Option Investor
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Daily Newsletter, Tuesday, 04/11/2000

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The Option Investor Newsletter         Tuesday  4-11-2000
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)
************************************************************
       4-11-2000           High     Low     Volume Advance Decline
DOW    11287.10 + 100.50 11361.10 11102.50   977,074k 1,519  1,434
Nasdaq 4,055.90 - 132.30  4182.96  4009.52 1,679,266k 1,215  2,998
S&P-100  816.76 -   4.38   823.04   807.85    Totals  2,734  4,432
S&P-500 1500.59 -  11.89  1512.80  1486.84            38.2%  61.8%
$RUT     510.13 -   8.53   519.24   502.46
$TRAN   2921.81 +  78.68  2921.81  2841.63
VIX       28.95 +   0.94    30.34    28.33
Put/Call Ratio       .51
*************************************************************

Close, but not close enough.

The Nasdaq continued to run away from the Dow and started the
day with a drop to 4009 or -178. The bargain hunters jumped the
starters gun and bought the dip only to bleed to death as the
day progressed. If you were lucky enough to buy at the very
bottom then you probably finished the day positive. Most who
were waiting for a real entry point in front of the PPI/CPI
should still be safely on the sidelines. I know it was tempting,
I almost bought the dip myself but if you know why you are going
to open a position then you are better off than those who simply
jump into the melee.

The Dow finally broke out of its trading range and added another 
+100 points to manage the best close since Jan-20th. The Dow is
now only -440 points from a new high and continues to make gains
on the back of the old economy stocks. There were only eight Dow
stocks that lost ground today and the big losers were the techs,
IBM -3.13, HWP -1.44, MSFT -2.19, INTC -.38 with WMT, T, EK and
MO rounding out the group. How much farther the Dow rally will
go is the million dollar question. The Dow stocks are only expected
to post +18% earnings compared to 30% to 40% for the Nasdaq stocks.
Once the Dow leaders announce the Dow will start to be top heavy.


 

 

With earnings moving into full swing next week we will be faced
with the quarterly sell or hold debate. While most new retail
investors will hold over earnings most experienced investors
will lock in their profits a day or two before and move into
something else that will announce several weeks later. This
strategy always causes us grief at OIN because there is always
some stock that blows out earnings and runs up the next day.
Although only about three out of ten stocks go up after earnings
and only one goes up strongly the perception is burned into the
collective investor consciousness that all stocks explode on
positive earnings. Several recent disasters should make you
reconsider this hold over strategy. 

BGEN announced this week and missed estimates by -.02 and 
promptly dropped -$11 before the open. This case of simply
missed estimates shows the problem with trading the unknown.
If all the major analysts miss the results with leading by
insiders of BGEN then how can we, the retail investors, do 
any better in deciding when to hold over? 


 

Motorola announced last night and beat estimates by +.01 but
then warned in the conference call that margins were slipping
and profits would be down in future quarters. Here is the 
other scenario of a better than expected earnings event, 
a warning out of the blue from a sector that is exploding.
If you had several sectors to choose from for exploding growth
the cell phone sector would have been one you had expected. But
exploding growth does not always mean exploding profits for
everyone in the sector. If you had held MOT over earnings
because of the hot sector you would have been burned at the
open this morning to the tune of -$25. Every April call option
$130 or above went to almost zero in the blink of an eye. The
$130 call dropped -$19.75 to $3.00 and the ATM $150 call dropped
-$6.63 to $.38. How much would that have hurt your long term
strategy?


 

Yahoo is a prime example of the "buy the rumor, sell the fact"
earnings event. Yahoo ran up from $150 to $203 before earnings
and then sold off before the actual event to around $170. After
beating analysts estimates but missing the highly aggressive
whisper number the stock has been dropping daily and closed
today at $133. Had you held over earnings the stocked dropped
-$11 the following day on record earnings. 


 


The reason I am repeating this basic strategy tutorial is due
to my market outlook for the next two weeks. In reality it
does not make any difference whether investors sell before
earnings for a profit or after earnings for a loss, the key
point here is most "option and stock traders" (as opposed to
long term "stock holders") SELL their stock/options around 
the actual earnings event. Earnings announcements peak in the 
next two weeks and then taper off as we get closer to May.
This means that there will be substantial selling in the next
three weeks due to post earnings depression.

Secondly, I still expect some selling pressure from the rapidly
approaching tax event. This could be part of the problem we
are experiencing with the Nasdaq slippage this week. As traders
decide they are not likely to see higher stock prices between
now and April-17th they are throwing in the towel and closing
positions to pay taxes. This will also stunt any rally as
traders sell into strength to gain that last tax dollar.

Thirdly, the contributions to tax deferred plans will dry up
by the middle of next week and market liquidity will suffer.
The record inflows of cash YTD which have been almost a drug
like daily fix to whatever ailed the market will dry up faster
than a busted junkie.

Now all of these events coming at the same time would seem
like a death sentence to the market but we all know different.
These events simply provide a new entry point for traders 
with cash on hand. Many funds have been holding cash until
they see how the flow of tax redemptions and tax contributions
will play out before committing this cash to stock positions.
Once the paper flow eases they will put this cash to work.
Other funds, which plan ahead for the April/May dip, are 
Hoping for another retest of the lows from last week to 
Provide another buying opportunity.

Based on the points outlined above you would think I was 
bearish on the outlook for the rest of the week. However,
I am leaning towards bullish. Now that I have totally
confused you I will explain my thought process. I think
we could see some more selling as these events develop but
I think the selling for this week is about over. There is
a conflict between my long term view and my short term view.
After looking at hundreds of individual stock charts tonight
more often than not there appeared to be a bottom forming
on these individual issues. Since the market is made up of
the individual stocks I think this is a leading indicator
for the Nasdaq. There are two groups of stocks that have
become readily apparent. There is a group that appeared to
have bottomed at about half the drop from last week and 
there is another group that stopped dead at the same bottom
we saw last Tuesday. Either group does not appear to want to
drop any further. This "grass roots" support is the first
step in forming a market bottom.

Many buying opportunities come from index managers "reweighting"
the different indexes or adding and subtracting individual
stocks. In the last three weeks the Nasdaq has been reweighted
by the retail investor using the well known method of supply
and demand. Many stocks that had been beneficiaries of the
buy at any price mentality have been destroyed and billions 
of dollars of market cap have evaporated. MicroStrategy
for instance closed under $50 today after trading as high as
$333 just weeks ago. Akamai (AKAM) closed at $107, down from
$345. PDLI at $87, down from $340, HGSI $80 from $238. I could
go on for pages. The point however is the excess has disappeared
and hundreds of these stocks are now good buys again. Triple
digit PE ratios are now back to double digits. Until greed
has been replaced by some other emotion in the human psyche
investors of all types will continue to buy stocks when they
are perceived to be bargains. Many of these stocks are bargains
again.

The Nasdaq is also approaching oversold again. After the rebound
rally from the Tuesday drop last week we have now dropped -390
points. This is half of the rebound gain and qualifies
as a 50% retracement on an intraday basis. The bottom today
at 4009 was the same bottom as last Wednesday after the dip.
Analysts are pointing to 4000 as a bottom but I do not see it.
I would love to believe it but the real bottom is closer to
3800 in my opinion. If we bounce off 4000 then I will believe 
it. Before you start wondering if I lost it by saying in one 
paragraph that individual stocks are bottoming but the Nasdaq 
is still 200 points away lets look at the facts. Indexes are 
made up of individual stocks and the top five Nasdaq stocks 
make up about 20% of the index. SUNW is at strong support and 
should not contribute to another drop but the other major 
pillars of the Nasdaq, INTC, MSFT, ORCL, CSCO could still
suffer weakness. (SUNW does have earnings Thursday and the
price is likely to be volatile.) While individual stocks traded 
on the Nasdaq exchange like, JDSU, ARBA, CMRC, are showing 
support the index could still lose ground. Since 85% of an 
individual stocks movement is related to market movement we 
are at the proverbial catch-22. 

The Greenspan talk today was a non-event and the last several
PPI/CPI events have produced relief rallies. With Greenspan
not using his podium appearance today to try and talk down
the market, even just a little bit, we may be seeing a bit
of easing in the Fed rhetoric. All these things provide 
subtle shifts in sentiment as we go forward.

While I am not claiming to be able to forecast the market
direction I do vote with my personal trading account. I am
still flat, in cash and waiting. I would love to see another
significant drop at the open tomorrow. I would buy it without
any hesitation. I would love to see 3800 but I think it is
wishful thinking. Anything under 4000 would be buyable in my
opinion. But before you charge off and start looking for
candidates I would stress that this is probably only a trading
rally and I would look for it to last only a couple days
depending on the depth of any drop on Wednesday. The deeper
the drop the better a chance for a long term bottom. We still
have to get past the post earnings, post tax depression
period before we will see any long term rally. 

While analysts are touting the highest close for the Dow
since Jan-20th and the lowest close for the Nasdaq since
Feb-1st, I would tell you that the tables are about to turn.
most of the Dow stocks have completed a 50% or better 
retracement of their previous losses and now every dollar
will be harder to gain. Profit taking on the Dow will come
more frequently and the Nasdaq may get to spend a few days 
in the limelight. The dive at the close tonight brought us
closer to the bottom but just not close enough.


Trade smart and sell too soon.

Jim Brown
Editor

Current positions: None



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

Rite Aid Receives Boost From Citibank
By Matt Paolucci

Rite Aid Corp. (RAD) said Citibank (C) will give the troubled drug 
store chain a $1 billion credit line.  Rite Aid, the country's 
third largest retail drugstore chain (behind Walgreens and CVS), 
operates over 3,800 stores in 30 eastern, southern and western 
states and the District of Columbia.  Rite Aid also owns PCS 
Health Systems, Inc., which provides pharmacy benefit management 
programs and services which help improve patient health and reduce 
health care costs.

The senior secured credit line, which matures Aug. 1, 2002, will 
give RAD time to improve its performance under a turnaround plan 
launched by the management team brought in late last year.  The 
Camp Hill, Pa.-based company has been under scrutiny since it 
announced late last year a $600 million downward restatement of 
its pre-tax profits, related to accounting improprieties. 

Rite Aid's management team has undergone quite a facelift.  The 
Company hired Bob Miller as its new CEO last December.  Miller is 
a 30-year veteran of Albertson's and most recently served as the 
Vice-Chairman and Chief Operating Officer of Kroger, the nation's 
largest retail food company.  RAD also appointed Christopher Hall 
as senior vice president and chief accounting officer.  Hall 
previously served executive vice president and CFO at 
California-based Golden State Foods.  Additionally, two long-time 
veterans from Fred Meyer, the nation's #5 food retailer, have 
joined Rite Aid as senior vice presidents. 

"Our new credit facility and the related transactions announced 
today, when completed, will provide us with the liquidity we need 
to support our turnaround plan," Bob Miller, chairman and chief 
executive officer of Rite Aid, said.  The line will provide Rite 
Aid with more than $600 million in funding for general working 
capital purposes. 

The rest of the credit will be used to repay the company's 
existing $300 million asset securitization facility and to pay 
expenses associated with planned refinancing and debt 
modifications. 

