Option Investor
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Daily Newsletter, Wednesday, 05/03/2000

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The Option Investor Newsletter           Wednesday  5-03-2000
Copyright 2000, All rights reserved.
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Also provided as a service to The Online Investor Advantage
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MARKET WRAP  (view in courier font for table alignment)
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       5-03-2000           High     Low     Volume Advance Decline
DOW    10480.10 - 251.00 10732.20 10400.10   991,690k   821  1,290
Nasdaq 3,707.31 -  78.14  3787.43  3592.79 1,479,950k 2,144  2,751
S&P-100  761.18 -  18.07   778.44   751.54    Totals  2,965  4,041
S&P-500 1415.10 -  31.19  1444.21  1398.36            42.3%  57.7%
$RUT     495.56 -   9.79   505.35   487.33
$TRAN   2796.45 -  62.23  2837.98  2784.79
VIX       34.51 +   3.64    35.83    32.03
Put/Call Ratio       .74
******************************************************************

Does Late Session Buying Break The Boycott?

As we have been drifting lower on light volume this week, the
commonly heard phrase "buyer's boycott" is being thrown around.
What does this mean exactly?  Well, seeing that volume isn't up to
its typical levels, there has been a lack of real conviction on
taking the market lower and no conviction on the buy side.  That's
why it has been a slow slide.  But we did see a glimpse of strong
buying into the close on both the NASDAQ and the DJIA.  Now, as
earnings season is winding down, all eyes are on the Fed again.
Interest rate fears are the primary market mover this week and
will be into the May 16th Fed meeting.  Today, echoes of a "50
basis point hike" ring across the Street.  Considering that a 25
basis point rate hike has been priced into the market already, are
the markets preemptively pricing in 50 points?  Maybe that's why
the buyers are few and far between.  The final 30 minutes, however,
gave us signs of life as buyers came in at key support levels.

Concern in the market has been volume.  Without strong volume,
the market moves are less convincing and indicate that traders
just aren't willing to commit money.  Volume at the NYSE was only
972 mln and this lack of liquidity usually means that institutions
are remaining on the sidelines.  The DJIA continued its slide since
hitting 11128 on April 25th, where it fell into a downward channel.
Note how the DJIA found key support at 10400, just at the bottom
of its regression channel.  It did manage to recoup 80 points on
the bounce to close down 250 points at 10480.  Big cap tech stocks
took the brunt of the selling today with A(-9.25), NT(-7.06),
HWP(-5.56), TXN(-3.81), and IBM(-3.25) all down, though well off
their lows.  Also taking a hit today were the retail stocks.
Goldman Sachs came out today with a major downgrade on the entire
sector, attributing their decision to the macroeconomic
environment.  Given that the U.S. is seeing slowing economic
growth after two years of record consumer spending, Goldman
removed a handful of retail stock from their recommended list
including TIF(-4.44), KSS(-3.81), and ANF(-0.13).  They did
remain positive on WMT(-4.19) and COST(-2.56).




The only standout today was the food sector.  On the heels of news
that Unilever is looking to make another acquisition, only a month
after the Ben & Jerry's deal, food stocks rallied.  Bestfoods Inc.
revealed they had received an unsolicited bid from Unilever at $66
a share.  That is a deal worth $66 billion.  The owner of such
well-known consumer brands as Hellmann's mayonnaise and Mazola
cooking oil, saw its shares rise 22% to $61.44, up $10.88 today.
This gave food for thought to investors who bid up the shares of
other food stocks which were definitely the strongest sector of
the day.  Unilever's stock was down $2.19.  Feeling the residual
effect, rival food stocks saw heavier than normal gains on the day:
OAT(+3.31), CPB(+3.06), HNZ(+3.69), and NA(+0.75).  This may be a
sign that a continuing consolidation is in store for the food
industry.

Turning to the tech index, the NASDAQ once again was in the
spotlight as it continued to drift lower throughout the day.  We
watched the NASDAQ with anticipation as it steadily converged on
key support levels.  Last week, we mentioned how the NASDAQ was
going to remain range bound in the short term between 3600 and
4000.  That was exemplified this week as it neared the upper limit
on Monday at 3982, only to begin a retreat that finally found a
bounce late in today's session at 3592.  At that 3600 level, the
buyers finally came out and did so with stronger volume.  This
bounce lifted the NASDAQ to close at 3707, down 78.14.  Notice on
the chart that support below 3600 can be found at the 200-dma of
3557.  Could this be the end of the "buyer's boycott"?  It's
difficult to say.  Volume on the NASDAQ was 1.5 mln shares, decent
but far from strong.  Strong volume is essential to prove buying
conviction.  Also, there are a number of factors that have
instilled fear in investors.  Topping the list are interest rates
and the hot economy.  The release of the Fed's Beige Book today
showed that the U.S. economy did indeed expand during March and
April.  Worker shortages are evident in all the nation's
districts which pushed up wages in the last two months.  Yet, on
the upside, retail prices remained tame.  This economic summary
is just a teaser to the economic data scheduled for the rest of
the week.




