The Option Investor Newsletter Thursday 3-9-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 3-09-2000 High Low Volume Advance Decline DOW 10010.70 + 154.20 10010.70 9738.90 1,126,833k 1,689 1,267 Nasdaq 5046.86 + 149.60 5047.96 4857.57 1,951,147k 2,471 1,819 S&P-100 756.97 + 17.11 757.11 733.06 Totals 4,160 3,086 S&P-500 1401.69 + 34.99 1401.82 1357.59 57.4% 42.6% $RUT 606.05 + 11.37 606.05 591.70 $TRAN 2341.44 - 11.09 2357.60 2321.38 VIX 23.78 - 2.17 27.55 23.77 Put/Call Ratio .38 ************************************************************* Nasdaq 5000, that was too easy. How about N6k by tax day? I told you it was a Super "Entry point" Tuesday and the market was nice enough to give us a second chance on Wednesday morning even though I "voted" to skip that option. The Nasdaq is now almost +300 points above the low set just yesterday. Nothing shabby about that! The Dow just tagged along for a ride and really did not change direction to the upside until about 2:PM. The lack of help by the Dow and the almost invisible rebound from the huge Tuesday drop should be a loud warning that the Nasdaq rally may have some rocky times ahead. The Nasdaq powered forward today seemingly oblivious to the fact that the Dow was still struggling. The Nasdaq itself was undergoing some serious sector rotation internally. The biotech sector which had led most of the last 700 points was a serious drag and the Internets were barely contributing. Stocks like YHOO +6, AMZN +5, CMGI +6, were up but not as much as you would expect. Other leaders were heading in the wrong direction, EBAY -1.50, BVSN -1.56. Of course if you consider merger partners NSOL +71, VRSN +37 and splitter RBAK +32 then everything is relative. That is what makes the Nasdaq so strong. When one sector is weak another picks up the slack. The Dow however is still stuck with the perpetual losers. T -.38, KO -.88, DD, -.50, EK -1.50, IP -1.31, MMM -1.63, PG -.06, MO -.13, SBC -.06, UTX -1.19. But you say those numbers were not that bad? You are right except almost all of them are at 52wk or longer lows and today was the rebound day from the really bad numbers. If this was all they could muster on a rally day then we still have some trouble ahead. It only took the Nasdaq 46 trading sessions to move from 4000 to 5000. Most of the heavy leadership today fell to the computer and software stocks that make up a large percentage of the index. MSFT +4.44 on news that Gates was "making every effort" to settle peacefully and that MSFT was entering the video game market and would compete head to head with other game makers. One point lost on the investing public was the timeframe for their new games, Christmas 2001, almost two years off. CSCO +7.25 on a rumor that Dow Jones was going to replace PG with CSCO in the Dow. Not hardly. CSCO may make it eventually but never in the past has a DOW change been leaked in advance or has any company been dropped for missing earnings. I can see why Dow Jones would want to replace some of the rusting assets of the Dow with technology companies but eventually we would have the Dow (TECH) 30. In reality with the market cap CSCO commands you could probably cut off the bottom six performers, add CSCO and have the Dow 25. Just dreaming. Continuing with the Nasdaq leaders INTC +3.44 on the delivery of their gigahertz chip. Dell, yes Dell, also soared +3.50 on huge volume after announcing that they were continuing to steal market share from Compaq in critical areas. We were watching the time&sales on DELL this afternoon and there were huge blocks, 60K, 75K, 100K going across the tape at the ask all afternoon. Over 71 million shares traded today. The buyers overcame a huge block of sellers at the 49.88-49.94 range. Millions and millions of shares traded hands with only a 1/16 spread and many times the bid/ask were the same for long periods of time. I don't know who wanted out but I estimate something close to 30 mln shares traded at $49.94 before the breakout finally came. All these "regulars" finally came together on the same day to accomplish the 5000 milestone. It is amazing to me how far and how fast the Nasdaq has risen. Here are some of the important dates. 2000 July 1998 2500 Jan 1 1999 3000 Nov 3 1999 3500 Dec 3 1999 4000 Dec 29 1999 4500 Feb 17 2000 Take a good look at that list. The Nasdaq was started in 1971 but 50% of its gains have come since January 1999. +2000 points in just the last four months and Y2K fell in the middle! After the bell today Ralph Acompora, if it is a big number event you can be sure Ralph will be on CNBC, said he could easily see Nasdaq 6000 before the end of the year. Come on Ralph, get with the program. Ramp up those expectations to real world, new economy, estimates. I am going on record tonight that the Nasdaq will see 6000 by tax day April 15th. Top that Ralph. It is simple math. 46 trading days since 4000 = only 22 points per day. At the current rate of climb of around 56 points per day on average, we are only talking about 19 more trading days. Thrown in a couple of mini corrections and a couple +100 point rebounds and I think we can do it, unless of course the Dow heads for 8000 and becomes an anchor for every other index. After the bell today CMGI posted a smaller than expected loss on an increase in earnings of +2,250% over last year. WOW! Analysts expected CMGI to lose -$1.28 and they posted a loss of -$.74 cents. Business is good at CMGI and they said they expected the AltaVista IPO to be out next month at $18 to $20. Delays were blamed on the SEC. CMGI has about 65 current Internet companies in various stages of development and they are planning to maintain the frantic pace. This news helped raise their share price by $4.00 to $149.56 in after hours trading. Where to from here? This is a catch 22. The Nasdaq rally today was pretty strong and fairly broad based. The financial stocks actually showed life today and the OEX was moving up well in advance of the Dow. The OEX actually put in a bottom at the end of February even though the Dow took out its Feb lows this week. The broader market is showing strength but the Dow is the proverbial "lead balloon." The catch? Don't look now but the rampant euphoria today sent the VIX plummeting to close at 23.78 after almost hitting 29 yesterday. 24 is not a sell signal but the speed at which it was declining could put it under 22 and in sell mode on a good strong open tomorrow. Couple that with the +300 points since the low yesterday and weekend profit taking could easily stop this rally dead in its tracks. Still the euphoria is rampant and money is flowing into techs at record rates. A continuation of the rally tomorrow could set up a Monday follow through and we could be on the way to April earnings. Now before you start selling the kids to raise cash let me remind you that CPI and PPI are next week and the FOMC meeting the following Tuesday. You did not think it was a yellow brick road all the way to 6000 did you? There will be some potholes but we will get there. We had a winner in the Nasdaq 5000 contest from Sunday. To enter you had to guess the day the Nasdaq would break 5000 the first time, the time of day and then the day it would close over 5000 the first time. The winner, by 3 seconds was Louise Hill. Louise has been a subscriber since Oct-1998 and must have been paying very close attention over the last few months. The exact time the Nasdaq broke 5000 was Tuesday morning at 9:49:06 EST. Louise guessed 9:37:15, only 11:51 off. The next closest guess was 10:01:00 or 11:54 after the fact. Congratulations Louise, now guess how long it takes us to mail your $500 prize! Just kidding. SEMINAR ALERT !! Due to scheduling conflicts we have had several cancellations for the March Option Expo Seminar n Denver. We have six openings for session one, March 25-28th and four openings for session two, March 28-31st. If you have interest in attending either of these sessions please register ASAP. It is first come, first serve. You will not regret fours days of intense option training by the Option Investor staff. For more info click here; http://www.OptionInvestor.com/bootcamp/oinmain.html Trade smart and sell too soon. Jim Brown Editor Disclosure notice: Current long positions include; SNE, TXN, DELL ****************************** OptionInvestor/Optionetics Spring Advanced Seminar Series ****************************** The spring dates for the OptionInvestor/Optionetics seminar series are approaching fast. This is the advanced seminar taught by George Fontanills and Tom Gentile. If you feel you need more option strategies in your trading arsenal like the Delta Neutral Straddles George is famous for then this seminar is for you. Remember, you can bring a friend for free and retake this seminar as many times as you want for free. The cost of the two day seminar is about what you would lose in only one trade. Invest it, don't lose it. Here are the spring dates: Mar 19/20 Chicago Mar 26/27 Dallas Apr 2/3 San Francisco For complete details http://www.OptionInvestor.com/seminar/ There is a 100% money back guarantee and you can take a friend for free. What else could you ask for? ********** STOCK NEWS ********** Test Yourself with Trinity Biotech By Matt Paolucci With the rising costs of healthcare, and the difficulties of scheduling appointments, going to the doctor has become a frustrating and economically prohibitive chore. For major medical problems, a doctor it is essential because of the diagnostic equipment they have access to. But in the cases in which you could perform a simple medical test on yourself, it would be nice to be able to simply buy a kit that could render results without a doctor's visit, or at least diagnose whether or not you need to consult a doctor. It would save time, cost less, and be much more convenient. Well, a little-known company called Trinity Biotech (TRIBY) just may have what you are looking for. Trinity Biotech develops, manufactures, and markets over 100 diagnostic products for the point-of-care, self-testing, and clinical laboratory segments of the diagnostic market. Trinity markets over 120 products through distributors in 80 countries. Without getting too technical, the company's products help in diagnosing conditions which include auto-immune and hormonal disorders, sexually transmitted diseases, enteric infections, respiratory infections, drugs of abuse, cardiovascular diseases, bone metabolism hCG (obesity), Strep A, HbsAg (Hepatitis), H. pylori, Chlamydia, HIV (AIDS), gonococcal (gonorrhea), CMV (cytomegalovirus, side effect of HIV), and HSV (herpes) infections. Trinity also provides control kits to assist in the interpretation of results. Trinity has grown rapidly through acquisition. It's most recent coup was the purchase, on March 7, of MarDx Diagnostics, which manufactures and markets an FDA-approved test kit that detects and assists in the diagnosis of Lyme disease. MarDx is a considered a world leader in the development and manufacture of diagnostic products for diagnosing certain infectious diseases. Trinity CEO Ronan 0'Caoimh said the acquisition strongly complemented the company's existing product portfolio and will be immediately accretive to earnings. Still more good news? Yep. Trinity also announced in January that it received Food and Drug Administration (FDA) marketing clearance for its Macra(R) Lp(a) test kit for use on automated systems. The kit is used to measure protein levels contained in human serum. Recent studies have identified Lipoprotein(a) as a significant risk factor for the development of coronary heart disease. What's great about Trinity is that its products could dramatically reduce the need for people to visit the doctor. Doctor visits are one of the things that people dread the most. Trinity's products should grow in popularity as the population grows. In the broader scope, fewer visits to the doctor means fewer insurance payments will be going to the doctor. I'm sure the guys in the long white coats don't want you to know about Trinity. Investors are always interested at the chance to get in early on companies with great products and potential. But biotech stocks can often be risky investments. Trinity is a small company, but it is also a profitable company. They recently reported record fourth quarter earnings, before items, of 4.5 cents per share versus 3.2 cents in the prior year