Rite Aid said that after completing the transaction, the company 
will have almost no debt maturing prior to August 2002. 

One of RAD's principal lenders, J.P. Morgan & Co., has agreed to 
convert $200 million of the existing bank debt which it holds, 
into Rite Aid common stock, at a price of $5.50 per share in 
connection with the closing of the new facility. 

Rite Aid's management changes are impacting the Company's 
operations.  Same store sales are on the rise.  Aside from its 
anomalistic 7.6 percent rise in January due to the holiday season,
RAD posted a 3.4 percent rise in February and a 4.8 percent rise 
in March.

If you add up the financial commitment made by Citibank, the 
Company's new management team, the reorganization of its debt, and 
the steep discount the stock trades relative to its 52-week high, 
shares do look enticing.  But before betting the "pharm" on this 
one, it may be prudent to see more follow through on the sales 
and earnings fronts.


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

As of Market Close - Tuesday, April 11, 2000 

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

DOW Industrials   10,850  11,250  11,287    BULLISH   4.11 **
SPX S&P 500        1,410   1,475   1,501    BULLISH   3.21
OEX S&P 100          780     800     817    BULLISH   3.21
RUT Russell 2000     470     580     510    Neutral   4.04
NDX NASD 100       3,800   4,700   3,909    Neutral   4.04
MSH High Tech        900   1,150     987    Neutral   4.04

XCI Hardware       1,480   1,510   1,571    BULLISH   2.24
CWX Software       1,450   1,670   1,317    BEARISH   4.04
SOX Semiconductor  1,050   1,360   1,132    Neutral   4.07
NWX Networking     1,070   1,190     980    BEARISH   4.04
INX Internet         800     940     670    BEARISH   4.04

BIX Banking          520     615     576    Neutral   3.16
XBD Brokerage        450     580     506    Neutral   4.04
IUX Insurance        520     620     606    Neutral   3.16

RLX Retail           900   1,000   1,022    BULLISH   4.11 **
DRG Drug             330     380     377    Neutral   3.30
HCX Healthcare       680     760     755    Neutral   3.30
XAL Airline          130     160     154    Neutral   3.10
OIX Oil & Gas        265     300     290    Neutral   3.16


***Posture Alert***
The "Old Economy" stocks chalked up another victory, as the Dow 
remained strong while the NASDAQ suffered more losses. Motorola 
and Biogen's earnings helped lead the technology and biotechnology 
sectors lower. Sectors getting hit today include Internet (-5.42%), 
Morgan Stanley High Tech (-3.45%), and Semiconductors (-3.07%). 
Winning sectors include Drugs (+2.69%), Oil & Gas (+2.04%), and 
Airlines (+2.02%). With this most recent action, we have upped 
the Dow and Retail sectors to Bullish from Neutral.    



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

Tuesday, April 11, 2000

Two down, Thousands to go!
 
The "Old Economy" stocks did it again, as the Dow flourished in the 
sunlight Tuesday while the "New Economy" stocks floundered like fish. 
Speaking of fish, has anyone watched CNBC? CNBC and the "professionals" 
that they aired these last two days were calling for the NASDAQ to go 
back and test last weeks lows. When was this next capitulation supposed 
to happen, today, yesterday, tomorrow, or next week? Please let us know 
guys, or Maria! As emotional as CNBC has become (one day raging bulls, 
next day huge bears), which is obviously for ratings, you have to 
wonder when they are going to hire Jerry Springer. 

Regardless of the media hoopla, technology shares were dampened today 
by earnings disappointments from Motorola and Biogen. These two giants 
stepped up to the plate and struck out; however, there are many other 
giants on-deck, and odds are, most people will forget about these two 
disappointments in a matter of days! Considering the major earnings run 
truly starts next week, we have two earnings down and thousands to go!

In last Thursday's letter, we talked about investor's break-even 
psychology, and the importance it had on the short term. We stated that 
"you have millions of investors who bought stocks at higher prices 
before the big drop. What this creates is potential selling pressure 
(as investors wait to be break-even), in addition to the bears that are 
ready to jump back in and short the market." Well, the NASDAQ had a 
record up day Friday, which we were surprised at, but this week's 
reaction in technology has been completely expected. What is important 
at the moment is that the NASDAQ holds key support levels, preferable 
above 4k.

On Sunday, we highlighted numerous companies regarding their earnings 
expectation and the Pinnacle Index for those issues. We looked at the 
numbers today, and the only major change was Advanced Micro Devices. 
The Pinnacle Index for AMD fell to 1.42, which may suggest that the 
stock would rally if they come in with a solid earnings report. Apart 
from that, the Pinnacle Index for the OEX suggests that we are going to 
be trading range bound in the near term, with a negative bias. Overhead 
resistance continues to be heavy, and support is light but growing 
stronger.  

Finally put/call ratios look a little more bearish today, which from a 
contrarian stance is actually positive. We will continue to monitor 
these statistics for any dramatic change.

CBOE Total P/C Ratio       .51
CBOE Equity P/C Ratio      .42
OEX P/C Ratio             1.86     
NASDAQ 100                2.55 



BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations. General Electric is the latest bellwether to give 
positive comments regarding earnings.

Short Interest NYSE:
Short interest continues to climb as quickly as the market. The short 
interest on the NYSE increased +5.7% to 4,110,510,698 shares on March 
15. This bearish level would suggest further upside potential.

Short Interest NASDAQ:
Short interest jumped +3.49% to 2,710,141,156 shares on March 15. This 
bearish barometer would indicate further upside potential.

Interest Rates (5.772):
The current yield is in bullish territory.

Volatility Index (28.95)
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.


Mixed Signs: None


BEARISH Signs:

IPO Dilution:
With so many IPO's hitting the market, there seems to be dilution 
occurring where shares of finally freed up to sell by insiders. $58.6 
billion of stock was freed up for trading in March, $67.3 billion this 
month, and $118.3 billion in May. This is too much stock for the system 
to handle. 
 
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 
Benchmark                        (3/31)      (4/04)

Overhead Resistance (830-860)     9.83        10.91

OEX Close                       821.52       816.76

Underlying Support  (800-825)     1.25         1.43
Underlying Support  (770-795)     2.17         2.47

What the Pinnacle Index is telling us:
Based on Tuesday's figures, overhead resistance is still heavy.  



Put/Call Ratio                  Friday     Tues 
Strike/Contracts                (4/7)     (4/11)


CBOE Total P/C Ratio             .37       .51
CBOE Equity P/C Ratio            .32       .42
OEX P/C Ratio                    .71      1.86


Peak Open Interest (OEX)
                     Friday           Tues 
Strike/Contracts     (4/7)           (4/11)

Puts                800 /  9,650   800 / 10,754     
Calls               830 / 11,175   845 / 19,040
Put/Call Ratio         0.86           0.56


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

April 11, 2000                          28.95


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

Daily Results

Index               Mon     Tue    Week
Dow    11287.08   75.08  100.52  175.60
Nasdaq   4055.9 -258.25 -132.30 -390.55
$OEX     816.76    4.87   -4.38    0.49
$SPX    1500.59    3.72  -11.89   -8.17
$RUT     510.13  -24.32   -8.53  -32.85
$TRAN   2921.81   15.41   78.68   94.09
$VIX      28.95    1.07    0.94    2.01

Calls               Mon     Tue    Week

MER      104.63    3.44    0.38    3.82  New, financials strong
WLA      107.50    3.31    0.19    3.50  Earnings run to Apr 19th
CL        62.63    0.94    2.38    3.32  Validation:  Going up!
LTD       51.44    0.06    2.63    2.69  New, dressed for success
UAL       65.13    1.06    1.19    2.25  New, flying higher
KSS      106.00    2.56   -2.75   -0.19  Just off new highs
IBM      119.00   -1.00   -3.13   -4.13  Still a stalwart in techs
HYSL      29.31   -1.69   -2.50   -4.19  Mimicking the NASDAQ
ADBE     119.50   -7.81    2.31   -5.50  New, a PE?  Not too high!
INTC     130.75   -5.69   -0.38   -6.07  Opportunistic trading
NXLK     100.75   -4.75   -1.75   -6.50  Dropped, reversed & over
HWP      145.81   -8.75   -1.44  -10.19  Off highs but very sturdy
AMAT     104.63  -11.50    1.25  -10.75  Fell to the profit takers
SUNW      87.88   -7.81   -3.13  -10.94  Dropped, earnings on 4/13
DISH      60.81   -9.00   -3.06  -12.06  Another helping?  Sure
SEBL     113.00  -16.43    2.63  -13.81  New, bucked the trend
NXTL     128.25  -10.69   -3.50  -14.19  Following the market
LXK      105.25   -4.31   -9.94  -14.25  Here we go again!
SILK      84.13  -13.88   -4.69  -18.57  Tied into KANA
MEDX      47.06  -14.50  -11.06  -25.56  Dropped, needs a medic!!
CHKP     169.50  -16.03  -10.94  -26.97  Dropped, earnings on 4/12
INKT     135.06  -19.63  -26.19  -45.81  Dropped, internet pain

Puts

FIBR      46.75  -19.00   -4.50  -23.50  Numbers not a "typo"
FDRY     101.56  -11.69   -6.88  -18.57  Dropped, earnings on 4/13
ICGE      57.56   -8.69   -6.44  -15.13  Busy breaking support
LVLT      81.88   -3.75   -4.50   -8.25  Can't get back on feet
IIJI      59.44   -4.38   -2.69   -7.07  Convincing performances
LU        57.38   -1.19   -1.63   -2.82  Thank you MOT!
KO        47.75   -1.19    2.75    1.56  An aberration? Entry pt.



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

For Sale: One Beat Up and Bloodied Option Trader. Cheap!
By Renee White

This is not your Mother's market.  Are we having fun yet?  How 
many of you were snickering at Warren Buffet just 2 months ago?  
How many would like to invite him to dinner tonight?  If he came, 
would you have to hire someone to laugh at his jokes for you? 

By now, the pain and reality of trading should have hit everyone 
who trades the Nasdaq with the optimism of eternal youth.  Any of 
you who have not been hit, but instead have continued to chug 
along with nice gains...please send me your address because I 
have a life-size package to send C.O.D. which needs food and 
water. 

I am sure this is a bad time to remind everyone that as option 
traders, we are never to trade with money we can't afford to lose.  
Now we know why, right?  Thank goodness, I sent in extra money to 
the IRS in January, just in case.  Thank goodness I took a little 
more off the table and kept it out of my trading account.  I 
thought I was being pro-active.  What I left in January, grew to 
a healthy level by mid March, mostly by staying out during the 
sell-off slides and entering on the violent bottoms.  I was 
planning on quarterly extractions out of my account as I sent 
quarterly payments in to the IRS.  Now, I can see that it was a 
bad idea.  If I had taken profits monthly, or even weekly 
during big runs, I would have kept more money in my pocket, 
while risking less.  Greed?

