219.55% JAN-2002 $ 90 WIV-AR $22.00 $62.63 184.68% GE 11/21/99 JAN-2001 $150 ZGR-AU $16.25 $12.13 -25.35% JAN-2002 $150 WGE-AU $25.50 $21.75 -14.71% NT 11/28/99 JAN-2001 $ 75 ZOO-AO $22.25 $49.88 124.18% JAN-2002 $ 75 WNT-AO $30.25 $59.25 95.87% VOD 12/05/99 JAN-2001 $ 50 ZAT-AJ $10.75 $16.50 53.49% JAN-2002 $ 50 WHV-AJ $15.00 $22.50 34.09% TXN 12/12/99 JAN-2001 $110 ZTN-AB $22.25 $56.25 152.81% JAN-2002 $120 WGZ-AD $28.50 $61.88 117.12% NXTL 12/19/99 JAN-2001 $ 90 ZFU-AR $23.50 $59.88 154.81% JAN-2002 $100 WFU-AT $27.25 $64.00 134.86% SUNW 12/19/99 JAN-2001 $ 80 ZJX-AP $17.63 $28.50 61.66% JAN-2002 $ 90 WJX-AR $22.00 $33.00 50.00% LU 01/09/00 JAN-2001 $ 50 ZEU-AJ $13.63 $17.00 24.72% MOT 01/09/00 JAN-2001 $125 ZMA-AE $31.13 $52.25 67.85% JAN-2002 $125 WMA-AE $41.50 $65.00 56.63% CY 01/16/00 JAN-2001 $ 40 ZSY-AH $ 9.13 $11.63 27.38% JAN-2002 $ 40 WSY-AH $12.63 $15.75 24.70% ERICY 01/30/00 JAN-2001 $ 65 ZYD-AM $19.75 $41.38 109.52% JAN-2002 $ 65 WRY-AM $27.00 $48.88 81.04% MSFT 01/30/00 JAN-2001 $100 ZMF-AT $17.63 $14.25 -19.17% JAN-2002 $110 WMF-AB $21.63 $18.25 -15.63% Q 02/13/00 JAN-2001 $ 50 ZWK-AJ $ 5.88 $ 6.13 - 4.25% JAN-2002 $ 50 WWH-AJ $10.88 $11.50 - 5.70% CS 02/13/00 JAN-2001 $ 30 ZCJ-AF $14.25 $19.00 33.33% JAN-2002 $ 30 WLJ-AK $18.25 $23.13 26.74% ICOS 02/20/00 JAN-2001 $ 40 ZIL-AH $10.25 $13.13 28.10% JAN-2002 $ 45 WJI-AI $12.13 $15.38 26.79% To review the play description on any of our current plays, go to the LEAPS section for the date the play was added Leap of the Week MSFT - Microsoft $91.31 Remember back in mid-December when MSFT broke out of the its broad trading range between $85 and $97? Well, don't look now, but the software giant is back in the middle of that range, testing support at $91. Plagued by the never-ending Justice Department anti-trust case and the lackluster debut of Windows 2000, MSFT has been dropping from its late-December highs near $120. This is still a great company with strong growth prospects and its hand in seemingly every new techno-toy that we can't do without. The advantage of LEAPS is that we can wait for these sentiment-driven declines to provide entry points near major support. Then when the investing public figures out that MSFT isn't going away, we can profit from the inevitable recovery. Stronger support exists near $84, and if you can get an entry there, consider it a gift. BUY LEAP JAN-2001 $ 95.00 ZMF-AS at $16.38 BUY LEAP JAN-2002 $100.00 WMF-AT at $21.75 /charts.asp?symbol=MSFT New Plays NSM - National Semiconductor $68.00 After the painful decline that began in October of 1997, NSM finally found its way again late last Spring. Since then, the chart presents us with a beautiful picture of higher-highs and higher-lows. What gets our attention though, is the upswings are getting larger, and the downdrafts are getting smaller. Each of the declines comes on lower volume and then as volume picks up again, so does the share price. Of course it doesn't hurt that NSM operates in the red-hot Semiconductor and Wireless industries; a fact that hasn't been lost on investors. Not only has the company returned to profitability, but it has also significantly beat earnings estimates over the last 2 quarters. Tagging a new 52-week high of $74 on Thursday, NSM is in blue sky territory with mild support at $67 and stronger support at $65. A decline to either of these levels looks like a good entry for the next leg up. That may not happen though with earnings only two weeks away. BUY LEAP JAN-2001 $70.00 ZUN-AN at $18.50 BUY LEAP JAN-2002 $70.00 WUN-AN at $24.25 /charts.asp?symbol=NSM Drops ICIX $53.25 Since we picked it up on February 6th, ICIX had a nice run into earnings on the 15th, but it doesn't look like the post-earnings depression is over. The fact that the loss was larger than expected was initially offset by the Warburg Dillon Read upgrade from $60 to $85. However, the revenue estimate was lowered based on a more conservative outlook for systems integration and long distance revenues. Once investors digested all the details, ICIX began selling off, shedding over $12 from its high of $65.63. The selling volume has dropped off considerably, but with so many other strong issues to choose from, we'll let ICIX go and move on to greener pastures. ***************** PUTS, PUTS, PUTS ***************** Put plays can be very profitable but have a larger risk than call plays. When a stock is falling the entire investment community (except the shorts) is hoping it will reverse and start back up. The company management is also doing everything they can to shore up their stock price. The company issues press releases, brokers talk it up, analysts try to put a positive spin on everything. Then of course there is the death knell, the "buy recommendation" simply because the price has dropped to some level that analysts feel attractive again. Buyers who like the stock wait until it appears a bottom has been reached and then jump on it in a feeding frenzy. They may already have a large position and are averaging down. Many factors can stop a free falling stock in mid drop. **** JNJ - Johnson & Johnson $71.19 (-6.25)(-0.00)(-4.69) Johnson & Johnson is one of the world's largest and diversified makers of healthcare products. JNJ has three distinct business segments serving the consumer, professional, and pharmaceutical markets. As a consumer you're probably most familiar with their over-the-counter brands like Tylenol, Band-Aids, and "no tears" baby shampoo. But Johnson & Johnson reaches beyond that realm and expands all aspects of its product lines through acquisitions. They are truly a healthcare giant. The interest rate fears have resurfaced further adding to the negative sentiment of the DOW. Even some of the techs were on shaky ground by the end of the week. In this environment JNJ couldn't help but lose its footing. By Wednesday, it slipped under $77, a formidable support level that was causing us great frustration. To put it into some perspective, JNJ has shed $6.75, or 8.6% since Tuesday's close and set two consecutive all-time lows. Thursday it hit $72 and then on Friday it sunk lower to $70.13. Our patience paid off big-time! It's important to note here that during Friday's session JNJ bounced upward off the vicinity of this latter mark ($70.13) three times in intraday trading. Put another way, this new low could be a possible bottom. And for those that have been following the play, you know what comes next. Yes it's an unavoidable warning that must be reiterated. We don't have a crystal ball and at some point value hunters will start nibbling so keep your stops in place to protect your profits! Recall just a week ago Ann Barber, analyst at CSFB, commented that JNJ "is attractively valued at discounts to the market and its peer group". She wasn't kidding. Although let's face it. For the most part, investors are still of the disposition that "techs are in and consumers are out". If you're considering opening new positions or adding to existing ones, please wait for downward confirmation preferably through $70. BUY PUT MAR-80*JNJ-OP OI=4044 at $9.25 SL=7.00 BUY PUT MAR-75 JNJ-OO OI=1539 at $5.00 SL=3.25 BUY PUT MAR-70 JNJ-ON OI=1509 at $2.25 SL=1.25 Average Daily Volume = 3.50 mln /charts/charts.asp?symbol=JNJ **** PGR - Progressive Corp $54.56 (-1.38)(+1.94)(-6.25)(-1.88) In business since 1937, Progressive is one of the nation's largest auto insurers. Progressive offers all types of vehicle insurance and property-casualty insurance through 30,000 independent agencies, the Internet and through affiliate programs. PGR is a holding company for 82 subsidiaries. PGR also has one mutual insurance company affiliate. Despite lackluster performance, don't