period, a forty percent increase. Revenues rose to $6.6 million from $6.3 million, also a record. For the year, Trinity, before items, earned $4.51 million, or 16 cents per share versus $2.58 million 10 cents in 1998, on revenues of $36 million versus $33 million. According to Zack's Investment Research, there are no analysts covering shares of TRIBY, currently. With net profit margins of 17 percent, strong earnings growth, and no debt, it won't be long before Wall Street breaks the seal on this biotech gem. ************** Market Posture ************** As of Market Close - Thursday, March 9, 2000 Key Benchmarks Broad Market Bearish/Bullish Last Posture/Since Alert **************************************************************** DOW Industrials 10,700 11,250 10,011 BEARISH 2.17 SPX S&P 500 1,410 1,450 1,402 BEARISH 3.07 OEX S&P 100 765 780 757 BEARISH 3.07 RUT Russell 2000 500 520 606 BULLISH 2.24 NDX NASD 100 3,800 4,000 4,586 BULLISH 2.24 MSH High Tech 1,850 2,000 2,194 BULLISH 2.24 XCI Hardware 1,300 1,460 1,625 BULLISH 2.24 CWX Software 1,200 1,470 1,639 BULLISH 2.24 SOX Semiconductor 800 900 1,290 BULLISH 2.24 NWX Networking 940 1,000 1,171 BULLISH 2.24 INX Internet 700 800 851 BULLISH 3.09 * BIX Banking 500 550 467 BEARISH 11.30 XBD Brokerage 400 450 478 BULLISH 2.31 IUX Insurance 500 550 449 BEARISH 11.30 RLX Retail 950 1,000 820 BEARISH 1.28 DRG Drug 340 380 326 BEARISH 2.18 HCX Healthcare 700 750 672 BEARISH 2.18 XAL Airline 120 140 117 BEARISH 3.07 OIX Oil & Gas 280 315 278 BEARISH 1.27 Posture Alert Technology stocks helped lead the broad market higher Thursday, as the NASDAQ closed above the 5,000 mark, while the Dow squeaked above the 10k mark once again. Most sectors participated in the rally, with Drug (+5.45%), Healthcare (+5.24%), and Networking (+4.38%) leading the charge. The Drug and Healthcare sectors are now up over +10% in two days. With this most recent action, we have upped Internet to Bullish from Neutral, as that sector finally broke out of its 3-month trading range, and joined the rest of the technology sectors in the bullish posture zone. **************** Market Sentiment **************** Thursday, March 9, 2000 What's Next for the Dow? Technology once again led the way to a big day on Wall Street, as the NASDAQ broke the 5k mark in spectacular fashion. The Dow also happened to close above the 10k mark, thanks to a strong performance by the Drug sector (+5.45%). Cisco Systems, which closed up almost +7, was the big rumor of the morning, as traders were speculating that the giant networking company would replace Proctor & Gamble in the Dow. What a bad week that would be for P&G, but like we said, this was a rumor that spread viscously. The folks at the Wall Street Journal (who choose the makeup of the Dow) must be shaking in their loafers, as the NASDAQ continues to outperform the "old index" in a dramatic fashion! It must be really hurting their egos that their index just plain stinks, and to see these technology stocks continue to soar. Now granted, we would not be surprised to see Cisco Systems (or AOL) in the Dow in the near future, we just doubt it will be tonight. Now from a sentiment standpoint, the day when the Dow Jones Industrial becomes technology dominated (thanks to the boys at the WSJ), is the day we short technology and buy the "old Dow" stocks! Everything seems to be going our way this week for trading. In Sunday's letter we stated that this market was due for a breather and boy did we get it! On Tuesday's letter, we hinted that the market would bounce, and we got just what the doctor ordered. Technology continues to be the safe haven, but volatility will continue. With one week to the March expiration, we will continue to see wild swings across the board. Now looking at the Pinnacle Index for the OEX, we view overhead as being heavy, with underlying support being light. The market may jump up slightly, but we would expect a slight sell-off in the near term for the OEX. The Volatility Index continues to be a great trading tool, as that index continues to predicate a overbought to oversold market in a timely matter. Currently, it is a couple of points shy of being overbought, which leads us to believe that we may see some follow through to today's action on Friday morning. However, once that VIX hits the 20-21 range, we will be sellers again. One sector that has been locked in a narrow trading range for the Year 2000 has been the Internet Index (INX). While other sectors such as Software, Hardware, Networking, Semiconductors, and Biotech have gone through the roof, this sector has continued to lag behind. However, this sector is known to make most of its gains in a very short period of time, and for the first time in months, this sector was upgraded to Bullish (in the Market Posture section) by Pinnacle Capital. We have listed the stocks and their respective weightings, so that you may target shoot and individual issue should this index make a major run. Symbol Name Shares Weight AMZN AMAZON.COM 82 6.23% AOL AMERICA ONLINE 90 5.07% ATHM ATHOME CORP 161 5.48% CMGI CMG INFO SYST. 72 8.04% CSCO CISCO SYSTEMS 77 10.05% DCLK DOUBLECLICK 74 8.19% EBAY E-BAY INC 51 7.79% ELNK EARTHLINK 235 5.75% EXDS EXODUS COMM 93 10.62% INKT INKTOMI CORP 90 9.86% LCOS LYCOS INC 95 6.56% RNWK REAL NETWORKS 100 8.84% YHOO YAHOO! 44 7.51% 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. With the NASDAQ surpassing volume of 2 billion shares again, this money is obviously flowing into technology. Short Interest: Short interest continues to climb as quickly as the market. The short interest on the NASDAQ increased another +8.51%, for a 5th consecutive record. Interest Rates (6.148): The current yield is now safely off of 52-week highs and is temporarily out of the danger zone. Mixed Signs: None BEARISH Signs: Pre-Release Season: With April just around the corner, we have the beginning of pre-release season. Over the next 3 to 4 weeks, companies will let Wall Street know that their profit/sales goals are not being met, and their stocks will get brutally punished. The first major corporation to do just this is Proctor & Gamble, with it's 27 point decline. Volatility Index (23.78): 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. At current levels, the VIX is within one good day of being in overbought territory. 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 Tues Thurs Benchmark (3/3) (3/7) (3/9) Overhead Resistance (790-820) 16.85 16.53 19.70 Overhead Resistance (765-785) 6.23 5.26 6.10 OEX Close 765.95 732.25 756.97 Underlying Support (740-760) 0.69 1.01 0.70 Underlying Support (700-735) 2.71 4.68 4.18 What the Pinnacle Index is telling us: On Sunday, we stated that the OEX was due for a breather, and boy did it get one. Then on Tuesday, we stated that a bounce was very likely, and we got that! We seem to be getting everything that we ask for! Anyway, as it stands now, direct overhead is heavy, and underlying support is light, which would indicate that we may be due for another pullback. Put/Call Ratio Friday Tues Thurs Strike/Contracts (3/3) (3/7) (3/9) CBOE Total P/C Ratio .40 .43 .47 CBOE Equity P/C Ratio .32 .35 .33 OEX P/C Ratio 1.36 2.04 .99 Peak Open Interest (OEX) Friday Tues Thurs Strike/Contracts (3/3) (3/7) (3/9) Puts 680 / 9,154 705 / 10,844 705 / 11,191 Calls 750 / 7,497 750 / 7,277 750 / 10,458 Put/Call Ratio 1.22 1.49 1.07 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 March 9, 2000 23.78 Investors Intelligence Major Percent Percent Date Turning Point Bullish Bearish October 97 Bottom 22.0 48.3 July 20, 1998 Top 52.0 24.0 October 8, 1998 Bottom 38.5 42.7 January 11, 1999 Top 58.3 30.0 March 4, 1999 Bottom 49.1 32.5 Oct. 13, 1999 Bottom 39.2 37.5 February 25, 2000 51.8 28.6 March 2, 2000 52.3 28.3 March 9, 2000 53.4 27.6 Please view this in COURIER 10 font for alignment ************************************************* CHANGES THIS WEEK Daily Results Index Last Mon Tue Wed Thu Week Dow 10010.73 -196.70 -374.47 60.50 154.20 -356.47 Nasdaq 5046.86 -9.94 -57.01 49.42 149.60 132.07 $OEX 756.97 -12.99 -20.71 7.61 17.11 -8.98 $SPX 1401.69 -17.89 -35.66 11.08 34.99 -7.48 $RUT 606.05 3.76 -6.17 -0.79 11.37 8.17 $TRAN 2341.44 -58.36 -112.50 88.94 -11.09 -93.01 $VIX 23.94 1.86 3.48 -0.68 -2.01 2.65 Calls Mon Tue Wed Thu Week CHKP 270.38 6.75 16.56 18.44 -1.13 40.63 Set stops NTAP 240.38 12.13 0.56 5.69 22.06 40.44 Excellent QLGC 187.59 19.50 14.31 1.19 -2.84 32.16 Rocket CLRN 169.50 8.50 13.25 -4.81 14.56 31.50 Low vol VERT 277.75 -6.59 -7.63 16.00 24.25 26.03 Near $300 EMLX 213.00 13.75 2.69 1.31 5.00 22.75 Entry RRRR 89.38 0.50 3.94 10.38 6.56 21.38 Ascending AMD 58.13 5.63 7.50 -1.38 4.63 16.25 Semi-play AFCI 79.88 10.25 -6.75 0.88 10.00 14.38 New high SEBL 167.69 -3.28 9.56 4.13 2.56 12.97 Up again DSTM 41.25 0.94 3.81 0.13 4.38 9.25 New DELL 50.44 0.50 -1.00 1.19 3.50 4.19 New ATML 55.56 1.19 2.94 -2.56 1.56 3.13 Bouncing ANDW 29.81 2.13 0.13 -2.19 2.25 2.31 At $30 CSCO 139.31 -1.31 -4.06 0.31 6.94 1.88 Rumors WCG 55.38 3.00 1.75 -3.13 -0.50 1.13 Basing MDT 50.00 -1.88 0.00 -0.56 1.06 -1.38 Dropped CCBL 47.50 1.91 -1.88 0.00 -2.25 -2.22 Dropped INSP 256.94 -6.31 6.00 -7.38 4.81 -2.88 Split run ADIC 93.75 2.06 -1.56 -0.44 -3.25 -3.19 Dropped MER 103.13 -0.19 -2.38 -4.00 2.69 -3.88 Rallying ERICY 100.50 -0.75 -1.63 -2.44 0.50 -4.31 Hold $100 NOK 214.63 6.50 -8.50 -6.63 3.25 -5.38 New TXN 180.00 -3.69 -5.94 -6.00 8.38 -7.25 New GLW 194.88 4.38 -12.63 -8.13 6.00 -10.38 Careful SNE 259.06 -27.56 -4.38 8.69 -17.13 -40.38 New DNA 187.50 -19.00 -4.00 -1.75 -22.25 -47.00 Dropped Puts DD 46.44 -1.00 -3.44 0.63 -0.50 -4.31 Bearish UAL 46.38 -1.69 -1.88 1.38 -1.88 -4.06 New PPG 45.56 -1.06 -1.50 -0.44 -0.50 -3.50 Dying CTS 49.00 -5.81 3.00 -3.13 2.63 -3.31 Dropped MRK 61.13 -1.00 -2.56 2.88 4.31 3.63 Dropped RNWK 80.75 2.56 -2.63 0.81 9.81 10.56 Dropped ************ WOMANS WORLD ************ Okay, So Bite Me! I Got Nasdaq Closing Over 5000 Right! Do You Want To Know How I Did It? By Renee White In my Tuesday's article, I predicted that Nasdaq would close over 5000 today. What Can I Say? My scientific background proved helpful. Never fight Mother Nature! It was just woman's intuition. It tickled me pink to get this one right. I even humored myself. More on today's trading, later. After writing Tuesday's article mid-day, the bottom fell out of Nasdaq. I lied. I said I wouldn't be buying again until after the major profit taking at or above the closing over 5000 had occurred. Well, you know how women are: we sometimes change our minds. I changed mine after the Nasdaq rocket exploded in thin air vaporizing into dust by Wednesday morning. Things began flying south quickly so naturally the typical chart problems and bad option prices began. My thinking centered on where support would be found and if a further meltdown would occur after Greenspan's speech was over. I love technology. I just hate it breaking down when I need it! By the time I could actually see things, the JDSU options purchased at the close of Tuesday, were off 65%. These were March OTM options, which I planned to exit today anyway. OUCH!! My thoughts turned to concern, but I rarely exit when things look the bloodiest. No use fretting over lost money there. Starring at it won't help. Charts were smokin' and thoughts turned to reminding myself not to sell when everyone else was panicking. I watched Nasdaq go lower and lower. JDSU stabilized, so I decided to evaluate it's damage again mid-day, after the panic was over. If I trade as I preach, by not playing with money you can't afford to lose, then why exit on the bottom in a panic, especially early morning? (I exited these today at a 50% loss.) Back to the Nasdaq, I started pulling up bar charts, looking for support levels and waiting for a bounce. It went lower still and lower. Then I saw the VIX was over 28, itching to take out 29. Oh Boy!! My hair on my legs relaxed and my focusing zeroed in on which prime candidate to buy. I'm sure I am not the only person thinking that all that cash coming out of the DOW recently, probably won't be going back in. Just think, if you were a fund manager who just got creamed with a disastrous DOW sell-off, right after you just moved into your new huge mansion bought with money you made last year, wouldn't you at least try to play some tech bulls during April earnings? Remember, you still owe taxes on all that money