Option Investor

Daily Newsletter, Sunday, 08/13/2000

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The Option Investor Newsletter                  Sunday  08-13-2000
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        WE 8-11           WE 8-4          WE 7-28          WE 7-21
DOW    11027.80 +260.05 10767.75 +256.58 10511.17 -222.39  - 79.19
Nasdaq  3789.47 +  2.11  3787.36 +124.36  3663.00 -430.86  -152.32
S&P-100  804.75 +  8.90   795.85 + 19.67   776.18 - 28.37  - 10.97
S&P-500 1471.84 +  8.91  1462.93 + 43.04  1419.89 - 60.30  - 29.79
RUT      510.27 +  6.64   503.63 + 13.41   490.22 - 32.48  - 19.93
TRAN    2927.50 + 40.69  2886.81 +117.28  2769.53 - 38.89  -110.62
VIX       21.19 -   .35    21.54 -  2.76    24.30 +  2.83  -  1.14
Put/Call    .57              .41              .59              .38

August 22nd has been deleted due to lack of interest!

Good news, bad news, great news! The good news was a PPI report
which was unchanged from last month with a core rate increase of
only +0.1% Bad news was a Retail Sales report that came in at +0.7%
or 75% more than expected. Good news, the retail sector is not ready
to roll over and die just yet. Great news was the unanimous agreement
that the Fed is on hold for the August 22nd meeting. No rate changes
of any type are expected. The Dow celebrated with the expectations
that the soft landing would be less than damaging to the old economy
stocks. Great news also came in the form of a drop in the Nasdaq at
the open giving everybody a super entry point for a Labor day rally!

The Dow shocked analysts again with another +119 point gain and the
first close over 11,000 since April 25th. The old economy stocks
rallied and even without help from the Dow tech contingent of HWP
-2.25, HON -.38, MSFT -.19 and UTX -.38 it closed up to post gains
for nine of the last ten days. The close took out three previous
failed rally highs from May, June and July and set us up for an
attack on the April 26th high of 11140 only 113 points away.

Stumbling along behind the Dow like an unruly child with a temper
tantrum, the Nasdaq struggled to break out of a morning, Dell
inspired, dip but finally gain some momentum before the close.
The dip was prompted by weakness in the Dell earnings and a -$4
drop in Dell stock. Dell's slower growth sent ripples into the
PC sector as evidenced by the -2.25 drop in Hewlett-Packard.
Gateway however, seen as stealing market share from Dell, actually
gained almost $1. Contributing to the Nasdaq dip was ICGE after
reporting earnings that were less than expected. Other culprits
included merger partner PHCM at -12, ADAP -7.63 on bad earnings.

With rates in the U.S. on hold, Japan took the spotlight and
raised rates for the second time in ten years. Don't start crying
for Japanese companies since the +.25% hike makes the current
rate .25%. Yes, Japan had a zero interest rate policy for the
last eighteen months and the quarter point rise today is not
a cause for alarm. Alan, what would our growth rate be with a
25% interest rate? Who knows but you can guess the GDP would
be double digits in a flash.

Well, there you have it. Four whole paragraphs of the relevant
market commentary for the week. August news equals no news and
this week end is no different. The only factors that we should
be concerned about now is getting out of August alive. The heat
is horrible and traders who have not yet taken their vacation
have only three weeks before Labor Day. Since temperatures in
Vegas in August are well over 110 most are likely heading to the
Beach instead. The only major events remaining are the CPI Report
next Wednesday and options expiration next Friday. Did I forget
the Democratic Convention? Yes, that too is available.

Going into next week I am bullish. I expect a September rally
and it looks like we have a really good base from which to
start. I like the volume for an August Friday. 1.3 billion for
the Nasdaq and 839 million for the NYSE. Even better was the
ratio of up volume to down volume which was BETTER than 2:1
on the NYSE. New 52 week highs were 102 compared to only 30
new lows. Advancers beat decliners better than 2:1. On the
Nasdaq they were 21:17, not exactly a stampede but I am not
complaining. The market internals are pretty good. Sure I
would like to see the Nasdaq joining the party but once it
starts the Dow will play second fiddle so let it run while
it can.

Normally traders can always point to some economic event on the
horizon that keeps the market in check. With the Fed on hold at
least until October 3rd, they are not a problem. The bonds are
pointing to a rate cut as the next move but just not soon. That
is never bad news. And if you think about it do you really think
the Fed will raise rates IN OCTOBER, in an ELECTION YEAR? There
would really have to be a smoking economic gun to cause that.
With only TWO rate hikes, of the recent six, fully factored into
the system, we still don't know what the economy is going to do.
It takes six full months for a rate hike to filter down through
the entire system and only two occurred more than six months ago.

With no more hikes tech stocks should be soaring but conventional
wisdom (don't you just love that term?) is now worried that
earnings may suffer from the economic slow down from rate hikes.
Once traders decide that in the current environment this is as
likely as the tooth fairy paying you a visit with SDLI stock
instead of pocket change, then the stampede will begin. Talking
heads on Friday were parroting the "no progress in two weeks"
song on the Nasdaq but is that a bad thing? We are building a
base and as long as we do not see a retest of the 3521 from
last week I would not complain. I may be too optimistic but I
would like to think the 3686 low from Friday could be the first
of a string of higher lows between here and Labor Day. The
Nasdaq did close back over support at 3750 again.

Just to balance the scales between my bullish outlook and the
bearish analysts I would also point out that we are still in a
technical down trend since March. The failed rally on July 17th
killed the recovery trend. The following lower high last week
just under the four major moving averages also was bearish. In
reality you could paint an equally convincing outlook for either
direction. Obviously only one direction can be correct so why
am I bullish? First I am not a technician, I am a news and event
player. Remember in July when the term summer rally was used in
almost every sentence? The technicals were all pointing up and
I am still getting emails about being too bearish but the dip
came just like we expected. My event was a historical pattern
not a short term technical chart.

My forecast going forward is based on multiple factors. Cash on
the sidelines. Over $8 billion came into mutual funds in the
week ended on Wednesday according to TrimTabs. The Fed is on
hold with the next move expected to be a rate cut. (I don't
believe it but that is another story. Let's go with the flow
on this one.) Summer is almost over. Traders will come back
with a vengeance in three weeks with no Fed cloud on the horizon.
Election years are normally bullish. Politicians will be stroking
investors with their version of a chicken in every pot. The
current analogy of prosperity may be a BMW in every garage? If
the Republicans are seen to be leading then drug stocks will
see investors coming back and that will be good for the market.
September is an earnings rally month. Not a big one but still
an end of the quarter month. Volume is good for August which I
believe is also a leading indicator for September. Productivity
is still soaring with no inflation in sight.

This is my forward looking OPINION. There are those that believe
we will retest 3000 again. Others not so far out on the fringe
gather at every century mark between here and there. My outlook
does not mean we will not go down before we go up but almost
every stock chart I looked at today had what looked like a
decent short term bottom. Still low volume may allow market
makers to try one more time to find a lower bottom from which to
build on. I would view any future dip to be a buying opportunity.
My only qualification would be to buy something with a heartbeat.
I know you want to stock up on those sexy Internet stocks that
did so well last year. Let me remind you that the market is
a very fickle discounter of future events. With 12 more months
of business history with which to value Internet business models
there are many previous high flyers that may never recover.
To prove this theory you only need to look at ETYS, ICGE, SFE,
TSCM, VUSA, MSTR, HCDC. Investors have gone from B2C to B2B and
back so many times we feel like a Duncan yo-yo. From bricks and
mortar to clicks and mortar. Gone are the $1000 price targets for
stocks like AMZN, EBAY, QCOM and dare we mention QXLC now trading
at $4.50?

The paradigm shift from "buy anything and it will go up" to
"buy companies that might go up" has changed the investor
psychology back to a value oriented perspective. So while I
am bullish, I do not believe we are immune to future dips
as the market finds its level. I feel we will have a fall
rally but it probably will not be as exciting as last year.
Because we did not have a market event that everybody can
point to and say, "that was the bottom" we are doomed to the
two steps forward, one step backward routine. Every time we
get to a new high somebody is going to sell into the rally
and take profits. This will keep us from setting any records
any time soon. Still, if you buy stocks on any dip and set
stop losses you can profit from these trends. It is going to
be a stock pickers market and the days of buying anything
with a four letter symbol and landing windfall profits are

I have to give you my final dose of caution as well. It is
kind of like MSFT or INTC warning in their conference calls
that business was great but it cannot continue at the present
rate forever. We know that but they have to keep saying it so
the analysts won't be predicting 100% increases in earnings
every quarter. My warning tonight, and I know you get tired
of hearing it, is the VIX again at 21.24. The only way the VIX
will go higher is a strong dose of volatility. Volatility is
a polite word for "serious dip." This could be intraday or
multi-day but it will happen. The market NEVER goes up for long
when the VIX is this low. The Dow is not up 9 of the last 10
days and that is a trend that will eventually be capped by
serious profit taking. Secondly, in the market sentiment report
tonight Austin Passamonte said the institutions are still short
the S&P at historical levels. I see it, but I don't understand
it. What do they see that we don't? The bearish side of my
brain is saying "they are smarter than I am and have a lot more
money, they must know something I don't." The bullish side of
my brain is saying "looks like a good chance for a serious
short squeeze rally." Only time will tell who is right. Maybe
both. If we did see another retest of 3521 and it held then
you would see strong covering from all sides and we would be
off to the races. For me, I went long QQQ calls at the close
on Friday. I can be just as wrong as the next guy but I vote
with real money. Which ever direction YOU think the market is
headed just remember that picking the direction is far more
dangerous than playing the direction. Use the market analysis
above to plan your trades BUT DON'T EXECUTE THEM BLINDLY. Wait
for the market to confirm the analysis then jump on for the
ride. Would you rather buy those calls at 3750 or 3550? I know
which one I will choose if I am given the choice again.

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Jim Brown


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The editors plays last week were met with mixed success. The
Lilly/Prozac case killed a perfectly good play in DNA after a
$13 gain. MERQ was met with sector weakness and rolled over
after a $10 gain.

The big loser was the dead cat bounce play on IVX but with the
gap down on Monday it was ruled a no play. We were waiting for
confirmation of a new uptrend which never happened.

The new play for the week is COHR as a long call play.


DNA - Recap

prior week

This week

DNA could still be a play. It has appeared to bottom at $164 and
may be poised to move up again. Time will tell but our signal for
entering this play again would be sustained movement over $167.
Wait for it to confirm the recovery and then open a new position.


MERQ - recap

previous week

Last week

MERQ gave us a $10 gain before rolling over and coming back to
previous resistance. If it can trade above $105 again I would
be a player. This could have been profit taking from the gains
made from the $85 bounce ($25 gain) the prior week. Wait for
confirmation above $105. Cautious traders would want to see it
trade over $110 as the previous failed rally high before
starting a new play.


IVX - Recap

Previous week

This play never made the cut. The gap down on Monday took
it out of contention and it never recovered. We were waiting
for a positive move up on Monday to confirm the sell off to
be over. This play is dead until a new trend is established.


Coherent - Call play

This one looks really good as long as profit taking does not
kill it soon. After a strong decline Coherent is showing a
nice rebound. The MACD and the Stochastics are strongly
positive and Friday ended with a spike on strong volume.
No real resistance until $81-$82 and then $90 but there
has got to be investors kicking themselves for not selling
last time it was this high in July. Buyers will have to
overcome these sellers as it continues to climb. The Nasdaq
will also impact it and trigger profit taking if we get below
3750 support again.

The plan here would be to go long above $70 with a positive
Nasdaq and positive Dow. Wait until after amatuer hour before
starting the play. Be ready to close the play if it drops
below $67.


Try to maintain a market neutral outlook and react to what
the market gives us instead of trying to force plays to fit
your market view.

Jim Brown


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It's Not An Easy Job
By Austin Passamonte

We eagerly accepted our role here in "Market Sentiment"
understanding it wouldn't always be a pleasant task to
remain objective. Today's report reminds me of this fact.

Market bulls (over 90% of all investors & traders) would love
to believe this week's action signals a beginning to the
next great market rally. For their collective sake we surely
hope so as well.

That not withstanding, unbiased reporting of the facts within
our technical sphere show mixed signals remain.

We like recent strength in the Dow and especially GE, the
biggest bell weather of all. Favorable reports show the series
of rate hikes have almost certainly taken effect and traders
are marking off their calendars to the first rate-cut ahead.

That might be premature. As for recent market action, we've
seen numerous rallies on light volume stall & retreat from
resistance. Floor traders still report fund managers are
dumping big blocks into the hands of small speculators,
especially in the tech sector.

A sustained rally will surely need help from the techs. We'll
tread water and slip below surface without both the Dow and
NASDAQ stepping lively, hand in hand. No two ways about that.

Friday's COT update shows S&P 500 commercial traders continue
to hold historical short positions. Commercials in the DJX
market are adding to their shorts as well. Meanwhile, small
speculators in both pits grow longer to broaden this month's-
long divergence. Neither side has flinched.

Someone has to break eventually. I wonder which camp is
positioned with more staying power?

On top of that, commercial traders in 30-year bond and 10-year
note arenas are near five year net-shorts while (you guessed
it) small traders grow net-longer. This means commercials
are betting interest rates will rise while small specs believe
rates will fall.

Hmm. Institutions in the S&P 500, Dow Jones Industrial,
30-year bond and 10-year note markets are all extremely short.
Who in the world are they selling to? Who's on the other side
of this gargantuan bet? Why that's easy; small speculators
continuing to build massive long positions themselves.

How does that make us feel? Hopefully Maria's shrill excitement
on "Squawk Box" can help offset this historical divergence.
Bullish traders can use the help. We toss our money into the
ring with colossal giants; professionals with more resources
than ourselves by far. Seeing them continue to ante & raise
on the short side has got to be cause for concern!

On a side note, commercial traders in the live cattle market
are at five year net-long positions for those bullish on
cattle. Work with me here, I'm trying my best to lighten this
thing up!

I won't mention the "V" index word tonight. You can see for
yourself where it's at.

There's nothing we'd rather do than announce the fall rally
has officially begun. Or play our first-ever round of par golf.
Each could come early as this week, but sand traps remain
sprinkled just off the fairways. Pray our shots fly straight
& true and always be prepared to pull out those wedges if we
land in the rough.


The CBOE Market Volatility Index measures certain S&P 100
option pricing to determine investor sentiment. Historically,
readings near 30 signal possible market bottoms while levels
near 20 indicate possible market tops.

Thurs 8/10 close: 21.57      Sat 8/12 close: 21.19

CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contrarian-sentiment
indicator. Numbers above .75 are considered bullish, .75 to
40 neutral and bearish below .40

                             Tues       Thurs         Sat
Strike/Contracts            (8/08)      (8/10)       (8/12)

CBOE Total P/C Ratio         .50         .62          .57
Equity P/C Ratio             .42         .56          .49

Peak Volume (OEX)
CBOE index put/call ratio is a contrarian-sentiment indicator.
Numbers above 1.5 are considered bullish, 1.5 to .75 neutral
and bearish if below .75

                        Tues         Thurs        Sat
Strike/Contracts       (8/08)        (8/10)      (8/12)

All index options       1.69          1.73        1.58
OEX Put/Call Ratio      1.84          2.09        1.22

OEX Maximum Open Interest Strikes/Contracts:

Puts               790/7,360      800/7,655    800/7,264
Calls              800/5,824      800/6,521    800/6,650
Put/Call Ratio       1.26           1.17         1.09

OEX S/R (Support/Resistance) Ratio Index
The OEX S/R ratio is a formula to gauge possible support
or resistance based on open-interest disparity. Numeral
listed for resistance is the ratio of calls to puts. Support
is ratio of puts to calls. Values above "10" considered firm.
Divergence of numbers may indicate future market direction.

OEX                      Tues         Thurs         Sat
Benchmark:               (8/08)       (8/10)       (8/12)

Overhead Resistance:
(850-825) (840-820)*     303.75        41.58       252.08
(820-805) (815/800)*       2.52         1.25         2.07

OEX close:                  805          799          804

Underlying Support:
(805-785) (800-785)*       1.66         2.09         1.67
(780-760)                  5.32         7.63         7.73

What the S/R measure indicates: Net open-interest ratios
are huge above 820. A large index move prior to expiration
has clearance in either direction between 780 and 820.
Market-makers would love to pin the OEX index near it’s
largest strike of 800 for maximum expiration of worthless
contracts. Too soon to predict.

We would consider a move testing the 820 range to be a good
put entry and tests near the 780 range good call entry prior
to Friday's option expiration.

30-yr Bond:          5.73%          5.68%         5.71%

Light, Sweet
Crude, Barrel:     $29.15         $31.20        $31.00

200 Day Moving Average (as of 8/08)
The 200 DMA is widely considered the major benchmark for
critical support in a market.

DOW:   10,778          10,976     10,908      11,027
NASDAQ: 3,911           3,848      3,759       3,789
NDX:    3,648           3,686      3,595       3,644
SPX:     1430            1482       1460        1471
OEX:      770             805        799         804

CBOT Commitment Of Traders Report: Friday 8/11
Biweekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade. Small specs are the general trading
public with commercials being financial institutions.
Commercials are historically on the correct side of future
trend changes while small specs are not. Extreme divergence
between each signals a possible market turn in favor of the
commercial trader’s direction.

                  Small Specs        Commercials
DOW futures
Net contracts;    +116 (long)        - 599 (short)
Total Open
Interest %          2% net-long       3% net-short

Net contracts;    - 1,854 (short)      + 1455 (long)
Total Open
Interest %          18% net-short       4% net-long

S&P 500
Net contracts;     + 44,924 (long)     -51,720 (short)
Total Open
Interest %           24% net-long       9.5% net-short


Interest rates
5.71% on the 30-year Treasury Bond may be signaling rate
fears are nil. Fed-Fund futures are pricing a slight chance
of one or more rate hikes, .25 basis at this time.

Benign Government Reports
Latest statistics hint the economy is cooling and no further
rate hikes may be needed. CPI is next

Strength In GE, Dow Components
GE has long been considered a market bell weather and recent
all-time highs are encouraging signs.

COT Report - NASDAQ 100
Sentiment reversal with small speculators growing net-short
while commercials increase accumulation may suggest expected
strength in the sector over the next weeks or months.



Thursday’s close below 22 sees us in the danger zone.

End Of Earnings Season
Lack of positive news will direct market focus on August
FOMC fears should future reports prove bearish.

Third-Quarter Earnings Warnings
A number of companies pre-warning slowed earnings later in
the year are being met with extreme selling pressure.

Energy Prices
Prices are still too high. Ultimately this affects profit
margins and inflation. Light, Sweet Crude closed $31.00 today.
Seasonal energy patterns typically bottom by late summer,
but all petroleum expected to be very high this fall. Prices
in low $20s would be welcome relief but may not arrive.

COT Report - S&P 500 & DJX
Latest updated figures show small spec traders remain heavily
long S&P 500 contracts while commercial traders continue
to hold ten-year extreme short position. DJX commercials added
to net short while small specs added to net long holdings.
Widened divergence strongly implores market turn in favor of
commercials. The market's bottom may still lie ahead.


As of Market Close - Sunday, 08/13/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert

DOW   Industrials      11,027      10,550  11,550     **
SPX   S&P 500           1,471       1,425   1,505
COMPX NASD Composite    3,789       3,500   4,000
OEX   S&P 100             804         770     812
RUT   Russell 2000        510         485     540
NDX   NASD 100          3,644       3,300   3,800
MSH   High Tech           998         935   1,040

BTK   Biotech             672         570     700
XCI   Hardware          1,491       1,380   1,550
GSO.X Software            429         385     455
SOX   Semiconductor       953         880   1,020
NWX   Networking        1,240       1,150   1,325
INX   Internet            496         460     530

BIX   Banking             598         550     610
XBD   Brokerage           623         570     655
IUX   Insurance           712         680     725

RLX   Retail              853         835     910
DRG   Drug                391         365     415
HCX   Healthcare          812         760     855
XAL   Airline             170         160     178
OIX   Oil & Gas           296         272     304

The DOW broke our resistance at 11,000 on Friday and literally
brought the COMPX out of an early morning slump.  Hewlett Packard
($-2.25) was Friday's under-performer in the DOW and may give clue
to the lack of excitement for technology.  Raising support (DOW
from 10,450).  Raising resistance (DOW from 11,000).

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Promise of a Brand New Day
By Buzz Lynn

Time to clean the bugs, tire rubber and road tar off the
windshield.  After last Thursday's 98-point decline on the NASDAQ,
we really needed a good squeegee to clear up the messy field of
vision.  We got that on Friday.  How so?  First of all, Thursday's
decline wasn't as bad as it seemed.  The 3750 level on the NASDAQ
provided support on that seemingly large decline and volume was
low by historical standards.  It was certainly not the stuff
market reversals are made of.  While it was touch-n-go in
anticipation of Friday's open, the recovery back to 3783 by 1:30
p.m. from the initial amateur hour dip to 3686 was measured and
steady - no whip saw here.  Yes, volume was low again at roughly
1.33 bln shares, but as slight descent took shape into the late
afternoon, NASDAQ again found strength at 3758 and moved up to
close at its high of the day at 3786.  Not only was that good for
a Summer Friday, it would have been good any day of the week.  Can
you see our horns poking through yet?  The steadiness of the
rebound and the markets' ability to maintain support followed by a
close at the daily high on a Friday is good sign in our book.

