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Daily Newsletter, Tuesday, 05/09/2000

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The Option Investor Newsletter              Tuesday 5-09-2000
Copyright 2000, All rights reserved.                   1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       5-09-2000           High     Low     Volume Advance Decline
DOW    10536.80 -  66.80 10684.80 10514.30   898,333k 1,282  1,580
Nasdaq 3,585.01 -  84.37  3708.74  3540.82 1,450,335k 1,365  2,703
S&P-100  757.82 -   5.77   768.49   752.01    Totals  2,647  4,283
S&P-500 1412.14 -  12.03  1430.28  1401.85            38.2%  61.8%
$RUT     490.86 -   9.22   504.07   486.82
$TRAN   2904.16 -  31.71  2958.01  2890.17
VIX       31.71 +   0.59    32.68    30.10
Put/Call Ratio       .50
******************************************************************

Only one week left until Super Tuesday but the answer is out!

Are you as tired of listening to and trading this pre-hike
hysteria as I am? This is ridiculous. I can't remember a hike
that caused this much aggravation in recent history. Give us
a break here! Everyone knew there would be a +.25% hike already.
Now it is almost a given that it will be a +.50% hike but so 
what? Fed member Perry today made the comment that a +.50%
hike was consistent with a gradual approach to rate hikes as
an inflation fighting tool. You heard it, right from the lips
of someone that should know. You know the Fed always telegraphs
the moves in advance and that was a personal email in my book. 

The Fed Funds Futures is now showing a 91% chance of a +.50%
hike, up from 66% just last week. Just when you thought is 
was cast in concrete there were several analysts out this
afternoon saying that there was now signs of the economy
slowing and a weaker than expected PPI on Friday would hold
the Fed to only a +.25% hike. Make up your mind please! Do 
you really think Greenspan will pass up a free +.50% hike?
Actually yes! Confused yet? Remember, although Greenspan
would like to shock the economy with a +.50% there are other
considerations. Remember the Euro? The lackluster performance
of the Euro has put pressure on the Fed to be moderate. Also
a +.50% hike would cause a round of similar hikes overseas to
prevent a flight of cash to the US. Many of the world economies
cannot stand a .50% hike now and it would stunt their fragile
economic recoveries.

It is not a simple black and white answer for the Fed team.
Did I forget to mention it is an election year? What would
soaring interest rates and a crashing stock market do to the
Gore election effort? Just another reason for the Fed to be
moderate in their moves. In reality the damage has already
been done. Just look at the markets. The Nasdaq is down
almost -30% off its highs and the Dow is trading at the same
level it was in April 1999. Despite all the volatility and 
the record highs in the middle it has really been trending
sideways for a year. 


 


 

There is good news tonight. The first came in the form of the
much anticipated CSCO earnings announcement. Yes, they beat the
streets estimates of $.13 with $.14 actual but the real news
was a +55% increase in revenue. Nothing shabby about one of the
worlds largest companies to post increases like that. The 
valuation concern of course is still a problem for some. When
Barrons did the chop job on them Sunday and they dropped -$7
intraday on Monday, they lost a huge chunk of their market cap.
Actually the market cap they lost on Monday almost equaled 
half of the entire $48bln market cap of GM. Yes that's right.
CSCO has 3.42 bln shares and a -$7 drop equates to almost $24
bln in market cap or half of GM. This is what is causing the
old timers to curse valuations of the new Internet stocks. 
Should CSCO have a valuation that is 10 times GM but able to
only produce a fraction of the profits? GM earns $8.52 per 
share but CSCO earns only $.73. GM has a PE of 9 and CSCO has 
a PE of 189. But I did say it was good news. By beating the
street and posting a 55% increase in revenue CSCO shook off
the clouds of suspicion from the Barrons article that trashed
the tech markets this week. Single handedly CSCO should power
the Nasdaq out of the dumps and back into the spotlight on
Wednesday.

While I am on the topic, almost, we really need to address the
Barrons direction. While I am a fan of free speech the tabloid
journalism they have started pouring out recently is atrocious.
Remember these recent market killers, Amazon.bomb for instance.
Or how about the one from three weeks ago about the Internet
companies burning cash? You just felt the impact in your wallet
from the CSCO expose. How much did these articles, based on
questionable facts and even more questionable journalism take
out of your pocket. You would have to be fully invested in
bonds not to have felt the pain. Literally hundreds of billions
in market value have gone up in smoke. Just let some company
like Lucent prewarn that they are going to miss earnings by a
penny or two and you would have a herd of class action lawyers
frothing at the mouth to file suit. Nobody running after Barrons
to the best of my knowledge due to the first amendment. Should
they be able to fire at will and trash your retirement dollars
without being held accountable? The conspiracy theorists
out there are probably wondering if Barrons secretly signed up
on the Fed payroll to accomplish the bubble bursting task that
Greenspan and company had been unable to bring under control.
The market impact from this tabloid is unbelievable. With a
paid subscriber base of only 306,000 Barrons is not exactly
a leader in the print community. We will send out more 
newsletters tonight than they have subscribers but we do not
try to flame the market to get readers or attention. If you
believe their journalistic bent of late is tabloid at best and
not befitting of their name or their parent, the Wall Street 
Journal, then click here and send them an email telling them
your feelings.      If you agree with
them then tell them that also. 

The rest of the good news is the amount of money piling up
on the sidelines. The volume on the Nasdaq is still anemic.
Four of the last five days have been the lightest of the year.
The late rebound off the lows this afternoon added about 300
mln to yesterdays light total but still left us at about 65%
of normal. I think there is light at the end of the tunnel.
On Sunday I suggested the more aggressive players would
probably see another buying opportunity this week. You saw
it and it was today. The "we have to retest" crowd is still
there but the money on the sidelines started to spill over
into the playing field this afternoon. While we could still
see some choppiness this week before the PPI the odds are
getting better that the worst is over. The number of analysts
now expecting a weaker PPI is growing. This is of course a
worst case scenario if the PPI surprises to the upside with
everyone expecting a downside. Still once the gold rush back
into the markets starts it is likely to be strong. There is 
an old adage about "never short dull markets." They are dull 
because investors are waiting on the sidelines waiting for a 
directional signal. When the signal comes the moves can be 
explosive.

The rate increase is already priced into the market even if 
it is +.50%. No real danger there. A +.50% is widely expected 
to be a sign of the end of the rate hikes. (wishful thinking) 
A +.25% now would be looked at almost like a rate cut. There 
is no severe downside from this point in my opinion. As 
others make this same judgement then cash will come off the 
sidelines. Remember the last Fed meeting? The markets rallied 
over +100 points during the meeting even though we knew there 
would be a rate increase. We only have three days left this 
week and traders like you and me as well as fund managers are 
looking for targets of opportunity. Once those targets start 
moving the race will be on. 

Sure things could be better. I wish the Nasdaq had held 3600
today. It didn't but I think it was fear of a CSCO disaster
and tech backlash that created the weakness. We did rally
off the low at 3540 to within 15 points of 3600. Close but
no cigar. Technicaally we have a lower high and a lower low
but I think it was entirely sentiment related to the CSCO
article. The Dow has gone exactly sideways the last three
days and it performing exactly as it normally does before
Fed meetings. On Sunday I suggested 4000 as an entry point
for the July earnings run. I am going to lower that to 3800
tonight. If we trade over 3800, closing would be better, 
then I would go long for July. Just my opinion but I voted
with my money today. I bought the dip with half my capital
and once I see confirmation tomorrow I may put the other
half to work. The VIX was over 32 and the TRIN spiked to
1.35. If it was not an entry point it sure looked like one.

The only notable earnings left this week are AMAT on Wednesday
and Dell on Thursday. Lets keep our fingers crossed that they
at least hit their numbers.

Trade smart and sell too soon.

Jim Brown
Editor

Current long positions include: 

NTAP, VIGN, BRCM, BVSN, CMTN, SEPR
ITWO, JNPR, QCOM, RMBS, SDLI


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

NTT DoCoMo Takes Stake in KPN Mobile
By Cindy Christ 

Japanese mobile phone giant NTT DoCoMo confirmed Tuesday it
would take a 15 percent stake in Dutch-based KPN Mobile for 5
billion euros in a move to gain a foothold in Europe's
lucrative wireless communications market.

Five billion euros is equal to roughly $4.5 billion.

A unit of Royal KPN NV, KPN Mobile is a holding company
representing a group of cellular operators in Germany,
Belgium, Hungary, Indonesia and the Ukraine with more than 10
million subscribers.

Under terms of the deal, NTT DoCoMo will have the right to
nominate at least one representative to KPN Mobile's
supervisory board and will provide technical support to help
KPN develop third-generation mobile phones and mobile
multimedia services.

The move comes on the heels of a failed merger attempt last
week between NTT DoCoMo and Spain's Telefonica SA that fizzled
after the Dutch government refused to divest its 43 percent
stake in KPN to win approval for the deal.

Along with U.S. partner BellSouth (BLS), KPN and NTT DoCoMo
now are expected to make a bid for Orange, the UK's No. 3 cell
phone operator, which will be sold-off later this year by
Vodafone AirTouch Plc as part of its acquisition of Germany's
Mannesmann.

Experts say KPN will be competing with France Telecom SA and
WorldCom in its efforts to acquire Orange.

By linking with NTT DoCoMo, the mobile arm of Japan's Nippon
Telegraph & Telephone Corp. (NTT), KPN Mobile also hopes to
improve its odds of winning prized third-generation phone
licenses now up for bid in Europe.

Third-generation, or 3G, technology enables users to access
the Internet from mobile phones and other wireless devices. 3G
services are slated to debut in Europe at the beginning
of 2002.

NTT DoCoMo leads the world in mobile Internet technology with
its i-mode line of cell phones allowing users to send and
receive e-mail, reserve airline and concert tickets, check
bank balances or transfer money, play games, find restaurants
and get driving directions, and automatically receive weather
updates and news.

"We are investigating all further possibilities to fill in the
Internet and data segments as well. We want to move fast so
you can count on us to come out with a next step pretty soon,"
KPN CEO Paul Smits said at an Amsterdam news conference.

