Option Investor

Daily Newsletter, Thursday, 05/18/2000

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The Option Investor Newsletter             Thursday 5-18-2000
Copyright 2000, All rights reserved.                   1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
       5-18-2000           High     Low     Volume Advance Decline
DOW    10777.30 +   7.60 10864.30 10764.30   812,134k 1,271  1,600
Nasdaq 3,538.71 - 106.25  3663.84  3538.71 1,255,062k 1,522  2,463
S&P-100  766.83 -   5.70   778.32   765.95    Totals  2,793  4,063
S&P-500 1437.21 -  10.59  1458.04  1436.59            40.7%  59.3%
$RUT     490.95 -   8.71   501.51   490.95
$TRAN   2796.75 -  43.68  2852.40  2796.15
VIX       26.87 -   0.33    27.68    26.54
Put/Call Ratio       .57

ARGH, The Pain Of Range-Bound Trading!

What happened to our post Fed decision rally?  I know, I know,
we had a pre-announcement rally instead.  Unfortunately, many
were hoping that a 50-point move would bring closure to the
rate issue and the return of volume.  Ehh!  Wrong answer.  Back
into the range we go.  That's what I get for not remaining
market-neutral.  Until we see strong volume, these head-fakes
can really put a dent into your trading capital.  Nevertheless,
not everything looks bleak on Wall Street.

In searching for new plays today, our short list was as long
as ever, both calls and puts, which leads us to a conclusion.
Perhaps this range-bound trading has brought the game back
to the individual stock pickers, instead of massive sector
momentum pulling everything back and forth.  What a concept!
Individual companies moving based on company fundamentals and
performance.  The hot list I use showed only two stocks on
the double-digit gain list and only five on the double-digit
loss list.  Most moves were subtle and part of a bigger trend.
Trends...remember those.  We have even seen an increase in
stock splits, especially today.  CPN, VSH, TIF, HBAN, HC and
TBL all announced today, proceeded by INTC and five others on
Wednesday.  This is a drastic rise over the past few weeks and
is possibly indicative of the feeling from CEOs that the market
has stabilized or has an upside bias.

On to today's action, the DJIA struggled to hold its gains
in the final hour and ended up with a 7.54 to 10777.28.  Yes,
volume was light once again at 808 million.  The financials
played a big part in holding up the DJIA as the sector had a
better day with J.P. Morgan up $0.94 at $133.56 and Chase
Manhattan gaining $1.13 to $75.13.  Big Board losers outpaced
gainers by a 5 to 4 margin.  Here is the chart to show you
just what an 0.07% gain looks like...

It was the tech shares bearing the brunt of the selling.  Names
like CSCO, MSFT, IBM, ORCL and SUNW all lost ground.  The Nasdaq
ended right smack on the low at 3538.71, down 106.25.  It looked
like most traders just gave up at the end of the day and went
home early.  The volume finished out at 1.25 billion.  You can
see the trend since Tuesday's Fed announcement.  The 50-point
hike could have started a meaningful rally, but the Fed's tough
talk in the comments kept the buyers at bay for a little while

The "big" bells were ambushed by The Wall Street Journal who
reported today that federal antitrust enforcers have recommended
blocking WorldCom's $115 billion buyout of Sprint because it
would violate antitrust law.  The Justice Department's concern
is that the two companies would dominate Internet switching
services.  FON ended down $1.75 to $56.25 and WCOM headed lower
to $39.56, down $2.44.  This didn't help the rest of the sector
either as AT&T dropped $1.25 to $36.88.

Today, the Labor Department's weekly jobless claims report showed
that new claims for unemployment benefits fell last week for the
second week in a row.  The weekly initial claims fell 21,000 to
276,000 while the Philadelphia Fed index for May rose to 20.2
from April's 12.8.  This news pushed bond prices down for the
second day in a row.  The next economic report with true potential
to move markets is due May 25th, when the Commerce Department
issues its preliminary report on first-quarter gross domestic
product.  Maybe this will spell relief for the markets over the
next couple days.  No news has been good news of late.

After-hours brought on a lot of action today.  Companies like
CIEN, NTAP and SCMR all reported earnings.  CIEN beat estimates
by $0.02 with a $0.12 profit.  Revenues grew by a healthy 66%.
Investors were rewarding CIEN in after-hour trading, pushing
the stock up to $139 from a $137.31 regular session close.  NTAP
also reported a better than expected profit, by a penny.  They
earned $0.07 versus a First Call estimate of $0.06.  There
revenues were up an astounding 120% over Q4 of last year.  This
news didn't do much for the stock price though as it was trading
in line with the regular session close.  Finally, SCMR beat the
street by turning in $0.05 versus an estimate of $0.03.  This
wasn't good enough apparently as SCMR traded down after the
close to $90, down $2.25 in after-hour trading.

It is hard to say with certainty what the Fed's next move is,
and traders were looking to the minutes from the March 21st
meeting, that was released today, for answers.  It showed that
although it was a unanimous vote for a 25 point hike, some
members actually favored a 50 point move.  But they also said
they saw "little evidence to date of any acceleration in core
inflation."  Another positive was the committee saw a softer
stock market as one of the key drivers behind slowing growth
down.  I think they got their wish in April.  It is possible
that they can now take a wait-and-see attitude to the current
hikes, but not all traders think they are done quite yet.
Some feel the Fed has one more move left in June and this
sentiment is holding back the buyers.

So interest rate fears continue to reign on Wall Street.  I
have to believe they are nearing an end though.  You almost
got the sense that a rally was very possible after the Fed
meeting on Tuesday.  The strong statements from the Fed held
back the buyers though.  Some suggest, and I agree, that the
strong statements were just aimed to keep buyers off the Street
a little longer becuase another 50 point move in June is far
from a lock at this point.

That is ok though.  This has become a stock-pickers market.
Use the VIX as your guide and watch for those stocks that are
establishing good trends and have some catalysts, such as
stock splits.  (The VIX is currently sitting middle of the
road at 26.50).   The Nasdaq will likely test 3500 in the
morning tomorrow.  A bounce off this level will be encouraging,
but watch for light volume on expiration Friday to cause some
sizable swings in individual issues.  As for me, I have no
agenda for trading tomorrow.  The typical Friday afternoon
sell-off pattern doesn't lend a lot of time for an intraday
trade.  You are probably more safe just taking the day off.
Let's face it, that is what everyone else is doing lately.

When in doubt...get out, stay out and enjoy the weekend.

Ryan Nelson
Asst. Editor


DOJ Aim To Block Worldcom Sprint Merger
By Matt Paolucci

The Wall Street Journal reported today that Federal antitrust
enforcers have recommended Worldcom's (WCOM) $115 billion
buyout of Sprint Corp. (FON) be blocked, stating it would
violate antitrust law, lawyers and industry executives said.

Sources close to the companies have acknowledged that WorldCom
and Sprint had both failed to anticipate the degree to which
their dominant market share in long-distance could impact
their merger. The companies are exploring concessions to win
regulatory approval.

Representatives of the companies and lawyers have forwarded a
formal recommendation to the Justice Department's antitrust
chief, Joel Klein, who has not yet taken a position on the
transaction, these people said. Mr. Klein has asked WorldCom
and Sprint lawyers to meet with him next week to hear their

A combination of the No. 2 and No. 3 long-distance phone
companies would create a telecom giant with revenues of more
than $50 billion. The company would rank among the largest in
the world, with operations in more than 60 countries.

The Justice Department argued against the deal, saying the duo
would dominate Internet switching services, among other items.

Sprint has already said it was willing to sell its Internet
backbone business, adding that it recently moved to create a
separate division for those assets within the company.

Worldcom and Sprint are expected to argue that sweeping
changes in the communications industry, advances in technology
and bandwidth capacity, along with the barrage of up-and-
comers in the industry have basically eliminated barriers to
entry. One Sprint official added, "We believe that the market
and the technology today are changing so fast that no one
company can monopolize the Internet," the official said.

In addition to Sprint's wireless network, WorldCom would also
add to its arsenal the Kansas-based company's fiber optic
network and its consumer and business customers. The company
plans to save billions by combining the networks, even if it
has to sell many of Sprint's other assets to get the deal past

The two companies said they remain confident the deal will
close, but declined to comment on the status of discussions
with U.S. and European regulators.

"If you look at all the changes that have happened (in the
long-distance market), from the regulatory arena, to the way
technologies have changed and the way the competitive
landscape has changed, all that stuff when taken into account
proves in our view that the merger should be approved," a
WorldCom spokesman said.

A second round of meetings with the companies is planned for
the following week, and the department isn't likely to take
formal action for another month.

Shares of Worldcom were down $1.69 to $40.31 and Sprint shares
were lower by $1.81 at $56.19 in afternoon trading.