count PGR out. The bears gave PGR a little push to trade them under support, giving us reason to keep them. This is a good indication that PGR has not hit bottom. Another good indicator is when they tried to reclaim the 10-dma territory, they were forced back down. It is hard to see investors appetite increasing for PGR since insurance stocks are trading around all time lows and the industry in general is not enticing. Negative momentum displayed by traders still exists, but isn't backed by a lot of volume. Therefore, this play should still be approached with caution. It's not an easy ride down just because support of $55 was pierced. We've already noted the lack of momentum and volume with that break. PGR has shown us last Friday that they can break $55 and then bounce back above it. With that in mind, watch out for a reversal. Set stops to protect yourself while the next couple of trading days unfold. An analyst from Advest started coverage of PGR on Wednesday with the ever-boring Market Perform rating. This news did little for the stock, almost as if no one noticed. Or maybe that PGR has just completely lost investor interest and no one is even watching PGR anymore. Either way, the lack of buyers attention should keep PGR trending lower. BUY PUT MAR-55*PGR-OK OI=1663 at $3.13 SL=1.50 BUY PUT MAR-50 PGR-OZ OI= 26 at $0.94 SL=0.00 High Risk! Average Daily Volume = 462 K /charts/charts.asp?symbol=PGR **** FD - Federated Department Stores $32.56 (-1.25) 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. With the kind of consistency that is hard not to love, FD continues to use the 5-dma, (now at $33.50) as resistance. The low on Thursday ($31.63), was not only a 52-week low, but also the lowest level for the stock since January of 1997. It has been over a week since FD managed to post a close above the rapidly declining 5-dma, and the stock shows no sign of reversing the trend. It is bad enough that interest rates are rising (always tough on the retailers), but the continuing weakness on the NYSE is making things even worse for FD. As if that wasn't enough, JC Penney and Gap Stores released earnings this week, along with FD. The street didn't show much enthusiasm for any of the numbers and the FD weakness is being exacerbated by association with a weak sector. With the DOW breaking support at 10,000 on Friday, the weakness is likely to continue. Good entries can still be had as FD moves up to the 5-dma and rolls over. BUY PUT MAR-40 FD-OH OI=20 at $7.88 SL=6.00 BUY PUT MAR-35*FD-OG OI=59 at $3.63 SL=1.75 Average Daily Volume = 1.23 mln /charts/charts.asp?symbol=FD **** KMG - Kerr-McGee Corp. $40.75 (-4.69)(-2.69)(-5.75) Kerr-McGee Corporation is an Oklahoma City-based company engaged in two worldwide businesses. One is oil and gas exploration and the other is production and marketing of titanium dioxide pigment. The company purchased Oryx Energy in 1999, making it one of the top US non-integrated oil and gas companies. KMG has fallen and it just cannot seem to get back up. KMG continued its downward pattern to close out last week, dropping another $1.25 back into the barrel. KMG briefly traded through $40 though quickly moved back up to claim this level as support, for the day at least. Though there is no negative news specific to KMG, it just can't seem to find its footing. As we have mentioned before, not even the days that see the oil service stocks doing well can seem to offer KMG shareholders any relief. If Friday's increased volume level backing the drop was any indication, it looks as though more and more investors are giving up and slipping out the back door on this one. Though KMG does have some pre-established support at this current level, we see the more solid support kicking in somewhere just above $30 (a share, not a barrel), where KMG was trading last April. It seems that the fear of OPEC may increasing oil production at their March meeting, is providing the fuel that continues to drive KMG south. Since the meeting is not until the end of March, there may very well be more downside to come. Watch for KMG to trade through $40 to confirm continuing negative momentum, keep your ear to the wall for any new developments in the continuing oil crisis saga, and as always, tighten your stops as we continue downward. BUY PUT MAR-45 KMG-OI OI=101 at $5.38 SL=2.50 BUY PUT MAR-40*KMG-OH OI=346 at $2.00 SL=1.25 Average Daily Volume = 767 K /charts/charts.asp?symbol=KMG **** RHAT - Red Hat, Inc. $68.38 (-3.13)(-11.88) Red Hat is a developer and provider of open source software and services, including the Red Hat Linux operating system. Red Hat is the market leader in open source operating systems (OS) software, services and information. Red Hat offers a full line of services, including telephone support, on-site consulting, developer training, certification programs and priority access updates. Red Hat shares all of its software innovations freely with the open source community under the GNU General Public License (GPL) and other public licenses. RHAT has several partners including Compaq, Dell, Gateway, IBM, Hewlett-Packard and Silicon Graphics. We owe a big thank you to Linux for giving us some more time to benefit from our put play on RHAT. Late on Thursday, Linux announced earnings that came in 15 cents under analysts estimates. This announcement drove shares of RHAT down on Friday, delivering not only the break through $70 we were looking for but a close below as well. Therefore, we are keeping our RHAT on for a while longer. RHAT's volume backing the drop was right on target with the daily average, and though we would have liked to seen a larger number, we can't complain too loudly. As you may know, RHAT did trade through $70 one other time last week and wound up bouncing from a support level right around $67.50. Well, if you take a look at Friday's chart, you will notice that RHAT tested and held this level of support yet again. Therefore, it is important to exercise caution at this point. We are not saying that RHAT has found its bottom yet, but we are also not ruling out the possibility. Should RHAT break through this level of support, we see the next level right around $60 with additional support backing in the neighborhood of $52. RHAT is still underneath its 10-dma of $73.50, and as long as RHAT does not breakthrough this level, we are not convinced that RHAT is pondering a trend reversal. BUY PUT MAR-75*RCV-O0 OI=362 at $12.25 SL=9.75 BUY PUT MAR-70 RCV-ON OI=927 at $ 9.00 SL=6.75 BUY PUT MAR-65 RCV-OM OI=398 at $ 6.13 SL=4.25 Average Daily Volume = 1.78 mln /charts/charts.asp?symbol=RHAT **** MCOM - Metricom $76.38 (-13.38) Metricom is a leading provider of wide area mobile data communications solutions. It designs, develops and markets wireless network products and services that provide low-cost, high performance, easy-to-use data communications that can be used in a broad range of personal computer and industrial applications. The Company's networks take advantage of Federal Communications Commission ("FCC") regulations that permit license-free, spread spectrum operation in the 902 to 928 MHz frequency band. Metricom's primary service, Ricochet, provides users of portable and desktop computers and hand-held computing devices with fast, reliable, portable, wireless access to the Internet, private intranets, local area networks ("LANs"), e-mail and on-line services for a low, flat monthly subscription fee that permits unlimited usage. Wasn't Friday a great day? Well, at least it was if you were playing MCOM as a put! Not only did MCOM close Friday's session down $7.63, it also offered an intraday trading range of $12.50, all of which was backed by strong