Smits told reporters that KPN also is seeking to ally with
French media and telecoms firms Vivendi and Bouygues and with
other European operators as well.

KPN said the deal with NTT DoCoMo would force it to delay its
planned spin-off of KPN Mobile for six to eight weeks until
the deal closes.

Shares in NTT DoCoMo (NTDMY) closed up $0.52, or 0.30 percent,
at $177.31.

KPN (KPN) fell $9.31, or 8.5 percent, to $99.88 in New York.



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

As of Market Close - Tuesday, May 9, 2000 

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

DOW Industrials   10,000  11,400  10,536    Neutral   5.05
SPX S&P 500        1,400   1,500   1,412    Neutral   5.05
OEX S&P 100          750     800     758    Neutral   5.05    
RUT Russell 2000     450     550     491    Neutral   5.05    
NDX NASD 100       3,200   4,000   3,445    Neutral   5.05    
MSH High Tech        860   1,000     890    Neutral   5.05

XCI Hardware       1,360   1,600   1,398    Neutral   5.05    
CWX Software       1,100   1,300   1,152    Neutral   5.05
SOX Semiconductor    960   1,200     994    Neutral   5.05    
NWX Networking       900   1,100   1,006    Neutral   5.05
INX Internet         550     800     579    Neutral   5.05

BIX Banking          530     600     542    BEARISH   5.04
XBD Brokerage        400     500     463    Neutral   5.05    
IUX Insurance        540     620     595    Neutral   3.16

RLX Retail           900   1,000     877    BEARISH   5.04 
DRG Drug             355     400     388    Neutral   4.28    
HCX Healthcare       710     800     787    Neutral   4.28    
XAL Airline          140     155     149    Neutral   3.10
OIX Oil & Gas        265     300     295    Neutral   3.16
 
Posture Alert    
Technology shares put in another poor performance, as the weak 
hands continue to fold ahead of several major earnings as well as 
the Fed announcement. The Semiconductor sector was the loser of 
the day, as that index fell -5.06%, which was followed by the 
Morgan Stanley High Tech (-2.26%), and the NDX (-2.17%). There are 
no changes in posture.    


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

By Pinnacle Capital Advisors

Tuesday, May 9, 2000

Is a rally around the corner?

Tuesday's trading was once again anemic, however; things may pick 
up very soon. On the earnings front, we have Cisco Systems, Dell 
Computer, and Applied Materials all reporting in the next 48 
hours. We are also a week away from the Fed Meeting, which may 
lift the lid off of this market or at least bring some traders 
back into play. Regardless, we thought highlighting the sentiment 
surrounding the 3 technology bellwethers would be useful topic 
this evening. 


Company:          Symbol:   Pinnacle  Expected  Whisper  Put/Call
                             Index:   Earnings:  Number:  Ratio:

Cisco Systems      CSCO       1.57     .13        .14      .46
Dell Computer      DELL       1.36     .16        .16      .75
Applied Materials  AMAT       1.98     .55        .60      .52

All 3 companies above have a relatively low Pinnacle Index, which 
would indicate the potential of a rally if the whisper number is 
met and the conference call is positive. Now as we write this 
article, Cisco Sytems reported earnings in-line with the whisper 
number, and was trading down fractionally. However, if their 
conference call is positive and without any negative surprises, 
we will keep an eye on this issue as it may have strong potential 
to rally tomorrow. 

Dell Computer is easily the lowest expectation issue this week, 
as their Pinnacle Index is the lowest and their whisper number is 
in-line with the expected earnings. We are also starting to hear 
the talking heads on CNBC reporting the rumor that Dell may miss 
earnings expectations. Reports such as these only help lower the 
expectation level of investors/traders, and thus, may give more 
potential for a relief rally should they deliver on earnings.    

Lastly, Applied Material is the highest expectation stock of the 
three, as their Pinnacle Index is the highest, but more 
importantly, their whisper number is a nickel higher than 
expected. What this suggests is that every analyst on the street 
has been raising the expectations, while the average has yet to 
catch up with reality. For a better description of the Pinnacle 
Index and how it relates with sentiment, just click below.

http://members.OptionInvestor.com/marketsentiment/042300_1.asp
   
Also, these three issues all have high levels of short interest. 
Cisco Systems 61.9 million
Dell Computer 40.5 million
Applied Materials 10.6 million
Due to these high levels of short interest, a squeeze may easily 
occur which would then help lead the broad market higher. Combine 
this with the fact that the markets have rallied at or after the 
previous Fed hikes, and we are beginning to see signs for a 
potential rally!


BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations. Walmart and Cisco Systems are the latest 
bellwethers to beat expectations.

Volatility Index (30.87):
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: 

 


BEARISH Signs:

Interest Rates (6.208):
With the long bond breaking significant support levels, new highs 
may be attempted in the near future.

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                              Friday       Tues        Thurs
Benchmark                        (5/5)        (5/9)       (5/11)
*****************************************************************

Overhead Resistance (805-830)     5.40        5.54
Overhead Resistance (775-800)     1.53        1.88

OEX Close                       767.79      757.82

Underlying Support  (745-770)     2.10        2.23
Underlying Support  (715-740)    10.54       12.81

What the Pinnacle Index is telling us:
Based on the above statistics, direct overhead resistance and 
direct underlying support both remain light, while OTM support 
and resistance levels are extremely strong. 



Put/Call Ratio 
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts                (5/5)       (5/9)      (5/11)
*****************************************************************


CBOE Total P/C Ratio             .53        .50
CBOE Equity P/C Ratio            .46        .42
OEX P/C Ratio                   1.25       1.07


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (5/5)          (5/9)            (5/11)
*****************************************************************

Puts                660 / 5,521   710 / 5,506
Calls               800 / 5,916   800 / 5,440   
Put/Call Ratio        0.93           1.01



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

May 9, 2000                             31.71


*************
WOMAN'S WORLD
*************

Rational Exuberance
By Mary Redmond

The new book "Irrational Exuberance" is a New York Times 
best seller, and makes some interesting and valid points about
the risks of market investing.  However, I think that there
are a number of important factors which were left out and 
need to be considered in evaluating investment decisions.

For example, the author uses the price/earnings(PE) ratio of
stocks in the S & P 500 today and compares the ratio to that
of previous "speculative bubble" periods which were followed
by devastating crashes and flat market periods.  However, the
PE ratio alone does not give enough depth of analysis or 
information upon which to make such a conclusion.  Many more 
stocks in the US are growing their shareholders' equity at a 
rate of 50 to 100% or more annually than in prior decades.  Also, 
many stocks have low PE ratios because there is something 
fundamentally wrong with the company.  PE ratios are best used 
in combination with other analytical tools. 

It is also dangerous to assume that prior decades in the stock
market can give us an indication as to what the stock market 
is going to do at any point in the future.  Just because the 
market corrected in the 1970s doesn't mean it will correct 
next year.  Just because the market was slow last summer does
not mean it will be slow this summer.  There are far too many
other variables in the equation, especially when you are 
talking about past decades.  In the 1970s, OPEC had a far 
greater control over oil prices than it does now.  In the
1920s, we did not even have an SEC or a Federal Reserve which
set margin requirements, so people were buying stocks on 
5% margin.  We don't know what is going to happen either in
the US or internationally to impact the stock market in the
future, either positively or negatively.

No one could have predicted decades ago the impact the
internet would have on all of our lives or the markets.
Mankind does make some progress over the years, and some
of this technological progress is reflected in the stock 
market.  We can't even begin to fathom what new technology
will change our lives in decades to come, or how this will
effect stock prices.

The only certain thing about the market is that the market
is uncertain, particularly in the long run.  It might be
even more dangerous to take an overly pessimistic attitude
about stock prices long term than an overly optimistic one.
If you look at a 50 year chart of the S & P 500 in 1950 it
was approximately 16.  Now it is in the range of 1400.  This
means if you had put $10,000 in the S & P 500 in 1950 you
would have approximately $870,000 today.  

One important point in the book was that public policy 
makers should be aware of the risks of stock market investing,
and should not use the market for government funded programs
like the Social Security trust fund.  This is a point I 
agree with for reasons not mentioned in the book.  No mention
is made of how this could potentially impact market mechanics
and stock prices.  For instance, a major fund or institution's
buying patterns often affect stock prices to the point of 
disrupting the entire market.  If the government were to begin
to buy billions or trillions of dollars of stock, this type 
of disruption would magnify to an extreme level.  Before long,
many companies would become majority owned by the government,
and this could cause conflicts of interest in many ways.
This is one of the reasons why we need the government to
continue to issue debt instruments to invest in the social
security trust fund.

There is a plethora of information available for anyone who
wants to learn about the stock market nowadays, and that is
one of the reasons the investing public is more savvy and 
sophisticated than in prior decades.  How the public uses this
information is the key.  In some cases, it creates a greater 
efficiency in the market, and in others it can result in 
misinformed decisions.  That's why it is important to discern
between good information and bad when making investment decisions.

Contact Support


*****

Here's Something That's Working...For This Week Anyway
By Renee White

Do you have a negative feeling about the overall market right 
now?  If you do, then why not put one of our "rules" to work? 

As many readers know, I'm having a hard time feeling bullish 
these days.  Don't laugh.  Some of my friends are very bullish, 
even for May.  There's room for all of us who want to play this 
month.  I find myself stuttering as I defend the reason for a 
brief rally next week because we are suffocating, dying for a 
relief rally.  At some point, it will come.  This week?  Next 
week?  Afternoon of Greenspan's speech?  That one would make 
sense to me.  Nevertheless, looking at the bigger picture, I 
still feel negative going into June with the next June FOMC 
meeting looming overhead also.  There's a lot of economic numbers 
which come out between here and there, with one of the more 
important being the CPI on the day of the Fed meeting on 
Tuesday.  Kudos to any brave souls willing to risk a play right 
in front of those numbers. 