you made also! I bet some of those guys are having a real hard time smiling when they get home everyday. "How was your day, Dear?" "Don't ask! I don't want to talk. I have a headache! Don't look at me! And NO, We can't go out to dinner!" "But Honey, I bought new furniture and I just invited my Mom to come stay with us a month and enjoy the new house." Quick call 911. I think he fainted! I went to the Nasdaq Daily chart, to see what my indicators told me. I didn't really like what I saw so I moved to the 60-min chart. Everything looked oversold and it was piercing the lower Bollinger Band, just like it had February 15th and February 22nd, my recent alert, support and buying days. My MACD looked to be completing it's negative peak, my directional movement indicator looked to be finishing a sell signal and my stochastic showed over-sold. Since I have recently made a killing on QQQ bought on February 22nd, I considered it again. I looked at the QQQ chart to find a support level. Since it has been flying lately, the 216 area on March 1st, was the best I could find. Then QQQ went right through it! But you know what? It too had pierced the lower Bollinger Band on those same two days in February. Although the VIX was not over 30 (my buy signal) as it was on my previous buy days, it had been rapidly moving up all morning and now staring at 29. Did anything show an all out "Buy" signal? No. But everything told this aggressive, intuitive trader, that it soon would and I may want to enter early. I figured this was the last steep, quick, sell-off, before a race through 5000. Risky? You Bet!! Early? Perhaps. I wouldn't know till later, but if I was off, I didn't think it would be by much. I decided to buy April QQQ, this time 220, a little OTM after it appeared to be bouncing back through the 216 level. Why did I buy OTM when I bought ITM last time? Because April earnings will soon be gearing up and there was a huge open interest at this level. Also, although QQQ went through the 216 support level, it now was rebounding nicely and I thought this would add weight to its support at this level. Also, QQQ does not track the Nasdaq exactly. Waiting for what I thought was the bottom to be confirmed on QQQ allowed me to see that the VIX had now dropped back into a mid trading range of a low 27 and the Nasdaq was rallying off it's low. To me, this was bounce confirmation. I also entered a basket of BVSN. It has a 3:1 split coming up soon, which I think will move it more. Tuesday, I took profits on most of my existing position, so I rolled up for a short-term churn, when it gave me an entry with the sell-off. As the rocket took off again, late this afternoon, I exited other March plays and my March QQQs at the close. I have several April plays which are deep ITM, which I will be exiting at the open, to catch an opening gap-up. Yes, during happy hour. I really tried to exit my NSOL today with a 504% gain since Feb. 22nd, but I just felt the risk was in my favor for an opening gap play since it was up 71 points today. Also, I glad I didn't exit my VRSN during the carnage Tuesday. That recovered nicely. Yes, VIX started dropping this afternoon. Until the last 15 min, I thought it was coming back up a little. It wasn't close enough to the low 20's for me to completely close out of everything and the momentum into the close seemed strongly up. I just thought the opening gap-up on a few, would fall to my favor. Risky? Yep! Those exiting at today's close were right to do so. Now for an email I received: "I e-mailed you once before. I was only doing 2 contracts at that time $7000 in (my) account. Thanks to you and the OIN newsletter, I am up to $32,000. Now I try to trade 10 contracts if I can or else 3 or 5. Thanks. Paul" Congratulations Paul. We appreciate hearing that we are helping. We've all learned from mentors somewhere, so it feels good to all of us, to give back. Now if we can just help you keep it! I don't mean to rain on your parade, but 10 contracts sounds like you are loading all your eggs into one basket. That's very, very dangerous. Allocate a portion of your money to trade with and diversify with a few good plays in different sectors. Always save some cash for those major sell-off buying opportunities and make sure you can justify your purchase. Good luck on your obvious continued success! Signed: Mother Nature. Renee White Contact Support ************** TRADERS CORNER ************** Judgment is The Result of Experience... By Janar Wasito Wednesday: Having just formulated my trading rules, I went right out and broke them. As the Marines like to say, judgement is the result of experience, and experience is the result of bad judgement. It wasn't as bad as it could have been, but it did illustrate why I formulated my rules in the first place. I was driving around Monday night, feeling pretty good about coming up with a systematic way to look at the market. But I was thinking, hey, I have all this cash sitting around in one portfolio. Maybe it's not such a bad idea to sell puts on a stock that I really know well, and that I really would like to own. What is the coolest stock out there? How about VRSN. I could sell puts against that thing every month. Terrific stock. At the very core of business to business ecommerce. Growth potential and everything is huge. Heck, I would rather have VRSN stock than cash anyway, right? I even mentally calculated how much VRSN stock I could buy, and how many puts I could sell. Why not start with the VRSN Mar 240s, those have a nice premium, and VRSN has been consolidating pretty nicely at about 250. Hmmmm.... Well, on Tuesday morning, as I was doing my checklist to view the market, I noticed a few stocks up, some stocks down. Market looking like it was ready to sell off. And VRSN was down 40! Oh boy, what's going on? So, I click over to see the news. VRSN buys NSOL. Brilliant. Absolutely brilliant. Great merger. Unlocks tons of value. I didn't completely back up the truck, but in the course of the day, I put on these plays: Jun 220/300 Bull Call Spread Apr 190/210 Bull Put Spread Sold Naked Mar 200 Puts Bought Sept 190 Calls The first two plays were in a fast option trading account in which I could shoot straight into the exchanges. So, I put on one side of the spread, and waited for the stock to bounce back up to put on the other side. Problem is, the stock didn't bounce as far as I thought it would. By Wednesday morning, I had completed the Bull Call Spread, but not the Bull Put Spread. I could have put both on for favorable terms on Wednesday morning, but I missed the opportunity for the Bull Put Spread in the first 15 minutes of the day. I was already breaking my rules. I slept with a naked put position on Tuesday night, and, truth be told, did not sleep that well. The short Mar 200 Put position is of a small enough size in another brokerage account that I can just buy the stock. At least I calculated how much stock I could purchase before I sold the puts. And, truly, I don't mind owning the stock. It is the must have Internet backbone company, in my mind (and some analysts too). But what I think doesn't count for much in the market. The Sept 190 Calls are as far out as I can go. They are basically as close to LEAPs as I can get. I will sell short term calls with 10 days of life against them every month in a calendar spread plan. The real problem, of course, is that now, midday Wednesday, I am already back to watching the market tick by tick to see (hope? pray?) that VRSN recovers enough for me to complete my Bull Put Spread. On the plus side, I did follow my money management rules, so I don't have too much capital at risk (4% of my portfolio). My focus on VRSN is preventing me from making other plays, such as the list of plays I generated on Tuesday night (various spreads): CIEN, CRA, INSP, PEB, DNA, CSCO, ARBA. With two hours remaining in the trading day, Wednesday, things are looking up. VRSN has finally moved off of its slug like stupor at 190 and is up to 205. I have also successfully legged into a CSCO Mar 130/135 Bull Put Spread to take advantage of the split on 3/23. I am waiting to get into the other side of my VRSN Bull Put Spread for a favorable price. I also enter a PEB Apr 105/125 Bull Put Spread. By the end of the day, I am glad its over. VRSN finishes the day at 203. Up 3, after dancing around in a 25 point range. At least I have put on some good trades (I hope). On the down side, I have become too wrapped up in one stock -- exactly the downside risk that my trading checklist is designed to prevent. I have lost my objectivity. My checklist will work, if I use good discipline in following it. For example, the checklist was telling me to exit some bull spreads on Monday, and I should have taken profits on JDSU and AFFX, but I elected to let them ride, since I have so much time. I was already at over 50% ROI on both plays. No where near max profit, due to the fact that I gave myself so much time, but they still would have been good to take profits on. I did, however, take profits on a JDSU Bull Put Spread. Anyway, the rest of my portfolio is down today, but that is OK. That is what I expected. A few days of profit taking, then, hopefully some good entry points for April Earnings. Thursday Morning: Things open down, but by the end of the first half hour, a bounce back in the averages has occurred. As well, I am ecstatic to see that VRSN is up 22! I was right! The other side of my Bull Put Spread order fills, and I am hedged. My April Bull Put Spread, with a max reward point at 210 is on for better than a one for one risk reward ratio. A few sleepless nights, and a great play is set up. I could actually have held out and nailed a really good price on the bounce back. I do my checklist. The VIX seems to have put in a top over 28, I guess Jim was right to buy the dip Tuesday. The DOW has found some kind of support at 9800, as if that matters. The OEX is bouncing around between resistance up at 765 and support down in the 720 range. Fine. More importantly, the NASDAQ, having bounced off of its 10 day Exponential Moving Average, is now heading up again. Sectors look good, but biotechs are still selling off. May be some opportunities there. I tried to put on a CRA Bull Put Spread for April, but it was difficult getting into the contracts that I wanted (wide bid ask spreads), so I held off. I did, however, enter a INSP Mar Bull Put Spread 240/260 with a risk of 11 for a reward of 9 -- a little under the 1:1 that I want. That is a pretty risky play, and I need INSP to go over 260 by next Friday for max reward. My CSCO Bull Put Spread is already at max reward since it is trading at 136. With a split less than a week after expiry, I think that I will nail that play. In sum, the 4 March Bull Put Spreads (IMNX, JDSU, CSCO, INSP) have already yielded one max reward (JDSU), IMNX is looking bullet proof with the max reward way back down at 185 and a split shortly after expiry, CSCO is looking good, and INSP is a gamble, but support is strong at 250, and the sector (VRSN, NSOL, internet generally) is hot and another split is on the horizon there, if memory serves. JDSU and AFFX are two object lessons in why to take profits at 50%+ ROI on Bull Call Spreads, even if they are several months out. I think that becomes part of my trading checklist. 