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Daily Newsletter, Wednesday, 08/16/2000

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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        08-16-2000        High      Low     Volume Advance/Decline
DJIA    11008.40 - 58.60 11089.00 10961.10  934 mln   1599/1239
NASDAQ   3861.20 +  9.54  3914.84  3844.17 1.40 bln   2028/1905
S&P 100   806.91 -  4.90   816.44   803.76   totals   3627/3144
S&P 500  1479.85 -  4.58  1496.09  1475.74           53.6%/46.4%
RUS 2000  512.74 +  2.81   513.33   509.93
DJ TRANS 2875.81 -  8.60  2884.17  2866.46
VIX        20.67 -  0.30    20.86    20.22
Put/Call Ratio       .55
******************************************************************

Will There Be A Pre-Fed Rally Or Sell-off?

The DJIA did its best to hold above the key support level of
11,000, but investors are beginning to wonder if it can hold.
The blue chips had a tough day right from the open, steadily
declining as the day went on.  The day low was put in during
the last hour of trading as the DJIA bounced off support near
the 10-dma.  This helped propel the recently resurgent Dow to
a close of 11,008.39.  Whew, support holds on a closing basis
and the bulls have something to lean on.

Nasdaq who?  I have more to say about DJIA which has had only
a minimal amount of focus this year relative to the Nasdaq.
Not anymore though.  Most traders are now watching this as the
main index for determining market sentiment and direction.  Most
of the new found popularity is from the Financials and Utilities
which have been hot sectors in July and August.  Oil has also
been on a steady run for nearly three weeks.  Could it be that
times are changing and that tech stocks are less important to
investors?  Maybe for now, but I wouldn't bet on that come mid-
October when the techs usually bottom out.

Still our focus is now in the options world and for now the
action is in the aforementioned sectors.  So if these three
sectors are the main drivers, how do they look going forward?
I have added charts of those indices for individual analysis.
As you can see, the Financials worry me as this is the exact
level and time they sold off before the last FOMC meeting.  It
just doesn't look like it has the gas to get over 900 any time
soon.




The Utilities, on the other hand, are looking pretty strong
as it makes new highs almost daily.  There is no resistance in
sight and (as most Peter Lynch fans would tell you) stocks that
are hitting new 52-week highs, usually continue to do so.




Finally, the Oil sector is back from the dead.  Just when we
thought they had the production problems under control, oil has
spiked back above $30.  Up $0.13 to $31.80 today, to be exact.
It's bad for our wallets at the gas station, but good for oil
stocks.  There was even word today that Pres. Clinton sent a
letter to Saudi Arabia to help relieve conditions.  Nevertheless,
from natural gas to oil drillers, stocks have been climbing.




Anyhow, this look at the three hottest sectors pushing blue chips
higher could be concluded with saying that two are still looking
strong (Oil and Utilities) and one looking lower (Banks).  The
downside is when Bank stocks fall they can affect the entire
market sentiment.

Back to today's action.  The Nasdaq finished up 9.54 to 3861.20
while the DJIA lost 58.61 to 11008.39.  Volume was average at
1.37 bln and 931 mln, respectively.  Advancers beat Decliners
by a 15-12 margin on the NYSE and 20-19 on the Nasdaq.  The
S&P 500 closed down 4.58 to 1479.85.  The Russell 2000 was up
2.81 to 512.74.  Banks, Biotechs and Retailers lead the way
down while Semis, Oils, and Drugs held the averages up.

The big news was the CPI that was released before the open
this morning.  It came in right in line with most expectations
at a gain of 0.2%.  This is the fourth straight month of 0.2%
gains for the consumer price index.  While this is an acceptable
rate of growth according to most, any fluctuations upward from
here will be met with hawkish comments from the Fed.  Also,
July housing starts fell 3.3% to a 1.512 million rate, lower
than the expected 1.55 million.  And building permits slipped
by 2% to 1.497 million.  At this point, traders are mostly
waiting for the July employment report.  "Inflation hawks may
be eating crow today," said Oscar Gonzalez, an economist with
John Hancock Financial Services. "Despite their fears of tight
labor markets and a strong economy, inflation is only creeping
higher, not accelerating."

Hewlett-Packard was in the news today, after the close, with
their earnings report.  Adjusted earnings from operations jumped
37% to $1.05 billion, or $0.97 a share, an increase from $0.71
in the year-ago period.  Analysts expected earnings of $0.85
according to First Call.  The gain was mostly attributed to
strong home computer and notebook sales.  Carly Fiorina, HWP's
CEO, commented that "last year at this time, we committed to
becoming a more aggressive and focused H-P, delivering strong
top and bottom line growth on a consistent basis.  Today's
results demonstrate the tremendous progress we're making in all
of our businesses around the world."  To add to the euphoria
for HWP call buyers and put sellers was the announcement of a
2:1 stock split.  This is the third major split announcement
in two days as CIEN and GLW announced splits.  HWP was trading
up nearly $10 after-hours to $120.75.

International Business Machines and Kana Communications said on
Wednesday they had formed a global strategic alliance to provide
systems that will allow businesses to manage interactions with
customers and business partners over the Web.  This helped to
propel shares of KANA by 17.3% today to $38.13.  This is the
second major announcement by KANA this week too.  On Monday,
they announced that Cisco has chosen their eRM (enterprise
relationship management) solution.

As far as tomorrow goes, you would have to figure a rally for
the DJIA given the plus 11,000 close and the after-hours HWP
news.  If HWP can hold a $10 gain tomorrow, that would be a
nice head start for the index.  It will be interesting to see
if it can hold those gains.  The Nasdaq will likely follow
suit based on Hewlett's "tech" status.