As of Market Close - Thursday, May 18, 2000

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

DOW Industrials   10,000  11,400  10,777    Neutral   5.05
SPX S&P 500        1,400   1,500   1,437    Neutral   5.05
OEX S&P 100          750     800     767    Neutral   5.05
RUT Russell 2000     450     550     491    Neutral   5.05
NDX NASD 100       3,200   4,000   3,426    Neutral   5.05
MSH High Tech        860   1,000     907    Neutral   5.05

XCI Hardware       1,360   1,600   1,377    Neutral   5.05
CWX Software       1,100   1,300   1,187    Neutral   5.05
SOX Semiconductor    960   1,200   1,002    Neutral   5.05
NWX Networking       900   1,100   1,007    Neutral   5.05
INX Internet         550     800     591    Neutral   5.05

BIX Banking          530     600     569    Neutral   5.11
XBD Brokerage        400     500     474    Neutral   5.05
IUX Insurance        540     620     635    BULLISH   5.16

RLX Retail           900   1,000     914    Neutral   5.11
DRG Drug             355     400     389    Neutral   4.28
HCX Healthcare       710     800     795    Neutral   4.28
XAL Airline          140     155     148    Neutral   3.10
OIX Oil & Gas        265     300     307    BULLISH   5.11

Posture Alert
Fears of future rate hikes and a general lack of institutional
participation sent the broad market lower Thursday. Sectors
leading the decline include Software (-4.46%), Networking (-
3.46%), Internet (-3.37%), and Airlines (-2.41%). Winners were
limited, but were led by Banking and Insurance (+1.61). There are
no changes in posture.


Thursday, May 18, 2000

Sentiment on the Downswing!

The market continues on its volatile path, as the gains from
Monday and Tuesday have now been taken away during the last 2
trading days. Fears of rising rates continue to plague this
market, as inflation jitters continue to keep institutional
investors at bay; which in turn, keeps volume on all the major
indexes at sluggish levels. This complacency in the market then
effects the retail investor, as they decide to wait things out
until the market looks better. This viscous circle will easily
continue in the near term, at least until the "Fed Storm Cloud"
start clearing up.

The notes from the FOMC meeting on March 21 were released today,
and even though it is very dry reading, we included the link
below for your convenience. An interesting note is that during
this meeting, the Fed made implications that the market was due
to correct. Now in the past, there have been many statements from
the Fed regarding the overextended market (see Greenspan's
irrational exuberance speech), and the markets have always
shrugged it off. However, this meeting seemed to be the turning
point where the Fed was now ready to take a 50 basis point rate
hike, if necessary. Well, several weeks later, and hundreds of
points on the NASDAQ and Dow, and we got our rate hike.


Now the most recent Investor Intelligence Survey came out, and the
bears are creeping in slowly but surely. This is what the market needs,
but to a larger degree. The amount of Bulls rose this latest week to
49.1% while Bears increased to 33.6%. High bullish readings suggest
excessive optimism, which typically occurs when buying strength has
been used up. Low sentiment readings usually represent depleted selling
strength, and tend to predicate market rallies. Now the current bearish
reading isn't near previous levels where the market bottomed out, but
it is a good start. What this market needs is more people throwing in
the towel, which is usually a good sign of a bottom. With the sentiment
in such a downswing, we'll probably be there in a month.

Investors Intelligence Survey
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish
October 97          Bottom            22.0        48.3
July 20, 1998       Top               52.0        24.0
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top               58.3        30.0
March 4, 1999       Bottom            49.1        32.5
Oct. 13, 1999       Bottom            39.2        37.5
April 12, 2000      Top               56.9        26.7

May 10, 2000                          48.6        31.2
May 17, 2000                          49.1        33.6


Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of
analyst expectations. Hewlett-Packard and Dell Computer are the
latest bellwethers to beat expectations.

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:

Volatility Index (26.87):
Up until recently, the VIX has proved that the low 30's are an
excellent buying opportunity, and the low 20's continue to be a
great selling opportunity. The VIX may now be attempting to get
back to the old trading range.


Interest Rates (6.231):
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 April, 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                        (5/12)      (5/16)       (5/18)

Overhead Resistance (805-830)     6.65        9.86       n/a
Overhead Resistance (775-800)     2.06        2.40       n/a

OEX Close                       761.67      784.23      766.83

Underlying Support  (745-770)     1.46        1.76      n/a
Underlying Support  (715-740)     8.74      10.33       n/a

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.

*** Due to weather problems in Chicago, we were unable to access
the CBOE's database for our updates!!!!

Put/Call Ratio
                                Friday      Tues       Thurs
Strike/Contracts                (5/12)      (5/16)     (5/18)

CBOE Total P/C Ratio             .53        .63      n/a
CBOE Equity P/C Ratio            .44        .52      n/a
OEX P/C Ratio                   1.38       1.10      n/a

Peak Open Interest (OEX)
                     Friday          Tues            Thurs
Strike/Contracts     (5/12)         (5/16)           (5/18)

Puts                700 /  7,010   760 / 10,554       n/a
Calls               800 / 10,855   800 / 10,319       n/a
Put/Call Ratio        0.65            1.02            n/a

Market Volatility Index (VIX)
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 18, 2000                            26.87


Index      Last     Mon     Tue     Wed     Thu    Week
Dow    10777.28  198.41  126.79 -164.90    7.54  167.84
Nasdaq  3538.71   78.59  109.92  -72.60 -106.25    9.66
$OEX     766.83   14.86    7.70  -11.70   -5.70    5.16
$SPX    1437.21   31.40   13.68  -18.24  -10.59   16.25
$RUT     490.95    6.87    8.17   -6.32   -8.71    0.01
$TRAN   2796.75  -35.98   27.23  -24.84  -43.68  -77.27
$VIX      26.87   -2.50   -0.74    0.44   -0.33   -3.13

Calls               Mon     Tue     Wed     Thu    Week

PDLI     131.03    8.81    4.38    7.93   -9.53   11.59  New
AFFX     151.63   -0.28   15.19    4.81   -8.31   11.40  At support
IMCL     101.50   -0.32    2.69    0.25    6.50    9.13  New
WLA      123.25    2.13    1.31    0.63    2.13    6.20  Dropped
UNH       77.50    3.25    1.00   -1.00    2.88    6.13  New
ANDW      34.69    2.00    1.25    1.44    1.00    5.69  New
SEPR     106.50    0.75    6.75   -1.75   -1.50    4.25  Uptrend
GLW      191.31   -8.44   14.50    1.75   -4.19    3.63  New
PLXS      84.19    7.25    1.00   -2.38   -2.69    3.18  Watch this
AMCC     103.06    1.69   10.50   -4.13   -6.31    1.75  Recovery
SEBL     130.13    8.88    2.94   -3.00   -7.69    1.13  At support
JDSU      86.56    3.88    4.38   -1.75   -5.94    0.56  Entry pt
MEDI     164.94   -1.88    9.41   -2.03   -5.06    0.44  Dropped
FAST      69.50    1.44    0.31   -0.75   -0.88    0.13  Consolidate
ALTR      84.06    3.31    5.25   -3.00   -5.56    0.00  Even Steven
BVSN      45.75   -0.25    2.88   -1.94   -0.69    0.00  On thin ice
FLEX      52.13    4.50   -1.50   -2.13   -2.00   -1.13  Reiterated
AMGN      61.19    1.81    0.50   -2.81   -1.72   -2.22  Dropped
MSFT      66.19    0.56    0.13   -1.81   -1.50   -2.63  Dropped
DNA      126.38    2.38    3.63   -5.50   -3.13   -2.63  Held well
RMBS     186.06   12.44    5.63   -8.56  -12.38   -2.87  Refueling
CDWC     113.31    1.25    3.50   -3.44   -6.25   -4.94  Treading


HLIT      49.13    1.88  -10.88   -2.38   -3.38  -14.75  New
NTLI      57.88   -2.19   -3.81   -2.31   -6.19  -14.50  New
INCY      61.00   -0.56   -0.81   -0.81   -5.56   -7.75  New
OPTV      57.63   -2.00   -3.88   -1.25    0.13   -7.00  Sliding
AZPN      23.19   -1.56   -0.75   -0.88   -2.81   -6.00  New
CMRC      43.13    2.25    2.63   -3.06   -3.06   -1.25  Gravity
SBL       46.94    0.31    0.69    0.06    0.81    1.88  Dropped
FDRY      70.00   -0.69    5.69   -2.50   -0.63    1.88  1 more dip
AKAM      75.56    4.25    1.31    0.94   -1.44    5.06  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.


MSFT $66.19 -1.50 (-2.63) No volume equals no profit.  While we
thought $67 looked like a buying opportunity, we've been more
concerned that the 10-minute volume spike at $67 today didn't
move the price a smidgen.  In short, there are no big buyers, and
the investors that are buying are not enough to support the
price.  The Justice Department's thumbs down on the WCOM/FON
merger isn't helping either.  That kind of news keeps investors
looking for other DOJ snakebite victims, of which MSFT definitely
fits the bill.  Don't get us wrong.  MSFT still has good support
at $65 and we could get a bounce if the market decides to
cooperate.  But as we've said, without volume, MSFT is destined
to flat-line.  We're letting it go tonight in favor of other

WLA $123.25 +2.13 (+5.88) The resurrection of its momentum was
encouraging at the beginning of the week.  WLA lifted itself off
near-term support of $115 and currently has established a higher
level at $122 and $123.  But despite this achievement, WLA is
getting the axe this evening for not giving us a better
performance.  In the past two sessions, the stock's volume
remained only average and it clearly found the $124 mark
impregnable.  Take today for instance.  The drug stocks were
rosy across the board and WLA didn't make a charge for its all-
time at $126.25!  Likely, this is because the merger with Pfizer
is coming to a close and the excitement is dwindling.  It was
announced yesterday that Pfizer (PFE) now expects to complete
its $115 bln acquisition of WLA in the first or second week of
June.  Altogether the stock was a solid performer while it was
on our call list.  This week alone it made over 5% in gains.
Nonetheless it's time to move on to greener pastures.