I have been surviving with successful plays on mostly an 
intra-day basis, mostly by scalping both to the up and downside.  
Only a few times in the last 3 weeks have I chosen to hold over 
until the next day.  With the markets so different day-to-day, I 
have felt more secure with the 1/2 to 4 point moves intra-day.  
I can sleep well at night because my profits have been 
consistent.  Since any good day has been followed by bad days, 
any play that has gone against me has generally worked out the 
next day.  When volume is low, markets usually drift lower.  So 
as long as this volume pattern continues, I will feel a comfort 
level playing the downside by either shorting, buying puts, or 
a combination play with a bias to the downside. 

There's more talk this week than last that we will probably retest
our recent lows.  That would make a lot of sense to me and in 
fact, could be the precedent to rejuvenate things with real 
volume for a while.  Until then, my thinking will continue to 
concentrate on ways to play the downside profitably and 
consistently.  We are basing now and the low volume tells us we 
are on track to building a nice strong base for future bulls.  In 
the long run, it's good.  It just hurts now because many can only 
play momentum bullish patterns.  On the brighter side, not only is 
it an election year which historically has a strong market in the
latter six months, but we have another cushion that may save our 
continued fall: the weak Euro.  That could be the cause of a 
smaller rate hike than expected.

For now, I feel comfortable making 2.5% to 6.75% a day by shorting. 
Or the 83% returns in 24 hours that I made today with my Nortel put 
play, something you may want to try yourself.  Being able to make 
money in this narrow market has given me new confidence in my 
trading skills.  As I've said many times before, I always improve 
my trading when I lose money during a nasty market reversal.  This 
one is paying off.

During our typical bullish periods over the last several years,
patterns have proven to consistently benefit most option 
traders with minimal effort.  These patterns were so forgiving 
that they falsely made beginners think they were wizards at 
trading.  The two most profitable patterns have been earnings 
runs and split-runs on highly favored companies.  Our "Rules" 
have taught us that we should: "Never hold over earnings" and 
"Never hold over a split."  Why?  We never hold because there 
is typically a steep sell-off after these two events.  Many 
traders help run the price of the stock up artificially, only 
to try to exit at the peak of excitement they helped cause. 

Well, earnings fizzled this quarter, which was a shock to many.  
Also, a ton of split runs have had "erratic" movement at best.  
Many have been afraid to play the typical split-run 10 days in 
advance due to the erratic market eating away at the time decay 
of their premiums.  Watching these split-runs fade has been 
depressing.

But wait!  "Erratic"?  Hmmmm, nice word.  Isn't that word close to 
the word "volatility" that option traders like so much?  I think 
so.  Although I haven't felt like playing options lately, a light 
went off yesterday when I remembered why we don't hold over 
splits: momentum players exit right before or shortly after the 
split.  The splits also put many portfolios out of balance and 
selling becomes a way to keep things in proportion while taking 
some profits off the table.  The usual post-split pattern is a 
sell-off.  On rare occasions, the sell-off is limited.  But since 
most equities move with the market, a market with a downward bias 
should enhance the post-split depression.  It would take a WHOLE 
lot for a company to rise up against the odds right after their 
split, especially with low volume in a downtrending market.
 
Since every-other-day we are bouncing positive and negative, I 
think it is possible to buy slightly OTM puts at the intra-day 
high, on the day before or day of the split.  It would be best to 
try to enter when the equity is reaching its last positive day, 
as close to the high as you can get.  If the markets are biased 
to the downside, this will certainly help your post-split put 
plays. 

Yesterday, I bought Nortel May 110 puts @ $4.50 when Nortel was at 
$112.  The better entry would have been Friday, but I didn't think 
of it then.  Nortel split last night after the close, so I felt 
sure that people would be selling today especially on a weak day.  
Today, I awoke owning 10 May 55 puts.  I could have sold 1/2 of 
the position and let the rest ride but I was afraid if Cisco 
reported good numbers, a brief relief rally might steal profits 
in the morning.  So I exited a little early, 10 puts @ 4 1/8 for 
a 83.3% profit in less than 24 hours.  Not bad, huh?  I also 
bought American Express puts, before its 3 for 1 split coming 
Wednesday after the close.  I thought that was a no-brainer play 
due to the interest rate worries.  At the close of today, they are 
up 38% but I expect much more by Thursday, the first day post 
split.  This is when I plan to exit.  I didn't think any brief 
intra-day tech rally would hurt my financial sector play in front 
of the Fed meeting.  In fact, I may add to the play tomorrow.  
Playing both sides and feeling good about CSCO, I did buy QQQ 
today to hold overnight for the brief rally I expect tomorrow.

Trading a bearish market doesn't have to be a scary dilemma.  All 
it takes is teaching your brain to think in the opposite 
direction.  Then it will clue your gut into placing confident 
plays.  You will always have more success if you can back up your 
plays with historical insight, instead of wishing and hoping.  By 
using the historical post-split sell-offs during a downtrending 
market with low volume, I am stacking the deck in my favor.

I am in a risk-averse mood these days so any play that gives me 
consistent profits is good enough for me.  I'll be checking the 
split list for other strong companies to play in this manner until 
my market bias changes.  

Contact Support



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

Chasing Rabbits
By Austin Passamonte

I knew for a fact when beginning to write for OIN that I 
would learn much more from the readership than you ever 
would from me.  That's just how sharing information goes;
I'm outnumbered many, many thousands to one and am grateful
for it!

Here's a note I received this weekend that makes a very 
important point to a lesson I need reinforced in my trading, 
and perhaps others do also.  As follows:

"Austin- thought you might enjoy hearing the results of your 
OEX educational articles.  I have been standing aside studying
after a not so good series of trades.  I have been at it about 
3 months now, so I'm still able to learn and have a lot to 
learn.

After your article, which positioned the Skybox as a 
benchmarking tool for the OEX as opposed to a mechanical 
series, I decided to get my feet wet again.  My Theory: after
trading sideways Thursday in advance of the economic numbers,
I figured any early trend Friday morning would be tradable.

Execution:

1. Confirmed first hour trend with Yahoo volume-advance decline 
   numbers-trend up.

2. Picked up 770 at OEX benchmark 762 just after 10:00 for 
   14 3/8. Good entry point on a little dip.

3. OEX immediately took off for 772. This is good!

4. Found congestion at 770 -772 and stalled. 

5. After watching OEX bounce from 770-772 several times, started 
   thinking about an exit. 

6. Set sell at 18 3/4 and watched OEX bounce one more time off 
   771 and got filled at the high on that bounce.

7. Watched the OEX go straight sideways for the rest of the day
   and close near 770 but premium down on 770 call at 17+

I now have $4500 in my account to the plus, some needed 
confidence and a new way to look at the Skybox. I think I'm going 
to rest on my laurels for a little while to study and learn." 
Doug C.

Rest away Doug, you've earned the right to do so.  Considering the 
trade was over by noon, I hope you took the rest of the day off.
As a matter of fact, that sum is roughly two months median income
for the average U.S. worker so I guess you don't need to take any
more trades until early July, anyway.

Make no mistake...I saw that trade coming a mile away.  Watched it
happen from start 'til finish as well.  Watching is about all I
did since my capital is spread out and tied up in a number of 
different equity plays. 

Near Thursday's close I picked up some May GE calls and June QQQ
puts.  Before Friday's bell I also placed a limit-buy order on 
ADBE June calls as well.  Then I watched the futures melt as
the countdown to our starting bell began.

Why did I do that, you ask?  Good question!  The answer is nothing
other than sheer boredom.  Too much time on my hands watching the
markets trade a tight range away from any OEX entries I felt
really good about.  Hey, I'm a trader--traders trade.  All these
other plays start looking really good when the broker's page 
reads, "You have no positions open".

Truth is, I didn't do badly. Q puts were gone 10 minutes into 
Friday's session for a fair gain.  Made a little on the GE calls,
did fine with the ADBE calls by afternoon.  Closed out GE calls 
and used profit on June GE puts for a free play to fade the split
event.  Bought more June QQQ puts near close on Friday to sit on 
for next dip.  Tried another half-dozen entries that were 
cancelled or left unfilled. 

Whew, that's a lot of work.  No time for boredom Friday.  Oh yeah,
the OEX play.  I was tempted to buy when it hit 754 and started
steaming due North, but had little cash left open.  The way I had
the market planned, I'd ride the OEX in the afternoon instead.
You see, that trade just wasn't convenient for me this morning...
I was too busy avoiding boredom. 

Well, the markets didn't care what I had planned for them this
time.  They went ahead and moved on their own accord.  Can you
believe it?  I did try to enter the OEX when it hit 770, seemed
like it might pass 900 by the close at the rate it was moving.
Alas, that play got stopped out well before then.

Moral of the story?  I was too spread out to make real money!
Oh sure, a few dollars were added to the pile but I worked
my tail off for them.  Doug on the other hand sat very 
patiently, had a plan, was focused and executed with surgical 
perfection when the opportunity arose.  Me?  I was all over the
place scattered hither and yon.  Doug was out enjoying the 
fine weather, I was still jiggling the mouse and grumbling over
market-makers.

One of us was trading to perfection and the other was 
inefficiently playing options Nintendo.  I'm sure you know who 
was which.

Focus, patience, preparation, execution.  Lessons I need to be
reminded of often these days.  Thank you Doug for doing exactly
that.

Sunday's OIN was chock full of excellent articles from all of 
it's talented writers, but did you take the time to read and study
those from Janar Wasito and Lynda Schuepp?  Two exceptional
examples on how to pinpoint trades stacked heavily in one's favor.
They also demonstrate laser-sharp focus and discipline in trading
to win.  These two exemplary writers can flat-out trade!

You and I are blessed to have OIN at the click of a finger every
day, guiding us successfully in our pastime.  The best thing
about OIN is that it's bursting with strategies and plays of every 
imaginable kind.  When given a choice, I want them all.  Am I alone?

Time for me to focus again.  The OEX has treated me well as
have other indexes and countless stocks.  Each of us could make
money from any of them, but not simultaneously.  "Don't chase
two rabbits, you'll catch neither" I continually chant to
myself.  Here's hoping it sinks in real soon!

Get ready for "Super Tuesday" next week!
 


