Option Investor
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Daily Newsletter, Thursday, 04/27/2000

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The Option Investor Newsletter         Thursday 4-27-2000
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)
******************************************************************
       4-27-2000           High     Low     Volume Advance Decline
DOW    10888.10 -  57.40 10941.90 10747.30 1,110,416k 1,308  1,592
Nasdaq 3,774.03 + 143.94  3774.11  3513.76 1,548,047k 2,120  1,952
S&P-100  790.70 +   1.63   793.49   774.61    Totals  3,428  3,544
S&P-500 1464.92 +   3.93  1469.21  1434.81            49.2%  50.8%
$RUT     494.58 +  10.34   494.58   473.76
$TRAN   2836.84 -  46.68  2882.62  2809.92
VIX       28.18 -   1.28    31.81    28.01
Put/Call Ratio       .54
******************************************************************

Has The Feeding Frenzy Begun?

After yesterday's preemptive sell-off in the markets ahead of the 
ECI and the GDP numbers, the stage was set.  The fear was of 
inflationary economic data.  And what did we get?  Just that, no
surprises.  So when I woke up this morning to see the NASDAQ and 
S&P futures down limit, the bullish sentiment that Ryan mentioned
in yesterday's wrap looked even stronger.  With interest rate 
sensitive stocks being sold, where would the proceeds go?  To the 
sectors that have felt the brunt of this recent sell-off, the 
NASDAQ.  In this investment environment, cash doesn't sit idle 
for too long.  And the feeding frenzy began.

The NASDAQ gapped down to open at 3519 and didn't look back.  
Within an hour the index had moved as high as 3665, well above its
10-dma of 3627.  As the NASDAQ continued to hold around this level,
the outlook for the day continued to improve.  By reestablishing
itself above the 3600, the NASDAQ confirmed its breakout from the 
regression channel that I mentioned last Wednesday.  Note on the 
chart how the low of the day came back to test support near the 
upper limit on the channel.


 

So have professional investors and money managers started to 
bottom fish?  Sideline cash has been growing and growing for the 
past month as institutional investors built up their treasure 
chests and drew up their shopping lists.  With so many tech 
bargains out there, once one sees the other begin to feast, a 
feeding frenzy is bound to occur.  Valuations have come in quite
a bit from their highs and as investors begin to focus on the 
May 16th Fed meeting, eyes may be on techs rather than interest
rate sensitive issues, a.k.a. "old economy."  Look at the strong
uptrend today in the above chart.  The buying increased as the 
session moved on and the NASDAQ closed at the high of the day.
Closing above 3750 is very encouraging.  Now we will be watching
for a test of the 3800 resistance level, which the NASDAQ 
challenged in vain Wednesday, April 19th.  Above that is 4000 
and then the 100-dma at 4200, but we don't want to get ahead of
ourselves.  The question remains, how far will the feeding frenzy
take us?  Many NASDAQ stocks began to round up today and have set
their sights on the 50-dma.  Leading the index today was the old
stalwarts:  Semiconductors($SOX +7%) and Internets($IIX +4%).  
The NASDAQ closed up 143.95 at 3774.

As for the DJIA, things are a bit slower.  Even as many of the 
financials and other interest rate sensitive issues came under
selling pressure early, they managed a decent recovery.  The DOW
was down almost 200 points at one point and rallied back to close
down 57.40 at 10888, its 100-dma.  In general, it looks like the
DJIA will be range-bound between 10750 and 11100.  Yet, its short
term trend appears to be upward.  Inflation concerns could be the 
DJIA catalyst as we near the May 16th Fed meeting.


 

Today's economic data shifted the focus from valuations to 
interest rates once again.  The Employment Cost Index(ECI), which
measures labor costs, was up 1.4% for the 1st quarter, higher than
consensus estimate of 1.1%.  This was the largest increase since 
the 3rd quarter 1989, yes 1989!  The obvious concern here is that
higher labor costs will force company's to raise prices on its
products.  Thus, inflation.  All the nervous analysts expected the
worst for GDP, some as high as 7%.  But 1st quarter GDP came in 
at 5.4% and upon closer analysis, the number indicated little
inflation outside the energy sector, and a strong economy.  Many
Fed-watchers fear that these numbers raise the risks of a 50 
basis point hike.  

As they very well may raise the risks, do the numbers really
warrant a 50 basis point hike?  The Fed futures indicate that a
25 basis point hike is expected on May 16th.  Yet, the real
question is will Greenspan move away from his gradualist trend
and jolted the markets with 50 basis points after such a 
significant and healthy market correction?  We will have to wait
until the 16th.  With that said, now for the best measure of 
inflation: the GDP deflator.  It rose 3.2% in the first quarter--
the highest in nine years.  At first glance, it looks bad.  But 
don't judge a book by its cover.  Looking deeper into the number,
excluding food and energy, it was only up 2.1%.  And to go even
further, excluding an across-the-board Federal pay hike, 
considered a government cost, the GDP deflator came in at 1.7%.  
So I guess it's all in the way you look at it, and Greenspan will 
give it a good one.

The big stock news today was AT&T Wireless Group's IPO.  Trading
under the symbol AWE, 360 mln shares hit the market and did quite
well given the current IPO and market conditions.  AWE gained 
$2.31 to close at $31.81, at the upper end of the initial pre-IPO 
range.  The majority of trading was in block trades, indicating
a strong institutional interest in the new issue.  After being
oversubscribed by 2.5 to 1, institutional investors couldn't 
get enough.  Retail investors were relatively scarce.  Being the
largest IPO in U.S. history, AT&T raised $10.6 bln from the 
tracking stock.

With wireless being the topic du jour, NOK came out with strong
earnings this morning.  They beat the Street estimates by two 
cents with 1st quarter EPS of $0.18.  Pretax profit rose by 76%
and revenues grew by 69% from the previous year.  The biggest 
cell phone maker in the world just strengthened its position and
even stated that they could exceed full year revenue growth 
previously stated at 30-40%.  NOK was up almost 10% today in 
trading, adding $5.13 to close at $57. 

In the B2B sector, VerticalNet posted a narrower than expected 
loss of $0.16 per share vs. consensus estimates of a $0.27 loss.
VERT's revenues jumped an astounding 1300% year-over-year.  The 
company attributed this to growth from acquisitions and a rising
sponsorship of their business.  Strong sequential revenue growth
was seen across VERT's network of 56 B2B "trade communities."  
Quite impressed by the numbers, Chase H&Q reiterated its Buy 
recommendation and noted that, according to their estimates, VERT 
is set to breakeven in mid-2001.  VERT was rewarded with an 11%
gain of $5.44 to close at $51.44.

As we look forward to tomorrow's trading session, all eyes will 
be on the NASDAQ to see if it can sustain this move out of the 
most recent channel.  We are encouraged with the health of the
NASDAQ, closing at its high for the day on strong volume late 
in the day.  Follow through is necessary to convince investors 
that the NASDAQ is back.  With interest rate fears creeping up 
again, techs could be poised to reestablish themselves as the 
feeding frenzy begins.

Matt Russ
Research Analyst


**************************
ATTENTION COLORADO READERS
**************************

OptionInvestor.com will be an exhibitor at the KTLK Financial 
Fest in Denver on Saturday.  We will be available to answer your 
questions as well as providing eight free mini seminars about 
stock and option trading.  Make plans to visit the Holiday Inn 
at I-70 and Chambers between 8:30 and 5:30 Saturday April 29th.
Many other major companies will also be present including Motley 
Fool and CNBC.


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

Nokia Forecast Strong Revenue Growth
By: Cindy Christ

Nokia, the world's No. 1 mobile phone maker, posted a better
-than-expected rise in first quarter profits amid strong
demand for its products and worldwide growth in wireless
communications.

After Wednesday's close, the Finnish company said pre-tax
profits increased 76 percent to 1.33 billion euros, or $1.23
billion, compared to 758 million euros, or $698 million, a
year ago.

Earnings totaled 0.19 euros, or $0.18 per share, versus last
year's 0.11 euros, or $0.12 per share, a 73 percent jump.

Analysts polled by I/B/E/S had projected net income of $0.15
per share.

The company said overall revenues rose 69 percent to 6.54
billion euros. Revenues for cell phones increased 88 percent.

Nokia's overall operating margin also improved to 20.1 percent
from 19.8 percent, with margins for handsets reaching a
stronger-than-anticipated 24 percent.

"Based on current market conditions and our globally strong
position, we are confident we can achieve full-year revenue
growth at, or higher than, the earlier stated 30 to 40 percent
range, combined with continued strong profitability," said
Jorma Ollila, Nokia chairman and CEO, in a statement.

Wall Street was impressed with the results, especially Nokia's
production methods, which support the highest operating
margins in the industry.

In a conference call with analysts, Nokia said its market
share for cell phones is growing. Nokia currently holds 27
percent of the handset market. No. 2 handset maker
Motorola (MOT) has a 17 percent market share and No. 3
Ericsson (ERICY) an 11 percent share.

The company also told analysts it's not experiencing component
shortages like those plaguing Motorola's first-quarter
results and that declining prices for mobile phones have
slowed.

Among analysts who cover the stock, 16 rate Nokia a "strong
buy," eight a "moderate buy" and one a "hold," according to
Zacks Investment research.

"Nokia is the most well positioned maker of cell phones in the
world," said Dan Ogden, president of Dock Street Asset
Management, in an interview with CNBC financial television.

"They have a lock on the market, and there's no reason why it
shouldn't continue to grow at its current rate."

The American Depositary Receipts of Nokia (NOK) were the Big
Board's third most active issue Thursday, closing up $4.62,
or 8.9 percent, at $56.50.


**************
MARKET POSTURE
**************

As of Market Close - Thursday, April 27, 2000 

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

DOW Industrials   10,825  11,400  10,888    Neutral   4.25    
SPX S&P 500        1,500   1,550   1,464    BEARISH   4.14  
OEX S&P 100          800     850     791    BEARISH   4.13  
RUT Russell 2000     550     600     495    BEARISH   4.14  
NDX NASD 100       4,000   4,500   3,693    BEARISH   4.13  
MSH High Tech      1,000   1,150     974    BEARISH   4.13  

XCI Hardware       1,600   1,700   1,514    BEARISH   4.13  
CWX Software       1,500   1,670   1,244    BEARISH   4.04
SOX Semiconductor  1,200   1,300   1,135    BEARISH   4.13  
NWX Networking     1,070   1,190   1,020    BEARISH   4.04
INX Internet         800     940     608    BEARISH   4.04

BIX Banking          530     620     554    Neutral   3.16
XBD Brokerage        500     580     476    BEARISH   4.14  
IUX Insurance        540     620     583    Neutral   3.16

RLX Retail           900   1,000     937    Neutral   4.13 
DRG Drug             355     370     379    BULLISH   4.25  
HCX Healthcare       710     760     767    BULLISH   4.25  
XAL Airline          130     155     143    Neutral   3.10
OIX Oil & Gas        265     300     291    Neutral   3.16
 
Posture Alert    
Corporate earnings continue to support this market even in the
face of higher interest rates. The NASDAQ led the rebound today,
as the technology index bounced back strong from an early morning
sell-off. Leading sectors include Semiconductors (+7.00%), NASDAQ
100 (+5.33%), Software (+4.44%), and Internet (+4.44). Losers on 
the day were limited to Insurance (-2.82%), Banking (-2.61%), and
Retail (-2.41%).       


****************
MARKET SENTIMENT
****************

Thursday, April 27, 2000

FedWatch!

Fears that wage inflation are on the rise sparked broad based selling 
off the open Thursday; however, the NASDAQ led a turnaround and ended 
the day with a +3.97% gain while the Dow closed with modest losses. 
Volume continues to be on the decrease, as the NASDAQ traded 1.5 
billion while the NYSE traded 1.1 billion. This trend will most likely 
continue in the near term.  