My concerns are two-fold.  First, the Financials need to hold
their current ground.  A post-Fed collapse like we witnessed
after the last FOMC meeting will curb the current bullish
bias.  Many of these stocks were heading into new 52-week
highs and a reversal now could spell trouble.  Second is the
situation once again developing in the oil patch.  We were
never really able to kick the inflation fears before until
oil dropped back below the $30 mark in mid-June.  Now we are
back near the high end of the range and it won't be long until
economists start pointing to this and screaming the "I" word.
Investors and analysts may start selling first and asking
questions later on any minor uptick in economic data.  It will
hang over the markets like a dark cloud, just like we saw from
March to June.

But I may be getting ahead of the markets in the short-term.
Right now the Fed is expected to sit back and let the markets
work.  The VIX sits at 20.71 with very little movement.  There
is some word that professionals are selling into rallies, but
you wouldn't be able to tell by looking at the Dow.  That is
still the area to focus on in this market.  If you are playing
the Nasdaq, continue to do it on a stock-by-stock basis.  With
the FOMC outcome already wildly anticipated, the volatility
going into Tuesday should be less than normal.  Trade wisely
and stick to familiar roads.


Ryan Nelson
Editor


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

It Has Been A Long Hot Summer
By Eric Utley

I'm ready for Fall to arrive!  My patience is running thin as the
market twists and turns its way through the Summer months.  The
bears have scorched one sector after another as innumerable
warnings of slowing growth, rising inflation, a slowing economy,
and interest rate worries have flooded the minds of Wall Street.
Even the once beloved Chip stocks fell under the claws of the
mighty Ursa.  But, as the Semis recently stated, the worst
appears to be over.  As we approach the prosperous time of year
I suggest you get ready to make money.  New leading stocks have
asserted themselves over the past three months, which will be the
stocks that carry the next bull market higher.  Professional
traders and hedge fund managers will soon be returning from their
retreats with pockets full of cash ready to deploy into the 'Next
Big Thing'.  It's our goal to find the winners before 'they' do.

I apologize for my unexpected absence last week, but duty called
me away.  I'm back this week with a full docket of readers'
requests.  I chose to skip the review of a past winner this week
in hopes to catch up on some of your requests.  And it's those
requests you need to keep sending so we can find the next winning
stocks before the professionals do.  Send your potential winning
requests to asktheanalyst@OptionInvestor.com.  Please put the
symbol in the subject line of the e-mail.

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

Ibis Technology - IBIS

Please review this fallen star.  Looks to me like a low risk
value bottom fishing play.  Thanks - Bill

IBIS is another one of the Chip stocks that has been tortured by
the bears recently.  However, the peculiar thing about IBIS is
that its competitors have held up very well in spite of the dip
in the Chip sector.  PMCS, which I'll review below, BRCM, VTSS,
and AMCC have all done relatively well recently.  All the while,
IBIS has fallen lower.  For its part, IBIS has mastered a
technology known as SIMOX-SOI.  In essence, the technology
creates an insulating barrier between the layers of a silicon
wafer, which prevent electrical current leakage which hinders the
performance of a semiconductor.  IBIS's technology is used by
manufacturers to produce chips used in servers, desktop
computers, wireless communications devices, and automotive parts.
Despite the recent boom in the Semiconductor business in the last
few years, IBIS has an extremely volatile earnings history, which
explains the stock's erratic movements.  The company broke even
last quarter, when it was expected to lose 6 cents per share.
The losses are expected to mount next quarter with a loss of 14
cents per share.  But, the reason I chose to review IBIS is that
the company is expected to earn a full 30 cents per share next
year.  If IBIS delivers on its promises, the stock is trading at
relatively discounted level right now.  Furthermore, continued
surprises to the upside will help put a little momentum into the
stock.

But, as I've said before, and I'll say again below, cheap stocks
are usually cheap for a reason.  IBIS needs to report two or more
quarters of solid earnings growth before the stock moves
substantially higher.  The bounces between the red and black on
the cash flow statement never pleases the Wall Street crowd.  The
stock has appeared to found bottom near its current levels, and
might trade higher if the Semi sector regains its momentum.  If
the company gets back to executing and consistently earning
money, it's worth considering.  I think it would be wise to wait
for IBIS to prove its worth, and deliver steady earnings growth.
Otherwise, the only catalyst that might lift the stock would be a
broad rally in the Chip sector.  And, in that case, I think there
are better alternatives such as PMCS or VTSS.  Bottom fishing for
stocks can be extremely profitable if you pick correctly.  But, I
feel that it is one of the hardest and most hazardous of trading
strategies.




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

Metro One Telecommunications - MTON

Please give me your thoughts on MTON?  I enjoy your column very
much, it is informative, educational, and enlightening.  It
always surprises me how much there is to know about the market.
Thank you for trying to educate all of us. - Heidi

I hate to get mushy on you Heidi, but your compliments are
extremely thoughtful.  I really appreciate your kind words.  And
now, onto your request.  I normally shy away from stocks like
MTON because of their extremely low prices and equally low ADVs.
I follow the philosophy that low priced stocks are generally low
for a good reason.  I prefer to buy high and sell higher.  But,
in some cases, you can pick up good stock on sale.  I think MTON
might be a good example of such an instance.  Let me provide a
little background on the company, which will help to explain why
I think the stock is attractively priced.  MTON is the leading
provider of Enhanced Directory Assistance (EDA).  The company
operates 28 calls centers, which it fills with representatives
that perform such services as call completion, information
searches, and connectivity.  The company outsources its services
to wholesale telecom providers and wireless carriers.  What's
compelling about MTON is the company's future earnings estimates.
Get this, the company is expected to earn 51 cents this year and
72 cents next year.  A profit of 72 cents next year would give
MTON a forward-looking P/E of roughly 17.  That is extremely
cheap when you figure the company is expected to grow its
earnings 40% over the next three years.  And, although, MTON is
not operating in an explosive high-tech market, the Telecom and
Wireless sectors are still growing at a relatively healthy rate.