It is painful, but I promise this:  Anyone who has seen their fat 
profitable accounts, shrink to puny numbers during this damaging 
market sell-off, have been part of an intensive trading course.  
Your rewards for participating will come later, due to a better 
understanding of the market for years to come.  These painful 
money-losing days actually have their own delayed rewards.  With 
every major loss I have had since I started trading (and this is 
one of them), I have always come out of it with a clearer 
understanding of myself and as a better trader.  These sell-offs 
create an opportunity for an accelerated learning curve.  If you 
are indeed trading with money you can afford to lose, it should 
mean that although you are limping to your safe camp, you are 
wounded but not dead.  The best lesson a trader learns is by 
looking at what he did wrong, given the information handed to 
him by the market.  The worst thing a trader can do is to try 
to recoup the loss by jumping the gun on re-entry, trying to 
out-smart the market, while he suffers continued losses from 
over-trading.

The devil of the deal surrounding trading is that when you make 
a big blunder...like when you're driving down the interstate, 
looking in your rear view window only to see your boat come 
un-hitched, bounce off the trailer and go sliding down the 
freeway on its belly... you may not have the opportunity to 
repair the damage for several months.  Many times, general 
market cycles will prevent the rapid recovery recent traders 
have become accustomed.  This is my concern for the period 
before us.  In general, perennially April has been a 
strong trading month.  This year, earnings are expected to be 
strong yet our bubble bursting tech correction came before 
earnings, instead of afterwards as I was hoping.  Darn!  There 
goes all my plastic surgery plans!!  With the correction in 
front of earnings (if not in the midst of it), the aftermath is 
not as clear.  Usually, after a major correction, we have 
rebounded, right?  Beware.  The aftermath this time may be 
different.

Usually, we see our usual post-earnings depression period.  May 
and June are typically weak months according to historical market 
data, along with August, September and October.  Typically, there 
is less money coming into the markets after early April.  People 
have taxes to pay in mid April and school lets out in May.  The 
sun begins to shine which motivates people to work less.  Volume 
declines and people focus on life, liberty and pursuit of their 
summer vacations.  August is post earnings depression again and 
also a time many pony up to pay their IRS extensions from April. 
September is still weak and this trader plays little in 
October due to the now famous, yearly October ghosts from 
Crashes-Of-the-Past.  Thank you CNBC, for making that a good 
"put" month with all the fear your commentaries create 
reminding us of yesteryear.

In essence, a major correction that basically wipes out our 
April earnings run, sliding into home base coming into the 
May-June depression months, does not feel like any fun.  I could
be wrong but I read this as a set up for a sideways consolidating
market with minimal spurts and sell-offs, until after the June 
FOMC meeting.  I hope I am wrong.  Certainly, I'd enjoy an 
elevator ride right back to the tree-tops.  While I am passing on 
my long shot hypothesis remember, this is an election year which 
usually bodes well for the markets the last half of the year. 

My uneducated economic mind tells me that this correction is a 
sigh of relief for Mr. Greenspan, for it facilitates "normal" 
market movement to occur in the later part of the election year.  
I played my gut in October when the markets were at their 
worst, anticipating his November rate hike would be his last 
due to fears of the unknown surrounding Y2K.  It is my thought 
that he may pause once again from raising rates, due to the 
presidential elections and to give the economy time to digest 
the full effects of previous rate hikes.  If that does occur, 
it could set off a summer rally beginning on the first FOMC 
meeting when he does not raise rates.  This could reverse our 
normal trading pattern and carry us into October.  All bets are 
off for October though, since elections are then one month away 
during a time CNBC haunts us with ghosts from the past. 

Keep in mind, I am just a trader with diverse backgrounds in 
business, real estate, science, medicine, construction and the 
financial markets, but no economics.  What I say means nothing.  
These are just my thoughts while thinking through what is 
happening now, with a backdrop of what I think about the markets 
tomorrow.  This is how I think through my near term trading 
comfort level. 

I am unaware of all the lessons I have learned this past month.  
Though, some are very clear.  This is the second time I have lost 
money while attending a trading conference.  Open positions were 
not the factor this time; it was buying the dips while not being 
able to watch the markets, expecting the correction that day
to be the bottom.  Also, having the big crash occur immediately 
upon my return did not give me time to re-acquaint myself with 
markets or charts, not to mention the total disarray one feels 
when they have been away for a week.  Traveling and trading just 
don't mix!  I will not need to learn this a third time.

So, two new lessons to add to my trading rules include:  

1.  When I feel the urge to buy a dip while out of town and not 
watching the markets, I will go deep and go long.  I use that 
theory during times of uncertainty anyway.  Deep (ITM) and Long, 
meaning LEAPS.  I may not be able to buy as many contracts at one 
time, but I will be participating on strong upside, while 
protecting myself with time, for temporary downside.  If the 
market turns against me, I can sell calls against the LEAPS.  The 
alternative play will be a medium term straddle position, which 
will give me time to get my bearings after returning home, without 
fear of market punishment. 

2.  The biggest change to my account may not have the opportunity 
to be utilized for several months, yet I know it will make me the 
most money.  I will not wait a whole quarter again, before taking 
money off the table.  By "off the table" I mean, transferring it 
out of my trading account.  Money in that account is at high 
risk, no matter what.  Short term options get whacked and 
premiums may never return, but at least the stocks are still 
there.  Granted, they may suffer for several months too, but 
their demise is not tied to implied volatility or decreasing 
time decay.  Also, some strategies are available using the 
equities, if you want to sell them for a little more cash.  So, 
I will no longer watch my account swell up waiting on the end of 
the quarter, before sending a check home.  I have now learned 
that lesson, since a chunk of my profits have recently vaporized 
like many of yours.  I must plug that hole from draining again. 

These are not the type of markets beginners should be practicing 
in.  Even if we do get a brief rally, there is possibly more 
danger ahead.  Be careful.  Recovery into a sideways markets will 
be tough to play, especially for an option trader and especially 
if you are trying to day-trade with the spreads we have been 
seeing.  No matter what your strategy, perfect discipline is 
hard for all of us.  When we are busy looking to the left, we 
usually get hit from the right. 

The best plan may be to sit out, watch, think and decide what 
lessons you should have learned recently.  Write them down for 
future review, in a journal of its own.  There will always be 
more lessons to add to it...during the next unexpected 
correction.  Remember, we are all just works in progress.

In your journal, just so we all start on the same page, make 
sure rule #1 is: I never trade with money I can't afford to 
lose.  

Contact Support



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

Please welcome tonight Traders Corner writer, Molly Evans.  I met 
Molly at the recent Denver seminar and I think you will enjoy her 
articles from a slightly different perspective.
 
Jim

Learning The Ropes
By Molly Evans

As I sit here at my desk this morning, the NAS is down 140 
points to 4047 and the Dow is up 90 to 11277.  I've read all the 
business news and newsletters I could get my hands on last evening 
and know thatthe NASDAQ would gap down.  And that we might even
"retest the lows of last week today".  Well, as I write now in the 
afternoon, we know that didn't quite happen.  If you play the 
NASDAQ, you know that nearly everything was down and stayed down.  
I have to wonder if everyone is thinking the same thing I am, 
which is, "I'm not selling and then have this thing jump up 500 
points!" and yet at the same time, "And I'm certainly not buying 
and have this thing go down 500 points!"  So where does that leave 
us?  It leaves us with a day like we witnessed today, fairly tight 
ranges, tiny breakouts only to fall right back down.  All of us 
were wishing, hoping, and praying that the other guy will blink 
first.  How many of you bought yesterday?  There were a lot more 
sellers yesterday, that I know!  I sold pretty much everything 
into the rally on Friday, you know, the largest point gain on the 
NAS in history.  Am I not so smart?!?  Well, not quite!  I also 
went right back in and bought big on Monday when the NAS offered 
such incredible opportunities at -100 and then again at -150. 
Then still again on that oh so brief pause of -200 that I just 
knew was "the bounce".  Uh huh.  Right.  By the time we were to 
-258, I was cussing.  There's a fool born every minute and I admit 
it, I am in the family!  I knew it was too late for damage control 
as finishing on the low of the day is ominous.  Today was no 
prettier, though I did get to play puts and calls on AMAT and 
QLGC.  As they bounced around, I was doing the hoping and praying 
thing for another capitulation or a violent breakout.  Not today 
I'm afraid.  

Since I've become a much more active trader, the days fly by yet 
a week in options trading is an eternity.  So lest you think it's
taking forever for the NAS to turn around as I do, remember 
it's only been two days!  The market is truly the great 
humiliator.  I believe this emphatically.  I was so sure of a 
late day sell off last Friday and so sure of a late day rally 
today.  Nope!  This is where we get into trouble as traders, 
trying to outguess the market instead of allowing it to show us
what it's going to do.  We painstakingly learn to read charts and 
draw our conclusions but a chart is simply a diagram of past 
events.  We make inferences into the patterns, of course, but it 
is difficult to not "read into it" what we want or think we should 
see.  We as individuals are but leaves in a stream.  We have to go 
with the flow and where it takes us.  

While it's been a tumultuous ride for the NASDAQ players, there's 
been a plethora of lessons to be learned.  Whether you're a 
seasoned veteran of options trading or newly discovering this 
venue of investing, you've no doubt had to pay some dues.  I paid 
for put lessons sometime ago when we were still in a raging uphill 
climb.  Wow!  Puts just don't really work in that environment 
unless you're REALLY right about the pick.  I had picked a very 
top-heavy stock: all-time high, weakening volume, and a fading 
good story.  Seemed like a no-brainer to me, bought my puts and 
waited for the "correction".  The correction was a 10% pullback 
yet my put appreciated by about only $0.50.  As a novice, I was 
quite disgruntled and unclear about the factors affecting the 
short side of option trading.  

First of all, in a charging bull market, you have to consider the
other side of the trade.  Who's selling the put?  Wouldn't he want 
to charge you the highest of premiums for your right to put the 
stock to him at said strike?  Lesson:  Be very picky about that 
entry point price.  Know what you pay for!  Secondly, a put's time
value premium is working against you just as a call would but 
presumably you've bought the put when the stock was topping and 
not quite over the edge yet.  It takes a little bit of rolling 
overthe top to get the put to start appreciating.  In a bull 
market, that can be a little bit of time before the bears are able
to wrestle the control.  Lesson:  Would that be...wait for the 
bounce or in this case, the carnage to begin???  Third, I didn't 
realize that ATM options have the highest premium for time value.  
See, I made all the mistakes.  Today, I bought ITM puts and calls 
just to simply play the range of my two chosen stocks.  It worked 
beautifully.  The calls were being sold about the same time that 
the puts were being purchased and vice versa.  The implied 
volatility factor made the ranges on the options fat on either side.  
What fun!  Made a couple of trips in fact.  Not big money but it's 
entertaining while sitting there waiting for major positions to get
up and move.  A girls gotta have some fun!

I don't pretend to know what tomorrow will bring.  I'm simply a 
leaf in a stream.  Or is that a minnow swimming upstream?  Good 
luck to you all.  Pick your entry points carefully and be too 
quick rather than too late to the exit.

Contact Support


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

An Osmotic Technical View on Penguin Guano
By Harrison Frolick

Thank you flightless birds, for my best laugh in quite some time.  
Flightless birds, i.e. Penguins, being Wall Street Analysts.  I 
have to thank them and the person that sent an Email that said I 
was making up my trades in my last article.  Talk about rich Both 
parties made statements without any basis of fact and in spite of 
information to the contrary.  One of the worst offenders is 
"Gabby Abby".  Is she running for office or what?