AMGN $61.19 -1.72 (-1.19) Sometimes the best course of action
is to recognize that your efforts are better spent elsewhere.
We're dropping AMGN not so much because its turned down, but
at this time there simply may be better opportunities available.
The ongoing court battle may have put a bit of a damper on our
play however the lack of any solid buying this week has cause
us to turn our attention in another direction.  For traders
wanting to stick with AMGN a while longer, it did come down
to an intraday support level at $61 late in the session.  The
next solid area of support isn't found until the $58 mark.
In the current market environment, we would be a careful about
leaving much on the table.  If you have a profit don't be
afraid to take it, or someone else will.  AMGN could return
at a moments notice, but for now, we will move on.

MEDI $164.94 -5.06 (+0.44) Our play on MEDI is over today as
shareholders approved the share increase from 120 to 320
million.  This cleared the way for the company's previously
declared 3-for-1 stock split, payable at the end of trading
today.  We got a nice jump in price on MEDI with last week's
announcement of its forthcoming addition into the S&P 500,
and are happy to take our profits and move on.  After the
dust settles, enthusiasm may very well propel MEDI higher,
and we could find it on our play list again - stay tuned.


SBL $46.94 +0.81 (+1.88) SBL bucked the market trend Thursday in
part from positive analyst comments.  A technology research firm
announced Thursday that growth in high tech and IT industries is
expected to top 41% in the next five years.  Analysts pointed out
the alliance between INTC and SBL to develop advanced wireless
products will benefit both companies.  SBL also benefited from
investors' anticipation of the earnings report from National
Computer Systems (NLCS).  The SBL competitor reported a one year,
30% increase in earnings, after the bell Thursday.  In light of
the positive outlook for SBL it's time to checkout.

AKAM $75.56 -1.44 (+5.06) Buyers returned to the markets
yesterday, but AKAM wasn't on their shopping list.  Resistance
at the $80 level remained unyielding.  And today, $77 developed
as overhead opposition after amateur hour passed, which is even
better confirmation that AKAM can trend lower.  There is concern
however that near-term support could be forming at $74, just
under the 5-dma ($75.20), and thus AKAM could become range
bound.  Because of this distinct possibility, we've decided to
exit the play this evening.  Discretion is advised if you have
open positions.  In the news Wednesday, Akamai and F5 Networks,
a maker of equipment to manage Web-site traffic, are jointly
developing a product that routes e-commerce business users to
the closest available content on Akamai's network.


BVSN $45.75 -0.69 (0.00) While BVSN announced the opening of an
office in China to further develop the Asian market, and while
both Southwest Securities and First Union initiated coverage with
Buy ratings and price targets of $85 and $60 respectively, it
didn't move this play.  BVSN is on thin ice, but we're keeping it
one more day because it keeps bumping its head on $50 while the
rest of the market sinks around it.  Still, volume has been cut
to half the ADV over the last two trading days.  We hate to keep
harping on volume, but heavy volume is what it's going to take to
push BVSN through the $50 barrier.  The good news is that it
keeps bouncing off the $46 support level, keeping the string of
higher lows intact.  Normally, we'd consider this a buying
opportunity.  But with sentiment for higher interest rates
starting to build, the gray cloud over the entire market could
have a nasty effect on a volatile issue like BVSN.  Nonetheless,
the B2B sector is still an investor favorite and should be one of
the first to rebound if the NASDAQ bounces back over its 200-dma
of 3610.  Wait for the bounce in the NASDAQ and BVSN.

SEBL $130.13 -7.69 (+1.13) Uh oh.  Looks like that Tuesday
breakout turned into a Thursday breakdown.  Hopefully, you
protected those profits with stop orders.  First the good news.
SEBL held support and bounced at $134-$135 for most of the last
two trading days where we thought it would.  The bad news is that
it broke down through $134 late in afternoon trading on heavy
intraday volume, which makes tomorrow's opening prospects pretty
ugly.  The only saving grace was that it closed right at support
of $130 (its former breakout point) and the daily volume was
about half the ADV indicating few overall sellers.  Going
forward, we need to see SEBL hold this level.  Barring any
sentiment change by tomorrow morning, we may see a dip below $130
to perhaps support of $127 to $128 during amateur hour.  If it
drops below that, we suggest passing it up in favor of another
play.  Any bounce though, coupled with a spike in volume and a
cooperative market may be a buying opportunity.  More conservative?
Wait for a move back over $130 before opening any
new positions.

FAST $69.50 -0.88 (+0.13) FAST has been consolidating its gains
in the past two days.  Volume has all but disappeared as traders
have stepped aside.  The light volume in conjunction with the
basing price is a clear sign of profit taking.  After all, FAST
rallied nearly 75% in two months.  No small feat considering the
market conditions.  Perhaps some profit taking was in order.  The
stock has established major support at $69.  Every time FAST has
dipped to $69, it has rebounded.  If we get cooperation from the
broader market we could see FAST move higher.  From here, watch
for buying interest to return to FAST.  Pay special attention to
volume, especially on a rally.  The trading activity has been
indicative of the price direction in FAST.  Watch for a bounce
off support at $69 for a possible entry point, or wait for FAST
to clear congestion in the $71 - 72 range before entering the
play.  Watch the volume closely to confirm that buyers have

FLEX $52.13 -2.00 (-1.13) After the analyst meeting Tuesday, a
slew of brokerages reiterated their price targets and ratings on
FLEX.  Needham & Co reiterated its Strong Buy rating and its $90
price target.  CIBC World Market reiterated its Strong Buy rating
along with its $86 price target.  And finally, Raymond James
reiterated its Strong Buy rating and its $78 price target.
Despite the host of positive comments from analysts, FLEX has
stumbled in the past two trading days.  Part of the decline in
FLEX can be attributed to the post earnings sell-off in
electronics maker HWP on Wednesday.  On a positive note, the
selling in the last two days came with little conviction as
volume was weak.  FLEX closed Wednesday just above support at
$52, watch for a bounce from current levels for a possible entry
point.  However, if you're wanting to minimize directional risk
wait for the buyers to return to FLEX, and look for an entry
point after the stock clears congestion at $56.

SEPR $106.50 -1.50 (+4.25) The positive analysts remarks made
about the biotechs last Tuesday were soon forgotten Wednesday as
the group fell with the broader market.  Thursday we saw another
day of selling in the sector as the Amex Biotech Index ($BTK)
shed 2.8%.  Despite the recent consolidation, SEPR remains in its
upward trend.  The stock is still heading north using its 10-dma
as support.  The steady climb in shares of SEPR suggests the
stock is under accumulation by institutions.  Analysts are
favoring biotechs with real products and reasonable valuations.
With its improving product pipeline and existing products, SEPR
is a favorite among money managers.  An event that may help SEPR
higher is the company's annual meeting.  SEPR will hold its
shareholder meeting on May 24th, when investors will vote to
increase authorized shares.  We could get a split announcement
that may lift SEPR.  From here, consider an entry at current
levels or wait for SEPR to clear resistance at $110.

PLXS $84.19 -2.69 (+3.19) The substantial run-up on Monday and
the new 52-week record on Tuesday ($91.50) provoked a bit of
back-filling in the last two trading sessions.  Nonetheless, PLXS
held firm at a higher near-term support level of $84 and is
currently perched a smidgen below the 5-dma ($85.94).  A leap
off this technical indicator would demonstrate an intensity we
like to see in momentum plays.  The volume was somewhat
lackluster too; so look for an increase in trading activity to
substantiate another breakout.  If you have open positions, pay
attention to the current 10-dma at $81.11 because this price
level would be the stock's first stop in a reversal.   We're
still unsure when to expect a split declaration, but if the
uptrend continues there is a chance of an announcement preceding
the July 19th earnings release.

ALTR $84.06 -5.56 (+0.00) In spite of the late afternoon sell-
off today, $87 and $88 should be considered short-term support.
Technically, the intersecting 5 and 10 DMAs are in accord with
this locale.  The good news is that the overall trading volume
was below average on the pullback.  This is a good indication
that the descent is simply natural consolidation after ALTR
broke through strong resistance at $90 on Tuesday.  And
nonetheless, ALTR is still in reasonable split territory.  We'll
keep looking for a BoD meeting that could potentially signal a
split declaration on the heels of last Wednesday's shareholders'
vote to increase the number of authorized shares.  Look for ALTR
to once again rise above $90 backed of course by better volume.