50% is a good return, especially if you can achieve it in a few weeks. The same basic 10 rules apply to spread trading -- cash flow is king, take a profit over and over and over. Sure, in the way that I set up the JDSU and AFFX Bull Call Spreads, I theoretically COULD get a max ROI of 200%+, but I would have to wait until expiry in the summer or September to do that. On the plus side, I have a long, long time horizon on my JDSU, AFFX, and other spread plays. Well, the market is looking up, my plays are doing well, time to hit the road. Contact Support ***************** BROKERS CORNER ***************** ARE PURCHASING OPTION SPREADS THE RIGHT TOOLS FOR THE JOB? The use of stock options in trading dramatically increases the leverage but does not change the fundamental fact that you have to pick the direction of the stock; up, down, or nowhere. In addition the limited time frame forces decions to be made prior to expiration. The ability to control shares with options contracts for a fraction of the price of the stock is very attractive but caution and discipline must be exercised to prevent emotional trading. One tool in the option strategy toolbox is the use of spreads. Unfortunately sometimes the different strategies are misused and certainly misunderstood. The benefit of trading either with bull call spreads or bear put spreads is the limited risk. If you purchase a call spread it is less aggressive and cheaper than purchasing the call outright. An example of buying a EMC JULY 120 call and simultaneously sell an EMC JULY 130 call would cost less than the outright call purchase but also take away flexibility and limits the profit potential. The maximum profit of 10 points is only made at expiration and the stock must be at 130 or above at that time. Unfortunately unwinding the spread in the interim does not mean you will make the maximum because of the time value left on the option sold. Many traders have learned the hard way by unwinding the spread early only to make a small amount. The most important thing is money was made but not nearly as much as common sense would dictate. A small profit is ALWAYS better than the alternative but there are ways that correctly picking the market direction yields better results. Essentially the spread locks you into a position and takes away the ability to take profits although you could exit prior to expiration. This loss of flexibility causes the greatest misuse of spreads and frustration among option traders. The most troublesome situation exists when trading long-term spreads with greater than six months until expiration. Even though the stock can move dramatically in your favor the option spread may change little and needs to be held for months and months until expiration in order to make maximum profit. It is a shame to be that right and not to profit sustantially. The key is you are not losing money but more importantly YOU ARE NOT MAKING MONEY FOR A LONG TIME EITHER and that could change. When you are correct in your market analysis there are much better was to capitalize. Instead possibly choose straight outright option purchases with unlimited upside and flexibility to exit anytime. In the example above with a bullish opinion purchase the call and place a stop loss as protection. Your initial cost may be higher but your ability to exit when you have a profitable situation is probably more beneficial in this trading environment. Please always have an exit plan if your market assumption was wrong to stop the losses. Spreads have their place in an option-trading portfolio. Often they are chosen when volatility is high and straight outright purchases are cost prohibitive. Spread trading allows you to participate in a stock that may have too much risk for your style. The only thing you can attempt to control is the risk. Spreads allow just that but unfortunately tie your hands and take away flexibility. You are giving up some ability to decide when to get out in order to participate in a stock. As long as that part of spread trading is understood and investors are well informed less confusion will result. SPREAD TRADING IS SUCCESSFUL when done properly and with a disciplined approach. Again I would like to stress that not all options strategies are suitable for everyone. Do not trade a strategy without having a beneficial reason to implement it. Any trade is worth doing after the proper research is completed and a trading plan is developed. When to exit is the most important factor and should be determined prior to entry. Account size, risk tolerance and most importantly market expectations will help in choosing a strategy and discipline to fit your needs and market environment. OPTION STRATEGIES ARE JUST TOOLS that need to be implemented properly to achieve the desired results of making money. Alan Knuckman and Andy Aronson Lasalle Options Toll-Free 888-281-9569 www.lasalleoptions.com PICKS WE DROPPED **************** When we drop a pick it doesn't mean we are recommending a sell on that play. Many dropped picks go on to be very profitable. We drop a pick because something happened to change its profile. News, price, direction, etc. We drop it because we don't want anyone else starting a new play at that time. We have hundreds of new readers with each issue who are unfamiliar with the previous history for that pick and we want them to look at any current pick as a valid play. CALLS: ***** DNA $188.50 -21.50 (-47.00) DNA suffered a severe tumble after Roche Holdings, a unit of the Swiss drugmaker, announced plans to sell 17.3 mln of its DNA shares to raise an estimated $3.6 bln. in cash. Roche Holding wants to take advantage of the quadrupled share price DNA has experienced since last July. Unfortunately this news by Roche Holdings to cut its stake in Genentech has driven DNA down $21.50, or 10.3% from yesterday's close at $209.75. Clearly this lucrative play is over. After such a severe drop, a resurgence in momentum will be hard to come by. We have no choice but to drop it from our call list this evening. ADIC $93.75 -3.25 (-3.19) The storm finally arrived. Unfortunately the lightning bolts hit ADIC right between the eyes. Falling out of bed yesterday morning on strong volume, ADIC didn't find support until it hit the sub-basement level of $78.75. Recovering back to $97 by the close, the issue provided ample rewards for vigilant high-risk players. Today, despite continued strength on the NASDAQ, ADIC fell back and spent the bulk of the day building support at $90. It looks like the momentum players have left this issue, and with its 2-for-1 split occurring next Monday, it is time for us to move on as well. MDT $50.00 +1.06 (-1.38) Just about as exciting as watching grass grow, action in MDT has been disappointing. After tagging a new high on Monday at $52.94, it has been Dullsville for this medical device-maker, as it trades in a narrow $2 range with volume only about 75% of the ADV. Believe it or not, we originally picked MDT on the momentum which carried it to new highs. The fickle finger of fate (along with buying interest) has moved on to greener pastures, leaving MDT to meander between the resistance forming at $50 and support at $48. Even the strength on both of the major indices today couldn't push MDT through its newly-formed resistance. This makes for an eminently boring play, and with so much excitement elsewhere in the market, we'll take our money and go find some action elsewhere. CCBL $47.25 -2.25 (-2.47) CCBL ran out of gas! Though there was no rush to get out the door on Tuesday, there was no rush to get back in the door either. Consequently, CCBL sank under its own weight and general lack of investor enthusiasm. Continually declining volume confirms this. While there have been good opportunities to profit by buying at the close and selling into the next day opening, the pattern was not readily discernable. Even if it was, the trend has been down in the last three days - not a good sign considering the NASDAQ benefited from an adrenaline rush today. Accordingly, it leaves our play list tonight. PUTS: ***** MRK $61.13 +4.31 (+3.63) Wait a minute...that's the wrong direction! Bouncing with the rest of the drug sector, our play on MRK didn't even give us a chance to jump aboard (Thank goodness!) before it moved up over the past two days. The selling associated with the Proctor & Gamble earnings warning seems like it was overdone, and MRK looks like it has caught the attention of value investors. Now firmly positioned above its 10-dma ($58.80), the strength of the move, accompanied by heavy volume (nearly double the ADV), leads us to believe that MRK is headed higher from here. At the very least, it looks like it has put in a bottom, so we will look elsewhere for more lucrative plays. RNWK $80.75 +9.81 (+10.56) Wednesday's session brought RNWK down into the $60s but it never quite tested support at $64. Instead, it bounced off $67 and built an intraday support at $68. That was the last of the sixties that we would see as RNWK steadily pushed onward to close at $70.94. Today's strong up move began early in the session with a breakout to the $76 level. This move that spoiled our put party can be attributed to Wedbush Morgan initiating coverage of RNWK with a strong buy. While sustaining these gains throughout the day and closing at $80.75, it's time to move onto greener pastures. CTS $49.00 +2.63 (-3.31) Alright, since our last update, we have seen lackluster downdrafts in CTS only to discover a new-found support at $46. Today's midday climb above $50 and steady hold at the $49 support level is not what we wanted to see on this put play. It seems like everything went up today with a successful NASDAQ 5000 run, and with a lack of downward conviction, CTS doesn't really provide a risk/reward that we like at this point. It was a short ride and now it's time to move on to one that's more fun. ******************** PLAY UPDATES - CALLS ******************** QLGC $187.59 -2.84 (+32.16) Taking a little time to consolidate its gains, QLGC looks to be coiling the spring for its next leg up. Investor reaction to the news (re-stated below) has been a dominant factor, and now that it is out, they are waiting for the next catalyst. As an indicator of the company's dominant role in the industry, QLGC's director of planning and technology, Skip Jones, has been elected president of the Fibre Channel Industry Association (FCIA). Of course, the primary mover in QLGC's price the last 2 days seems to have come from the Robbie Stephens Tech 2000 conference last week. Dane Lewis of Robertson Stephens, in an interview with The Wall Street Transcript called QLGC and EMLX the leaders in the emerging new wave of storage solutions, namely Storage Area Networks (SANs) and Network Attached Storage (NAS). Holding support at $182, QLGC has seen successively lower highs since Monday. The breakout from this shallow pennant will likely come soon so start looking for entries now. The first serious resistance shows up at $194, followed by Tuesday's high of $203.25. Volume is still running 50% over the ADV, with positive price moves being accompanied by increases in volume. Watch for QLGC to bounce at support and then jump on board as volume picks up. RRRR $89.38 +6.56 (+21.38) If anything, the rate of ascent is increasing. When we picked up RRRR on Tuesday, the stock had been moving in $5 steps before consolidating. Over the last 2 days, the increments have increased to $10, and the enthusiasm has been confirmed by increasing volume. Trading over 2 million shares again today, the company definitely has investors' attention. This is exactly the kind of action we like to see in our momentum plays, and it has certainly been helped by the surge on the NASDAQ. Now that N5K has been reached, we could see some profit-taking, so move your stops up to protect your gains. Mild support can be found at $87 and then $80, with resistance at today's new 52-week high of $92.38. The 5-dma has provided good support since early February, but now even it is far behind, at $76.25. Keep a tight watch on the volume, as a weakening of this indicator may be your first indication of profit-taking. Quicknet Technologies, a privately-held company with RRRR as one of its primary investors, reminded investors yesterday that Voice over IP technology is still hot. Featuring live demos and tutorials at the Computer Telephony Expo, the company reportedly drew standing room only crowds. *********************************************** PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO *********************************************** ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. 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It is possible at this or some subsequent date, the editor and staff of The Option Investor Newsletter may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The newsletter staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control.