volume. One cautionary note is the fact that the majority of MCOM's Friday was ruled by the bears. MCOM was dragged as low as $71, a level of pre-established support, where it bounced as the bulls stepped into the ring to close MCOM above $75. We did see a pick up in volume on the bounce, so there are some interested buyers out there. As we mentioned, MCOM looks to have some support right around $71, however, we see the more solid level right around $68, which is also MCOM's 100-dma. Should MCOM make a move to continue its downward trend next week, exercise caution, particularly with new entries, around these levels. If MCOM decides to opt for a move on the positive side, it still has a good deal of resistance to contend with. MCOM's 5-dma, which is now at $84.75, has done a nice job of holding MCOM back. MCOM may also encounter resistance at $88 and $90, both levels at which MCOM has struggled before. Any moves up that are met and held back by these resistance levels may provide the gift of potential entry. As always, be sure to use your stops to protect any profits made so far. BUY PUT MAR-80*MQM-OP OI=131 at $8.50 SL=6.50 BUY PUT MAR-75 MQM-OO OI= 48 at $5.63 SL=3.75 BUY PUT MAR-70 MQM-ON OI=114 at $3.50 SL=1.75 Average Daily Volume = 749 K /charts/charts.asp?symbol=MCOM **** LLY - Eli Lilly $56.69 (-1.81) Eli Lilly is a major U.S. drug company that discovers, develops, manufacturers and sells products in the Life Sciences industry. Some of Lilly's products include Prozac, to treat depression, Zyprexa, used in treatment of schizophrenia, Permax, a treatment for Parkinsons disease and Gemzar used for treatment of a pancreatic cancer. Also the company produces a wide range of antibiotics, growth hormones, cardiovascular therapy medications, anti-ulcer agents, vitamins and animal health products. The company also has subsidiaries through which it provides health care management services in the U.S. The drug stocks have had a rough go of it lately and have yet to find the medicine to make them feel any better. LLY has been gradually trending lower since mid-November and on Friday, traded to a new 52-week low of $56.13. Strong volume continues to back LLY's decline, indicating that there are plenty of sellers out there looking to unload this headache. LLY seems to have a habit of making weak attempts at moves up. Use this knowledge of LLY's trading to your advantage for possible new entries. Just be sure to watch for holding resistance levels to confirm the continuing downward trend. LLY closed on Friday just shy of its low for the day, so we could be poised for a nice start to the week. LLY's 5-dma, which is currently at $58.50, seems to be working well at keeping the lid on LLY. LLY also has resistance at $59 and $60 (10-dma). Other then negative sentiment against its sector, many seem to be pointing toward weak management as another possible catalyst for LLY's continuing descent. Not too mention all of the new competition that continues to emerge on the scene. For example, on Friday, IVX Corporation announced supplemental FDA approval for its generic equivalent to LLY's Darvocet, which is a widely prescribed painkiller. At this point, we believe that there may be enough negative sentiment out there against not only LLY, but the sector as a whole, to keep LLY on its current downward track. Apparently, Prozac doesn't have much of an effect on bears! BUY PUT MAR-65 LLY-OM OI=2739 at $8.63 SL=6.50 BUY PUT MAR-60*LLY-OL OI=1432 at $4.38 SL=2.50 BUY PUT MAR-55 LLY-OK OI=1274 at $1.63 SL=0.75 Average Daily Volume = 2.63 mln /charts/charts.asp?symbol=LLY **************************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. Email contact information to Contact Support **************************************************************** ***************************** SEE DISCLAIMER IN SECTION ONE *****************************
The Option Investor Newsletter 2-27-2000 Sunday 5 of 5 ************* COVERED CALLS ************* Charting Basics: Trend Line Analysis.. The majority of technicians use historical charts to reflect the daily price and volume action in a specific instrument. In simpler terms, a chart is simply a representation of the conditions that exist in the market. While it is helpful in projecting trends and character, technical analysis cannot predict the future. Charts are precise, accurate and correct in their depiction and astute technicians will tell you the "tape doesn't lie." Unfortunately, they do not reflect all the nuances of the market and the instrument itself. Charts exhibit patterns and relationships, but they cannot identify the causes of a market condition, nor determine it's eventual outcome. As long as you are aware of the limitations of the practice, technical analysis can be your best ally in the world of investing. With that in mind, our focus today will be identifying changes in trends. Last week, we reviewed a number of basic formations and the area patterns that were discussed; ascending triangles, pennants, and rounded bottoms are common precursors to upside break-outs. After the new direction is established, it's very important to discern the quality and strength of the trend. In many cases, the up-trend is broken shortly after the reversal is complete. The problem for investors is to identify those breakdowns which are significant, as opposed to the minor penetrations which simply require an adjustment of the trend line. Unfortunately, the majority of small movements will not offer a clear indication of character without confirmation from other chart developments. The key is to understand that any significant penetration of a trend line is cause for concern and requires subsequent reevaluation of the underlying position. Before you can determine the significance of a correction or pullback, the quality of the trend must first be established. There are a number of traits common to the development stages of powerful trends. The first is the number of bottoms that have occurred at or near the trend line in the recent history of the issue. With each successive test, the significance of the movement is increased. Another important component is the period of time before the trend undergoes a significant test or consolidation. The longer it is, the greater its technical strength and significance. The severity of the slope or angle of the trend line also has a bearing on the potential effect of any pullback. Generally, the greater the angle the smaller the consequences of any penetration. In contrast, flatter trend lines are subject to greater fluctuations when broken. You may see that effect in the current Dow-30 chart. There are some basic guidelines to help establish the validity of a break through the trend line. The simplest factor to evaluate is the magnitude of the correction. In significant reversals, the opposing move will end well beyond the previous support area for the trend. If trading volume is light during the initial stages of penetration, a rebound is likely to occur. However, when the recovery is not supported by increased trading activity, the reversal will likely continue. A decisive break through a well-developed rally generally indicates the advance has run out of momentum and steps should be taken to protect profits. On the other hand, a brief consolidation or topping pattern which forms well away from the trend line can often be ignored. The most important concept is that almost any activity can take place as long as the primary boundaries of the trend are not threatened for more than a brief period. Any sustained movement beyond the trend line is generally a major change in character. SUMMARY OF PREVIOUS PICKS ***** NOTE: Using Margin