With relatively no good news in the market, traders used this
information to sell off semiconductor stocks and biotechs.  Both
indices made a stellar recovery in the final half hour of trading
when the NASDAQ bounced, $SOX(-38.42) was down 3.4% and
$BTK(-11.61) fell 2.4%.  On flip side, the bad news was bad for
selective stocks.  From euphoria to disaster, NOVL was the biggest
percentage loser in any market today.  The Utah-based provider of
network software enabled by directory services said Tuesday that
the recent quarter would come in below revenue and earnings
targets due to weak sales.  Dennis Raney, chief financial officer,
said "Novell thinks management and organizational issues in sales
led to the decline".  At least they owned up to it.  Nevertheless,
the Street punished NOVL for the problems as the stock fell to
$10.63, down $6.94 on volume of 92 mln shares, about 15 times its
ADV.

Security One was another headache for investors today.  The
company released Q1 earnings last night that missed the mark and
margins were lower than expected.  This was due to the acquisition
of three companies last year, according to SONE.  Pacific Crest
was first jump on the stock with a downgrade from Strong Buy to
Buy after the news.  The First Call estimate was for a loss of
$0.23, but it came in at a loss of $0.35.  SONE dropped $17.06 to
$42.31 it today's trading.

As we look forward to the last two trading days of the week, we
have a slew of economic data scheduled for release.  Tomorrow,
Initial Jobless Claims are forecasted to be 275,000 and first
quarter Productivity is expected to be 3.5%.  Greenspan will
be speaking tomorrow in Chicago on the Financial Industry
Structure and Regulation.  Fed-watchers will be tuning in to see
if they can detect any hints about the upcoming Fed rate hike.
But, Friday's Unemployment Rate and Hourly Earnings will take the
spotlight.  They are forecasted at 4% and 0.3%, respectively.
These are two closely watched indicators of inflation and labor
cost increases.  Also on the agenda is Non-farm Payrolls.  The
markets will be watching all of these closely, trying to find
some direction in this time of increasing uncertainty and
volatility.  Look for the markets to continue to be range bound
and be cautious as interest rate worries drive the indices.
When in doubt, stay out.

Matt Russ
Research Analyst



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

Martha Stewart Beats the Street
By: Cindy Christ

Martha Stewart may be the Rodney Dangerfield of late-night TV,
but after posting earnings Wednesday that beat estimates by 7
cents, her much-maligned brand earned the respect of Wall
Street.

Martha Stewart Living Omnimedia posted a 57 percent increase
in earnings per share, buoyed by strong growth in advertising
and circulation revenues and merchandise sales.

For the first quarter, net income totaled $5.6 million or 11
cents a share compared to $3.4 million or 7 cents a share a
year ago.

Analysts polled by First Call/Thomson Financial were looking
for earnings of 4 cents per share.

First-quarter revenues increased 30 percent to $69.1 million
from $53.4 million last year.

The company's Internet and direct commerce segment nearly
doubled revenues to $10.6 million compared to $5.6 million
last year amid increased traffic on marthastewart.com and
higher catalog circulation.

Registered Web site users were up 73 percent to 1.3 million.
Still, losses from the unit grew 275 percent to $6 million
from $1.6 million due to increased spending on technology,
marketing and promotion.

Publishing revenues rose 26.5 percent to $45 million, while
television and merchandising sales were up 11.1 percent and 9
percent respectively.

Core earnings before interest, taxes, depreciation and
amortization, or EBITDA, a measure of cash flow and a telling
metric for media companies, grew 41.5 percent to $25.3 million.

"The outlook for the balance of the year continues to be
strong," said Martha Stewart, the company's chairman and CEO.

"We will increase the frequency of our flagship magazine,
Martha Stewart Living, from 10 issues to 12 issues per year.
In merchandising we will launch our Martha Stewart Everyday
Housewares line in the third quarter, and in Television we
continue to explore international opportunities," Stewart
added.

New York-based Martha Stewart Living Omnimedia is a
multimedia and retail company promoting information and
products focused on home entertaining, gardening, crafts and
weddings. The company's four business segments cover
publishing, Internet/direct commerce, television and
merchandising.

Shares in Martha Stewart (MSO) shot up 25 percent on the news,
closing up $4 at $20.

Martha Stewart's Initial Public Offering debuted in October
1999 at $18 a share. During the last 52 weeks, shares have
traded as high as $49.50.



***************
ASK THE ANALYST
***************

As the market turns, I get dizzy.
By: Eric Utley

Down, up, and back again.  Talk of an early surprise from the
Federal Reserve combined with an earnings warning from Ma Bell
set the tone for Wednesday's trading session.  Distribution by
mutual funds and other institutions continues to rule the market,
leaving the individual investors holding an empty bag.  I've
been writing about how difficult this market is to trade.  I'd
like to reinforce the idea that Jim and Ryan constantly profess,
sell too soon!  Over the past week, I've seen dozens of stocks
breakout from consolidation, only to give back those gains in the
following days.  If your entering long positions in this market,
don't be afraid to set tight stops and save your capital for
another day.

With inflation fears here to stay, traders have become paralyzed
with fear and uncertainty.  Volume has disappeared from the big
blue chip tech stocks such as CSCO, DELL, and IBM.  The lack of
liquidity leads to continued volatility.  I've seen 10,000 share
block trades push stocks around by 2 sometimes 3 points.  I asked
our readers to send me their opinions about the current market
conditions last Sunday, and I read some very insightful thoughts.
I gathered that the consensus opinion is - uncertainty.  I'm
probably sounding like a broken record here, but it may be a good
time to sit and watch.  Exert patience, and wait for the market
to come to you.  Like Jim said a week ago, we'll probably see
these gyrations for the next month until the next earnings
season commences.  Enough of my rambling, we have a few more
charts to look at tonight, so let's get to it.