The common element that continues to support this market is strong 
corporate earnings, which have consistently beaten analysts' 
expectations. This has been a great earnings season; however, the 
season is now soon over. Sure, there will be some retailers and other 
technology stragglers that report next month, but for the most part, 
earnings season is coming to a close. They have been phenomenal, but 
what will everyone be concentrating on over the next several weeks? 
That's right. FedWatch. 

Over the next several weeks, the media will have nothing relevant to 
talk about, so they will concentrate on interest rates and inflation. 
The next Fed Meeting is on May 16th, where a 25 basis point hike is 
already assumed. The next meeting after that is on June 28th, where 
another 25 basis point hike seems priced into the market. Now the 
recent question is, do they raise rates by 50 basis points during the 
May meeting? The sentiment seems to be changing, and we are starting to 
hear rumblings that the professionals feel 75-100 basis point increase 
is most likely over the next several months. This is not the scenario 
that we like to hear. But unfortunately, we will start hearing a lot 
more of this speak during the next couple of weeks. So get ready for 
every bear or interest rate guru to speak on CNBC during the next 
couple of weeks, because that is what we are going to get.
 

   
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.

Interest Rates (5.9393):
The current yield is in bullish territory.

Volatility Index (28.18):
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.

Short Interest (NYSE):
Short interest on the NYSE fell 1.33% to 4,055,931,190 shares on 
April 14; however, this is still a high level and from a contrarian 
viewpoint, would be considered bullish. 


Mixed Signs: None


BEARISH Signs:

Liquidity Crunch:
With the fear of inflation, and the most likely scenario of several 
more rate hikes, liquidity in the marketplace will become a more 
significant issue and put more pressure on equities.


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 sell-off 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                              Thurs       Tues        Thurs
Benchmark                        (4/20)      (4/25)      (4/27)
******************************************************************

Overhead Resistance (805-830)     1.65        2.25        2.79
Overhead Resistance (775-800)     1.70        1.82        1.48

OEX Close                       777.12      795.32      790.70

Underlying Support  (745-770)     1.60        1.84        2.26
Underlying Support  (715-740)     5.53        6.45        8.91

What the Pinnacle Index is telling us:
Based on the above statistics, overhead and underlying both remain 
light, indicating we can still go in either direction with relative 
ease. Resistance will start to be felt at the 800 benchmark.   



Put/Call Ratio 
********************************************************************
                                Thurs      Tues       Thurs
Strike/Contracts                (4/20)    (4/25)      (4/27)
********************************************************************


CBOE Total P/C Ratio             .75       .41         .54
CBOE Equity P/C Ratio            .68       .34         .42
OEX P/C Ratio                   1.42      1.40        1.57


Peak Open Interest (OEX)
********************************************************************
                     Thurs          Tues            Thurs
Strike/Contracts     (4/20)         (4/25)          (4/27)
********************************************************************


Puts                680 / 4,808   680 / 5,264     680 / 5,373
Calls               800 / 5,512   800 / 5,376     780 / 6,218
Put/Call Ratio         0.87         0.98             0.86


Market Volatility Index (VIX)
********************************************************************
                    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 14, 2000      Bottom?             39.33

April 27, 2000                          28.18


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

The Treasury Giveth as the Fed Taketh Away
By: Mary Redmond

When the S & P futures were down 34 points this morning and
the NASDAQ futures were down over 100 I thought the market
opening could have been brutal, but I also thought that the
NASDAQ might have recuperated somewhat.  The GDP growth of 
5.4 percent was actually lower than expected.  The fact is,
the S & P futures are usually indicative of only the open of
the market, and are usually an extreme exaggeration of the
pre-opening sentiment.

Almost everyone is expecting the Fed to raise rates in May,
and the issue of whether it will be a quarter point or half
point will probably be talked to death in the media over the
next few weeks.  The stock market generally responds to the
corporate bond rate, as some corporations need to finance
their expansion by issuing corporate bonds.  If the bond
rates are too high the payments can reduce corporate profits
and further expansion efforts.  The stocks which are not 
interest rate sensitive are generally the ones which are
profitable and have little need for debt.  The corporate bond
rates vary depending on the credit risk of the corporation,
the long and short term interest rates, the existing debt
of the corporation and a lot of other factors.  

Despite the interest rate hikes we have had so far this year,
the Treasury's program of starting to buy back 30 billion
dollars worth of government bonds has actually reduced the
Treasury bond yield to a bullish 5.9% to 6%. If they decide
to retire the 30 year bond, then the 10 year will probably
become the new bench mark risk free rate, and the bond
which will be held in the Social Security trust fund.
The 10 year bond yield is still under 6.25% despite the 
expectation of one or more interest rate hikes.  

Remember, it was announced in January that the Treasury 
planned to retire the 30 year bond.  At this point, the 30
year rate was fluctuating between 6.5% and 6.75%, and was
approaching 7%.  If the Fed had raised rates twice since 
then and the Treasury had not repurchased any bonds, then
we could have been looking at a 30 year bond yielding over
7%.  This could have pushed up all of the other rates to
the extent that the prime rate might have been close to 
10%.  It is unlikely that we would be seeing the same 
stock market if that scenario had happened.  The market
might have corrected and not come back up again.  It is
fortunate for the market that the Treasury's program 
seems to have acted as a buffer against the rate hikes.

The statistics were released on the mutual fund inflows 
for the previous week.  According to AMG Data, for the week 
ending April 26, $4.5 billion went into equity funds, with over 
79% going into growth funds.  This can mean generic growth funds, 
usually not sector specific as in biotech or financial.  The data 
on flows into tech funds was not available, although for the 
prior week the flows were approximately 450 million.  It is
encouraging to see the money coming in consistently, although it 
does not equal the strongest levels of the year. 

To really see the NASDAQ rally we want to see at least 2 billion 
in cash going into tech funds each week, and volume on the NASDAQ
of 2 billion or more shares each day.  The 10 billion dollar AT&T 
Wireless IPO may have taken some fund money away from other 
stocks, as the buyers were primarily institutions.  

Contact Support


*****

Ricky, Can Ethel & I Borrow Some Money? We Want To Go Shopping
By: Renee White

Pretty soon, our spare time may be consumed trying to decide 
which option to buy.  I can't think beyond a week yet, but it 
feels like a strong rally lasting a few days is brewing.  Be 
very skeptical and please come to your own conclusions.  
Yesterday's light volume spoke loudly to me, along with the 
minimal sell-off after a worsening ECI report this morning.  
It was especially noticeable since a bad report had potential 
implications of prompting Greenspan to immediately take action 
before the next FOMC meeting.

The drift downward since Tuesday was expected but the light 
volume made me feel there were few willing to sell their 
positions.  Low volume on an up day tells me many buyers are 
indecisive, waiting for others to test the waters first.  Low 
volume on both an up and a down day back to back, tells me 
something is soon to happen.  My chart and indicators help me 
read which way my bias should turn and I combine that with what 
I think is happening in the week ahead. 

By now you've probably read in the market wrap how impressive 
today's strength was in lieu of the poor economic numbers this 
morning.  That's another sign sellers slept late and the real 
risk takers decided to go shopping for their bargain stocks.  
This is the last large economic report to concern us on a big 
scale for a few weeks.  Once the worst was known, many decided to 
take a test position while others decided to wait for more 
confirmation.  I have to admit, the strength holding the market 
up with a bad economic report was pretty convincing. 

Okay, so no interest rate hike today.  But, wait!  Now Greenspan 
has more reasons to raise rates by 50 basis points.  That's 
usually bad.  Since it was shrugged off, that tells me we were 
so oversold that no one cared, for today at least.  The question 
now is deciding whether the aftershock will wake sellers up, to 
the realization that the report REALLY was worse than expected?  
I wouldn't be surprised.  Then the question becomes: When? I 
don't know, but the Nasdaq chart is looking like a buy.  Don't 
get me wrong, I still think a shaky market remains and soon 
fear will return to keep things choppy until the FOMC meeting.  
In the meantime, I will not use a hatchet to kill a fly on a 
friend's head.  If the market wants to breathe and advance a 
little, so be it.  Tomorrow, if it looks like Nasdaq will close 
above 3793, I'll probably take positions for a possible 
short-term breakout. If not, I'm still in "shorts".

It has been an interesting week playing "shorts".  Until today, 
all plays were very profitable.  My bias finally got me this 
morning when I shorted QQQ after hearing the bad eco report.  
The Nasdaq rocket blasted off just as I was laying pennies on 
the launch pad and it torched me badly!  I started to buy calls 
into the close, but then it just didn't feel right yet.  I need 
more than one day up and I still want to see strong volume with 
a bias towards buying.  My thinking is it could occur tomorrow 
or Monday.  Shorting has been profitable this week, but it is 
much easier to play in a down-trending market. 

I learned another nasty trading lesson yesterday and today.  
Expecting the sell-off yesterday, I had a list of stocks I 
wanted to short.  But try as I may, every equity order got 
rejected one after another.  I must have made 10 trade attempts 
during the day yesterday, all being rejected by my broker.  Why?  
Well, the explanation I was given was: "We couldn't find (borrow) 
the shares to cover your position".  One of the companies was 
Vertical Net, which traded well over 1 million shares...I guess 
somebody else "found" their shares!  I also wanted to add to 
my short position in NZRO at 16 5/8 which would have made me 
4 3/4 points in 24 hrs on several thousand shares.  But, these 
couldn't be found either.  They "lost" more this morning too!  
It is so frustrating when you read the market correctly but 
can't execute your plan.  How would you feel if you had been 
sitting on cash waiting for the right entry, then they can't 
find the shares to let you trade your plan?  Grrrrrrr!  I see a 
fly.  Where's that hatchet?  Ahhh.  Life is so much fun.

I received this email recently and wanted to share it as an 
example of one reader's successful trading plan:

"Hi Renee: My wife and I have especially enjoyed your work and 
articles in the newsletter.  We thought we would let you know 
our story, if you can see through the blood stains.  We started 
in Sept 98 with $67K.  Even though this was not really money we 
felt we could LOSE, we never counted it in our future portfolio.  
With options and outright purchases and all the extra cash we 
could muster(about $110,000) we worked our plans.  We nearly 
always followed the 10 rules and a couple of our own and paid the 
price when we didn't.  As of March 1, we had made 186 trades, 36 
at a loss, growing this piece of our portfolio to $1.2 million.  
This was from buying the dips and getting out in front of splits 
and earnings.  Wait for the dip again, no matter how small, and 
get back on with tight trailing stops. 

The best were your plays of YHOO, QCOM and JDSU a while ago.  BUT 
life sure changed in March, didn't it?  The 2 dips with modest 
volume fooled me, big time.  We got too eager, entered more plays 
and got stuck with sinking stocks because "this can't get worse." 
It did.  Today, this account is down to $450K and we feel like we 
have been ripped off.  How did this really happen?  Where are the 
buyers?  More importantly, where is the money now of these buyers.  
Oh, I know !!!!  What's left of it is in $$$$.  The $450 we have 
left is 70% in cash.  Guess what, it's going to stay there for 
now.  I'm waiting for serious volume WITH direction.  Even after 
all these screw-ups, we are still up nicely and the drop did 
include $$ for the Inferno Revenue.  We made this account pay all 
of our 1999 taxes.  

We keep two (2) lists:
1.  A RESEARCH LIST which serves as our filter.   
2.  An ACTION LIST.  

The filter list is limited to 40 stocks that have raised 
general interest from various sources and talking heads.  Heck, 
we even put on the list a couple of tips from buddies.  You know, 
"the can't miss stocks".  HA!!  We spend about 10 hrs/wk on this 
list.  We never buy off this list.  Therefore, we never buy IPO's 
or hot tips. 

The second list is our ACTION LIST and it is limited to 12 stocks.  
Our rules require us to work only these 12.  We spend about 10 
hrs/wk on this list.  All 12 have one thing in common; their 5-dma
is above their 30-dma.

On Sunday we create a strategy for the week on all 12 issues.  
Depending on whether we are holding, exiting or entering on the 
hoped for dip, we create a plan.   We try to option only those 
appearing to be moving up with volume.