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

Index      Last     Mon     Tue    Week
Dow    10536.75   25.77  -66.88  -41.11
Nasdaq  3585.01 -147.44  -84.37 -231.81
$OEX     757.82   -6.20   -5.77  -11.97
$SPX    1412.14   -8.46  -12.03  -20.49
$RUT     490.86  -12.76   -9.22  -21.98
$TRAN   2904.16   59.76  -31.71   28.05
$VIX      31.71    0.73    0.59    1.32

Calls              Mon     Tue    Week

SEPR     106.75    1.19    2.31    3.50  Bucking market trend
BSX       28.31    0.81    0.94    1.75  New, breaking out
WLA      123.56    2.84   -1.53    1.31  New, drugs looking hot
BVSN      45.13   -3.31   -1.19   -4.50  Holding on with light vol
EPNY      84.75   -1.75   -2.88   -4.63  Look for upcoming B-week
QCOM     105.00   -6.75    2.00   -4.75  Recouping losses
NTAP      63.44   -6.69    0.25   -6.44  Dropped, moving on
HIFN      36.13   -3.50   -3.50   -7.00  So stay on your toes
MERQ      77.94   -3.88   -3.19   -7.06  Following broader trend
ADBE     112.31  -10.31    2.94   -7.38  Relative strength amazing
KANA      46.38   -2.66   -6.31   -8.97  Good recovery potential
AMD       83.00   -3.38   -5.75   -9.13  Looking for a bounce
MEDI     160.56  -12.00    2.31   -9.69  Weak volume is the culprit
EMLX      52.25   -5.94   -4.31  -10.25  Dropped, flat lined
SCMR      73.63   -0.19  -12.19  -12.38  Dropped, take profits
TER       93.75   -7.19   -7.69  -14.88  Dropped, slipping away
ABGX      97.50   -5.88   -9.50  -15.38  Following NASDAQ lead
BRCM     161.94   -6.56   -9.31  -15.88  Dropped, done for now
JNPR     177.00   -4.38  -12.00  -16.38  Dropped, time to go
AFFX     139.50   -7.94   -8.63  -16.56  Support at $130
RMBS     178.56  -16.88  -12.19  -29.06  Dropped, downtrending

Puts

EBAY     121.19   -5.50   -7.31  -12.81  New, free fallin'
RBAK      57.44   -6.25   -5.81  -12.06  New, downward channel
SNE      213.38   -2.25   -5.94   -8.19  Signs point to...down
CMRC      47.75   -4.82   -3.31   -8.13  New, rolling over
SBL       44.19   -1.75   -3.81   -5.56  New, 200-dma at $38
CTXS      41.06    0.56   -2.88   -2.31  Sliding toward $40
GCI       59.25   -0.50   -1.00   -1.50  Selling with high volume
LOW       49.25    1.25    0.19    1.44  Dropped, perhaps a bottom


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:
*****

EMLX $52.25 -4.31 (-10.25) Not only was our EMLX play tarnished
by a weak tech sector, the stock suffered from the announcement
that Qlogic (QLGC) would acquire Ancor (ANCR).  Buying ANCR will
add to QLGC's existing portfolio of fiber channel technology.
It just so happens that EMLX is the leading provider of fiber
channel products.  Analysts believe that the merger between the
QLGC and ANCR will cut into EMLX's commanding market share.  The
announcement caused EMLX to gap lower Monday morning, and the
selling continued into Tuesday's trading.  EMLX's CFO appeared on
CNBC Tuesday afternoon, but was unable to deliver any appeasing
comments for traders.  Ironically, we were looking for EMLX to
fill its gap from April, but the most recent gap down Monday 
and the concerns over valuations has us selling too soon.

TER $93.75 -7.69 (-14.88) Barron's is once again the culprit,
publishing detrimental stories that send leading tech stocks
lower.  The article in last weekend's Barron's questioned CSCO's
high valuations.  Renewed fears of high valuations swept through
the semiconductor sector like wild fire, sending the chip
equipment makers like TER sharply lower.  Fellow chip equipment
maker KLAC made positive comments about the company's upcoming
quarter.  But the upbeat remarks had no effect on the Semis.
Though traders are highly anticipating the earnings report from
AMAT later in the week, the valuation concerns have overcome 
the tech sector.  The selling in the Semi sector was especially
heavy Tuesday, as TER traded well above its ADV.  The stock fell
through several key support levels, most notably the $100 mark.
The recent dip in the chip stocks has caused us to step aside.

NTAP $63.44 +0.25 (-6.44) The headlines read "Network Appliance
forecasts continued growth."  In a presentation at the Chase H&Q
Technology Conference, NTAP CEO, Dan Warmenhoven said the company
intends to capitalize on the increasing demand for storage by
the Internet and corporations.  Nice presentation, but it didn't
stop investors from taking the opportunity the past two days to
lighten their load of shares of NTAP.  The one positive to come
out of the past two sessions, is once again the $62 level seemed
to be the point where the sellers passed the baton to the buyers.
But one positive with a better than $6 drop, just aren't enough 
to keep NTAP on our list.  Networking grandfather CSCO reported
better expected results after the close today, and headed south
in the after market hours.  For now it's time to go our separate
ways.

RMBS $178.56 -12.19 (-29.06) Unfortunately the downtrend line that
began to be drawn at the beginning of May can be extended another
two days.  We said unfortunately, however traders that entered
this play shortly after being added to our list, in late April
have seen the company's stock run from $167.50 to $248.  We are
now just about back where we started, and the current downtrend,
even though it comes on lighter than average volume, has put an
end to our play.  Keep in mind if RMBS did bounce, it may or may
not mean the return to the levels seen earlier this month.  It 
could be just a quick pop to the upside, which is met by more
selling.  Although we look forward to its return to our list
of favorites, the risk-reward simply isn't in our favor at this
time. 

JNPR $177.00 -12.00 (-16.38) JNPR confirmed on Friday the 2:1 
stock split will indeed happen next month on June 15th.  That's 
not too far away and we're sure looking forward to a split run.  
But at the moment it doesn't look too promising for JNPR.  The 
violation of the 10-dma ($197.12) and 5-dma ($187.46); plus 
today's slide below $180 bottom support to an intraday low of 
$170.63 is just too perilous.  Granted it's likely if the market 
trends up after the Fed meeting next week, JNPR will snap back.  
But that's a big IF to bet on.  So we're taking this volatile 
Internet off our plate for the time being.  The tid-bit of news 
this week was the company's announcement it standardized all of 
their company sites, including international operations, on 
Nokia's patented CryptoCluster technology for secure site-to-
site communications. 

SCMR $73.63 -12.19 (-12.38) Sycamores may be sturdy trees, but 
there's nothing attractive about the investors hanging from a 
noose after a $12 drop today.  It's weakness became apparent 
right after today's opening gap up and steady $14 descent without 
missing a beat to its low at 2:00 p.m.  Volume was heavy - 33% 
in excess of the ADV.  Despite a weak attempt at recovery in the 
final two hours, SCMR closed at its low of the day.  Investors 
were using every minor pocket of stability (let alone strength) 
to unload the issue.  SCMR sits right on historical support.  
While it could rise from here, consider exiting on any strength 
since sentiment seems to be changing for the worse - increased 
volume and big declines aren't usually good going forward.  
That's especially true on the heels of yesterday's BBRS 
reiteration of their Buy rating while raising their 2000 EPS 
estimate from a loss of $0.01 to a profit of $0.06 and their FY01 
from $0.08 to $0.18.  Even that didn't help.  Earnings are 
scheduled on May 18th, which may help with a better exit.  
Still a nice play thought when you consider the entry at $53.

BRCM $161.94 -9.31 (-15.88) Yesterday's introduction of another 
two-way cable set-top communications chip and its adoption by 
set-top box manufacturers for use on Time Warner's system could 
not keep BRCM afloat.  It took a beating despite the news, 
closing at good support near $160 on stepped up volume of 10% 
over the ADV.  While brave traders would consider this an entry 
in a different market, we think it's akin to a stop at the Bates 
Motel in search of a good night's sleep.  Technicals have 
reversed course and the new trend appears to be downward.  If 
you didn't have a stop set (we hope you did), consider using 
pockets of strength for a better exit.  Investors holding big 
stock positions are finding it tough to make an exit themselves 
as any volume on the sell side is met with a lack of buyers, 
thus sending the price lower.  So too with the options business.  
Time to move on.

PUTS:
*****

LOW $49.25 +0.19 (+1.44) Like we said, the stock was trading
like one that's trying to find a bottom.  That may just be
what's happened to our put play.  From last Wednesday until 
early Monday, Lowe's traded in a narrow range between $47 and
$48.  Yesterday afternoon, the volume picked up and so did the 
price.  Some say the sell-off, after Goldman Sachs downgraded
the retail sector was overdone, while other suggest today's
better than expected earnings announcement by Wal-Mart, helped
lead LOW and the sector our of the hole.  Whatever the reason,
Lowe's may have found new life.  With earnings due to come
out in less than a week, it's time to step aside and look
elsewhere.  For those wanting to hang on to Lowe's remember
April retail sales will be reported on Thursday and could
drive this on and the sector either way.



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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              Tuesday 5-09-2000
Copyright 2000, All rights reserved.                   2 of 2
Redistribution in any form strictly prohibited.

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

SEPR $106.75 +2.31 (+3.50) Another bad day for the NASDAQ, and
another good day for SEPR.  We saw some weakness in shares of
SEPR early Tuesday morning.  After bouncing for the second time
from the $101 level, the stock edged higher towards the end of
trading Tuesday.  But the final five minutes of trading provided
the fireworks.  A massive wave of buying pushed SEPR nearly $3
higher in the final moments of Tuesday's trading.  Traders may
have been positioning themselves ahead of the Healthcare 2000
Conference.  SEPR is scheduled to be a key presenter at the
Deutsche Bank Alex Brown event taking place this week.  Yet
another event that could carry SEPR higher is the company's
upcoming shareholder meeting, to be held on May 24th.  Investors
will vote on a proposal to increase authorized shares, possibly
paving the way to a split announcement.  After the late-day 
rally Tuesday, an aggressive trader might look for SEPR to build
momentum from its current level.  If you're looking to minimize
directional risk, wait for SEPR to clear resistance at $110 on
healthy volume.