I'm trying to analyze as many stocks as possible, so if I haven't
done one of yours yet keep those symbols coming.  Send your
requests to asktheanalyst@OptionInvestor.com.  Please put the
symbol in the subject line of the e-mail.

----------------------------

Dun & Bradstreet - DNB

Could you give your opinion on Dun & Bradstreet (DNB).  Looking
at the chart is it ready to move?  Has it formed a Bottom Head
and Shoulder?  Thanks. - KG

DNB is an interesting company.  DNB is comprised of D&B operating
company and Moody's Investors Service.  The former division
provides business services and the latter provides research and
ratings on fixed-income securities.  DNB has a steady earnings
growth rate of 10%.  The Sage of Omaha, Warren Buffet, owns
nearly 15% of the company.  Mr. Buffet has been acquiring shares
of DNB since early February and rumors are circulating that he
is considering purchasing the company outright.  Remember though,
sometimes rumors cost you money.

Anyway, I don't see a clear head-and-shoulders bottom.  But let
me tell you what I do see.  DNB traced a double bottom at $27 in
early April and subsequently rallied into May.  DNB is forming a
wedge pattern, that may lead to higher prices if it can get above
resistance at $30.50.  What concerns me is the lack of volume
during the recent rally.  When a wedge forms, the volume usually
tapers off near the apex, currently around $30.  The premature
decline in volume waves a caution flag.  But, if buyers step in,
the stock could rally above resistance and retest its recent
highs.




----------------------------

Atmel - ATML

OI played ATML about 2 months ago.  Can you analyze this stock as
it stands today?  I think there is a lot of interest from other
OI subscribers as well.  Thanks. - Edwin

You're right, we've played ATML a few times in this new
millennium.  Like most chip stocks, ATML had an incredible run
from last Winter to early this Spring.  ATML has subsequently
consolidated those gains over the past two months.  The stock is
now range bound between $40 - 60.  From here, a move above
resistance or below support would be bullish or bearish,
respectively.  But there is just no clear trend right now.  The
only bullish sign I see on the chart is the declining volume in
the past week while ATML slid from $50, at the same time volume
has been anemic for the rest of the market as well.  We need to
see some buyers step up to the plate if ATML is going to bounce
off support at $40.

One thing that does worry me is that ATML's competitors such as
SSTI and MU have shown a little stronger relative strength in the
past two months.  ATML peaked in early March, while MU extended
its gains and SSTI kept on running through April.  I do want to
point out the bouncing pattern last Winter.  That trading pattern
that ATML formed would have been an ideal time to use an
oscillator to pick entry points and take profits.




----------------------------

Citrix Systems - CTXS

Hello OIN.  What is your opinion on CTXS?  It looks like one of
the steaks on the table to me.  Thanks! - Jim

As you probably know Jim, we added CTXS as a put play on Tuesday.
Let me explain what we saw on the chart and why we added CTXS as
a put.

From a fundamental perspective, the uncertainty surrounding MSFT
has plagued shares of CTXS.  Not only is Microsoft a large
investor, they are also one of Citrix's largest customers.
CTXS's business is closely tied to the viability of MSFT.  Many
investors feel that CTXS is oversold, considering the company's
one year EPS growth rate of about 27%.  For a long-term
investment, CTXS may be a good buy now, but the MSFT variable
may impede progress in the near-term.

The chart for CTXS reveals quite a bit, and there are some
interesting patterns that have developed over the past three
months.  Notice the big head-and-shoulders pattern that formed
in February and March.  The stock then fell into a descending
channel in April.  And look at the volume during the recent
sell-off, indicating a massive distribution by institutions.




----------------------------

Varian Semiconductor Equipment Associates - VSEA

Could you please comment on SSTI and VSEA, or at least SSTI?
Thanks very much. - Q.T. Fang

As you know, we've been bullish on the semiconductor equipment
makers recently.  Stocks such as AMAT and TER have had incredible
runs thus far.  And the outlook for the semis continues to remain
positive.  We'll get some numbers tomorrow that will report the
sales for the month of March for the semis.  Analysts are
expecting a bullish report.

I know you emphasized that you would like me to take a look at
SSTI, but the chart for VSEA looked more interesting for study.
So let's take a look.  VSEA had a great run from the beginning of
January to early March.  After a big run like that, I like to see
a consolidation for six to eight weeks, then a breakout on big
volume.  The 40% correction concerns me a bit, but we have to
account for the market conditions during early April.  A triple-
top formation is usually bearish, but the rosy outlook for the
semis may be enough to breakthrough resistance.  Monitor the
stock closely for a move above $70, and watch the volume.




----------------------------

DISCLAIMER:
This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.



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

Swing - Trading Systems
By: Austin Passamonte

Can trading systems be developed for any index or market? That's
been a common theme in recent e-mails and also conversations I
was privileged to share while attending the OptionInvestor Expo
in Denver. What. is there something wrong with the OEX? Seriously
though, I can understand why traders like to find systematic ways
of trading markets they're comfortable and familiar with. Let's
visit this topic today and then outline nightly research and CBOE
option charts next. Saturday we'll key on subjective trading
methods following the Skybox framework, which will pull the
mechanics of trading the OEX together for us.

For those who might not be 100% clear on how trades are placed
and triggered via the Skybox model, may I respectfully suggest
reading through yesterday's piece another time or three? I surely
realize the methodology can be challenging to grasp, rest assured
it took me quite some time to internalize the concept myself.
I'll do my best to briefly crystallize & recap that precise topic
tomorrow also.