Another headfake?  We don't think so.  On a micro scale, this is
option expiration week, which typically supports stock prices.
Not only that, but markets have rallied lately in front of the Fed
meetings in anticipation that there would no further rate hikes
coming.  There were then brief selloffs as investors sold on the
good news.  But, on a macro scale, if the FOMC meeting does not
produce another rate hike (that is the current consensus outcome)
on August 22nd, that would most likely mean no more hikes until
next year!  It would also plant the seed that interest rates are
due for a REDUCTION at that time!  Couple that sentiment with
traders, investors and fund managers alike returning from Labor
Day vacation with plenty of cash to spend, and we could see a
rally through the month of September.  While there will be
gyrations along the way, we think there are some bullish trades
ahead of us starting now and lasting for the next few weeks.  It
won't necessarily be easy, so sharpen your horns, and get ready
for the opportunities that come your way.

As for the HOLDRS, news came out last week that Merrill Lynch
would bring you the world!  A sort of worldwide nifty fifty.
That's right, a new super-HOLDR will soon be offered bringing you
the ability to own the 50 largest stocks (a clear departure from
the usual 20 sector related issues) in the world through one
security called Market 2000+.  We'll pass along the symbol as soon
as we learn it's available.  In addition to the biggies you might
expect from the U.S. market (CSCO, MSFT, INTC, GE, HD, LU, WMT, C,
KO, AOL and others), Deutsche Telekom (DT), AstraZeneca (AZN),
British Telecom (BTY), Ericsson (ERICY), Nokia (NOK), Sony (SNE),
Toyota Motors (TN), and Total Fina Elf (TOT) and others also make
the cut.  This could be a good one.

In the meantime, we've pretty much wiped the slate clean for the
coming week based on last Thursday and Friday's action.  Of course
QQQ is there and always will be, but check out the new biotech and
Internet Architecture plays, which are new to the lineup.  Trade
smart with eye toward post FOMC meeting profits.  Good luck!

Index             Last    Mon    Tue    Wed    Thu    Fri    Week
QQQ NASDAQ-100    91.06   2.38   0.50  -2.50  -1.75   1.25  -0.13
HHH Internet     104.06   3.56  -0.94  -2.94  -1.88   0.56  -1.63
BBH Biotech.     182.75   7.31  -3.88  -1.25  -9.44   5.19  -2.06
PPH Pharm.        96.88  -1.13   0.25  -6.00   0.81   1.31  -4.75
TTH Telecom.      65.00   0.69  -2.69  -1.31   0.25  -0.31  -3.38
IAH I-net Arch.   95.56   2.44   0.69   0.44  -1.81   0.25   2.00
IIH I-net Infr.   51.50   2.31  -1.00  -0.63  -0.63  -0.69  -0.63
BHH B2B           45.56   2.00   1.00  -2.19   0.75  -1.25   0.31
BDH Broadband     88.50   2.94  -1.06  -0.13  -1.75  -0.31  -0.31
SMH Semicon.      82.69   2.31   0.06   2.38  -2.00   1.25   4.00
RKH Reg. Banks   106.00  -0.38   0.75  -0.50   0.94   0.19   1.00
UTH Utilities    101.00   2.50   1.00  -1.13  -0.25   0.75   2.88


QQQ - NASDAQ 100 $91.06 (-0.13 last week) Friday changed our whole
opinion.  While you can read the story above, the steadiness of
the rebound and the markets' ability to maintain support followed
by a close at the high of the day on a Friday is good sign in our
book.  Technically, though QQQ closed under its 50-dma of 93.98,
the dma's haven't been giving us the best signals lately, but the
candlesticks have.  Thursday's close on support at $90 followed by
a sharp selloff to $88, then a rebound to close at the daily of
high of $91.06 shows that daily support at $90 is alive and well.
We think that's a bottom since it's been holding fairly well as of
early June.  Not only that, but connecting the lows from mid-May,
early August, and Friday creates a trend line of higher lows from
which $9 moves have followed.  Friday's bullish reversal indicates
that the sentiment may continue.  The next level of resistance is
at $95.  However the trend suggests we may get as high as $99.
CSCO, JDSU, ORCL and INTC had nice reversals from their lows if
that's any clue.  Use dips as a buying opportunity and enjoy what
should be a good ride.

Calendar Spread:

Sure we have upward bias for the coming week, but that doesn't
mean we have to drop this play.  If you are already in the long
leg of the play, then great!  Look for an opportunity to sell the
short leg at resistance of $95 if QQQ rolls over there or at its
potential high up to $99.  The point is you want to see a rollover
to capture the greatest amount of premium.  You'll worry less
until the time you need to buy it back, which is when the time
value has mostly disappeared or just before expiration, whichever
occurs first. The point is you don't want to have to exercise your
long position and give up all that time value you purchased if you
get called out.  Getting called out is OK for covered calls but
not for calendar spreads.  If you are already in the play and you
have already satisfied one of the above conditions for buying
back, by all means, repurchasing the short position might be
prudent, especially if it's an AUG strike (it expires this week).
Otherwise look to cover on a penetration above $94.

BUY  CALL DEC- 90 YQQ-LL OI= 2047 at $11.50

SELL CALL SEP- 90 QVQ-IL OI=15936 at $ 5.88, ND = 5.63 or less
SELL CALL SEP- 94 QVQ-IP OI= 1620 at $ 3.88, ND = 7.63 or less
SELL CALL SEP- 99 QVQ-IU OI= 2281 at $ 2 13, ND = 9.38 or less

Long Puts

"While we may see the QQQ fall back to $86, we also don’t think it
will remain there long as the market makes what has become a
familiar move back up into the FOMC meeting."  Remember that from
Thursday night?  QQQ only managed to retrace a double bottom at
$88 in the morning session.  A double bottom (or top) is usually a
good sign that the level will hold and signals a possible
reversal.  We hope you got out there.  While you can still play
puts on any downward retracements from resistance, we are looking
for more upside this week and aren't suggesting any new put plays
be opened.

Long Calls

It's option expiration week and one week before an FOMC meeting.
That can only mean one thing.  Right!  Upside bias.  To that end
with premiums still relatively cheap from shrinking volatility, we
could have a good call buying opportunity this week.  Support is
at $90 - $88 on the extreme side.  Target shoot to your level of
comfort.  If QQQ moves more than a few cents under $88, reconsider
the market tone before making an entry on a call, as it (market
tone) will not likely be good.  A down day with volume over 1.6
bln shares on the NASDAQ or 1.1 bln shares on the NYSE is a big
clue to stick with put buying.  But in our opinion, that's
unlikely.  The first level of resistance is at $95, then $99.

BUY CALL SEP-85 YQQ-IG OI= 1551 at $9.25 SL=6.50
BUY CALL SEP-90 QVQ-IL OI=15936 at $6.13 SL=4.00
BUY CALL SEP-95 QVQ-IQ OI=11945 at $3.63 SL=2.00

Average Daily Volume = 21.75 mln


SMH - Semiconductor $82.69 (+4.00 last week) SWITCH!  If the
market is going to rally this week into the FOMC meeting, there is
no reason to keep playing SMH to the downside as a put.  Unlike
the other sectors we dropped this weekend, SMH has a real strong
chance of running even harder than the market in general.  The
SOX.X has refused to stay under its 200-dma for very long while
SMH components, INTC and NSM, put in nice bottoms.  Friday, SMH
took off like a shot to engulf the previous day's red candlestick.
That's generally bullish.  The stochastic and RSI have turned
upward.  Even MACD, a lagging indicator, has finally started to
point north again.  We may be a bit early to the party yet, so
conservative types might want to wait for a move over resistance
at $84.  For the more aggressive types, wait for a bounce off $81,
which has provided some historical support.

BUY CALL SEP-80 SMH-IP OI=13 at $7.13 SL=5.00
BUY CALL SEP-85 SMH-IQ OI=20 at $4.63 SL=3.00
BUY CALL NOV-85 SMH-KQ OI= 3 at $8.75 SL=6.25

Average Daily Volume = 333K K

New Plays

BBH - Biotech $182.75 (-2.06 last week) Welcome back to the list.
It's been a while since we've played this sector and things have
heated up since Friday.  Unlike drug companies that cool off when
technology turns up, biotech is at the center of the flame.  While
there were some fractional losses on Friday in two of the
components, the rest posted mostly high $1+ gains.  AMGN, BGEN,
MEDI, IMNX, PEB, CHIR, and GENZ led the charge.  But what a
beautiful story the technicals tell.  Friday showed us a strong
reversal in another higher low.  What makes this one so good is
that BBH bounced hard off its Friday morning low of $174, tad shy
of its 50-dma of 176.43.  The rebound was tremendous.  While BBH
couldn't break its intraday resistance at $184 and fell back
slightly by mid-day, it finished $1.38 above its mid-day support
level of $181.38.  Historical support is rock bottom at $175 and
could be considered a buying opportunity, while even the current
level looks attractive based on what we expect to be a bullish
NASDAQ.  For those more conservative, wait until BBH exceeds $184
before making an entry.

BUY CALL SEP-175 BBH-IO OI= 12 at $17.25 SL=12.25
BUY CALL SEP-180 BBH-IP OI=566 at $14.63 SL=10.75
BUY CALL SEP-180 BBH-IQ OI= 81 at $12.25 SL= 9.00
BUY CALL OCT-185 BBH-JQ OI= 47 at $18.25 SL=13.00

Average Daily Volume = 638 K


IAH Internet Architecture $95.56 (+2.00 last week) As a whole,
this group did not change much on Friday.  HWP and DELL kept a lid
on the action and actually dragged IAH down in early trading.
However, CSCO, SUNW, IBM, and EMC kept it afloat.  But the
technicals are the real story here.  IAH slammed hard into its 50-
dma of $92.90 following an ugly gap down from an already ugly
chart pattern Wednesday and Thursday.  What happened next was a
thing of beauty.  It came back from the depths past its open at
$94, past Thursday's close at $$95.25, and finished the day on a
strong ascent at its high of the day.  It regained excesses over
its 30 and 10-dma in the process.  The next level of resistance is
$97, then $99.  If the tech issues take off in front of the FOMC
meeting, IAH could deliver us nice profits this week.  Target
shoot to $93.50 for the best entry.  Or if there is no decline
during amateur hour on Monday, feel free to buy minor intraday
dips, or even at the current level.  Watch out for low OI though.

BUY CALL SEP- 90 IAZ-IR OI= 5 at $9.63 SL=6.75
BUY CALL SEP- 95 IAZ-IS OI=15 at $6.38 SL=4.25
BUY CALL SEP-100 IAZ-IZ OI= 0 at $4.00 SL=2.50

Average Daily Volume = 54 K

Dropped Plays

IIH - Internet Infrastructure $51.50 (-0.63 last this week) With
the exception of EXDS, this sector has some notable losers on
Friday including AKAM, VRSN, BVSN, and BEAS.  While we had this
listed as a put play, IIH nonetheless found support and formed a
doji on the candlestick chart, indicating investor indecision.
While we favor the downside on a sentimental basis, a rising tide
(NASDAQ) will likely float all boats, or at least keep them from
sinking in the coming week before the FOMC meeting.  Thus we drop
IIH as a play for now until we can see a clear direction for the

BDH - Broadband $88.50 (-0.31 last week) We saw BDH lose ground as
anticipated in Thursday's write-up.  The chart proved accurate and
the trend appears to be down.  However, since we've sharpened our
bullish horns a bit this weekend, and despite weakness in a key
component like LU (new 93-wk low - UGGHHH!), many of the other
underlying issues could rally if the NASDAQ perks up.  It's tough
on a HOLDR when its largest component is its worst performer.
Given the doji star on the candlestick chart though, investors are
showing lack of conviction.  Thus we can't turn this into a call
play just yet, nor can we keep it as a put play any longer.

No Play



For the week of August 14, 2000


Business Inventories   Jun   Forecast:    0.5%   Previous:    0.8%


Industrial Production  Jul   Forecast:    0.3%   Previous:    0.2%
Capacity Utilization   Jul   Forecast:   82.1%   Previous:   82.1%

CPI                    Jul   Forecast:    0.1%   Previous:    0.6%
Core CPI               Jul   Forecast:    0.2%   Previous:    0.2%
Housing Starts         Jul   Forecast:   1.55M   Previous:  1.554M
Building Permits       Jul   Forecast:   ----    Previous:  1.511M

Initial Claims        8/12   Forecast:    288K   Previous:    293K
Philadelphia Fed       Aug   Forecast:    5.0%   Previous:    0.7%


Trade Balance          Jun   Forecast: -$31.5B   Previous: -$31.0B
Michigan Sentiment     Aug   Forecast:   108.9   Previous:   108.3
Treasury Budget        Jul   Forecast:  -$1.0B   Previous: -%.2B

Week of August 21st

08/22 FOMC Meeting
08/24 Durable Orders
08/24 Initial Claims
08/24 FOMC Minutes
08/25 GDP - Revised
08/25 GDP Chain Deflator
08/25 Existing Home Sales

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The Option Investor Newsletter                   Sunday 08-13-2000
Sunday                                                      2 of 5

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Jumping the Gun on Cup and Handles
By Lynda Schuepp

I received a few emails this week on my article last Sunday
asking me if a stock they were looking at was a cup and handle.
These emails provide me a great way to follow-thru on my article
with real live current stocks.  First, it is very important not
to try to make a pattern fit a stock you are following or you’ll
get burnt.  These patterns are very powerful, but very infrequent.
Using the criteria from my previous article we will review two
stocks and determine if they qualify and why or why not.  One
reader wrote the following:

Hi Lynda, I've been studying your article "How to handle the cup
and handle".  When DNA came up I began following it.  Yesterday I
entered after the short pullback at 174 11/16. I thought that was
the handle. Obviously, I didn't recognize the correct handle.
Today, of course, I got stopped out when it went way down.  Is
it still forming a handle?  I sure would appreciate it if you
would analyze DNA the way you did APOL.  I've been trying to
learn how to recognize and understand the cup and handle for some
time now, and yours was the best explanation yet.  I enjoy your
articles.  Thanks so much. Frances (feminine)

Lets look at the daily chart of DNA:

You might want to review the specific criteria laid out in my
previous article because I’m not going to go over all the
criteria here, I will simply show where the pattern fits or fails.
There are many criteria that are met that make DNA look like it
is a potential cup and handle pattern.  Visually, DNA has formed
a cup and a partial handle.  However, the volume on DNA is quite
sporadic so it is difficult to interpret the volume indicators
with any certainty.  The volume ranges from 400,000 one day to
1.8 million the next and back down again the following day.  For
that reason, I am using the 4-day average volume to let you SEE
how the moving volume average line reflects the general direction
of the volume in relation to the direction of the prices.  The
left side of the cup, stage 1, should be forming with volume
dropping.  However, in this case, the volume is increasing as the
prices are decreasing.  The right side of the cup or stage 3 is
being formed with decreasing volume.  One should be suspect of
this pattern.  The handle or stage 4, is just beginning to be
formed with only 2 days to form the pattern.  A handle must have
minimally 3 days to qualify.  The reader jumped the gun and bought
before a signal was given.   Although you can take some liberties
with the other stages of the cup, handles need to be treated very
strictly.  Volume MUST decrease on the handle or it is simply a
failed rally.

On the first day of the handle, the volume increased substantially.
Because this stock’s volume varies so much daily, we will have
to wait and let the moving average show us the true volume pattern.
If DNA drops below 160, 10% from the high, it would violate our
"handle" criteria.  Time will tell on this stock.  It is too soon
to tell because we have only had 2 days to form the handle.  Remember,
the entry trigger is formed when the stock breaks above the high of
the last two days and the price is 1/8 above the top of the right
side of the cup.  In this case it would be about 177-1/4 with
volume at least 30% greater than the previous day.  Because the
volume is so sporadic in this stock, I probably wouldn’t act unless
the volume was 30% greater the 4 day average volume.  Remember,
Patience rewards, don’t jump the gun on this one.  When you see a
pattern like this it is a good idea to set an alarm for the trigger
entry point.  That way you won’t be tempted to enter early.  This
chart could still complete a Cup and Handle pattern. WAIT!

Our next reader writes:

Would this pattern qualify for the handle of the cup? MAIL has
consolidated for 4 months, formed a nice base and looks like it
could breakout any time now.  If it can bust 10 it should make a
nice move. We can buy today at 7.88 with the 1/4 pt below low of
handle at approximately 7-3/8.   Please take a look and advise.
If it doesn't breakout at 10 then at 9.85 would equal a 25% return.
Thanks, Bill.

See Daily Chart of MAIL:

Visually, MAIL has formed a cup and handle pattern.  Volume fits
the criteria for a cup and handle pattern.   However, there are
problems with the handle.  Although the volume pattern is correct
and has decreased to almost nothing, the price range of the handle
has dropped more than 10% from the top.  This violates our strict
criteria for the handle.  As stated in my previous article, a drop
in price greater than 10% from the high probably indicates a
reversal.   A big increase in volume would verify this.  Although
the chart doesn’t represent a valid cup and handle pattern, it does
show us what I would consider as a flag pattern.

See Chart below for Flag pattern:

Flags are typically formed after a sharp vertical move in the stocks
prices.  MAIL almost doubled in price between July 7th and July 17th
as the volume quadrupled.  After such a dramatic increase, stocks
typically consolidate.  A Flag is formed by two parallel lines
running in the opposite direction of the previous sharp move.
In this case, mail shot UP the flagpole so the flag would hang
downward, as depicted in the chart above.  Volume should shrink
to almost nothing as the flag forms.  A breakout usually occurs
in the same direction as the flagpole on VERY heavy volume.   To
project the potential upside, you measure from the bottom of the
flagpole to the lowest low of the flag and add that distance to
the breakout point.  No such breakout has occurred yet and it is
probably too late for this pattern to be valid.  Generally, flags
do not take longer than 4 weeks to form and usually fly at half-
mast.  We are at a critical point in the chart pattern for this
stock.  Not only has the stock reached the 4-week mark, but also
the price has dropped below the 50% point.  Coincidentally the
current price is at the lower end of a fibonacci retracement
(66.6%), but that is a subject for another article.  The flag
represents consolidation and as such, heavy volume or a long
duration is not representative of that.  A signal either way is
imminent and will be given on strong volume.  A further drop from
this point would violate the trading channel.  Conversely, a true
breakout must clear the TOP band of the flag on big volume.  Don’t
jump the signal early or you could get whipsawed out rather

My advice to you is to learn various chart patterns but don’t try
to force fit them into the stocks you are following and especially
don’t try to anticipate the signals before they actually happen.
The reader in the previous example wanted to buy MAIL this week
at 1/4 of a point below the low of the handle.  This is clearly
jumping the gun.  The entry signal is to WAIT until the price
cleared the HIGH of the right side of the cup on big volume.
Had you entered on Wednesday at 7-3/8, you would have seen your
stock drop to 6-3/4 or 8% by Friday.  Where would you have set
your stops?  There is no support until you get down to the base of
the cup, surely not a fun ride.  Remember, the handle represents
the few remaining buyers that bought at the top of the left side
of the cup and who held on all the way down to the bottom of the
cup and back up again.   At this point they are looking to sell
to break even.  Once they are out of the way, the previous strong
up-trend (right side of the cup) should continue for a large move.
If the criterion for the handle is not met, then it is more
likely to be a failed rally.   So, remember, don’t jump the gun.
Have I said that enough to convince you yet?  Instead of jumping
the gun, pick up a good book on technical analysis and read it
during the slow times of the market, like lunchtime, and be
ready to pull the trigger when you do get your signal.  You
will be a better trader and richer for the effort.



Is This The Fall Rally?
By Mary Redmond

It is possible to make money in a choppy, trending market by
following the trading pattern of a few stocks very carefully.
It is not as easy as it is to make money in a market which is
trending strongly upward, but sometimes by practising in a
slower market you can fine tune your skills for the time when
you might want to use them more aggressively.

We all want a real fall rally to start, the one the bullish
analysts are talking about when the Dow will hit 12,500, and the
Nasdaq will hit 5000, and traders will make back any money lost
this spring and more on top of it.  Historically August has
been a slow month, however if many traders and retail investors
start becoming impatient a rally could start sooner than

A good way to begin a trading day or week is to write down a
list of the stocks you are trading regularly.  Most of us have
several stocks we understand fully and feel comfortable trading.
It is important to keep track of the 200, 50, 10 and 5 day moving
averages of each of the stocks, earnings dates of the stock and
other stocks in the sector, and key economic reports coming up.

One of the best ways to identify strong support and resistance
levels is to find a stock's call and put options which have the
highest amount of open interest.  These are important, as a high
number of unexercised calls at a strike price higher than the
stock price can provide resistance, and a high number of put
options at a strike price under the stock price can provide
strong support.