We have an alert number 8% below the 3 day daily lows that tells 
us to come to the computer to sell because the issue has moved 
below our theoretical stop.  On these very same issues we have 
entered a target shooting number ABOVE the 3 day daily high by 
+/-3% takes us out with a quick profit.  This is the most 
rewarding and quickest money.  

Now where does the system fail us--when buying the dips turns 
into a bear trap.  It's funny but hunting bear in Michigan was 
never like this!  The dips since March just took more and more 
each time.  

Keep up the good work Renee and OIN.  The cash is there and 
technology will return." GG

Thanks G. Congratulations on your success and your discipline.  
I can tell you will be a long-term success story by the way you 
approach your trading.  Obviously, your trades are well planned 
out.  Your systematic approach to studying your plays is 
something everyone can learn from.  Learning to follow "the 
rules", watching volume, charts and understanding your equities, 
can really enhance one's trading results. 

I think the most valuable part of your email is your 
self-evaluation of mistakes.  Buying the dips can be incredibly
rewarding, until you load up on the big black hole instead of a 
dip.  Obviously, I've been there too.  Waiting for the volume to 
give us buy signals again, is the right way to play this 
confusing and dangerous market.  Many new traders ignore volume, 
which can kill them in a sideways market.  All traders should 
have a game plan and spend time researching potential plays 
before deciding to jump back in.  Otherwise, many will decide to 
keep their old careers.  When we learn from our mistakes, we can 
more easily navigate when the situation presents itself again. 
Hopefully next time, we will see the signs and profit from it.
  
I wish you the very best of luck and continued success. 

Contact Support


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

Chill Mode Zulu, Asset Allocation and Other Lessons Learned
By: Janar Wasito

In a portfolio theory class which I took this past year, one point 
rings true--asset allocation is the single biggest factor in 
determining the results of your investing.  I am going to discuss
my portfolio and asset allocation with the goal of giving traders 
one example of money management, but by no means the "correct" 
one.  First though, I am going to do something that the Marines 
call a debrief.

The logical place for me to start is Jan 3.  On that day, I closed
out some very successful trades that I had held over the Y2K 
divide.  I not only closed the trades, but also transferred cash 
equal to about 66% of my assets from my ST trading account to my 
LT Stock account.  On Jan 4, I was planning on going on a trip for 
two weeks, but that trip was canceled.  I needed that trip to 
unwind, decompress, and compensate for two months of hard trading 
through November and December.  Is this really relevant?  We just 
want to know how to make great trades and big profits.  I would 
contend that it is more relevant than entry points, stop losses, 
and a variety of other techniques.

Marty Schwartz, and other great traders chronicled in Market 
Wizards, all note the importance of regularly taking a day or 
longer off trading, both as a reward for a solid streak of wins, 
and because a good streak tends to roll over into a bad streak 
quite frequently.  There is also a prominent theme mentioned in 
The New Market Wizards--successful trading does not necessarily
equate to successful living.  Know the difference.

January was a losing period in my trading.  The saving grace is 
that I was playing small, with less than 3% of my assets.  I was 
testing new techniques such as spreads, naked puts, and short 
covered strangles.  I would enter the occasional directional trade, 
such as a QQQ Put play, and lose, close it for a loss, and move 
on.  At least I had the good sense to protect the majority of my 
assets.  February was a continuation of the same theme.  I studied 
the advanced techniques--bull put spreads, bear call spreads, 
etc, etc.  I learned a lot, but didn't make a lot of money in that 
period.  The simple truth is that I was burned out, both by 
trading, and by school and professional commitments.  Trading took 
up more and more of my attention, and I did it less well.

Lesson Learned #1:  Plan your downtime.  My platoon sergeant in 
the Marines used to come up to me and say, hey, the Marines need 
some FAT.  I'd say, what the heck is that.  The experienced staff 
sergeant would say, "Fooling Around Time."  Chill Mode Zulu.  
Sure enough, after a day or two of just doing nothing--playing 
volleyball, going out in town--we did whatever we were doing 100% 
better.  Yahoo! has slides and adult playgrounds in their corporate
headquarters.  That's why they are one of the most successful 
companies in the world.  There's a lesson here for individual 
traders.  You need to plan your downtime first.  That is every bit 
as important as planning trades for any given week.  Right now, I 
am looking at late May, after my exams are done, and before 
preparation for professional exams begin in earnest.  I am 
thinking about visiting Germany and my family, maybe Ireland.  
10 Days.  And the point is to completely avoid anything having to 
do with the market.  Several traders in our local Silicon Valley 
group have done this recently, or are doing it, and I think it is 
very important.

In late February/early March, I visited London and Paris.  But I 
did it with about 5 spreads open.  So naturally, between nights 
out drinking and relaxing, I picked up the Financial Times, or 
hopped on the web.  Overseas and making money, what could be 
better?  One of my travel companions was checking his quotes on 
a computer, so my affliction was not unusual, and he doesn't even 
trade options.  Another one had a May Nanogen call that paid for 
his trip(hope he closed it).  Another one worked at QCOM, so in
effect, he was always long QCOM calls.  Funny, we Americans 
abroad--leveraged financial players to the hilt.  It was a great 
trip, but not really a break from the market.

I arrived back on a Thursday, checked the market on Friday, 
planned my trades over the weekend, and thought I was Soros-esque 
in my trading ability.  In Paris and paying for my last two years 
of grad school.  How cool is that?  Well, that was the market top. 
On Tuesday of the following week, Clinton and Blair rained on the
Biotech parade.  Tired, recovering from the trip, and behind in 
my classes, I made bad decisions, which in turn led to more bad 
decisions.  On that Tuesday, I bailed out of my biotech spreads 
almost exactly at the bottom.  I had underestimated the difficulty 
of closing spreads rapidly, and it chewed up capital.  I also 
bailed out of my other spreads.

On Wednesday and Thursday of that week, I tried a strategy which 
I had rejected as inappropriate for my level of risk--naked puts. 
I set stops, and the stops worked like a charm, but resulted in 
losses as the B2B stocks I played crashed down through the stops. 
On Friday of that week, with the NASDAQ at 4800, I initiated a 
strategy which I intended to execute for the entire year--calendar 
spreads.  I bought a large number of LEAPs on leading tech stocks,
against which I would sell current month calls every month. 
Somewhere in that week I also sold a bunch of long term stocks
that I had been holding since 1998 because I had convinced myself 
that I had cracked the code of great option trading with a 
combination of spreads, etc.  Big tax mistake, but that is another 
11 months away.

Lesson Learned #2:  Bad decisions lead to more bad decisions.  The
Marines call this a degenerating decision-making cycle.  You want 
to DO it to your opponent.  Lawyers call it rattling their 
opponents.  It happens in every arena where human wills compete,
whether the NBA or the options trading pit.  Bad Decision #1 was 
closing all my spreads in a panic.  Don't blame Bill Clinton, the
biotech bubble was due to pop.  Bad Decision #2 was trying those 
naked puts when I wasn't really prepared to trade them.  Again, 
the key is to personally accept responsibility.  Bad Decision #3 
was to, overnight, decide on a strategy for a major part of my 
capital, for the rest of the year.  One of the keys to long term 
success as a trader is to recognize and to interrupt these bad 
decisions leading to bad decision cycles when they occur.  You can
overcome one or two bad decisions individually, but if they lead 
to more bad decisions, that is when you are in trouble.

Lesson Learned #3:  The Jesuits have a spiritual rule for this: 
Make important decisions in a state of consolation, not 
desolation.  Consolation is basically when you are feeling good 
because everything in your life is working.  Sleep, diet, 
exercise, relationships, etc, etc.  So, this leads me to the 
important decision which is the topic of this article--asset 
allocation.

You should make a decision about how much capital to commit to a
certain strategy in the context of whatever constitutes full 
support in your life.  On a Sunday afternoon, in consultation with 
any affected parties, after a good day, etc.  Not after 3 days of 
losing trades.  Easier said than done, but important nonetheless.

So, here is where I stand:

75% Long Term Options
25% Cash

Could be worse, a lot worse.  On the upside, the long term options 
are mostly concentrated in solid companies that have weathered 
this downturn really well.  My saving grace has been to buy Long 
Term Options on companies that I know from a variety of contexts 
in Silicon Valley.  Revenues are doubling year over year.  Revenues 
are cracking a billion dollars for the first time and accelerating. 
Markets are huge.  Lots of solid products in the pipeline.  Even 
Barron's likes some of my LEAPs picks.  Plus, with the volatilities 
on those positions, selling short term options has been very 
productive, but this is not an article about calendar spreads.  
The real question is where do I want to be?  And how do I get 
there?

I need to think this over--as I said, in a state of consolation, 
not in a state of having been whipsawed by the NASDAQ's 300 point 
daily swings for the last few weeks.  But, as a first cut, I think 
I want to be at:

33% Long Term Options/Calendar Spreads (eventually, even stock 
from exercised LEAPs)
33% Short Term Trading Option Trading Portfolio (straight calls & 
puts, and spreads, on stocks, indexes, etc)
33% Cash and/or hard assets such as real estate

So, how do I get there?  Continue to execute the Calendar Spread 
trading?  After all, the market may have bottomed, or close to it.
I have actually executed this strategy very well, its just that my
entry point at NASDAQ 4800 instead of NASDAQ 3500 ensured that the 
first month was a loser despite my best efforts.  But I have 20
months on most of my positions to continue to spin off about 11% 
in cash every month.  But, instead of reinvesting all the cash into 
new LEAPs, I might just save it month after month, thus building 
up a cash position closer to what I want to end up with.  Later 
this year, I will be closer to rebalanced.  I can also sell some 
LEAP positions when the stocks ramp up near earnings.

Lesson Learned #4:  Chris V. hit a really important point a few 
weeks ago, which I am stealing:  Have a trading partner.  I have
several in my local OIN club.  But I also have a friend whom I 
have known for over half of my life, also an option trader.  A few
months ago, he was saying things like, all these B2B companies are
bull because GE makes all the stuff and it is not big feat to put
together a web site or a B2B auction algorithm.  He was saying 
that this earnings season, revenues will be dissected with a fine 
tooth comb.  He called this downturn right on the money, and 
stayed on the sidelines, except for his long term stock holdings. 
I have a lot of confidence in my ability to trade a situation if 
I recognize it correctly.  I can nail trades day after day for 2 
or 3 weeks, up markets and down markets.  I traded the techs up in
November and December, I traded the OEX down in July and August 
last year.  But, if I don't correctly recognize what is happening, 
I can blow it, as the last month demonstrates.  The key to building 
any team--sports, relationships, business--is complementary skills 
and talents.

Lesson Learned #5:  Have a daily & weekly plan to reduce stress.  
It is really simple.  Swim, bike & lift weights every morning.  
Eat a balanced diet.  Get plenty of sleep.  Chill out on the 
weekends.  Simple, but the fact is I have not been doing this, 
except haphazardly.  Add to that school(or work) commitments.

A final word about my plan.  It is my plan, and it is not a 
complete plan.  I wrote a personal trading checklist a few months 
ago and posted it here.  Had I followed it in early March, I would 
be much better off, as I would have pulled off onto the sidelines.
Now I am going to revise that because it was basically sound, and 
it was MY plan.

But I am 31, a soon to be graduate of a good school, and single.  
That affects my outlook and risk tolerance.  I envision trading up
to 66% of my assets in options.  I think that may last a few years
until I achieve my financial goal.  It is sure to be stressful.  
Is it worth it?  Here's another lesson from that portfolio 
management class.  Financial advisors counsel younger clients to 
take greater risks because they have a longer time horizon to
recover their losses.  That's one way to look at it.  The other 
way to look at it is that if a young person takes bigger risks 
now--and wins--that fundamentally changes the person's financial 
outlook.  Make a fair amount now, and then put it in cash, bonds, 
and stable stocks, and let it compound for a long time.  Does this 
apply more broadly to people in other situations?  I think so. 
Say you are a couple with a few kids, and you can only responsibly 
put 10% of your assets into an option trading account.  Go for it,
paper trade it first, pick the right market to start in, and treat 
it seriously, as a business, not as "house money," and see what 
you can accomplish.  On a regular basis, take some of the profits 
and put it into stable assets like certain stocks that might offer 
the ability to compound year over year while protecting your 
principle.  Eventually, that will pay for a bigger house and 
education for your kids. It varies case by case.  One person might
decide to trade options with 10 or 20% of available assets.  
That's probably a reasonable allocation for most.