doubles the listed Monthly Return! Stock Price Last Call Strike Price Profit Monthly Symbol Picked Price Month Sold Picked /Loss Return BIDS 5.34 5.50 MAR 5.00 1.06 *$ 0.72 19.0% HEB 11.94 13.88 MAR 10.00 2.69 *$ 0.75 9.1% ANIC 6.94 8.50 MAR 5.00 2.31 *$ 0.37 9.0% PTEK 8.94 9.88 MAR 7.50 2.13 *$ 0.69 8.8% TSEMF 21.00 25.06 MAR 17.50 4.63 *$ 1.13 7.8% FSII 17.81 17.38 MAR 15.00 4.25 *$ 1.44 7.7% DRMD 12.75 12.81 MAR 10.00 3.38 *$ 0.63 7.6% IMNR 15.75 13.81 MAR 10.00 6.38 *$ 0.63 7.6% GZTC 29.13 46.75 MAR 22.50 8.38 *$ 1.75 7.3% AND 8.88 12.75 MAR 7.50 1.94 *$ 0.56 7.0% SCTC 22.31 24.38 MAR 20.00 3.75 *$ 1.44 6.7% UBET 6.25 5.19 MAR 5.00 1.63 *$ 0.38 6.0% REMC 26.38 34.50 MAR 22.50 5.00 *$ 1.12 5.9% PCMS 23.06 22.63 MAR 17.50 6.38 *$ 0.82 5.5% MCRE 15.50 16.25 MAR 12.50 3.88 *$ 0.88 5.5% SIII 15.00 15.31 MAR 12.50 3.38 *$ 0.88 5.5% EPIC 9.56 8.63 MAR 7.50 2.50 *$ 0.44 5.4% MSGI 24.88 23.75 MAR 20.00 6.00 *$ 1.12 5.2% RNBO 30.88 30.13 MAR 25.00 7.00 *$ 1.12 4.1% GELX 17.81 20.50 MAR 15.00 3.75 *$ 0.94 3.6% *$ = Stock price is above the sold striking price. Comments: Last Friday's drop in Metacreations (MCRE) appears to have been a one day event though some negative technical divergence's are apparent. Overall, the majority of stocks are holding up well considering the general market malaise. NEW PICKS Sequenced by Company Stock Last Call Strike Option Last Open Cost Return Return Symbol Price Month Price Symbol Bid Intr Basis Called Unchanged ASPX 12.56 MAR 10.00 XUM CB 3.25 267 9.31 7.4% 7.4% ELIX 21.75 MAR 17.50 XQQ CW 4.88 46 16.87 3.7% 3.7% ITIG 43.44 MAR 30.00 ITU CF 14.25 65 29.19 2.8% 2.8% SMSC 14.25 MAR 12.50 OMQ CV 2.25 0 12.00 4.2% 4.2% TLXN 20.78 MAR 17.50 TNQ CW 4.00 462 16.78 4.3% 4.3% WRLS 28.00 MAR 17.50 QVW CW 11.13 6 16.87 3.7% 3.7% XICO 26.13 MAR 22.50 CIU CX 4.75 394 21.38 5.2% 5.2% Sequenced by Return Called & Return Not Called Stock Last Call Strike Option Last Open Cost Return Return Symbol Price Month Price Symbol Bid Intr Basis Called Unchanged ASPX 12.56 MAR 10.00 XUM CB 3.25 267 9.31 7.4% 7.4% XICO 26.13 MAR 22.50 CIU CX 4.75 394 21.38 5.2% 5.2% TLXN 20.78 MAR 17.50 TNQ CW 4.00 462 16.78 4.3% 4.3% SMSC 14.25 MAR 12.50 OMQ CV 2.25 0 12.00 4.2% 4.2% ELIX 21.75 MAR 17.50 XQQ CW 4.88 46 16.87 3.7% 3.7% WRLS 28.00 MAR 17.50 QVW CW 11.13 6 16.87 3.7% 3.7% ITIG 43.44 MAR 30.00 ITU CF 14.25 65 29.19 2.8% 2.8% Company Descriptions OI - Open Interest CB - Cost Basis or break-even point RC - Return Called RNC - Return Not Called (Stock unchanged) **** ASPX - Auspex Systems $12.56 *** New Management *** Auspex Systems is a leading provider of network data-access solutions for All the Data, All the Time(TM). The company's customers are the market leaders and innovators in some of today's most competitive industries, where around-the-clock availability of data is essential in order to achieve the individual objectives of their businesses. With a new CEO and president, and an upgrade from Preferred Capital, Auspex appears ready to breakout above the November high. We favor the improving technicals and the increased volume on rallies. MAR 10.00 XUM CB Bid=3.25 OI=267 CB=9.31 RC=7.4% RNC=7.4% Chart = /charts/charts.asp?symbol=ASPX **** ELIX - Electric Lightwave $21.75 *** Blue Sky? *** Electric Lightwave is a leading integrated communications provider of enhanced data services, frame relay, ATM and Internet access to bandwidth intensive businesses and the growing e-commerce market. The company provides long-distance and data services nationwide. In its full-service markets, the company offers businesses local and long-distance telephone service and high-speed broadband via its fiber optic networks. Electric recently settled its dispute with US West and completed two more segments of its $131 million long haul route. Electric Lightwave has been in a strong up-trend since December and is just shy of a new all time high. We favor a cost basis below the January high. Earnings are due next week. MAR 17.50 XQQ CW Bid=4.88 OI=46 CB=16.87 RC=3.7% RNC=3.7% Chart = /charts/charts.asp?symbol=ELIX **** ITIG - Intelligroup $43.44 *** SeraNova IPO *** Intelligroup is a leading global Application Services Provider that helps companies of all sizes improve their business performance by implementing, optimizing, hosting and supporting innovative, customized, e-commerce and enterprise applications. Among its portfolio of ASPplus Solutions is the revolutionary myADVISOR, a personalized, web-based knowledge management support system that delivers personalized user support for customized e-commerce and enterprise applications. Intelligroup has been in strong stage II climb since November when it announced a plan to spin off its B2B subsidiary, SeraNova, during the first quarter of 2000. We favor a very conservative entry point below the 50 dma and the recent January consolidation area. MAR 30.00 ITU CF Bid=14.25 OI=65 CB=29.19 RC=2.8% RNC=2.8% Chart = /charts/charts.asp?symbol=ITIG **** SMSC - Standard Microsystems $14.25 *** Technicals Only! *** Standard Microsystems is a worldwide supplier of metal-oxide- semiconductor/ very large scale integrated (MOS/VLSI) circuits for the personal computer, peripherals and embedded systems marketplaces. The company's products provide solutions in PC I/O, PC Systems Logic, USB and 1394 Connectivity, LAN and Embedded Control Systems. Standard Microsystems resumed its uptrend in January after a post earnings dip. We favor the change of character as SMSC has broken a multiyear downtrend. The test of the December high in early February bodes well for further upside movement. We favor a cost basis below the support near the 50 dma. MAR 12.50 OMQ CV Bid=2.25 OI=0 CB=12.00 RC=4.2% RNC=4.2% Chart = /charts/charts.asp?symbol=SMSC **** TLXN - Telxon $20.78 *** New uptrend? *** Telxon is a leading global designer and manufacturer of wireless and mobile information systems for vertical markets. The company integrates advanced mobile computing and wireless data communica- tion technology with a wide array of peripherals, application- specific software and global customer services for its customers. Telxon has risen in unison with the rise of Aironet (AIRO), its former subsidiary. Telxon recently made a move to obtain 90% ownership in Metanetics, which gives Telxon the largest portfolio of image processing patents in the industry. We favor the strong technical history with the January consolidation area providing support near our cost basis. MAR 17.50 TNQ CW Bid=4.00 OI=462 CB=16.78 RC=4.3% RNC=4.3% Chart = /charts/charts.asp?symbol=TLXN **** WRLS - Telular $28.00 *** Lucent Deal! *** Telular designs and manufactures Fixed Wireless Terminals. The Company's proprietary telecommunications interface technology enables standard phone systems, fax, computer modem or monitored alarm systems to utilize available cellular wireless service for communications. Telular's product lines incorporate the world's leading cellular standards (GSM, TDMA, CDMA, AMPS) and include the PhonecellŽ and TelguardŽ lines. Telular has been on a ride into space since reaching severe lows last year. The company's revenues continue to improve with new agreements being announced almost weekly. Investors have been bidding Telular ever higher, impressed with the move into China, and most recently, the deal with Lucent (enough for a 5 dollar spike on Friday). We will remain conservative and take advantage of the call buyers who continue to inflate the option premiums. MAR 17.50 QVW CW Bid=11.13 OI=6 CB=16.87 RC=3.7% RNC=3.7% Chart = /charts/charts.asp?symbol=WRLS **** XICO - Xicor $26.13 *** Improved Model! *** Xicor designs, develops, manufactures and markets re-programmable nonvolatile semiconductor integrated