Before sounding the bull horn on MTON, there are three distinct
risks I see with the stock.  First, the company missed EPS
estimates by 1 penny last Fall, which sent the stock nearly 50%
lower in one day.  Second, the company's balance sheet is
carrying some debt, with only a small amount in cash.  Finally,
the stock is thinly traded, which presents liquidity risk.  The
lack of buyers or sellers in a stock can cause severe problems in
times of distress.  That's why I first said that I'm sometimes
wary of stocks like MTON.  But, the company's prospects are
extremely promising if MTON can deliver the earnings that are
projected for the company.




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

PMC Sierra - PMCS

The stock has been on uptrend for some time now.  Can you please
give your view on this stock.  Regards - Sunil

Certain Chip stocks have done phenomenally well over the past
month despite the dip in the broader sector.  PMCS is one such
stock.  The reason PMCS has not suffered from the sell-off in the
broader Semi sector is because the company has a proprietary
technology that manufactures chips for telecommunications
applications.  The company has a steady flow of orders coming
from the likes of CSCO, LU, and NT for chips used in the buildout
of high-speed broadband networks.  There are still a lot of
people who want high-speed Internet access (myself included) and
cannot receive.  The growth of broadband networks shows few signs
of slowing, which means the builders like CSCO need the chips
that PMCS makes to power the networks.  PMCS, and its peers,
including BRCM and AMCC, are trading at or near their all-time
highs.  PMCS's high price does present some risk in the form of
volatility.  But, for those aggressive investors out there, PMCS
should provide handsome rewards over the next 3 - 5 years.  The
company is expected to grow its bottom-line between 40 - 50% over
the next three years.  PMCS's recent price action, in spite of
the weakness in the Chip sector, reveals just how strong of a
stock it is.  That level of relative strength might help soothe
investors' nerves over the long haul.

If the volatility is too much for you to handle, PMCS is an
excellent trading stock.  By that I mean momentum investors can
really get behind PMCS during the stock's extended runs.  Case
in point: PMCS traced a double bottom around $165 in early
August, and quickly charged past the $200 level.  PMCS's profits
were reported in mid-July, so we don't have an earnings run to
look forward to until October.  But, a driver in the near-term is
the potential for a stock split.  PMCS is trading well into split
territory above $200.  Momentum investors love splits!  PMCS is a
solid company with a strong stock, that should do well over the
next several years.




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

EMC Corporation - EMC

Can you please comment on EMC.  I have seen this stock always
moving in a steady fashion.  I wonder why this stock in not OI
favorite list.  Thanks - Sunil

Sunil has sent in a myriad of exquisite requests recently, so if
you don't mind, I thought I would review two requests from him
today.  Thank you, Sunil.  I reviewed EMC about two months, but
I thought it would be relevant to take a look at the stock again
given the fact it made its way onto the OI call list.  When we
first reviewed EMC in early July, I talked about the company's
strong fundamentals, excellent earnings growth, and impeccable
management team.  Well, nothing has changed.  The stock is still
loved by Wall Street, and has benefited recently from the shift
back into high-quality growth stocks.  The data storage market,
which EMC conquers, is growing faster than ever, with no signs of
slowing.  EMC continues to operate with lethal efficiency.  The
company has funneled billions into research and development
recently, which has produced a host of new revenue-generating
products.  Analysts project that EMC has the opportunity to rake
in nearly $78 bln in revenues over the next 3 - 5 years.  The
company has a knack for turning its sales into big profits, with
its high operating margins.  As long as the company continues to
innovate and execute, EMC is a stock you could buy and forget
about.  Despite the bear market last spring, EMC is trading near
all-time highs.  The stock is up 200% in the last year!

The steady fashion, like you mentioned Sunil, with which EMC
advances makes the stock a compelling idea for the long-term
investor, along with my argument above.  But, EMC can be traded
for short-term profits as well.  Why else would it be on the OI
call list!  The stock broke from an extended consolidation in
early June, and has been rolling higher ever since.  The key to
trading EMC is to watch for a breakout after a week or two of
consolidation.  You can see on the chart over the past two months
that EMC bases for several days, then breaks to new highs in its
ascending channel.  The stock is currently hovering above its
20-dma, which has been the launching pad for EMC's last two runs.




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

Puma Technology - PUMA

Like PUMA quite a bit.  Think its found its bottom and has much
upside.  Will be introducing new wireless platform software
during Q3 which may be a catalyst to the upside.  If you could
review this stock for the trading family, would be greatly
appreciative.  Sincerely - Ariel

Ariel, I wish I had better news for the trading family.  PUMA
has definitely seen better days.  The company went from a money
making concern to a money losing firm when it reported its
second-quarter results in May.  PUMA had a string of four
profitable quarters running until it fell into the red.  What's
more, the losses from operations are expected to greatly increase
over the next year.  I think PUMA picked a poor time to shift its
business strategy, which resulted in losing money.  Like I have
said before, market sentiment has shifted back to the stocks of
companies that make money.  PUMA provides a novel service, which
delivers personalized Internet information to customers through
various mediums, including e-mail, pagers, and cell phones.  I
just don't know if they can make money?  Most of PUMA's business
currently comes from Japan, where the company has a relationship
with NTT-Dokomo, the Japanese Wireless Corporation.  The
agreement with NTT includes access to over 10 mln customers.
And, like you said Ariel, PUMA is introducing a new version of
its Mobile Application Platform (MAP), which will allow more
users to access the Internet through wireless means.

PUMA operates in a growing sector of Technology, but it remains
to be seen how many people will actually be accessing the
Internet through their cell phones, and if any companies can make
money by providing the necessary services.  PUMA is scheduled to
report its third-quarter results early next week.  I believe the
report is set for release on August 22nd, although I have not
confirmed that date.  PUMA's CEO recently said he was comfortable
with the -ll cent estimate.  A smaller-than-expected loss
combined with upbeat guidance might be the catalyst to reverse
PUMA's dreadful course.  A breakout above the 10-dma might
provide an opportunity for a quick trade.  But, be careful.
When I go wading in rivers chasing fish I like to see the bottom
before jumping in.  I don't see the bottom in PUMA.