ADBE $112.31 +2.94 (-7.38) ADBE's relative strength is simply
amazing.  Over the last 12 months, ADBE has managed to outperform
over 93% of stocks in the market.  Though a strong performer,
ADBE isn't completely immune to external factors affecting stock
prices.  The Barron's article proved to be one of the events that
can push ADBE lower.  The stock gapped down Monday morning, and
sold-off into Tuesday.  Traders fearing that ADBE is overvalued
remembered that the stock sports a P/E of 53, much lower than the
average tech stock.  That revelation by investors sent ADBE into
rally mode late Tuesday, as the stock gained over $7 in less than
an hour of trading.  However, the stock did give back much of 
its early gains in the last ten minutes of trading Tuesday.  It
appears that the selling was nothing more than profit taking,
noting the weak volume in the last ten minutes.  The scare by
Barron's wasn't enough to knock ADBE out of its ascending channel
that we've come to love.  From here, an aggressive trader might
look for ADBE to rebound quickly from its current levels.  A
conservative trader might wait for the valuation concerns to
dissipate and watch for ADBE to clear resistance above $117
before entering the play.

AFFX $139.50 -8.63 (-16.56) It is a rare stock that can escape
the decline of neglect being experienced on the NASDAQ, and AFFX
has not been that stock this week.  As the markets continue to
see the lowest volume of the year, it is clear that buyers are
just not ready to jump in ahead of the impending Fed meeting.
Investors are not in a rush to sell at these levels either, and
so the waiting game continues.  Dropping both days this week,
AFFX finally saw a bit of a bounce at the end of the day near
the $135 support level.  If this level can hold as support, 
it will keep alive the fledgling recovery, which began in mid-
April.  This support level is backed up by the 30-dma ($130.69)
and the 50-dma ($125.63), which is also at a strong support
level.  Resistance is found at $145 and then $150, but
challenging these levels will likely require the return of
buyers.  Any move up will be difficult to sustain without solid
volume backing it up.  Consider using intraday dips to support
as buying opportunities, but keep in mind the importance of
confirming volume.

HIFN $36.13 -3.50 (-7.00) The buyers' strike continues and HIFN
was not immune over the past 2 days.  After moving up strongly
at the end of last week, it became clear that the conviction was
not there and the stock fell through the tenuous support at $40,
giving back the majority of last week's gains in the process.
Even announcing new state of the art products is failing 
to attract buying interest.  Yesterday HIFN announced the
industry's first complete DSL and Cable modem security
processor for the widely-deployed PCI-Bus system and today
investors continued to sell.  Volume is still anemic (less
than half the ADV today), indicating investors are not
necessarily negative on the stock, they are just nervous about
the direction of the markets in the near term.  This week's
losses have brought HIFN back to the $34-35 support level, and
today's close is just fractionally above the 10-dma ($36.25).
If some buyers wake up and create some volume near this level,
it could be an attractive entry point.  Unfortunately, volume
is unlikely to pick up significantly until the other shoe drops,
(Greenspan and the Fed announce the outcome of their meeting
next week) so stay on your toes.

MEDI $160.56 +2.31 (-9.69) It is sounding like a broken record,
but the culprit behind the drop in MEDI this week is the weak
volume pervading the broad markets.  Although only slightly
below the ADV on yesterday's decline, today saw only about half
the average number of shares trade hands.  Shares of the
Biotech company are finding some support at the 30-dma ($157.88)
and bounced intraday today at the 10-dma ($154.44), helping the
stock to actually move up by the end of today's session.  The
markets are nervous about interest rates, MEDI has already
reported earnings (strong, but now the news is out), and
consequently the stock is having a hard time moving up without
some fresh motivation.  That motivation (in the form of volume
caused by improved investor sentiment) is unlikely to be
forthcoming until we get the results of the Fed meeting next
week.  Following that meeting, we have another one that could
be much more positive.  On May 18th, the company will hold its
Annual Shareholder Meeting, and on the agenda is a vote to
increase the number of shares outstanding.  Upon approval, the
company will be free to complete its 3-for-1 split, payable on
May 18th as well.  Consider nibbling on new positions if support
can hold near $159, supported by 30 and 50-dmas, but keep your
eye on the volume.  Without it, MEDI isn't likely to go very
far.

MERQ $77.94 -3.19 (-7.06) We said Sunday, next week could be 
a bit tricky.  Well for traders with MERQ in their sights it 
really hasn't been tricky at all.  MERQ has followed the rest
of the tech stocks lower for the first two days of the week.
We are somewhat disappointed that the $80 area wasn't able
to hold up, but were pleased to see a few buyers appear as
MERQ approached its 100-dma at $75.92.  Many are looking for
answers as to what's going on in the broad markets and why?
We won't attempt to dissect the broad market here, but the
fact is there simply are no buyers.  For now, investors have
decided to lighten their load in stocks and wait, which
may be the most prudent way to play MERQ.  We are not trying
to scare anyone off, but for more conservative types that
may be the best course of action.  For traders that prefer
to play, then the support levels formed near $76 today could
provide a suitable entry for a short-term play.  MERQ did
announce today Topaz 2.0, the first Web application performance
management solution that can correlate end-users performance
issues to the source of the problem, while a presentation at 
the Chase H&Q Tech Conference did little to help prop up the
stock.  For those wanting to enter the arena, be prepared to
sell too soon, until a liquidity returns to the markets.   

AMD $84.31 -4.44 (-7.94) AMD is holding strong amid investors' 
fears and the dubbed "buyers' strike".  AMD's momentum however 
did let out a much needed exhale in the last two sessions.  Over 
the past couple of weeks this stock powered higher, and on 
Friday, it set the latest 52-week record at $93.  The downdraft 
brought AMD to a firm support level at $82 and $83.  This 
consolidation is fine as long as there isn't any further 
decline.  On the upside, volume is respectable with trading at 
moderate levels.  The converged 5 and 10 DMAs also remain close 
at $88.50 and $87.54, individually.  Conservatively look for a 
move through these technicals.  There's no doubt that would give 
us with a solid indication that AMD may once again make a charge 
for newer heights. 

KANA $46.38 -6.31 (-8.97) KANA was a stellar performer in 
yesterday's market.  It couldn't be beaten down below $50.25 
demonstrating its liquidity was better off than most.  It's 
recovery potential clearly remains intact.  Even today it was 
resilient.  we can understand about a mild pullback to near-
term support at $45 and the 10-dma ($45.96).  Entry points, 
entry points.  But please, wait for a definitive upward bounce 
for evidence that KANA is not entering a consolidation phase.  
A break through the 5-dma ($49.74) would be even better.  In the 
news today KANA announced that Office Depot (ODP), the global 
office product leader, is implementing Kana's eBusiness System 
across all communication channels. 

ABGX $97.50 -9.50 (-15.38) ABGX is a newcomer to our call list, 
so let's give it a chance to show us its true potential.  Yes 
the 15+ point drop over the past two days is nothing to sneeze 
at or dismiss.  However considering the devastation that 
occurred on the NASDAQ so far this week and the stock's recent 
break out above $100 we'll keep it on probation.  Why?  Because 
yesterday it maintained an intraday support level at $105 and 
$106 (damn good!) and today, despite profit-taking, it shot 
back off a low of $91 recouping $6.50 on decent volume.  Wait 
for another move through $100, or better off the 5-dma at 
$103.28 before opening new positions; and especially if you'd 
rather not take an aggressive approach to into this momentum 
play.  

QCOM $105.00 +2.00 (-4.75) While it didn't escape yesterday's 
NASDAQ whirlpool, QCOM kept its head above water today tacking 
on $2 while its tech brethren struggled to no avail to keep 
themselves from getting sucked down the drain.  While it finished 
weak in the last 30 minutes with volume of only 69% of the ADV 
(yet an amazing 93 block trades) on the day, that tells us that 
institutions were buying the stuff instead of selling it.  In 
this case, it's the quality, not the quantity of volume that 
figures positively going forward.  Sunday, we noted that $100 and 
$105 might be support targets at which to shoot.  While there was 
a brief opportunity at $102, $104 provided a number of bounces at 
which to take a position (sure, hindsight is 20/20, but we 
weren't far off the mark).  Depending on your risk profile, you 
still may want to wait to se $100.  Still, we need the market's 
cooperation for this to become a successful play and that may not 
happen until after the FOMC meeting next Tuesday, or perhaps 
Friday following the PPI at the earliest.  Tread carefully.  But 
based on today's technical indicators coupled with volume, QCOM 
is setting up to become a great play if the market comes around 
a bit and shows us the volume.  Earnings are not until mid-July.

EPNY $84.75 -2.88 (-4.63) Uh oh.  EPNY seems to have begun a 
slight downtrend, though on only average volume.  But then again, 
very few companies have escaped the market's southward move.  
While intraday support remained intact at $87 yesterday, EPNY 
could not escape the market pressure that took it under $85, near 
a more solid level of support at $80.  Still, we don't yet have 
an entry unless you target shot $85.  The good news is that EPNY 
remained above its 10-dma of $81.93.  Consider target shooting 
there or at another level of support commensurate with your risk 
tolerance $80 or $85 as suggested earlier.  Keep your eyes open 
too for the next copy of BusinessWeek (May 15 issue) where EPNY 
will be featured as one of 10 "Up-and-Coming" companies poised 
for tremendous success.  Be patient and wait for the market to 
come to you.

BVSN $48.13 -1.19 (-1.50) Here's another one rolling over, but 
low volume is keeping the damage to a minimum.  If you keep your 
head down while bullets are flying overhead, there is less of 
an opportunity to be hit.  Particularly striking too is the 
nice rebound off $43.50 coupled with a $2 rise into the close.  
That's a real show of strength in this market and a clue that 
BVSN should one of the first to rally when uncertainty eases, 
presumably next week.  It helps confirm that there are currently 
few sellers, and helps explain why BVSN isn't falling with the 
rest of the market.  It helps a lot too that BVSN announced a 
launch of a new B2B site with Boeing for airline customers and a 
new consulting venture to advise clients on Internet strategy 
with Deloitte Consulting.  Nonetheless, support levels $45 and 
$48.50 did not hold.  However $42.50 did.  $40 is much stronger, 
but the 10-dma also held today, currently at $44.81.  Pick your 
favorite, but no matter what, wait for the bounce.