The "Penguins" are telling one and all that people should invest 
in the "Old Economy" stocks and divest of the "New Economy 
Stocks".  Here is the best quote that I have seen.  "It seems like 
every single analyst on the Street is on the Old Economy bandwagon 
and determined to drive the last nail in the coffin of highflying 
techs and arrogant investors," as per Charles Payne head analyst at
Wall Street Strategies.  Arrogant investors???  Since I speak 
fluent Penguinese I will give you a translation from Analyst speak 
to English. 

"We have only recently figured out what almost everyone that has
used a PC in the past 8 years already understands the
benefits of the New Economy.  That is everyone except us and the 
Feds.  Since we have done in many cases criminal disservice to 
our clients to the point that they got fed up and now invest on 
their own and have blown away the measly returns that we gave to 
them, we can't blame ourselves. It's our clients fault for leaving 
us!  So we have to do everything that we can to screw them to the 
wall, even if it takes blowing all the money that we still 
control.  We get paid no matter what our performance is and we 
stuck our own money in the New Economy stocks that were much too 
risky for our clients even though these companies gave us a 1000% 
return. We are experts, we can invest in companies like this (at 
least since we figured this out a few years ago).  We want to cash 
out of our own portfolios now as we know that we are going to be 
out of business in a few years due to the New Economy.  We are 
going to punish all of those people, especially the widows and 
retirees that did not allow us to squander their life savings.  
Anyone that has the audacity to invest on their own is arrogant 
and should suffer the wraith of Penguin droppings.  Besides, if 
we can help manipulate the market enough,  we can pick up these 
great companies that are growing at 100% each year at bargain 
prices.  Then we can convince people to buy up the dogs that we 
are selling in the Old Economy companies that are only going to 
grow at a whopping 10% per year.  That is the icing on the cake 
for us"!

Penguinese is kind of like French, a few words can mean a lot
when translated.  That is basically the gist of it.   Now you can 
see why the first four letters of ANALyst are what they are!

Here is a an Email that I received that I want to share.  I am 
not picking on this person this time but I want to point out a 
few things to that him or her and anyone else that is thinking 
about sending me an email that is negative in nature.

"Hi, you sound like the women in Woman's Corner Dept.  Telling us 
what you did.  "I did pick up some MERQ at 61 and sold it at 
85.50."  I can say that too.  Let's have credibility and say what 
you are going to do, not fictional I dids."

(no signature included-HF)

Here is a portion above the paragraph in the story reporting on 
the MERQ trade.

"I picked up 5 contracts of RBF-JT's at $30.38.  These are the 
MERQ October 100 calls.  The last trade was around $25 but the 
current ask is $20.13.  I also picked up 500 shares of DSLN at 
$23.19 with the ask at $18.25.  Can everyone say crater?" 

Logic dictates that if I was going to put in fictional trades, I 
would not have included those for Pete sake.  Besides, I left 
another $6 dollars on the table with MERQ as my original sell was
going to be when it hit $90.  Which it did today by the way.  But 
then again, why let logic stand in the way of saying something 
negative.  As far as accusing me of lying about trades,  this 
person does not have a clue as to what makes me tick.  I nearly 
laughed until I had tears in my eyes on that one.  My partners 
were howling!  Truly, thank you, whoever you are.  I have a hunch 
that this person is a guy.  One of my partners says she agrees 
with me.  What do you think?  Do women think like this?

As I said, I don't mind people that disagree with me, but if you 
send me an E that is illogical and insulting, it will get deleted 
from now on.  However, intelligent disagreements are welcome!  
(In that vain, Richard H. I will get back with you just as soon as 
I can.) 

Ok, enough fun and Frolick!  I had a very interesting interview 
with the CFO of DSL.Net (DSLN) this morning and I will try and get 
it ready for Thursdays Email.  Yes, I am still long DSLN for 
disclosure purposes.  I am also going to be interviewing the 
President of ISPD next week and I should have a few others, as 
well.  Pretty interesting stuff!

I was reminded in an Email from Doug that there is still some 
money to be made in the ETEK-JDSU acquisition.  If you have the 
time you might want to look at that as a possible play.  Now the 
exchange ratio is 2.2 shares of JDSU for every 1 share of ETEK 
due to the split.  I have to check the charts first and see what 
is going on. 

Went down to the Sun-N-Fun Fly-In in Lakeland, FL yesterday and 
sucked in a bunch of Jet-A fumes and finally got to go up in the 
World's only 1930 New Standard D-25 Biplane.  I had a blast 
spending my $0.38's money with friends!!!  It is quite an event.  
I saw the most Paraplanes(parachutes with motors, wheels optional) 
in the air at one time that I have ever seen, there were 29 of 
them flying at sunset.  I am a Paraplane pilot and highly 
recommend the sport.  If you are going down to Florida in the next 
week or live there, it is an absolute blast to see.  To find out 
more information go to www.sun-n-fun.org .  Remember, watch out 
for Penguin Guano, there is a lot of it out there these days!

Happy Trading!

Contact SupportHarrison



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:
*****

CHKP $169.50 -10.94 (-26.97) As we mentioned in the weekend
write-up, this roller coaster ride comes to an end tonight
because of the earnings announcement tomorrow morning.
Unfortunately, the move on Friday was all we got on this play
due to the deteriorating market conditions.  Good entry/exit
techniques were critical to this play as it has been all over
the map in the past couple weeks.  Patience has been rewarded
with some very profitable 2 or 3 day runs, but the trend appears
to be down now.  With the arrival of earnings and market
internals continuing to deteriorate, we'll bid farewell to CHKP
for now.

INKT $135.06 -26.19 (-45.81) The second week of Internet stock
abuse is well under way.  Helped along by several noted analysts
cutting back on their exposure to tech stocks, former high-
flyers in the Internet sector are feeling the pain.  Seeing
nearly $45 disappear from INKT's stock price in the past 2 days
is not encouraging.  Heap on the additional insults of nearly
double the ADV today and posting the lowest close in over 6
weeks (also just fractionally above the low of the day), and you
can see why we are letting INKT go today.  Investors don't seem
to be interested in helping out with an earnings run, so rather
than fight the crowd, we'll move on and look for other
opportunities with more positive sentiment.

MEDX $47.06 -11.06 (-25.56)  Quick!  MEDX needs more than just a 
medic if it's going to recover anytime soon.  We never saw a good 
entry over the last two days of trading, and it doesn't help that 
the whole sector is moving into sickbay.  As Jim noted over the 
weekend, even a helium balloon won't go up in a downward moving 
elevator.  Comparing the chart of the NASDAQ to the MEDX chart 
shows a nearly identical pattern for both.  There hasn't been any 
news on the company for a week.  So it is that we say good bye to 
MEDX tonight.

SUNW $87.88 -3.13 (-10.93)  This SUNW is setting tonight.  So much 
for the earnings run into April 13.  While we had a nice run at 
the end of last week, SUNW has faltered in the last two days of 
trading.  Even if it had performed better, we would still be 
dropping it in front of earnings on Thursday.  Veteran readers 
will recall that we never recommend holding a position through 
earnings since more often than not, stock prices fall thereafter.  
Need current evidence?  Look no further than Motorola who 
reported a penny ahead of expectations and reported greater than 
expected revenues.  It got clocked for negative $27 today because 
a few analysts chose to focus on low margin handsets instead of 
their otherwise great showing.  Besides that, what if Michael 
Dell is proven right sooner rather than later, and SUNW's hype 
has exceeded it's ability to deliver?  Time to move on.

NXLK $100.75 -1.75 (-6.50) In our write-up last Sunday, we
mentioned that NXLK showed resilience last week when the telecom
sector fell victim to profit taking.  That situation reversed
Tuesday as stocks such as SBC, GTE, and BLS showed impressive
strength as NXLK continued its decline from Monday.  NXLK fell
through support at $105 on Monday and could never manage to climb
back above that level on Tuesday.  The stock made a run several
times to break $105 today, but never managed to gather enough
momentum.  The stock ended Tuesday positioned just above the
critical support level of $100.  We see continued weakness in
NXLK, especially with its poor showing Tuesday relative to the
rest of the telecom sector.  We don't see much help should NXLK
breakdown and fall through support of $100.  There's too much
risk to continue to hold any positions in NXLK from here, we
don't want to hang around to see what happens below $100.


PUTS:
*****

FDRY $101.56 -6.88 (-18.56) Looks like that lack of relative 
strength really paid off for this put play.  All the market had 
to do was roll over, then FDRY said, "how deep?"  Right down to 
$100 please, if you don't mind.  That's where FDRY found strong 
support.  We hope you made an exit there because FDRY sprang back 
to $113 within 30 minutes and inched its way to $114 before 
rolling over again in the afternoon.  Even as this put play 
continues on its way down, we must exit the play due to the fact
that earnings are on Thursday.  If you choose to play, just be
out by Thursday's close.  It has been a nice slide.



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

INTC $130.75 -0.38 (-6.06)  Keeping in line with its trend, INTC
was choppy and volatile.  It traded between $127.50 and $134.25, 
choosing to close right about in the middle.  The Semiconductor 
Index($SOX) was down 3.3%.  The good news is that INTC has been 
holding up relatively well and has allowed for opportunistic 
entry points.  Looking at a chart, INTC sold off in the final ten 
minutes from its intraday high.  Be aware of this tomorrow as
we may see initial selling at the open.  This could be a good 
entry yet a more conservative entry would be after the first hour.  
Two down days for the NASDAQ...could we see a rebound before the 
PPI on Thursday?  Quite possibly.  Remember that INTC has earnings
on Tuesday, April 18th after the close and we may see a short run
prior to the weekend.  Enter on the intraday dips suited to 
individual risk levels.  This play has been strong and a NASDAQ
recovery could push INTC back through $135. 

DISH $60.81 -3.06 (-12.06) It seems that investors had one too
many helpings of DISH last week and are still feeling a bit ill.
Maybe a little food poisoning or maybe the bearish comments
about the tech sector on CNBC add nauseum.  If that isn't enough,
Motorola ruined the effects of a strong earnings report this 
morning by raising caution flags about its revenue stream and 
investors suddenly lost their appetite.  After losing $8.50 
yesterday, we were praying that buyers would step in and provide 
some support at the $60 level.  With enough conviction to attract 
more buyers, DISH found support near $58 and bounced up to the 
high side of $60.  Yet, that was the end of the good news as the 
stock rolled over and dropped all the way to $55 (only $2.25 above 
the low from last Tuesday).  So why are we keeping it?  As the 
NASDAQ waffled late in the day, DISH caught the attention of some 
hungry investors and rallied strongly to close over the 
afore-mentioned $60 level.  Going forward, we need to see that 
DISH has put in a bottom; risk-takers can attempt to target shoot 
intraday dips near $55, but more conservative players will want to 
wait for a convincing move (strong volume) through the gap created 
at today's open.  If DISH can stay above $64, we may be willing to 
sit down for another helping.