AMCC $103.06 -6.31 (+1.75) Yes indeed, AMCC lost a few points,
but there's no doubt this recovery play has some pretty good
odds stacked in its favor.  First of all, it's on the plus side
for the week overall.  Then consider the fact that after AMCC
crashed through resistance of $100 during last Friday's rally it
has never closed below that mark.  And furthermore, near-term
support is now entrenched above the 5-dma ($106.14).  But you
say, AMCC closed lower at $103.06 today!  Yes, the broad market
pressure pulled it down to the 10-dma ($102.74) level.  However
the stocks overall volume level was only at 75% of its ADV and
this is a good sign.  Conservatively though, we must be patient
and wait for the upward moves from here to confirm a revival.
News-wise, there's nothing to report that would effect trading.


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The Option Investor Newsletter             Thursday 5-18-2000
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JDSU $86.84 -5.66 (+0.84) With little leadership in the markets
our play tried to go it alone.  JDSU did mount an assault on the
$96 mark late Wednesday, which proved to be a tough nut to crack.
The fiber-optics equipment producer pulled back to close near
support near $92.  This morning investors woke up to news the
company's President and CEO was stepping down.  Saying he was a
"little bit burned out", Kevin Kalkhoven, announced he was
retiring and will start a venture-capital fund.  Shares of JDSU
headed south at the opening bell, finishing the day down more
than 6% at $84.75.  Analysts at Credit Suisse First Boston
attempted to do damage control by reiterating a Buy rating
shortly after the open.  As for how we continue with our play,
we believe the new CEO will do just fine, and that the investment
community will probably agree.  The decline today may be setting
up a chance to buy calls once again.  Today's close is above
the next level of support near $83 followed by $80.  At this
point confirm any bounces with volume before entering a new
play, as without leadership in the broad market a retest of
recent lows may be in the cards.

RMBS $186.06 -12.38 (-2.88) It's been a rough couple of days at
the office for traders trying to participate in RMBS.  On
Wednesday, it appeared as though the $195 area we mentioned on
Tuesday may hold up.  The lack of conviction from buyers
drove RMBS lower today.  We said Tuesday to be patient as RMBS may
need a day or two for refueling.  Although we are not dropping
RMBS, the sentiment in the broad markets may have changed the way
we approach this play.  Until either some company news or sector
strength returns, we would enter new positions and be prepared to
sell too soon.  Profits can still be achieved, but may require
more monitoring.  Technically, support is now found at $180 and
$170.  The selling the last 15 minutes and close below the 100-dma
at $191.68 doesn't bode well for the near term.  We may be
settling into a pattern of a day or two higher followed by a
couple of days lower.  If that's the case, pick your entry points
carefully and be prepared to pull some money off the table when
given the opportunity to do so.

DNA $126.38 -3.38 (-2.63) Well, this one certainly seems to
be going nowhere fast.  Given the action in the markets this
week, that isn't necessarily a bad thing.  Genentech has actually
held up pretty well considering the negative study released
earlier this week concerning the clot-busting drug given to
heart attack patients.  The real problem for this play is the
lack of volume.  The past two sessions have seen the number of
shares traded all but dry up.  Today's 437K was about one-third
the average daily volume for DNA.  While the Genentech is down
a bit for the week, we are pleased the damage hasn't been worse.
A cancer conference this weekend could give Genentech and some
of the biotech stocks a boost.  Researchers will convene at a
medical meeting of the American Society of Clinical Oncology
on Saturday and will run through Tuesday.  DNA did close below
its 10-dma at $128.17, but has intraday support near $121 with
the 200-dma back at $117.50.  If we continue in a trading range,
look for bounces off intraday support levels as a chance to
participate in this play.

AFFX $151.63 -8.31 (+11.41) Pressured by weakness in the
Biotechnology sector, AFFX gave up a portion of the week's
gains.  Fortunately, the move came on very weak volume, and
has the look of nervous investors taking some profit off the
table in light of the negative economic environment.  Fears of
future interest rate hikes are being kept alive by more Fed
rhetoric and as expected, more investors are standing aside
waiting for the other guy to start buying first.  Yesterday's
high of $163.50 was the highest price seen in the Biotech issue
since the recovery began in mid-April, enabling AFFX to finally
close above the 50-dma (currently $148.75).  We'd like to see
support at $150 (backed up by the 50-dma) hold, and increased
buying volume will be the key.  A failure at $150 could open the
door to a retest of support at $145, and then $140.  Consider
new entries as AFFX bounces from support, and remember that in
this market environment, taking small profits frequently is the
best way to increase the size of your account.

CDWC $113.31 -6.25 (-4.94) Nervous investors are keeping the
markets range-bound, and could be providing us with yet another
attractive entry point.  After a mild drop yesterday, it looked
like CDWC might find support at $120.  Today's trading shot a
hole in that theory as investors ran for cover after more
hawkish comments from the Fed.  CDWC fell through the 5-dma
(currently $118.75) and the 10-dma (currently $115) as sellers
piled on in the last half-hour, dropping CDWC to support at
$113.  Closing near the low of the day with increasing volume
is not a good sign and we need to see the situation improve
before initiating new positions.  Recall that CDWC has its
Annual Shareholder meeting next Wednesday, and with a pending
vote on a share increase, we are looking for a possible split
announcement.  Further uncertainty in the broad markets could
push the stock down for a retest of stronger support at $110
or even $105.  Consider new positions as CDWC bounces from
support accompanied by increased buying interest.


OPTV $57.63 +0.13 (-7.00) OPTV gapped down by $1 Wednesday
morning, falling all the way to $55 before finding support.  The
decline during Wednesday's trading pulled OPTV lower from the
right shoulder of its broken head-and-shoulders pattern.  The
stock did manage to bounce from support Thursday and edge higher
into the close.  Despite the slight rally Thursday, uncertainty
looms about the merger between OPTV and SPYG.  Looking at the
volume Thursday solidifies the fact that traders are staying away
from OPTV during any rally.  Investors exchanged less than half
of OPTV's ADV in Thursday's trading.  On the flip-side, we've
seen volume swell during sell-offs, indicating that institutions
want nothing to do with OPTV.  The $55 support level is proving
to be stronger than we had anticipated.  Watch for the sellers to
return and look for a fall below support at $55 for a possible
entry point.  Confirm any sell-off with heavy volume before
entering into the play.

FDRY $70.00 -0.63 (+1.88) A look at the daily chart and several
technical indicators suggests that perhaps our play could be
ready for one more move south.  We did get the bounce up earlier
this week, but the lack of any follow-through suggests the next
move may be down.  Foundry is like many others has seen the
volume drop off to anemic levels with only 569K shares traded
and 713K exchanging hands yesterday.  Total shares traded the past
two days barely matches an average day's volume.  The company did
come out with a press release this morning announcing it had
captured more than 50% market share worldwide in Web switch
port shipments according to a new report published by Dell'Oro
Group, a leading network market research firm.  While FDRY could
be attractive at current levels for the long-term investor, we
believe it may have a bit more room to go before hitting bottom.
For the last three days, FDRY has traded in a narrow $3 range,
and has developed a pattern of lower lows and lower highs on
an intraday basis.  If the bears return breaking the $68 area
with conviction, then FDRY may be in for another ride down hill.

CMRC $43.13 -3.06 (-1.25) The specter of more interest rate
hikes hit the markets today and the B2B sector is continuing to
suffer.  Volume continues to be very weak, and as the buyers
continue to stand aside, gravity is taking its toll.  Volume in
CMRC is only about two-thirds of the ADV, but investors are
selling into each attempted rally.  Tuesday's action provided
another attractive entry as the price failed to break through
the declining 10-dma (then at $49.81) and began rolling over.
The downward move accelerated over the past 2 days, with
today's $3.06 decline dropping CMRC to the $42-43 support area.
A drop through this support area could open the door for a
retest of the April lows near $30.  New entries can be
considered on a failed penetration of the 10-dma (currently
just below $46) as selling volume returns and causes the stock
to roll over.  Alternatively, look to jump on board as CMRC
violates its current support level, but confirm the strength
of the move with strong volume.


ANDW - Andrew Corporation $34.69 +1.00 (+5.69 this week)

Andrew Corporation is a global supplier of communications
systems equipment and services.  Major markets are wireless
communications which includes cellular, government and military
end use, antennas and complete earth stations for satellite
communication systems, personal communications services,
electronic radar systems, communication reconnaissance systems,
connectivity devices for use in communication systems, and
related ancillary items and services, and common carrier.