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

CTXS $41.06 -2.88 (-2.31) BSQUARE (BSQR) announced Monday that
the company has licensed CTXS's application server technology.
Investors reacted positively to the news, and bid CTXS slightly
higher.  After enjoying a small up-tick Monday, the sellers
returned in full force Tuesday.  CTXS fell below support at $42
early Tuesday morning and continued to slide, finding support
just above $40.  The stock bounced twice from its critical
support level of $40.  Traders have warned that if CTXS falls
below $40, it would signal a full fledged breakdown by the stock.
The trading activity remains steady in CTXS as volume continues
to be heavy as traders exit CTXS.  The company is scheduled to
present at the much publicized H&Q conference late Tuesday.
If CTXS rallies from any positive analyst comments Wednesday,
wait for the sellers to step in, and look for an entry near the
descending 10-dma.  But if the sellers show up early Wednesday
morning, watch for a move below major support at $40 on heavy
volume.

SNE $213.38 -5.94 (-8.19) What do you get when you combine poor
earnings, a rocky new product launch, negative currency issues
and a weak stock market?  If you said a put play, you were
right.  After the strong run up in advance of the Playstation2
release, SNE was looking great.  After the much-publicized
problems with their new game unit though, investors took their
money elsewhere.  Then the company reported earnings along with
a forecast of increasing revenues and decreasing profits in an
already negative market.  More investors jumped ship and the
downtrend is continuing this week.  Support near $220 failed 
to hold and this morning the stock plunged to $212.25 before
finding support.  Volume remains light, near 50% of the ADV, as
buyers sit on their hands in advance of the Fed meeting next
week.  The lower highs and lower lows pattern remains intact,
indicating that SNE may have further to fall.  Support could be
stronger near today's lows, which are near the bottom of the big
gap up that occurred in late December.  Look to initiate new
positions if SNE rolls over at resistance at $216 and then $220.
More conservatively, wait for a move down through today's low
and then jump on board for the trip down.

GCI $59.25 -1.00 (-1.50) Very little news and few buyers so far
this week for one of our new plays as Gannett has continued to
slide into territory not seen in the past eighteen months.  The 
loss today came with 1.7 million shares traded, nearly twice 
the norm.  A quick check of the technicals continues to show
GCI is getting a bit oversold.  Gannett will need buyers to
enter from somewhere to pull it out of the whole, for even a 
technical bounce, and right now we aren't sure just exactly
where they would come from.  Does that mean GCI will go straight
down?  Nope, but with the recent downgrade, the legal problems,
and the resignation of the company's CEO last week, they are
definitely a company that could use a boost.  A British regional
newspaper group said today it had pulled out of the takeover
battle for News Communications & Media Plc, after Gannett had
raised its offer.  Investors apparently aren't too sure of the
direction of the company over the near-term and continued to
sell stock for the first two days of this week.  Technically
speaking, $60 could provide resistance followed up by the $62
mark.  Should some buyers appear, a bounce followed by weakness
could provide a good entry for our play. 



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

BSX - Boston Scientific Corp $28.31 +0.94 (+1.81 this week)

Boston Scientific makes medical supplies used in surgical
procedures.  Its products are minimally invasive, inserted into
the human body through natural openings or small incisions.
Their products are used to diagnose and treat conditions in a
wide variety of medical fields.  Products made by BSX included
catheters, surgical grafts, ureteral stents, and lithotripsy
devices.  More than one-third of the company's sales come from
international business.

Hopefully you haven't had to use any of BSX's products lately.
But if you have, and you owned BSX stock over the past two
months, you're probably feeling much better.  After hitting
bottom in early March, BSX bucked the market trend and rallied
over 50%.  The medical product makers have seen renewed interest
from investors as of late.  Most recently, a positive report on
BSX competitor, Baxter International (BAX), published in Barron's
last weekend, gave the group a lift.  Money managers are once
again returning to the medical equipment stocks, looking for
earnings momentum and double-digit sales growth.  Stocks such 
as SYK and BAX, along with BSX have been under accumulation by
professional investors for the past two months.  We're looking
for the momentum to continue to build in shares of BSX as
excitement about their improving product pipeline and increasing
earnings potential carries the stock higher.  The momentum from
the Barron's article Monday carried over into Tuesday's trading
as BSX easily cleared resistance at $28 on nearly double its ADV.
From here, look for an entry point at current levels if momentum
continues.  But if the profit-takers come out of hiding, wait 
for BSX to bounce from support at $28, or lower at $26.  As we
mentioned above, trading in BSX was especially active Tuesday.
Confirm any move higher with above average volume.

In the news recently, BSX joined an online healthcare exchange
formed by five of the largest global healthcare companies.  The
business-to-business exchange will be launched in the third
quarter of this year.  The online enterprise is expected to cut
costs for healthcare providers and medical equipment makers.

***May contracts expire in less than 2 weeks***

BUY CALL MAY-20 BSX-ED OI=3413 at $8.63 SL=6.00
BUY CALL MAY-25 BSX-EE OI=5556 at $3.63 SL=2.50
BUY CALL MAY-30 BSX-EF OI=6206 at $0.56 SL=0.00 High Risk!
BUY CALL JUN-25*BSX-FE OI=3900 at $4.38 SL=2.75
BUY CALL JUN-30 BSX-FF OI= 816 at $1.56 SL=0.75

Picked on May 9th at     $28.31    P/E = 30
Change since picked       +0.00    52-week high=$47.06
Analysts Ratings    4-12-14-0-0    52-week low =$17.56
Last earnings 04/00   est= 0.24    actual= 0.26
Next earnings 07-18   est= 0.28    versus= 0.27
Average Daily Volume = 1.85 mln
/charts/charts.asp?symbol=BSX


WLA - Warner-Lambert Co $121.38 -3.72 (-0.88 for the week)

If you've ever experienced heartburn, bad breath, or one of 
those colds you just can't shake then you're likely familiar 
with Warner-Lambert.  Some of the popular consumer health care 
products include Zantac, Listerine, Clorets, and Certs, and 
Sudafed.  The company operates three main business segments: 
consumer health care products, confectionery products, and  
pharmaceuticals.  Its Parke-Davis and Goedecke pharmaceuticals 
divisions make analgesics, anesthetics, and homeostatic agents, 
as well as cholesterol treatments, which includes best-seller 
Lipitor.  This division accounts for more than 60% of sales.

There's not many stocks escaping the menacing clutch of the bear 
trap, but then there's WLA swaggering around in the bullpen.  
And why not, the company has a lot to flaunt.  On April 19th, 
they reported earnings showing a 35% gain in operating profits, 
confirming a strong trend in pharmaceutical sales throughout the 
industry.  WLA came in at $0.58 and beat consensus estimate by 
$0.02 p/s and the whisper number by $0.01.  Analysts at Dain 
Raucher Wessels liked the numbers enough to tag the stock with 
a Strong Buy rating.  And just a week later on April 27th, 
Pfizer's shareholders overwhelmingly backed the merger 
acquisition to ultimately create the US's largest drug firm and 
the world's second largest and.  When it was first announced on 
February 7th, the deal was valued at $93 bln and ended a three-
month takeover battle that revolved around Lipitor.  Under the 
terms of the agreement, Warner-Lambert shareholders will receive 
2.75 Pfizer (PFE) shares for each share of WLA they own.  
Shareholders of Morris Plains, NJ-based Warner-Lambert will vote 
on the deal this Friday, May 12th.  Recently the watch dog, 
European Commission extended a deadline to rule on plans by 
the drug giants to May 22nd from May 10th after receiving 
concessions to deal with potential competition problems.  The 
acquisition is expected to be approved and to close by the end 
of May.  Technically the chart is very bullish and appears to 
have shrugged off the violent gyrations of the market.  And 
there is a pattern of higher-lows and higher-highs clearly 
evolving.  Overhead resistance at $120 was shattered during 
Friday's "rally" and yesterday, WLA was propelled to a another 
all-time high at $126.25 on respectable volume.  The stock 
remained perched on its lofty pedestal today to confirm its 
strength at the new heights.  Never once did it dip under the 5 
or 10 DMAs ($120.43 and $118.27).  Near-term support is at $121 
and $122.  Look for solid moves off this level before jumping 
in head-first.  We don't want our glasses to take on a  rose-
colored hue with the PPI coming up on Friday and the Fed meeting 
next Tuesday, May 16th.

In the news, Japanese drug maker Yamanouchi Pharmaceutical said 
it would start marketing the blockbuster anti-cholesterol drug 
Lipitor in Japan this week.  Lipitor is currently available in 
about 70 countries and had global sales of $3.7 bln in 1999.  
With the introduction into the Japanese market, sales are 
expected to jump to $5 billion in 2000.

***May contracts expire in less than 2 weeks***

BUY CALL JUN-115 WLA-FC OI=162 at $12.88 SL=9.75
BUY CALL JUN-120 WLA-FD OI=190 at $ 8.63 SL=6.00
BUY CALL JUN-125*WLA-FE OI=334 at $ 5.88 SL=4.00
BUY CALL JUL-125 WLA-GE OI= 71 at $ 8.38 SL=5.75
BUY CALL JUL-130 WLA-GF OI=130 at $ 6.00 SL=4.00

Picked on May 9th at    $121.38    P/E = N/A
Change since picked       +0.00    52-week high=$126.25
Analysts Ratings     13-4-7-0-0    52-week low =$ 60.81
Last earnings 03/00   est= 0.56    actual= 0.58
Next earnings 07-24   est= 0.51    versus= 0.63
Average Daily Volume = 3.48 mln
/charts/charts.asp?symbol=WLA



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

CMRC - Commerce One $47.75 -3.31 (-8.13 this week)

Providing global e-commerce solutions for businesses, CMRC is
endeavoring to create a network of interoperable marketplaces,
trading communities and commerce portals called the Global
Trading Web.  The company has developed the Commerce One
Solution to automate the procurement cycle between multiple
buyers and sellers.  The company also provides services
including content management, order availability information,
status tracking and transaction support.