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

MatrixOne - MONE

I bought 100 of each IPO (MONE & HAND) at the offering price.
Would you please provide your analysis of these securities.
Thanks - Ashok

Thanks for writing in, Ashok.  Of your two requests, I chose to
review MONE because of the recent renaissance in the B-2-B and
Internet Infrastructure sectors.  Though, this time around
investors are much more particular with their picks within the
two sectors.  If the selective buying of quality B-2-B and
Infrastructure stocks continues, I think MONE is positioned well
for a Fall rally.  The company provides a plethora of Internet
services to businesses, including establishing trading
communities and hosting applications for service providers.  So,
with MONE, you get exposure to both the Infrastructure and B-2-B
sectors.  MONE's two largest competitors are EXDS and ARBA, which
are both formidable opponents within their respective sectors.
However, MONE has partnered with ARBA on several projects, which,
I think, falls towards MONE's favor.  Furthermore, of its
competition, MONE is the only company making money.  MONE burst
into profitability several quarters ahead of schedule with an
upside EPS report in late July.  The company is expected to earn
24 cents next year, which gives the stock a P/E, something EXDS
and ARBA are both lacking!  MONE's five-year earnings growth is
estimated at 70%, again, better than both ARBA and EXDS.  Now,
don't get me wrong, EXDS and ARBA are both great companies, and
both stocks have done very well recently (that's why EXDS is on
the OI call list).  But, MONE has some of the best fundamentals
among its peers, and has under performed in the last month.  MONE
might have been overlooked by Wall Street during the recent
rebirth of B-2-B and Infrastructure, which might make the stock
undervalued at its current levels.  That's why I like the stock
going into the Fall if the current, and selective, Tech rally is
sustained.  Unfortunately, MONE is not yet optionable.

For the life of me, I can't find a legitimate reason for MONE's
25% sell-off over the last two weeks.  In fact, USB Piper Jaffray
initiated coverage on MONE with a Strong Buy rating last week,
and set a $77 price target.  You can see the spike in volume on
the chart when MONE hit bottom on Monday.  It has since
rebounded, but that big dip last week throws up a cautionary
flag.  It's uncertain what spurred the sell-off.  And where
there's uncertainty, there's risk!  I think it would be prudent
to wait for the stock to regain its momentum before jumping into
new positions.




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

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


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

Reevaluate The Risk
By David Popper

If you jumped off of the Empire State Building, would you be
injured?  The answer is entirely dependent on whether you jumped
from the threshold on the ground floor, or whether you chose to
jump out of a window on the 100th floor.  Gravity is a truth
that we all recognize, except when it comes to the stock market.
Isn’t it amazing that the same people that clamor for a stock
that is quickly advancing, treat that same stock like a leper
when it tumbles.  Indeed, every greedy fiber of my being wants
to jump on a hot stock, whose major move may be behind it.
Every fearful fiber of my being wants to dump that same stock if
it falters.  The funny thing is that often the stock’s story has
not changed.  It is just that for some reason the emotional tide
of the crowd has turned against that particular stock, sector, or
perhaps the market as a whole for a short time.  How many times
has CSCO, SUNW, ORCL and others gone through a free fall only to
come roaring back?  On the other hand, when KTEL fell, who was
there to catch it, certainly not the institutions.  In a
nutshell, that is why quality matters.

When you trade quality, corrections are buying opportunities.
Corrections help you identify support and provide you with an
entry point.  The only real danger when you are buying quality
is when you buy quality that is technically extended.  You see,
sometimes the enthusiasm for a stock develops into unrealistic
short term price acceleration.  Buying into that madness almost
always guarantees you a short term loss because institutions will
not pass up the opportunity to lock in a profit and buy the
quality back cheaper.  The money managers know that when a price
becomes too extended, people get nervous, especially people on
margin.  (This is why I never use margin.  I want my trades to be
governed by logic, not emotion)  The money managers know that
when they sell, it will impact the price, because they sell a
sizable amount.  They also recognize that often when the price
declines even slightly, nervous people pull the trigger and
the momentum reverses.  Just about the time that all the nervous
traders sell, the price stabilizes, institutions buy, and the
whole process begins again. You see, stock prices are very seldom
based on true value.  Remember the market is an auction, and
often emotions effect prices at auctions.  Institutions make a
lot of money recognizing the value of a stock, and simply by
trading against the emotions of the crowd.  They have the
advantage because their actions directly impact a stock’s
direction.  This is precisely why it is critical to trade
unemotionally, using at least basic technical analysis. This
is also why you never put too much money in one play.  This
is also why you use proper money management.  Failing to take
these precautions exposes you to short term institution induced
market fluctuations which can harm you.

How much technical analysis do you need?  It depends on your
time parameters.  A daytrader may need every oscillator and
short term signal available.  Since I do not daytrade, and
since oscillators often give contradictory signals, I prefer
to keep it simple. And when I doubt, I get out. If I had more
time, I would love to learn all of the fine nuances that
undoubtedly have benefited so many.  My schedule requires me
to acquaint myself with a stripped down version.  I typically
like to buy a stock after a correction only when it begins to
move up off its newly formed base.  The base should develop for
at least a couple of weeks.  I take this precaution because often
after a fall, there may be additional aftershocks.  I may make
an exception if the stock is compelling and I plan to use it
to write a covered call.  When I hold a stock, I typically use
trend lines and moving averages as my guide.  If the trend line
becomes too steep, I will place stops because stocks that go up
hard, will come down hard.  Further, if a stock advances more
than 20% over its 10 day moving average, I set stops because it
is advancing too fast and profit taking will happen. (Again,
these are my own rules, and I would gladly defer to those writers
who are more experienced)  Sometimes as a stock advances, I will
take partial profits along the way, so that when the music ends
I won’t be hurt too badly.