circuits containing digital, analog and re-programmable nonvolatile elements. Xicor's devices offer a comprehensive set of features to its customers. By virtue of their non-volatility, Xicor's devices retain their information content when power is lost or turned off. Reprogramming is accomplished by writing over the old data without a need for first erasing the old data. Xicor's devices can be reprogrammed bit by bit or in larger groups of bits called words and pages without being removed from the system. Xicor products are sold in a variety of packages, including plastic, ceramic and chip scale packages for small footprint and height. The transformation of its business model is the reason behind the new success. Last summer they announced plans to outsource all of their production and transition to R&D on the chips it makes. Analysts took notice and CIBC World Markets recently came out with a BUY rating and a $28 price target. RGR Financial has a STRONG BUY recommendation with a $30 target. MAR 22.50 CIU CX Bid=4.75 OI=394 CB=21.38 RC=5.2% RNC=5.2% Chart = /charts/charts.asp?symbol=XICO Naked Put Percentage List The votes have been counted and it is overwhelming. We are not only going to keep this section, but we are going to add some charts to it as well. Under the list you will find 4 to 5 charts each week that show some of the plays with multiple support levels. This will help you choose your play based on your risk tolerance. Higher risk equals a higher return, but a safer play may help you sleep at night. You make the call. Thanks for an overall the great response to our inquiry last week! There are 3 weeks left until expiration on the contracts listed below. Not too shabby when you consider that fund managers used to hope for this kind of return in an entire year. Stock Stock Strike Option Option Margin Percent Symbol Price Price Symbol Price At 25% Return ITWO 150.27 135 QYJ-OF 9.00 37.57 24% HGSI 206.00 180 HBW-OP 12.13 51.50 24% IMNX 201.63 190 QUV-OR 13.50 50.41 27% MLNM 263.00 240 QMR-OV 18.50 65.75 28% VERT 225.75 210 ERW-OB 14.13 56.44 25% NSOL 308.75 290 JNV-OR 15.50 77.19 20% VRSN 239.88 220 QVD-OZ 10.25 59.97 17% VSTR 140.44 130 BWU-OF 6.63 35.11 19% CMRC 213.06 200 RUC-OT 12.00 53.27 23% PMCS 185.63 165 SZI-ON 8.38 46.41 18% VRTS 181.19 170 UQJ-ON 8.25 45.30 18% INSP 225.31 200 FHY-OT 10.25 56.33 18% CMVT 190.00 185 CQZ-OQ 8.38 47.50 18% VIGN 228.75 220 GGV-OD 14.00 57.19 25% JDSU 256.81 240 UCQ-OH 11.63 64.20 18% BVSN 240.50 220 BZV-OD 13.63 60.13 23% BRCM 191.00 180 RDU-OP 7.25 47.75 15% AKAM 267.06 250 UMU-OJ 13.38 66.77 20% BRCD 267.25 260 UBZ-OL 12.88 66.81 19% AMCC 260.00 240 AZV-OH 14.00 65.00 22% EPNY 187.00 170 UEP-ON 12.63 46.75 27% NTAP 192.94 180 ULM-OP 9.38 48.24 19% BEAS 129.88 120 BUC-OD 5.75 32.47 18% DCLK 91.81 85 TDU-OQ 4.88 22.95 21% CMGI 117.50 115 GCD-OC 8.63 29.38 29% PHCM 153.00 145 UMC-OI 9.00 38.25 24% CHKP 205.63 200 YKE-OT 12.38 51.41 24% VRSN AGGRESSIVE SELL PUT MAR-240 QVZ-OH at $19.25 = 32% MODERATE SELL PUT MAR-230 QVZ-OF at $14.25 = 24% CONSERVATIVE SELL PUT MAR-220 QVZ-OZ at $10.25 = 17% MLNM AGGRESSIVE SELL PUT MAR-260 QMR-OX at $27.25 = 41% MODERATE SELL PUT MAR-240 QMR-OV at $18.50 = 28% CONSERVATIVE SELL PUT MAR-220 QMR-OD at $ 9.38 = 14% VERT AGGRESSIVE SELL PUT MAR-220 ERW-OD at $19.13 = 34% MODERATE SELL PUT MAR-210 ERW-OB at $14.13 = 25% CONSERVATIVE SELL PUT MAR-200 ERW-OT at $10.13 = 18% CHKP AGGRESSIVE SELL PUT MAR-200 YKE-OT at $12.38 = 24% MODERATE SELL PUT MAR-190 YKE-OR at $ 8.50 = 17% CONSERVATIVE SELL PUT MAR-180 YKE-OT at $ 5.25 = 10% ***************** NAKED PUT SECTION ***************** Option Trading Mechanics: Making A Market This week we examine a typical transaction and the method in which floor-brokers profit through synthetic positions. The majority of methods employed by floor specialists to profit from options trading are based on pricing theory and statistical probability. Traders who participate in these transactions use simple arbitrage techniques. Very simply, when a retail trader wants to buy a call or put option, the specialist will usually create a synthetic call or synthetic put to offset the transaction. The most profitable transactions for market makers are generally deep-in-the-money calls and puts, since these options usually have large bid-ask spreads (due to the lack of liquidity). An example of this type of trade: If an individual places an order to sell a deep-in-the-money call, then the floor broker uses a reversal, or reverse conversion with a short synthetic call (short stock and short put) to offset the purchased call. If the bid-ask spread is $1 and the specialist pays the retail trader bid price only, the position should yield a profit. Recall that the basis for this transaction is the market maker can buy the call at a discount and at the same time, sell the synthetic call at fair value to generate a risk free position. Obviously this assumes the put option is fairly priced and the stock can be shorted (sold) for the current bid. Any delay in the execution of the remaining components will put the trade at risk. If the share price changes or the "uptick" rule (in most cases, stocks can be shorted only on an upward move) prevents the specialist from shorting the stock in a timely manner, the profit will quickly disappear. There are no up-front funds needed for this technique but because of the difficulty in shorting stock, specialists generally do not receive all of the profit from the initial transaction. However, they do have one method of offsetting any potential losses. In the case of a reversal, the funds received from the sale of the stock are placed in a risk-free, short-term investment. Thus the level of interest rates, the difference between the market prices and fair value of the options, and the amount of funds received in the short sale all have an effect on the eventual profitability of the position. Fortunately, all option trades do not result in a conversion or reversal. Since the majority of retail traders BUY options, and since a large portion of purchased derivatives are redeemed at a lower value (or expire worthless), market-makers will often take a short position in these options. Then they simply wait until the option falls in value, to purchase an offsetting position. In the case of a short call option, they may eventually construct a long synthetic call (a much easier transaction - no shorting of stock) to offset the sold position. Regardless of the situation or type of arbitrage, their fundamental goal is to profit from disparities in option pricing and by trading inside the bid/ask spread. Now, is everybody ready to learn how they manage so many positions? *** WARNING!!! *** Occasionally a company will experience catastrophic news causing a severe drop in the stock price. This may cause a devastatingly large loss which may wipe out all of your smaller gains. There is one very important rule; Don't sell naked puts on stocks that you don't want to own! It is also important that you consider using trading STOPS on naked option positions to help limit losses when the stock price drops. Many professional traders suggest closing the position when the stock price falls below the sold strike or using a buy-to-close STOP at a price that is no more than twice the original premium from the sold option. SUMMARY OF PREVIOUS PICKS Stock Price Last Put Strike Price Profit Monthly Symbol Picked Price Month Sold Picked /Loss Return WSTL 25.88 31.50 MAR 17.50 0.69 *$ 0.69 13.2% WPZ 15.31 12.25 MAR 10.00 0.38 *$ 0.38 12.4% New Symbol ZONA 7.69 8.50 MAR 5.00 0.31 *$ 0.31 12.1% NTRX 31.13 26.25 MAR 20.00 0.69 *$ 0.69 11.2% TSEMF 20.13 25.06 MAR 15.00 0.56 *$ 0.56 10.6% CRUS 