Through the years I've looked at many trend-following and swing-
trading systems designed for a host of different markets. Pork
bellies, live hogs & cattle, soybeans, currencies, bonds and the
S&P 500 to name a few. Every method differs from another due to
the intricate behavior each market exhibits. The basic premise
remains the same regardless the underlying market. Traders
attempt to identify points of potential support & resistance and
look to enter trades when the market bounces or breaks out
decidedly. This is a market-neutral approach - the trader doesn't
care which way the market heads as long as it moves strongly. The
plan is to catch the market when a movement is clearly defined and
then ride it for a quick profit.

Being a breakout strategy, we merely attempt to trade our stock,
commodity or option once it pops free and begins to sprint away.
Easier said than done. Most of the volatile markets tend to chop
around these points of congestion and trigger numerous signals,
some false and some real. Bond markets are notorious for this.
It's almost a cliché for bonds to break through support or
resistance and spin 180 reversal after triggering orders. How
frustrating! Of course, that's probably why we trade options and
not bonds.

There must be a way to define the eventual trend change from
normal market "noise". Futures traders pick points of congestion
based on recent and past support & resistance, moving averages
and also where they guess traders have their stops in place.
Would you believe traders are human and tend to cluster
protective stops in highly predictable places? It's true, and
locals in thinly traded markets can and do target these stop
orders but that's another subject away from the topic here.

Obviously there's more to the concept than this and I'm
certainly no expert, but let me share some ideas with you I use
to trade the QQQs and DJX for short and mid-term plays. Perhaps
you can glean a tip or two that may help with markets that
interest you.

Option traders don't have a real picture where stop orders may
cluster. What's clear for us to see on any given day is the
volume and open interest of each option strike price every for
stock or index that options trade on. Considering option traders
are dwarfed by stock players and equity fund managers in sheer
size and number, would you agree the majority of option contracts
probably serve as hedging tools for the big boys? That being
said, we can almost see where they load up in anticipation of
market breaks that may cause them to buy, sell or ride out the
pain. I'd surmise these points of congestion could serve as
support and resistance to the markets we intend to trade.

As an example, I took a look at the CBOE option chains found in
this website for the QQQ and DJX last Sunday night as I do
several times a week. It's my opinion the weekend gives a great
indication of large investor's sentiment for at least the
beginning of next week ahead. I've often noticed open orders
soar from Thursday's close to Friday's close, which tells me
someone is making decisions on Friday for the week ahead.

The largest volume and open interest is usually in the front-
month option contracts. You should see much of the action
clustered near the given day's strike price, with similar or
more volume at prices a few strikes out of the money each
direction. Total call volume usually exceeds put volume when
equal strike prices are averaged out. Times when this is greatly
skewed tell us market sentiment is directionally strong. I
always check the nearestback month as well; when volume and
open interest is high in the current and back months, to me
that shows much anticipation for the market to reach this
point.

Next, we pull up the charts and confirm these clusters of
congestion with candles and bars. I prefer to view charts
after looking at option chains because I don't want a personal
bias towards any strike price. If I knew where support and
resistance was on the charts before looking at option chains,
my opinion would likely be skewed with anticipation of what
I expect to see. Just my personal quirk, feel free to do as
you please!

Now that I've identified key prices on the charts that confirm
to me what I learned in the option chains, it's time for a
written plan of action. I decide where the heaviest near-term
resistance a market has in each direction and plan my trades
if it bounces or breaks there. Keep in mind this concept works
regardless whether the market punches through resistance or
bounces off it, we don't care which. Let me share a couple of
live examples to illustrate the idea. This weekend my research
indicated to me that the Dow might reach mild resistance at
10,800 and heavier at 11,000. The NASDAQ had that 4,000
mark to beat. No mystery there for anyone who reads newsprint,
charts or watches tv. This prompted me to target specific QQQs
and DJX calls and puts if the markets hit these points and
reacted. I chose June contracts instead of May to give a little
staying power should I decide to hold near the FOMC meeting three
days before May's option expiration.

I also like to determine potential profit prices should the
market reach my projections. For example, when looking at call
options three strikes away from the money, I check the value of
put options currently at the money, in the money and three strikes
deep in the money. This price relationship provides me approximate
targets to shoot for if and when I'm executed and the trade is
performing my way.


Well, the markets rallied sharply on Monday and the Dow sailed
through the 10,800 mark with ease. Everyone figured 11,000 might
be the next ceiling to hold. The NASDAQ banged 3970 -3980 range
several times early on and slowly retreated from there. After
all those consecutive up moves we've had lately, one could expect
a bit of exhaustion. I pulled the trigger on those June QQQ puts
and actually bought at the low price of the day for a change.
Wow, how'd that happen? I'm more accustomed to buying near a
high price for the day instead!

When the Dow began to slip, a clear evening-star candle formation
began on the 60 minute chart and that was all I could take.
Coupled with the fundamental weakness this index has heaped upon
it near-term, I bought DJX puts in the middle of their trading
price for the day.

I targeted what I felt might be obvious levels of support and
was prepared to sell later this week or into next. However, the
Q contracts were up by 40% and the DJX puts up almost 25% by
3:45 on Tuesday. I entered sell limit orders at those prices
right then and was filled on both lots by 4:10. Yes, I know the
charts looked awesome for a continued drop Wednesday but I don't
care. too many times I've held on and watched those hard-fought
gains evaporate! Jim's mantra of sell too soon is now firmly
entrenched in my head. We'll use the chicken's approach and face
tomorrow in cash with a fresh outlook on the day instead of
holding over.