Another safety feature that I find helpful when trading is to
research the splits calendar and upcoming trade shows and
analyst meetings.  Often these provide a good emotional spike
to a stock, though recent times have not necessarily backed
up this proposition.  Again, this is all relatively simple stuff.
It does not always work, but more often than not, it keeps me
out of too much trouble.

Contact Support


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

Candlestick Formations
By Austin Passamonte

A wave of recent email suggests I should backtrack a little
bit. Chart examples last week & this Monday past in my section
brought plenty of questions as to how these signals are read.

As always, OIN archives hold articles in the "Traders Corner"
link under the "Education" heading, left-margin of OIN's front
page. Those who wish to research this discussion can find all the
details & tons more from other contributors within.

In a nutshell, we look for Bollinger Band, MACD, Stochastic and
Candlestick signals to converge between different time-session
charts for entry confirmation. I missed covering basic candle
signals previous, so let's visit that now. This will allow us
to completely wrap up the rolling stock subject next week.

Candlestick charting offers a three-dimensional view of the
market action. This visual perspective helps better predict
future market action.

Each candle-line body begins at the market open and ends at
close. If the close was higher than its open, a clear or green
candle is formed. A lower closing price than open creates a
red candle instead. Prices that move outside the open/close
range form thin lines or "shadows" above and/or below the
candle’s actual body.

There are numerous signals and formations with different
versions of each but we'll focus on a few basic patterns
that warn of market reversals. They are as follows:


Bullish signals:
Tweezer Top
Morning Star
*Hammer
*Doji
*Engulfing white candle

Bearish Signals:
Tweezer Bottom
Evening Star
Shooting Star
*Hanging Man (hammer)
*Doji
*Engulfing red candle

*Denotes formations that are bullish or bearish depending
 upon where they form within price action

(Daily chart of NASDAQ)

http://www.OptionInvestor.com/playimages/index.asp?image=tc73



Within this chart of NASDAQ numerous formations show but we’ll
focus on those outlined above. First you’ll see clear "Shooting
Star" candles near the market tops of March 13 and again on the
27th This lone-candle signal is formed when prices open at one
point, rally up for the day and fall back to close near the open
once again. When formed at a price peak on the chart it suggests
buying has waned and the market may be nearing a correction.

Around April 12th we see a long red candle that exceeds or "engulfs"
the clear bullish candle of the previous day. This suggests any
bullish sentiment the day before was completely erased and then
some by today’s "Engulfing Candle" formation. A further move in
the direction of the longer candle is expected, in this case to
the downside following the bearish red candle.

April 24th shows a lone-day "hammer" pattern. This formed as
prices fell from the open only to rally back and close near the
day’s open. This shows buyers rallied the market up after sellers
took it to an intraday low. The lone candle at the bottom of this
pattern resembles a hammer, hence the name. It suggests the market
may have found a bottom and will advance from there.

The same "hammer" style candle found near the top of a price range
is called a "hanging man" formation instead. This is a bearish signal
that indicates new buying above the open has exhausted and a move
down is likely.

On May 29th we observe a candle formation called a "doji" or
stalemate. It's formed by a complete shadow line with little
if any real body in the middle. Daily prices opened, rose/fell
and then returned to close almost unchanged. When found near a
market high or low extreme it suggests a point of equality and
indecision between buyers and sellers. Such indecision could mean
the current price direction may be nearing a reverse.

(Daily chart of DOW)





This chart of the Dow is rife with clear candle formations.
Extreme volatility created numerous reversals in short order.

Around March 15th we note a large white engulfing candle near
support of a long decline. This indicates buyers have erased
all the prior session’s losses to drive prices higher. As
indicated, the market indeed moved up from there in record
fashion with a 499 point gain the very next day.

After this major rally we witness a pair of doji candles
near 3/23 and 4/3 that warn of possible weakness in
bullish sentiment. The doji near 4/3 spans an exceptionally
large range one session after a long, engulfing white candle.
This combination suggests extreme indecision after the big
price rise and possibly a move down in the near term.

The "Tweezer Top" April 12th should have been confirmation that
this market was on shaky ground. Those who moved to protect
profits and/or played the downside with shorts or put options
fared incredibly well. Several dominant bearish patterns warned
of the massive decline days in advance.

In true volatile fashion, the Dow hit bottom three sessions
later as a clear "Tweezer Bottom" complete with shadow line
pinchers emerged. Again, fair warning that the bulls were now
in charge of near-term price movement.

Late in May we notice a three-day pattern form called a "Morning
Star" The first full session formed a bearish candle, the next
day ended in a "doji" stalemate while the third day formed a new
bullish candle. As you can guess, this suggests the sentiment has
turned from bearish to neutral and finally bullish over three
trading periods. Prices should advance from there.

Likewise the opposite of this, an "Evening Star" three-day
pattern of sorts warned a pending market drop. A bullish white
candle was followed by a doji, then met with a bearish red candle.
This was matched with an equal white candle as bulls struggled to
wrest control but were finally overwhelmed as proven with a longer
red candle that sealed the new move down.

(Daily chart of Dow, 8/16)




Ready for a fearless forecast on the Dow? Well I'm not will you
settle for a fearful forecast instead? We may very well be seeing
yet another Tweezer Top formation in the making here.

Oh I know, this time it's different; the Fed is done raising
rates, the fall rally is just ahead, let's buy calls with blind
abandon, yadda-yadda-yadda. And just what may I ask was the
market sentiment at each of the other four top formations we've
outlined? You think anyone was bearish after the other first long
candles emerged? Certainly not, at least until the next session
or two erased that price action & then some.

Time will certainly tell how this one ends. With the VIX at
20.71, a few hundred points upside over the last three weeks
and no volume to confirm these moves I for one wouldn't ignore
that potential reversal pattern.

*******

For further study on this fascinating subject and powerful
trading tool let me refer you to the website bookstore in
the top margin of OIN's home page. Enter "candlestick charting"
in the topic search box and you’ll find several excellent books
that cover the subject in complete detail. Those by Nison are
are great place for complete coverage from start to finish.