Then, if you combine the primary support and resistance levels
with the technical indicators on the live charts like the MACD,
stochastic and Bollinger band lines you can make some low risk
trades with high probability of profit.

For example, JDSU has a ratio of 11,291 puts to 6757 calls at
the Aug 115 strike price, which gives it a 1.67 to 1 put/call
ratio.  This provides some support, although it is not as strong
as the resistance at 125 and 130.  For example, the call/put
ratio at 125 is 8934 to 2449 , nearly 4 to 1.  At 130 the call/
put ratio is even stronger, at 10887 to 2443, a 4.5 to 1 ratio.
You can see from the chart how it tried to penetrate this level
and fell back.

Similarly, Sycamore has a put to call ratio of 972 to 110 using
the August 110 strike price.  This is a ratio of 8.8 to 1 which
gives the stock strong support at 110.  It also has an Aug 140
call to put ratio of 1455 to 93, a ratio of 15.6 to 1.  You can
see from the chart how it tried to penetrate 140 and fell back.
Both of these attempted breakouts could have presented profitable
trading opportunities.

In a highly volatile market, stocks sometimes break support and
resistance levels.  However, unless there is an extreme market
situation stocks usually revert back to these levels.

AMG Data reported that equity funds took in $5.6 billion in cash
last week.  Over 60% of the money went into growth funds.  It is
interesting to note that cash flows increased to the banking
and financial sector, which probably helped this sector to rally.
The four week moving average of cash to equity funds is in the
range of $3.5 billion.

It is important to note that the level of cash reserves in
US money market funds is higher than it ever has been.  The
amount of cash in money market funds rose by $250 billion last
year, from $1.4 trillion last summer to the current level of over
$1.729 trillion.  The investment company institute reported that
retail money market funds increased by $2 billion last week to
$984.14 billion, and institutional money market funds increased
by $9.95 billion to $744 billion.  Money market funds have taken
in over $60 billion in the last few weeks.  The institutional and
retail investors have powerful levels of cash at their disposal,
and it is likely that this cash will start going into the market
if the sentiment becomes more bullish.

The ipo schedule was robust again this week , as 27 new issues
traded raising approximately $2 billion.  This is less than the
amount raised last week of over $6 billion in new issues, although
last week included a large secondary issue of over $4 billion.
The average first day ipo performance this week was significantly
lower than it was last week, which may delay further issues.  It
is important to note that this is the first week in a few weeks
when the cash flows to equity funds were higher than the cash
flows out of the market through new issues.

Contact Support


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Call Play of the Day:

TIBX - TIBCO Software, Inc. $102.94 (-1.75 last week)

See details in sector list

Chart = 

Put Play of the Day:

LVLT - Level 3 Communications $59.75 (-7.88 last week)

See details in sector list

Chart = 

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Index      Last   Week
Dow    11027.80 141.01
Nasdaq  3789.47   2.11
$OEX     804.75   8.90
$SPX    1471.84   8.91
$RUT     510.27   6.64
$TRAN   2927.50 -30.22
$VIX      21.19  -0.35


ITWO     146.94  20.88  New, picking it up where we last left it
EXTR     159.75  17.94  New, rallied an impressive $285 since May
COHR      68.94   8.81  New, the right businesses at the right time
SUNW     112.19   5.56  New, network behemoth shines again
CCU       83.06   4.97  New, sure looking like a breakout
EMC       89.56   4.06  New, a clear winner in the tech area
MER      139.31   3.56  This bull is leading the charge on Wall St
AFL       56.31   0.75  The crazy quacking duck is still in favor
JPM      143.88   0.63  New, breaking to new 52-week highs
PVN      113.19   0.47  Buyers have been flocking to this Financial
DNA      164.00  -0.13  Looking for the Holy Grail of entry points
MERQ      99.75  -0.25  One that has avoided the Dot Com bust
IDPH     136.00  -1.00  Held up relatively well in biotech sector
MVSN      84.75  -1.47  Dropped, key support at $85 broken
HWP      110.00  -1.75  Dropped, had the blues as INDU soared
TIBX     102.94  -1.75  Caught in the NASDAQ downdraft last week
PEB       94.00  -3.00  LLY's "slamming hammer" came down on Wed.


VRSN     140.31 -21.75  Negative momentum is nothing but amazing
CRA       85.00 -10.50  New, tumbling below short-term support
LVLT      59.75  -7.88  Telecom sector has been vacated by bulls
AETH     149.44  -7.06  Dropped, one day play that bounced back
INCY      74.81  -5.19  New, need an umbrella? Stuck in a downpour
AMD       57.75  -4.63  Care for a little dip with your Chips?
IMCL      70.50  -2.69  Dropped, downward slide may have ceased
SGP       41.00  -2.13  Anybody for a "dead cat" bounce?
TERN      54.00  -1.13  Dropped, not a bad way to go out of a play
AAPL      47.69   0.31  Summer doldrums supplied slothful scenario
MU        75.63   2.75  Rangebound trading giving great entries


Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


MVSN $84.75 (-1.48)  What looked like a promising run towards a
new all-time high has now fizzled into a slow bleeding on low
volume.  On Friday morning, the key support level of $85 was
broken and although it was on low volume, it was apparent that it
became a resistance level as MVSN failed to rally above that point
later in the day.  Looking at MVSN's chart in the past three
months, the stock has tended to trade in a wide range, rallying on
high volume for a couple of weeks before drifting lower towards
its 50- or 100-dma (now $74 and $67) on low volume.  With what
appears to be a continuation of this trend, MVSN could see more
downside and with that we leave this play for more promising

HWP $110.00 (-1.75) Unfortunately, HWP was one of the half dozen
stocks to record a loss in the INDU Friday.  Even worse, HWP was
the biggest percentage loser in the blue chip index.  HWP's poor
performance can be directly linked to the less-than bullish
report issued by DELL last Thursday night, which we had warned
of.  DELL reported sales figures that fell just shy of what some
analysts had forecasted.  The slight shortfall of DELL's top-line
growth sent a ripple throughout the PC sector Friday, which
caused the Goldman Sachs Hardware Index ($GHA) to fall despite
the rally in the broader markets, thus prematurely ending our
earnings play on HWP.


TERN $54.00 (-1.13) After a fantastic entry point on Wednesday
at $60, TERN bled straight down to support to $54.  Not a bad
way to go out of a play.  We are dropping TERN from the put list
since it found what appears to be solid support at $54.  On a
30-min chart, you can see the buying spurts every time it touched
that level.  What also added to our decision to close this play
was the 47K shares in the final ten minutes that popped the
stock up a dollar.  Even though TERN is still in a downtrend and
traded as low as $48.50 during the play, it might be putting in
a bottom with the NASDAQ looking positive for now.  It's good bye
for now, TERN.

IMCL $70.50 (-2.69) Meandering lower for much of the past
2 weeks, IMCL made for a quick and profitable play over the
past 2 days.  After struggling up to the $72 resistance level
(just below the 10-dma), the stock rolled over near the close
on Wednesday.  IMCL headed lower from there on Thursday,
weighed down by the negative effect of the LLY verdict on the
entire sector.  Market jitters on Friday morning pulled the
stock down a few more points before the buyers came in to
support the stock.  Falling from nearly $72 to below $62 in
less than 2 days made this a great short-term trade, but given
the strength of the recovery (coming on volume 50% over the
ADV) on Friday, it looks like the downward slide may have come
to an end.  Besides that, IMCL moved up its earnings release
date and will now announce their results on Monday before the
open.  It’s time to move on.

AETH $149.44 (-7.06) It was a short, but sweet play.  We're
hoping you were able to hop aboard this play early Wednesday on
the bounce back from resistance and enjoy some gains.
Unfortunately, the downward trendline didn't resume after that
nice slide.  Instead, AETH rallied throughout Friday's session
and finished with an $8.25 point gain.  The momentum has
obviously changed course.  The strong reversal leaves us with no
choice but to exit this weekend.


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


JPM - J.P. Morgan $143.88 (+0.63 last week)

J.P. Morgan is a leading global financial firm that serves
business, government, and individual clients through a range of
sophisticated advisory, financing, trading, and investment
capabilities. Morgan also commits its own capital and resources
to promising enterprises.

Peaks and valleys.  JPM has been on the rise all summer,
responding favorably to news that the economy may actually be
slowing in accordance with Mr. Greenspan's wishes.  Shares of the
firm surged to a 52-week high on Friday.  This followed an
$8 jump on the 4th, spurred by the latest unemployment report,
revealing that the U.S. economy lost jobs in July, which was the
first time it has done so in 4.5 years.  Brokerage and financial
service stocks are also benefiting from the "New Economy" by
acting as underwriters of the stock offerings for emerging
high-tech firms.  These factors, in addition to an above-estimate
earnings report on July 13th, have contributed to a rise from the
valley of $110, where the stock sat in early July.  Since that
time, JPM has been on the rise, climbing to new territory.
Trading within a $6.50 range this week, the stock finished the
week in strong fashion, just off its 52-week high.  Closing at
$143.88, overhead resistance is only $1.06 away, and could easily
be overcome, based on the past month's performance.  If profit
takers emerge, look for entry points to the play on dips towards
intraday support at $142 and $140.  Below that, the 10-dma at
$138.93 would offer a great entry with a bounce.  However, if
buyers continue to favor the stock, wait for a surge through
resistance of Friday's high for a clear indication of a
continuing uptrend.

On Friday, JPM announced its commencement of a sponsored American
Depository Receipt(ADR) program on NASDAQ for LION Bioscience,
A.G.(LEON).  It is an information technology solutions provider
for the life sciences industry.  This is in conjunction with the
company's $182 mln global IPO.

BUY CALL SEP-140 JPM-IH OI=1094 at $ 9.75 SL= 7.00
BUY CALL SEP-145*JPM-II OI=2222 at $ 7.13 SL= 5.25
BUY CALL SEP-150 JPM-IJ OI=1918 at $ 4.88 SL= 2.25
BUY CALL DEC-145 JPM-LI OI=  47 at $13.88 SL=11.00
BUY CALL DEC-150 JPM-LJ OI= 185 at $11.63 SL= 9.50

Picked on August 13th at  $143.88   P/E = 13
Change since picked         +0.00   52-week high=$144.81
Analysts Ratings        3-3-6-0-1   52-week low =$104.69
Last earnings 07/13     est= 2.45   actual= 2.90
Next earnings 10-19     est= 2.56   versus= 2.22
Average Daily Volume  =  1.36 mln

EXTR - Extreme Networks Inc. $159.75 (+17.94 last week)

Extreme Networks provides broadband switching solutions for the
Internet economy, focusing on high-performance multilayer
capabilities that scale to meet the demands of networks based on
Ethernet and IP technologies.  Currently, the markets for these
solutions include: metropolitan area networks, service providers,
web content providers, e-commerce businesses and large
enterprises.  As the Internet continues to evolve, more new types
of networks may emerge and other existing legacy networks may
continue to converge to Ethernet and IP technologies.  All of
these markets represent opportunities for Extreme to continue to
expand its addressable market.

Shareholders of Extreme Networks in the past 10 weeks have found
the venture to be extremely profitable.  Since making a 52-week
low of $42.38 in late May, the stock has rallied an impressive
285% to a new all-time high of $163.00.  EXTR shareholders are
easily identified as they can usually be found scratching their
heads wondering what other investors mean by a sideways to down
summer market.  Reporting earnings on July 19th, net income for
the period ending June 30 fell to $600,000, or a penny a share
from $2.89 million, or 5 cents a year ago.  Revenues, however,
more than doubled from $38.1 million to $92.4 million.  Despite
the strong revenue growth, the company reported an 80% drop in net
income.  Considering the report, a steep sell-off would have been
expected for the stock.  Instead, investors chose to ignore the
earnings and focus on the 2-for-1 stock split set for August 24th.
EXTR has seen its stock move higher, helped by a slew of upgrades
from the likes of PMG, Thomas Weisel, and Morgan Stanley Dean
Witter.  After breaking through resistance at $150 on Monday, the
rest of the week saw EXTR successfully testing its new support
level.  A bounce off that area may serve as an entry point for
aggressive traders, as well as a bounce off the 5-dma at $156.
More conservatively, wait to see if EXTR can clear $160 with
conviction before entering.  A break through $160 will likely see
EXTR make a new all-time high and blue skies into a split run.
Below $150, there is support at the 10-dma at $145.85 and then at
$142.  Volume this past week has been light indicating that a
large move may be ahead.  Make sure volume confirms direction
before entering.

There was much positive news for EXTR this week.  A Strong Buy
rating from Morgan Stanley Dean Witter early in the week
certainly helped the stock along with comments that EXTR may be
stealing market share from rival FDRY.  The announcement of a
strong earnings report from Cisco Systems also helped.  Continued
good news could be the catalyst needed next week to drive EXTR to
a new all-time high, as could anticipation of the upcoming split.

***August contracts expire this week***

BUY CALL SEP-155 EXR-IK OI=  72 at $21.50 SL=15.50
BUY CALL SEP-160*EXR-IL OI= 650 at $18.63 SL=13.50
BUY CALL SEP-165 EXR-IM OI=  25 at $16.50 SL=11.25
BUY CALL DEC-165 EXR-LM OI= 210 at $34.25 SL=29.75
BUY CALL DEC-170 EXR-LN OI=1199 at $32.25 SL=27.50

SELL PUT AUG-150 EXR-TJ OI= 173 at $ 2.88 SL= 4.50
SELL PUT SEP-150 EXR-UJ OI= 131 at $12.50 SL=17.00
(See risks of selling puts in play legend)

Picked on August 13th at $159.75    P/E = N/A
Change since picked        +0.00    52-week high=$163.00
Analysts Ratings       8-2-1-0-0    52-week low =$ 42.38
Last earnings 07/19    est=-0.04    actual= 0.09
Next earnings   N/A    est= 0.10    versus= 0.08
Average Daily Volume  = 1.83 mln

EMC - EMC Corporation $89.56 (+4.06 last week)

EMC wants to be your storage solution.  The company designs,
manufactures and markets a wide range of enterprise storage
systems, software, networks, and services.  The company’s
products store, retrieve, manage, protect and share information
from all major computing environments including mainframe, UNIX,
and Windows NT.  EMC is continuing to boost its presence in
software and related services, with an emphasis on overseeing
corporations’ Internet data.  With offices around the world
and a record of growing earnings by 25% every year for the
past 5 years, EMC is effectively filling its role as the
worldwide storage leader.

If there is one thing that the recent market conditions have
communicated loud and clear, it is that you shouldn’t argue
with success.  EMC is a clear winner in this area, as they
reported stellar earnings in mid-July and have been charging
higher ever since.  Even more important than the earnings
number, was the 30% revenue growth.  This is amazing for a
company with a market capitalization approaching $200 bln!
Given EMC’s dominance of the storage market, which is continuing
to expand, it is no surprise that SUNW and IBM have announced
initiatives to challenge the company’s 800-lb gorilla status.
For now though, EMC is secure in its dominant position and this
is reflected by investors' appetite for the stock and analysts’
positive comments.  Of 27 analysts that follow the stock, 26 rate
it either a Buy or a Strong Buy.  To see the strength of the stock,
all you have to do is look at a daily chart.  Even while the
NASDAQ was headed for the basement in May, EMC was one of a handful
of stocks that refused to touch its 200-dma, and once the market
headed higher, this storage company was leading the charge.  Since
then, the stock has traced a series of higher highs and higher
lows, using the 30-dma ($82.63) for support on major pullbacks and
the 10-dma ($86.94) for minor corrections.  After tracing a new
all-time high in the middle of last week, EMC pulled back until
the bulls re-emerged Friday morning with freshly sharpened horns.
Charging onto the scene as EMC kissed the 10-dma, they pushed the
price up from a low of $86.50 to close more than $3 higher.  There
is chart support near $88 and then $86.50, and this is backed up
by the 10-dma.  Consider a bounce at either of these levels to be
an attractive entry point for buying calls.  If EMC comes charging
out of the gates on Monday, use a move above $92 (after amateur
hour) as a trigger for entering on strength.

In a crowded IPO market, EMC had a strong day on Wednesday as
its storage area network (SAN) subsidiary, McData (MCDT) had a
stellar launch, shooting up from an initial price of $28 to
close above $85.  Only 10% of the shares of MCDT were released
in this week’s IPO - the remaining shares will be distributed
to shareholders over the next 6-12 months.

BUY CALL SEP-85*EMC-IQ OI=1423 at $ 8.63 SL=6.00
BUY CALL SEP-90 EMC-IR OI=1864 at $ 5.63 SL=3.50
BUY CALL SEP-95 EMC-IS OI=4060 at $ 3.13 SL=1.50
BUY CALL OCT-90 EMC-JR OI=5415 at $ 8.25 SL=6.00
BUY CALL OCT-95 EMC-JS OI=3882 at $ 6.13 SL=4.00

SELL PUT SEP-85 EMC-UQ OI=3747 at $ 3.00 SL=5.00
(See risks of selling puts in play legend)

Picked on August 13th at $89.56     P/E = 158
Change since picked       +0.00     52-week high=$94.00
Analysts Ratings    16-10-1-0-0     52-week low =$28.16
Last earnings 07/00   est= 0.17     actual= 0.19
Next earnings 10-18   est= 0.19     versus= 0.14
Average Daily Volume = 7.17 mln

COHR - Coherent $68.94 (+8.81 last week)

COHR makes lasers for medical, scientific, and industrial uses.
The company produces more than 150 kinds of lasers, laser
systems, precision optics, and components.  These products are
used in scientific research, medical, and manufacturing markets
for such applications as spectroscopy and non-destructive
testing, delicate surgical procedures, and the manufacture of
semiconductors and compact discs.

Although it's not a household name yet, COHR has garnered the
attention of Wall Street.  The company's recent report of a 75%
increase in earnings combined with its relatively low valuation
has sent institutions into accumulation mode.  The recent analyst
actions helped to prompt the spree of professional buying.  COHR
has benefited from no less than six upgrades in less than two
weeks.  Among the most notable actions were Warburg Dillion Reed
initiating a Buy rating and a price target of $80, CIBC starting
COHR with a Strong Buy rating and setting a $100 target, and most
recently, USB Piper Jaffray initiating coverage with a Buy rating
and a price target of $83.  The surge in institutional interest
has come on the heels of COHR's 700% increase in orders for its
Telecom products, which are used in the manufacturing
semiconductors and high-speed optical networking equipment.
Along with its booming business in fiber optic related products,
COHR is benefiting from a surge in demand for its lasers used in
medical applications, such as hair removal and plastic surgery.
The propensity for people to want to look better has made COHR an
attractive stock on Wall Street, which we'll try to capitalize
upon to make our profits even prettier.  The stock bounced off
support at $60 early last week and has been plowing higher ever
since.  COHR finished Friday right at its day high, which
positions the stock for a breakout above $70.  Above that level,
resistance is evenly spread on the chart near round levels at $75
and again at $80.  Watch for the institutional buying to return
early next week, and look for an entry if COHR charges above $70.
COHR has rallied for five consecutive days without a hint of
reaction.  If the profit takers return from hiding next week,
look for a bounce off support at $68, or lower at the 5-dma at
$65.25 for a possible entry.

COHR is in all the right businesses at the right time.  The red
hot fiber optic market combined with plastic surgery products
makes for a potent combination.  Of course, a P/E hovering around
50 with earnings growth north of 35% doesn't hurt.

BUY CALL SEP-65 HRQ-IM OI= 5 at $ 9.25 SL=6.50
BUY CALL SEP-70*HRQ-IN OI= 7 at $ 6.50 SL=4.50
BUY CALL SEP-75 HRQ-IO OI=44 at $ 4.38 SL=2.75
BUY CALL NOV-70 HRQ-KN OI=14 at $11.63 SL=9.00
BUY CALL NOV-75 HRQ-KO OI=27 at $ 9.50 SL=6.50

Picked on August 13th   $68.94    P/E = 57
Change since picked       0.00    52-week high=$107.38
Analysts Ratings     2-5-0-0-0    52-week low =$ 16.63
Last earnings 07/00  est= 0.27    actual= 0.31
Next earnings 11-02  est= 0.30    versus= 0.24
Average Daily Volume  =  294 K

ITWO - I2 Technologies $146.94 (+20.88 last week)

I2's RHYTHM supply chain management software helps manufacturers
plan and schedule production and related operations such as raw
materials procurement and product delivery.  Companies that use
RHYTHM include:  3M, Dell, Ford, and Motorola.  Maintenance,
training, and other services account for more than a third of
sales.  I2 is using acquisitions of complementary technologies
and companies to position itself as a leader in the market for
Internet-based production process applications.