It's hard to find a better looking stock in this apathetic
market.  While the tech sector languishes amid anemic volume,
ANDW has been marching steadily higher over the last week on
volume consistently double the daily average.  Those of you
that have been with us for a while will remember our trading
alert on the company back in early March.  Continuing to build
its own niche in the communications market, ANDW strengthened
their broadband capabilities with the acquisition of Conifer
Corporation, a leading manufacturer of MMDS (Multichannel
Multipoint Distribution Service), back in December of 1999.
No stock was entirely immune to the NASDAQ pullback, but ANDW
held up pretty well, finding support repeatedly at the 100-dma.
After building a strong base near $22, the company ran strongly
into its April earnings announcement, until finding formidable
resistance at $30, just a touch below its 52-week high at the
time.  After a brief post-earnings depression where the stock
pulled back to the $25 area, investors started taking notice
again and we appear to be in the midst of a strong momentum
run.  Prompted by more good news (see below), buyers returned
in force and we have witnessed a 24% move in the past 6 sessions
on very strong volume.  This has come in the face of continued
weakness in tech issues and anemic volume in the broad markets.
Closing very near the high of the day on a surge of buying
interest, ANDW looks poised to continue its run.  As long as
the momentum remains strong, consider pullbacks to intraday
support between $32-33 as attractive entry points.  After such
a strong move, some profit taking would be expected, and we
could even see a retest of support at $30.  The strong move
near the close today could very well continue as investors
search for strength.  It is hard to argue with strong buying
volume though and we would consider a push to new highs as a
good indication of the strength of the stock and would consider
such a move as a good opportunity to jump on board.

On May 9th, ANDW received a contract from World Wide Wireless
Communication (WLGSE) to supply infrastructure equipment for
a broadband, high-speed Internet access network in Lima, Peru.
The services offered will be cellular two-way wireless systems
for high-speed, broadband access to the Internet and other
networked data services.  According to WLGSE's CEO, this
relationship will enable a quick build-out of the Lima market
as the company pursues its aggressive penetration of the Latin
American market.  In this case, it looks like what is good for
WLGSE is good for ANDW.

BUY CALL JUN-30*AQN-FF OI= 539 at $5.63 SL=3.50
BUY CALL JUN-35 AQN-FG OI=  97 at $2.25 SL=1.00
BUY CALL JUL-30 AQN-GF OI=2776 at $6.50 SL=4.50
BUY CALL JUL-35 AQN-GG OI=1576 at $3.50 SL=1.75

Picked on May 18th at    $34.69     P/E = 44
Change Since Picked       +0.00     52-week high=35.06
Analysts Ratings      2-2-3-0-0     52-week low =11.19
Last Earnings 04/00   est= 0.16     actual= 0.21
Next Earnings 07-20   est= 0.23     versus= 0.18
Average Daily Volume = 1.17 mln

IMCL - ImClone Systems $101.50 +6.50 (+9.13)

ImClone Systems Incorporated is advancing oncology care by
developing a portfolio of targeted biologic treatments, which
address the medical needs of patients with a variety of cancers.
The Company's three programs include growth factor blockers,
cancer vaccines and anti-angiogenesis therapeutics. ImClone's
strategy is to become a fully integrated biopharmaceutical
company, taking its development programs from the research
stage to the market. ImClone Systems is headquartered in
New York City with manufacturing facilities in Somerville,
New Jersey.

This company missed analysts' estimates by 30%.  So what's
it doing on our list of calls?  They also announced that they
are working very hard to bring their first drug to market, and
will present "compelling" data on human trials of their
experimental cancer treatment IMC225 this month.  Earlier this
month, Imclone said they will discuss results of a drug trial in
patients with head and neck cancer, and a second study of the
drug in patients with colorectal cancer at a medical meeting
scheduled for this weekend.  To quote ImClone's Chief Executive,
Sam Waksal, "It's going to be very compelling data", and "You're
going to be very excited".  That's all the chief would say, but
it was enough to get investors excited about the possibility of
things to come.  Today's move through the $97 area that had
provided resistance on several occasions was impressive.  What
was also impressive was the volume behind the move as over
1.0 million shares were traded.  Today's 6.8% move came on
nearly twice what we've seen since the beginning of May.  From
a technical perspective IMCL has more ahead as stochastics and
others point higher.  Remember this play is really based on
the anticipation of good news from the meeting of the American
Society of Clinical Oncology, which begins Saturday and ends
next Tuesday.  At this time it could be a short, in and out
play, or it could be the beginning of quite a run for IMCL.

As we said ImClone reported first quarter results on Monday.
The company lost $-0.43, compared to Street estimates of $-0.32.
Next quarter calls for an improvement to a profit of $0.46 per
share.  The next few weeks could be crucial for not only the
company earnings, but for their biological treatments as well.

BUY CALL JUN- 90 QCI-FR OI=177 at $19.25 SL=14.00
BUY CALL JUN- 95*QCI-FS OI=110 at $16.38 SL=11.88
BUY CALL JUN-100 QCI-FT OI=410 at $13.88 SL=10.00
BUY CALL AUG-100 QCI-HT OI=325 at $23.38 SL=16.95

SELL PUT JUN- 90 QCI-RR OI=358 at $ 6.13 SL= 8.50
(See risks of selling puts in play legend)

Picked on May 18th at $101.50    P/E = N/A
Change since picked     +0.00    52-week high=$171.98
Analysts Ratings    2-6-0-0-0    52-week low =$ 16.25
Last earnings 05/00 est=-0.32    actual=-0.43
Next earnings 08-15 est= 0.46    versus=-0.36
Average Daily Volume =  918 K

PDLI - Protein Design Labs, Inc. $131.03 -9.53 (+11.59)

PDLI develops humanized (part mouse) and human monoclonal
antibodies to prevent and treat various disease conditions and
gene-based molecule compounds to treat microbial infections.
Zenapax, an antibody created by PDLI and licensed exclusively to
Hoffmann-La Roche, is approved in many countries including the
U.S. and most European nations for the prevention of rejection
episodes in kidney transplants.  PDLI receives royalties on
Roche's Zenapax sales.  From fundamental patents, PDL has granted
nonexclusive licenses to more than 20 companies that either have
independently developed humanized antibodies or have collaborated
with PDL to humanize their antibodies.

PDLI earns revenues from the issuance of licenses to its patents
and currently receives royalties from sales of two independently
developed and marketed antibodies: Synagis, an antibody developed
by MedImmune, Inc. for the prevention of a specific respiratory
virus in infants, and Herceptin, an antibody developed by
Genentech for the treatment of breast cancer.  Got all that?
Great!  In the biotech sector, PDLI is about as volatile as they
get, ranging from $52 on the April 4th selloff to $152 today.
Notice the steep ascent while the rest of the market remained
rangebound.  Pass this one up if you don't like roller coasters.
Today, PDLI was down almost $10 from yesterday and down $20 from
today's high.  So why play it?  For no other reason than the
breakout of the ascending wedge over $125 on volume of 50%
greater than the ADV.  The lows had been getting higher while
$125 provided the ceiling.  We got the breakout Tuesday and
volume has been rising with the trading range moving up since.
Even in today's loss, support held at $131, which also happens to
be above the 5-dma of $130.38.  We consider today's closing price
a good entry level unless the market rolls over.  Why the volume
increase now?  We think it's technically driven (old support is
usually the next resistance in the recovery of a fallen angel)
since $134 was the close in March from which this angel fell from
the sky.  If the market cooperates and PDLI's volume remains
intact, $152 is the next level of resistance.  Again, volatility
lovers only - the spreads on PDLI are HUGE!!.

While products under development include the SMART Anti-CD3
Antibody for transplantation and autoimmune diseases, the SMART
M195 Antibody for myeloid leukemias, and the Ostavir antibody for
hepatitis B infections, they don't add to revenue just yet.
However, today's news that AHP exercised its option to market an
existing antibody humanization process in Japan and Asia will
provide real revenue (currently at $42.2 mln ttm) to the income
stream.  From the analysts' perspective, CIBC World Markets
reiterated their Strong Buy rating with a price target of $309.
In the "olden days", we'd see that by tomorrow's close.  Don't
bet on it in this market.

BUY CALL JUN-120 PQI-FU OI=501 at $25.00 SL=17.50
BUY CALL JUN-130 PQI-FW OI= 10 at $19.88 SL=14.50
BUY CALL JUN-140*PQI-FZ OI=319 at $16.25 SL=11.75
BUY CALL AUG-130 PQI-HW OI= 54 at $30.25 SL=21.00
BUY CALL AUG-140 PQI-HZ OI= 35 at $26.63 SL=18.75

SELL PUT JUN-100 PQI-RT OI= 27 at $ 4.50 SL= 7.00
(See risks of selling puts in play legend)

Picked on May 18th at  $131.03     P/E = N/A
Change since picked      +0.00     52-week high=$338.00
Analysts Ratings     4-2-1-0-0     52-week low =$ 17.19
Last earnings 04/00  est=-0.04     actual= 0.04 surprise= 200%
Next earnings 07-17  est= 0.02     versus=-0.14
Average Daily Volume = 1.4 mln

GLW - Corning Inc. $191.31 -4.19 (+3.63 this week)

Corning provides communications technology at light speed.  The
materials pioneer is one of the world's top makers of fiber-optic
cable, which it invented more than 20 years ago.  Corning's
Telecom unit (about 50% of sales) makes optical fiber and cable
and photonic components.  The company's Advanced Materials unit
makes industrial and scientific products, including semiconductor
materials.  Its Information Display segment makes glass products
for TVs, VCRs, and flat-panel displays.  The company operates 40
plants in 10 countries.