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


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

The Option Investor Newsletter         Tuesday  4-11-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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

HWP $145.81 -1.44 (-8.69) What the market gives, the market
takes away.  Those of you that were hoping for our computer
hero to charge through to new highs will have to wait a bit
longer.  Hampered by bearish analyst comments towards tech
stocks and Motorola's cautionary statements this morning, HWP
had an uphill battle to wage.  For those of you that thought
yesterday's $6 retreat was enough, the markets demonstrated
the error of your ways this morning by pulling back to solidify
near $141 before running higher.  Buyers re-emerged and helped
the beleaguered stock recover to just below $150 before the
sneak attack from the broader markets dragged HWP back for
another small daily loss.  What is encouraging is that the $140
support level held up today without much of a challenge.  However,
the $150 level will provide resistance going forward.  Look
to open new positions as the stock bounces near $140, or for the
more risk-averse, wait for a powerful charge through $150.  Once
the broader markets figure out which way they want to march, HWP
should benefit from the positive sentiment created by the
pending spin-off of the remainder of its stake in Agilent and
the fact that the stock is in split territory above $140.  In
any case, confirm market direction before playing; even a winner
like HWP will get caught in a market downdraft.

LXK $105.25 -9.94 (-14.25) Here we go again!  Patient investors
are being rewarded as the market gives them another shot at
entry points that evaporated all too quickly last Tuesday.  Many
of the pundits on CNBC, as well as many of us in the office feel
that a retest of the lows we saw last week will be necessary
before we can move higher.  Applying this logic to LXK puts us
close to another entry point.  Although last week's intraday low
was $99, at $105.25, we don't have too far to go.  LXK may find
support near current levels, but vigilance may yield a nice
entry into this earnings play near the $100 level (also the
location of the 100-dma).  Earnings are confirmed for April
24th, so start looking for your entry now.  Erasing all of last
week's gains in only two days is not a particularly encouraging
sign, so make LXK prove itself by forming a bottom and moving
higher.  Volume on today's decline was slightly below average,
but picked up considerably as the decline accelerated in the
afternoon, so exercise caution going forward.  Wait for the
bounce and confirm its strength with increasing buying volume
before putting your cash at risk.

KSS $106.00 -2.75 (-0.19)  Our retailer made another new high
late Monday at $109.56.  The volume Monday continued to be
a bit light, following the trend seen in the broader markets.
This morning traders pulled some money off the table at the
opening bell.  As we mentioned this weekend, for KSS to sustain
it recent upward momentum, we wanted to see new buyers enter
the market.  The 5-dma at $105.15 provided support for KSS,
with a few buyers entering the picture late in the day.  Volume
was light again today with 710K shares changing hands, which
could be viewed as a plus.  It is somewhat concerning that on a
day when the retail sector and many stocks at the NYSE were
enjoying solid gains, KSS gave back 2.5%.  Kohl's added about
15% the previous 4 sessions so at this point we will view
today's action as profit taking.  The close today at the $106
level of support may have provided a buying opportunity, while
the next level is seen between $103 and $104.  The upcoming
split on April 25th may bring also buyers back to the table.
Keep your powder dry, as we are expecting the momentum to
return on this one.  

WLA $107.50 +0.19 (+3.56) After a tough start, through no fault
of its own, WLA began the week making a new high in each of the
past two sessions.  The moves this week have at least given us 
some breathing room.  Whether WLA can continue the momentum seen 
so far this week remains to be seen.  WLA shot up to its high 
right out of the gate this morning, and traded in a narrow range 
for the balance of the day.  A look at intraday charts shows that 
WLA continued to make higher lows on each pullback during the 
session today, which is a definite plus.  ABN AMRO said Tuesday it 
was maintaining its hold rating on merger partner and Viagra 
manufacturer, Pfizer, after U.S regulators yesterday recommended 
marketing approval of Uprima, a rival impotence treatment.  They 
believe the competition may continue to heat up in key 
therapeutical areas in the industry.  If profit taking sets in, we 
would look for the $106 or $104 to bring fresh buyers to the 
market.  WLA is also scheduled to report first-quarter results on 
April 19th, so we could still have time for a run into earnings.  
Indications are for a nice increase over last year, with estimates 
of $0.56 per share.

NXTL $128.25 -3.50 (-14.19) Well, we are just about right back
where we started our play in NXTL.  Some may view this as a good
thing, while others may be concerned that there was little or
no follow-through so far this week.  NXTL did give us a chance to
jump in on Friday.  Depending on your entry, it also gave us a 
chance to pull some profits out of the play as it began to come
back yesterday.  On the bright side the support at today's low of
$124.50 did hold.  It was a volatile session as NXTL shot up to
$138.88 in the first thirty minutes of the session, and began to
head south.  Another buying opportunity?  It could be as investor
sentiment did seem to improve late in the day.  This morning NXTL
announced the signing of a marketing alliance with ServiceHub 
Corporation that will put ServiceHub wireless intelligence
applications on Nextel handsets and the Nextel Website.  We do
we go from here?  We are at a crossroads on this one.  If 
investors continue to shift away from NASDAQ stocks, our play
could come to a pre-mature end.  If sentiment at the NASDAQ
improves, NXTL should be back on track.  

SILK $84.13 -4.69 (-18.57) SILK showed impressive strength in the
first half of trading Monday as it held firmly above $105.
Traders came back from lunch yesterday with a bad taste in their
mouths as SILK sold-off sharply after 1:00.  The stock lost $15
in the latter half of Monday's session.  The selling pressure
continued Tuesday as SILK opened the morning with a gap down by
$1.81, falling to $80 before finding support.  The weakness in
SILK can be attributed to the selloff in KANA.  The two companies
plan on completing their merger in the coming months and our play
is a leveraged one.  As KANA loses ground, so goes SILK.
However, KANA has found solid support at its current level which
has stabilized shares of SILK.  And we are looking at the volume
very carefully in the last few days.  KANA's volume all but dried
up on Tuesday as traders left the stock untouched.  We're looking
for SILK to rebound from its recent slide as traders refocus on
earnings and renew their interests in the leading tech stocks.
Watch for SILK to bounce off its current support level of $85.
The stock could run into resistance at $90 and again at $95.
Again, confirm direction in KANA before entering into SILK, and
watch volume closely as traders participate in any rally.  If the
NASDAQ rebounds from its recent decline, SILK and KANA can move
quickly.  But if the rotation out of tech stocks spills over to
Wednesday, look for SILK to find support at $80.

AMAT $104.63 +1.25 (-10.25) We mentioned last Sunday that AMAT
may fall victim to profit taking.  Well, the profit takers were in
full swing Monday as the stock gave back $11.50 of its gains
from last week.  However, Tuesday was a new day, and AMAT
prevailed in the face of a Motorola (MOT) meltdown and a weak
tech sector.  In fact, if there was one bright spot in the NASDAQ
Tuesday it was the chip equipment sector, led higher by AMAT.
Wall Street continues to find solace in the semis, noting analyst 
actions Tuesday.  Advest upgraded shares of AMAT from a Buy to 
Strong Buy and Morgan Stanley raised their price target to $120 
from $105.  Along with AMAT, Morgan Stanley raised price targets 
for several other semis today, including LRCX, KLAC, and TER.  
Technically, AMAT fell through the support level of $105 on
Monday, a level that now appears to be resistance.  Watch for
AMAT to clear $105 on heavy volume as an entry point.  Also look
for resistance at $110, if AMAT can clear that level it could
very well retest its high of $115 reached last Friday.  If we see
the NASDAQ rebound in the next few days AMAT could take-off,
noting its relative strength Tuesday.  However, set your stops
carefully after entering into the play, as we saw on Monday, AMAT
could fall to $100 before finding support.

HYSL $29.31 -2.50 (-4.19) HYSL's chart pattern mimicked the 
Nasdaq's movements over the past two days.  Coming off a three-
day uptrend last week, HYSL retreated a few points on low 
volume.  Natural consolidation is fine in and of itself, however 
the danger of this play is the power of market sentiment.  In 
the short-term, it's essential you pay close attention to the 
Nasdaq swings to foreshadow this stock's ultimate direction.  
Additionally, watch for another positive move through the 
converged 5-dma ($30.59) and 10-dma (now at $30.40) before 
adding or opening new positions, unless you're the more 
aggressive type.  Upcoming earnings may also help pump up the 
momentum.  Hyperion is confirmed to report on April 25th, after 
the bell.  In the news today, they announced an expansion to its 
global partnership agreement with IBM that includes their 
Hyperion Essbase OLAP Server technology being part of every copy 
of IBM's DB2 Universal Database Version 7.  Hyperion also 
reported it began shipping its Customer Interaction Center, a 
solution used in worldwide call center operations.

CL $62.63 +2.38 (+3.31) Validation!  Investors are indeed 
showing some favor to the old stand-by stocks, like CL.  We saw 
the evidence again this week as the trading volume perked back 
up and CL cleared the formidable resistance at $60.  Yesterday 
the stock eeked out a fractional close at $60.25, but today it 
firmed just a smidgen off its intraday high of $62.88.  These 
are certainly bullish sentiments; especially in front of 
earnings next week.  The company is scheduled to report on April 
19th, before the bell.  This gives us only five more trading 
sessions to profit from this equity rotation play.  Solid 
bounces off $61 and $62 provide new entries, but be careful if 
there's a slip back to the 5-dma ($59.93).  Overhead the 
opposition is now at $66.75, the 52-week record high set in 
January.

IBM $119.13 -3.00 (-4.00) IBM managed well on Monday while other 
hardware and chip equipment makers followed EMC and Hewlett-
Packard in a descent.  Overall IBM lost a mere dollar throughout 
trading and even popped over that hard-line $125 mark at the 
open.  Today's performance however was a bit more daunting.  In 
light of Motorola's (MOT) cautious earnings' outlook not only 
did MOT suffer a severe lashing from investors (down $27.50), 
but also the news effectively dragged down the tech sector as a 
whole.  IBM shed $3.00, or 2.5% bringing it below the 5 and 10 
DMAs, $122.43 and $121.54 respectively.  It's likely that IBM 
will recover before its earnings' announcement next Tuesday on 
the 18th (after the bell); however it'd be prudent to wait for a 
confirming bounce off the technical indicators before opening 
new positions.  On the analyst front Monday, CSFB's Amit Chopra 
sees weak hardware sales putting a "drag on growth in software 
and services" for IBM and "hurting first quarter revenues".  Yet 
Salomon Smith Barney raised its EPS estimate for the company.  
Plus, the firm reiterated its Buy rating and $155 price target 
citing "the current highly volatile market environment, its 
steady earnings growth and conservative accounting practices 
offer investors a safe haven".


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

ICGE $52.44 -5.50 (-20.25) While competitor SFE was busy telling 
the street that they would no longer focus on B2B, and would 
instead focus on Net infrastructure, ICGE was making a comedian-
like (think Chevy Chase) stumble down a flight of stairs into the 
basement.  ICGE commiserated with the rest of the B2B stocks 
yesterday and found support at $62.50.  Today, that support 
turned to vapor as ICGE gapped down and traded under $60, its 
previous support (now presumed resistance), by the close.  That 
said, there may be a retest of $60 to see if it might offer 
resistance before any further move down.  Assuming $60 offers 
some resistance from now on, the next level of support should 
come at $50-$53, a level from which ICGE broke out last October.  
You can consider taking a position at a bounce south of $60, or 
wait until there is a clear break below $56 with an increase in 
volume.  No news on this issue, except the announcement of a 
stake in CentriMed and IndustrialAmerica - presumably more B2B 
auction sites.