We're picking up ITWO where we last left it.  Only this time, the
company has the wind of earnings blowing in its sails.  ITWO
sailed past consensus estimates by 25% when it reported its
second quarter results a little more than two weeks ago.  The
strong EPS report kept ITWO's string of highly profitable
quarters rolling, along with its stock for that matter.  While
Wall Street sorts through the rubble known as the B-2-B sector,
ITWO is emerging as a clear winner.  And, although the B-2-B
marketplace is flooded with competing companies and technologies,
few can match the products and services that ITWO provides.
Also, ITWO just completed its merger with Aspect Development
(ASDV), which will only add to its stronghold of software
offerings.  The company captured Wall Street's attention with its
blowout quarter as a string of positive analyst comments have hit
the wires recently.  Just last week, Goldman Sachs reiterated
ITWO to its Recommended List, based on the closing of the ASDV
acquisition.  Jeffries & Co. initiated coverage with a $163 price
target, citing the company's rapid growth prospects and strong
partnerships with ARBA and IBM.  And finally, DLJ reiterated its
Buy rating after the company's bullish presentation at the E-day
2000 conference last week.  The love from Wall Street last week
vaulted ITWO to the top of its ascending channel to position the
stock on the brink of a breakout.  Watch closely Monday morning
for a rally with healthy volume above resistance at $148.50,
which would mark a near-term high in ITWO's channel.  A more
conservative trader might wait for momentum to build and look for
an entry if ITWO moves above $150.  A bounce off the 5-dma,
currently at $143, might provide a solid entry after any profit
taking, but make sure to wait for an ensuing rally.

ITWO revealed its strategic direction and announced the
availability of its new TradeMatrix Network last week at its
E-day 2000 conference.  The company said it plans to offer
marketplaces, which provide one-stop-shopping for e-business
services.  ITWO's presentation was well received by analysts as
we noted above.

***August contracts expire this week***

BUY CALL SEP-140 QYI-IH OI= 98 at $18.88 SL=13.75
BUY CALL SEP-145 QYI-II OI= 17 at $16.50 SL=12.00
BUY CALL SEP-150*QYI-IJ OI=639 at $13.88 SL=10.50
BUY CALL OCT-145 QYI-KI OI= 76 at $28.75 SL=21.00
BUY CALL OCT-150 QYI-KJ OI=231 at $25.50 SL=18.50

SELL PUT AUG-140 QYI-TH OI=139 at $ 2.38 SL= 4.00
(See risks of selling puts in play legend)

Picked on August 13th   $146.94    P/E = 459
Change since picked       +0.00    52-week high=$223.50
Analysts Ratings     8-19-3-0-0    52-week low =$ 14.06
Last earnings 06/00   est= 0.08    actual= 0.10
Next earnings 10-20   est= 0.10    versus= 0.06
Average Daily Volume = 3.59 mln

SUNW - Sun Microsystems $112.19 (+5.56 last week)

SUNW is a leading maker of UNIX-based, number crunching
computers, storage devices, and servers for powering corporate
computer networks and Web sites.  The company is the largest to
make computers that use its own chips and operating systems.
SUNW's most talked about product is Java, a programming language
intended to create software that can run unchanged on any kind of

SUNW shines again.  The networking behemoth blew past analyst
estimates when it reported its fiscal fourth-quarter results a
little over two weeks ago.  SUNW benefited from a broad boom
across all of its business segments, which resulted in a 63% year
over year increase in earnings.  More importantly, during the
conference call, SUNW guided Wall Street to higher-than-expected
revenue growth for its next fiscal year.  Analysts had expected
SUNW to grow sales around 25% next year, but, the company
gleefully raised the bar upwards to 30%.  The beauty of SUNW's
fourth-quarter report was that it lacked the pessimism which is
so prevalent among tech heavyweights in the current market.  The
combination of strong historical earnings combined with a rosier
outlook helped SUNW buck the usual post-earnings sell-off.  While
the other four horseman of the NASDAQ (CSCO, MSFT, DELL) battle
with the Tech bears and the prospects of slowing growth, SUNW is
shining brighter than ever.  Several analysts jumped on the SUNW
bandwagon of growth, with none other than the influential Kurt
King of Banc of America Securities, who reiterated his Strong Buy
rating and raised his target price on the stock.  SUNW's earnings
momentum has fueled the stock's momentum over the past two weeks,
which has resulted in a string of all-time highs.  The stock
bounced off its 10-dma at $107.31 last Friday to climb past
resistance at $112.  An aggressive trader might look for a quick
entry at current levels given SUNW's strong showing late last
week, despite the wavering in the NASDAQ.  A more conservative
entry might be found if SUNW bolts above resistance at $113.50,
which might set the stock to test its 52-week high at $115.  An
intraday pullback to support at $110 might provide an additional
entry into the play.

SUNW added to its momentum late last week when the company said
it had partnered with Vignette (VIGN) to offer e-commerce
products and services for businesses going online.  SUNW and VIGN
plan to target the new e-business products at new media and
telecom companies, including wireless applications.

BUY CALL SEP-110*SUX-IB OI=1726 at $8.13 SL=5.75
BUY CALL SEP-115 SUX-IC OI=1631 at $5.75 SL=3.75
BUY CALL SEP-120 SUX-ID OI=4502 at $3.75 SL=2.25
BUY CALL OCT-115 SUX-JC OI=3868 at $9.50 SL=6.50
BUY CALL OCT-120 SUX-JD OI=5049 at $7.75 SL=5.50

Picked on August 13th   $112.19    P/E = 101
Change since picked       +0.00    52-week high=$115.19
Analysts Ratings     11-9-2-0-0    52-week low =$ 32.94
Last earnings 06/00   est= 0.33    actual= 0.39
Next earnings 10-16   est= 0.25    versus= 0.17
Average Daily Volume  =  15 mln

CCU - Clear Channel Communications $83.06 (+4.97 last week)

Clear Channel Communications is a diversified media company with
extensive holdings in over 510 radio stations, 22 television
stations, and more than 550,000 outdoor billboards.  After the
acquisition of the #1 radio station owner, AMFM, is completed
this year, CCU will have a presence in 47 of the top 50 radio
markets in the US. Additionally they are the largest Spanish
language broadcaster in the US.  The company is also a leader in
the live entertainment industry through its subsidiary SFX

It sure does look like a breakout!  CCU demonstrated a classic
vertical climb straight up from the open on respectable volume.
The converged 5- and 10-dmas at $80.86 and $79.23, respectively,
provided the solid floor from which CCU could launch itself.
Reference this level for entries into this potential momentum
run.  Shorter-term support is at $81 and $82.  Take a look at a
daily chart and see how CCU mimics the INDU's movements.  If
Monday marks D-day for a Fall rally, then hang on for a wild
ride.  CCU and other momentum runners will certainly benefit.
There is some historical resistance at $88 and $90, but it
shouldn't pose too much of an obstacle.  The real challenge will
be at $95.50, the 52-week high.

On August 1st, CCU completed its previously announced merger with
SFX Entertainment.  This event provided the catalyst to initially
propel the stock through its stubborn resistance at $78 and $78.
According to Lowry Mays, Chairman and CEO of Clear Channel
Communication, "This merger allows Clear Channel, through SFX, to
gain immediate leadership in the highly attractive live
entertainment segment, while taking advantage of the natural
synergy between radio and live music events."  Pursuant to the
terms, a SFX class A shareholder will receive 0.6 shares of Clear
Channel common stock for each SFX share and SFX Class B
shareholders will receive one whole share per SFX share.

BUY CALL SEP-80 CCU-IP OI=3832 at $7.13 SL=5.00
BUY CALL SEP-85*CCU-IQ OI= 349 at $4.50 SL=2.75
BUY CALL SEP-90 CCU-IR OI=  21 at $2.81 SL=1.50
BUY CALL OCT-85 CCU-JQ OI= 436 at $6.63 SL=4.75
BUY CALL OCT-90 CCU-JR OI=3735 at $4.63 SL=2.75

Picked on August 13th at $83.06    P/E = N/A
Change since picked       +0.00    52-week high=$95.50
Analysts Ratings     12-3-1-0-0    52-week low =$57.88
Last earnings 06/00   est= 0.06    actual= 0.09
Next earnings 10-25   est= 0.05    versus= 0.00
Average Daily Volume = 2.28 mln

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The Option Investor Newsletter                   Sunday 08-13-2000
Sunday                                                      3 of 5

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PVN - Providian Financial Bancorp $113.13 (+0.47 last week)

Providian Financial Corporation provides consumer-lending products
such as home loans, credit cards, and other fee-based products.
The Company mainly issues secured credit cards to customers with
not-so-perfect credit histories and charges a high fee and high
interest rates. With the use of direct mail, phone solicitations
and online advertising, Providian has been able to attract more
than 12 mln customers. The company has operations in the US and
the UK.

After basing the past three days in the $109-$110 area, PVN broke
out again late in Friday's trading session.  On stronger volume,
the stock surged from $111 to $114 in the final hour of trading.
Investors and traders have been flocking in droves to the
Financial stocks as interest rate worries dissipate.  They just
brushed off the higher-than-expected Retail Sales number on
Friday and rallied the broader market.  This play has had a great
trading pattern over the past month.  It appears that PVN
consolidates at a certain level for 4 to 5 days, and then spikes
up to the next with a $5 or $6 move.  The last spike up was on
August 4th when it opened at $107.50 and closed at $112.75.
Since then, we have seen a five day basing period, mentioned
above.  Take a look at a daily chart to see for yourself.  So
with this in mind, and Financials being the hot issues, watch
for PVN to make its next move in the next day or two.  Resistance
will be at $114 and $114.88, its most recent intraday high from
Tuesday.  Any pullbacks to the $112 area, or the base at $110,
followed by a bounce would provide nice entry points.  If profit
takers step into the Financials next week, watch the 10-dma at
$108.83 as another support level.  If PVN decides to make that
spike to the next level, jump on board with a convincing move
through $114.88-$115.  A close above this level will indicate that
the stock has its sights set on $120 for the next basing period.
If this is the case, look for $114 to hold as the next support

There has been nothing exciting in the news lately.  On Wednesday,
the company did, however, declare a quarterly cash dividend for
its common stock of 5 cent per share, to be payable September 15th.
This did not really affect trade in PVN.  Here's something worth
noting though:  PVN last announced a split in September 1998 when
the stock was trading $63.  It split that December at $93.  So
at $113, PVN just might being nearing that time again.

BUY CALL SEP-110 PVN-IB OI=360 at $ 8.75 SL=6.50
BUY CALL SEP-115 PVN-IC OI= 96 at $ 6.00 SL=4.25
BUY CALL SEP-120*PVN-ID OI=296 at $ 4.00 SL=2.50
BUY CALL DEC-120 PVN-LD OI= 31 at $10.88 SL=8.75

SELL PUT SEP-105 PVN-UA OI= 40 at $ 2.88 SL=4.00
(See risks of selling puts in play legend)

Picked on July 23rd at    102.38    P/E = 28
Change since picked       +10.75    52-week high=$118.50
Analysts Ratings      16-6-2-0-0    52-week low =$ 58.13
Last earnings 06/00    est= 1.25    actual= 1.29
Next earnings 10-19    est= 1.34    versus= 1.04
Average Daily Volume  = 1.02 mln

AFL - AFLAC, Inc. $56.31 (+0.75 last week)

AFLAC, Inc. provides supplemental insurance to individuals in
the United States and Japan. The Company's products help fill
gaps in consumers' primary insurance coverage. AFLAC's products
include cancer expense insurance, care plans, supplemental
general medical expense plans, and living benefit plans.

The crazy quacking duck is still in favor.  After closing just
below the 10-dma on Thursday, we were a bit concerned that profit
takers would ravage this uptrending insurance issue.  Oh contraire!
AFL opened on Friday $0.19 higher than its Thursday close and
never looked back.  Investors jumped at the chance to get into
this stock, reaffirming support in the $54 area.  Within the first
two hours of trading, AFL popped to the heights of $57 where it
encountered resistance.  After that, the stock comfortably settled
into its new surroundings, holding $56 solidly.  Interestingly,
with ten minutes left in the session, a large order of 230K shares
appeared to trade at $56.25, so an dealer may have been
positioning for next week.  The Time & Sales was inconclusive as
to whether it was buy or a sell.  Just keep you eyes peeled for
heightened activity like this.  If investors are bullish on the
insurance issues next week, look for AFL to continue off of its
intraday support at $56.  A bounce from there would be a good
entry.  A dip back to $55 would also be a nice entry, currently
the site of the 10-dma at $54.99.  The challenge most certainly
will be resistance at $57.  The intraday high on Friday of $56.94
actually is an all-time high for AFL.  If AFL breaks above $57
on strong volume, jump on board as the stock soars to new heights.

Not much in the way of news for AFL.  It seems that investors are
liking the stock very much as the companies ad campaign is
becoming extremely recognized by consumers.  CNBC has hammed it
up quite a bit since the CEO of AFL was on the show a few weeks

BUY CALL SEP-50*AFL-IJ OI=90 at $7.18 SL=5.25
BUY CALL SEP-55 AFL-IK OI=55 at $3.38 SL=1.75
BUY CALL SEP-60 AFL-IL OI=53 at $1.38 SL=0.75
BUY CALL NOV-60 AFL-KJ OI=97 at $3.00 SL=1.50

Picked on August 3rd at  $55.31     P/E = 25
Changed since picked      +1.00     52-week high=$56.94
Analyst Ratings       7-3-5-0-0     52-week low =$33.56
Last Earnings 07/25   est= 0.58     actual= 0.59
Next Earnings 10-24   est= 0.61     versus= 0.52
Average Daily Volume   =   667K

DNA - Genentech, Inc. $164.00 (-0.13 last week)

Using human genetic information to discover, develop, manufacture
and market human pharmaceuticals for significant unmet medical
needs is DNAs quest.  Thirteen of the currently approved
Biotechnology products came as a direct result of the company's
science.  DNA markets and manufactures seven of these with the
eighth just getting ready to go into production.  The products
include Rituxan, Activase, Nutropin, NutropinAQ, Nutropin Depot,
Protropin, Pulmozyme, and Actimmune.  The firm is developing other
cancer drugs with ImmunoGen and earns royalties for hepatitis B
vaccines, bovine growth hormones, and Humulin (human insulin).

Although the stock price has only changed 13 cents for the week,
traders who have been playing this one know better.  Those who
read Jim Brown's column last Sunday when he suggested taking some
profit as DNA got close to the $177 area did well.  Selling at
the recent top on Wednesday after three consecutive days of
rallying proved to be the right thing to do.  Those who were late
to take some money off the table had to do so at lower prices on
Thursday, courtesy of Eli Lilly's patent news which appears to
have resulted in strong selling volume in the Biotechs.  Since
then, the stock appears to have found a bottom at $160 on Friday.
Selling down to that level in early morning trading, DNA bounced
quickly spending the rest of the day moving higher.  But, end of
day profit-taking brought the stock to close fractionally lower.
Traders looking for the Holy Grail of entry points for this play
would be hoping for another successful test of the $160 level.  A
more attainable entry point could be found at the 10-dma at
$162.88.  Conservative traders may want to wait for DNA to move
above its 5-dma at $168.75 to confirm upward momentum before
entering.  A breach of the key $160 support level could find the
next level of support at $156.50 and from there, the 50-dma at
$152. Overhead, the stock could find resistance at $165, $167 and
$170.  Clearing $170 would likely bring DNA back to the key level
of $177.  Jim's advice of taking some profit and moving back in
only if DNA clears this level with conviction may once again be a
good idea.

Aside from the appointment of a Vice President on Tuesday, there
has been little material news for DNA.  Sector sympathy and a
strong knowledge of DNA's support and resistance levels will be
the name of the game in trading this stock.

BUY CALL SEP-160 DNA-IL OI= 396 at $15.00 SL=11.00
BUY CALL SEP-165*DNA-IM OI= 202 at $12.50 SL= 9.25
BUY CALL SEP-170 DNA-IZ OI= 360 at $ 9.75 SL= 6.75
BUY CALL DEC-170 DNA-LZ OI= 128 at $23.75 SL=19.50
BUY CALL DEC-175 DWN-LO OI= 516 at $21.50 SL=18.50

SELL PUT SEP-155 DNA-UK OI= 866 at $ 6.88 SL=10.00
(See risks of selling puts in play legend)

Picked on August 5th at $164.13     P/E = N/A
Change since picked       -0.13     52-week high=$245.00
Analysts Ratings      6-8-3-0-0     52-week low =$ 66.88
Last earnings 07/17   est= 0.29     actual= 0.29
Next earnings N/A     est= 0.31     versus= 0.25
Average Daily Volume = 1.10 mln

IDPH - IDEC Pharmaceuticals Corp $136.00 (-1.00 last week)

Based in San Diego, IDEC Pharmaceuticals Corporation is a
biopharmaceutical company engaged primarily in the research,
development and commercialization of targeted therapies for the
treatment of cancer and autoimmune and inflammatory diseases.
The Company's first commercial product, Rituxan, and its most
advanced product candidate, Zevalin are for use in the treatment
of certain B-cell non-Hodgkin's lymphomas (NHL). The Company is
also developing products for the treatment of various autoimmune
diseases (such as psoriasis, rheumatoid arthritis and lupus).

Considering the heavy damage inflicted on a number on biotechs
and pharmaceutical stocks this past week, IDPH has held up well.
Bad news from Eli Lilly rocked both the biotechs and the
pharmaceuticals last week when an unfavorable court ruling
invalidating one of LLY's patents for Prozac sent Wall Street
into a panic.  Re-assessing the strength and value of patents
throughout the industry, the Street decided to re-value stocks
from the two drug-related sectors and for the most part, they
depreciated.  When Thursday's LLY news hit the wires, IDPH fell
and found that the key support level of $130 held up strong.
From there, the buyers rushed in to close the stock higher for
the day, bucking the sector trend.  It is interesting to note
that volume on the buy side has been stronger than volume on the
sell side, which is a good sign for our play.  For those looking
for an entry point, a bounce above $130 would be an ideal target
to shoot for - just make sure it bounces before entering.  Along
with that, a bounce off its 10-dma at $134.60 could also serve
as an entry point for the more aggressive.  Looking overhead, the
next resistance level for IDPH appears to be at $138, and from
there $140 and $143.  Conservative traders may want to see the
stock move past $140 before entering.  For the most part, IDPH has
traded in a range between $130 and $143 this past week.  A
continuation of this sideways action could be possible so keep
those two support and resistance levels in mind before entering
and exiting.

The only news item for IDPH came this Monday when the company
announced that it had began Phase 2 trials in the development of
a treatment for rheumatoid arthritis.  Investors bought on the
news Monday, but the next day sold it back.  While IDPH has held
up in the face of sector weakness this week, any lack of news
could find the stock once again moving in sympathy with sector.

***August contracts expire this week***

BUY CALL SEP-130 IDK-IF OI=29 at $17.75 SL=13.00
BUY CALL SEP-135 IDK-IG OI= 4 at $15.25 SL=11.00
BUY CALL SEP-140*IDK-IH OI=76 at $13.13 SL= 9.75
BUY CALL OCT-140 IDK-JH OI=33 at $20.13 SL=14.50
BUY CALL OCT-145 IDK-JI OI=21 at $18.25 SL=13.50

SELL PUT AUG-130 IDK-TF OI= 3 at $ 2.88 SL= 4.00
SELL PUT SEP-125 IDK-UE OI= 5 at $ 8.88 SL=11.50
(See risks of selling puts in play legend)

Picked on August 3rd at $138.88    P/E = 209.51
Change since picked       +0.13    52-week high=$173.00
Analysts Ratings      6-5-0-0-0    52-week low =$ 42.75
Last earnings 07/17   est= 0.18    actual= 0.26
Next earnings   N/A   est= 0.25    versus= 0.21
Average Daily Volume = 1.10 mln

MER - Merrill Lynch & Co. $139.31 (+3.56 last week)

With its bull icon prominently displayed, many investors view
Merrill Lynch as the leader of herd.  The diversified Financial
powerhouse provides investment, financing, advisory, insurance
and related products and services on a global basis to both
individuals and institutions.  Its Corporate and Institutional
Client Group offers investment banking, brokerage and clearing
services to corporate and government clients.  MER has been
slow to move into the online world, entering the online trading
ring in 1999.

The bull is still charging ahead.  After tracing a new all-time
high Thursday morning, MER succumbed to profit taking ahead of
Friday’s PPI and Retail Sales reports.  After investors absorbed
the impact of these reports, they jumped right back into buy
mode, pushing the stock back up to the $140-141 resistance level
by late afternoon.  Although the stock gave back some of its
gains at the close, there are several levels of nearby support
to help push MER even higher.  Intraday support is seen at $139,
$137.50, and then $136.  Stronger support exists between
$133-135, and is confirmed by the 10-dma (currently $133.94).
As you have heard repeatedly, the Financial stocks will have to
join in the party if we are going to have a significant and
sustained rally.  The DJIA continued to move higher on Friday,
topping 11000 for the first time since late April.  As interest
rate hike fears continue to dissipate, financial powerhouses
like MER should be leading the charge as the markets put on
their rally caps.  Conservative investors may want to wait for
strong volume to return and push MER to new highs (above $141)
before initiating new positions.  If you are a little more
patient though, look for a pullback to support to provide a
more attractive entry point.  As always, follow the money flow;
in order to move higher, MER will need the support of strong
buying and this will be seen in the pattern of increasing

On Friday, MER was announced as one of the winners in the race
to lead-manage a lucrative sale of shares in Japanese telecom
giant Nippon Telegraph and Telephone (NTT).  Along with Goldman
Sachs, Nikko, Salomon Smith Barney, and Nomura Securities, MER
will manage the sale of up to one million shares in the former
state monopoly.  At current market prices, this amounts to more
than $11 billion, and the banks handling the sale will earn tens
of millions of dollars in fees.  The market sentiment seems to be
indicating that the Fed will have a hard time raising interest
rates at its August 22nd FOMC meeting, and the Financials and
Brokerages will be a natural beneficiary of such a move.