GLW is a fiber-optic glow worm, shining brightly.  Companies that
make fiber-optic equipment have come to light in the past year.
The fiber-optic firms have seen earnings explode as demand for
high-speed data routing equipment has expanded.  Additionally,
consolidation in the photon industry has spurred stock prices.
CSCO has been swooping up fiber-optic equipment companies, SDLI
recently invested in a multiplex technology concern, Photonic
Integration Research.  And last month, GLW bought 80% of NZ
Applied Technology, an optical-components maker.  The purchase of
NZ Tech will add multiplexing capabilities to GLW's boutique of
optic connections.  Signs that the growth for the optical
equipment makers remains strong came Thursday with the JDSU
earnings report.  JDSU edged past estimates and guided analysts
to an increased 80% year-over-year growth.  The CFO of JDSU
succinctly said, "The business remains very strong."  The
earnings report from JDSU helped GLW to edge slightly higher in
Thursday's trading despite the broad weakness in the tech sector.
The stock has fallen from its high reached in late March along
with the rest of the market, but has since rebounded strongly.
Thursday's trading places GLW just below the psychologically
important $200 level.  The stock moved back above its 10-DMA
early last week and has since climbed higher using the 10-day as
support.  An aggressive trader might consider a bounce off the
10-day as a possible entry point.  While a more conservative
trader might wait for GLW to clear resistance at $200 combined
with heavy volume.

Though investors have turned cold on the IPO market, traders
remain hungry for new optical equipment companies.  Fiber optic
components maker New Focus (NUFO) shot up 155% in its initial
public offering Thursday.  GLW is one of NUFO's largest
customers.  The strong IPO showing by NUFO combined with positive
earnings reports may set the tone for the fiber-optic sector.

***May contracts expire tomorrow***

BUY CALL JUN-195*GRJ-FS OI= 509 at $13.63 SL=10.00
BUY CALL JUN-200 GRJ-FT OI= 274 at $11.38 SL= 8.50
BUY CALL JUN-210 GRJ-FB OI= 264 at $ 7.88 SL= 5.75
BUY CALL AUG-210 GRJ-HB OI= 139 at $20.50 SL=14.50

SELL PUT MAY-190 GRJ-QR OI=1171 at $ 2.00 SL= 3.75
(See risks of selling puts in play legend)

Picked on May 18th at   $196.28    P/E = 105
Change since picked        0.00    52-week high=$226.44
Analysts Ratings      8-5-0-0-0    52-week low =$ 47.69
Last earnings 04/00    est=0.55    actual=0.64
Next earnings 07-24    est=0.67    versus=0.49
Average Daily Volume = 2.97 mln

UNH - United Healthcare Group $77.50 +2.88 (+6.13)

United Healthcare owns and manages a broad spectrum of health
care plans and services across in the United States and
internationally.  This global enterprise provides employers
products and resources to plan and administer employee benefit
programs.  They operate distinct business segments:  United
Healthcare manages HMO, point-of-service, and preferred provider
plans; Ovations is Medicare and Medicaid options provider;
Uniprise handles health plans for large companies; and
Specialized Care offers the specialized plans.

UNH's share price didn't get put in traction or suffer a post-
earnings affliction after reporting earlier this month on May
4th.  United Healthcare achieved record revenues and came in at
$0.95 p/s, up 32% from same quarter last year, easily
overshooting the $0.90 consensus estimate.  Chairman and CEO
William McGuire, M.D. noted that the "strong results reflect the
continuing growth and momentum evident in each of our
businesses, as well as our attention to continuous productivity
improvement and capital structure".  His future outlook for UNH
was extremely positive.  He added that they "now project full
year EPS growth will approach 25 percent in 2000".  Investors
cheered along with Salomon Smith Barney who came out the next
day with an upgrade to Buy from Outperform.  The positive
business prospects and upgrade clearly jump-started the
momentum.  Coming off the lows of $60, UNH steadily climbed to
new heights.  During last Friday's broad rally UNH cleared
April's formidable resistance of $70.  By Tuesday it stepped
into the limelight and set an all-time high at $77.50, only to
out-do itself in today's market with a peak at $78.56 on
increasing volume.  What's really amazing is UNH bucked all the
market downdrafts of the past couple weeks.  With a sustaining
market, there's little doubt UNH of powering higher in the
coming days. On Tuesday, Chase H&Q initiated new coverage with
a Strong Buy rating and issued a $92 price target.  Nevertheless,
keep trailing stops in place to protect your capital.  In these
markets, there's never any guarantees!  Look for entries at
short-term support of $75, which is in-line with the ascending
5-dma ($74.75).  More solid support is at old resistance of $70,
but a return to this level should raise your radar antennae.

Today, UnitedHealth Group, together with Cole Managed Vision,
introduced the managed care division of Cole Corporation's new
vision care services for AARP members.  This will provide
significant savings.  In other news this week, it crossed the
wire that Jeannine Rivet, CEO of UNH, filed to sell 44,430 shares
of her company stock, worth approximately $3 mln.

BUY CALL JUN-65 UNH-FM OI= 571 at $14.00 SL=10.50
BUY CALL JUN-70*UNH-FN OI=1661 at $ 9.75 SL= 6.75
BUY CALL JUN-75 UNH-FO OI= 847 at $ 6.25 SL= 4.25
BUY CALL JUN-80 UNH-FP OI=   9 at $ 3.63 SL= 1.75

Picked on May 18th at    $77.50     P/E = 22
Change since picked       +0.00     52-week high=$78.56
Analysts Ratings     13-5-2-0-0     52-week low =$39.38
Last earnings 03/00   est= 0.90     actual= 0.95
Next earnings 08-03   est= 0.98     versus= 0.76
Average Daily Volume = 1.04 mln


HLIT - Harmonic Lightwaves $49.13 -3.38 (-14.75 for the week)

Harmonic designs, manufactures and markets digital and fiber
optic systems for delivering video, voice and data over cable,
satellite and wireless networks.  The company is headquartered
in Sunnyvale, CA where it also operates an R&D center and a
manufacturing facility.  It maintains several sales and support
centers worldwide including its subsidiaries in Israel and the UK.

Investors have big concerns that the recent $1.74 bln
acquisition of DiviCom will be a drag on Harmonics revenue
growth.  DiviCom, formerly a unit of C-Cube Microsystems, makes
equipment used for video compression by satellite-TV companies
like Hughes Electronics and EchoStar Communications.  The deal
was completed on May 3rd, although it was day of the Fed meeting
and HLIT went through the shredder.  On Tuesday, traders
unloaded shares of HLIT at a phenomenal rate.  The trading
volume was more than 10 times the norm.  The share price dropped
a whopping $10.88, or 16.5% in one session - HLIT closed at
$54.88.  The following sessions have left HLIT significantly
lower.  Today it shed another 6% and slithered under its bottom
support of $50.  In addition, all the DMA indicators are much
higher.  The 5-dma at $57.44 is the closest technical line,
which previously served as overhead resistance on any
downdrafts.  With all this said and done, what we've have at
hand is a technical momentum play driven by investors' fears
that relate to the company's bottom-line dollar value.  In this
uncertain market environment, HLIT's descent could easily
continue over the short-term.  Look for negative moves off the
current level to confirm the downtrend.

BUY PUT JUN-55 LOQ-RK OI= 85 at $10.25 SL=7.25
BUY PUT JUN-50*LOQ-RJ OI=517 at $ 6.13 SL=4.00
BUY PUT JUN-45 LOQ-RI OI=184 at $ 4.63 SL=2.75

Average Daily Volume = 1.76 mln

INCY - Incyte Pharmaceuticals, Inc. $61.00 -5.56 (-7.75)

Quick version: Incyte provides information about genes, related
data management software, verified copies of genes and related
reagents and services to pharmaceutical and biotechnology
researchers.  Details: INCY is a leading provider of an
integrated platform of genomic technologies designed to aid in
the understanding of the molecular basis of disease.  Incyte
develops and markets genomic databases, genomic data management
software, microarray-based gene expression services, and related
reagents and services.  These products and services assist
pharmaceutical and biotechnology researchers with all phases of
drug discovery and development including gene discovery,
understanding disease pathways, identifying new disease targets
and the discovery and correlation of gene sequence variation to

Isn't biotech supposed to be a hot sector?  Yep, but genomic
science is affected by herd instinct...and the herd says run
for your life, especially since INCY announced May 9th that they
would provide genomic sequencing free to the public.  It doesn't
mean INCY will give away their research to anyone for the asking,
but that they will provide raw data from the National Institute
of Health Human Genome Sequencing Project free of charge.  That
isn't really a big deal, but investors in volatile issues don't
like to hear the word "free" (unless they're on the receiving
end, of course), which sent INCY shares on their latest tumble.
It gets worse from a technical perspective.  INCY held $65
closing price support all through March, April and this month too
- except today.  That's when it fell below support.  Today's
chart shows a perfect $5 descending staircase into the basement
to $61 at the close.  Even during the last hour, which accounted
for 25% of today's volume (big volume spike), the price came up
only $0.88 off the low.  Going forward, this spells technical
weakness and we could see volume increase if the price moves
down, causing further damage by inducing more sellers to get out
while the getting is good.  Though, note from the chart that $60
could become support also.  The danger is that INCY finds its
land legs and moves up on any market strength from here.  How to
work it?  Consider waiting for a breakdown under $60 and for the
volume to increase, or look for a rollover from a dead cat bounce
say at previous support at $65.  While founded in sentiment, this
play is now purely technical.