I have probably painted an overly negative picture.  On the plus 
side, I have learned a heck of a lot about different strategies. 
I stuck to my plan in the downturn(hopefully it is nearly over), 
and lost 10% as of today, which is a lot better than many traders 
over the last month.  Since the beginning of the year, though, my
losses are larger than that.  On the downside, I saw this 
correction coming.  But, due to a series of bad decisions which
violated my own trading rules, I did not play it successfully, as 
I had played another downturn in July/August 1999.  In the 
serious business of building my own financial future, I am a 
survivor, and wiser for it.

It's about time for some FAT.

Contact Support


*****

OEX Questions
By: Austin Passamonte

Well, looks like we've cracked open Pandora's box!  Wendy logged 
online this morning to check e-mails while I hawked the Bloomberg 
channel for pre-market reports, praying they'd tank the market 
early on.  What a way to begin the day limit-down futures can 
send index put holders to elation!  As I strolled into the office 
several minutes later, Wendy was still poised in front of the 
monitor going over a large number of emails about the OEX. 

The question & comments inside cover everything under the sun
concerning the OEX and Skybox, many of which overlap or repeat. 
It is flat impossible for me to address each one individually and 
I hope you understand, but rest assured I read them all. 

I can understand many people's anxiousness to learn everything 
tonight in one fell swoop and put it all to work in tomorrow's 
market.  Sadly, I can't do that for you. It may take several days 
to discuss matters in depth so we can all begin well prepared? 
The sense of urgency not to miss a single opportunity is great but 
rest assured, the markets will continue to move when we're done!

When I began trading options having traded futures contracts for
several years in the past with success was a tremendous help. 
Believe me, in many ways I find this to be a tougher challenge. 
After much study I began trading options with a very small account 
using one or two option contracts at a time just to gain live 
experience.  All of the paper-trading in the world will not prepare 
you 100% for live fire with real money that's yours.  I strongly 
implore the many new traders who have written me to do the same! 
Let the first year of live trading be your college course in this 
game.  Think about it; a surgeon will study their profession for 
more than a decade yet nobody volunteers to be the first patient 
on the table in front of them.  Why then do traders expect to 
profit wildly from day one while lacking proper training through 
the natural progression of learning?  One can't just toss money 
out and expect to rake in even more.

I am not a member of Pinnacle Advisors nor am I affiliated in any 
way.  There might be some confusion for attendees of the Denver 
seminar between Austin Tanner and myself.  Austin Tanner is part 
of the Pinnacle Team.  Sorry to say, I am the other guy!  Please 
address all future requests to modify the Skybox to someone who 
has that ability.  Keep in mind that Pinnacle is the authority on 
all issues concerning the Skybox...I'm merely offering my 
experiences and interpretations in this forum.

I am a private trader and free-lance writer for O/I exclusively.
Thanks for the offers to write elsewhere, but I'm exclusive here. 
For the people who inquired about myself managing their accounts 
for discretionary trading the OEX, here's a hint: even Wendy won't 
let me manage her money.  She prefers to diversify heavily in 
commodities such as precious metals, rare gemstones and Italian 
leather durable goods. 

For those who did last night's homework and are prepared to dive 
right in tonight I apologize profusely, but it's very important 
we all begin at the beginning, fair enough?  Please do the same 
exercises tonight and I promise we will apply them together next 
time.

In a series of articles we'll completely cover features including 
what any brokerage needs to offer for us to be effective.  We'll 
talk about market behavior, patterns and how to use the Skybox as 
a guideline tool for trading the OEX on a subjective basis. 
Probably the most vital topic will outline a money-management 
system for reducing account balance draw down while safely
maximizing gains. You won't want to miss that one!  
   
Trade the right direction,

Open positions: OEX calls


*****
LEAPS
*****

So You Bought Your First LEAP.  Now What?
By: Mark Phillips

A whole new level of respect has been accorded to LEAPS lately
as the markets gyrate wildly, giving indigestion to even the
most seasoned option traders.  Investors are looking for a way
to leverage their accounts without suffering the anxiety of
watching the time premium on those front month call options
melt away.

To many investors, LEAPS look like the perfect solution, so when
they see that attractive entry point appear on their favorite
stock, they leap (pardon the pun) into LEAPS.  The satisfaction
they get from the purchase of a long term option at what appears
to be an attractive point soon gives way to the nagging
question, "Now What?".

I would like to believe that seasoned subscribers have now
learned that they should never enter a position until they know
how they will handle the exit.  LEAPS are more forgiving of this
lack of forethought, and I know that we're all human; sometimes
we leap (there I go again) before we look.  Now before you start
thinking I am terribly insightful, remember I haven't always
been an option trader.  At one point I was new, made all the
mistakes new option traders make and (thankfully) learned the
important lessons in time to be able to keep trading.

I have been considering an article on how to manage existing
LEAPS positions, and the influx of reader email in the past week
has convinced me that the time for such an article is now.  Just
as with short-term options, there are no hard and fast rules for
when to apply what strategy.  My intent is to present some basic
rules that will allow you to effectively manage your open LEAPS
positions, and hopefully get you to think about the best way to
play a new LEAP position before initiating it.

As with any option (or stock) position, the two primary issues
are:
1) When to take your profits
2) When to cut your losses
With LEAPS, the long time horizon provides more flexibility,
but this benefit can create greater confusion for the unprepared
trader.  Some of the more common questions that come up are: is
there an appropriate profit target, are covered calls a good
strategy, how to recover when a position goes bad, where to
place stop losses, and the list goes on.

Starting with the easy one first, let me say that setting a
profit target is a great start.  I would qualify it though, to
be a profit target within a specific period of time.  For
instance, I may expect a 20 month LEAP on EMC to increase in
value by 20% per month on average.  If it increases by 100% in
the first 2 months, that means the rate of increase has exceeded
by expectations by 250%. At this point I would be happy (and
smart) to take the profit, wait for the inevitable pullback and
re-enter the position at a higher strike.  The other extreme
would be if the EMC LEAP moved exactly at my expectations, 20%
per month.  I would not necessarily take profits at the end of 5
months, just because the return on my investment reached 100%.
The rate of increase is right at what I expect and looks
entirely sustainable.  I would look to hold the position as long
as the growth rate remained near this average and the
fundamental/technical picture for the play looked solid.

An additional incentive for holding LEAP positions beyond 12
months (an eternity in the option trading world), is the fact
that the gains become taxable as Long-term Capital Gains rather
than Short-term Capital Gains.  The result of holding the LEAP
over this longer period of time is that a lower rate of return
on the LEAP can actually provide a higher rate of return after
allowing for taxes.

So much for the upside.  I know with the recent volatility in
the markets, many of you are champing at the bit for me to tell
you how to protect against the downside.  At the risk of
repeating what you have already read many times, let me say the
best way to minimize your losses is to initiate the position at
a good entry point.  That is all well and good, but in recent
weeks we have seen many stocks provide what looked like an
attractive entry point, followed by a 20% decline.  Unless your
game plan has been mapped out in advance, it is very difficult
to make a rational decision about how to protect your money
while the market bleeds away the value of your position.

The first and most common way to protect your LEAP position is
through stop losses.  As with short-term options, good money
management techniques dictate that if a position loses 20-30%
(I prefer 25%) of its value, exiting the position at a loss is
better than watching the entire investment decay to a 50-70%
loss (or more).  With LEAPS, there is more flexibility than
with short-term options due to the slow time decay, meaning
that a losing position will have time to bounce back.  Even
with this advantage, it is more prudent to exit the position at
a small loss, wait for a bottom to form and re-enter if the
play still looks like a good investment.

There is one large wrinkle to LEAPS investing that makes the
money management issue more confusing.  LEAPS can act as a
proxy for the underlying stock due to the long time horizon,
allowing us to write Covered Calls against the LEAP.  If done
properly, writing Covered Calls against an 18 month LEAP can be
done in such a way that the cost basis of the LEAP is negative,
creating a net credit in your account and making the profit
from the LEAP the next best thing to free money out of thin 
air.

Next week, we'll talk about using Covered Calls against LEAPS
to repair a losing position.  As an added bonus we will also
cover how to get paid to buy a LEAP.

Stay tuned and keep your powder dry.

Contact Support


***********
OPTIONS 101
***********

The Big Picture
By: David Popper

Over the years, I have been a subscriber to many newsletters.  
Often, you will read that people consistently earn 25% monthly 
or perhaps even more.  While, I have no doubt that many of 
these claims are absolutely true, I began to believe that I 
was trading poorly because I only averaged 8% to 10% per month.  
My competitive spirit prompted me to strive to achieve the 
"average" 25% that others were earning.  Sometimes I did achieve 
the 25%, often, I did not.  After years of striving to "win", 
I concluded that the 25% people were full-time traders who had 
the ability to monitor the screen all day.  I also concluded 
that to achieve such results, one would have to adopt risky 
positions that had to be monitored in order to be successful.  
Most importantly, I realized that investing is not a race against
others.  Instead, it is a marathon towards financial security.
This security does not have to be achieved in one month.
We need to concentrate on the big picture.  

For me, the big picture is different for each account.  I have
a cash account, an IRA account, and a college account.  Each 
account has different goals and different time parameters 
attached to it.  

In the case of the cash account, my goal is to supplement my 
income by $8,000 to $10,000 per month.  I personally try to 
achieve this goal by writing OTM calls above resistance and 
OTM puts below support.  Because I have a goal, I do not put 
any more capital at risk than I need to in order to achieve 
that goal.  I save the remaining capital for occasional buying 
opportunities on severe dips.  I only change my philosophy in 
this account during those times of steady uptrends such as we 
saw last February and March.  During these times, my philosophy 
changes from one of cash flow to one of capital accumulation.  
During these times, I am purchasing stocks and buying calls.  
This is only a seasonal aberration from my cash flow philosophy,
however.  

In the IRA account, my goal is retirement. Retirement is
twenty years away.  In this account, I cannot sell naked
positions.  Therefore, last year when I traded this account
continually each month, I found that I made a significant
amount of money during uptrends and would have much of it
nibbled away during sideways markets.  I realized that if I 
only traded this account during strong uptrends, I could 
achieve yearly returns of 75% to 100%.  Twenty years of 
such returns would put even a small portfolio into seven 
figures.  Not too bad.

In the college account, I have five years to achieve my goal.
Since again, I cannot take naked positions, I only trade in
significant uptrends.  One aberration to this philosophy is
that occasionally I will purchase stocks on severe dips only to 
sell them quickly on the inevitable technical bounce.  Again, a 
75% to 100% annual return will turn a $10,000 nest egg into 
enough money for any college and post-graduate school.

In short, it is important to establish the purpose for the 
trading account.  It is important not to risk any more capital 
than is necessary to achieve your purposes.  By maintaining 
this philosophy, you will have cash available to take advantage 
of severe dips and other great buying opportunities that perhaps 
you did not have the ability to take advantage of before.  
Keeping the big picture in mind makes you realize that you are 
not competing against anybody and it eliminates a great deal 
of the gambler mentality that can be devastating to an account. 

Contact Support


**************
BROKERS CORNER
**************

Look At What The Market Is Doing

Not what you want it to be doing!  The Nasdaq is in a bear 
market.  The index is 21% below its March 10th high.  So what!  
Don't worry about it, as a trader you must be a realist.  Keep 
focused on the stocks that will make you money on.  Keep a 
close eye on the new highs list.  Stocks like Citigroup (C), 
Disney (DIS), Home Depot (HD), General Motors (GM), Harley 
Davidson (HDI), Lowe Stores (LOW), are setting new highs.  
Do you own calls on these?