LU $57.38 -1.63 (-2.38) Thank you Motorola!  As you probably
have heard MOT reported better than expected earnings yesterday.
This morning before the open they said in a conference call that
next quarter won't be so darn good.  That seemed to set the stage
as tech stocks and communication equipment stocks had a rough go 
of it today.  LU lost another 2.0% today.  Lucent did bounce off 
the $56.50 area early in the session, but is a long way from 
reversing its current trend.  Over the long term, several analysts 
said the MOT problems could eventually help others in the 
industry.  As we mentioned this weekend, Lucent is going to have 
prove to investors it has turned the corner before we can expect 
any significant moves higher.  Since the first of March, traders 
have used every bounce to sell shares of Lucent stock.  LU has 
closed lower four of the last five sessions.  The 5 and 10-dma are 
back at $60.16 and $61.13, respectively.  A bounce back to the $58
area or the moving averages, followed by further weakness could 
provide another opportunity to buy puts.

FIBR $46.75 -4.50 (-23.50) No, the prices to the left are not
not a "typo."  If you entered this play late Monday morning as
FIBR began to fall out of bed, then a quick look at your account
will tell you the same thing.  Unfortunately no real news to
hang our hat on, just another 33% drop in price in the first
two days.  Rumors in the chat rooms suggested their may
have been some institutional selling, but could not be
substantiated.  The carnage continued today at the opening bell
as FIBR dropped to a low of $39 in the first thirty minutes of
the session.  Over 384K shares were traded in the first half-hour
indicating FIBR may have put in a short-term bottom.  Remember
this is a stock that closed on March 31st at $112.25.  FIBR 
did announce this morning that Sync Research a provider of
Wide Area Networking solutions had signed a definitive agreement
to merge Sync and Osicom's wholly owned Network Access 
subsidiary.  The combined public entity is expected to be
named Entrada Networks.  Traders did bid the price back up
to $52.13 only to see more sellers enter the market.  FIBR 
has once again reached an oversold condition, but we would
use further weakness as an opportunity to join this play.

KO $47.50 +2.50 (+1.31) KO benefited from a broad based rally in
blue chips Tuesday.  Traders continued their mass exodus from
tech stocks and moved into consumer staples, drugs, financials,
and the like.  KO bottomed at $45 on Monday, a level that
continues to provide support for the stock.  After hitting bottom
on Monday, investors sought value on Tuesday, bidding shares of
KO higher.  The stock opened today with a gap up by $1.44 and
rolled higher as investors fled the tech sector.  Traders weren't
completely convinced with the KO's advance today as volume was
lukewarm.  There is no news out on KO and nothing has
fundamentally changed in the last two days, making the advance
Tuesday look a little artificial.  It appears that some bottom-
fishing combined with blue chip strength helped lift KO higher.
With the gap open this morning the stock managed to climb above
its 10-dma, previously a resistance level.  Watch for selling to
resume as investors remember the dismal situation KO is currently
facing.  Look for the stock to fall through its 10-dma, currently
at $47.50, as a sign the selling has resumed.  Confirm any
weakness in KO as the stock fills its gap from this morning at
$46.50.  Firm support has been established at $45 for KO, so watch
the stock carefully as it approaches that level, as a breakdown
below $45 would provide a good entry point.

IIJI $59.44 -2.69 (-7.06) A convincing performance two days in a 
row restored our faith in IIJI.  We didn't get the big upset 
like last Tuesday and Wednesday (dives to $50), but a 10.6% 
correction is acceptable!  And technically this put play is 
still sound with the MACD, MOM, and STO still indicating a 
further descent.  If you're looking for entries into this 
volatile Internet play, then watch for downward moves off $61 and 
$60.  At $63.99, the 5-dma technical is a bit high to use an 
entry devise; however, you may want to consider it as a mental 
stop-measure.  The entry ultimately depends on your personal 
strategy and risk portfolio.  It's true IIJI is not without wide 
intraday swings, which makes it a target shooting candidate for 
day trading.  But let's not leave this one without its rightful 
attention. 

LVLT $81.50 -4.88 (-8.63) Banc of America Securities must be 
trying to get this stock back on its feet, but its not working. 
Just last week their analysts went to bat for LVLT and now 
again today, analyst Andrew Hamerling reiterated his Strong Buy 
recommendation and issued a $146 price target.  LVLT continues 
to shed its skin this week losing another 9.6% of its share 
price.  The Nasdaq's bearish behavior of the past two days is, 
of course, aiding the stock's descending momentum.  Recall from 
Sunday's write-up, we need to keep an eye on the 200-dma ($78.94)
which is historical support and may pose some opposition.  The 
current trading range between $78 and $83.  This play is based 
purely on technical momentum and not any devastating news event.  
Yet, next week the company is reporting its earnings on April 
18th, before the bell, so head's up for some possible excitement.




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

SEBL - Siebel Systems $113.00 +2.63 (-13.81 this week)

Providing sales automation and customer service software through
its main product, Siebel Sales Enterprise, SEBL offers its
customers the ability to access client information and decision-
making support across a corporation's global computer network.
The company's e-commerce applications deliver the first entirely
Web-based, enterprise class family of sales, marketing and
customer service applications.  Among the company's heavyweight
clientele are Lucent Technologies, Glaxo Wellcome, and
Prudential Insurance.

What's this, an Internet software company that actually went up
today?  Well, it wasn't a huge gain, but at least it was in the
right direction and came on strong volume.  That alone should be
enough to get your attention in this market.  SEBL is beating
the old Enterprise Resource Planning (ERP) companies at their
own game, by providing automated solutions that dinosaurs like
SAP, PeopleSoft, and J.D. Edwards are just beginning to think
about.  It isn't just about resource planning anymore;  the
industry now encompasses customer relationship management,
supply-chain management and e-commerce.  It is ironic that the
core of SEBL is the sales-force automation product that Larry
Ellison declined to sell a decade ago.  That is all well and
good, but why is this a good play now?  How about earnings next
Tuesday after the close and the fact that SEBL is finding support
at its 100-dma ($103.50).  With earnings so close, we normally
don't pick up a new play, but SEBL has been severely beaten up
with the rest of the Internets over the past month.  Starting
out at a high of $175.13 on March 8, SEBL has pulled back far
enough that, even in the current schizophrenic market
environment, buyers may emerge to give us a quick earnings run.
Granted, this play is not for those prone to ulcers, as SEBL
can easily move $20 in a day.  We are looking for SEBL to hold
support at $103 as buyers return to push upwards into earnings.
Target shooting intraday dips can be profitable, but make sure
you know your risk tolerance before playing.  A more conservative 
approach would be to await a strong move through resistance at 
$120 before jumping on board.  One final note:  SEBL becomes a 
split candidate above $120 and the company has plenty of shares 
authorized.  If the stock can get moving, there could be an 
announcement in the near future.

Continuing to form powerful alliances, SEBL announced a global
distribution agreement with Lawson Software yesterday.  In the
terms of the alliance, Lawson will integrate and sell its new
line of enterprise applications with SEBL's comprehensive suite
of e-business applications for sales, marketing and customer
service.

***April Strikes expire in less than 2 weeks***

BUY CALL MAY-110*SGW-EB OI=1270 at $18.25 SL=14.25
BUY CALL MAY-115 SGW-EC OI= 535 at $16.13 SL=11.50
BUY CALL MAY-120 SGW-ED OI= 873 at $13.88 SL=10.25
BUY CALL MAY-125 SGW-EE OI= 380 at $12.25 SL= 9.50

SELL PUT APR-105 SGW-PA OI=2386 at $ 4.50 SL= 6.50
(See risks of selling puts in play legend)

Picked on Apr 11th at   $113.00     P/E = 207
Change since picked       +0.00     52-week high=$175.13
Analysts Ratings     14-5-0-0-1     52-week low =$ 15.75
Last earnings 01/00   est= 0.15     actual= 0.19
Next earnings 04-18   est= 0.15     versus= 0.10
Average Daily Volume = 4.09 mln
/charts/charts.asp?symbol=SEBL

****

LTD - Limited, Inc $51.44 +2.63 (+2.69)

Ever been to a store in the shopping empire that retail concept 
developer, Leslie Wexner built?  If you've shopped at Lerner New 
York, Express, Lane Bryant, The Limited, Henri Bendel, Structure, 
The Limited Too, and Galyan's Trading Co., you've been to a 
Limited owned store.  LTD also owns an 84% stake in Intimate 
Brands, the parent company of Victoria's Secret and Bath &Body 
Works.  The Limited is principally engaged in the purchase, 
distribution, and sale of women's apparel in 2,861 stores. 

Bucking the technology market trend, retailers are finding new 
respect on Wall Street.  Listen to leading expert, Stacy Pak, 
First Vice President at Prudential Securities as reported by 
Bloomberg News.  Pak is beginning to see better times for the 
retail sector.  "We've seen a bounce in retail, and there is a 
little bit of blue sky out there.  So investors are looking 
around and they're seeing some very attractive valuations, which 
we definitely have in this sector.  They are seeing some actual 
green on the screen in the retail sector, so there is some 
optimism."  Priced at a reasonable 30 times earnings, and 
sporting over an 18% return on equity, The Limited owns some of 
the best branded apparel stores in the world (see above).  But 
the real story is in the chart.  Having been beaten down so badly 
over the last few months, LTD barely registered a hiccup as it 
dropped to $35.31 last Tuesday, a previous level of RESISTANCE 
for most of the month of March!  Ever since, it's been on the 
move, stacking up gain after gain for the last five days on 
strong volume.  Though down from levels seen in the previous few 
sessions, volume even today registered 50% greater than the ADV 
of 1.1 mln shares while LTD broke out to a new all-time high.  
The trend looks strong for now.  You can consider target shooting 
at $48 or $50, depending on your risk profile, or wait for a 
volume-backed breakout over $52 before taking a new position.  
Earnings are not scheduled until mid-May tentatively, so you 
won't have to dodge that bullet. 

Analysts lately have come out to support LTD too.  Robbie Stevens 
upgraded the issue from Attractive to Buy, while B of A
Securities upgraded from Buy to Strong Buy, and DB Alex Brown did 
the same.  The first two made their announcements last week 
following the tech wreck.

BUY CALL MAY-45*LTD-EI OI=282 at $7.50 SL=5.25
BUY CALL MAY-50 LTD-EJ OI=330 at $4.00 SL=2.50
BUY CALL AUG-45 LTD-HI OI=198 at $9.50 SL=6.50
BUY CALL AUG-50 LTD-HJ OI=403 at $6.63 SL=4.75

Picked on Apr 11th at    $51.44     P/E = 24
Change since picked       +0.00     52-week high=$51.75
Analysts Ratings      9-9-5-0-0     52-week low =$28.88
Last earnings 02/00   est= 1.20     actual= 1.31
Next earnings 05-23   est= 0.23     versus= 0.19
Average Daily Volume = 1.1 mln
/charts/charts.asp?symbol=LTD

****

ADBE - Adobe Systems Inc. $119.50 +2.31 (-5.50 this week)

Adobe Systems is a leader in desktop publishing software, the
company's Acrobat Reader is popping up all over the Internet as
users clamor to display portable document format (PDF) documents
on the Web.  Three of Adobe's products, Photoshop, Illustrator,
and Page Maker generate about 60% of its sales.  The company also
markets print technology to OEMs and has stakes in a string of
technology firms whose products complement its own offerings.
Adobe is hoping a restructuring effort and the introduction of
its InDesign publishing package will spur sales and accelerate
its product growth track record.