BUY CALL SEP-135*MER-IZ OI= 985 at $10.38 SL= 7.25
BUY CALL SEP-140 MER-IH OI= 837 at $ 7.50 SL= 5.25
BUY CALL SEP-145 JMR-II OI= 749 at $ 5.38 SL= 3.25
BUY CALL OCT-140 MER-JH OI=1544 at $11.50 SL= 8.50
BUY CALL OCT-145 JMR-JI OI= 356 at $ 9.13 SL= 6.25

SELL PUT SEP-130 MER-UF OI= 254 at $ 3.38 SL= 5.25
(See risks of selling puts in play legend)

Picked on August 3rd at $130.81     P/E = 18
Change since picked       +8.50     52-week high=$140.94
Analysts Ratings      3-4-3-0-0     52-week low =$ 62.38
Last earnings 07/00   est= 1.71     actual= 2.01
Next earnings 10-17   est= 1.65     versus= 1.34
Average Daily Volume = 2.81 mln

MERQ - Mercury Interactive $99.75 (-0.25 last week)

Mercury makes testing software for enterprise resource planning
applications, client/server software, and e-business
applications.  The company's products perform such tasks as
analyzing and eliminating Web site performance bottlenecks, and
automating quality assurance testing.  Customers include AOL,
American Airlines, Citigroup, and ETrade.  Mercury is looking for
the growing demand for e-commerce to fuel its business.

The dot com bust has taken its toll on many Web stocks.  But, the
right Net companies continue to bring in the cash.  MERQ happens
to be one of those right stocks.  The company operates in the
still-red-hot sector of Internet infrastructure.  Without MERQ's
products, the Web might be an even scarier place.  Along with its
core business of improving Web site performance, MERQ added to its
boutique of offerings with the introduction of a wireless platform
recently.  In essence, MERQ is applying its proven technologies to
such wireless hand-held devices as cell phones and electronic
organizers.  MERQ's quantum leap into wireless applications
induced a strong rally early last week, which tapered off into
the weekend as the broader Tech sector was inflicted with pain
from the bears.  But, MERQ had come a long ways recently, so a
little profit taking last week might have been in order.  The
stock didn't suffer any major technical damage in the wake of the
weak Tech sector last week, which bodes well for the health our
play.  Given MERQ's impressive relative strength, we'll look for
a quick bounce off the technically and psychologically significant
$100 level early next week.  If the Tech sector reasserts its
leadership role, MERQ is sure to lead the way.  A quick bounce
off $100, which is coincidentally the current site of the 10-dma,
might provide an entry point for the more aggressive traders.
MERQ has slight congestion above its current levels, with $105
marking the next hurdle.  A more conservative trader might wait
for MERQ to regain its footing, and look for an entry if the
stock charges above $105.  Make sure to confirm any rally above
resistance with healthy volume as a sign the bulls have regained
the upper-hand.  A bounce off support at $95 might provide another
aggressive entry into the play upon further profit taking.  Friday
morning gave a nice entry at that $95 area.

The news wires were fairly mute last week for MERQ.  Although,
the company announced several new initiatives the week prior with
the likes of ORCL.  Another catalyst to watch for in the coming
weeks is a possible split announcement.  MERQ is trading well
into historical split territory with plenty of shares to authorize
a 2-for-1.

BUY CALL SEP- 95 RBF-IS OI= 42 at $13.38 SL=10.00
BUY CALL SEP-100*RBF-IT OI=305 at $10.63 SL= 7.50
BUY CALL SEP-105 RBF-IA OI= 69 at $ 8.75 SL= 6.25
BUY CALL OCT-100 RBF-JT OI=382 at $16.00 SL=11.50
BUY CALL OCT-105 RBF-JA OI=364 at $13.75 SL=10.25

Picked on August 6th at $100.00    P/E = 204
Change since picked       -0.25    52-week high=$134.50
Analysts Ratings      9-3-1-0-0    52-week low =$ 19.88
Last earnings 06/00   est= 0.12    actual= 0.14
Next earnings 10-16   est= 0.16    versus= 0.11
Average Daily Volume = 1.80 mln

PEB - PE Biosystems $94.00 (-3.00 last week)

PE Biosystems develops, markets and maintains systems that are
used in basic life science research, pharmaceutical research and
development, diagnostics, forensics, and food testing.  PEB and
the Celera Genomics Group are parented by the PE Corporation.
One of PEB's largest customers is sister company, Celera
Genomics, which used the company's technology in its effort to
map the human genome.  The separately traded stocks were
launched in 1999.

PEB's momentum was snowballing earlier in the week.  The share
price made the technical break through the psychological hurdle
at the century mark.  PEB was poised to move higher off its new
near-term support of $100.  Then came the "slamming hammer" on
Wednesday!  The press released the negative findings of a patent
ruling effecting Eli Lilly's (LLY) Prozac.  The judgement
ultimately dragged down the whole drug and biotech sector.
Despite the strong negative pressure following the announcement,
$90 proved to be a firm intraday bottom.  Very aggressive traders
may enter on bounces off these lows, however, it would be safer
to wait for more upward confirmation.  PEB should begin to move
through the 10- and 5-dmas, at $95.23 and $97.29, respectively, in
the next couple of days.  If not, be patient and conservatively
stay on the sidelines.  Remember, this play is purely a
stock-specific run.  Be watchful of the INDU's direction.  At $110,
PEB is considered a split-candidate.  This can sometimes generate
its own excitement and entice more momentum traders to start
nibbling.  The company has plenty of shares to initiate a stock
dividend with 500 mln authorized and approximately 208 mln issued.

In the news this week, PEB announced that Gene Tec Corp. granted
them a non-exclusive license to its patented method of amplifying
nucleic acid targets directly in cells and viruses.  This method
of direct amplification immobilizes biological specimens by
drying them onto solid or porous supports, such as microscope
slides or membranes.

***November options just created, no markets available yet***

BUY CALL SEP- 90 BVE-IR OI=302 at $11.00 SL=8.25
BUY CALL SEP- 95*BVE-IS OI=549 at $ 8.50 SL=6.00
BUY CALL SEP-100 BVE-IT OI=595 at $ 6.38 SL=4.50
BUY CALL SEP-105 BVE-IA OI=562 at $ 4.75 SL=2.75
BUY CALL SEP-110 BVE-IB OI=220 at $ 3.50 SL=1.75

SELL PUT SEP- 85 PEB-UQ OI=226 at $ 4.63 SL=6.00
(See risks of selling puts in play legend)

Picked on August 8th at $100.69    P/E = 113
Change since picked       -6.69    52-week high=$160.00
Analysts Ratings      6-4-1-0-0    52-week low =$ 28.63
Last earnings 06/00   est= 0.26    actual= 0.26
Next earnings 11-02   est= 0.18    versus= 0.14
Average Daily Volume = 1.78 mln

TIBX - TIBCO Software, Inc. $102.94 (-1.75 last week)

TIBCO Software is a leading provider of real-time infrastructure
software for the Internet and enterprise that enables business
to dynamically link internal operations, business partners and
customer channels. The company's flagship solution,
ActiveEnterprise, facilitates this business process integration
by connecting applications, web sites, databases and other
content sources using patented technology called The Information
Bus (TIB).  This technology revolutionized trading on Wall
Street in the mid 1980's and has since been adopted in a wide
range of industries from high-technology manufacturing and
telecommunications to retail and e-business.  TIBCO's global
client base includes 3Com, Netscape, NEC Electronics, Yahoo!,
Bechtel, PageNet and Glaxo Wellcome.

This company went center-stage with investors after it made two
consecutive announcements on August 3rd and 4th.  First, TIBX
saw an increase in volume due to its $100 mln stock acquisition
of XML software maker, Extensibility.  This merger will give
TIBX an excellent resource to the computer languages used in
developing their real-time software.  The action extended into
Friday morning's session with volume once again above average as
TIBX exploded upward.  The jump was fueled TIBCO and Meractor
Software's marketing alliance.  The two companies will now benefit
from selling each other's products to a larger customer base and
thus, increase their respective bottomlines.  On Monday of this
week, the momentum went into full throttle.  TIBX continued to
propel upwards.  By Wednesday, the stock met the next level of
opposition near $120.  The downdraft that followed was clearly
related to the stock's market sensitivity and typical profit
taking.  What it did leave us with are entry opportunities.  The
current price level does mark firm support, but before testing
the waters, wait for positive bounces through the 10-dma at
$106.48 before entering.  Even more conservatively, high volume
moves through $110 may be a better fit with your risk portfolio.
TIBX will be reporting earnings around September 21st with the
expectation to earn $0.05 p/s.  This profitable forecast is
somewhat in the distance, but it's still a good indication that
TIBX could make a run into earnings.

No company news this week to effect trading.

BUY CALL SEP-100 PIW-IT OI= 51 at $13.75 SL=10.25
BUY CALL SEP-105 PIW-IA OI=  9 at $11.25 SL= 8.25
BUY CALL SEP-110*PIW-IB OI=121 at $ 9.38 SL= 6.50
BUY CALL SEP-115 PIW-IC OI= 10 at $ 7.38 SL= 5.25
BUY CALL NOV-120 PIW-KD OI=248 at $13.63 SL=10.25

Picked on August 10th at  $108.00    P/E = N/A
Change since picked         -5.06    52-week high=$147.00
Analysts Ratings        5-2-1-0-0    52-week low =$  6.58
Last earnings 06/00     est= 0.01    actual= 0.04
Next earnings 09-21     est= 0.05    versus=-0.01
Average Daily Volume  =  1.55 mln

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The Option Investor Newsletter                   Sunday 08-13-2000
Sunday                                                      4 of 5

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INCY - Incyte Genomics, Inc. $74.81 (-5.19 last week)

Incyte Genomics, Inc. designs, develops and markets genomic
information-based products and services. These products
and services include database products, genomic data management
software tools, microarray-based gene expression services, genomic
reagents, and related services. The Company's genomic databases
integrate bio-informatics software with proprietary and, when
appropriate, publicly available genetic information to create
information-based products and services used by pharmaceutical
and biotechnology companies and academic researchers to
understand disease and to discover and develop drugs.

Need an umbrella?  Trading down over $200 from its 52-week
high of $289.06, INCY is in the midst of a downpour.  Despite
overall sector popularity, and a run up to $106 on July 11th in
the pre-earnings period, an announcement of negative earnings on
July 18th only proved to accelerate the company's downward spiral.
Only managing to climb to a day high of $77.44 on Friday, the
stock ran right into resistance at the 5-dma and rolled over.
Reporting their 2nd Quarter SEC report last week, things do not
appear to be any more rosy for the upcoming quarters.  Although
the company is expanding like wildfire, making great products, and
increasing customer base, they are spending a huge sum of money to
spur their development.  The Company is investing in its
sequencing, bio-informatics, expression database development, and
e-commerce programs in 2000, and as a result expects to report a
net loss at least through 2000.  If the costs of these programs
are greater than anticipated, or if these programs take longer to
complete, profitability may be further off than thought.  Down 24%
in the past 4 weeks, it appears INCY could be heading lower before
seeing sunnier skies.  Since August 1st, the INCY has managed
nothing more than a few bounces, unable to break resistance of the
downtrending 10- and 100-dmas, $79.46 and $83.13, respectively.
With these bounces, the stock offers a great entry point on spikes
up to the 10-dma.  If it fails to reach that level, however, look
for a convincing drive below support of $71, which held well on
Thursday.  Although INCY announced a 2-for-1 stock split, payable
August 31st, we do not anticipate this to be a major driver for
the stock, considering its prevailing downtrend.  Stop losses may
prove to serve well in any case.

BUY PUT SEP-75 IPQ-UO OI=155 at $12.63 SL=10.00
BUY PUT SEP-70*IPQ-UN OI=134 at $ 8.00 SL= 6.25

Average Daily Volume = 985K

CRA - Celera Genomics $85.00 (-10.50 last week)

Celera Genomics Group is a unit of the PE Corporation.  They
generate and commercialize genomic information to promote the
understanding of biological processes and to assist
pharmaceutical, biotechnology, and life science research
entities in various areas of research.  The company recently
announced it completed the mapping of the human genome ahead of
the international consortium, Human Genome Project.  It will
provide access to its extensive database to the other related
firms and organizations, but at a hefty price of $5 mln to $15
mln per year.

The drop in drugs and biotechs across the board on Wednesday
provided the perfect catalyst for CRA to tumble below its
shorter-term bottom support at $90.  Sister company, PE
Biosystems (PEB), even took a lickin' when the negative news hit
the wire that Eli Lilly was losing its patent rights for Prozac
sooner than anticipated.  There'll likely be an underlying
disposition among investors as to who's next to the patent
chopping block.  So here's our play on CRA.  We've got a
technical breakdown in the share price coupled with a dissenting
sentiment in the sector to stack in our corner.  Here we have
another bearish piece of evidence.  Downside volume, which has
actually been in motion since Tuesday, has been robust.  In the
past two sessions, CRA couldn't penetrate $87 on a rebound so
look to this level for potential entries on a downward bounce.
Going back to May, there is some support at $80 so be aware.  If
it breaks this historical barrier, then the support levels step
down in increment of $10 until it dwindles around $50.  All these
factors cannot guarantee further devastation of the share price,
but they certainly do increase the odds of profiting from a good
play on CRA.  And of course, remember to set stops for protection,
despite this rosy outlook.

BUY PUT SEP-90 CZA-UR OI=178 at $14.00 SL=10.50
BUY PUT SEP-85*CZA-UQ OI=189 at $11.38 SL= 8.50
BUY PUT SEP-80 CZA-UP OI=313 at $ 8.63 SL= 6.00

Average Daily Volume = 1.97 mln


VRSN - VeriSign, Inc. $140.31 (-21.75 last week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  To date, over 300
enterprises have subscribed to the OnSite service and VRSN has
strategic relationships with industry leaders including Cisco,
Microsoft ,RSA, Security Dynamics, and VISA.

The negative momentum for VeriSign has been nothing short of
amazing.  The law of gravity does indeed exist and it appears as
if VRSN has been pulled into a black hole.  Even stocks in a
downtrend get temporary relief from positive news items or
technical bounces, but not for VRSN.  This past week could be
summed up in one sentence: one consecutive down day after another.
When it rains, it pours and without even a dead-cat bounce to sell
into, investors of VRSN have been just plain selling.  Even news
on Tuesday of an alliance with Chinese Domain Name Corporation
failed to bring in the buyers.  The 10-dma (now at $151) has been
formidable resistance for the stock for over the past two weeks.
On Monday, VRSN moved below not only its 100-dma (now at $152),
but its 200-dma (at $158) as well.  From there, VRSN attempted to
move above those two technicals with no avail, as the stock broke
key support of $150 on Tuesday.  Since then the stock has
continued lower ending the week just above another key support
level at $140.  Traders looking for an ideal entry point would
want to see a failed rally above its 10-dma in the $150 area.
The past couple of days has seen the move down accelerate with
VRSN now finding resistance at the 5-dma at $146 as well.
Conservative traders will want to see VRSN break $140 to the
downside with conviction before entering.  From there, support
levels can be found in increments of $5, at $135 and $130.  With
numerous overhead resistance points, a resurrection for VRSN will
be difficult.  It appears now that VRSN is moving in sympathy
with Internet plays which seasonally have a difficult time in the
summer.  With positive news not helping the stock and negative
momentum accelerating, it is not unreasonable to see the selling
continue if support at $140 fails to hold.

BUY PUT SEP-145*XVR-UI OI=740 at $19.00 SL=13.75
BUY PUT SEP-140 XVR-UH OI=459 at $15.25 SL=11.00
BUY PUT SEP-135 XVR-UG OI=179 at $13.50 SL=10.00

Average Daily Volume = 4.05 mln

MU - Micron Technology $75.63 (+2.19 last week)

Micron is one of the world’s leading makers of semiconductor
memory components.  Two-thirds of the companies revenues come
from dynamic random-access memory (DRAM), flash memory, and
other chips.  MU has added the newer Rambus DRAM and Synchronous
DRAM products to its line, and it is developing embedded memory
for the digital video and other markets.  The other third of
the company’s sales come from Micron Electronics (61% owned by
MU), which makes PCs and laptop computers and offers Internet
related business services.

The meltdown in the Semiconductor stocks set the stage for our
play on MU last weekend.  After Jonathan Joseph at Salomon Smith
Barney yanked the rug out from under the sector with cautionary
comments about slowing demand, the SOX index dropped 25% in less
than 2 weeks and MU went along for the ride.  When we added it
as a play last weekend, the stock had dropped over $6 the prior
day, closing at the low of the day, just fractionally above the
100-dma (then at $72.56).  Looking for confirmation that the
trend would continue, we had to wait until Thursday morning for
our signal.  Although MU showed signs of weakening near the
close on Wednesday, the real deal came midday on Thursday, as
the stock rolled over from the $80 level on increasing volume.
For those that slept through that entry point, they were
provided one more chance late in the day as MU bounced near
$75 and then rolled over again at the $78 resistance level,
right at the 10-dma.  Friday’s action was mixed as the stock
bounced again at the 100-dma (now at $73.19), but couldn’t
even penetrate the declining 5-dma (now at $77.06) before
rolling over again.  In short, the downtrend is still intact,
but we need to see a penetration of the 100-dma to the
downside.  Consider new positions as the stock rolls over
from either the 5-dma or 10-dma on increasing volume.  If MU
heads lower from current levels, wait for a penetration of
the 100-dma before jumping on the bandwagon.  If the 100-dma
continues to hold, we may be looking at a bottom.

BUY PUT SEP-80*MUY-UP OI=17134 at $9.88 SL=7.00
BUY PUT SEP-75 MUY-UO OI= 5842 at $7.13 SL=5.00
BUY PUT SEP-70 MU -UN OI= 2699 at $5.00 SL=3.00

Average Daily Volume = 6.44 mln

SGP - Schering-Plough Corp. $41.00 (-2.13 this week)

Schering-Plough is a holding company that, through its
subsidiaries, is engaged in the discovery, development,
manufacturing and marketing of pharmaceutical products
worldwide.  The company has three principal product lines;
prescription products, animal health products, and over the
counter (OTC) health care products.  At the head of SGP’s
prescription drug roster is Claritin, the world’s top
antihistamine.  The company’s OTC brand names include Afrin
(nasal sprays), Dr. Scholl’s (foot care), and Coppertone and
Bain de Soleil (sun care).

Anybody for a "dead cat" bounce?  After the selloff that ensued
in the wake of the announcement of Eli Lilly’s failure to extend
its patent protection for Prozac, certain Pharmaceutical
companies recovered on Friday.  Companies at risk of similar
drops in their stock prices are those that derive a large
portion of their revenue stream from sales of patent-protected
drugs.  SGP has its own patent expiration problem to deal with,
as its patent on Claritin will expire later this year.  Although
the company already has a replacement in the pipeline awaiting
FDA approval, the negative sentiment created by the LLY judgment
is likely to weigh heavily on the share price of the larger
Pharmaceutical companies in the near future.  SGP bounced with
its peers, but it was clearly a half-hearted attempt.  After the
bulls had their say during amateur hour, it was clear from the
declining volume that the stock would have a hard time holding
its gains.  The price gradually drifted lower for the balance
of the day on light volume.  Although the daily volume came in
above the ADV, the bulk of that volume came early in the morning
with muted interest for the rest of the session.  So where do
we go from here?  Mild resistance at $42 is backed up by the
10-dma at $42.69 and much stronger resistance at $43.  Consider
new entries on a volume-backed rollover at resistance or wait
for selling to push the price through support between $39-40.
Below that, support is found at $35 and $30, and as the price
approaches these levels, prudent investors will lock in profits
by tightening up their stops.

BUY PUT SEP-45 SGP-UI OI= 242 at $4.88 SL=3.00
BUY PUT SEP-40*SGP-UH OI= 470 at $1.88 SL=1.00

Average Daily Volume = 4.41 mln

LVLT - Level 3 Communications $59.75 (-7.88 last week)

LVLT is building more than 20,000 miles of fiber-optic networks
in the U.S. and Europe in an attempt to become a leading
bandwidth provider.  The company's networks also include undersea
capacity across the Atlantic and Pacific.  LVLT serves such
data-intensive customers as Internet service providers (ISPs) and
telecom carriers.  Services include Internet access, network
equipment, and fiber optic leasing.