If the answer is no, you should do a self-analysis and ask 
yourself why didn't I re-allocate into companies like these?  
The clues have been there, why didn't I acknowledge these clues.  
The Nasdaq had already declined seven times in heavier volume 
since early March.  Such action is the unmistakable mark of 
institutional selling, or distribution.  When mutual funds unload
stock, you don't want to get in the way.  Monday's light activity 
turned out to be a starting point for further weakness, rather 
than a continuation of last weeks rally.  Indeed, Tuesday's 
volume picked up 16% to 1.68 billion adding another day of 
distribution to the Nasdaq.  The most important thing to watch 
as a trader are the markets daily price and volume action.  When
you see the distribution days adding up, look at where the money 
is going via the "New Highs" list.  Start to trade those.  So 
many people get stuck on a sector because they do well a couple 
of months and marry the sector.  Don't do it.  Plan what's hot, 
stay with momentum, make the institutions help you, not hurt you.

Robert L. Norman
J. Michael-Patrick,LLC
314-725-7275


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

The Option Investor Newsletter         Thursday 4-27-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


*************
DAILY RESULTS
*************

Index      Last     Mon     Tue     Wed     Thu    Week
Dow     10888.10   62.05  218.72 -179.32  -57.40   44.05
Nasdaq   3774.05 -161.40  228.75  -81.14  143.96  130.17
$OEX      790.70    5.50   -4.57   -2.24    1.63    0.32
$SPX     1464.92    7.07   27.81   -0.08    3.93   38.73
$RUT      494.58  -13.30   20.49   -4.79   10.34   12.74
$TRAN    2836.84  -28.12  108.90  -30.51  -46.68    3.59
$VIX       28.18    1.87   -3.12    2.40   -1.28   -0.13

Calls               Mon     Tue     Wed     Thu    Week

RMBS      211.75   -5.63   24.34    4.84   20.69   44.25  Breakout
JNPR      208.94  -11.57   17.94    3.13   13.31   22.81  New
BRCM      170.75  -10.63   19.00   -0.31   10.19   18.25  Hot sector
MERQ       84.75   -6.63    9.69    4.81    4.50   12.38  Nice move
TIBX       79.94   -2.88   14.38   -1.31    1.88   12.06  Basing
ADBE      123.44   -7.88   15.25   -5.13    8.56   10.81  Trending
ADCT       62.69   -2.63    6.50   -3.37    8.31    8.81  New
CMGI       66.19   -5.19    9.44   -3.94    8.19    8.50  New
CMVT       88.13   -4.81    4.44    1.19    7.25    8.06  Momentum
AMD        85.50    1.88    7.00   -4.63    3.25    7.50  Semi play
NOC        73.06    3.44    2.13   -2.75    3.25    7.19  Steady 
TER       107.94   -3.81   10.88   -1.19    5.75    6.50  New high!
DHR        57.00    0.50    1.50    1.00    1.06    4.06  Rock solid
ARBA       70.13   -7.00    4.94    1.63    1.56    1.13  Creeping 
SCMR       65.06   -1.75    6.69   -8.63    4.19    0.50  Entry 
GE        161.50    3.81    3.94   -2.75   -1.75   -2.44  Splitting
CVS        44.25    0.19    2.75   -1.88   -0.63   -2.94  Earnings
VSTR       87.56  -14.06    6.13  -10.00    4.56  -13.38  Dropped

Puts

DIGX       57.00  -24.06    1.06    3.44    1.13  -18.44  Dropped
PG         60.88    1.56   -6.25   -3.50    0.13   -8.06  Waffling
ADRX       49.00    1.19   -0.13   -3.94   -3.06   -5.94  New
AKAM       83.13  -11.06   -2.81    0.44    9.63   -3.81  Dropped
MCOM       27.56   -2.25    5.00   -2.75   -0.06   -0.06  Dropped
NTPA       37.88   -0.50    3.38    2.94    0.56    6.38  Dropped


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:
*****

VSTR $87.56 +4.56 (-13.38) When the momentum is gone, it's time 
to move on.  That is what we are doing with VSTR.  It had a 
nice rally up to $100 for us last week, but gave it all back 
and then some this week.  The real kicker is the poor relative 
performance it has shown lately.  Despite today's late rally 
with the market, we are leaving this play for better stocks.  
Everything on the Nasdaq looks in breakout mode and we will 
turn our attention to the most healthy looking plays.  No 
recent news, just more sellers than buyers.


PUTS:
*****

AKAM $83.13 +9.63 (-3.81) Fortunately AKAM didn't offer 
stupendous entry opportunities yesterday.  The sharp upward 
reversal this Internet experienced today killed the play's 
technical prospective.  AKAM crawled back to a comfortable 
support level in the vicinity of $80 despite promising slides 
to $67 and $68 at the opening bells, respectively.  Volume is 
typically under one mln shares on an average day, but in the 
past two sessions we've seen almost double that figure 
indicating buyers are nibbling.  Recall AKAM is well below its 
1999 IPO prices and therefore, a prime buying target.  There was 
some news surrounding Akamai.  The company announced it entered 
into an alliance with eBusiness Technologies (INSO), a provider 
of e-business applications, to jointly promote their respective 
solutions.  Another tidbit hitting the press was Digix (DIGX)'s 
announcement that it's the first hosting provider to offer 
Akamai's FreeFlow Streaming service, which expands the companies 
strategic relationship first established in November of 1999.  
While these news releases are important to investors it's 
unlikely they created the upsurge in AKAM's share price today.  
Instead the Nasdaq's positive sentiment and bargain hunters are 
the more probable culprits.  Needless to say, we're turning away 
from AKAM tonight in search of more advantageous put plays.

DIGX $57.00 +1.13 (-18.44) Akamai Technologies (AKAM) and DIGX
announced a strategic partnership Wednesday.  The two companies
will combine forces to deliver high speed, high reliability, 
and high quality Web content for their customers.  DIGX 
also announced Wednesday that the company has expanded its
relationship with Computer Associates (CA).  The new agreement
will allow DIGX to expand its increasingly complex server and
networking services.  The deal stems from the increased demand
for DIGX's managed hosting services.  While the announcements
didn't have a profound effect on the stock price, the deals show
that DIGX is continuing to expand its revenue base.  With the
broad rally in the tech sector Thursday, DIGX managed to edge
higher.  We feel it would be a good time to step away in case 
a rising tide lifts this sinking ship.

NTPA $37.88 +0.56 (+6.38) Trading in a very narrow range the
past 2 days was almost enough to lull us to sleep, but we
finally got a wake-up call in the last 30 minutes of trading
today.  Unfortunately it is in the wrong direction.  Resistance
had been forming near $37.50 and today's close above that
level, combined with the strong volume approaching the close
has the appearance of a stock getting ready to break higher.
NTPA may not run much higher, but right now the downside looks
limited.  In light of the wealth of exciting plays out there
we'll let NTPA go and move on to greener pastures.

MCOM $27.56 -0.06 (+0.06) It wasn't until the last 30 minutes of 
trade that we decided to drop MCOM.  Can you guess why?  While 
seemingly unable to keep up with the rest of the NASDAQ today, 
MCOM made a 180-degree turn near the close and spiked up $2 on 
a heavy flood of volume.  Though it retraced slightly into the 
close, it's clear that there are bargain hunters out there ready 
to snatch up this issue at around $24 support.  If you are still 
in the play, MCOM is still in a descending channel and well 
below any of its moving averages.  By definition, it remains 
technically ugly.  While we're not suggesting you close the 
play at any cost, we think closing on an intraday dip may be a 
smart move since today's closing volume may be indicative of 
institutional investors taking a nibble.  The fact is it's shown 
not great propensity to drop at a faster rate than the market 
since we picked it and it's probably close to a bottom and 
time to move on, given the opportunity.


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

RMBS $211.00 +19.94 (+44.25) Oh the bitter taste of regret!  
Might not have been the way you would have thought this write-up 
to start, but we are referring to the fact that this was our 
Play-of-the-Day runner-up yesterday.  Obviously, we can't 
complain about our actual Play-of-the-Day MERQ since the stock 
jumped 5%, but we would prefer the 10.5% turned in today by 
RMBS.  So from where did RMBS find its strength?  First, the 
SOX.X continued its momentum from earlier this week as it 
posted a 7% move today.  Second, a technical breakout over 
$200 on strong volume brought the buyers back.  This second 
factor is a biggie too since RMBS doesn't show much resistance 
until it hits the 50-dma at $266.  Volume will continue to be 
the key, but we would expect buyers to really start coming back 
to the Nasdaq if it breaks above 3800.  That could be as soon 
as tomorrow.  In all cases, watch this one like a hawk as it 
is known for big moves in both directions.

MERQ $84.75 +4.50 (+12.38) MERQ was our victorious Play-of-the-
Day for Thursday adding $4.50 and brining the weekly stock 
gain to 17%.  Hopefully, we are just at the beginning too with 
MERQ breaking out over resistance at $80 today.  Looks like 
just a hop, skip and a jump to $90 from here.  Ultimately, it 
depend on market sentiment, but we see lots of positive signs 
for this short-term move to continue for another day or two.  
There wasn't any fresh news on MERQ today so we have to rely on 
the technical picture for guidance.  A pullback to $80 would 
be a tempting entry, but may not be likely.  If it does, make 
sure you get the bounce first.  Maybe the new rating from Lehman 
Brothers at a Buy announced on Tuesday is finally taking hold.  
Watch for news to propel the play, but use the technicals to 
guide your entry and exit points.

AMD $84.25 +2.00 (+5.88) The technology stocks lost their 
momentum in late trading Wednesday and even the strong 
Semiconductors weren't immune.  There wasn't any shocking news 
event that rocked the markets.  Investors were just plain 
skittish ahead of the economic data due out this morning.  AMD 
lost $5.50, or 6.25% by the close yesterday, which offered quite 
nice entry points on the descent.  As it turned out the data 
wasn't the best, but wasn't bad enough either to buckle the 
Nasdaq.  So today AMD took flight once again.  It repeatedly 
bounced off the $84 and $85 marks, which appears to be evolving 
as a higher near-term support level.  In NYC this morning AMD's 
shareholders' meeting was beginning.  Besides the impending vote 
to increase the number of authorized shares to 7.25 mln, 
executives will discuss the Thunderbird, Spitfire, Corvette and 
other Athlon processors coming later this year.  Across town 
rival, Intel, was having its semi-annual analysts' meeting.  
With AMD currently experiencing financial success and shining 
brightly in the limelight of analysts and money managers, Intel 
was presumably on the defensive.  So far at press time, we've 
heard no word of a split announcement from AMD's Board of 
Directors.  We've got our fingers crossed!  Apart from that 
hopeful, look for this sexy semiconductor to nevertheless 
continue making new highs with Nasdaq advances.  

CVS $44.25 -0.63 (+0.44) It's nice when a plan starts to come 
together.  CVS was added in Tuesday evening's newsletter as a 
momentum play with the added gratuity of an earnings' run 
prospect.  We suggested however waiting for possible 
consolidation to occur before jumping into new positions.  Sure 
enough CVS returned to near-term support at $43 and $44 by 
today.  This level at the 10-dma ($43.88) and 5-dma ($43.88) 
technicals held up well and further demonstrated this may be the 
launching point.  The volume was moderate to low indicating 
sellers weren't anxious to get rid of shares.  This is another 
good sign.  Therefore look for a solid bounce on the upside 
along with increased trading levels for confirmation.  CVS is 
only reporting in a couple of weeks so we've got plenty of time 
to pick entries.  The company is releasing their numbers before 
the bell on May 9th.  