ADBE is one of the few high-flying Internet companies to actually
sport a P/E ratio.  With a P/E of 58, some consider ADBE a
value play in the volatile tech sector.  That low P/E could be
the very reason ADBE has showed resilience in the face of an
unforgiving tech sector.  Its relative strength helped to buck
the trend Tuesday as the NASDAQ continued to sink.  The momentum
stems from last week when ADBE said it raised its revenue growth
targets for the second half of 2000 to 25% from 20%.  The company
said it will maintain its targets for its upcoming second fiscal
quarter ending June 2 at 20% revenue growth.  CEO John Warnock
said, "The growth of the Web continues to fuel our business and
we are now in the strongest position in our history."  The good
news prompted Chase H&Q to upgrade ADBE from Market Perform to
Buy.  The chart for ADBE looks stellar, as the stock continues to
make new highs using its 10-dma as support.  Although ADBE is
showing impressive strength, the stock did run into light
resistance Tuesday at $122.  Watch for ADBE to break that
resistance level and confirm any move with heavy volume.  Should
ADBE fall to profit taking or succumb to broad market weakness,
the stock has support at $115 which might provide an additional
entry point should the market rebound.

As if ADBE needs any help, traders may began to focus on the
upcoming Annual Shareholder Meeting on April 26th.  Investors are
expected to approve the proposal to increase the number of
authorized shares from 200 mln to 500 mln.  The increased number
of shares is most likely a precursor to a stock split which could
further boosts shares of ADBE.

***April Strikes expire in less than 2 weeks***

BUY CALL MAY-115 AXX-EC OI=1935 at $15.75 SL=12.25
BUY CALL MAY-120*AXX-ED OI=  82 at $13.38 SL= 9.75
BUY CALL MAY-125 AXX-EE OI=  82 at $11.13 SL= 8.75
BUY CALL JUL-125 AXX-GE OI=  65 at $18.13 SL=14.00

SELL PUT APR-110 AXX-PB OI= 234 at $ 2.50 SL= 3.50
(See risks of selling puts in play legend)

Picked on Apr 11th at   $119.50    P/E = 58
Change since picked        0.00    52-week high=$125.00
Analysts Ratings      4-7-3-0-0    52-week low =$ 27.50
Last earnings 02/00    est=0.43    actual=0.47
Next earnings 06-15    est=0.47    versus=0.35
Average Daily Volume = 2.41 mln
/charts/charts.asp?symbol=ADBE

****

UAL - UAL Corporation $65.13 +1.19 (+2.35 this week)

UAL is the holding company for United Air Lines, the #1 air
carrier in the world.  United flies more than 570 jets to some
130 destinations in the US and 27 other countries.  It has hubs
in Chicago, Denver, London, San Francisco, Tokyo, and
Washington.  UAL's United Express connects passengers from
regional carries to United's system. United leads a sharing
partnership called Star Alliance with Germany's Lufthansa and
several other airlines.  Employees own 47% of UAL, making it one
of the world's largest employee-controlled companies.

Like UAL's flights, its stock made a smooth landing and is now
ready for take off.  UAL is ascending with little interruption
after bottoming last March.  The stock had been on a steady
decline in the face of rising oil prices.  Now that oil has
come down substantially from its highs, the transportation
sector has been set alight.  Early last week, ING Barings said
it raised its rating on UAL to Buy from Hold based on strong
industry conditions, its leadership position, decreasing fuel,
and an expected spring rally in airline stocks.  Analysts
believe that UAL is likely to lead the way in the airline sector
due to its powerful franchise.  One cautionary note, UAL's
employee stock ownership plan expires at the end of April.  The
expiration has the potential to result in a large-scale wage
increase as labor contracts are renegotiated.  However, analysts
believe that UAL will offset some of the costs through increased
automation of their operations.  Turning to the chart, UAL has
had a smooth flight with little turbulence in the last month.
The stock has not fallen below its 10-dma in that time.  Look
for a bounce off the 10-day as a possible entry point.  Volume
has been light in the last week and could lead to profit taking.
Watch for volume to pick-up as UAL heads skyward.

Service on US airlines continued to decline in 1999 in all areas
except baggage handling, authors of an annual airline study said
on Monday.  Researchers said consumer complaints jumped 130% in
1999 from 1998.  UAL ranked dead last in the survey of 10 major
US airlines.  The announcement didn't have any impact on shares
of UAL, I guess we'll take the bad service as long as the stock
serves us well.  

BUY CALL MAY-60*UAL-EL OI=834 at $7.25 SL=5.50
BUY CALL MAY-65 UAL-EM OI=637 at $4.25 SL=2.50
BUY CALL MAY-70 UAL-EN OI=637 at $2.19 SL=1.00
BUY CALL AUG-70 UAL-HN OI=465 at $5.50 SL=3.75

Picked on Apr 11th at   $65.13    P/E = 6
Change since picked       0.00    52-week high=$87.38
Analysts Ratings     3-5-2-0-0    52-week low =$45.75
Last earnings 12/99   est=1.75    actual=1.91
Next earnings 04-19   est=1.32    versus=1.54
Average Daily Volume  =  845 K
/charts/charts.asp?symbol=UAL

****

MER- Merrill Lynch $104.63 +0.38 (+3.81)

Ever since the 1970's, they've been bullish on America.  Anyone 
unfamiliar with this financial behemoth?  Merrill Lynch, public 
since 1971, serves a wide array of clients ranging from 
individuals and small businesses to the world's largest 
corporations and governments.  With over 67,000 employees in more 
than 40 countries, the company provides investment, financing, 
advisory, insurance and related services, through its 
subsidiaries and affiliates. 

First of all, do yourselves a favor.  Call 212-449-1000 to 
confirm the earnings date.  While the date is tentatively set for 
April 18, we were not able to confirm it from MER's Web site or 
with Investor Relations prior to the decision to play it for an 
earnings run.  That said, let's get to the meat of the play.  
Considering the blowout earnings reported in January, and that 
trading volume has jumped dramatically since the last quarter of 
1999, we think the new revenue will be nicely reflected in 
earnings and that other investors will take positions with the 
same expectation.  It doesn't hurt that the financial sector has 
been on a roll and considered a safe haven for those fleeing tech 
stocks.  The real beauty though is in the formation of an 
ascending pennant or wedge since last week.  Volume is low 
indicating sellers are not turning up to unload at these levels.  
The lows keep getting higher as MER nudges up to resistance at 
$105.  It's there right now and we expect that earnings will 
drive it to break out of the trading range with any volume 
increase.  As long as the financial sector remains in favor for 
the short term, we consider dips to support as buying 
opportunities.  Where is support?  Historically, it's at $100 since 
early-March.  However, the 5-dma (currently $102.50) may work 
too.  If it slips under $100 in a market selloff, you may want to 
nibble on the bounce.  However, if it slips while the rest of the 
market is moving up (financials included), you may want to move 
on to a new play.  Remember to check earnings until we can update 
you on Thursday.

We haven't seen an upgrade or reiteration of a rating on Merrill 
since early March.  On the downside though, MER has been barred 
from trading until October 1, and "severely reprimanded" for 
failing to prevent improper warrant trading on the Hong Kong 
stock exchange.  Not much else that will move the stock.

BUY CALL MAY-100 MER-ET OI= 670 at $10.75 SL=8.00
BUY CALL MAY-105*MER-EA OI= 685 at $ 8.00 SL=5.75
BUY CALL MAY-110 MER-EB OI=5397 at $ 6.00 SL=4.00
BUY CALL JUL-105 MER-GA OI=3127 at $12.50 SL=9.50
BUY CALL JUL-110 MER-GB OI=2744 at $10.25 SL=7.25

Picked on Apr 11th at   $104.63     P/E = 17
Change since picked       +0.00     52-week high=$115.19
Analysts Ratings      9-9-5-0-0     52-week low =$ 62.00
Last earnings 01/00   est= 1.36     actual= 1.80
Next earnings 04-18   est= 0.23     versus= 0.19
Average Daily Volume = 3.1 mln
/charts/charts.asp?symbol=MER



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

No new puts today.



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

AMAT - Applied Materials $104.63 +1.25 (-10.75) (+20.63)

Applied Materials is the world's #1 maker of complex
manufacturing equipment used in semiconductor factories.  Its
machines have a big share in most industry segments, including
deposition (layering film on wafers), etching (removing excess
material during patterning), and ion implantation (altering
electrical characteristics of certain areas of wafer coating).
Applied Materials also makes metrology systems and inspection
equipment.  Their customers include Advanced Micro Devices,
Intel, Lucent, and Motorola.  

We mentioned last Sunday that AMAT may fall victim to profit 
taking.  Well, the profit takers were in full swing Monday as the
stock gave back $11.50 of its gains from last week.  However, 
Tuesday was a new day, and AMAT prevailed in the face of a 
Motorola meltdown and a weak tech sector.  In fact, if there was 
one bright spot in the NASDAQ Tuesday it was the chip equipment 
sector, led higher by AMAT.  Wall Street continues to find solace 
in the semis, noting analyst actions Tuesday.  Advest upgraded 
shares of AMAT from a Buy to Strong Buy and Morgan Stanley raised 
their price target to $120 from $105.  Along with AMAT, Morgan 
Stanley raised price targets for several other semis today, 
including LRCX, KLAC, and TER.  Technically, AMAT fell through the
 support level of $105 on Monday, a level that now appears to be 
resistance.  Watch for AMAT to clear $105 on heavy volume as an 
entry point.  Also look for resistance at $110, if AMAT can clear 
that level it could very well retest its high of $115 reached last 
Friday.  If we see the NASDAQ rebound in the next few days AMAT 
could take-off,noting its relative strength Tuesday.  However, set 
your stops carefully after entering into the play, as we saw on 
Monday, AMAT could fall to $100 before finding support.

It feels like the NASDAQ is ready to come back a little and if 
that happens, AMAT could continue leading the tech rally.  With
an overall strong trend and a good bounce in today's early going,
AMAT may be poised to go higher.  It's 10-dma at $100.50 is the
support level to watch to see if buyers are stepping in to retest
its highs.

***April contracts expire in two weeks***

BUY CALL APR-100*ANC-DT OI=2671 at $8.75 SL=6.50
BUY CALL APR-105 ANC-DA OI=5483 at $6.00 SL=4.25
BUY CALL APR-110 ANC-DB OI=6050 at $4.00 SL=2.50

Picked on Apr 4th at     $98.13    P/E = 70
Change since picked       +6.50    52-week high=$115.00
Analysts Ratings    14-15-2-0-0    52-week low =$ 24.19
Last earnings 01/00    est=0.38    actual=0.40
Next earnings 05-10    est=0.54    versus=0.18
Average Daily Volume = 8.13 mln
/charts/charts.asp?symbol=AMAT



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

Here We Go Again...