Next week I expect to finish the "rolling stock" concept and
where & how to find a PHD course in option trading you don't
want to miss. Trade wisely and prosper!

Contact Support


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

JNPR - Juniper Networks Inc $166.31 -3.44 (+6.38 this week)

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

Most Recent Write-Up

Give JNPR a good market environment and watch it explode!  Juniper
Networks is once again on the move and we want a piece of the
action.  As the NASDAQ made its way above the 3800 level this
week, JNPR shot upwards with a fervor.  There's a momentum run in
our midst or so it seems.  Let's retrace for a moment.  Last week
JNPR traded above the former resistance of $160, but didn't
demonstrate any strength at the higher price level.  This week
JNPR is not only holding the lofty gains, but also shot through
technical resistance at the 5-dma ($165.51) without a backslide.
Entries off the current level may be somewhat aggressive in this
topsy-turvy market.  If you are looking for more confirmation,
then wait for high-volume moves through the first line of
opposition at $175.  Upper resistance is at $180 and $181.25, the
52-week high.  We're anticipating the respectable volume to
sustain the upward momentum in the short-term.  However, you will
want to monitor the market's direction.  Remember, the NASDAQ is
currently at a precarious level and could pullback with profit
taking.  Stop losses may be useful, but remember, this is an
Internet play and is subject to wide intraday swings.

Comments

Thanks to strong earnings from HWP, we expect tech stocks to
bounce tomorrow.  JNPR looks in good shape as the selling never
fully materialized and it is close to a breakout.  A move over
$173 on strong volume would be the confirmation.  Support from
the 10-dma at $159 would be attractive on a pullback.

BUY CALL SEP-160 JUD-IL OI=3823 at $17.50 SL=12.25
BUY CALL SEP-170*JUD-IN OI=3743 at $12.88 SL= 9.25
BUY CALL SEP-180 JUD-IP OI= 340 at $ 9.00 SL= 6.75
BUY CALL OCT-170 JUD-JN OI= 345 at $21.38 SL=17.50
BUY CALL OCT-180 JUD-JP OI= 956 at $17.50 SL=12.25

Picked on August 15th at  $169.75    P/E = 1882
Change since picked         -3.44    52-week high=$181.25
Analysts Ratings       15-3-0-0-0    52-week low =$ 28.25
Last earnings 06/00     est= 0.04    actual= 0.08
Next earnings 10-12     est= 0.08    versus=-0.01
Average Daily Volume  =  6.21 mln



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

The DOW retreats in the face of the Oil sector's strength...

Concerns about future earnings, along with the potential for
higher interest rates and oil prices, are making it difficult
to sustain any rally.

Rather than discuss another day of lackluster trading, we thought
it might be more productive to publish some recent correspondence
with one of our readers.


Dear OIN,

I have been reading your big cap covered calls and conservative
naked puts articles recently.  I like them very much.  I am an
options trader (for about a year now) and I have studied options
strategies extensively.  The one thing I have not done is sell
naked options.  I have recently been approved by my broker to do
so, but I am still trying to figure out a couple of things.

How do you calculate the amount of money being tied up by a naked
option.  Do you recommend any guidelines for closing a profitable
position early or do you normally let them expire.  Any other
thoughts you might have would be appreciated.

Thanks,

SC


Regarding Naked Puts...

Selling naked-puts offers an attractive method of generating small
profits on portfolio collateral.  A premium is received for the
obligation to buy the underlying security at a specific price.  A
successful outcome is achieved if the stock remains above the sold
strike at expiration.  It is also one of the best ways to achieve
a technically correct entry position for owning a stock.

As far as equity requirements, every broker has different formulas
for collateral with naked options.  The following explanation will
illustrate the basic conditions for trading the strategy.  It will
also demonstrate the small mathematical advantage of using this
technique when compared to covered-call writing.

Return On Investment (ROI) = Profit / Collateral Requirement. In
this strategy, profit is the initial premium received for the
sold option.  The collateral requirement is simply the amount of
cash or equity that must be in your account to open the position.

Note: You must have a margin account to participate in this type
of trading.  To establish and maintain a margin account, a broker
requires a minimum of $2,000-$5,000 in any combination of cash or
marginable securities to be on deposit at your brokerage.  For an
account to carry uncovered options and/or spreads there is also a
maintenance requirement of $5,000-$10,000.

Most online brokers use the following formulas to determine the
collateral requirement for naked puts.  The margin maintenance
per contract is the greater of:

The premium received plus 40% of the underlying issue price,
minus the out-of-the-money amount;

(0.40 * Stock Price + Premium - ( Price Picked - Strike))

- or -

The premium received plus 20% of the underlying issue price;

(0.20 * Stock Price + Premium)

The second formula generally applies when the strike price sold
is significantly below the underlying stock price.

In the monthly summary, the ROI calculation is based on a 30 day
time period.  The original collateral requirement is always used
regardless of the eventual change in stock price.  The final price
of the stock determines the actual profit when that price is below
the sold strike but above the cost-basis.  In any case, the total
profit can never be greater than the initial premium for the sold
option.

As you can see, there is a slight mathematical edge with this
strategy when compared to covered-calls because of the lower
margin maintenance or collateral requirement.  However, the
true risk is the same in both techniques; the underlying stock
can always fall to $0.

As far as techniques, rather than try to explain our strategic
outlook in an E-mail, it might be easier for you to simply review
some of the older articles in the "Covered-Calls" and "Naked-Puts"
sections, on the web site.  In addition, read Jim's "Top Ten"
rules for option trading, now referred to as "Winning Axioms,"
which apply to almost every strategy available.  I would also
recommend that you simply read the newsletter including the back
issues, especially Jim's commentary.  Study any other "worthy"
trading publications and read all you can about option trading.
Explore the current bibles: "Options as a Strategic Investment",
"Option Volatility and Pricing Techniques", and "Trading for a
Living."  Learn the rules (and live by them) and repeat whatever
you do successfully.  Don't bother with exotic strategies that
you don't like or do well with and always avoid any position
in which you are not completely comfortable with the potential
loss, the necessary adjustments and the most common entry-exit
techniques.