The Telecom Services sector has been vacated by the bulls
recently.  And it's no wonder, the slew of warnings from a
diverse number of Telecom-related companies has prompted the
bears to take charge.  Earnings warnings from the likes of AT&T,
Verizon, and Lucent have spread harm throughout the sector like
the wild fires burning out of control in the west.  For its part,
LVLT has been scorched by the high-profile missteps by its
Telecom brethren.  Although LVLT operates in the bullish Fiber
Optic sector, the threats of slowing growth in its other business
segments have overshadowed its future prospects.  The biggest
challenge that LVLT currently faces is trying to prove to Wall
Street that it can deliver the profits it has promised.  The
increasingly stiff competition within the sector lends itself to
scrutiny from profit hungry investors.  That scrutiny is evident
in LVLT's recent fall from grace near the $80 level.  The stock
has been punished by institutions over the last month, noting the
unusually heavy volume on the downside.  The massive liquidation
in LVLT has carried the stock below one support level after
another, with few signs of the selling slowing.  While the
broader Telecom sector somewhat stabilized last Friday, LVLT
plunged lower on more than twice its ADV.  LVLT's poor showing
Friday might warrant consideration for entering the play at its
current levels.  If the stock bounces higher, look for a bump
against resistance at $60 for a possible aggressive entry point.
A more conservative trader might target shoot for entry if LVLT
falls below $58.  Confirm any downside move with volume as a sign
the institutions are still selling.  Look for new OTM contracts
to be issued next week as LVLT fell below its lowest option
series Friday, and remember to wait for OI to build.

BUY PUT SEP-70 QHN-UN OI=547 at $12.75 SL=9.50
BUY PUT SEP-65*QHN-UM OI=349 at $ 8.88 SL=6.25
BUY PUT SEP-60 QHN-UL OI=557 at $ 6.00 SL=4.00

Average Daily Volume = 2.05 mln

AMD - Advanced Micro Devices $57.00 (-5.75 last week)

AMD ranks #2 in the microprocessor market, after Intel.  The
company has grabbed a substantial share of the sub-$1000 PC
market.  AMD's microprocessors include the K6 and the super-fast
Athlon (K7).  The company also makes embedded chips and
nonvolatile memories.  AMD's major markets are computers,
networking, and communications.  About 60% of sales are outside
the United States.

Care for a little dip with your Chips?  A few brave souls on Wall
Street have recently muttered "correction" regarding the recent
action in leading Semi stocks.  Judging by the action in AMD over
the past two weeks, the term "correction" might very well apply.
It's evident that the Chip bears have taken the control of the
group away from the bulls recently.  Although demand for flash
memory and the broader Chip business appears healthy on the
surface, the fear of a slowdown remains at the forefront of
investors' concerns.  The slowdown in PC sales, which was
exacerbated by DELL late last week, has added to the bearish
outlook for AMD.  In conjunction with the recent sell-off in the
stock, AMD has announced several key developments in its product
offering.  The company said last week that it had developed a
chip to compete with Intel's 1.13 ghz powerhouse.  On top of
that, AMD announced last Thursday it is currently developing a
64-bit processor, which will make its debut in high-end servers
and desktop PCs early next year.  Despite the promising
developments within the company, its stock continues to languish
in the wake of the weakness in the broader Semi sector.  The
overpowering bearish sentiment in the Chip sector pushed AMD
below several key support levels last week.  The stock fell as
low as $54 last Friday, before an intraday reversal in the Chip
sector carried AMD out of the mire.  The late-day buying last
Friday might have been the early signs of a split run; AMD is set
to split 2-for-1 on August 21st.  With that said, wait for the
bears to return to the sector before initiating new positions.
An aggressive trader might target shoot for entry if the Chip
sector shows weakness early Monday morning.  A more conservative
trader might look for an entry if AMD falls back below $56, or
plunges below its intraday low at $54.

BUY PUT SEP-60*AMD-UL OI=690 at $7.75 SL=5.50
BUY PUT SEP-55 AMD-UK OI=379 at $5.00 SL=3.00
BUY PUT SEP-50 AMD-UJ OI=702 at $3.13 SL=1.50

Average Daily Volume = 4.89 mln

AAPL - Apple Computer Systems $47.69 (+0.31 last week)

Apple ignited the personal computer revolution in the 1970s with
the Apple II and reinvented the personal computer in the 1980s
with the colorful Macintosh.  Other products include the Mac OS
operating system, the portable iBook, and a variety of
multimedia tools.  Apple is committed to bringing the best
personal computing experience to students, educators, creative
professionals and consumers around the world through its
innovative hardware, software and Internet offerings.  The
company is still run by the original founder, Steve Jobs.

The big picture is the story of slowing PC sales and a poor
outlook for the 3Q.  The summer doldrums supplied the slothful
environment that perpetuated AAPL's recent slippage.  But, DELL's
sharp dive following its earnings release on Thursday was a
direct bonus!  Currently the 5-dma ($47.51) and 10-dma ($48.03)
are serving as impenetrable shields against upward advancements,
which provides us with a good entry/exit gauge.  Technically,
there's light support first at $45, then lower at $40, so watch
for opposition at these levels.  For visual confirmation, take a
look at Friday's chart and note how AAPL found a near-term
bottom at $45.56 during amateur hour.  The stock-specific
intraday gyrations should provide enough volatility to make a
quick in-and-out play profitable.  However, there's no question
AAPL is risky.  Keep stops tight.

BUY PUT SEP-50*AAQ-UJ OI=408 at $5.38 SL=3.25
BUY PUT SEP-45 AAQ-UI OI=783 at $2.63 SL=1.25
BUY PUT SEP-40 AAQ-UH OI=751 at $1.19 SL=0.00

Average Daily Volume = 4.62 mln

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Shhhh! I Think I Hear A Bull Charging Up Wall Street
By Mark Phillips
Contact Support

After enduring a weak market like we have seen since early
spring, many investors (myself included) have started seeing
marauding bears around every corner.  Of course it doesn’t help
that many of our favorite companies have failed to rally into
earnings for the last two quarters, causing many to question if
and when we will return to the "good old days".  It doesn’t help
having every bearish pundit and analyst that wants their 15
minutes of fame being paraded on CNBC, where they proceed to
tell us that the good old days are over and we should just get
used to it.

But it isn’t my job to rehash the old news.  I want to help you
grab the opportunities that do present themselves so that we are
all sitting on much fatter trading accounts this time next year.
So let’s take a fresh look at what has happened in recent
months.  The DJIA have been effectively rangebound (although it
is really quite a large range) for well over a year.  The NASDAQ
endured a painful 40% decline this spring and has been
struggling to stay on the road to recovery ever since the lows
in late May.

But if you look under the surface, many of the strong "new
economy" companies are trading at or near their highs for the
year.  Many of these companies (such as EMC, NT, SUNW) are on
the LEAPS playlist.  What about those Financial stocks?  Look at
our plays in this sector, as WM, AXP, and C are continuing to
move higher.  Even select Biotechs (GENZ, and our new play FRX)
have had stellar performances recently.  So why is the NASDAQ
still trading over 1300 points off its March highs?  The much
anticipated dot.com shakeout was the major casualty of the
spring decline, and it is clear that many of the once-hot
e-commerce stocks will likely never regain their past glories.

Weakness on the NYSE has largely come from cyclicals like IP,
AA, DD, GM, and the like.  But look at charts and you can see
classic bottoming patterns on many of these.  Their weakness is
no surprise, as they typically bottom every year about this time
(late July - early October) before running up into the fall and
early spring.  I guess that is why they are called "cyclical
stocks".  Granted, these stocks are not as exciting as JDSU,
AMCC, and a couple hundred other rocket stocks, but they are
predictable.  I don’t know about you, but I don’t care what I
invest in, just so long as I make money - the more, the better!

The economy still looks strong, unemployment is low, and it
looks like there are enough signs of slowing to keep the Fed on
the sidelines for the rest of the year.  Except for those
companies that didn’t execute on their business plan, earnings
came in very strong and many of our favorite companies guided
the analysts to revise their future growth estimates upwards.

This is just about my favorite time of the year as a LEAPS
investor.  While other investors are on vacation or wondering
whether the market is ever going to relive the glory days from
so long ago (you know, 5 months ago?), I am thanking my lucky
stars that I was smart enough to listen to Jim and rest of the
OIN staff this spring and preserve my capital.

Now before you think I have become a stampeding bull and run
out to buy everything on the playlist, make sure you heed the
warning signs as well.  The VIX is continuing to meander south
of 22, closing out the week at 21.24.  The market is usually
weak this time of year, and another retest of recent support
levels is entirely possible before we head to new highs.  If
we do get a rally in the weeks ahead, it could be just a
pre-game warmup for the main event which (if history repeats
itself) should start by late October.

I hope you took my advice and used the past couple months as an
opportunity to close out any remaining 2001 LEAPS positions.  We
are already starting to see the effect of time decay on these
front-year options.  This effect is most pronounced on those
positions that are currently OTM.  Any option that is out of the
money is, by definition, all time value.  Look at the disparity
in Return (or Loss) on some of our beaten down positions like
NSM, AOL, and NOK.  When these positions were profitable, the
2001 would show a better percentage return than the back year
strikes due to the lower cost basis, but that effect is reversed
in a down market.  We have entered the portion of the time decay
curve where the slope continues to steepen as we get closer to
expiration.  If you locked in your profits, you will be in great
shape as you go hunting for new entry points over the coming
weeks and months.

The key to successful LEAPS investing is finding strong
companies that continue to show impressive revenue growth.
Once you find those companies (and if you’ll pardon a little
immodesty, I think the LEAPS playlist is a great place to
start), the real trick is to exercise an inordinate amount of
discipline.  The truly large gains will come from waiting, and
waiting, and waiting some more for that market event that
provides the truly attractive entry point.  If you have cash in
hand when it comes, you’ll be really happy.  But if you are
still nursing losing positions because you "know" they will come
back, it is hard to focus on new opportunities, and many times
they will pass you by.  There are many of our current plays that
are trading very close to major support (VRSN, DELL, NSM, AOL,
to name a few), and the coming weeks could provide the entry
points we all want for the rally later this year.

Decide where you want to put that cash to work and then define
your entry strategy.  And actually write it down.  Then you have
it recorded, so when you go to place that trade, you know that
you have thought the trade through and are happy with it.  The
best decisions are made while the market is closed, so that they
can be acted on in a sure and confident manner when the market
is open.

Plan your trade and then stick to the plan.

Current Plays


EMC    11/07/99  JAN-2001 $ 40  EMB-AH   $ 7.69   $50.88   561.64%
                 JAN-2002 $ 45  WUE-AI   $ 9.50   $52.00   447.37%
                 JAN-2003 $ 90  VUE-AR   $35.50   $35.00    ------
CSCO   11/14/99  JAN-2001 $ 40  CYQ-AH   $ 9.56   $27.13   183.79%
                 JAN-2002 $ 45  WIV-AI   $11.00   $27.88   153.45%
                 JAN-2003 $ 70  VYC-AN   $25.13   $22.00    ------
NT     11/28/99  JAN-2001 $37.5 NT -AU   $11.13   $42.88   285.27%
                 JAN-2002 $37.5 WNT-AU   $15.13   $46.88   209.85%
                 JAN-2003 $ 80  ODT-AP   $28.63   $29.88    ------
SUNW   12/19/99  JAN-2001 $ 80  SUX-AP   $17.63   $38.00   115.54%
                 JAN-2002 $ 90  WJX-AR   $22.00   $43.00    95.45%
                 JAN-2003 $105  VSU-AA   $40.63   $45.00    ------
ERICY  01/30/00  JAN-2001 $16.3 RQC-AO   $ 4.94   $ 4.50   - 8.90%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 6.75     0.00%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 6.00   -12.79%
NSM    02/27/00  JAN-2001 $ 70  NSM-AN   $18.50   $ 1.75   -90.54%
                 JAN-2002 $ 70  WUN-AN   $24.25   $ 7.50   -69.07%
                 JAN-2003 $ 40  VSN-AH   $16.50   $16.88    ------
AOL    03/12/00  JAN-2001 $ 60  AOO-AL   $14.00   $ 4.13   -70.50%
                 JAN-2002 $ 65  WAN-AM   $18.63   $ 9.25   -50.35%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $17.50     0.00%
AXP    03/12/00  JAN-2001 $43.3 AXP-AP   $ 7.25   $17.63   143.17%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $20.38   118.44%
                 JAN-2003 $ 60  VAX-AL   $18.38   $17.50    ------
WM     03/19/00  JAN-2001 $ 25  WM -AE   $ 5.00   $10.50   110.00%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 9.25    71.93%
                 JAN-2003 $ 35  VWI-AG   $ 7.63   $ 9.25    ------
AMD    04/16/00  JAN-2001 $ 70  AMD-AN   $17.50   $ 8.63   -50.69%
                 JAN-2002 $ 70  WVV-AN   $26.00   $18.50   -28.85%
                 JAN-2003 $ 90  VVV-AR   $36.75   $20.38    ------
JDSU   04/16/00  JAN-2001 $ 80  XXZ-AP   $27.50   $45.75    66.36%
                 JAN-2002 $ 80  YJU-AP   $39.63   $59.50    50.14%
                 JAN-2003 $120  VEQ-AD   $52.38   $55.38    ------
MOT    05/14/00  JAN-2001 $33.3 MOT-AY   $ 6.58   $ 5.75   -12.61%
                 JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 9.13   - 4.30%
                 JAN-2003 $ 40  VMA-AH   $13.38   $11.25    ------
NOK    05/21/00  JAN-2001 $ 50  NZY-AJ   $10.25   $ 3.75   -63.41%
                 JAN-2002 $ 50  IWX-AJ   $17.25   $10.00   -42.03%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $14.00   -21.13%
HD     05/28/00  JAN-2001 $ 50  HD -AJ   $ 6.25   $10.63    70.10%
                 JAN-2002 $ 50  WHD-AJ   $11.38   $16.63    46.13%
       08/06/00  JAN-2003 $ 60  VHD-AL   $15.25   $16.50     8.20%
NXTL   06/11/00  JAN-2001 $ 60  FZC-AL   $12.25   $ 8.63   -29.55%
                 JAN-2002 $ 60  YFG-AL   $19.25   $15.50   -19.48%
                 JAN-2003 $ 60  VFU-AL   $21.88   $20.38    ------
C      06/18/00  JAN-2001 $ 65  C  -AM   $ 7.63   $12.38    62.25%
                 JAN-2002 $ 65  WRV-AM   $13.75   $19.50    41.82%
                 JAN-2003 $ 75  VRN-AO   $20.50   $19.75    ------
AMGN   07/02/00  JAN-2001 $ 75  YAA-AO   $10.75   $ 8.88   -17.40%
                 JAN-2002 $ 75  WQY-AO   $20.75   $19.13   - 7.81%
                 JAN-2003 $ 70  VAM-AN   $28.75   $27.63   - 3.90%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $41.63   -37.16%
                 JAN-2003 $180  OVS-AP   $88.00   $57.63    ------
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 4.88   -61.36%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 6.88   -55.27%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $24.13    40.86%
                 JAN-2003 $ 70  OZG-AN   $23.13   $30.63    32.43%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $29.63     4.88%
                 JAN-2003 $120  VHP-AD   $32.63   $34.75     6.50%
PCS    07/30/00  JAN-2002 $ 60  WVH-AL   $11.88   $11.38   - 4.21%
                 JAN-2003 $ 65  VVH-AM   $14.38   $13.63   - 5.22%
EXDS   08/03/00  JAN-2002 $ 55  WZZ-AK   $20.75   $24.13    16.29%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $29.00    14.26%
MFNX   08/03/00  JAN-2002 $ 40  WOF-AH   $13.75   $13.00   - 5.45%
                 JAN-2003 $ 45  VKW-AI   $15.63   $15.38   - 1.60%
GM     08/03/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $12.38    25.30%
                 JAN-2003 $ 65  VGN-AM   $13.25   $16.00    20.75%

Spotlight Play

AOL - America Online $51.75

It’s been awhile since we looked at our play on AOL.  When was
the last time you saw this number 1 ISP move up 8-10 points in a
single day?  It’s hard to do in this market environment, and
investors are still unsure what to make of the pending merger
with Time Warner (TWX).  As long as there are no regulatory
snags, look for the deal to be finalized later this year.  This
merger is expected by many analysts to create a tremendously
powerful media and Internet conglomerate, and the decline in
price and volatility is serving to make the play look attractive
again.  As the NASDAQ has continued to consolidate, AOL has
been drifting lower, but on continually declining volume.  Every
so often, there is a higher volume day, and it is interesting to
note that these are normally days when the stock goes up in
price.  Major support sits between $48-50, and a dip to this
level looks like the best entry we will see this year.  Don’t
try to catch a falling knife though.  If the stock drops through
this support level, stand aside and look for another play.  Wait
for the bounce at support and then grab your share of the pie
as the buying volume grows.

BUY LEAP JAN-2002 $55.00 WAN-AK at $12.75
BUY LEAP JAN-2003 $55.00 VAN-AK at $17.50

New Plays

FRX - Forest Laboratories $100.63

If you like excitement, the Pharmaceutical stocks were the place
to be last week.  After Eli Lily (LLY) failed to convince the
courts to extend the company’s patent protection for their
flagship drug, Prozac, investors were feeling the need for this
wonder drug.  This raised concerns throughout the sector about
any drug company with a large portion of their revenue stream
coming from drugs approaching the end of their patent cycle.
It is expected that drug companies that produce generic forms of
these patented drugs will undercut the large Pharmaceutical
companies, and eat into their profit margins.  Investors really
couldn’t make up their mind what they wanted to do with shares
of FRX.  The company develops, manufactures and sells both
branded and generic forms of prescription drug products as well
as many over the counter (OTC) products.  Some of the company’s
more notable products are Celexa (for depression), Tiazac (for
hypertension and angina), and respiratory products Aerobid,
Aerochanber and Tessalon.  Initially lumped in with LLY, FRX
saw its share price cut from nearly $120 to $80 on Wednesday
afternoon.  Quickly coming to their senses though, investors
realized that FRX was positioned to profit from the generic side
of the drug business and the stock marched higher for the
remainder of the week, closing back above the magical $100
level.  On Wednesday afternoon, the stock gapped down from $102
to $92, and the recovery late in the week has almost filled the
gap.  Resistance could materialize at this $102 level, but if
the stock continues to recover, look to initiate new positions
as the price moves above $102.  Although it is a less likely
scenario at this point, a pullback is also possible.  If it
occurs, look for a bounce between $93-95, where the price
consolidated for much of Thursday afternoon.

BUY LEAP JAN-2002 $ 95.00 WRT-AS at $31.38
BUY LEAP JAN-2003 $100.00 VFB-AT at $37.38




From Splits to Split Runs
By Ryan Nelson

If July was plentiful for splits, then August should produce
plenty of split runs.  We are starting to see this come to
fruition too as our split run list begins to grow.  You can
see from the splits calendar listed below that many ex-dates
are coming up in the next two to four weeks.  The market is
looking stronger now with the DJIA above 11,000.  All we need
now is relief from a Fed tightening at the next FOMC to help
momentum players return to market.

Current Split Run Plays

MER - 09/01 ex-date
EXTR - 08/25 ex-date

Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

SEBL - 08/08 (most recent announcement)
SAPE - 08/01
AMD - 07/19
PDLI - 07/11
TXN - 04/20
CMVT - 03/07
CHINA - 03/06
VRTS - 01/27
NT - 01/25
SEPR - 01/20

Major Announcements So Far This Month = 8


For our complete stock split calendar, click here...