The Option Investor Newsletter Thursday 3-9-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. ******************************** PLAY UPDATES - CALLS - CONTINUED ******************************** AFCI $79.88 +10.00 (+14.38) This stock's intraday volatility continues to offer profitable entry points. On both days we saw AFCI confidently bounce off the 5 & 10 DMAs and today we got decisive confirmation. The 10-point gain on rising volume proved there's still some spark left in our momentum play; although now we face tough resistance at $80. While AFCI made a champion charge for the next price level it just couldn't penetrate the mark. However it did set another new 52-week high, which notably makes it the third time to do so out of the last four trading sessions. Again today's performance bodes well for the play, but remember one day doesn't seal its fate. So conservatively let's keep our guard up and watch for supplementary moves to newer heights. CSCO $139.63 +7.25 (+2.19) CSCO led the pack as the Nasdaq made its first close above 5000! This move came on rumors that CSCO would oust PG as a member of the Dow Industrials and take their place. A battle ensued between buyers of the rumor and the invisible force field of $140. In anticipation of the upcoming 2:1 stock split in a couple weeks (ex-div 3-23), we expect CSCO to easily shatter $140. But if there's enough intraday volatility, then use dips near the vicinity of the converged 5 & 10 DMAs for entry points. Lehman Brothers is also bullish on CSCO. Analyst Tim Luke remarked yesterday that "Cisco remains a core holding in our universe of Internet infrastructure stocks" and repeated his Buy rating. There was also big news on Wednesday surrounding Cisco and Cap Gemini SA, Europe's largest computer-services company. They recently entered into a Web alliance to sell and service Internet and telecommunications systems. Currently this is a market where sales are increasing by 30% a year! According to the terms, Cisco will invest $671 million in Cap Gemini and $164 million for a 4.9 percent stake in the new venture company while Cap Gemini will contribute 12% of its workforce. INSP $256.94 +4.81 (-2.88) Volume levels remain respectable as INSP bounces essentially between $250 and $260. INSP remains on our call list because for one, we now have more time to trade this split play and two, it's currently at a sensible entry level. From a technical standpoint, the 10-dma ($244.14) is serving as the bottom support while the rising 5-dma ($256.38) reflects the near-term. What of course we're patiently waiting for is a breakout. As more time passes with INSP locked in a channel and the anticipation of the 2:1 split (ex-div 4-7) grows, it's likely the move will be sharp and swift. We're hoping it can reach SG Cowen's price target of $310! They began coverage with a Strong Buy recommendation on Tuesday morning. Keep in mind, INSP is a HIGH-RISK Internet play and likely doesn't fit everyone's risk portfolio. ANDW $29.81 +2.25 (+2.31) The rally commenced again today for Andrew, but it has still yet to crack the resistance at $30. Something is going to have to give as it builds higher-lows and pushes up against this stubborn mark. Either the lows will stop getting higher or the breakout we want will occur. Volume has slacked off since Tuesday and the 10-dma is rising rapidly to help support the stock. The 10-dma is currently at $26.85. Look for support at $28.50 if it is going to keep this trend in tact. In the news today, ANDW had a new product launch. It is a Home/Office speaker for your wireless phone. This helped sentiment, but was not a major influence on today's trading. The confirmation of the breakout over $31 will be determined by volume increasing over the ADV. Otherwise, use patience and buy the dips. ATML $55.56 +1.56 (+3.13) ATML's pace had slowed down as they had fallen Wednesday down to about $50 before making a comeback to close at $54. They dipped down to $50 again today, but closed near $56. Hopefully, Atmel can put the market weakness behind it and trade back to new high territory. We have seen a good double-bottom on this stock and expect a test of the 52-week high soon at $58.94. We haven't gotten any new news or seen an increase of volume. Either of those events may be what ATML needs to kick back into high gear. Tomorrow will be the test. It needs to get moving or get off our call list. EMLX $213.00 +5.00 (+22.75) Our fibre channel technology leader stubbed its toe Wednesday. Or did it? Granted shares of EMLX fell about $26 in the first ninety minutes of trading. If you had a position,(you'll noticed we used the word "had") you hopefully were stopped out as EMLX fell. Yesterday's drop is one of the very reasons we suggest the use stops, whether mental or actually placed with your broker. After the run EMLX has had, it was overdue for a bit of profit taking. Now did you notice the volume on the decline? More importantly did you notice the volume when buyers stepped in at the $180 level? Over 200K shares were traded on the bounce off $180. Unless you are a gunslinger we aren't necessarily suggesting you should have try to pick a bottom. However the volume as buyers did step in was a good indication that further advances could provide a good entry point for a new play. After several chances to join in, EMLX went on to make a new high today at $221.72. EMLX pulled back to close just above intraday support at $211, with the next level seen at $203. If you did re-enter this play make sure your stops are in place. Continued moves higher would give us another chance to enter this great play. CHKP $270.38 -1.13 (+40.63) We said Oh My! over and over again for most of the day Wednesday, as CHKP continued its march to another new high. Investors bid shares of CHKP to a high at $288 before traders that had rode this one to a new high decided it was time to take some well deserved profit. Interestingly though the profit-taking only dropped CHKP to the $270 area. News of a pact with Telecom Italia may have helped keep CHKP suspended in mid-air. Telecom Italia said it will use the security software to secure Internet and other services for its customers. As we mentioned earlier, Prudential Securities upgraded CHKP from a Accumulate to a Strong Buy and sometimes it takes a while for that kind of news to hit home with the retail investor. Today it was a different story CHKP really drifted sideways to lower in a very narrow range between $269 and $275. A bounce from this level could provide another opportunity to enter a new play. If CHKP experiences more profit-taking, it may not find any help until around $263 or down near $250. To prove the strength of the momentum, a drop to $245-$250 would just bring CHKP back in to its channel formed during its recent move. CLRN $169.50 +14.56 (+31.50) When we last visited, CLRN had made a new high and a gain of about 9.0% On Wednesday CLRN had some uninvited guests show up at the party, with the last name of Sellers. The sellers that came to visit drove CLRN down to $143.25 before they got tired and left. Early this afternoon CLRN got back on track breaking through the $160 level and gained almost $18.50 in the last 3 hours of trading. If you re-entered this play, congratulations. There is one minor item we must point out however. The volume today was minor alright. CLRN could only muster about 412K shares today. Now here is the scenario as we see it. The bulls may be back in the drivers seat and CLRN will find new buyers to push the communications company higher and re-establish the momentum. If the volume can't pick back up, we would be a bit suspect of any further moves higher. We are not suggesting that you stay away from this play by any means, just check the volume as you establish a new play. If it's lighter than normal, be prepared to pull the trigger and sell too soon, just in case those nasty old uninvited guests return to our party. Technically CLRN has support at $164 and $150. Depending on your entry point, adjust your stops accordingly. NTAP $240.38 +22.06 (+40.44) We said Tuesday, be patient and a good entry point for our split run play could develop. If you made it through the direction-less day on Wednesday, and noticed the higher-lows being made by NTAP as the networker drifted for most of the session, you probably found a very good point to enter a new play. If not, the pop above $226 should have been your next clue it was time to jump back on board this great play. By the closing bell today NTAP had made a new high at $241, on strong volume, with 2.6 million shares changing hands. Networking leader CSCO, had rumors circulating all day, and made a new high gaining about 7.0%. Our favorite son NTAP gained over 10% for the day and didn't even need any rumors to propel it to a new high. Yesterday Steve Salopek, a team member of the One Group Small Cap Growth Fund made some favorable comments about NTAP. He said, "the secular case for storage is tremendous, and NTAP's value is that their software makes a company's data storage needs a manageable application, and it works in a mixed operating environment." Nice comments but the real strength behind this play is the split of the company's stock in couple of weeks. NTAP closed near its high indicating were aren't done yet. Support is found at $233 and $226. AMD $58.00 +4.50 (+16.13) On Wednesday, AMD tested the $49 support level we mentioned Tuesday and it held up just like it was supposed too. This morning AMD gave us a nice entry point for our new chip play. The battle between Intel and AMD as to who can produce the fastest chip, and get it to market, has gone on for some time now and will continue for a long time. The real push behind this play however comes from news that semiconductor sales are strong. By the sounds of things there will be plenty of business to go around. The Semiconductor Industry Association reported on Wednesday that worldwide sales of semiconductors reached $14.8 billion in January, increasing from $11.1 billion in January of 1999. The chip industry is off to a strong start for year 2000. As we said Tuesday, the first quarter tends to be the weakest quarter of the year. A 32.0% increase in January certainly suggests 2000 will be one of the best ever for companies like AMD. The volume and the price picked up for AMD in the last hour of trading today which suggests this one may be just breaking loose. AMD tested the $54 area several different time today, which has now proved to be good support. DSTM $41.25 +4.38 (+9.25) Up, up, up and away we go! As DSTM continues on its healthy uptrend, option volume swelled today as many traders picked their entry points throughout the day. Yet, along with increased option volume comes an increase in implied volatility. It's simple supply and demand, and the market makers have raised volatility. At this point, exercise caution in tomorrow's early going, since options have become pricey. The final two hours of trading had DSTM holding solid around $41, so it's important to watch tomorrow and see where it settles. Once a level is established, pick entry points suited to your risk. ERICY $100.50 +0.50 (-4.31) The past two sessions have been quite a roller coaster ride for ERICY. First, ERICY gapped from Tuesday's close of $102.43 to open Wednesday at $100.75. It dipped as low as $96.31, providing very nice entry points. Today's trading session was similar to yesterday's except that ERICY seemed to consolidate at the $99 level for most of today. And there you have it, short-term support. Yesterday's gapped opening at $100.75 poses a resistance point. With NASDAQ 5000 finalized, watch tomorrow for a follow through and to see if ERICY can regain some of its lost ground. Remember, we are still up on this position and the past few days only represented entry opportunities into an uptrending stock. MER $103.13 +2.69 (-3.88) Wednesday looked bleak with MER falling through its $104 support level, and doing so rather quickly. But that was Wednesday. Thursday brought some saving grace to the financials as MER opened near its intraday low of $98.06 and climbed smartly to close near its intraday high. Today's pattern established short-term support at $101 and $100. Strong volume in the final hour of trading pushed MER to the $103 level. Its previous support level of $104 should provide resistance. Overall, MER is still trending upward and the financials, who have taken there fair share of bumps and bruises recently, are recovering. Keep in mind key levels and watch to see if the market can sustain this rally or if it will fall to the hands of profit-takers. GLW $194.88 +6.00 (-10.38) Careful. The steady stream of photonic news from the OFC 2000 conference ended today, and optical companies in general have had some air let from their sails in the past two days. While we like this