Good Luck!


Summary of Previous Picks:

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

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

PROX    AUG    75    73.43   91.38   $1.57   7.2%
GMST    AUG    60    56.06   65.63   $3.94   7.1%
EXTR    AUG   140   137.31  169.69   $2.69   6.6%
CALP    AUG    50    47.84   55.50   $2.16   6.0%
CALP    AUG    50    48.50   55.50   $1.50   5.9%
TUTS    AUG    90    88.50  100.63   $1.50   5.7%
ITWO    AUG   115   109.00  146.56   $6.00   5.6%
ENE     AUG    75    72.88   84.03   $2.12   5.5%
IDPH    AUG   120   116.94  125.75   $3.06   5.0%
VRTA    AUG    55    52.18   67.38   $2.82   4.4%
NTAP    AUG    90    85.44   88.31   $2.87   3.4%
VSTR    AUG   135   127.25  126.88  -$0.37   0.0% Buyout candidate

PHCM    SEP    85    78.25   84.94   $6.69   7.0%

ARTG    Closed (Now Profitable - Murphy's Law)
AWRE    Closed ( Ditto  - ho hum)
AETH    Closed

Naked Puts:

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

PROX    AUG    75    73.75   91.38   $1.25  17.1%
SAPE    AUG    95    93.12  129.69   $1.88  13.7%
TUTS    AUG    85    84.12  100.63   $0.88  11.8%
ENE     AUG    75    73.12   84.03   $1.88  11.8%
TUTS    AUG    70    68.81  100.63   $1.19  11.8%
CALP    AUG    45    43.88   55.50   $1.13  10.9%
CALP    AUG    45    44.31   55.50   $0.69  10.4%
VRTA    AUG    55    53.81   67.38   $1.19   9.6%
IDPH    AUG   110   108.50  125.75   $1.50   9.2%
NTAP    AUG    80    78.12   88.31   $1.88   8.7%
VRTA    AUG    50    48.38   67.38   $1.62   8.4%
EXTR    AUG   130   129.12  169.69   $0.88   8.1% 2-1 split 8/25
GMST    AUG    50    48.87   65.63   $1.13   7.7%
TIBX    AUG    90    87.63   95.88   $2.37   7.5%
AMCC    AUG   120   118.31  164.63   $1.69   6.5%
SEBL    AUG   115   113.94  169.06   $1.06   6.5% 2-1 split 9/11
MACR    AUG    75    73.32   76.13   $1.68   6.2%
ITWO    AUG    95    93.31  146.56   $1.69   6.1%
MERQ    AUG    85    83.32   98.94   $1.68   5.8%
SAPE    AUG    85    83.56  129.69   $1.44   5.7% 2-1 split 8/29
VSTR    AUG   110   108.31  126.88   $1.69   5.6% Buyout candidate
MERQ    AUG    80    78.87   98.94   $1.13   5.2%

PHCM    SEP    65    63.50   84.94   $1.50   6.2%

ARTG    Closed (Now Profitable - Murphy's Law)
AWRE    Closed (Ditto - darn Murphy anyway)
CLRN    Closed (Ditto again - sigh)
AETH    Closed


Naked Calls:

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

MRVC    AUG   100   102.44   64.88   $2.44  19.4%
IMCL    AUG    90    90.69   83.00   $0.69  15.8%
VRSN    AUG   175   176.00  155.13   $1.00  11.2%
RBAK    AUG   155   156.13  146.13   $1.13   8.7%
ADBE    AUG   135   135.69  115.94   $0.69   8.2%
MUSE    AUG   195   196.31  129.31   $1.31   5.9%
HWP     AUG   150   151.00  120.75   $1.00   5.7%


New Candidates:

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

***************

BULLISH PLAYS - Covered Calls & Naked Puts

***************
EMLX - Emulex  $73.50   *** Own This One ***

Emulex is a designer, developer, and supplier of a broad line of
fibre channel host adapters, hubs, ASICs and software products
that enhance access to, and storage of, electronic data and
applications.  Their products are based on internally developed
ASIC technology and are deployable across a variety of network
configurations and operating systems.  These products support
increasing volumes of stored data.  Emulex is also a supplier of
some traditional networking products that include printer servers
and network access products.

Shares of data network company Emulex have recovered in recent
sessions after the company reported better-than-expected results
for the quarter.  Analysts for Robertson Stephens reported that
EMLX posted fixed fourth quarter results well above consensus
expectations and based on the bullish announcement, they have
raised their estimates to reflect higher revenues and a future
increase in profitability amid new confidence in the company's
business model.

Investors appear to share the positive outlook and with the move
above recent technical resistance near $70, this issue is poised
for further upside activity.

EMLX - Emulex  $73.50

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

Sell Put  SEP 55   UMQ UK  28        1.25    53.75     7.9% ***
Sell Put  SEP 60   UMQ UL  82        2.13    57.87    12.0%
Sell Put  SEP 65   UMQ UM  99        3.25    61.75    13.6%

Chart =
 

******

METHA - Methode Electronics  $50.88  *** Entry Point ***

Methode Electronics is engaged in the manufacture of electronic
components and devices that connect, control and convey
electrical energy, pulse and signal including connectors,
automotive components, printed circuits, and current carrying
distribution systems.  Components and devices manufactured by
Methode Electronics are used in the production of electronic
equipment and other products in the automotive, computer, voice
and data communications equipment, industrial, military and
aerospace, and consumer electronics industries.  Their products
are sold primarily to original equipment manufacturers and also
to independent distributors.