NOC $73.06 +3.25 (+6.13) NOC announced late Tuesday night that
the company was holding discussions with DaimlerChrysler
Aerospace on forming an alliance to develop advanced radar and
electronic surveillance systems.  The agreement marks NOC's
second agreement with a European defense firm.  The company is
also working with Airbus, the European aircraft manufacturer.
Consolidation in the defense industry continues to reign supreme.
BAE Systems, a British defense firm, said Wednesday that it was
interested in buying aerostructures division of Lockheed Martin.
What's more, a few weeks ago NOC said it is exploring
alternatives for their aerostructures business.  The announcement
of an alliance with DaimlerChrysler didn't help Wednesday as NOC
slid lower throughout the day along with the broader market.
After establishing strong support at $69, NOC rebounded sharply
and closed back above its 5-dma.  The stock has light resistance
at $74, watch for a bounce off the 5-day, and look for an entry
if NOC breaks through resistance.

TER $107.94 +5.75 (+11.63) Semis are hot again!  Semiconductor
stocks surged Thursday, led by the equipment makers such as TER
and AMAT.  The Philadelphia Semiconductor Index ($SOX) gained
almost 7%.  Excitement was provided by Intel and AMD as the two
chip makers offered Wall Street analysts insight into future
product launches.  Intel held an analyst meeting Thursday and
AMD announced the name of its new processor family for use in
business and home.  What's good for the chipmakers is good for
the chip equipment manufacturers.  Executives of the semi
equipment companies told analysts Thursday that orders are
booming and the future looks bright for the industry.  All of the
good news pushed TER to an all-time high of $110.63 on Thursday.
The stock continues to roll higher using its 10-dma en route 
to reaching new highs.  From here, we can continue to look for
bounces off the 10-day for possible entry points.  TER ran into
minor resistance Thursday at the $110 level after traders took
profits.  Watch for the strength to continue in the broader
semiconductor group, a move above minor resistance at $110 may
provide a good entry point for a new position.  

ADBE $123.44 +8.56 (+10.81) ADBE held its Annual Shareholders
meeting Wednesday.  Shareholders approved the proposal to
increase authorized shares from 200 mln to 500 mln.  However, the
company did not announce a stock split.  Executives said they may
consider a stock split when the NASDAQ stabilizes.  Officials
went on to say that they do not like the volatility in the stock
as it does not reward stockholders and a stock split might add to
the fluctuations.  The lack of a split announcement combined with
sector weakness caused ADBE to stumble Wednesday.  But the stock
regained lost ground and more on Thursday.  After hitting bottom
at $107, ADBE reversed and rose steadily Thursday to close the
day near its highs.  The stock is just below its all-time high of
$125.  That level is the only resistance preventing ADBE from
moving higher.  Volume has been impressive as ADBE climbs higher.
Watch for a move above $125 on heavy volume as a possible entry
point.  

CMVT $88.13 +7.25 (+8.06) CMVT continues to show impressive
relative strength.  The stock actually edged higher Wednesday
while the broader market languished.  The strength Wednesday can
be attributed to the strong numbers reported by Nortel.  NT
crushed estimates, beating analysts' views by about 25%.  The
company also enjoyed a host of upgrades and increased price
targets.  The good news from NT spilled over to the rest of the
telecom equipment makers and carried CMVT higher.  CMVT also
benefited from positive remarks from an esteemed money manager.
Charles Ghering said, "We expect earnings to grow at 30% over the
next three to five years.  [CMVT's] revenues have really come on
strongly and we expect them to accelerate in the near future."
The positive comments and stellar earnings from NT sent CMVT
screaming higher Thursday on heavy volume.  We've seen heavy
buying interest on the up days for CMVT while volume has been
lukewarm on down days.  This indicates "smart money" has been
accumulating CMVT, possibly for an earnings run.  If the stock is
going to move higher it needs to clear resistance at $95.  Watch
for the stock to roll higher using its 10-dma as support or wait
for CMVT to clear its next level of resistance.  Either way,
confirm any move higher with strong volume before entering the
play.

ARBA $70.13 +1.56 (+1.13) Hopefully ARBA is wearing a hardhat.
It keeps bumping its head on the $70-71 resistance level and
even the strong gain on the NASDAQ was only sufficient to push
it up to close at this resistance level today.  This morning's
opening dip to $62.50 provided a nice entry, confirming support
at that level, but the longer ARBA spends wrestling with the $70
level, the harder it will be to break.  On the positive side,
ARBA is gradually moving higher and today managed another close
over the 200-dma ($67.56).  Receiving a Sands Brothers upgrade
from Buy to Strong Buy yesterday should help motivate buyers as
long as the Internet sector can continue its recovery.  We are
waiting for the conviction that is normally demonstrated by
strong volume as ARBA has been trading slightly below the ADV
of 5.2 million shares.  Support appears to be building between
$68-69, with stronger support at $65.  Consider entering new
positions on a bounce from support, but the more cautious
approach will be to wait for a strong move through $71 on
increasing volume.

DHR $54.94 +1.06 (+4.06) After a slight hiccup yesterday
afternoon, DHR was back to its now-familiar pattern today.
Continuing to march higher, even in the face of weakness in
"old economy" stocks, DHR is looking good.  Closing very near
the high of the day today, the only point of concern is the fact
that volume remains light, posting only two-thirds of the ADV
today.  Even the weakness seen in the DJIA today had no effect
on DHR, as investors continued to bid the share price higher.
The light volume is likely due to the lack of trading volume in
the market as a whole, rather than any stock-specific factor.
Posting gains for each of the past 6 days, DHR may be due for a
break, so keep your stops set.  Support looks good near $55, so
this would be a good level to target shoot new entries in the
event of any profit-taking.  We have to go back to early
September of last year to find historical resistance levels,
but look for possible opposition at $59 through $61.

SCMR $65.06 +4.19 (-0.50) We debated dropping SCMR this evening 
since it hadn't shown any signs of life...that is until later 
in the trading day when it moved off $59 support in a $6 
recovery.  OK, so we'll keep it one more day to see if it has any 
legs left given today's 144-point NASDAQ gain.  After all, it is 
still technically oversold and beginning to form a neutral wedge 
pattern.  Of course wedges can break out in either direction, but 
given the quality of the company and the positive outlook for the 
optical networking business, our expectation is "up".  The point 
of convergence is roughly $61, so set your Q-chart "alert" there 
to see which direction it moves.  A bounce up over $70 from 
there backed by volume would be a big confirmation for the more 
conservative trader to take a new position.  A move over $73 with 
volume would create new support at $70 and hopefully begin the 
next leg up.  A drop under $55 would mean to walk away in favor 
of another play.  No news here, but volume has been ascending to 
levels well over the ADV of 2.5 mln for the last four days, 
indicating a renewed interest by investors.  This probably 
represents a bottom if the overall market remains cooperative.  
Earnings are May 18th - a bit too early for an earnings run yet.

TIBX $79.94 +1.88 (+12.06) Yesterday, TIBX was stuck in a narrow 
trading range reminiscent of an evening star pattern (but not 
quite) on the candlestick chart, indicating it may be due to roll 
over.  The low decreasing volume had us concerned yesterday and 
it still has us concerned today - just 58% of the ADV today.  No 
matter, we'll take a gain any way we can get it, especially when 
it represents a substantial comeback above the opening price of 
$69.50 and the 5-dma of $71.58.  The only problem we still have 
with TIBX is that it's nearing resistance at $82, and with low 
volume may be in danger of rolling over.  It will be particularly 
vulnerable if the rest of the market rolls over too.  We still 
like this company and its outlook remains good.  However by 
tomorrow if it hasn't shown a volume increase, it may have 
outlived its usefulness as a call play.  We are inclined to wait 
for a pullback to support of $70, or $73 (pick your favorite 
level of comfort), then wait for the bounce (did we mention 
backed by volume?) before taking a position.  Otherwise we think 
conservative traders will be better served by waiting for a 
breakout over $83.  No news and the next earnings are not until 
mid-June.

BRCM $170.75 +10.19 (+18.25) Wow - is this ever working out well!  
BRCM is the focus of institutional buying as evidenced by the 
strong volume - still 60% over the ADV of 3.6 mln shares.  As 
long as volume remains significant, we expect the price to 
continue a move north until it runs into resistance at $180.  
There is still room to run.  BRCM had been in an ascending wedge 
pattern with resistance at $160.  Once broken, buying the dips 
at $150 and $155 historical support has been very rewarding.  
Today's steady comeback from the opening low was particularly 
impressive.  Target shooting at $158 and $160 support, or waiting 
for a break over mild resistance at $172.50 should yield the best 
entry.  Just be aware that we need to see volume remain strong 
to keep the play moving.  No particular news, but there is no 
substitute for great earnings and a B of A Securities' Strong Buy 
reiteration and a price target of $300 from earlier this week.  
Beware of profit-taking Friday and keep you stops set so profits 
don't vaporize.

GE $161.50 -1.75 (+3.25) Down but not out, GE got whacked $10 
to $158 from yesterday's high of $168 only to stage a small 
rally back over $160 support to $161.66 today, its 5-dma where 
it now precariously rests.  Volume, which has descended all 
week from 10% over the ADV on Monday to 10% under the ADV 
today is giving us a sign that this play may be over before 
it's really had a chance to begin - though we'll forgive today's 
performance given that the Dow closed down too.  Adding to 
our caution is that the stochastic indicating "overbought" is 
giving the rollover sign.  The bright spot is that the 3:1 split 
date has finally been determined, and perhaps now GE will begin 
a split run into its May 8th execution date.  The actual split 
happens after the close on May 5th.  That could be just the 
ticket for a continued move up.  Look for the bounce from $158 
for the best entry, but GE really needs to hold $160 and break 
over near-term mild resistance of $162 to confirm that the 
recent gains are for real and not about to end.  


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

PG $61.06 +0.31 (-7.88) The pain that PG investors began to feel
when the company issued their earnings warning in early March
got cranked up again on Tuesday when the actual earnings were
released.  Barely matching the revised estimates didn't sit well
with investors.  Investors responded to the news by dumping
their shares, and PG gave up over $6 on Tuesday followed by a
$2.50 loss yesterday, pushing the stock down to close below the
50-dma.  Finally slowing its descent, the consumer staples
company managed to eke out a $0.31 gain today, but doesn't look
good going forward.  Buyers tried to push through resistance 
at $62 today, and were promptly rebuffed, giving back most 
of their intraday gains amid average trading volume.  As an
old-line manufacturing company, PG will be susceptible to any
market downturn caused by increasing interest rates.  With the
shift in market sentiment from the NYSE back to the NASDAQ,
more interest rate hikes expected, disappointing earnings, and
the approach of the summer doldrums just around the corner,
look for this week's decline in PG to continue.  Use any rallies 
up to resistance as an opportunity to enter new positions as 
the stock rolls over.  One final item that will likely push PG 
down further is yesterday's AG Edwards downgrade from Accumulate 
to Maintain.


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

ADCT - ADC Telecommunications $62.69 +8.31 (+8.88 this week)

ADC Telecommunications makes systems that crank up the rate at
which voice, data, and video signals are transmitted.  Cable TV,
Internet and telephone access providers use ADC's software and
hardware to build high-speed multiservice networks.  ADC's
products are used deep within networks as well as in "the last
mile," between central offices and customers.  The company also
provides design and installation services.  Customers include 
the regional Bell operating companies.

We've got another earnings run on our hands.  ADCT is scheduled
to report earnings after market close on May 18th.  Historically,
the stock usually begins running about two weeks before reporting
results.  Noting the strong reports recently from fellow telecom
competitors QCOM and NOK, ADCT is expected to have another
estimate beating quarter.  Along with the excitement of upcoming
earnings, ADCT announced several partnerships Thursday.  ADCT
said it has partnered with Symmetry Communications to deliver
solutions for wireless and wireline networks.  ADCT also signed
a key agreement with Mpathix for its wireless messaging
solutions.  The two announcements today show ADCT's continued
push into the wireless and Mobile-commerce arenas.  Traders
applauded the announcements as ADCT broke out of a month long
trading range Thursday to close at an all-time high.  The stock
had been consolidating since late March and has since formed a
picture perfect breakout pattern.  ADCT has used its 10-dma as
support as it has climbed higher in the past week.  Volume has
been increasingly strong as the stock confirmed the breakout on
nearly double its ADV.  Watch for a bounce of the 10-day and
confirm with heavy volume before entering the play.  Any weakness
in the market might send ADCT to support at $59, its previous
high.  A bounce from that level might provide an entry point as
well.