20.31 19.88 MAR 15.00 0.38 *$ 0.38 9.6% PTEC 20.63 27.25 MAR 15.00 0.63 *$ 0.63 9.6% RWAV 10.56 8.44 MAR 7.50 0.31 *$ 0.31 9.3% PGEX 23.13 19.88 MAR 17.50 0.50 *$ 0.50 8.5% IDTC 31.50 38.13 MAR 20.00 0.50 *$ 0.50 8.3% SKYC 28.63 35.00 MAR 20.00 0.44 *$ 0.44 8.0% PILT 33.94 32.06 MAR 22.50 0.63 *$ 0.63 7.4% EXLN 23.00 20.19 MAR 15.00 0.31 *$ 0.31 7.1% MSGI 24.88 23.75 MAR 17.50 0.44 *$ 0.44 7.1% PTEC 23.06 27.25 MAR 17.50 0.38 *$ 0.38 6.6% DRD 28.00 24.56 MAR 20.00 0.56 *$ 0.56 6.6% AXTI 31.94 38.00 MAR 17.50 0.50 *$ 0.50 6.3% RNBO 30.88 30.13 MAR 22.50 0.38 *$ 0.38 5.0% *$ = Stock price is above the sold striking price. Comments: Advanced Communications (ADG) has changed its name and ticker symbol to WorldPages.com (WPZ) and is experiencing some near term selling pressure. Close monitoring is warranted as WorldPages.com is testing support above $10.00. Rogue Wave (RWAV) is testing its 150 dma after a hard fall. There are signs of strong accumulation but that doesn't prevent further downside movement. NEW PICKS Sequenced by Company Stock Last Put Strike Option Last Open Cost ROI Opt Symbol Price Month Price Symbol Bid Intr Basis Expired ANET 12.69 MAR 10.00 QTE OB 0.25 97 9.75 9.0% CLPA 44.81 MAR 20.00 QJC OD 0.75 244 19.25 7.7% ESPI 12.75 MAR 10.00 AQ OB 0.50 659 9.50 16.4% MSGI 23.75 MAR 17.50 UMS OW 0.38 36 17.12 7.4% SCTC 24.38 MAR 17.50 YQS OW 0.63 8 16.87 11.4% WSTL 31.50 MAR 22.50 QLW OX 0.56 493 21.94 8.2% XICO 26.13 MAR 20.00 CIU OD 0.44 65 19.56 7.8% Sequenced by ROI Stock Last Put Strike Option Last Open Cost ROI Opt Symbol Price Month Price Symbol Bid Intr Basis Expired ESPI 12.75 MAR 10.00 AQ OB 0.50 659 9.50 16.4% SCTC 24.38 MAR 17.50 YQS OW 0.63 8 16.87 11.4% ANET 12.69 MAR 10.00 QTE OB 0.25 97 9.75 9.0% WSTL 31.50 MAR 22.50 QLW OX 0.56 493 21.94 8.2% XICO 26.13 MAR 20.00 CIU OD 0.44 65 19.56 7.8% CLPA 44.81 MAR 20.00 QJC OD 0.75 244 19.25 7.7% MSGI 23.75 MAR 17.50 UMS OW 0.38 36 17.12 7.4% Company Descriptions OI - Open Interest CB - Cost Basis or break-even point ROI - Return On Investment **** ANET - Act Networks $12.69 *** Own This One! *** ACT Networks develops, manufactures, and markets multi-services access products that enable the convergence of voice, video and data onto one managed network. Service providers and enterprise customers use their products to build converged networks that are bandwidth efficient, cost-effective and easy to manage. Their award-winning NetPerformer product incorporates advanced voice and data compression algorithms, enhanced switching and traffic management capabilities, and state-of-the-art hardware and software integration technologies. This position is simply based on the new technical character of the issue. The possibility of owning the issue is slim but even in that case, the reward is favorable. MAR 10.00 QTE OB Bid=0.25 OI=97 CB=9.75 ROI=9.0% Chart = /charts/charts.asp?symbol=ANET **** CLPA - Cell Pathways $44.81 *** Speculation Only! *** CLPA is a pharmaceutical company focused on the development and commercialization of products targeted at the treatment and prevention of pre-cancerous lesions and cancer. They aim to be a leader in cancer chemo-prevention and to build and integrated pharmaceutical company focused on the oncology market. Their business is characterized by a unique compound, Aptosyn that is undergoing clinical trials for the treatment of various types of pre-cancerous conditions. Another drug candidate, CP461, has completed Phase Ia human clinical testing and a Phase Ib clinical trial in cancer patients is currently underway. CLPA reported earnings last week and there were no major surprises. The company also affirmed that preparations for commercializing Aptosyn are proceeding as anticipated. With some of the most overpriced options in this market, this position must certainly be considered speculative. MAR 20.00 QJC OD Bid=0.75 OI=244 CB=19.25 ROI=7.7% Chart = /charts/charts.asp?symbol=CLPA **** ESPI - e.spire $12.75 *** Expansion And Growth! *** e.spire is a facilities-based Integrated Communications Provider to businesses primarily in major markets in the southern half of the United States. They were one of the first Competitive Local Exchange Carriers (CLECs) to combine the provision of dedicated, local and long distance services with frame relay, asynchronous transfer mode (ATM) and Internet services. Having established a suite of telecom services which emphasizes data capabilities in addition to traditional CLEC offerings, e.spire has evolved into an ICP. Their facilities-based network infrastructure is designed to provide services to customers on an end-to-end basis, and has an extensive physical infrastructure and coast-to-coast broadband data network. e.spire was recently awarded more than $16 million in its reciprocal compensation collection action against BellSouth and GTE Florida. The company also received $50 million of new funding from Allied Capital Management. This commitment brings the current total of equity financing to $175 million; plenty of money to complete their aggressive business plan. MAR 10.00 AQ OB Bid=0.50 OI=659 CB=9.50 ROI=16.4% Chart = /charts/charts.asp?symbol=ESPI **** MSGI - Marketing Services Group $23.75 *** A New CMGI? *** MSGI provides direct and database marketing, telemarketing and telefundraising, media planning and buying, online consulting and commerce, automated Internet marketing and Web design services. MSGI operates in the category of Marketing Services; defined as direct marketing; print & mail, telemarketing and telefundraising, infomercials, Internet marketing, point of purchase, lettershop and fulfillment. This area has grown rapidly during the 90's due to its consistently improving cost efficiencies (compared to mass marketing) as well as advances in technology and data capturing capabilities. Marketing Services recently completed a $30 million strategic private placement of preferred stock. The shares were purchased by an affiliate of Credit Suisse First Boston and the proceeds will be used for working capital including additional minority Internet investments. In short, MSGI plans to expand into other strategic areas and this new funding will help them exploit new opportunities. MAR 17.50 UMS OW Bid=0.38 OI=36 CB=17.12 ROI=7.4% Chart = /charts/charts.asp?symbol=MSGI **** SCTC - Systems And Computer Tech. $24.38 *** Learning Curve *** SCTC licenses and supports a suite of client/server, enterprise software and provides a range of information technology services, including outsourcing, systems implementation, systems integration and maintenance and enhancements. The company offers a continuum of information technology solutions from application software to large-scale outsourcing contracts. SCT targets the 2,200 English speaking institutions of higher education with enrollments greater than 2,000 students for its software and services. SCTC recently announced they will form a company with Datatel in the distance education market. This new company would provide a web-based platform for integrating electronic teaching/learning environments with administrative enterprise systems. This is a unique and undeveloped market that should provide enormous potential. MAR 17.50 YQS OW Bid=0.63 OI=8 CB=16.87 ROI=11.4% Chart = /charts/charts.asp?symbol=SCTC **** WSTL - Westell Technologies $31.50 *** On The Move! *** Westell Technologies and its subsidiaries supplies DSL Customer Premise Equipment, DSL and Telephone Access Systems and monitoring equipment for demarcation points in telecom networks. Conference Plus, their service business, is an Application Service Provider, hosting and providing audio, video, IP conferencing and support services. They service