After recovering somewhat in late April, CMRC is following the
B2B sector lower.  Investor nervousness, prompted by fears of
what the Fed will do with interest rates at its meeting next
week is causing a general buying strike, and CMRC has not been
immune from the weakening effect.  After a brief pause at the
200-dma (just over $56), the decline continued this week,
causing the stock to shed an additional $8.13.  Volume had been
declining for the past few days, but today saw it move up again
to just under the ADV.  That is just one more negative factor,
given the extremely light volume in the broader market.  CMRC
is now sitting just above support at $46.50, and if this level
fails, the stock may have trouble holding above $40.  Overhead
resistance sits at $52 and further pressure will likely come
from the 5-dma,which is just over $53.  Consider entries on
either a violation of support or a failure to penetrate
resistance.  Keep an eye on the volume, as it should continue
to confirm the strength of any move, whether up or down.

***May contracts expire in less than 2 weeks***

BUY PUT MAY-50*RJC-QJ OI=2128 at $5.50 SL=3.50
BUY PUT JUN-50 RJC-RJ OI= 100 at $8.13 SL=5.75
BUY PUT JUN-45 RJC-RI OI=  63 at $5.25 SL=3.25

Average Daily Volume = 4.86 mln
/charts/charts.asp?symbol=CMRC


EBAY - eBay, Inc. $121.19 -7.31 (-12.81 this week)

Credit the founder, Pierre Omidyar's wife, Pam's need to buy and 
sell Pez dispensers to a wider audience as the seed of success 
for this undisputed leader in online auctions.  eBay Inc. is now 
the world's largest and most popular person-to-person trading 
community on the Internet.  eBay pioneered online person-to-
person trading by developing a web-based community in which 
buyers and sellers are brought together in an efficient and 
entertaining auction format to buy and sell personal items such 
as antiques, coins, collectibles, computers, memorabilia and 
toys.  The eBay service permits sellers to list items for sale, 
buyers to bid on items of interest and all eBay users to browse 
through listed items in a fully automated, topically-arranged, 
intuitive and easy-to-use online service that is available 24 
hours a day, seven days a week

Unfortunately for eBay, they are experiencing technical 
difficulties of the stock chart type, not the site outages of 
last year.  Nothing particularly wrong with the company (it is 
in the minority of profitable B2C and C2C companies) except that 
sequential revenue growth is falling (still over 30% though), 
which makes a $17 bln market cap harder to justify with only $13 
mln in profit available to common shares.  Much noise has been 
made too about the founder recently selling about $64 mln worth 
of his holdings, though that isn't the real issue with a few 
billion dollars still to go.  No, the real issue is the technical 
breakdown below support today.  Today was also the eighth day of 
sequential price declines.  eBay has not closed this low since 
August 30, 1999 when it hit $119.44.  Volume, while matching 
the ADV was also the highest in the last eight days.  There is 
nothing left to hold EBAY up - no more earnings season or company 
stock events like earnings/split runs, the threat of higher 
interest rates, and an overall tech selloff - until its next 
level of support at $80, and earnings are not until July 25th.  
The stock has not been able to pull out of its last five days of 
descent either since falling below its 200-dma of $147, and the 
pace has accelerated.  If eBay heads further south from here, 
feel free to take a position as long as the market remains in a 
sour mood.  Otherwise, you can consider an entry if you see it 
bounce south of mild resistance at $125 or previous support at 
$130 (now presumably new resistance).

***May contracts expire in less than 2 weeks***

BUY PUT MAY-125*QXB-QE OI=103 at $11.25 SL=8.25
BUY PUT MAY-120 QXB-QD OI=165 at $ 8.25 SL=5.75
BUY PUT MAY-115 QXB-QC OI= 91 At $ 6.13 SL=4.00

Average Daily Volume = 3.3 mln
/charts/charts.asp?symbol=EBAY


SBL - Symbol Technologies Inc. $44.19 -3.81 (-5.56 this week)

Symbol Technologies is the world leader in portable data
terminals (50% of sales) and bar code scanners (40%).  Its
products retrieve data, such as product and price information,
everywhere from the grocery store to the stock market.  The
company serves customers in such industries as warehousing and
distribution, postal service, retail, and health care.  The
company has recently attempted to increase its distribution,
reseller, and manufacturing channels.

Investors have taken SBL to the checkout line recently.  The
problems for SBL began in late February when a large shareholder
began selling massive blocks of stock.  The 10% beneficial
owner of SBL distributed over 3.5 mln shares of stock in less
than a month.  After the enormous liquidation, and sharp decline,
SBL stabilized, and even rallied from its trading range lows.
Then came the downgrade from Merrill Lynch, and SBL fell faster
than before.  Merrill downgraded the stock from a buy rating to
an accumulate in late April.  That warning sent investors running
for the exit, as SBL stumbled.  As if heavy insider selling and
a downgrade weren't enough, traders now have to contend with the
idea that SBL is overvalued at its current levels.  The now
infamous Barron's article placed heavy pressure on second-tier
tech stocks such as SBL.  What's more, there are rumors
circulating trading desks that a professional short-selling firm
has targeted SBL.  Though just rumors, the volume Tuesday
suggests that there were far more sellers than buyers for the
day.  Tuesday's 8% decline places SBL just above its critical
support level of $43.  Below that level, SBL will find support
again at $40, but not much thereafter.  Look for an entry if SBL
falls through support at $43, confirm a move lower with heavy
volume.  A more conservative trader might wait for SBL to cross
$40 before entering into the play.  If investors decide a relief
rally is in order, SBL will face major resistance at $48, where
you might find another good entry point.    

BUY PUT MAY-50 SBL-QJ OI=27 at $6.38 SL=4.50 
BUY PUT MAY-45*SBL-QI OI=22 at $2.81 SL=1.50 
BUY PUT JUN-50 SBL-RJ OI=59 at $7.63 SL=5.25

Average Daily Volume = 724 K
/charts/charts.asp?symbol=SBL



*********************
PLAY OF THE DAY - PUT
*********************

SNE - Sony Corporation $213.38 -5.94 (-8.19 this week)

If you like to be entertained, Sony has your fix.  Its
PlayStation home video game system alone accounts for about
11% of the electronics and entertainment giant's worldwide
sales.  As the #2 consumer electronics firm, SNE makes a host
of products including cameras, DVD players, MiniDisc and Walkman
stereo systems, computers, TVs, and VCRs.  Rounding out the
company's assets are Columbia TriStar and record labels Columbia
and Epic.
 
Most Recent Write-Up

What do you get when you combine poor earnings, a rocky new 
product launch, negative currency issues and a weak stock market?
If you said a put play, you were right.  After the strong run up 
in advance of the Playstation2 release, SNE was looking great. 
After the much-publicized problems with their new game unit 
though, investors took their money elsewhere.  Then the company
reported earnings along with a forecast of increasing revenues
and decreasing profits in an already negative market.  More 
investors jumped ship and the downtrend is continuing this week.
Support near $220 failed to hold and this morning the stock 
plunged to $212.25 before finding support.  Volume remains light, 
near 50% of the ADV, as buyers sit on their hands in advance of 
the Fed meeting next week.  The lower highs and lower lows 
pattern remains intact, indicating that SNE may have further to 
fall.  Support could be stronger near today's lows, which are near 
the bottom of the big gap up that occurred in late December.  Look 
to initiate new positions if SNE rolls over at resistance at $216 
and then $220.  More conservatively, wait for a move down through
today's low and then jump on board for the trip down.

Comments

With the techs falling out of favor for the moment and the lack 
of good news for SNE, this stock very well may slide to its 
200-dma of $201.  That's our goal.  Today, SNE found support 
between $212 and $213.  Targetshoot on intraday spikes and 
remember that the trend is your friend.  

***May contracts expire in 2 weeks***

BUY PUT MAY-220 SMW-QD OI=144 at $11.00 SL=8.75
BUY PUT MAY-210*SMW-QB OI=143 at $ 5.88 SL=3.25
BUY PUT MAY-200 SMW-QT OI=294 at $ 2.75 SL=1.25

Average Daily Volume = 396 K
/charts/charts.asp?symbol=SNE



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

Will We Test The April Lows?

Monday, May 8

The Nasdaq posted a triple-digit loss Monday amid concerns over
valuations in technology stocks.  The composite index plummeted
147 points to 3,669.38, pulled down by Cisco, the market's most
heavily weighted issue.  Industrial stocks managed slim gains,
aided by strength in financial and major drug stocks.  The Dow
rose 25 points to end at 10,603.  Broad market measures trended
lower, with the S&P 500 Index sliding 8 points to 1,424.  Volume
suffered with only 783 million shares traded on the NYSE, a new
low for 2000.  The Nasdaq also logged its slowest session of the
year with 1.139 billion shares traded.  The U.S. Treasury 30-year
bond fell 24/32, pushing the yield up to 6.25%.


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

Applied Mat.   AMAT   MAY70P/MAY80P   $1.00   credit  bull-put
Antec          ANTC   MAY65C/MAY60C   $0.75   credit  bear-call
Scm Micro.     SCMM   MAY75P/MAY80P   $0.88   credit  bull-put
Smith INtl.    SII    MAY70P/MAY75P   $0.50   credit  bull-put
Best Foods     BFO    MAY65C/MAY60P   $2.88   credit  strangle

Today's slump in technology issues provided a number of favorable
opportunities in our new spread positions.  Unfortunately, with
the concerns of over-valuation, many of the bullish issues may
suffer additional downside movement in the coming sessions.


Portfolio plays:

The market ended mixed today as technology stocks slumped while
industrial issues rallied, helping to offset the worries over the
upcoming FOMC meeting.  Fear of the unknown was the major reason
for the sell-off with most analysts expecting the volatility to
continue until the interest rate decision is announced.  As the
day of reckoning moves closer, confidence that the Fed will move
rates up by 50 basis points is growing and some experts believe
that will be a motive for another rally after the news is public.
Additional data on retail sales and inflation pressure at the
wholesale level is due out later this week and for that reason,
most traders are waiting patiently on the sidelines for the next
trend to emerge.  Based on today's activity, it appears that the
market has already factored in a 50-basis-point move next Tuesday.