In analyst actions recently, Wachovia Securities raised ADCT to 
a Strong Buy rating and maintained its target price at $75 per
share.  Spencer Clarke reiterated the stock at a Strong Buy 
with a 12-month price target of $79 per share.

BUY CALL MAY-55 TLQ-EK OI=1835 at $9.88 SL=6.75
BUY CALL MAY-60*TLQ-EL OI=2031 at $6.25 SL=4.25
BUY CALL MAY-65 TLQ-EM OI=   0 at $3.38 SL=1.75 Wait for OI!
BUY CALL MAY-70 TLQ-EN OI=   0 at $2.00 SL=1.00 Wait for OI!

Picked on Apr 27th at    $62.69    P/E = 111
Change since picked       +0.00    52-week high=$63.00
Analysts Ratings    10-11-1-0-0    52-week low =$17.19
Last earnings 01/00    est=0.33    actual=0.36
Next earnings 05-18    est=0.24    versus=0.16
Average Daily Volume = 3.42 mln
/charts/charts.asp?symbol=ADCT


CMGI - CMGI Inc. $66.19 +8.19 (+8.50 this week)

The original Internet incubator firm, CMGI is one of the chief
architects of the Internet.  The firm nurtures companies
in-house and invests in others through its capital venture arm,
@Ventures.  CMGI has stuffed its portfolio with stakes in more
than 60 Internet companies concentrated in marketing,
advertising, content, e-commerce, and technology.  Among the
more prominent companies in its nest are Lycos, AltaVista and
Raging Bull.  Fully 80% of the firm's revenue comes from
fulfillment and mailing list services.

Proof that you can't keep a good stock down, CMGI confirmed on
Monday that it had no intention of trading below $50.  With
volume sitting very near the daily average, investors started
coming back earlier this week, helping CMGI to regain its feet
and start marching higher.  After a nearly continuous, 8-week
slide, it is good to see this old favorite start moving in the
right direction again.  Aided by (or perhaps contributing to)
the NASDAQ rally today, CMGI managed to tack on over $8 and
looks like it may be ready to run even higher.  With the
Internet sector appearing to regain its health, CMGI makes a
great poster-child for the return of positive sentiment.  After
posting strong gains on Tuesday and then again today, CMGI is
running into resistance at $68 - above that we have resistance
at $70 and $75.  Particularly encouraging today was way volume
ramped up in the afternoon, providing good confirmation of the
increase in share price.  Support looks good at $60 and even
stronger at $55.  Any market-induced pullback to these levels
is buyable as soon as it is clear that the stock has bounced.

Continuing to expand and grow, the latest news on CMGI is that
its Alta Vista access server had registered 2.5 million unique
users.  The seven-month old Alta Vista service is signing up
some 10,000 users per day while the access service operates
some 4000 dial-up connections.  CMGI holds 83% of the Alta
Vista service.

BUY CALL MAY-65*GCB-EM OI=1109 at $6.63 SL=4.50
BUY CALL MAY-70 GCB-EN OI=1543 at $4.50 SL=2.75
BUY CALL MAY-75 GCB-EO OI=1000 at $3.00 SL=1.50
BUY CALL JUN-70 GCB-FN OI=1133 at $8.50 SL=6.00
BUY CALL JUN-75 GCB-FO OI= 643 at $6.88 SL=4.75

SELL PUT MAY-60 GCB-QL OI=1760 at $2.63 SL=4.00
(See risks of selling puts in play legend)

Picked on Apr 27th at    $68.38     P/E = 114
Change since picked       +0.00     52-week high=$163.50
Analysts Ratings      4-7-0-0-0     52-week low =$ 33.13
Last earnings 03/00   est=-1.28     actual=-0.74
Next earnings 06-08   est=-1.60     versus=-0.14
Average Daily Volume = 7.23 mln
/charts/charts.asp?symbol=CMGI


JNPR - Juniper Networks Inc $208.94 +13.31 (+22.81 this week)

Juniper Networks develops and provides next-generation 
Internet infrastructure systems that are designed to meet 
the scalability, performance, density, and compatibility 
requirements of IP networking systems.  The company's M40 
and M20 Internet backbone router use JUNOS network traffic 
management software, ASICs.  Its clients include some of 
the world's leading service providers such as Ericsson and 
MCIWorldcom. 

JNPR snapped back with style and determination this week.  
Rising from the depths of Internet devastation of not long ago, 
JNPR left recent support at $150 and hoisted itself above 
stubborn resistance of the 10-dma ($184.43).  The last time JNPR 
saw the upside of this technical indicator was on April 7th, but 
unfortunately couldn't hold the gains then.  The outlook is much 
better this time around.  Other technical achievements today 
included a definitive move through the $200 mark and a strong 
close just a fraction from the intraday high of $209.  Plus 
there was significant volume to back the advance.  Generally 
speaking too, analysts and other professionals are positive on 
the company's future outlook.  Juniper Networks posted 
exceptional 4Q results on April 13th blowing away the estimates 
by double the consensus.  Of the 14 analysts currently tracking 
JNPR all have Strong Buy or Buy recommendations in place.  Many 
have raised earnings' estimates and JNPR has a price target as 
high as $330 attached to it.  Our play on JNPR is simple.  Take 
a ride on its recovering momentum with the optimistic view that 
the company's upcoming 2:1 stock split will sustain the climb.  
You said split?  Yes, along with the first class earnings' 
numbers the BoD announced another stock dividend for this 
millennium (JNPR split 3:1 in January).  Assuming all goes 
according to plan and the shareholders agree to increase the 
number of authorized shares from 200 mln to 1 bln at the 
meeting on May 4th, JNPR will split 2:1 on June 15th.  We know 
this stock is a strong performer in rebounding markets and we're 
expecting JNPR to power higher in the short-term, but let's 
also keep an eye out for bumps in the road.  Technically old 
resistance at $200 should now serve as intraday support, but 
pullbacks to the 10-dma near $180 aren't out of the question 
either.  So while it's understood that it's difficult to use 
stops with volatile movers such as JNPR, perhaps it'd be a wise 
choice to at least consider setting a mental one.  Be aware of 
market conditions and investor sentiment while you're playing 
this high-flying Internet.  With earnings' season coming to a 
close, the focus may once again shift to interest rate worries.  

In recent news Active Software, a leading provider of eBusiness 
infrastructure software products announced Juniper Networks has 
implemented its ActiveWorks Integration System as the platform 
for its comprehensive e-business processes.

BUY CALL MAY-200*JUY-ET OI= 854 at $25.63 SL=20.00
BUY CALL MAY-210 JUY-EB OI= 321 at $21.13 SL=16.50
BUY CALL MAY-220 JUY-ED OI= 366 at $16.88 SL=13.25
BUY CALL MAY-230 JUY-EF OI=1081 at $13.00 SL=10.50
BUY CALL JUN-210 JUY-FB OI=  20 at $25.38 SL=19.75
BUY CALL JUN-220 JUY-FD OI=  20 at $22.38 SL=17.50
BUY CALL JUN-230 JUY-FF OI=  19 at $19.25 SL=15.00

Picked on April 27th at $208.94    P/E = N/A
Change since picked       +0.00    52-week high=$312.94
Analysts Ratings     10-4-0-0-0    52-week low =$ 30.04
Last earnings 12/99   est= 0.03    actual= 0.06
Next earnings 07-13   est= 0.06    versus=-0.03
Average Daily Volume = 3.23 mln
/charts/charts.asp?symbol=JNPR


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

ADRX - Andrx Corp $49.00 -3.06 (-5.94 this week)

Andrx develops and commercializes time-released pharmaceuticals.  
It formulates generic versions of such high volume brand-name 
drugs as Cardizem and Dilacore.  Currently they have 17 
bioequivalent versions of drug products in the pipeline.  While 
waiting for FDA approval Andrx primarily derives revenues from 
Anda, its generic drug distributor, and sales from third party 
manufacturers.

Sometimes it just doesn't make sense why a stock moves one way 
or the other, but our objective is make profits off the current 
trend no matter what the direction.  You've probably heard us 
preach over and over that we don't recommend holding over a 
split date or earnings' announcement.  The theory is quite 
rudimentary especially in these crazy markets - you just don't 
know what a stock is going to do!  Although typically, the odds 
are stacked it'll go down in a post-event depression in the 
near-term.  This is the case with ADRX.  After a quick rise to 
stardom following its 2:1 split on April 4th, the stock skated 
to bottom support at $50.  Take a look at a one month chart and 
it's déjà vu this week.  In anticipation of earnings Tuesday 
morning, ADRX banged on the door of resistance at $60 but 
ultimately wasn't allowed in.  The stock was quickly kicked back 
to the curb despite beating estimates by a whopping $0.10 and 
showing an increase in net income of 136%! Then today we saw the 
blinking neon sign.  ADRX committed a technical snafu and slid 
under previous support of $50 on strong volume.  Thus we have a 
potential case for further demise.  Conservatively, it'd be best 
to see ADRX move deeper towards the next level of support at 
$45.  However if you're interested in playing the current range, 
then look for downward bounces off the 10-dma ($54.19).

BUY PUT MAY-55 QAX-QK OI=105 at $9.38 SL=7.00
BUY PUT MAY-50*QAX-QJ OI=290 at $6.25 SL=4.50
BUY PUT MAY-45 QAX-QI OI= 21 at $2.44 SL=1.25

Average Daily Volume = 571 K
/charts/charts.asp?symbol=ADRX


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

ADBE - Adobe Inc. $123.44 +8.56 (+10.81 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.

Most Recent Write-Up

ADBE held its Annual Shareholders meeting Wednesday.  Shareholders 
approved the proposal to increase authorized shares from 200 mln 
to 500 mln.  However, the company did not announce a stock split.  
Executives said they may consider a stock split when the NASDAQ 
stabilizes.  Officials went on to say that they do not like the 
volatility in the stock as it does not reward stockholders and a 
stock split might add to the fluctuations.  The lack of a split 
announcement combined with sector weakness caused ADBE to stumble 
Wednesday.  But the stock regained lost ground and more on 
Thursday.  After hitting bottom at $107, ADBE reversed and rose 
steadily Thursday to close the day near its highs.  The stock 
is just below its all-time high of $125.  That level is the only 
resistance preventing ADBE from moving higher.  Volume has been 
impressive as ADBE climbs higher.  Watch for a move above $125 
on heavy volume as a possible entry point. 

Comments

With the Nasdaq finally showing signs of breaking out of this 
month long funk, the leaders are stepping back to the center 
stage.  ADBE is challenging resistance at the old high of $125 
and a move above that level would bullish.  Volume was strong 
end of day on Thursday and, should it continue to pick up, a 
breakout is likely.  Watch the Nasdaq volume as well to make 
sure the buyers have returned in full force.

BUY CALL MAY-115*AXX-EC OI=2066 at $15.63 SL=10.75
BUY CALL MAY-120 AXX-ED OI= 535 at $12.75 SL= 8.75
BUY CALL MAY-125 AXX-EE OI= 282 at $10.25 SL= 7.25
BUY CALL JUN-130 AXX-FF OI=  13 at $14.13 SL=10.00 low OI

SELL PUT MAY-115 AEQ-QC OI=  52 at $ 6.38 SL= 9.00
(See risks of selling puts in play legend)

Picked on Apr 11th at   $119.50    P/E = 60
Change since picked       +3.94    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


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

Title:  Technology Stocks Recover!

Wednesday, April 26

Equity markets ended lower Wednesday as concerns over inflation
ended the recent rally.  The Dow closed down 179 points at 10,945
and the Nasdaq Composite finished 81 points lower at 3630.  The
S&P 500 Index slid 16 points to 1460 and small cap issues also
languished with the Russell 2000 Index down almost 1% to 484.  The
volume on the Nasdaq hit 1.58 billion shares with declines beating
advances 2,325 to 1,815.  The broad market activity was moderate
with 985.5 million shares traded on the New York Stock Exchange.
The 30-year Treasury fell 6/32, bid at 104 3/32, where it yielded
5.94%.