ILECs, CLECs, alternative carriers, and Fortune 100 companies in North America, and through partners and reseller programs, telecommunications companies around the Globe. New contracts with SBC Communications (SBC) and BellSouth (BLS) along with the pending acquisition of Teltrend, a telecom and data communications company have attracted investors to the issue. Warburg Dillon Read recently raised their price target on Westell to $48 based on the near-term upside potential. We simply favor the bullish technical outlook. MAR 22.50 QLW OX Bid=0.56 OI=493 CB=21.94 ROI=8.2% Chart = /charts/charts.asp?symbol=WSTL **** XICO - Xicor $26.13 *** Improved Model! *** Xicor designs, develops, manufactures and markets re-programmable nonvolatile semiconductor integrated circuits containing digital, analog and re-programmable nonvolatile elements. Xicor's devices offer a comprehensive set of features to its customers. By virtue of their non-volatility, Xicor's devices retain their information content when power is lost or turned off. Reprogramming is accomplished by writing over the old data without a need for first erasing the old data. Xicor's devices can be reprogrammed bit by bit or in larger groups of bits called words and pages without being removed from the system. Xicor products are sold in a variety of packages, including plastic, ceramic and chip scale packages for small footprint and height. The transformation of its business model is the reason behind the new success. Last summer they announced plans to outsource all of their production and transition to R&D on the chips it makes. Analysts took notice and CIBC World Markets recently came out with a BUY rating and a $28 price target. RGR Financial has a STRONG BUY recommendation with a $30 target. MAR 20.00 CIU OD Bid=0.44 OI=65 CB=19.56 ROI=7.8% Chart = /charts/charts.asp?symbol=XICO ************************ SPREADS/STRADDLES/COMBOS ************************ Support At 10,000? Not Hardly... Friday, February 25 Blue-chips plummeted Friday driving the Dow below the 10,000 mark for the first time in almost a year. The industrial index ended 230 points lower at 9862. The Nasdaq Composite also slid lower, closing down 27 points at 4590. The S&P 500 index ended down 20 points at 1333. Volume on the Big Board reached 1 billion shares with declines outpacing advances 1,807 to 1,169. Increasing bond yields added downward pressure to stocks with the 30-year treasury down 7/32, bid at 101 8/32, pushing its yield up to 6.14%. For the week, the Dow slid 357 points while the S&P 500 index fell 12 points. The Nasdaq opposed the trend, gaining 178 points. Thursday's new plays (positions/opening prices/strategy): Exodus EXDS MAR105P/M110P $0.68 credit bull-put Macromedia MACR MAR65P/MAR70P $0.68 credit bull-put Minimed MNMD MAR70P/MAR75P $0.68 credit bull-put Polycom PLCM MAR70P/MAR75P $0.50 credit bull-put All of our new plays offered favorable entry opportunities. The most interesting position was Minimed. The stock fell sharply during the session, providing a much larger credit than expected. The key now will be the recent technical support near $80. Any sustained move below that area should be considered a signal for early exit or roll-out. Portfolio plays: The Dow industrials fell precipitously Friday, ending below the technically significant 10,000 level as investors continued to liquidate positions in inflation-sensitive stocks. Analysts said traders were also concerned with stronger-than-expected economic data and the weakening broad market. Almost half of the S&P 500 stocks are down at least 30% from last year's highs and only one quarter of the issues on the NYSE have managed to avoid a severe correction. The leadership in the market has become extremely narrow and despite several attempts to rally, technology stocks were unable to drive the Nasdaq to a new record Friday. With so much negative sentiment among blue-chip issues, the number of investors retreating into conservative investments such as money market funds has increased significantly. Fortunately, the Spreads portfolio has been blessed with a number incredibly strong issues. The top performers in the section were among the market leaders. MRV Communications (MRVC) had another outstanding session, climbing $24 to a new all-time high at $139. Ariba (ARBA) made the leader board for the third consecutive day with an $11 rally to $264. Ionay (IONA) bounded $8 to a recent high near $81 and Iss Group (ISSX) closed at a record $100. In the small-cap group, Ptek Holdings (PTEK) jumped $1.31 to $9.88 on speculation of favorable earnings and the biggest surprise of the day, IDT Corporation (IDTC) gapped $4 to a 52-week high near $38 on continuing rumors of the Net2phone buy-out. The majority of these issues are well beyond their maximum profit targets and there is little to suggest the trend will change in the near future. It's anybody's guess where the market is going and with that in mind I feel fortunate to be departing the mayhem for a few days. This week I am traveling in Russia and will be unable to provide spread and combination candidates for the newsletter. I will however be publishing some new articles on strategy selection and trading techniques (if my current ISP in Moscow is intact). Those of you with questions concerning trading techniques can send them to: Contact Support and they will be forwarded to another of our talented researchers. Good Luck! ********* NEW PLAYS ********* MIR - Mirage $15.00 *** An Offer On The Table! *** Mirage Resorts owns and operates hotel-casinos and resorts. The company is also developing hotel-casinos in the Marina area of Atlantic City, New Jersey. Bellagio is a European-style luxury resort located on an approximately 90-acre site at the center of the Las Vegas Strip. The Mirage Hotel is a tropically themed destination resort adjacent to Treasure Island near the center of the Las Vegas Strip. Treasure Island is a pirate-themed hotel resort that attracts a number of first-time Las Vegas visitors. Beau Rivage is a new beachfront resort located in Mississippi. The Golden Nugget is a hotel-casino in downtown Las Vegas. The Golden Nugget-Laughlin is located near the center of the tourist strip in Laughlin, Nevada. Holiday Inn-Casino Boardwalk is also on the Las Vegas Strip and the Monte Carlo just south of Bellagio. Quite a collection of establishments! Officials at the MGM Grand hotel recently offered to buy Mirage resorts in a cash and stock deal valued at over $3 billion. Kirk Kerkorian of the MGM Grand said he would pay $17 per share in cash or a combination of stock and cash to acquire the hotel group. The offered price is well above the recent trading range of MIR's stock and represents a substantial premium to the current shareholders. Park Place Entertainment and Harrah's may also be interested in the bidding for Mirage but neither of the potential suitors is ready to make a public offer. Both companies are reportedly crunching the numbers to determine whether a bid of their own is feasible. After the announcement, First Boston and Deutsche Banc Alex Brown upped their ratings on Mirage Resorts. PLAY (speculative-bullish/diagonal spread): BUY CALL MAY-12.50 MIR-EV OI=2698 A=$3.38 SELL CALL MAR-15.00 MIR-CC OI=2212 B=$1.12 INITIAL NET DEBIT TARGET=$2.00-$2.12 INITIAL TARGET ROI=18% Chart = /charts/charts.asp?symbol=MIR **** UFS - U.S. Foodservice $15.50 *** Buyout Coming? *** U.S. Foodservice is a broad-line foodservice distributor that operates a number of full-service distribution centers that cover a geographic area encompassing more than 85% of the population of the United States. The company markets and distributes more than 40,000 national, private