company a lot as a long term play, GLW's failure to close today over its 10-dma of $196 is a sign of technical weakness, especially on diminished, but still average volume of 2.6 mln shares. Here's the other side of the double-edged sword though...the comeback from today's intraday low of $184.44 is a big plus, and leaves a nice technical tail on today's candlestick chart. Flip a coin? Tails, we keep it! (even though we never got that breakout we were looking for back over $200). More weight in GLW's favor is that earning will be announced on Apr 17th causing what we think will be a splendid earnings run. Add to that the likelihood then of a split announcement too, followed by shareholders authorization of new shares on Apr 27th, and we have a good buying opportunity at these levels. You'll probably want to consider the April strikes at this point since the March strikes expire next week. GLW could still go either way from here, so pick your entry carefully. SEBL $167.69 +2.56 (+12.97) Reaching as high as $175 yesterday and $170 today, both during amateur hour, SEBL found footing at $160-$162. Stuck right in the middle, $167 is providing mild resistance in which a rise convincingly above that is becoming harder, though the 5-dma of $160 is looking strong. While volume at the close picked up, adding over $2 in the last 15 minutes to boost it to a new closing high, today's volume was 17% under the ADV. The signal here is that SEBL may be running temporarily out of steam. In a 5-day move from $140, that's entirely possible. After all, the 10-dma is way back at $148.53. We suggest a bit of caution now and to keep a trailing stop in place to protect your profits. SEBL will fall back to meet it's average; we just don't know when. Mild intraday support is at $163, firmer at $160. If it falls under that, wait for the dust to settle and a convincing bounce (with volume) before making a new play. Though SEBL is a split candidate again, the announcement may have to wait until earnings on April 25th - too far away to affect the play. A shareholder meeting to authorize new shares would be required too should management opt for anything greater than 3:2. VERT $277.75 +24.25 (+26.03) VERT goes vertical! What a powerful move VERT made today on volume exceeding the ADV by 82% - roughly $40 in two days. Part of the hoopla was yesterday's announcement that they would buy privately held Tradeum for $500 mln. The deal was immediately expected to add to earnings, and was thus worthy of wall Streets blessing - a rarity on both counts for an acquiring company. The second blessing? Lehman Bros. reiterated their Buy rating and upped their price target to $350 based on the purchase. Intraday support is at $240, $263, and from today, $280, which held nicely most of the day. Obviously, VERT is a moving target, and we need to be quick on the draw to pick it off. That said, we don't want to let our profit vaporize - keep a trailing stop in place. You can always buy back cheaper on the bounce. We have only three points of concern. The first is that VERT holds great altitude over its 5 and 10-dma (only $253.12 and $239.31, respectively). The second is that despite its $24 gain, VERT gave back $6 into the close and fell far short of its highest altitude of $294, thus leaving a very long upward tail. With the associated volatility, we strongly suggest you wait for a pullback. The third item related to the second is that despite a new all-time closing high ($1 over the high close set in late January), VERT could struggle here at its highest resistance. In short, gravity could take over following today's gain. Assess your risk profile before you board the E-ticket. WCG $55.38 -0.50 (+1.13) That broadbandy goodness got a bit sour on us yesterday, as WCG fell slightly over $3. Today was no inspiration of confidence either as WCG held steady at best while NASDAQ set a new record. No news, and volume remains around the ADV too. The good news is that $53.50 showed us a nice bounce from good support - it's held well over the last five days, and we think makes a great target at which to shoot. Gunslingers may want to consider that entry. If you'd rather play it safe, you can wait to nibble at prices over $58, then again over $61. Just make sure you see the volume return. We'll give it another day to see if it can get back over its 5-dma of $56.36 or bounce hard off its 10-dma of $50.88. It's along ride down, so wait for your entry. ******************* PLAY UPDATES - PUTS ******************* PPG $45.56 -0.50 (-3.50) You certainly wouldn't know by looking at PPG's chart that the DJIA had an up day. This poor, beat-up issue had to fall all the way to $44.38 before finding support today, a level last seen in early 1996. Needless to say, PPG is really getting down there and may find a bottom soon. Support began forming in the early afternoon near $44.63, before finally moving up into the close. Volume has started dropping the past 2 days, with today posting about 15% less than the ADV. If we see support hold in the $44 range and can break resistance at $48, also the site of the 10-dma, then it may be our signal to move on. Otherwise, look to enter new plays as sellers return, forcing PPG to rollover near $48. There has been a dearth of meaningful news on PPG, other than minor product announcements, and with the NASDAQ closing above 5000 today, diminutive stocks like PPG just don't seem to grab investors' attention. Keep an eye on volume as it will likely give an early indication of whether the bulls or the bears are winning this tug-of-war. DD $46.44 -0.50 (-4.31) Dupont got a bit of relief on Wednesday with a pop up to $47.75, but quickly plummeted to an intraday 52-week low of $45.25. This point provided support again today with a brief bounce and a close at $46.44. So, have we gone anywhere? Not really, yet what is important here is that the downtrend does not appear to be reversing. Even in light of strength in pharmaceuticals, DD has not been a participant and simply is trying to keep its head above water. Going forward, we will watch DD to see if it retests support at $45.25 and we will remain bearish until DD moves above its 10-dma at $48.94. ************** NEW CALL PLAYS ************** SNE - Sony Corporation $259.06 -17.13 (-40.38 this week) If you like to be entertained, Sony has your fix. Its PlayStation home video game system alone accounts for about 11% of the electronics and entertainment giant's worldwide sales. As the #2 consumer electronics firm, SNE makes a host of products including cameras, DVD players, MiniDisc and Walkman stereo systems, computers, TVs, and VCRs. Rounding out the company's assets are Columbia TriStar and record labels Columbia and Epic. A call play, you say? Although it may look like we are trying to catch a falling knife, in actuality we are grabbing a rare entry point on this huge entertainment conglomerate. Since tagging a new all-time high of $314.75 at the end of February, SNE has been dropping as investors take profits. So what about SNE caught our attention? How about the strong bounce at $250 today, confirming the support level which was first established in mid-February. That's a good start, but the real clincher is the volume story today. Even though the volume was heavy on a day where the stock lost over $17, there was a nice increase in volume in the last hour of trading as the price continued to rise. Look for a confirmation of support at $250 before jumping aboard. The stock has had some exciting runs in the past few months, and this could be an exciting ride. Although SNE is splitting 2-for-1 on May 18th, that event is likely too far away to influence our play. One cautionary note about SNE; since it is an ADR, it tends to gap at the open, meaning it can run right over your stops. Take this into account when evaluating your risk tolerance. For the big kids out there, SNE has a DVD-Video system for you. On March 2nd, the company announced 8 new systems designed to maximize the home theater experience for any lifestyle and budget. With more than 7 million new DVD buyers expected in 2000 and more than 5000 software titles available, SNE looks to capitalize on the exploding market. Each of the new systems feature single- or multi-disc players, Dolby Digital 5.1 channel surround sound processing, pre-programmed A/V remotes, and six-piece speaker packages. Can I order two? BUY CALL APR-250*SMW-DJ OI=166 at $26.25 SL=20.50 BUY CALL APR-260 SMW-DL OI= 33 at $21.50 SL=16.75 low OI BUY CALL APR-270 SMW-DN OI=132 at $16.63 SL=13.00 BUY CALL APR-280 SMW-DP OI= 49 at $12.75 SL=10.25 SELL PUT MAR-250 SMW-OJ OI= 88 at $ 3.13 SL= 5.00 (See risks of selling puts in play legend) Picked on Mar 9th at $259.06 P/E = 76 Change since picked +0.00 52-week high=$314.75 Analysts Ratings 1-1-0-0-0 52-week low =$ 89.25 Last earnings 01/00 est= N/A Next earnings 04-?? est= N/A Average Daily Volume = 451 K /charts/charts.asp?symbol=SNE **** DELL - Dell Computer $50.44 +3.50 (+4.19 for the week) Dell Computer is the world's #1 direct-sale computer vendor and one of the world's top PC makers. Therefore it's understandable that the company designs, develops, manufactures, markets, services, and supports a variety of computer systems including desktops, notebooks, workstations, network servers, and storage products. Dell's clients include the government, corporations, the medical and education industries, as well as the individual consumer. Founder Michael Dell is still the CEO and maintains a 14% stake in the company. Pumped up by a sector revival and signs that corporate customers are buying more PCs and we've got lots of promise in the near- term. Earlier in January, Dell warned its investors that Y2K concerns were paramount and companies were buying fewer PCs; thus, earnings would only increase by 30% from year earlier quarters instead of the stellar 50% expectations. But now those concerns are easing according to Trent May, manager of the Invesco Growth Fund, who states that "over the last two weeks, we've seen reports of improving corporate PC demand, which obviously Dell would be the biggest beneficiary of". Ashok Kumar, analyst for USB Piper Jaffray, further added that Dell "should have no problem exceeding the recalibrated earnings" and noted he rates DELL as a Strong Buy. Earlier in the week, he upped DELL's price target to $65 from $55. These comments follow yesterday's press release that Dell Computer became the global market leader in both portable and desktop personal computer shipments to medium and large businesses in the 4Q of 1999 according to the market research firm IDC. This puts rivals Compaq (CPQ) and IBM in the backseat as they struggle to move from largely indirect to direct sales models. According to IDC analyst Roger Kay " Dell has a lot of momentum, that's the bottom line" and ours too! Today DELL's dynamism demonstrated growing intensity as the share price edged closer to December's record high of $53.97! The stock sprung off the 5-dma ($47.24) and didn't look back at the comfortable support zone. The bold move was backed by heavy volume (more than double the ADV) of over 71 mln shares exchanging hands, making it the most active US stock in today's session. At the moment, earnings aren't expected until the beginning of May and DELL isn't a split candidate until it trades consistently above the $65 and $70 range. Therefore this play is based on sheer momentum. Near-term support is firm at $47 hence, be on alert if DELL pulls back to $44 and $45 at the 10-dma ($44.72). If today's "straight-up from the open" pattern continues over the next few days, you'll obviously have to enter on the climb. Although be cautious as DELL faces its overhead resistance ($53.97) and always keep your eyes peeled for the profit mongers. In the industry this week, Intel announced the 1GHz Pentium III, which they claim is faster than anything fierce competitor, Advanced Micro Devices (AMD) has in its inventory. For now anyway, Dell's computers along with IBM and Hewlett-Packard PCs will be the "chosen ones" to have the new chip. Talking about chips...Dell warned owners of a faulty memory chip in its Latitude and Inspiron computers shipped between February 1 and November 20, 1999. As many as 400 K, or 48% of the notebook computer are likely to contain the defective memory chip. On a more positive note, Dell announced it