Should either index have broken resistance and soared into the
stratosphere boldly enough to make Greenspan & the Fed Govs.
blanch, I would've just as happily bought calls and "rode the
waves of success, my man" (to cop Ameritrade Stewart's line).
Doesn't matter what the market does. we're prepared to trade
whichever way the water flows. These days it seems to run both
ways with equal aplomb. Sure hope you have fun jumping in when
the tides begin to turn, regardless which profitable direction
it takes you!

Wishing you prosperous trading.


*****

Do As I Say, Not As I Do
By: Molly Evans

My accounts hate me.  Can't blame them really.  Forced, emotional
and just plain dumb trades have dwindled them down to where I'm
no longer a cowgirl.  At this point I'm just hanging in there
and staying out of the way of falling trees.  I'm laughing here
as I say it....I'm not in a cave or a catatonic state.  I hate
losing my hard earned money like anyone else but I consider it
tuition and I know that we're dealing with the Harvard Institute
of Markets.  Sure, I can cuss like a sailor, pout and stammer
about, and I have, but in my brief sane moments, rational
thinking synapses start to connect.  I've forced myself to look
at my mistakes, forgive myself and promise my ports to do better
by them.

It's really not my intention to dole out the advice in my
writing.  Someday, I certainly hope to be there but I think
my job now is to be the voice of the common grunt striving to
learn how to first survive and then be able to pull out superior
gains in the marketplace.  I read all the other writers just
like you.  We've heard it over and over:  this is not a beginner's
market, don't buy too soon, when in doubt get out, sell too soon,
bearish sentiment prevails et al.  We know they're right and yet,
somehow, someway, we think that we've now got a play that's a
"can't lose deal."  Woops.  I've done it and betting you know what
I'm talking about too.  It's ok.  This too shall pass.  I know I'm
in the ocean and there's some mean fish in these waters.  A minnow
has to run for cover quick but you know, they grow up too.  We'll
all get through this if we keep ourselves out of danger.  I'm not
going to lecture you but some of the ranting I do to myself is
probably worth eavesdropping upon.  Stop forcing those trades!
Get out of the way when trouble starts and don't get back into the
market until the storm passes.  How many times have we heard about
the volume indicator?  I have for over a month.  I'm listening now.
I promise!  Stop trying to be the one to pick the bottom.  It CAN
go lower as you well know by now.  It's just plain double trouble
playing options and not getting the trade that's going in that
direction.  Stop caring if the market is up 200 points.  Stop
caring if the market is down 300 points.  You "know" it's crazy
and you "know" it's irrational.  Think with your head.  Don't be
scared that you've missed the train leaving the station.  The
markets have and will be here for a long, long time.  There will
be another train.  Buy low and sell high, or buy puts at highs
and buy calls at lows.  Trade the greed, trade the fear.  If you
know TA, use it!  Draw the lines and WAIT!  Be patient.

Which brings me to my next point.  I'd like to think I've gotten
pretty good at drawing these support, resistance, and trendlines.
They work.  For today, I drew support lines on 19 stocks, shopped
the best value in an ITM call at that level and then set the
alerts.  Only ONE went off.  I'm now the proud owner of AMAT calls
as it bounced beautifully off 90.  I've not had a losing trade when
I stick to this method.  The problem for me is that when I never
get an alert I get itchy and fudge my entry point.  Dumb, dumb,
dumb.  Another problem for me is that I hate stop losses.  I know;
you all gasp as that's the mantra of OIN.  My reasoning, which is
poor at best, is that it allows the market maker to pull it out
quickly and then the stock immediately rebounds.  I so hate that.
But, I must admit, I hate losing my capital even more and I've had
plenty of that bitter medicine.  I'm cured.  I'm using stops now.
A couple gap down days in March and April have cleared my clouded
vision.  I wince when it happens But feel oh so vindicated when I
see that my options are now trading at half what I sold out.

Since my introduction to the world of options about a year ago,
I've dug my heels in to learn the ropes.  I think I'd forgotten
that I could actually own stock long.  It's my pleasure to say
that is still a viable option (pun intended).  I found a
reasonable play and am selling covered calls...yep, just like
OIN had told us to do.  The perspective is so different now.  I
just really don't care that I won't make a five bagger on that
money.  I don't care if the shares get called out.  If they don't,
and the market is still poor, I'll do it again for the next month.
Let someone else do the gulping thing on what I sold them.  It's
very liberating.  I'm not saying that I'm changing my modus
operandi.  Not at all!  This is just another venue of putting
money to work safely...uh, relatively speaking of course.  I am
confident that the craziness will die down pretty soon.  I'm done
trying to guess which way the gauntlet will fall but I do know
that I'll live to trade another day whether it is on the long or
short side if I simply use a little discipline.

Shall we review the thou's?

-Thou shalt not force a trade or trade just to trade.  Click
your mouse elsewhere.

-Thou shalt listen to the opinions of those wiser and more
experienced regarding market sentiment and counsel.  Give
these opinions due consideration but do not forget to use
own brain in determining what is happening at that time whether
it be fortuitous or grievous.

-Thou shalt set stop losses on each play.  Capital preservation
is the first rule of order in investing.  One should know his
own risk tolerance, both subjective and objective.  There is
a difference.