BUY PUT JUN-65 IPQ-RM OI=  7 at $11.75 SL= 8.75  Low OI!
BUY PUT JUN-60*IPQ-RL OI=166 at $ 8.69 SL= 6.00
BUY PUT JUN-55 IPQ-RK OI=  0 at $ 6.13 SL= 4.00  Wait for OI!

Average Daily Volume = 1.4 mln

NTLI - NTL Inc. $57.88 -6.19 (-15.50 this week)

NTL is the UK's #3 cable and TV operator.  The company recently
purchased the residential cable business of Cable & Wireless
Communications.  The acquisition is expected to challenge phone
giant British Telecom by using cable and fiber-optic networks to
provide local and long-distance telephone service and Internet
access.  The company also offers leased lines, frame relay, and
other corporate data services.  NTL will expand in Europe with
the purchase of Cablecom, a Switzerland cable provider.

There is no room for widening losses in this market.  Last
Monday, NTLI reported a larger first quarter loss than a year ago
and said it will incur losses in England, Ireland, and France
well into fiscal year 2001.  The losses stem from costs incurred
with upgrading its network, and acquisitions.  And the spending
spree continues for NTLI, the company announced Thursday that it
will buy Swiss Guide, operator of Switzerland's largest Internet
directory.  Additionally, there's an issue with component
shortages in Europe that NTLI has had to contend with.  In an
attempt to gain market share, NTLI offered free Internet access.
The company ran into a shortage of modems.  Consequently, many of
NTLI customer's are unable to access the Web and questions have
been raised about the company's service.  Because of NTLI's
acquisition of Cable & Wireless Communications, the company was
forced to restructure its operations.  NTLI announced Thursday
that they had created a holding company, of which NTLI became a
subsidiary.  The merger is expected to be completed by the end of
May.  And that merger has weighed heavily on the stock.  Since
the acquisition, traders have sold NTLI sharply lower.  And it
appears the selling is not over.  Thursday's sell-off marks a
failure of NTLI's major support at $60.  Volume has swelled
recently as traders have taken NTLI lower.  From here, feel free
to look for an entry near current levels.  If the stock does
enjoy a dead-cat-bounce, watch for NTLI to bump against
resistance at $60, which might provide a secondary entry into the

BUY PUT JUN-60*USO-RL OI=52 at $6.38 SL=4.50
BUY PUT JUN-56 USO-RC OI=40 at $4.25 SL=2.50
BUY PUT JUN-52 USO-RB OI= 1 at $2.50 SL=1.25  Low OI!

Average Daily Volume = 1.88 mln

AZPN - Aspen Technology $23.19 -2.81 (-6.00 this week)

Aspen Technology builds computer systems that assist process
manufacturers in designing and automating their plant
operations.  Among the companies using AZPN's software are
Chevron, Dow Chemical, and Proctor & Gamble.  Not only does
the company's software find more efficient methods of
production and management, but it also lets manufacturers
explore "what if" scenarios without reassembling their
facility.  Receiving nearly 60% of its revenues from
consulting and other services, AZPN has operations in more
than 20 countries and more than half of all sales come from
outside the U.S.

After posting very strong earnings in late January, it has
been a long painful slide for AZPN shareholders.  Moving as
high as $55.38 by early February, the excitement faded and
along with it went the buying volume.  The company was just
one more victim of the weakness seen across the broad markets
and its stock has been caught in a downtrending channel ever
since.  Even April earnings (where the company surprised the
street by 25%) were only sufficient to push the price to the
upper end of the channel.  Despite a continuous stream of
alliances and accolades in the news, AZPN has continued to
suffer at the hands of an increasingly fickle market.  The
last attempted rally failed at the 30-dma (then at $35.94),
and it has been a rapid decline since then.  As volume picked
up, the price continued to fall and the past 2 days saw the
200-dma ($26.25) fail as support.  This was a fairly solid
support level and the sellers cut through it like a hot knife
through butter.  Unless the situation improves soon, AZPN looks
poised for a trip down to its long-term support near $18.  AZPN
now has resistance near $27, solidified by the 200-dma and a
failure to penetrate this level looks like an excellent entry
point.  Wait for the rollover and then enjoy the ride down as
the sellers pile back on.  Near-term support is found at
today's low of $21.88, and a penetration of this level on
continued strong volume will be a good indication of more
weakness to come.

BUY PUT JUN-30 ZQP-RF OI= 0 at $6.00 SL=4.00  Wait for OI!
BUY PUT JUN-25*ZQP-RE OI= 0 at $4.63 SL=2.75  Today's vol=73
BUY PUT AUG-30 ZQP-TF OI=30 at $8.50 SL=6.00
BUY PUT AUG-25 ZQP-TE OI=72 at $5.25 SL=3.25

Average Daily Volume = 296 K


FAST - Fastenal Company $69.50 -0.88 (+0.13 this week)

Fastenal operates nearly 800 stores in 48 states, Puerto Rico,
and Canada.  Its stores stock over 130,000 products, including
treaded fasteners such as screws, nuts, and bolts.  Other sales
come from power tools, cutting blades, hydraulic and pneumatic
parts, electrical, and welding supplies.  Its customers usually
come from the construction and manufacturing industries.  FAST
also sells through catalogs and its Web site.

Most Recent Write-Up

FAST has been consolidating its gains in the past two days.
Volume has all but disappeared as traders have stepped aside.
The light volume in conjunction with the basing price is a clear
sign of profit taking.  After all, FAST rallied nearly 75% in
two months.  No small feat considering the market conditions.
Perhaps some profit taking was in order.  The stock has
established major support at $69.  Every time FAST has dipped to
$69, it has rebounded.  If we get cooperation from the broader
market we could see FAST move higher.  From here, watch for
buying interest to return to FAST.  Pay special attention to
volume, especially on a rally.  The trading activity has been
indicative of the price direction in FAST.  Watch for a bounce
off support at $69 for a possible entry point, or wait for FAST
to clear congestion in the $71 - 72 range before entering the
play.  Watch the volume closely to confirm that buyers have


FAST has held up well the past two days.  The 10-dma is quickly
gaining and FAST typically bounces off this support level.
Look for a market rebound first, but as long as FAST continues
to close above the 10-dma support, we see profit potential.

BUY CALL JUN-65 FQA-FM OI= 18 at $8.00 SL=5.25
BUY CALL JUN-70*FQA-FN OI=181 at $4.13 SL=2.50
BUY CALL JUN-75 FQA-FO OI=  5 at $3.13 SL=1.50 low OI
BUY CALL AUG-70 FQA-HN OI= 50 at $7.88 SL=5.00

Picked on May 14th at   $69.38    P/E = 36
Change since picked      +0.13    52-week high=$71.50
Analysts Ratings     4-2-1-0-0    52-week low =$34.00
Last earnings 03/00   est=0.50    actual=0.53
Next earnings 07-12   est=0.55    versus=0.45
Average Daily Volume =   339 K


Fear And Loathing In The Markets...

Wednesday, May 17

The markets moved lower a day after a 50-basis-point rate hike
by the Federal Reserve.  The Dow ended down 164 points at 10,769
and the Nasdaq closed 72 points lower at 3644.  The S&P 500 slid
18 points to 1447.  Trading volume on the NYSE was light at 820
million shares exchanged with declines beating advances 1,886 to
1,003.  Volume on the Nasdaq was also very thin with just 1.22
billion shares changing hands.  Declines beat advances 2,519 to
1,470.  In the bond market, prices fell after the U.S. Treasury
said it would buy back up to $2 billion of outstanding 30-year
bonds.  The 30-year Treasury fell 31/32, bid at 100 29/32, where
it yielded 6.17%.

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

AM-FM      AFM    MAY55P/MAY60P   $0.56   credit  bull-put
Ditech     DITC   MAY65P/MAY75P   $1.18   credit  bull-put
Allstate   ALL    JUN20C/JUN22C   $2.12   debit   bull-call

Our new candidate in the media-merger group, CCU/AM-FM offered
two choices and based on the lower risk/reward, we chose the
conservative position in AM-FM.  The credit for the aggressive
CCU position ranged from $0.93 to $1.06 on a simultaneous order
basis.  Ditech dropped over $5 in the first few minutes of the
session and the suggested entry was easily achieved.  Allstate
slid $0.50 in early trading and the target debit was observed
near 9:45 A.M.