began online product sales in Hungary. This new online venture marks the first of its kind in central and Eastern Europe according to Glenn Jones, Dell marketing director in Europe, the Middle East and Africa. BUY CALL APR-45 DLQ-DI OI=16967 at $6.88 SL=5.25 BUY CALL APR-50*DLQ-DJ OI=15914 at $3.75 SL=2.25 BUY CALL APR-55 DLQ-DK OI= 2009 at $1.69 SL=1.00 BUY CALL MAY-50 DLQ-EJ OI=20279 at $5.00 SL=3.25 BUY CALL MAY-55 DLQ-EK OI=17390 at $3.13 SL=1.50 Picked on March 9th at $50.44 P/E = 83 Change since picked +0.00 52-week high=$53.97 Analysts Ratings 13-18-2-0-0 52-week low =$31.38 Last earnings 12/99 est= 0.15 actual= 0.16 Next earnings 05-18 est= 0.16 versus= 0.16 Average daily volume = 31.7 mln /charts/charts.asp?symbol=DELL **** TXN - Texas Instruments $180.38 +8.38 (-7.25 this week) Texas Instruments is in the semiconductor business. They specialize in real-time technologies, digital solutions for applications where waiting isn't an option. Their DSP and analog chips are the brains behind many of today's most attractive opportunities such as digital wireless phones and broadband. To quote their President, "Texas Instruments is gaining significant market momentum, and is well positioned going forward as the global market for DSL continues to ramp up." TXN is currently engage with several other manufacturers to provide advanced DSL solutions and plans to announce additional customers throughout the year. Why do we get so excited when we add this old friend back on our play list? Well this time the reasons are many. TXN is in the semiconductor industry that today helped lead the Nasdaq to a new closing high. TXN had a bit of profit-taking this week after making a new high at $200 on Monday. Today the bulls jumped back on board and grabbed hold of the reins and began to drive TXN higher. The reasons the chip sector has received so much positive attention this week are because business is outstanding for most in the industry. A report out Wednesday showed January sales for the semiconductor industry jumped 33%, and that's suppose to be their slowest time of the year! Earlier this week analysts at Gerad Klauer reiterated their Buy rating on TXN. That's a nice little extra for our play, but here's the good part. Last Thursday, TXN filed the necessary forms with the SEC to have the number of authorized shares increase from 1.2 billion to 2.4 billion. Shareholders of TXN stock will have the chance to approve this request at the annual stockholders meeting on April 20th. TXN is scheduled to report earnings on April 24th. What we are looking for here is a split announcement to come with earnings. Although earnings are weeks away, the request for an increase in authorized shares could propel TXN to new highs. TXN is also on track to report solid earnings compared to last year, as they came in well ahead of analysts estimates last quarter as well. TXN hovered near the $170 level for most of yesterday and today, when the volume and price began to pick up late in the session today. We would use any further movement to the upside as a chance to jump on board this new play. Companies in the chip sector continually strive to produce the fastest chips and get them into the marketplace first. If they can't provide them to their customers in a timely manner, then sales and profits suffer. Today Maxtor Corporation named TXN as their supplier of the year. Maxtor officials said TXN has provided consistent execution and technical leadership quarter to quarter and has been a major contributor to Maxtor's growth and success. BUY CALL APR-170 TNZ-DN OI=1298 at $21.75 SL=16.25 BUY CALL APR-180*TNZ-DP OI=1905 at $16.50 SL=13.00 BUY CALL APR-190 TXR-DR OI= 536 at $12.00 SL= 9.50 BUY CALL APR-195 TXR-DS OI= 392 at $10.63 SL= 8.25 SELL PUT MAR-170 TNZ-ON OI= 955 at $ 3.00 SL= 4.75 (See risks of selling puts in play legend) Picked on Mar 9th at $180.38 PE = 107 Change since picked +0.00 52-week high=$199.56 Analysts Ratings 15-13-4-1-0 52-week low =$ 45.50 Last earnings 01/00 est= 0.47 actual= 0.51 Next earnings 04-24 est= 0.53 versus=-0.32 Average daily volume = 4.57 mln /charts/charts.asp?symbol=TXN **** NOK - Nokia $214.63 +3.25 (-5.38 this week) Finnish Phone Firm, Nokia is the world's number one maker of wireless cellular phones, ahead of Motorola, Ericsson and Kyocera. In addition they make wireless networking equipment, PC monitors and workstations, digital satellite and cable network systems, and set-top boxes. However mobile phones make up 80% of their $19.8 bln in annual sales. Here's an old favorite stock and a simple play that doesn't require so much as rocket scientist's IQ. Feb 1st was the day NOK announced it would split its shares 4:1 pending shareholder approval at a special meeting to be held on Mar 22nd. The actual split date will follow in roughly two weeks, or the first week in April. Following a three-day pullback ending at $207 (nice support), NOK closed at its high of the day on strong finishing volume. $214 looks to have some support too on the "old support equals new resistance" theory. Now's the time to look for an entry. If it holds $214 or bounces off $207 (after amateur hour in both cases), feel free to take a position. Here's some background for a flavor of what this market leader in wireless handsets offers to investors. On February 1, NOK also announced a 46% increase in previous year profits, a 2-mln share repurchase, and a dividend increase. Net sales grew at 49%, which comes as no surprise given their CEO's comments late in 1999 that they would meet their 2003 total revenue figures by the end of 2002 (cramming 3 yrs of income into 2 yrs). In short, earnings were a blowout as they reported a 7.5% surprise of $0.72 vs. estimates of $0.67. At the same time, NOK was keeping the Street's expectations in check by guiding analysts to a "30-40% growth" rate. Also, their 1999 market share grew to 30% from 23% in 1998. There are all kinds of announcements of alliances and recently won contracts in the news - the most noteworthy is that NOK will collaborate with AOL to bring instant messaging to the handset. While that helps, the real play is in the split run. Analysts have helped too. Today, Prudential Volpe Tech reiterated their Strong Buy with a price target of $230, citing that NOK currently trades at 10% discount to ERICY based on 2001 First Call EPS estimates BUY CALL APR-200 NZY-DT OI=2506 at $23.13 SL=18.00 BUY CALL APR-210*NZY-DB OI=2033 at $17.25 SL=13.50 BUY CALL APR-220 NZY-DD OI=3078 at $12.50 SL=10.00 BUY CALL JUL-210 NZY-GB OI= 354 at $31.75 SL=24.75 BUY CALL JUL-220 NZY-GD OI= 708 at $27.25 SL=21.25 Picked on Mar 09 at $214.63 P/E = 95 Change since picked +0.00 52-week high=$227.06 Analysts Ratings 16-9-1-0-0 52-week low =$ 67.69 Last earnings 02/00 est= 0.67 actual= 0.72 Next earnings 05-02 est=-0.61 versus= 0.48 Average Daily Volume = 3.45 mln /charts/charts.asp?symbol=NOK ************* NEW PUT PLAYS ************* UAL - United Airlines $46.38 -1.88 (-4.06 this week) United Airlines is the largest air carrier in the world and the largest majority employee-owned company, offering nearly 2,300 flights a day to 135 destinations in 27 countries and two U.S. territories. It is an industry innovator with break- throughs such as E-Ticket Service, Airport Gate Readers, The Chariot(SM) mobile airport podium, United Shuttle, and the introduction of the technologically advanced Boeing 777. Ready for another NYSE stock taking a nosedive? Allow us to present UAL, a transport stock (Strike 1) feeling the pinch of increasing fuel costs (Strike 2), and announcing this week that its load factor in February dropped 1.8 percent from the same period last year (Strike 3). With crude oil prices hitting 9-year highs, the transports are really starting to feel the pinch. Add to that a declining occupancy rate in their aircraft, and voila, you have another NYSE stock hitting multi-year lows (in this case, the lowest share price since late 1996). So where do we go from here? If support near $45-46 can't hold, we are looking for a drop to $39-40 before UAL pulls out of its dive. The poor beleaguered stock barely has the strength to challenge the 10-dma ($48.50 after today's drop), so look for a move up to this level to trigger your entry. Use volume as a measure of the longevity of our play. Selling volume has been strong, with total volume at or above the ADV throughout most of the decline this year, and a resumption of buying interest may mean the value investors have arrived. With UAL trading at a PE under 5, somebody may get it in their head that the stock looks like a bargain. BUY PUT APR-50*UAL-PJ OI=137 at $5.25 SL=3.50 BUY PUT APR-45 UAL-PI OI=138 at $2.44 SL=1.25 Average Daily Volume = 783 K /charts/charts.asp?symbol=UAL ********************** PLAY OF THE DAY - CALL ********************** AMD - Advanced Micro Devices $58.13 +4.63 (+16.25 this week) AMD is a global supplier of integrated circuits for the personal and networked computer and communications markets. They produce processors, flash memories, programmable logic devices, and products for communications and networking applications. The company ranks #2 in the microprocessor market behind Intel, however it has captured about a 60% share of the sub-$1000 PC market. AMD also makes embedded chips and nonvolatile memories. They have manufacturing operations in Europe, China and Japan, with about 55% of its sales outside the U.S. AMD gets about 12% of its revenues from Compaq Computers. Most Recent Write-Up On Wednesday, AMD tested the $49 support level we mentioned Tuesday and it held up just like it was supposed too. This morning AMD gave us a nice entry point for our new chip play. The battle between Intel and AMD as to who can produce the fastest chip, and get it to market, has gone on for some time now and will continue for a long time. The real push behind this play however comes from news that semiconductor sales are strong. By the sounds of things there will be plenty of business to go around. The Semiconductor Industry Association reported on Wednesday that worldwide sales of semiconductors reached $14.8 billion in January, increasing from $11.1 billion in January of 1999. The chip industry is off to a strong start for year 2000. As we said Tuesday, the first quarter tends to be the weakest quarter of the year. A 32.0% increase in January certainly suggests 2000 will be one of the best ever for companies like AMD. The volume and the price picked up for AMD in the last hour of trading today which suggests this one may be just breaking loose. AMD tested the $54 area several different time today, which has now proved to be good support. Comments AMD has had a nice run over the past week and has done so on heavier volume. With almost three times the ADV on Monday and Tuesday, and twice the ADV the past two sessions, AMD has made a steady and convincing climb to close near its 52-week high. This strong volume has laid good support levels at $54.50 and $53. The positive outlook for semi-conductors in the near future will help AMD test the psychological resistance of $60. Watch for market direction in the early going and pick entry points that suit your risk levels. ***March contracts expire in next week*** BUY CALL MAR-55 AMD-CK OI=6097 at $5.00 SL= 3.75 BUY CALL MAR-60*AMD-CL OI=2458 at $2.56 SL= 1.75 BUY CALL APR-60 AMD-DL OI=5955 at $6.88 SL= 5.13 BUY CALL APR-65 AMD-DM OI= 79 at $5.13 SL= 3.81 Picked on Mar 7th at $53.25 P/E = N/A Change since picked +4.88 52-week high=$59.00 Analysts Ratings 8-6-8-0-0 52-week low =$14.56 Last earnings 01/00 est=-0.06 actual= 0.43 Next earnings 04-19 est= 0.35 versus=-0.81 Average daily volume = 3.74 mln /charts/charts.asp?symbol=AMD ************************ COMBOS/SPREADS/STRADDLES ************************ Another Day, Another Record... Wednesday, March 8 Blue-chip stocks rebounded Wednesday as bargain hunters scoured the market for oversold issues. The Nasdaq also managed modest gains in the volatile session. The Dow Jones industrial average ended up 60 points at 9856 while the bullish technology index rose 42 points to 4897. The S&P 500 index finished up 11 points at 1366. Volume on the Big Board was active with 1.19 billion shares exchanged and declining issues edged advances 1,535 to 1,438. In the bond market, the 30-year Treasury fell 1/32, bid at 101 10/32, where it yielded 6.14%. Tuesday's new plays (positions/opening prices/strategy): CMG Inc. CMGI MAR115P/120P $0.75 credit bull-put KLA Tencor KLA MAR70P/75P $0.88 credit bull-put Level 3 LVLT MAR110P/115P $0.88 credit bull-put All three of our new picks slumped during the session and each position offered entry prices at or above our suggested targets. Portfolio plays: The majority of stocks moved higher today, recovering some of the losses suffered earlier in the week. Traders sensed that much of the previous selling was overdone and the perception now is that many of traditional manufacturing companies have fallen so far they are attractively valued. Lower oil prices also added to the optimism with crude futures falling on news there were additions to U.S. crude and gasoline inventories and a belief that OPEC and other oil producers were near a consensus on an output hike. The Nasdaq rose on strength in telecommunications and Web-B2B issues while drug stocks led the Dow higher with a number of upgrades in the sector. Market bellwether Procter & Gamble (PG) opposed the rally, falling $3 to close at $58; a 3-year low. Surprisingly, analysts said many traders believe the stock is overvalued even at the current levels. Federal Reserve Chairman Greenspan has contributed significantly to the recent slump in blue-chip stocks and today he continued his assault on the rising market. He warned bankers not to assume that current robust conditions in the U.S. economy will last and he urged them to give thought to how borrowers might perform under more stressful conditions. Greenspan also noted the recent rise in equity values and mutual funds has put competitive pressure on the banking industry's deposit base, forcing lenders to turn to other sources of funding. Sounds like he is again on a mission to arrest any market rallies. Fortunately, the majority of issues in our Spreads portfolio are sailing comfortably along on the heels of the recent technology boom. Virtually all of the March positions are profitable and only the long-term plays require any attention. The necessity for upside adjustments is now a priority with many of the bullish spreads and most of the diagonal positions are prime candidates for 'roll-ups' to higher-priced options. With my recent absence from the market, I have been unable to monitor the portfolio and thus many of the opportunities for timely moves are no longer available. Hopefully, those of you participating in our spread positions have made the necessary adjustments. We will also use the upcoming transition to April options to improve each play's profit potential. Thursday, March 9 Technology issues soared today, driving the Nasdaq to another record close as investors battled for networking and e-commerce issues. The composite of technology stocks rocketed 149 points to 5,046 with Internet issues leading the way. The Dow Jones Industrial Average participated in the rally, up 154 points to 10,010. The S&P 500 index finished up 35 points at 1,401. Advancing issues outnumbered decliners by a 4-to-3 margin on the New York Stock Exchange on active volume of 1.12 billion shares. The bond market closing numbers were unavailable. Portfolio plays: Today's rally was broad and decisive with stocks from all major groups enjoying significant moves. Blue-chip recoveries were widespread and the Nasdaq soared on strength in networking and Internet stocks, even as profit-taking continued to plunder the high-flying biotech sector. Our portfolio continues to benefit from the bullish movement of technology issues and the #1 stock in the group was Network Solutions (NSOL) with a $71 move to close at $494. Web-security company VeriSign (VRSN) recently announced a $21 billion merger with Network Solutions and both issues have been extremely volatile in the last few sessions. Intervu (ITVU) and Polycom (PLCM), both up $12, competed for a distant second while MRV Communications (MRVC) secured third place with a $10 spike to $190. Bea Systems (BEAS), CMG Inc. (CMGI), ISS Group (ISSX) and KLA Tencor (KLAC) all finished near the front of the pack with $6 rallies. The leading mid-cap stocks were Computer Associates (CA) which rebounded $5.75 to $66 and Cabletron (CS) with a $4.50 move to $48. Today's rally in Computer Associates provided a perfect opportunity to transition to April options in our LEAPS/CC's play. The new position is LJAN60C/APR65C at a credit of $2.38 and now there is no downside risk in the spread. A number of smaller issues enjoyed significant rallies. The most surprising was P-Com (PCMS) with a $4 spike to end at $20. The issue had been in a slump recently but the brisk reversal may be the first indication of a significant change in character. Unisys (UIS) rose $2.12 to a recent high near $29 and the move provided an excellent early-exit on the April diagonal spread. The spread closed with a $3.50 profit. Tera Computers (TERA) rallied $1.12 to end at $9 after a brief test of the $7 range and Star Telecom (STRX) reversed a recent trend to end $1 higher at $6.88, a great opportunity to roll-out to the April options. One of our straddle stocks made it to the leader-board. Applix (APLX) gapped $4 to a 3-month high near $20 after unveiling new plans for creating two dedicated business units, the eBusiness Division and the Linux Division. The company also plans to increase investments in these businesses for improved market visibility and accelerating revenue growth. Our (JUL-$15) straddle moved into positive territory with $1.75 profit on $6.50 invested in just one month. Of course there were numerous other issues that participated in today's rally; far too many to list on an individual basis. The important thing to remember is that we can utilize these volatile market gyrations to improve our profit potential in current spread positions. Making timely adjustments with regard to changing technical character and inflated option premiums is what position management is all about. For those who are interested, I plan to explore that topic further in the coming weeks. Questions & comments on spreads/combos to Click here to email Ray Cummins ********* NEW PLAYS ********* AMD - Advanced Micro Devices $58.12 *** On The Move! *** Advanced Micro Devices offers a wide variety of industry-standard integrated circuits (ICs) that are used in many diverse product applications such as telecommunications equipment, data and network communications equipment, consumer electronics, personal computers (PCs) and workstations. AMD is engaged in the three principal technology areas within the digital IC market, memory circuits, logic circuits and microprocessors, through its two operating segments, AMD and Vantis. The AMD segment includes the Computation Products Group (CPG), Memory Group and Communications Group, and the Vantis segment, which consists of the company's programmable logic systems. Advanced Micro Devices reached the milestone gigahertz mark this week with a new Athlon processor that makes computers 10 times faster than just six years ago. The processor is essentially the heart of the computer, performing a certain number of instructions per second. The faster the clock speed of the processor, measured in megahertz, the quicker it goes. AMD's 1-GHZ Athlon chip came a day before the six-year anniversary of rival Intel's breaking of the 100 megahertz barrier with its Pentium chip, and just two days ahead of that company's announcement that it will ship its own 1-GHZ chip. These gigahertz chips; Intel's Pentium III and AMD's Athlon, speed up complex computer tasks such as high-end games and other sophisticated software. AMD says it has committed to orders from its flagship customers, Compaq and Gateway and the chip will also reportedly be the CPU of the prototype of the new X-Box gaming console that Microsoft will unveil this Friday. Analysts were in favor of the news and both Gruntal & Prudential raised their targets on the issue. We agree with the outlook but prefer a conservative approach with this (ITM) debit spread. PLAY (conservative - bullish/debit spread): BUY CALL APR-37.50 AMD-DU OI=1689 A=$21.38 SELL CALL APR-50.00 AMD-DJ OI=4445 B=$11.12 INITIAL NET DEBIT TARGET=$10.00-$10.12 ROI(max)=25% Chart = /charts/charts.asp?symbol=AMD **** TTWO - Take-Two Interactive $18.38 ** New All-Time High! *** Take-Two Interactive Software is a worldwide developer, publisher and distributor of interactive software games. TTWO's software operates on multimedia personal computers and video game console platforms manufactured by Sony, Nintendo and Sega. The company publishes its software under the Rockstar Games, Talonsoft, Gathering of Developers, Mission Studios and Take-Two labels. The company has released titles in a variety of genres; Grand Theft Auto, GTA2, Railroad Tycoon II, Monster Truck Madness and the very popular Thrasher: Skate & Destroy. TTWO also intends to release new titles, including Oni and Halo, and titles based on the Duke Nukem franchise and Austin Powers movies. This issue has been hot in recent weeks and the options are very active. It appears all the commotion is based on TTWO's recent decision to combine subsidiaries Rockstar Games, DMA Design and Pixel Broadband Studios into one newly created company, Broadband Studios, Inc. Broadband Studios will independently focus on broadband interactive entertainment and continue to develop and publish original content for next-generation game consoles, with particular emphasis on the ongoing development of tools and technologies for consumers who have broadband access. BBS will pursue relationships with broadband service providers to market and deliver its products to the multi-player broadband consumer of the future. Take-Two will own 100% of the outstanding stock of Broadband Studios, but it is their intent that the company operate as a separate entity. They will maintain a distribution relationship for all traditional physical console goods marketed to retailers and consumers worldwide. The agreement will give the company continuing access to Take-Two's current distribution network. That's sounds like an ambitious project but investors appear to favor the plan. With the recent bullish trend and a new all-time high, the risk/reward potential for this conservative position is excellent. PLAY (conservative - bullish/diagonal spread): BUY CALL JUN-7.50 TUO-FU OI=30 A=$11.25 SELL CALL APR-17.50 TUO-DW OI=610 B=$3.00 NET DEBIT TARGET=$8.00-$8.12 INITIAL ROI TARGET=21% To reduce the risk/reward potential, sell half of the position at $15.00 and half of the position at $17.50. For example: BUY (10) CALL JUN-7.50 TUO-FU OI=30 A=$11.25 SELL (5) CALL APR-15.00 TUO-DC OI=868 B=$4.25 SELL (5) CALL APR-17.50 TUO-DW OI=610 B=$3.00 Chart = /charts/charts.asp?symbol=TTWO **** BMCS - BMC Software $51.50 *** On The Rebound! *** BMC provides software products that significantly increase the productivity, reliability and recoverability of its customers' core information technology (IT) operations, including their software applications and the systems on which they run. BMC's goal is to help its customers improve the efficiency and productivity of their mainframe and distributed IT systems. BMC's software products address the three predominant operating environments of enterprise computing: the IBM OS/390 mainframe operating system; the various Unix operating systems employed by leading hardware manufacturers such as Hewlett Packard Company, Sun Microsystems, IBM and Compaq Computer Corporation; and Microsoft's Windows NT operating system. A slew of upgrades came out in late January (after the big fall) but no one has publicly supported the stock in recent weeks and yet it continues to recover. Now the lawyers are out in force and everybody wants a piece of the action. If you like bottom fishing for undervalued issues, this may be just what the doctor ordered. Rather than try to decipher the reason for the change in character, we will simply follow the trend and take a conservative, in-the-money position in this speculative, "technicals only" play. PLAY (speculative - bullish/debit spread): BUY CALL APR-35 BCQ-DG OI=6 A=$17.25 SELL CALL APR-45 BCQ-DI OI=845 B=$8.75 INITIAL NET DEBIT TARGET=$8.25 ROI(max)=21% Chart = /charts/charts.asp?symbol=BMCS ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************ See Disclaimer in section one ************
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