-Thou shalt have a predetermined and logical sell point before
ever opening the position.

-Thou shalt keep the mind open to consideration of other
venues of investment such as covered calls, puts, calendar
spreads, straddles etc etc etc.  Study and do due diligence
before tackling of course.

-Thou shalt study a new concept in investing at a personally
acceptable pace.  Consider learning technical analysis,
fundamental analysis, how to work an options calculator and
what it's telling you, or read a book.

-Thou shalt not panic when the market is running hard and
you're not in.  Conversely, do not panic when the market is
tanking and you are in.  (I know, that's a particularly tough
one...sorry.)

-Thou shalt sell too soon.  (I'm reaching here, can you tell?? -
have to borrow!)

-Thou shalt not buy too soon.

-Thou shalt survive to trade another day.

Good luck to you all.

Contact Support



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

ARBA - Ariba, Inc. $78.13 +3.56 (+3.94 this week)

A leading provider of Intranet and Internet based B2B e-commerce
solutions, ARBA enables organizations to automate the procurement
cycle through the company's Operating Resource Management System
(Ariba ORMS).  The recently launched Ariba.com network is a
global B2B e-commerce network that enables buyers and suppliers
of operating resources to automate transactions on the Internet.
Among the company's more notable customers are DuPont, Federal
Express, Chevron and Hewlett Packard.

Most Recent Write-Up

If you didn't watch the markets the past couple days, you might
think trading in ARBA has been really quiet this week with a
gain of only $0.38.  Nothing could be further from the truth as
shares of the Internet software shot up $9.75 on Monday and then
gave up all but a fraction of that gain today.  Following the
lead of the Internet sector, ARBA saw strong buying volume
yesterday, and suffered from a lack of buyers today.  As the
NASDAQ weakened late in the day, there was nothing to support
the gains from Monday and the price dropped to support at $75
as volume increased.  The decline finally halted and bounced in
the last 5 minutes, but use caution as the week progresses.
Interest in the Internet sector and the NASDAQ will likely
dictate ARBA's near-term fate as the April earnings cycle
winds down.  Wait for the buyers to return and confirm a bottom
for the stock before playing - a drop to the next support level
at $70 may be necessary before the bounce occurs.

Comments

What can you say about B2B today?  This sector was holding
strong, even holding some gains, the entire day until the market
finally bounced with 30 minutes left.  It was at that point
that you saw this group really take off.  ARBA perked right up
to close just off the high.  Look for momentum in this group
tomorrow.  Hopefully, it will provide a good entry point to
let us in.

BUY CALL MAY-70 IUR-EN OI=1726 at $12.00 SL=8.00
BUY CALL MAY-75*IUR-EO OI=2149 at $ 8.63 SL=5.75
BUY CALL MAY-80 IUR-EP OI=2031 at $ 6.25 SL=4.00
BUY CALL JUN-75 IUR-FO OI= 325 at $13.63 SL=9.00
BUY CALL JUN-80 IUR-FP OI= 366 at $11.13 SL=7.50

Picked on Apr 23rd at    $69.00     P/E = N/A
Change since picked       +9.13     52-week high=$183.34
Analysts Ratings     9-12-1-0-0     52-week low =$ 15.25
Last earnings 04/00   est=-0.08     actual=-0.06
Next earnings 07-12   est=-0.08     versus=-0.12
Average Daily Volume = 5.30 mln
/charts/charts.asp?symbol=ARBA



*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

Inflation worries cause a buying strike...

The market retreated today on concerns over inflation and rising
interest rates.  Earnings reports also troubled investors and
companies that warned of poor revenue growth were severely
punished.  The industrial group endured the brunt of the sell-off
with classic issues falling significantly during the session.
Most analysts believe that "old economy" stocks will be noticeably
affected by rising interest rates because the cost of borrowing
money will reduce their future growth.  Of course, no one knows
what the Fed will do on May 16 but it is widely expected they will
again raise rates to attempt to slow the economy.  The majority of
economists are expecting a quarter-percentage point increase, but
concerns that they could boost the prime lending rate even higher
are unnerving investors.  The next sample of economic data will
be reported on Friday, when the Labor Department releases key
employment data for the month of April.  Until then, the outlook
can only be one of cautious optimism and we will draw upon that
attitude in today's selection of plays.


Summary of Previous Picks:

Covered Calls: (Margin would double the listed Monthly Return)

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

CY      MAY    45    42.06   49.50   $2.94   7.1%
INSUA   MAY    35    32.19   34.88   $2.69   6.9%
SEPR    MAY    75    70.75   93.00   $4.25   6.1%
AMD     MAY    60    55.25   87.75   $4.75   5.9%
TQNT    MAY    80    76.65  101.31   $3.35   5.8%
TER     MAY    85    81.56  100.19   $3.44   5.6%
NVLS    MAY    50    48.06   60.94   $1.94   5.3%
PLXS    MAY    65    62.56   67.56   $2.44   5.2% 50 dma bounce?
PVN     MAY    85    80.38   89.75   $4.63   4.7%
BRKS    MAY    70    66.88   80.00   $3.12   4.7%
AHP     MAY    55    52.75   55.88   $2.25   4.3%
CSCO    MAY    68    62.88   66.06   $3.18   3.5% earnings soon
CGNX    MAY    55    51.34   53.50   $2.16   3.5% holding above 50

IMNX - Closed.


Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

CY      MAY    40    38.56   49.50   $1.44  12.6%
PLXS    MAY    60    58.75   67.56   $1.25  10.1%
NVLS    MAY    45    44.06   60.94   $0.94   9.7%
TER     MAY    75    73.50  100.19   $1.50   9.0%
SEPR    MAY    65    63.25   93.00   $1.75   8.8%
INSUA   MAY    30    29.06   34.88   $0.94   8.7%
TQNT    MAY    70    68.87  101.31   $1.13   7.5%
BRKS    MAY    60    58.94   80.00   $1.06   5.9%
AHP     MAY    50    49.12   55.88   $0.88   5.8%
PVN     MAY    70    68.75   89.75   $1.25   5.2%
CGNX    MAY    45    44.25   53.50   $0.75   4.8%


Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

CMTN    MAY   115   117.19   82.00   $2.19  12.4%
ITWO    MAY   185   187.25  112.13   $2.25   9.5%
CHKP    MAY   270   273.25  175.44   $3.25   9.3%
AAPL    MAY   145   143.44  115.06   $1.56   7.8%
AMAT    MAY   125   123.87   94.50   $1.13   7.8%
NEWP    MAY   160   158.75  124.47   $1.25   7.3%



New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.

***************
BULLISH PLAYS - Covered Calls & Naked Puts
***************

BBRC - Burr-Brown  $65.69  *** On The Move! ***

Burr-Brown is a global developer, manufacturer, and marketer of
high performance analog and mixed signal integrated circuits.
They target high growth segments of the communications, consumer,
computing, and industrial markets.  Their major customers are
among the world's leading electronics manufacturers, including
3Com, Cisco, Fujitsu,IBM, Lucent,Motorola, Nokia, Sony, and many
others.

In mid-April, Burr-Brown announced record results with sales of
$90 million and net income of $18.5 million or $0.31 per share.
This compares to revenue of $61 million and net income of $7.5
million or $0.13 per share for the first quarter of 1999.  The
incredible report reflects a 148% increase in net income on a 48%
increase in revenue.  Burr-Brown also expects to post earnings
growth for the year of 75-80% percent as it moves to fulfill a
backlog of orders for its integrated circuits.  That's a very
positive report with bullish forecasts and the technical history
agrees with the fundamental outlook.

BBRC - Burr-Brown  $65.69

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 60   BQB EL  28        8.13    57.56     8.1% ***

Sell Put  MAY 55   BQB QK  30        0.94    54.06    10.8% ***
Sell Put  MAY 60   BQB QL  4         2.25    57.75    18.7%

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

*****

PDLI - Protein Design Labs  $108.09  ** On The Rebound! ***

Protein Design Labs uses computer modeling and unique genetic
engineering to develop SMART humanized antibodies, which combine
the binding site of a mouse antibody (the small part of the
antibody that attaches to its target) with approximately 90% of
a human antibody.  Clinical studies with SMART antibodies have
confirmed the hypothesis that because SMART antibodies use only
a very small amount of a mouse antibody, they will not cause the
immune responses common with mouse antibodies that have been used
in the past.  PDL's partner Hoffmann-La Roche currently markets
the first humanized antibody created by PDL, Zenapax, in the U.S.,
Switzerland and other countries.  Other PDL humanized antibodies
in clinical testing include SMART Anti-CD3 for transplantation
and autoimmune diseases and SMART M195 for myeloid leukemias.
Complementary to its expertise in antibodies, PDL also has a
program to develop novel antibiotics to treat infections.

The market has punished the biotech sector in recent weeks but
the brisk sell-off appears to have abated for now.  Investors
are beginning to focus on progress in each individual company's
developmental technologies and the most promising issues will
recover soon.  PDLI's recent rally suggests that activity may
already be underway and we are going to speculate on that outcome
with some moderately aggressive, in-the-money positions.  In the
event of further consolidation, we will plan to roll our plays
into June with a lower cost basis.

PDLI - Protein Design Labs  $108.09

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 85   PQI EQ  47       25.38    82.71     5.3% ***
Sell Call MAY 90   PQI ER  25       21.88    86.21     8.4%

Sell Put  MAY 70   PQI QN  140       0.81    69.19     6.9% ***
Sell Put  MAY 75   PQI QO  37        1.19    73.81     9.9%
Sell Put  MAY 80   PQI QP  50        2.50    77.50    19.7%
Sell Put  MAY 85   PQI QQ  13        3.00    82.00    23.2%
Sell Put  MAY 90   PQI QR  66        4.38    85.62    28.2%

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

*****

STT - State Street  $106.12  ** A New Trading Range? ***

State Street Corporation is a bank holding company and is one of
the world's leading specialists in serving institutional investors.
State Street provides a full range of products and services for
portfolios of investment assets.  Customers include mutual funds
and other collective investment funds, corporate and public
pension funds, corporations, unions and non-profit organizations.

State Street ended the session near a record closing high today
after moving out of a recent trading range on increasing volume
and heavy institutional buying.  Public investors also began to
participate in the rally after the company announced quarterly
revenues and profits that topped analysts' estimates.  In April,
the State Street reported quarterly profits of $0.92 per share,
easily beating the consensus by $0.05.  Now the issue is trading
in a new range above previous resistance and if the share value
moves higher in the short-term, the momentum will likely carry
the stock to $110 or possibly even higher.