Monday, April 10

The Nasdaq posted another record loss Monday as investor concerns
over the value of technology stocks sent the index reeling.  The
The Dow enjoyed modest gains amid a move to safety issues.  The
technology index fell 258 points to 4188 while the industrial
average rose 75 points to 11,186.  The S&P 500 index slipped 11
points to 1504.  Volume on the NYSE was light with 856 million
exchanged.  Declines beat advances by 1,612 to 1,381.  The Bond
market was boosted by the Nasdaq's losses.  The 30-year Treasury
rose 15/32, bid at 108 8/32, where it yielded 5.66%.
 
 
Sunday's new plays (positions/opening prices/strategy):

Computer Assoc.  CA    APR75C/APR70C  $0.43  credit  bear-call
Computer Assoc.  CA    APR50P/APR55P  $0.50  credit  bull-put
Visual Networks  VNWK  APR80C/APR70C  $1.00  debit   bear-call
Apple Comp.      AAPL  APR110C/A120C  $8.38  debit   bull-call
Warner Lambert   WLA   MAY85C/MAY95C  $8.75  debit   bull-call

The market volatility provided some assistance in our position
entries.  Computer Associates moved higher in early trading but
eventually fell to profit-taking.  Visual Networks also started
higher but fell significantly by the end of the session.  Apple
opened lower, and within a few minutes the stock was trading down
$3.  The move offered a favorable entry with a slightly lower
debit, but unfortunately the issue closed down $6 in the Nasdaq
sell-off.  If the technology exodus continues, our exit signal
will be the next support level near $118.  Warner Lambert was the
portfolio standout, rising $3 to a new all-time high.


Portfolio plays:

Technology issues succumbed to heavy selling pressure Monday with
high-priced stocks enduring the biggest losses.  Valuation in the
group continues to worry investors and new indications suggest
that quarterly earnings may not live up to previous expectations.
Analysts are now saying the recent move out of growth into value
is not a brief trend but the beginning of a long-lasting change.
Regardless of the eventual outcome, technology stocks have begun
an important correction and it may be time to move into classic,
more stable issues such as consumer-cyclicals and financials.  In
the broad market, air freight, agricultural products and paper
stocks advanced, while semiconductor, computer and telecom issues
fell lower.  Oil stocks continued to slide as crude prices fell to
their lowest point since last November.  May crude fell to $23.85
a barrel and commodity traders said the petroleum market is still
reeling from OPEC's decision to increase production.

A number of positions in our portfolio benefited from the move to
classic issues.  Renewed investor interest in "old economy" value
revived the recently slumping Procter & Gamble shares, enabling
the consumer products giant to survive a rout on Wall Street and
end with solid gains.  Proctor & Gamble (PG) was the leader in the
conglomerate group with a $2.50 rally to a high at $66.  Navistar
(NAV) has weathered the storm, remaining comfortably in a trading
range near $38-40, and Kroger (KR) has surpassed all previous
expectations, up $4 since February and now testing resistance near
the $20 mark.  Financial companies are also considered safe haven
issues and most of our positions in that sector are trading above
the maximum profit range.  The group standouts are Northern Trust
(NTRS) and Bank One (ONE).  Bank of Tokyo, Mitsubishi (MBK) and
Summit Bancorp (SUB) are also performing very well.

There were a number of significant losers in the Spreads Section.
Fortunately, the majority of positions that can be affected are
closed or have been adjusted forward and lower (to May positions).
A few of the more conservative credit and debit spreads (those
with little or no potential for loss) remain open and of course
the bearish plays have excellent probability of success.  One of
today's casualties was Qualcomm (QCOM).  Today the issue, along
with shares of other mobile phone makers fell in sympathy with
Motorola's pre-earnings announcement.  Before the open, Motorola
warned that second quarter and full-year earnings would come in
shy of expectations.  Additionally, the company said its goal of
10% operating margin is at risk, due to lower handset selling
prices.  For Qualcomm (QCOM), the news was negative and after the
recent slump, there was little support for the issue.  The stock
opened flat and never recovered, falling $11 during the session.
A timely exit during the morning trading should have yielded a
small closing loss (near $7 debit).


Tuesday, April 11

Technology issues fell precipitously in today's session with the
volatile biotech sector leading the way down.  Blue-chip stocks
rallied on strength in safety issues, pulling the Dow industrials
to a recent high.  The Nasdaq Composite fell 132 points to close
at 4,055 while the resurgent blue-chip average rose 100 points to
finish at 11,287.  The S&P 500 Index slipped 3 points to 1,500.
Advancing issues outnumbered declining issues 10-to-9 on the New
York Stock Exchange, with 1,530 up, 1,456 down and 481 unchanged.
NYSE volume totaled 967 million shares.  The 30-year Treasury
bond was off 1-18/32 with the yield at 5.77%.


Portfolio plays:

With the rotation to quality issues, many of our blue-chip plays
advanced significantly.  Nervous investors are continuing to shed
technology stocks that may not be worthy of their valuations and
the effects on our target "flight to quality" groups; Financials,
Major Drugs and Consumer Products have been favorable.  Today's
leaders were Abbott Labs (ABT), Bank One (ONE), Kroger (KR), and
Northern Trust (NTRS).  Other bullish issues were Proctor & Gamble
(PG), Warner Lambert (WLA), and Summit Bancorp (SUB).  Even with
the blue-chip recovery, the difference between rising and falling
stocks (market breadth) remains very narrow.  There were only a
few groups participating in the rally and that negative technical
aspect may eventually lead investors to avoid the equity market in
greater measures.

The corporate earnings season also begins this week and as the
sell-off in Motorola (MOT) and Biogen shares (BGEN) demonstrated,
traders in a nervous market are proving unwilling to tolerate any
disappointment.  The technology group also showed its true colors
with numerous failed rally opportunities.  The volatile trading
that has plagued the market recently returned, with the Nasdaq
paring an early loss of almost 200 points to fewer than 10 before
heading lower again.  After weeks of tumultuous selling, the
high-flying index is actually lower than it began the year and
now it is struggling to find a technical bottom.

The majority of traders are shifting money from sector to sector
on a daily basis, and that makes for a difficult effort in longer
term strategies such as spreads.  Our biggest disappointment today
was the new (aggressive) position in Apple Computers (AAPL).  The
issue fell another $5 to end near a recent support level at $119.
A move below that range would suggest the stock is no longer in a
bullish trend and unfortunately, a losing exit would be the likely
outcome.  Of course there are a number of ways to limit potential
losses or even capitalize on the new downward trend.  The common
alternatives range from "legging-out" or rolling into a long-term
spread to "shorting" the underlying issue.  In all cases, you must
be prepared for further draw-downs and have thorough knowledge of
the strategy.  As with any technique, it must also be evaluated
for portfolio suitability and reviewed with regard to your basic
approach and trading style.  Based on the Nasdaq's condition, our
suggestion would be to monitor the issue for a break below the
technical support (near today's low) and adjust the position when
the stock fails to recover through the (new) resistance level.

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


******************************************************************
				- NEW PLAYS -
******************************************************************

HAL - Halliburton  $40.18  *** Disparity Play ***

The Halliburton Company provides a variety of services, equipment,
maintenance and engineering construction to energy, industrial
and governmental customers.  Halliburton offers its products and
services through three business segments: Energy Services, which
provides discrete services and products and integrated solutions
to customers in the exploration, development and production of oil
and gas; Engineering and Construction, which provides services to
energy and industrial customers and government entities worldwide;
and Dresser Equipment, which designs, manufactures and markets
highly engineered products and systems, primarily for the energy
industry.

We found this position while sorting for neutral, calendar-spread
candidates and based on the favorable chart pattern and inflated
front-month premiums, the play offers an excellent risk/reward
ratio.  The advantages of a neutral calendar spread are; low cost
and large potential profit.  The basic premise in this type of
spread is simple; time erodes the value of the near-term option
at a faster rate than it will the far-term option.  If the issue
remains in a relatively small range, the position will profit.

Our outlook is based solely on the current price and trading range
of the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on the issue
so please review it thoroughly and make your own decision about
the future outcome of the position.


PLAY (conservative - neutral/calendar spread):

BUY  CALL  MAY-40  HAL-EH  OI=1980  A=$3.88
SELL CALL  APR-40  HAL-DH  OI=7156  B=$1.81
INITIAL NET DEBIT TARGET=$1.88 TARGET ROI=25%

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

****

R - Ryder  $23.94  *** Takeover Rumors! ***

Ryder System provides a continuum of leading-edge logistics and 
transportation solutions and services to local, regional and
multi-national businesses.  Ryder's product offerings range from 
full-service leasing, commercial rental and programmed maintenance 
of trucks, tractors, trailers and special-use vehicles to integrated
services such as dedicated contract carriage (buses) and carrier 
management.  Additionally, Ryder offers overarching supply chain 
consulting and lead logistics management services which support 
clients' entire supply chains, from inbound raw materials through 
distribution of finished goods.

At first glance, it appeared that Ryder's rally last month came
after a strategic alliance with Qualcomm (QCOM).  Looking back,
the issue may have also been affected by speculation of a merger.
Regardless of the cause, investors have pushed Ryder's stock above
its 150 dma on heavy volume and the recent correction has yet to
affect the bullish trend.  Thursday's announcement that Ryder is
combining the Company's two European business units, may have
helped the stock eclipse the March high but the take-over rumors
certainly played a significant role.  Now the options are again
active and Friday's $2 move suggests the January high may soon be
breached.  With favorable disparities in the front-month premiums,
this position offers a favorable speculation play for those who
are bullish on the issue.


PLAY (speculative - bullish/diagonal spread):

BUY  CALL  MAY-15.00  R-EC  OI=490  A=$9.62
SELL CALL  APR-22.50  R-DX  OI=721  B=$2.75
INITIAL NET DEBIT TARGET=$6.75 TARGET ROI=11%

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

****

NVLS - Novellus  $55.12  *** Technicals Only! ***
 
Novellus Systems manufactures, markets and services advanced
automated wafer fabrication systems for the deposition of thin
films within the semiconductor equipment market.  Novellus is a
leading supplier of high productivity deposition systems used in
the fabrication of integrated circuits.  The company employs a
number of primary film deposition systems: the Chemical Vapor
Deposition (CVD), the Physical Vapor Deposition (PVD) and the
electrofill systems.  CVD systems employs a chemical plasma to
deposit all of the dielectric or insulating layers and certain
of the conductive metal layers on the surface of a semiconductor
wafer.  PVD systems are used to deposit conductive metal layers
by sputtering metallic atoms from the surface of a target source
via high DC power.  Electrofill systems are used for depositing
copper conductive layers in a dual damascene design architecture
using an Aqueous solution.

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the potential
for a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.  Once again, the play is based on
the current price or trading range of the underlying issue and
the recent technical history or trend.  Please review the issue
carefully and make your own decision about the future outcome of
the position.


PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-70  NLZ-DN  OI=1534  A=$0.68
SELL CALL  APR-65  NLZ-DM  OI=2701  B=$1.12
INITIAL NET CREDIT TARGET=$0.50 ROI(max)=11% B/E=$65.50


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


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

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