Portfolio plays:

The markets moved lower today as investors began to discuss the
affects of the recent hike in interest-rates and the potential
for future increases.  On Tuesday, the central bank raised the
federal funds rate to a nine-year high of 6.50% but said it
remains concerned about possible inflationary imbalances.  Some
analysts were expecting a neutral bias but in its commentary,
the Fed made it clear that this week's increase does not mark
the end of the tightening cycle.  The question now is when the
FOMC will again raise the federal funds rate and already there
is speculation of a 50-basis-point move at the next meeting in

Concerns over the accumulation of rate hikes hampered blue-chip
issues and shares of Hewlett-Packard (HWP) led the Dow lower in
today's session.  General Motors (GM) and Exxon-Mobil (XOM) were
also big losers while Intel (INTC) rallied after announcing a
2-for-1 stock split.  The Nasdaq faltered on weakness in biotech
and Internet stocks.  Bellwether issues such as Cisco (CSCO),
Microsoft (MMSFT), Dell (DELL), and Sun Microsystems (SUNW) all
moved lower.  In the broad market; integrated oil, agriculture
and leisure products stocks advanced while footwear, retail and
gold mining issues consolidated.  Our portfolio offered mixed
success with many of the basic industry stocks moving higher
while technology, energy and banking shares slumped.  Trading
volume was light, extending a pattern of slow sessions for most
issues, and the day was relatively meaningless as the majority
of positions are expected to remain profitable through Friday.

Temple Inland (TIN) provided some new excitement during today's
session.  The issue dropped to lows near $52 before rallying at
the close to a recent high near $54.  During the morning slump,
our bearish credit spread traded as low as $0.50, a profit of
$0.25 on the position.  Unfortunately, we were too confident to
take the easy money and later in the session, we paid the price.
Temple climbed back above $54 in the closing hour, in opposition
to a 165 point Dow drop and that was the final straw.  Our exit
was much less favorable at $0.93 but the potential for loss is
eliminated and we may be able to sell the long position for a
small closing credit.  Murphy's Law almost guarantees the play
will close profitable for OIN readers and the saving grace in
this situation is our new covered-call play (MAY-$50 strike).
Ocular Sciences (OCLR) managed a reasonable recovery today and
with resistance building near $17, we decided to close the long
position for the current credit of $1.50.  There is no loss (or
gain) in the play if the stock closes below $17.50 on Friday.

Thursday, May 17

Investors retreated to the sidelines today amid concerns over
rising interest rates.  The Dow closed up 7 points at 10,777 and
the Nasdaq was down 106 points at 3538.  The S&P 500 Index slid
10 points to 1437.  Volume on the NYSE reached just 810 million
shares, with declines beating advances 1,597 to 1,281.  Market
breadth was very poor in technology issues with declines beating
advances 2,466 to 1,524 on Nasdaq volume of 1.25 billion shares.
The 30-year Treasury fell 19/32, bid at 100 7/32, where it
yielded 6.22%.

Portfolio plays:

The market ended mixed today as investors remained unconvinced
of any bullish potential in the face of rising interest rates.
Buyers and sellers both moved to the sidelines with a "wait and
see" attitude amid the rising costs of borrowed funds.  The Fed's
most recent hike was the sixth since last June, pushing the rate
that banks charge each other to the highest level in almost ten
years.  Higher interest rates reduce corporate profits and most
economists expect more hikes later this year.  Analysts say the
the market will likely be range-bound prior to the next economic
report with little news to indicate whether the rate increases
are having a beneficial effect.  Additional information may come
on May 25 when the Commerce Department issues its initial report
on first-quarter gross domestic product.  Until then, there is
little data from which to gauge future inflation.  The Labor
Department's weekly jobless claims data showed that requests for
unemployment benefits fell for the second week in a row.  That
suggests that companies are having difficulty finding qualified
workers and many industries remain vulnerable to increasing wage
costs.  Overall, it's not a pretty picture going forward.

Our portfolio enjoyed some bullish activity during the session.
Safety stocks are once again attractive and a few of the Major
Drug issues made favorable moves.  Johnson & Johnson (JNJ) and
Warner Lambert (WLA) led the group and both of these positions
are performing better than expected.  WLA has moved up $20 since
we opened the bullish debit spread last month and the JNJ play
is at maximum profit with the stock at $90 (JNJ closed near $89).
Small-cap Health Industry stocks have performed well and our
newest winner is Oxford Health (OXHP).  The issue rallied $1.12
today to close near $22.50, $5 above our maximum profit range.
Finance stocks edged higher during the session and our entries
in the sector; Bank One (ONE) and Summit Bancorp (SUB) climbed
with the group.  Both of these long-term positions are trading
near maximum profit.  The recent bullish play in Allstate (ALL)
also benefited from the upside activity with the stock closing
near $27, almost $5 above the break-even price.  Andrew (ANDW)
continues to rally after a recent break-out and now it appears
the play will be closed early.  The bullish diagonal spread is
trading at almost 75% profit ($4.25 returned on $5.75 invested
in just 3 months).  Our new calendar spreads have been standout
performers this month.  Dean Foods (DF) ended the day near $30,
our sold strike and maximum profit price.  Magna International
(MGA) is trading near $49.75, up $4 since we initiated the play
and above the target closing price for the bullish position at

Our credit (strangle) positions in Best Foods (BFO) and Abgenix
(ABGX) are trading within the target ranges and we expect both
plays to expire at maximum profit.  Last on the list is National
Computer Systems (NLCS), a debit straddle issue that broke above
previous resistance today with a $3.88 jump to $56.  The neutral
position is near break-even and will soon be profitable but you
may consider closing the bearish portion of the straddle, based
on the new technical character.

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

                         - NEW PLAYS -

This week I received a request for some conservative positions on
small-cap issues.  Here are two new candidates that may fit the
bill.  Both positions are based on recent increased activity in
the stock and underlying options.  Each of these plays offer
favorable risk/reward potential but they should also be evaluated
for portfolio suitability and reviewed with regard to your
strategic approach and trading style.


MAT - Mattel  $13.06  *** A New CEO! ***

Mattel designs, manufactures, and markets a broad variety of
family products on a worldwide basis through both sales to
retailers and direct to consumers.  Mattel's segments are
separately managed business units and include Toy Marketing,
Consumer Software and Operations.  The Toy Marketing division
is divided on a geographic basis; domestic and international.
The domestic Toy Marketing segment is divided into USA Toys
and US Fisher-Price/Tyco Preschool.  The Consumer Software
group consists of educational, productivity and entertainment
software products developed and sold by the Learning Company
division on a worldwide basis.  Mattel's Operations segment
manufactures toy products, which are sold to the other Toy
Marketing segments.

Mattel has been on the move since the company announced that
Robert A. Eckert quit as president and CEO of Kraft Foods to
accept the top job at Mattel.  The new chief says one of his
main priorities is to reassure employees that the company is
getting back on track.  The world's biggest toy-maker has been
hurt by financial woes, layoffs, and the departure of a number
of key executives.  Now the outlook is cautiously optimistic
and a group of brokerages are backing the change.  Merrill
Lynch was the first to offer a new outlook, raising its rating
on Mattel to a long-term "buy."

Implied volatility and volume in Mattel options is at a recent
high and we are going to use the new interest to open this low
cost, bullish position.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JUL-10.00  MAT-GB  OI=4952  A=$3.25
SELL CALL  JUN-12.50  MAT-FV  OI=4721  B=$1.06
INITIAL NET DEBIT TARGET=$2.00  ROI(max)=25% B/E=$12.00

Chart =


COVD - Covad Communications  $26.88  *** On The Rebound! ***

Covad is a provider of broadband communications services to
Internet service providers, enterprises, telecommunications
carriers and other customers.  These services include a range
of high-speed, high capacity Internet and network access
services using digital subscriber line technology, and related
value-added services.  Internet service providers purchase the
company's services to provide high-speed Internet access to
their business and consumer end-users.  Enterprise customers
purchase Covad's services directly or indirectly to provide
employees with high-speed remote access to the enterprise's
local area network, which improves employee productivity and
reduces network connection cost.  Telecommunications carrier
customers purchase the company's services for resale to their
Internet service provider affiliates, Internet users and other
enterprise customers.

The Covad recovery rally began Wednesday as rumors resurfaced
that it could be a buyout target.  Analysts say the takeover
speculation may not make much sense but the rumored buyers are
Northpoint (NPNT) and Rhythms NetConnections (RTHM).  Covad is
seen as one of the more unlikely targets in the DSL industry but
there are other possible reasons for the rally.  The company
recently bought LaserLink.net, a provider of branded Internet
access in a deal to deliver broadband Internet services to its
customers through company-branded access.  In addition, Covad
said today it had expanded its digital subscriber line service
into the Columbus and Dayton, Ohio, markets.  This followed
Wednesday's announcement that the company had extended its
broadband network to Las Vegas.  Covad is also part of a new
13-company consortium that agreed last month with Baby Bell
phone company US West (USW) to share phone lines regionally.
The company has entered into line-sharing agreements with two
other Baby Bells, Bell Atlantic (BEL) and BellSouth (BLS).

So there is hope for this beleaguered issue and with target
prices as high as $90, the share value is due for a rebound.
The recent increase in option interest has produced a number
of favorable positions.  Our play offers the simplest approach.

PLAY (conservative - bullish/debit spread):

BUY  CALL  JUN-20.00  COU-FD  OI= A=$8.62
SELL CALL  JUN-22.50  COU-FX  OI= B=$6.50
INITIAL NET DEBIT TARGET=$1.88-$2.00  ROI(max)=25% B/E=$22.00

Chart =

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