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

Arrow Electronics  ARW  MAY30P/MAY35P  $0.38  credit   bull-put
General Electric   GE   MAY145P/M150P  $0.68  credit   bull-put
Teradyne           TER  MAY65P/MAY75P  $0.93  credit   bull-put

The market's bearish activity did little to help our new credit
spread positions.  General Electric was the only issue that
moved low enough to offer the target entry price.  Arrow rose $3
in early trading and never looked back, closing $1.50 higher for
the session.  Teradyne traded in a relatively small range and the
suggested credit was unavailable on a simultaneous order basis.


Portfolio plays:

The market retraced Tuesday's gains as investors shifted their
attention away from strong earnings to the economic outlook and
future interest rates.  Key economic reports, the employment cost
index and gross domestic product are due Thursday and experts say
the data will significantly affect the Federal Reserve's decision
to raise rates at its May 16 meeting.  The FOMC has increased
short-term rates five times since last June in an effort to keep
inflation in check.  Treasury players were also nervous ahead of
the data Thursday but many traders suggest the upcoming data has
already been priced into the market.  The consensus belief is that
regardless of revenues and forecasts, continued signs of inflation
in each piece of economic data will eventually start to weigh on
equities.

The Dow industrials succumbed to selling pressure after two days
of strong gains and large-cap technology stocks, which supported
the rally Tuesday, were mostly lower during the session.  On the
S&P 500, biotech, oil drilling and retail stocks advanced, while 
telecom, chip and household non-durable issues pulled back.  Oil,
Drug, and Financial stocks also slumped in a broad-based decline.
Technology issues weakened despite a few pockets of strength in
the computer-chip and Internet sectors and while some analysts
suggest the Nasdaq could retest its lows, few traders believe the
the index will repeat the record slide of "Black Friday."  Most
investors simply expect the technology index to find a bottom near
the current range and resume its bullish trend in a more cautious
manner.  Of course the task now is to determine when the market
correction becomes a consolidation, signaling a new time to buy.

Earnings reports commanded attention in today's trading and many
of the issues in our portfolio were affected by the news.  The
top performer of the technology group was Computer Associates (CA)
with a $4 rally to a recent high near $55.  The rally occurred in
sympathy with BMC software's positive earnings report.  Shares of
business software maker BMC Software (BMCS) rose 11% on Wednesday,
riding a wave of positive analysts' comments a day after reporting
stronger-than-expected earnings.  BMC announced a profit of $123.2
million, or $0.49 per share, $0.02 above consensus expectations.
The performance was led by strong growth in license revenues, as
well as maintenance and service revenues.  After last Friday's
expiration, we have only one position in Computer Associates; a
MAY-$50 Covered-call at a cost-basis of $48.56.

Andrew Corporation (ANDW) rallied to a mid-day high near $28 and
during the afternoon session, officials at the telecom company
announced they had placed the first international order for fixed
broadband wireless products for the World Wide Wireless (WLGSE)
contract in Buenos Aires, Argentina.  The initial order is for
approximately $700,000 of Hybrid head-end broadband wireless
data products for the Buenos Aires site.  This is the first step
in an expected rollout of fixed broadband wireless installations
in eight cities in Argentina.  Andrew is the exclusive worldwide
systems integrator for World Wide Wireless at fixed broadband
wireless sites elsewhere in Latin America and in other parts of
the world, including Asia.  Our bullish diagonal position appears
to be in good shape with a cost basis near $21.50.  

One company that sold-off today in anticipation of earnings is
Kellogs (K) and if tomorrow's report is not outstanding, the new
trend may continue.  A viable exit alternative may be to sell the
(long) May call option and buy another call option with a future
expiration date.  The new call option will cover the current short
position and allow you to profit from a near-term consolidation in
a time selling strategy.  Of course you will need to assess the
technical outlook for Kellogs and make a decision as to the nature
of the new position;  neutral or bullish.  The primary level of
technical support is near $22-$24 and that would suggest a more
neutral trend for the next few weeks.  Another issue that may have
failed technically in the recent recovery attempt is Bank of Tokyo
(MBK).  With the downtrend beginning to gain momentum we decided
to close the long; MAY-$12.50 Call option for the current credit
of $1.38, a break-even exit.


Thursday, April 27

The Nasdaq regained leadership of the equity market today, rising
on bullish revenue forecasts from industry-leading corporations.
The strength in telecom and technology helped the broad market
recover from initial weakness in the wake of government reports
on the gross domestic product and the Employment Cost Index.
The Nasdaq Composite Index rose 144 points to 3,774 while the Dow
Jones Industrial Average fell 57 points to close at 10,888.  The
1.1 S&P 500 Index was relatively unchanged at 1,464.  The Russell
2000 index of smaller companies rose to 494.  Declining issues led
advances 11-to-9 margin on the New York Stock Exchange, with 1,618
down, 1,317 up and 502 unchanged.  NYSE volume was over 1 billion
shares.  The 30-year Treasury fell 18/32, bid at 103 19/32, where
it yielded 5.98%.
 

Portfolio plays:

Small-cap issues continued to rally in Thursday's session and
a number of positions in our portfolio benefited from the trend.
Network Associates (NETA) rumbled $2.43 higher to close at $25
along with other bullish stocks in the computer software group.
Andrew Corporation (ANDW) continued its recent rally, climbing
$1.62 to an April high near $29 and Unocal (UCL) prospered from
strength in the oil sector, moving up $1.12 to $32.  Our bullish
debit position achieves maximum profit above $27.  A few mid-cap
issues also participated in the upside activity and the leaders
in that category were Halliburton (HAL), Medtronics (MDT), and
Vodaphone (VOD).  Halliburton, the world's biggest oilfield
services company, was in the news Wednesday.  HAL's board of
directors has approved plans to sell Dresser Equipment (DEG),
which supplies equipment to the energy and chemical industries.
Halliburton also said the board has approved plans for a buy-back
of up to 44 million shares, about 10% of their outstanding common
stock.  Obviously, if you haven't taken profits in the position;
MAY-$40 Call, now may be the time as today's offered a 50% profit
in less than one month in the recent calendar spread.

There were also some excellent moves in the Straddles Portfolio
today.  MasTec (MTZ) jumped over $7 to a recent high near $84,
bringing the profit for our new debit straddle to $4.50.  Another
winning issue, Applex (APLX) fell $0.62 to a new low near $6.31.
The bearish move raised the overall credit in the JUL15C/JUL15P
to $8.62, a $2.12 return on $6.50 invested.  With the extremely
small downside potential, it may be time to take profits in this
position and move to another favorable play.

Questions & comments on spreads/combos to Click here to email Ray Cummins
******************************************************************
                         - NEW PLAYS -
******************************************************************
TIN - Temple Inland  $49.56  *** Merger Speculation! ***

Temple-Inland is a holding company with interests in corrugated
packaging, bleached paperboard, building products, timber and
timberlands, and financial services.  The Paper Group consists
of the company's corrugated packaging and bleached paperboard
operations.  Corrugated packaging includes the manufacturing of
container-board that is converted into corrugated packaging and
point-of-purchase displays.  Their bleached paperboard operations
produce various grades and weights of coated/uncoated bleached
paperboard, bleached linerboard and bleached bristols.  Temple's
Building Products Group manufactures building products including
lumber, plywood, particleboard, gypsum wallboard and fiberboard.
The company's Financial Services Group consists of savings bank
activities, mortgage banking, real estate development and
insurance brokerage.

Stocks in the paper industry have gained new attention recently
after Champion (CHA) received a $6 billion takeover offer from
industry giant International Paper (IP).  International Paper is
offering to buy Champion for $64 a share, $43 of which would be
in cash and $21 in stock.  With IP's offer to buy a major company
in the industry, investors are now speculating on other issues
in the group.  Implied volatility in Temple-Inland options has
also been on the rise this week and that's unusual considering
the company has already reported earnings.  Based on the recent
resistance at $52 and the neutral technical outlook, this play
offers a unique opportunity to benefit from the current merger
speculation in the Paper Industry.

This position is based on recent increased activity in the stock
and underlying options.  The play offers favorable risk/reward
potential when analyzed with regard to the trading range of the 
underlying issue and the recent technical history or trend.  As
with any potential position, it should be evaluated for portfolio
suitability and reviewed in relation to your strategic approach
and trading style.


PLAY (speculative - bearish/credit spread):

BUY  CALL  MAY-60  TIN-EL  OI=70    A=$0.56
SELL CALL  MAY-55  TIN-EK  OI=1160  B=$1.12
INITIAL NET CREDIT TARGET=$0.62-$0.68  ROI(max)=15% B/E=$55.68

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

*****

CY - Cypress Semiconductor  $52.94  *** Break-Out Coming? ***

Cypress Semiconductor designs, develops, manufactures and markets
a broad line of high performance digital and mixed signal
integrated circuits for a range of markets including data
communications, telecommunications, computers and instrumentation
systems.  Cypress' memory products division offers static random
access memories and multi-chip modules.  The non-memory products
include programmable logic products and programming software,
data communication products, computer products, including clocks
and Universal Serial Bus micro-controllers, and non-volatile
memory products.

Earlier this month, Cypress became the latest in a group of chip
companies to report strong earnings for the quarter.  CY topped
First Call estimates by a penny with operating profits of $0.41
per share.  The company reported record sales of $264 million for
the first quarter, up 20% sequentially, and up 66% from the first
quarter a year ago.  Cypress added that it had record bookings of
$322.8 million based strong demand from the communications market
and the CEO suggested the company will enjoy another excellent
quarter at growth rates well in excess of the industry average.
Sounds like a great company to own and the chart supports the
fundamental outlook.  The current technical assessment is also
bullish and this conservative, out-of-the-money credit spread
offers a low risk method to achieve a favorable profit.


PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-40  CY-QH  OI=1181  A=$0.43
SELL PUT  MAY-45  CY-QI  OI=461   B=$1.06
INITIAL NET CREDIT TARGET=$$0.68-$0.75  ROI(max)=17%  B/E=$44.25

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

*****

ADBE - Adobe Systems  $123.44  *** Reader's Request! ***

Adobe Systems is a provider of graphic design, publishing, and
imaging software for Web and print production.  Adobe offers a
line of application software products for creating, distributing,
and managing information of all types.  The company licenses its
industry-standard technologies to major hardware manufacturers,
software developers, and service providers, and offer integrated
software solutions to businesses of all sizes.  The company has
made its mark in desktop publishing industry with products like
Pagemaker, Photoshop and Illustrator and its Acrobat program has
become the standard for publishing portable document format (PDF),
files on the Internet.

The software sector is on the move and Adobe's earnings puts the
company in the upper echelon of the group.  Adobe's quarterly
profits were up 69% and sales grew 22%.  Net income was $64.6
million, or $0.51 per share, compared to $0.30 per share in the
same period in 1999.  The earnings were well ahead of consensus
forecasts and the now the company has outperformed expectations
for six straight quarters.  Adobe also boasts a positive balance
sheet and future forecasts are favorable.  With customers moving
to purchase the updated versions of Adobe's products, top line
growth should continue to expand.  In fact, during a meeting with
analysts, management suggested its estimated earnings growth rate
will increase to 25%.  In addition, Adobe officials promoted a
number of new products scheduled to be unveiled in the coming
months.

With the recent coverage of Adobe in the main section of the OIN,
one of our readers suggested a bullish credit spread on the issue.
Here is my choice for the most favorable credit position based on
the recent technical trend and historical volatility.


PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-95   AEQ-QZ  OI=212  A=$1.50
SELL PUT  MAY-100  AEQ-QT  OI=283  B=$2.12
INITIAL NET CREDIT TARGET=$$0.68-$0.75  ROI(max)=17%  B/E=$99.25

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


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

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