Symbol  Company Name                Splits  Payable   Executable
ACTU - Actuate Corporation           2:1  08-14-2000  08-15-2000
DFXI - Direct Focus, Inc             3:2  08-14-2000  08-15-2000
CORR - COR Therapeutics, Inc         2:1  08-15-2000  08-16-2000
POS  - Catalina Marketing Corp.      3:1  08-17-2000  08-18-2000
MNMD - MiniMed Inc.                  2:1  08-18-2000  08-21-2000
PROX - Proxim, Inc                   2:1  08-18-2000  08-21-2000
SIMG - Silicon Image, Inc.           2:1  08-18-2000  08-21-2000
SYMM - Symmetricom, Inc              3:2  08-18-2000  08-21-2000
AFFX - Affymetrix, Inc               2:1  08-21-2000  08-22-2000
AMD  - Advanced Micro Devices        2:1  08-21-2000  08-22-2000
CDT  - Cable Design Technologies     3:2  08-21-2000  08-22-2000
DYN  - Dynegy Inc.                   2:1  08-21-2000  08-22-2000
NSIT - Insight Enterprises Inc.      3:2  08-21-2000  08-22-2000
INHL - Inhale Therapeutic Systems    2:1  08-22-2000  08-23-2000
PDLI - Protein Design Labs           2:1  08-22-2000  08-23-2000
BRO  - Brown & Brown Inc.            2:1  08-23-2000  08-24-2000
TSTN - Turnstone Systems, Inc.       2:1  08-23-2000  08-24-2000
VRTX - Vertex Pharmaceuticals Inc   .2:1  08-23-2000  08-24-2000
AMRI - Albany Molecular Research     2:1  08-24-2000  08-25-2000
EXTR - Extreme Networks              2:1  08-24-2000  08-25-2000
ATML - Atmel Corporation             2:1  08-25-2000  08-28-2000
C    - Citigroup Inc.                4:3  08-25-2000  08-28-2000
CECO - Career Education Corp.        2:1  08-25-2000  08-28-2000
MERX - MERIX CORP.                   3:2  08-25-2000  08-28-2000
RFMD - RF Micro Devices, Inc.        2:1  08-25-2000  08-28-2000
WAT  - Waters Corporation            2:1  08-25-2000  08-28-2000
IMPH - Impath Inc.                   2:1  08-28-2000  08-29-2000
MPWR - Mpower Communications         3:2  08-28-2000  08-29-2000
SAPE - Sapient Corporation           2:1  08-28-2000  08-29-2000
BELM - Bell Microproducts Inc.       3:2  08-31-2000  09-01-2000
INCY - Incyte Genomics, Inc          2:1  08-31-2000  09-01-2000
MER  - Merrill Lynch & Co., Inc.     2:1  08-31-2000  09-01-2000
PLCM - Polycom, Inc.                 2:1  08-31-2000  09-01-2000
PLXS - Plexus Corp.                  2:1  08-31-2000  09-01-2000
VSAT - ViaSat, Inc.                  2:1  08-31-2000  09-01-2000
NETE - Netegrity, Inc.               3:2  09-01-2000  09-04-2000
MARY - St Mary Land & Exploration Co 2:1  09-05-2000  09-06-2000
RARE - Rare Hospitality INC.         3:2  09-05-2000  09-06-2000
SEBL - Siebel Systems, Inc.          2:1  09-08-2000  09-11-2000
BUD  - Anheuser-Busch Companies Inc  2:1  09-11-2000  09-12-2000
PWER - Power-One, Inc.               2:1  09-11-2000  09-12-2000
NDSN - Nordson Corp                  2:1  09-12-2000  09-13-2000
EXBD - Corporate Executive Board Co  2:1  09-15-2000  09-18-2000
ORBK - Orbotech Ltd                  3:2  09-15-2000  09-18-2000
SNWL - SonicWALL Inc                 2:1  09-15-2000  09-18-2000
FLEX - Flextronics International Ltd.2:1  10-16-2000  10-17-2000
PSC  - Philadelphia Suburban         5:4  12-01-2000  12-04-2000

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The Option Investor Newsletter                   Sunday 08-13-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:


Trading Basics: Rules for success...
By Mark Wnetrzak

There are a number of fundamental guidelines that can help a new
trader profit in the market.  These rules, along with a system for
money management and a proven trading strategy will provide any
investor with the basis for consistent profits.

The first rule is: Know the market, its condition and the future
economic outlook.  Use that knowledge to place trades that conform
with the direction given by the fundamentals.  The equity market
anticipates the movement of the economy and shows us in advance
what we can expect with regard to corporate health, unemployment,
interest rates and other financial trends.  Understand there is
an economic reality to which the market will inevitably converge
and it is far easier to profit from positions that are in harmony
with that trend.  Stay in touch with the "tone" of the public and
learn to anticipate swings in investor sentiment.  News and major
events should evoke the proper response.  For example, a strong
market will shrug off bearish developments and respond vigorously
to favorable conditions.  When a specific sector or industry group
encounters adverse circumstances, but does not decline in reaction
to the occurrence, then it should certainly outperform the
majority of issues in that segment of the market.  In addition,
when reviewing specific issues, remember that fundamental analysis
is the principle activity of brokerages and public investors and
that is the most common manner in which the outlook for equities
is reflected in the current prices.

The second important axiom is: Trade the primary trend and focus
on issues or groups that are performing the best in the current
environment.  There are many ways of expressing this idea but the
simplest approach is "buy rising markets and sell falling markets."
This theory seems paradoxical, because common sense would suggest
that the best way to make money is to buy low and sell at higher
prices.  Of course, this is true from an abstract point of view
but it has nothing to do with "trend" or "momentum" trading.  In
fact, buying a market that is in a downtrend is often the quickest
way to lose money.  While the issue may appear to be a bargain at
the reduced levels, chances are it will likely become even cheaper.
A well known trading adage suggests, "The best time to pick up a
falling knife is after it has hit the floor, and finished its

One way to determine the primary trend is to use a moving average.
Obviously, there are many types of moving-average analyses, all of
which are basically equivalent.  Some traders monitor crossovers
while others concentrate on the direction of the moving average,
or the slope of its ascent or descent.  After the major bias is
established, use relative-strength analysis to identify the groups
or sectors that are leading the movement.  The relative-strength
comparison helps determine which individual issues or industries
are outperforming the broader market.  The basic premise of this
type of approach that you should buy only the strongest stocks
in the top performing sectors and liberate your portfolio of the

The most important guidance that new traders should adhere to is
the need to outline an entry/exit strategy, before you initiate a
position, to eliminate emotional decisions.  Using predetermined
targets for profit and loss addresses a number of points.  First,
it eliminates the need for judgment under fire.  Second, it keeps
you from selling too soon, depriving yourself of potential upside
profits.  Finally, an exit strategy will help you retain previous
gains rather than exposing the position to a possible loss.  Most
techniques for limiting losses (and taking profits) are based on
a prearranged goal, or a trailing stop, which is moved up as the
issue advances.  For example, traders commonly use a percentage
trailing stop, such as 5% or 10%.  In simple terms, the trailing
stop is placed a fixed distance below the highest price attained
by the issue since the position was initiated.  As the instrument
moves higher, the stop is adjusted upwards, in essence "locking in
profits."  Wise traders know it is prudent to initiate a stop-loss
system (mental or mechanical) with any new position and those who
comply with this principle are certain to improve their success in
this vicious game that is the Stock Market.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

Stock  Price  Last   Call  Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

TMWD   59.50  51.19   AUG  45.00 18.63  *$  4.13  11.0%
HLYW    8.94   8.06   AUG   7.50  2.06  *$  0.62   9.8%
ASKJ   17.44  18.50   AUG  15.00  3.25  *$  0.81   8.3%
ACOM   21.75  23.94   AUG  15.00  7.50  *$  0.75   7.6%
ANTC   45.50  43.06   AUG  40.00  6.63  *$  1.13   6.3%
DLK    16.75  18.00   AUG  12.50  5.25  *$  1.00   6.3%
NPNT   14.63  12.19   AUG  12.50  2.75   $  0.31   5.7%
CGO    42.13  45.31   AUG  35.00  8.38  *$  1.25   5.4%
PSFT   18.38  24.81   AUG  15.00  4.38  *$  1.00   5.2%
WFR    18.38  15.50   AUG  15.00  4.38  *$  1.00   5.2%
PMTC   12.69  11.25   AUG  10.00  3.25  *$  0.56   5.2%
FRNT   18.44  17.56   AUG  17.50  1.50  *$  0.56   4.8%
MCOM   33.00  33.50   AUG  25.00  9.25  *$  1.25   4.6%
OO     13.94  16.13   AUG  12.50  1.94  *$  0.50   4.5%
IGEN   20.69  18.50   AUG  17.50  3.88  *$  0.69   4.5%
REGN   29.38  29.44   AUG  25.00  4.88  *$  0.50   4.4%
CLTR   22.00  25.50   AUG  17.50  5.00  *$  0.50   4.3%
EPTO   15.13  12.25   AUG  12.50  3.38   $  0.50   3.1%
MCRE   13.06   9.75   AUG  10.00  3.50   $  0.19   2.2%
IMNR   11.00   7.28   AUG   7.50  3.88   $  0.16   2.0%
GPX     5.81   4.56   AUG   5.00  1.25   $  0.00   0.0%
MAIL    9.44   6.78   AUG   7.50  2.50   $ -0.16   0.0%
LOOK   23.00  16.38   AUG  17.50  6.25   $ -0.37   0.0%

NOVN   35.00  34.94   SEP  35.00  2.88   $  2.82   6.4%
ROS    15.75  15.31   SEP  15.00  1.88  *$  1.13   5.9%
ECLP   12.00  13.38   SEP  10.00  2.75  *$  0.75   5.9%
ORG    14.38  14.50   SEP  12.50  2.75  *$  0.87   5.4%

*$ = Stock price is above the sold striking price.


Exiting Tumbleweed (TMWD) early appears to be a prudent move
given the continued technical deterioration.  A profitable exit
($2.25-$2.31 credit) was available near the close on Friday and
we will record that result in the final tally next week.  Antec
(ANTC) should be watched closely as it is under some selling
pressure.  Northpoint (NPNT) appears to be suffering collateral
damage from the strike at Verizon (VZ).  Verizon plans to merge
its high-speed Internet access business with Northpoint.  Memc
Electronic (WFR) is threatening to move below the June low but
a break-even exit was available on Friday.  Frontier Airlines
(FRNT) continues to consolidate, evaluate your long-term outlook.
Epitope (EPTO) has moved below its 50 dma and is at a key moment.
Metacreations (MCRE) is undergoing post-earnings selling and has
moved below its 150 dma.  Immune Response (IMNR) appears to be
holding steady near the June low, consider exiting with further
weakness.  GP Strategies (GPX) is reacting to the Millennium Cell
(MCEL) IPO, which has moved lower after it opened on Thursday.
Once again, evaluate your long-term outlook.  Mail.Com continues
to correct on declining volume (optimistic?) but moving through
the June high is bearish.  Looksmart (LOOK) is again re-testing
the June Low - consider an early exit if the attempt fails.

Positions Closed:

Ivillage.com (IVIL), Electric Fuel (EFCX), Bluestone Software
(BLSW), and Itxc Corp. (ITXC).


Sequenced by Company

Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

CLTR   25.50  AUG  22.50  QCE HX  3.38  182  22.12    7     7.5%
PX     43.00  AUG  40.00   PX HH  3.63  287  39.37    7     7.0%

DLK    18.00  SEP  12.50  DLK IV  6.25  21   11.75   35     5.5%
DRMD    5.72  SEP   5.00  DUQ IA  1.13  179   4.59   35     7.8%
FHS    16.06  SEP  15.00  FHS IC  1.94  84   14.12   35     5.4%
PCTL    6.03  SEP   5.00  PTQ IA  1.38  790   4.65   35     6.5%
XICO    7.81  SEP   7.50  CIU IU  1.56  164   6.25   35    17.4%

Sequenced by Return

Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

CLTR   25.50  AUG  22.50  QCE HX  3.38  182  22.12    7     7.5%
PX     43.00  AUG  40.00   PX HH  3.63  287  39.37    7     7.0%

XICO    7.81  SEP   7.50  CIU IU  1.56  164   6.25   35    17.4%
DRMD    5.72  SEP   5.00  DUQ IA  1.13  179   4.59   35     7.8%
PCTL    6.03  SEP   5.00  PTQ IA  1.38  790   4.65   35     6.5%
DLK    18.00  SEP  12.50  DLK IV  6.25  21   11.75   35     5.5%
FHS    16.06  SEP  15.00  FHS IC  1.94  84   14.12   35     5.4%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, MR-Monthly Return.

CLTR - Coulter Pharmaceutical  $25.50  *** 1-week Speculation ***

Coulter Pharmaceutical is engaged in the development of novel drugs
and therapies for the treatment of cancer and autoimmune diseases.
The company currently is developing a family of therapeutics based
upon two drug development programs: therapeutic antibodies and
targeted oncologics.  The company's most advanced product candidate
is Bexxar(TM), a monoclonal antibody conjugated to a radioisotope.
The company's therapeutic antibodies program also includes an
interferon receptor antagonist.  Initial efforts in the targeted
oncologics program are based on tumor activated prodrug and tumor-
specific targeting technologies.  Coulter intends to seek expedited
Biologics License Application ("BLA") review and marketing
approval for Bexxar while simultaneously pursuing clinical trials
to expand the potential use of Bexxar to other indications.  CLTR
and SmithKline Beecham announced recently the start of Phase II
multicenter investigational trial of Bexxar in combination with
CHOP chemotherapy as a first-line treatment of patients with
intermediate-grade non-Hodgkin's lymphoma.  The U.S. Patent office
also issued another patent relating to CD20 antibody therapy for
the treatment of lymphoma.  Technically the issue is attempting to
move out of a stage I base and with the recent bullish activity,
this position offers a relatively conservative speculation play.

AUG 22.50 QCE HX LB=3.38 OI=182 CB=22.12 DE=7 MR=7.5%

Chart =
PX - Praxair  $43.00  *** 1-week Speculation ***

Praxair is the largest industrial gas company in North and
South America and the third largest worldwide.  In addition
to gas production, Praxair also supplies wear-resistant and high
temperature corrosion-resistant metallic and ceramic coatings and
powders.  They also design, engineer and build equipment that
produces industrial gases (for internal use and external sale).
At the end of July, Praxair reported the highest quarterly
earnings in the company's history, with second-quarter net income
of $122 million, compared to $107 million last year.  Sales grew
10 percent to $1,265 million (also a quarterly record) compared
to $1,149 million last year.  The company continues to have a
favorable outlook for demand in the second half of the year, even
in a slower U.S. economic growth environment.  The bullish
technicals suggest further upside potential and we favor the
support at our cost basis.

AUG 40.00 PX HH LB=3.63 OI=287 CB=39.37 DE=7 MR=7.0%

Chart =
DLK - Datalink.net  $18.00  *** Soon to be XLNK! ***

Datalink.net is a leading wireless-application service provider
that delivers end-to-end wireless data solutions to enterprises
and custom data applications to consumers.  As today's premier
provider of consumer wireless data, and the first to deliver
real-time wireless financial information, Datalink.net pioneered
the development of wireless information technology.  Datalink.net
enables a new generation of wireless devices that allow enterprises
and consumers to customize, respond, and interact with critical
data.  Its XpressLink technology processes high-speed data content
feeds or corporate databases for wireless applications that are
compatible with the entire range of wireless devices, networks and
protocols.  Datalink reported earnings Friday after the close,
showing an expected weakness in the B2C (business to customer)
revenues but a positive outlook for its new B2B focus.  Datalink
is dedicating its resources to building a strong infrastructure
for the Internet enterprise market and starting Monday, it will
trade its common stock on the Nasdaq under the symbol XLNK.  With
several new executives, new contracts, and acquisitions, Datalink
is moving aggressively to market its wireless enterprise solutions.

SEP 12.50 DLK IV LB=6.25 OI=21 CB=11.75 DE=35 MR=5.5%

Chart =
DRMD - Duramed  $5.72  *** Cheap Stage I Speculation! ***

Duramed Pharmaceuticals develops, manufactures, and markets a
line of prescription drug products in tablet, capsule and liquid
forms throughout the United States.  Their products are sold to
a wide variety of organizations, including drug store chains,
hospitals, nursing homes, and governmental agencies.  In July,
Duramed reported favorable results for the past quarter with
record sales, up 25% from the first quarter of 2000, and gross
profits that increased 63% from the previous quarter.  The
company cited a strong, balanced performance with contributions
from the family of Cenestin (R) products, the flagship drug of
Duramed's long-term commitment to hormone problems.  The company
is also continuing to monitor a number of business activities
that may improve its working capital position and expects to
place heavy emphasis on partnering high-profile projects.  The
issue continues to form a stage I base, with support near $5,
which makes this a reasonable speculation position.

SEP 5.00 DUQ IA LB=1.13 OI=179 CB=4.59 DE=35 MR=7.8%

Chart =
FHS - Foundation Health  $16.06  *** A Healthy Rally! ***

Foundation Health Systems is a managed health care company.  FHS
offers a wide range of healthcare services.  They also own six
health and life insurance companies, and provide health benefits
to over 5.8 million individuals through group, individual,
Medicare risk, Medicaid and CHAMPUS programs.  Foundation Health
has been in a stage II climb for the last several months and is
showing no sign of slowing.  On Tuesday, the company reported a
23% increase in second-quarter earnings per share with revenues
up 5%.  Foundation appears to have finished their turnaround and
is showing signs of renewed enrollment growth in key markets.
During the last few months, Goldman Sachs and Chase H & Q have
initiated coverage on Foundation, and Wednesday,  Salomon S & B
upgraded their rating to a "buy."  We favor a conservative entry
point with a cost basis near technical support.

SEP 15.00 FHS IC LB=1.94 OI=84 CB=14.12 DE=35 MR=5.4%

Chart =
PCTL - PictureTel  $6.03  *** New Videoconferencing System ***

PictureTel is the world leader in developing, manufacturing and
marketing a full line-up of visual and audio collaboration
solutions.  Their products and services allow businesses,
schools, medical facilities, government and other organizations
to work together more effectively.  PictureTel markets a complete
line of videoconferencing systems, multi-location servers,
peripheral equipment and a broad spectrum of enterprise-wide
services.  After disappointing results the last several years,
PictureTel is hoping an improved videoconferencing system will
lead the company to profitability.  Intel collaborated on the
development of the new system, the PictureTel 900 Series, launched
July 31, which solves the traditional videoconferencing problems
and delivers a host of new functionality.  With its financing
secured (the future sale of the company's Starlight division),
PictureTel expects to be profitable by the first quarter 2001.
We like the technical breakout and the move above the 150 dma on
strong volume.

SEP 5.00 PTQ IA LB=1.38 OI=790 CB=4.65 DE=35 MR=6.5%

Chart =
XICO - Xicor  $7.81  *** Bottom Fishing! ***

Xicor designs, develops, manufactures, and markets reprogrammable
nonvolatile semiconductor integrated circuits containing digital,
analog and reprogrammable nonvolatile elements.  Xicor's devices
retain their information content when power is lost or turned
off.  Xicor products are sold in a variety of packages, including
plastic, ceramic and chip scale packages for small footprint and
height.  Xicor was trashed in May after it issued an earnings
warning amid concerns about the cellular-phone supply market and
was promptly downgraded to a "Hold" by CIBC.  After the initial
shock, Xicor has formed a stage I base with support around $6.50.
Earnings in July depicted a 5% increase in sales and net income
of $2.4 million, which was in line with revised estimates.  With
several new products recently released, investors appear to be
convinced that Xicor has left the bad times behind.  A reasonable
speculation play for traders with a neutral-to-bullish outlook on
the issue.

SEP 7.50 CIU IU LB=1.56 OI=164 CB=6.25 DE=35 MR=17.4%

Chart =


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Trading Basics: Stock Selection Techniques...
By Ray Cummins

This week, one of our readers asked why we focus primarily on
technical analysis, as opposed to a fundamental evaluation of
the candidates in our Covered-Call and Naked-Put portfolios.

There are three primary types of information that investors use
to determine a bias or opinion on a specific stock.  The first is
"fundamental" analysis; income statements, balance sheets, and
the future projections for revenues and earnings.  The second is
"sentiment" analysis; investor expectations of the market and of
individual stock performance, news or upcoming events, and other
potential activities such as mergers and stock splits.  The final
category is charting or "technical" analysis.  This method relies
on the actual history of trading and price in a specific stock,
commodity, or index.

Most analysts believe that charts can reflect all of the known
information and public opinion surrounding a particular stock or
security.  As market opinions change, so do the prices of the
underlying instruments.  When the prices are plotted, historical
patterns and formations evolve.  This concept allows a technician
to forecast how the current market will perform, based on how it
reacted to similar conditions in the past.  There are also methods
that attempt to identify price formations within seemingly random
movements.  Some technical studies, such as seasonal or cyclical
analysis, believe prices tend to follow a predetermined pattern.
Technicians that subscribe to the Elliott Wave Theory believe that
collective trading behavior is predictable enough to project waves
of price movement.  Proponents of cyclical analysis suggest there
is a regularity in the way specific instruments perform at certain
times in the year.

Charts are constructed in various time frames and different types
of indicators are displayed on price histories.  Moving averages,
support/resistance lines, envelopes, Bollinger bands, and momentum
curves are all common indicators.  Price, time and volume are all
inputs into these indicators.  Price reflects the level of change
in the attitude of investors.  Time measures the cycle or period
of change and volume (relative to its past history) measures the
intensity of that change.  Various systems have been developed to
help investors form an opinion based on the chart patterns and
predict future turning points and direction in the underlying
issue.  Analysts begin by determining the strength and direction
of a trend.  The basis for future predictions is supported by the
fact that once a trend is in motion, it will continue in that
direction until a change in character occurs.  Successful traders
will study many different indicators from contrasting perspectives
to help identify signals that forecast upcoming changes or trend

In short-term option trading strategies, the most important factor
in selecting profitable positions is the technical health of the
underlying issue.  To determine the future trend or character for
any financial instrument, you must be able to identify the most
common historical patterns and understand the implications of
basic technical indicators.  When you can do this accurately on a
regular basis, the quality of your stock selections will improve
substantially and that's the key to consistent profits for traders
who sell Covered-Calls and Naked-Puts.

Good Luck!