In the broad market, healthcare, oil issues and airline stocks
advanced but trading volume hit lows for the year, continuing a
recent lull ahead of key earnings reports and upcoming economic
data.  Our portfolio was a mix of slumping technology stocks and
bullish safety issues.  The top sectors were Finance, Oil Service
and Major Drugs.  Johnson & Johnson (JNJ), Sepracor (SEPR), and
Warner Lambert (WLA) led the Spreads/Combos section as investors
moved back into safe-haven stocks.  The rally in JNJ propelled the
issue to a recent high and with the bullish outlook, we adjusted
the position up and out to the next strike at $90.  Our LEAPS/CC's
play is now a JAN85C/JUN90C at $8.25.  The Oil Service Industry
issues; Halliburton (HAL), Nabors (NBR), Tuboscope (TBI) and
Unocal (UCL) all moved higher and banking stocks; Bank One (ONE)
and Summit Bancorp (SUB) also participated in the rally.  Today's
surprise was the rally in Magna International (MGA).  Our bullish
calendar spread on the issue is now profitable and with the stock
trading at a recent high, our next move will be to take profits
or roll the play to June options.


Tuesday, May 9

Technology stocks tumbled ahead of key earnings reports and the
upcoming FOMC policy-meeting.  The Nasdaq Composite dropped 84
points to 3584.  Industrial stocks also faltered in a session
characterized by very thin volume.  The Dow ended down 66 points
at 10,536.  The S&P 500 Index fell 12 points to 1412.  Trading
was light on both the Nasdaq and the NYSE.  The Nasdaq saw 1.45
billion shares traded while the Big Board exchanged 893 million
shares.  The bond market rose with the 30-year U.S. Treasury up
13/32 while the yield dropped to 6.22%.


Portfolio plays:

The majority of stocks fell lower today in a subdued session that
was plagued with comments about the valuation of technology issues.
The downdraft in the Nasdaq pulled other market indices lower and
even with the thin volume, there was little optimism for a rally
in the near-term.  With additional economic data due out Friday
and the next meeting of the FOMC a week away, trading activity has
been slow.  In fact, Monday's session was the quietest of the year.
In the broad market, investors continued to reduce their holdings
of hi-tech issues, storing their money in traditional safety
stocks such as Major Drugs and Food Makers.  Oil Industry Service
companies have also performed well with the price of crude oil
recovering to recent highs and real-estate holding companies
(REITS) are beginning to attract attention with the anticipated
rate hike.

Our portfolio continues to offer a mixed bag of results with most
technology stocks slumping while Oil, Major Drug, Food and Bank
issues enjoyed small rallies.  One of the most surprising issues
of the day was Ocular Sciences (OCLR) which rebounded $1.43 to $17
after Wesley Jessen VisionCare received a "best and final" offer
from Bausch & Lomb (BOL) to buy the contact-lens maker for $35.55
per share in cash.  Bausch made its first bid for the company in
March in a move to block Wesley's proposed merger with Ocular
Sciences but Wesley has since announced that the initial pact will
ultimately be included in any new merger and that discussions were
taking place with a third party.  Today's move may be short-lived
depending on Wesley Jensen's reply so monitor the proceedings on a
daily basis.  Another speculative issue continued higher during
the bearish session.  Magna International (MGA) rose $1.06 to $50
and the bullish issue appears poised for further upside movement
after breaking through a recent resistance area near $47.  Our new
calendar spread position has doubled in value in just under one
month and it may be prudent to take those profits now.

Questions & comments on spreads/combos to Click here to email Ray Cummins
******************************************************************
                         - NEW PLAYS -
******************************************************************
BSX - Boston Scientific  $28.31  *** On The Rebound! ***

Boston Scientific is a worldwide developer, manufacturer and
marketer of minimally invasive medical devices.  Their products
are used in a broad range of interventional medical specialties
including cardiology, electrophysiology, gastroenterology,
neuro-endovascular therapy, pulmonary medicine, radiology,
urology and vascular surgery.  Their products are generally
inserted into the human body through natural openings or small
incisions in the skin and can be guided to most areas of the
anatomy to diagnose and treat a wide range of medical problems.
These products provide effective alternatives to traditional
surgery by reducing procedural trauma, complexity, risk to the
patient, cost, and recovery time.

Medical device manufacturers have been on the rebound in recent
months after posting strong first-quarter profits with solid
double-digit top-line growth.  Boston Scientific's revenues for
the quarter came in just as expected, and the company delivered
on the earnings line while adding an optimistic outlook for the
future.  The company made progress in a number of areas such as
cost control and inventory management.  They are also preparing
a group of promising products for launch in the second quarter
and throughout the year.  The approval of the NIRŪ with SOX(TM)
coronary stent system late in the first quarter was a bonus and
the company expects to see the financial benefit in the second
quarter.  International sales growth was also excellent and the
company delivered strong results while extending their lead in
key overseas markets.

Technically the Medical Device industry is starting to rally and
it appears that many of the issues, including Boston Scientific,
have excellent upside potential.  With the long-term outlook of
this position, the probability of profit is high and a favorable 
risk/reward ratio exists for those who like to participate in
time selling strategies.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JAN01-22.50  ZSX-AX  OI=987  A=$8.62
SELL CALL  JUN00-30.00  BSX-FF  OI=816  B=$1.50
INITIAL NET DEBIT TARGET=$6.88-$7.00 TARGET ROI=50%

Chart =
/charts/charts.asp?symbol=BSX
******************************************************************
FLC - R&B Falcon  $24.06  *** Technical Break-out! ***

R&B Falcon provide marine contract drilling and other oilfield
services.  R&B furnishes the equipment and personnel for drilling
wells and conducting operations on wells in marine environments.
Work-over operations involve efforts to repair damage to, or
stimulate production from, an existing well and most of their
rigs are capable of providing both drilling and workover services.
The company owns and operates power vessels and barges used to
transport and store equipment and material.  These assets are
primarily deployed in the barge rig business and are used to move
barge rigs to their operating location, transport materials and
personnel to barge rigs, and provide storage adjacent to barge
rigs.  R&B also engages in providing such equipment for ocean
transportation of materials and in connection with marine
construction projects.

Oil stocks rallied again this week, lifted by news of the oil
workers strike in Norway and the belief that OPEC members won't
boost production anytime soon.  A general strike among workers
in Norway is the country's first major labor walkout in more
than a decade, making it difficult to assess its affects on the
market.  Additionally, Algerian oil minister Chakib Khelil said
that OPEC might raise production toward the end of the year,
implying that a hike in output at the cartel's summer meeting
is unlikely.  Saudi Arabia also voiced doubts of an OPEC hike in
June, giving an additional lift to the price of crude.  In short,
oil prices could climb this month based on three factors; the
Norwegian labor strike, increased seasonal use of gasoline and
the rising Asian demand for crude oil.

Companies in the Oil Service group have been on the move in recent
weeks and most industry analysts believe the trend will continue.
The industry is said to be in the early stages of an up-cycle that 
should eclipse the rally of the mid-90's, in terms of earnings and
share value performance.  Based on the technical condition of most
stocks in that group and the recent bullish earnings, that outlook
appears to be correct.  With R&B's price break-out on heavy volume,
the character of the issue firmly supports the fundamental optimism
and it appears there is little to hold the share value down in the
short-term.

 
PLAY (aggressive - bullish/debit spread):

BUY  CALL  JUN-17.50  FLC-FW  OI=3885  A=$7.00
SELL CALL  JUN-22.50  FLC-FX  OI=3711  B=$3.25
INITIAL NET DEBIT TARGET=$3.50-$3.62  ROI(max)=42% B/E=$21.12

Chart =
/charts/charts.asp?symbol=FLC
******************************************************************
ATHM - ExciteAtHome  $19.94  *** Reader's Request ***

At Home Corporation (@Home) provides Internet services over the
cable television infrastructure and leased digital telecom lines
to consumers and businesses.  The company currently offers two
Internet services: @Home for consumers and @Work for businesses.
ATHM's technology foundation of the @Home Experience is their
national Internet network; a parallel Internet that optimizes
traffic routing, improves security and consistency of service,
and facilitates end-to-end network management.  The content
foundation of the @Home Experience is provided by the company's
@Media group, which aggregates content, sells advertising to
businesses and provides premium services to @Home subscribers.
For businesses, ATHM's @Work provides managed connectivity for
Internet, intranet and extranet solutions over a variety of
transport media including the cable infrastructure and leased
digital telecommunications lines.

Implied volatility in options rocketed Tuesday on web-access
provider ExciteAtHome as the stock price gyrated on confusing
takeover talk.  The company's share value rose over $10 at one
point as comments by the CEO of cable systems operator Comcast
(CMCSA) were construed by the media as an offer to buy AT&T's (T) 
controlling stake in the company.  Options volume ballooned on
the news, far eclipsing the average daily turnover.  After the
announcement, an Excite@Home spokesperson reported that Comcast
had not submitted a bid of any kind, and analysts suggested that
the comments behind the speculation were taken out of context.

One of our readers requested a play on this issue and strangely
enough, situations like these often result in bullish outcomes
even when the rumors eventually prove incorrect.  The renewed
attention simply brings optimism to the share value and with the
short-term technical bottom near $17, this play may indeed have
merit. Our approach will be to "target shoot" the entry at a
slightly lower debit and hope for a small consolidation before
the issue moves higher.

This position is based on recent increased activity in the stock
and underlying options.  The position offers favorable risk/reward
potential for those who are bullish on the issue but as with any
speculative play, it should be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading
style.

PLAY (speculative - bullish/debit spread):

BUY  CALL  JUN-15.00  AHQ-FC  OI=69   A=$6.12
SELL CALL  JUN-17.50  AHQ-FW  OI=357  B=$4.12
INITIAL NET DEBIT TARGET=$1.75-1.88 ROI(max)=32% B/E=$16.88

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




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