STT - State Street  $106.12

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  MAY 85   STT QQ  60        0.69    84.31     6.0% ***
Sell Put  MAY 90   STT QR  86        1.19    88.81     8.2%
Sell Put  MAY 95   STT QS  89        2.13    92.87    12.1%

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

***************
BEARISH PLAYS - Covered Puts & Naked Calls
***************

BRCM - Broadcom  $175.95  *** On The Rebound? ***

Broadcom develops highly integrated silicon solutions that enable
broadband digital data transmission to the home and within the
business enterprise.  Their products enable the high-speed
transmission of data over existing communications networks, most
of which were not originally intended for digital data
transmission.  Using proprietary technologies and advanced design
methodologies, Broadcom has designed and developed integrated
circuits for some of the most significant broadband
communications markets, including the markets for cable set-top
boxes, cable modems, high-speed networking, digital broadcast
satellite and terrestrial digital broadcast and xDSL.

The recent recovery of Broadcom continued Tuesday after the
company introduced its first chip for the optical networking
market.  The largest maker of semiconductors used for Internet
access via cable-TV lines, said it has designed a new optical
networking chip that can be used in wide-area networks, which
are larger than the local area networks limited to one or a few
buildings.  The company is basically adapting its 10-gigabit
technology for corporate local area networks using copper wires,
where it has been a dominant supplier, and extends it into wide
area fiber optic networks.  The announcement was viewed as very
positive news for the company, but unfortunately, analysts say
the full impact of the technology will not be realized one to
three years.

With all the excitement over a new product, call-option buyers
have come out in force.  During the recent upside momentum, the
option prices have increased exponentially and we plan to sell
this premium until technology stocks demonstrate greater strength
in each successive rally.

BRCM - Broadcom  $175.95

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 220  RDU ED  2048      2.00   218.00     5.4% ***
Sell Call MAY 210  RDU EB  1352      3.00   207.00     7.6%

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

*****

JNPR - Juniper Networks  $194.88  *** Searching For A Bottom ***

Juniper Networks is a leading provider of Internet infrastructure
solutions to Internet service providers and other telecom service
providers.  Juniper delivers next generation Internet backbone
routers that are specifically designed for service provider
networks.  The company's flagship product is the M40 Internet
backbone router.  The M40 combines the features of the JUNOS
Internet Software, high performance ASIC-based (application
specific integrated circuit) packet forwarding technology and
Internet optimized architecture into a purpose-built solution for
service providers.  Unlike conventional routers that are developed
for enterprise applications and are increasingly inadequate for
service provider use in public networks, Juniper's routers are
specifically designed to accommodate the size and scope of the
Internet.

Although the majority of well-known technology stocks have fared
better than the broad market in recent sessions, there remains
a significant amount of technical damage to repair before the
sector leaders can recover.  Juniper is certainly one of the top
companies in the Internet Software group but for now the issue
is simply trying to find solid footing in this volatile market.
We will use the current consolidation period to benefit from
overpriced options premiums with these relatively conservative,
bearish positions.

JNPR - Juniper Networks  $194.88

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 260  JUY EL  620       2.25   257.75     5.5% ***
Sell Call MAY 250  JUY EJ  1101      3.00   247.00     7.1%

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

*****

PWAV - Powerwave  $176.06  *** A Big Split Rally! ***

Powerwave Technologies designs, manufactures and markets
ultra-linear radio frequency (RF) power amplifiers for use in the
wireless communications market.  Their power amplifiers, which
are key components of wireless communications networks, increase
the signal strength of wireless transmissions from the base
station to a handset while reducing interference, or noise.
Their primary focus is on the cellular and PCS markets.

Powerwave Technologies has continued to rally over the past week
after the company said that its shareholders approved a 3-for-1
split of PWAV common stock.  The split would increase the number
of outstanding shares to 135 million and will be paid on May 15.
The bullish move carried the issue to incredible highs near $215
and the call option premiums extend well beyond that price range.
In this case, we don't believe there is a high probability that
the issue will reach our sold options in the next two weeks.
However, a close above the recent high near $218 would signal a
renewed Stage II rally and if that occurs, we will simply buy the
stock to cover the short position.

PWAV - Powerwave  $176.06

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 240  AHV EH  56        4.38   235.62    11.1% ***
Sell Call MAY 230  AHV EF  497       5.38   224.62    13.3%
Sell Call MAY 220  AHV ED  174       6.25   213.75    15.1%

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

*****

TDS - Telephone Data Systems  $100.12  *** Technicals Only! ***

Telephone and Data Systems is a diversified telecommunications
service company with cellular telephone and telephone operations.
At the end of 1999, TDS served approximately 3.2 million customer
units in 35 states.  TDS conducts its cellular operations through
its subsidiary, United States Cellular Corporation.

This play is simply based on the current price or trading range
of the underlying issue and its recent technical history.  The
TDS price trend reflects a negative divergence from the long-term
moving average (200-day) moving average line and the new downtrend
has endured successively lower highs and lower lows, on increased
selling pressure.  With today's drop, the issue has again failed
to recover after a recent consolidation and for now it appears the
stock has little chance of reaching our sold positions.

TDS - Telephone Data Systems  $100.12

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 120  TDS ED  83        1.13   118.87     5.3% ***
Sell Call MAY 115  TDS EC  92        1.38   113.62     5.2%
Sell Call MAY 110  TDS EB  424       1.69   108.31     5.3%

*** The collateral formulas in this position affect the ROI - or
Return On Investment.  Be sure to check with your broker for his
or her specific requirements.

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




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This newsletter is a publication dedicated to the education
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newsletter picks are not to be considered a recommendation
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