                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


Stock  Price  Last   Put   Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

DRMD    5.75   5.72   AUG   5.00  0.31  *$  0.31  24.1%
HLYW    8.94   8.06   AUG   7.50  0.50  *$  0.50  20.6%
CLTR   24.00  25.50   AUG  20.00  0.56  *$  0.56  19.8%
GSTRF  10.56   7.63   AUG   7.50  0.56  *$  0.56  18.2%
WAVX   18.06  17.00   AUG  15.00  0.38  *$  0.38  18.2%
R      21.25  21.69   AUG  20.00  0.88  *$  0.88  15.7%
ZIXI   55.00  40.13   AUG  40.00  1.63  *$  1.63  14.0%
STLW   36.69  34.50   AUG  25.00  0.50  *$  0.50  13.9%
NFLD   17.50  16.44   AUG  15.00  1.00  *$  1.00  13.2%
ATMS   11.44   8.88   AUG   7.50  0.31  *$  0.31  13.0%
CMRC   46.25  50.13   AUG  35.00  0.56  *$  0.56  12.4%
PSFT   21.88  24.81   AUG  17.50  0.44  *$  0.44   9.9%
THC    31.19  32.13   AUG  30.00  0.81  *$  0.81   9.7%
DRTE   30.38  29.38   AUG  25.00  0.31  *$  0.31   9.5%
ICGE   39.94  30.44   AUG  30.00  0.75  *$  0.75   9.3%
ADPT   24.00  22.44   AUG  20.00  0.31  *$  0.31   7.6%
RHAT   25.31  20.06   AUG  17.50  0.38  *$  0.38   7.6%
JEF    26.56  27.44   AUG  25.00  0.50  *$  0.50   7.6%
MRVT   22.63  21.25   AUG  17.50  0.50  *$  0.50   7.2%
LAMR   49.88  49.94   AUG  45.00  0.50  *$  0.50   7.0%
GELX   28.56  35.50   AUG  25.00  0.38  *$  0.38   6.7%
NXLK   39.69  31.31   AUG  30.00  0.75  *$  0.75   6.3%
INFS   37.00  45.50   AUG  30.00  0.50  *$  0.50   5.2%
PILT   17.81  11.63   AUG  12.50  0.50   $ -0.37   0.0%
SQST   14.00   9.09   AUG  10.00  0.50   $ -0.41   0.0%
RAZF   22.25  15.88   AUG  17.50  0.56   $ -1.06   0.0%

TLXN   19.88  17.84   SEP  15.00  0.44  *$  0.44   7.2%

*$ = Stock price is above the sold striking price.


Zixit (ZIXI) continues to act suspect and has moved below its
150 dma.  Northfield Lab's (NFLD) decline on heavy volume Friday
is worrisome and there is no news to indicate a change in the
company's outlook.  Did anyone take the early exit in Tidel Tech
(ATMS) this week?  We will show the position closed profitably.
Dendrite's (DRTE) big whipsaw (Thursday/Friday) marks the issue
as an early exit candidate.  Internet Capital Group's (ICGE)
earnings report was less than pleasing to investors and the stock
is now testing the bottom of its price channel.  Nextlink (NXLK)
has broken down technically and is at a key moment - monitor the
issue closely.  Evaluate closing out Pilot Networks (PILT) and
Sciquest (SQST) versus owning the underlying stock (and selling
future covered-calls) as they test the bottom of their respective
stage I bases.  The same can probably be said for Razorfish (RAZF).

Positions Closed:

Westell (WSTL), Bluestone Software (BLSW)


Sequenced by Company

Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

CRUS   27.44  SEP  22.50  CUQ UX  0.50  18   22.00   35     6.6%
CTIC   39.25  SEP  30.00  CUC UF  1.38  0    28.62   35    13.0%
FNSR   29.00  SEP  22.50  FQY UN  0.94  117  21.56   35    12.1%
GSTRF   7.63  SEP   5.00  YVQ UA  0.31  5091  4.69   35    14.7%
IMAX   28.06  SEP  22.50  IZQ UX  0.94  200  21.56   35    12.4%
JDEC   21.88  SEP  17.50  QJD UW  0.69  7    16.81   35    11.8%
NDC    30.06  SEP  22.50  NDC UX  0.38  20   22.12   35     5.2%

Sequenced by Return

Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

GSTRF   7.63  SEP   5.00  YVQ UA  0.31  5091  4.69   35    14.7%
CTIC   39.25  SEP  30.00  CUC UF  1.38  0    28.62   35    13.0%
IMAX   28.06  SEP  22.50  IZQ UX  0.94  200  21.56   35    12.4%
FNSR   29.00  SEP  22.50  FQY UN  0.94  117  21.56   35    12.1%
JDEC   21.88  SEP  17.50  QJD UW  0.69  7    16.81   35    11.8%
CRUS   27.44  SEP  22.50  CUQ UX  0.50  18   22.00   35     6.6%
NDC    30.06  SEP  22.50  NDC UX  0.38  20   22.12   35     5.2%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, MR-Monthly Return.

CRUS - Cirrus $27.44  *** On The Move! ***

Cirrus Logic designs and manufactures integrated circuits that
employ high-performance analog and digital signal processing
technologies.  Their products, sold under their own name and
the Crystal, Maverick and 3Ci brand names, enable system-level
applications in the Analog, Internet, and Mag-storage markets.
On Friday, Cirrus Logic rallied after the company's CEO's said
their revenue in fiscal 2001 will increase as much as 50% next
year on sales of audio chips for consumer electronic products.
He also commented that profit, margin and the company's share
price will rise in the coming months because of strong demand
from every segment of the audio business.  Based on the trading
activity, investors believe the bullish forecasts and we are
inclined to, as well.

SEP 22.50 CUQ UX LB=0.50 OI=18 CB=22.00 DE=35 MR=6.6%

Chart =
CTIC - Cell Therapeutics  $39.25  *** Own This One! ***

Cell Therapeutics is focused on developing and commercializing
novel treatments for cancer. Their research and in-licensing
activities are concentrated on identifying new, less toxic and
more effective ways to treat cancer.  In May, CTIC announced that
the FDA had accepted its New Drug Application for its lead drug
candidate, Arsenic TriOxide, for acute promyelocytic leukemia,
and had granted priority review for this application.  PG-TXL,
in clinical trials in the United Kingdom, links paclitaxel, the
active ingredient found in Taxol, to a polyglutamate polymer.
Taxol is the world's most widely used cancer drug.  Clinical
trials are expected to be initiated later this year.  CT-2584
(Apra) is a novel anti-cancer drug candidate in clinical trials
for patients with cancers which are resistant to conventional
chemotherapy.  Lots of potential for this company but we simply
favor the technical trend.  Due-diligence is a prerequisite!

SEP 30.00 CUC UF LB=1.38 OI=0 CB=28.62 DE=35 MR=13.0%

Chart =
FNSR - Finisar Corporation  $29.00  *** Entry Point! ***

Finisar is a leading provider of fiber optic subsystems and
network performance test systems that enable high-speed data
communications over Gigabit Ethernet-based local area networks,
and Fibre Channel-based storage area networks.  Finisar also
provides unique network performance test systems which assist
networking and storage equipment manufacturers in the design of
reliable, high-speed networking systems and the monitoring of
of these systems.  On Thursday, Finisar announced that it had
delivered the first units of its SONET OC-48 Small Form Factor
optical transceiver which operates at data rates of 2.488 Gb/s
over single-mode fiber.  According to Finisar's CEO, this opens
another important market sector as telecom companies begin the
process of upgrading metropolitan networks to handle the enormous
demand for bandwidth.  With earnings due near August 22, we favor
the strong technical support near our cost basis as FNSR forges
a stage I base.

SEP 22.50 FQY UN LB=0.94 OI=117 CB=21.56 DE=35 MR=12.1%

Chart =
GSTRF - Globalstar Telecom  $7.63  *** Speculation! ***

Globalstar Telecommunications provides global mobile telephone
service.  Their satellites form a global telecommunications
network which can reach virtually every populated area of the
world.  Globalstar uses Qualcomm's patented CDMA technology, and
Qualcomm has agreed that they will be the only provider of mobile
satellite services to which it will license this technology.
Funding has been a problem for satellite communications companies
but in mid-July, Globalstar exercised an option giving them access
to $250 million in corporate loans.  The company said it expects
to end the year with a cash balance in excess of $100 million and
now they can pursue current business plans, working to establish
themselves as a potential competitor in the communications market.
The company also recently launched commercial service in Peru and
Russia and they now have roaming service in South America as well
as advanced coverage in the Caribbean.

SEP 5.00 YVQ UA LB=0.31 OI=5091 CB=4.69 DE=35 MR=14.7%

Chart =
IMAX - Imax Corp. $28.06  *** A Steady Performer for Sale? ***

Imax provides a wide range of products and services to the
network of Imax theaters.  The principal activities of Imax are
the design, manufacture and marketing of proprietary projection
and sound systems, maintenance of these systems, and the
production of films for Imax theaters.  The big move back in
July was caused by news that Imax had retained Goldman, Sachs &
Co. and Wasserstein, Perella & Co. as financial advisors to
explore potential strategic alternatives, including the sale or
merger of the Company.  Nothing like a buyout candidate to bring
on the speculators!  On Thursday, Imax reported earnings of $0.10
per share, exceeding analyst expectations and representing a 43%
increase over last year.  The company exhibited a significant
increase in System revenues and margin, and had another strong
quarter from its Digital Projection International subsidiary.
Historically the issue has excellent support above our cost basis
and this position offers a conservative method to speculate on
the outcome of the current rally.

SEP 22.50 IZQ UX LB=0.94 OI=200 CB=21.56 DE=35 MR=12.4%

Chart =
JDEC - J.D Edwards  $21.88  *** Big Mover! ***

J.D. Edwards develops, markets and supports enterprise software
and supply chain computing solutions that enable customers to
translate ideas into practical realities quickly and efficiently
using their Idea to Action software.  J.D. Edwards' integrated
applications deliver e-business solutions that give customers
control over their front office, manufacturing, distribution,
human resources, finance and customer service management
processes.  The share value of JDEC soared recently after the
business-to-business e-enabler said that it expects third-quarter
earnings per share to be between breakeven and $0.02, with revenue
in the $250 million to $260 million range.  Analysts currently
expect the company to lose $0.05 a share on average and investors
are happy with the potential for an upside surprise.  Our position
allows a technically correct entry in an issue with a bullish

SEP 17.50 QJD UW LB=0.69 OI=7 CB=16.81 DE=35 MR=11.8%

Chart =
NDC - National Data  $30.06  *** Target Shooting! ***

National Data Corporation is one of the leading providers of high
volume information services to the health care and e-commerce
markets through its Health Information Services and e-commerce
business units.  Their primary products and services include
electronic eligibility, claims processing, billing services,
business office management services, and other information-based
services.  NDC is in a bullish industry with strong potential.
They have excellent products and services, as well as an enviable
financial model; one with strong earnings, margins and cash flow
from recurring revenue.  They also have demonstrated good growth
through innovation and adaptation to new opportunities and the
company possesses a shrewd management team.  All that combines
to produce a very potent formula for success and we favor the
issue for a portfolio position.  We will "target shoot" the
initial credit in this play at $0.50 to increase the overall
return on investment.

SEP 22.50 NDC UX LB=0.38 OI=20 CB=22.12 DE=35 MR=5.2%

Chart =

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Blue-Chips To The Rescue!

The Dow posted double-digit gains today, closing above 11,000 for
the first time in three months amid tame PPI data and a strong
retail sales report.

Friday, August 11

The Dow posted double-digit gains today, closing above 11,000 for
the first time in three months amid tame PPI data and a strong
retail sales report.  The blue-chip average ended up 120 points
at 11,027.  The Nasdaq Composite also advanced 29 points to 3,789
as strength in biotech and chip stocks outweighed weakness in the
hardware sector.  Trading volume on the NYSE reached 839 million
shares with advances beating declines 2,024 to 852.  Activity on
the Nasdaq was light at 1.33 billion shares, with advances edging
declines 2,116 to 1,781.  In the bond market, investors did not
respond to the Bank of Japan's decision to eliminate its zero
interest rate policy and the U.S. 30-year Treasury fell 13/32,
pushing its yield up to 5.70%.

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

Ciena          CIEN  SEP195C/SEP190C  $0.62  credit  bear-call
Xilinx         XLNX  SEP100C/SEP95C   $0.68  credit  bear-call
Hew. Packard   HWP   SEP95P/SEP135C   $0.88  debit   synthetic

Ciena and Xilinx both traded actively and moved higher during the
session, providing relatively favorable entry opportunities into
our new spread positions.  Hewlett Packard slid lower at the open
and never recovered, preventing the purchase of the synthetic
position at our suggested price.  We will watch for an upcoming
rally to enter the play near the target debit.

Portfolio Plays:

The Dow industrials recorded strong gains Friday as investors
rotated to "old economy" issues that have slumped in recent
months.  The transition was inviting to many investors and our
portfolio benefited from the upside activity in blue-chip stocks.
Charles Schwab (SCH) led the finance group, up $2.62 to $39.68 on
strength in the return to classic "value" companies.  Our bullish,
synthetic position can now be closed for a $0.75 profit after less
than one week in play.  Bed, Bath and Beyond (BBBY) was the top
performer in the retail sector, up $1.56 to $37.75 on speculation
of an upcoming stock-split rally .  Our "bull-put" spread is at
maximum profit above $35.  Stocks in the small-cap group performed
particularly well with Secure Computing (SCUR) finishing up $1.18
at $21.  Our current "call-debit" spread achieves an 86% return
above $20.  Shares in American Eagle Outfitters (AEOS), Polaroid
(PRD), Peoplesoft (PSFT), and Ryder Systems (R) also participated
in the bullish activity.  In the technology group, Advanced Fiber
Communications (AFCI), Cisco Systems (CSCO), i2 Technologies (ITWO),
Network Appliances (NTAP), Qlogic (QLGC), and Sun Microsystems
(SUNW) all moved higher.

We enjoyed another surprise winner in one of our long-term plays.
Paxson Communications (PAX) rallied 28% to $13 following a media
report that the company could experience big financial benefits by
giving up its UHF airwaves to cellular phone companies.  We expect
the bullish debit-spread position to achieve a maximum profit of
25% at September option expiration.  Philip Morris (MO) was also
on the move, up $2.75 to $31.25 after Goldman Sachs said it expects
tobacco company valuations to improve significantly over the next
12 to 18 months.  The brokerage also said shares of Philip Morris
could rise by 50% in the coming year.  Our bearish credit position
offered a favorable roll-out opportunity for traders that chose to
to act on the recent move through technical resistance near $29.
The original portfolio play was closed prematurely as the issue
crossed the sold strike near $27.50.  Our new position in Millipore
(MIL) also deserves mention.  The bearish issue dropped $5 to $55
on concerns over the company’s valuation and future profits.  Our
new "call-credit" spread returns maximum profit below $70.

Questions & comments on spreads/combos to Contact Support

                         - NEW PLAYS -

Once again, the requests for credit spreads have dominated my
incoming Email.  Fortunately, we have a number of excellent
candidates for the strategy this week.  The following plays are
based on well-known companies in favorable industries.  Each
position is evaluated for probability of profit using the
current price and trading range of the stock and the recent
technical history or trend.  News and market sentiment will
have an effect on these issues.  Please review each position
individually and make your own decision about the future outcome
of the play.

BUD - Anheuser Busch  $86.00  *** Split Rally? ***

Anheuser-Busch Company’s principal product is beer, produced and
distributed by its subsidiaries, in a variety of containers
primarily under the brand names Budweiser, Bud Light, Bud Dry,
Bud Ice, Bud Ice Light, Michelob, Michelob Amber Bock, Michelob
Pale Ale, Michelob Honey Lager, Michelob Hefe-Weizen, Busch,
Natural Light, Hurricane Malt Liquor, Safari Amber Lager and
Rhumba, among others.  Their products also include non-alcohol
malt beverages.  The company's beer products are also marketed
internationally.  In addition, Anheuser Busch is also the parent
company to a number of subsidiaries that conduct various other
business operations including packaging and entertainment.

Anheuser-Busch rallied again last week after Banc of America
Securities said it had initiated coverage of a number of major
beverage companies.  Analyst C. Scott Wilkins said in a research
note he had issued a "buy" rating on the company with a $92 price
target after the world's biggest brewer reported a 10% increase
in second-quarter earnings.  The company, citing strong volume,
said it now expects full-year 2000 earnings per share growth of
14% to 15%.  In addition, Anheuser-Busch also said its board
approved a 2-for-1 stock split and a 10% increase in its dividend.
The stock split will be effective for shareholders of record on
August 17 and will be distributed on September 18.

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-75  BUD-UO  OI=280  A=$0.43
SELL PUT  SEP-80  BUD-UP  OI=148  B=$1.06

Chart =

INFS - Infocus Systems  $45.50  *** New Trading Range! ***

InFocus Systems develops, manufacture and market innovative
projection products.  The company's products utilize LCD and
Digital Light Processing (DLP) technologies to present output
from personal computers and other electronic devices.  They
also develop, manufacture and market data/video projection
products and services to present video, audio, graphics and
data from personal computers, workstations, VCRs and laser disc
players.  Their products are used in business, education and
government markets for training sessions, meetings, sales
presentations, technical seminars, group collaboration and
other applications involving the sharing of computer-generated
and/or video information with an audience.  Their products are
compatible with all major personal computers and most video
sources used in business and education.

Earnings continue to dominate the market and InFocus shares
are moving higher after the company reported a very bullish
second quarter.  InFocus earned $0.41 a share on $220 million
in revenue, up sharply from $0.23 a share on revenue of $163
million a year ago.  The latest quarterly results were $0.05
ahead of consensus estimates and the company has now outpaced
analysts for the past eight straight quarters.  In addition, a
recent merger with Proxima Corporation, its top competitor,
makes the combined company a giant in both the United States
and in European projector industries.

With favorable disparities in option premiums, this position
offers an excellent speculation play for traders who are
bullish on the issue.

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-35  IQL-UG  OI=0   A=$0.50
SELL PUT  SEP-40  IQL-UH  OI=25  B=$1.18
INITIAL NET CREDIT TARGET=$0.75-$0.88  ROI(max)=21%

Chart =

WLP - Wellpoint Health Network  $90.06  *** Hot Sector! ***

WellPoint Health Networks is a managed health care company with
over 7 million medical members and approximately 32 million
specialty members.  The company offers a broad spectrum of
quality network-based managed care plans, including preferred
provider organizations, health maintenance organizations and
point-of-service and other hybrid plans and traditional
indemnity plans.  In addition, the company offers managed care
services, including underwriting, actuarial services, network
access, medical cost management and claims processing.  The
company also provides a broad array of specialty and other
products, including pharmacy, dental, utilization management,
life insurance, preventive care, disability insurance, major
behavioral health, COBRA and flexible benefits account

Wellpoint shares rallied on Friday and after the market close,
the reason became clear.  Salomon Smith Barney analyst James
Lane increased his long-term target price for WellPoint to $105,
based on a positive fundamental outlook for the company.  In a
research note, the analyst said the key driver of the potential
multiple expansion should be less dependence on the company's
Blue Cross of California franchise.  Additionally, he commented
that the recent acquisition of Rush Prudential and the upcoming
acquisition of Cerulean Companies should be future drivers of
earnings contribution beyond California.  It sounds complicated
to us but the technical outlook for the underlying issue and the
sector provide more than enough cause to participate in this

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-75  WLP-UO  OI=6   A=$0.88
SELL PUT  SEP-80  WLP-UP  OI=10  B=$1.62
INITIAL NET CREDIT TARGET=$0.75-$0.88  ROI(max)=21%

Chart =

                   - STRADDLES AND STRANGLES -
PMCS - PMC-Sierra  $200.00  *** Trading Range? ***

PMC-Sierra develops, markets and supports new, high-performance
semiconductor networking solutions.  The company's products are
used in the high-speed transmission and networking systems,
which are being used to restructure the global telecom and data
communications infrastructure.  The company provides components
for equipment based on Asynchronous Transfer Mode, Synchronized
Optical Network, Synchronized Digital Hierarchy, T1/E1/J1 and
T3/E3/J2 access transmission, High speed Data Link Control and
Ethernet.  Their networking products adhere to international
standards and are sold on the merchant market to customers
either directly or through its worldwide distribution channels.

Based on analysis of the historical option pricing and technical
background, this position meets the fundamental criteria for a
favorable credit-strangle.  The issue has overpriced options, a
relatively well-defined trading range, and no major activities or
events expected in the near future.  The probability of profit
from this position is higher (near 80%) than other plays in the
same strategy based on theoretical option pricing.  As with any
recommendation, the play should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

PLAY (aggressive - neutral/credit strangle):

SELL CALL  SEP-270  SAR-IN  OI=255  B=$2.50
SELL PUT   SEP-150  SZI-UJ  OI=162  B=$2.38
INITIAL NET CREDIT TARGET=$5.00-$5.25 ROI(max)=11%
UPSIDE B/E=$275.00 DOWNSIDE B/E=$145.00

Chart =


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