label and signature brand items to over 130,000 foodservice customers, including restaurants, hotels, healthcare facilities, cafeterias and schools. U.S. Foodservice product offerings include non-frozen food products, frozen foods, janitorial and paper products and equipment and supplies. Their private label brands are Rykoff-Sexton Connoisseur, Foodservice Blue, Foodservice Red, Chef's Variety, Harvest Value, Foodservice Cattleman's Choice and Selection, Magnifry and Magnifries. Their Signature brands are Roseli, Hilltop Hearth, Cross Valley Farms, Patuxent Farms, El Pasado Authentic Mexican Cuisine with a Touch of the Past, Rituals, Pacific-Jade and Harbor Banks. UFS enjoyed a big rally to close the week and implied volatility nearly doubled in the options as takeover rumors circulated. The volume has been off the scale in both stock and option trading and with the speculation of a buyout price in the low 20's, the trend should continue. Officials at the company did not return phone calls for comment on the rumors or the stock and options activity but there were a number of traders that suggested the rumors are accurate. Prior to the move there were two major brokers covering the issue. Schroder recently offered a STRONG BUY on quarterly earnings strength and growth momentum while US Clearing reiterated their STRONG BUY with a target of $29, based on expected 15% annual EPS growth. Regardless of the fundamentals, this position is a speculation play with low risk and favorable reward. PLAY (speculative - bullish/covered-combo): BUY STOCK - UFS LAST = $15.50 SELL CALL MAR-12.50 UFS-CV OI=992 B=$3.62 SELL CALL MAR-12.50 UFS-OV OI=195 B=$0.68 TARGET COST BASIS=$11.81 COMBINED ROI=12% (margin) Chart = /charts/charts.asp?symbol=UFS **** ICGX - Icg Communications $30.94 *** Earnings Rally! *** ICG is a leading competitive integrated communications provider (ICP). ICPs seek to provide an alternative to incumbent local exchange carriers (ILEC), long distance carriers and other communications service providers for a full range of services. Through its competitive local exchange carrier (CLEC) operations, the company operates fiber networks in regional clusters covering major metropolitan statistical areas in California, Colorado, Ohio, the Southeast and Texas. They also provide a wide range of network systems integration services and maritime/international satellite transmission services. The company markets bundled service offerings provided over its fiber network including long distance, enhanced telecommunications services and data services. Additionally, ICGX owns and operates a nationwide data network, over which the company recently began providing wholesale Internet access and enhanced network services. This play is all about earnings and with the conference call scheduled for Tuesday, the potential for a large movement is excellent. Unfortunately, we don't know in which direction that move will be. Prudential Securities is bullish on the upcoming report with a recent suggestion that the company will announce several new developments. Earlier in the month, Merrill Lynch reinstated coverage of ICGX with new target price of $35. Our outlook is cautiously optimistic and we will participate in the speculative play with a conservative, low-cost position. PLAY (speculative - bullish/debit spread): BUY CALL MAR-20 QIG-CD OI=503 A=$11.25 SELL CALL MAR-25 QIG-CE OI=3719 B=$6.88 INITIAL NET DEBIT TARGET=$4.25 ROI(max)=17% Chart = /charts/charts.asp?symbol=ICGX *************** TECHNICALS ONLY *************** These plays are based on the current price or trading range of the underlying issue and the recent technical history or trend. The probability of profit from these positions is also higher than other plays in the same strategy based on disparities in option pricing. Current news and market sentiment will have an effect on these issues. Review each play individually and make your own decision about the future outcome of the position. **** CTXS - Citrix Systems $100.06 *** Post-Split Rally? *** Citrix supplies thin client/server application server products and technologies that enable enterprise-wide deployment of applications designed for Windows operating systems. Their MetaFrame and WinFrame product lines, developed under license and strategic alliance agreements with Microsoft Corporation, permit organizations to deploy Windows applications without regard to location, network connection or type of client hardware platforms. MetaFrame software is an enhancement to the Windows NT Server 4.0, Terminal Server Edition. The MetaFrame product line enables organizations to deploy, manage and access applications across the extended enterprise. WinFrame is a Windows application server software based on Windows NT 3.51 that allows customers to deploy advanced Windows applications remotely, provide Windows applications to a broad array of client platforms and publish enterprise applications on a corporate Intranet. In mid-January, Citrix posted fourth-quarter operating earnings of $37.7 million, 50% higher than the year-earlier quarter and slightly ahead of Wall Street's consensus expectations. Citrix also recently split their stock 2-for-1 and after the dividend was issued, there was little change in the trend. The technical pattern indicates support near $82-$85 and with last week's move to a new all-time high, this position appears to be favorable short-term speculation. PLAY (aggressive - bullish/credit spread): BUY PUT MAR-85.00 XWW-OQ OI=282 A=$2.38 SELL PUT MAR-87.50 XWW-OY OI=20 B=$2.75 INITIAL NET CREDIT TARGET=$0.43 ROI(max)=20% Chart = /charts/charts.asp?symbol=CTXS **** VIGN - Vignette $228.75 *** Going For A New High! *** Vignette is the leading supplier of e-business applications for building online businesses. Vignette enables Internet businesses to reach more prospects, attract and retain new customers, and increase overall customer satisfaction, raising the total purchase per visit. Vignette powers more than 500 of the leading dot.com and Fortune 500 e-businesses, including AT&T, BMW, CBS Broadcasting, c/net, Daimler/Chrysler, Drug Emporium, FedEx, Kinko's, Simon & Schuster, Sprint, Tandy, United Airlines and Waste Management. Vignette e-business applications transparently automate the customer's side of the interaction, taking away all the anxiety and work involved in being a customer. Vignette reported record earnings last month with total revenues up 512% to $40.9 million compared to the same period in 1998. Though it reported a loss ($0.10 a share), it expects to turn profitable by the last quarter of 2000. It is interesting that Vignette's board of directors voted in favor of increasing the number of authorized shares to 500 million from the current 80 million (pending approval by share-holders on March 14). The stock split in late 1999 near $100. Is there another split on the way? The consolidation we encountered in past weeks may be ending and now the question is, "Will a new high be the outcome?" The chart remains bullish with the current price well above a rising 50 DMA and Vignette may soon continue its stage II climb into "blue sky" territory. PLAY (aggressive - bullish/credit spread): BUY PUT MAR-185 GGV-OQ OI=222 A=$2.75 SELL PUT MAR-190 GGV-OR OI=327 B=$3.50 INITIAL NET CREDIT TARGET=$0.88 ROI(max)=21% Chart = /charts/charts.asp?symbol=VIGN **************************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. Email contact information to Contact Support **************************************************************** ***************************** SEE DISCLAIMER IN SECTION ONE *****************************
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