METHA rarely gets any attention but investors have taken notice
since the company spun-off shares of Stratos Lightwave (STLW), a
company which develops, manufactures and sells optical subsystems
and components for high data rate networking, data storage, and
telecommunications applications.  STLW is also a market leader in
high data rate optical subsystems, offering superior optical
transmission line performance with top state of the art EMI
characteristics.  In addition, they market optical components and
cable assemblies for use in these networks and currently, that's
one of the most popular "high growth" industries.

Whether you like one company or the other, it appears that both
issues have a reasonable expectation of increased share value in
the coming months.

METHA - Methode Electronics  $50.88

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

Sell Call SEP 45   QME II  10        9.38    41.50     8.6% ***

Sell Put  SEP 40   QME UH  10        1.63    38.37    14.0% ***
Sell Put  SEP 45   QME UI  0         3.25    41.75    18.6%

Chart =
 

******

MIPS - Mips Technologies  $52.13  *** Bracing For Upside? ***

MIPS Technologies is one of the leading designers of high
performance processors, cores and related intellectual property
for use in a wide variety of increasingly sophisticated consumer
devices and business equipment.  Its designs are based on its
reduced instruction set computing (RISC) architectures.  Its
64-bit RISC architecture is the volume leading architecture for
64-bit processors.  MIPS licenses its designs and related
intellectual property to semiconductor companies and system
original equipment manufacturers.  Its licensees currently offer
over 60 standard processors based on its RISC architecture, which
have a cumulative installed base of over 120 million units.

Earnings are one of the primary movers of stock prices and last
month, MIPS reported stellar results for the quarter.  Revenue
for fiscal year 2000 grew 25% to a record $89 million and when
the royalties from Nintendo were excluded, revenues increased
over 100% compared to fiscal 1999.  Contract revenue jumped 176%
and accounted for 38% of the total revenue.  Quite simply, MIPS
Technologies completed its strongest quarter and fiscal year
since their IPO and future growth in the fundamental business is
forecast to be excellent.

If you favor the bullish outlook for the issue, this conservative
position offers an excellent entry point, considering the current
market volatility.

MIPS - Mips Technologies  $52.13

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

Sell Call SEP 45   MUP II  24        9.25    42.88     5.0% ***

Sell Put  SEP 40   MUP UH  57        1.13    38.87     9.9% ***
Sell Put  SEP 45   MUP UI  40        2.13    42.87    13.6%

Chart =
 

******

MMCN - MMC Networks  $75.00 *** On The Move! ***

MMC Networks is a developer and supplier of Network Processing
Platforms that allow network equipment vendors to more rapidly
develop high-performance, feature-rich, products supporting a
broad range of networking functions.  MMC Networks also offers
and markets nP Design Services, which provides hardware and
software design consulting as well as training and
traditional support services.

MMC Networks recently reported outstanding financial results for
the second quarter.  Revenues were $17 million, up 35% from the
$12 million reported in the first quarter of 2000.  The numbers
represent a strong sequential growth based on a shift in their
business toward Internet-driven, higher growth, higher margin
service provider equipment.  After the announcement, Mmc Networks
was reiterated a "buy" rating by analysts at Frost Securities and
earlier this month, the company was raised to a "strong buy" by
by analysts at Adams, Harkness & Hill.  The 6-to-12 month target
price is $80 per share and it appears that investors are intent
on helping the issue reach that goal much sooner.

MMCN - MMC Networks  $75.00

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

Sell Put  SEP 55   CMQ UK  0         1.06    53.94     6.7% ***
Sell Put  SEP 60   CMQ UL  23        2.00    58.00    11.9%
Sell Put  SEP 65   CMQ UM  0         3.38    61.62    14.7%

Chart =
 

******

MXIM - Maxim Integrated  $78.50  *** New Trading Range? ***

Maxim Integrated Products is a worldwide leader in design,
development, and manufacture of linear and mixed-signal
integrated circuits.  Maxim circuits provide an interface between
the real world and the digital world by detecting, measuring,
amplifying, and converting real-world signals, such as
temperature, pressure, or sound, into the digital signals
necessary for computer processing.  Maxim's products are used in
a wide range of microprocessor-based electronics equipment,
including personal computers and peripherals, test equipment,
hand-held devices, wireless communicators, and video displays.

Semiconductor stocks have been in a slump recently but in the past
few sessions, a few of the leading issues have begun to show signs
of an impending recovery.  Maxim is one of the top companies in the
group, having vastly outperformed the Nasdaq and the overall market
in recent years.  Last Friday, ABN AMRO raised its rating on the
analog chip maker to a "buy," with a 12-month price target of $100,
citing better than expected orders in the fourth quarter.  In his
commentary, ABN AMRO analyst David Wu said Maxim's bookings grew at
a 19% rate year-over-year, while order backlog expanded by 22%.  He
also pointed out that the company's current demand is geographically
broad-based, suggesting revenues will reach at least $1.45 billion
in the coming year.

MXIM - Maxim Integrated  $78.50

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

Sell Put  SEP 65   XIQ UM  36        1.25    63.75     6.6% ***
Sell Put  SEP 70   XIQ UN  63        2.13    67.87     8.6%
Sell Put  SEP 75   XIQ UO  70        4.00    71.00    12.7%

Chart =
 

******

NAVI - Navisite  $52.00  *** Basing Pattern ***

NaviSite is a provider of outsourced Web hosting and application
services for companies conducting mission-critical business on
the Internet.  They help customers focus on their actual business
operations by outsourcing the management and hosting of critical
Web sites and applications that support those operations.
NaviSite is a majority-owned operating company of CMGI, Inc. with
minority investment from Microsoft.  NaviSite's SiteHarbor
solutions provide secure, reliable co-location and high
performance hosting services, including high performance
Internet access and high-availability server management.

There is little news to report on this unique company but a recent
comment from a popular analyst sums up their market niche.  First
Albany's software expert Ullas Naik remarked that, "Navisite is an
applications service provider that manages applications and hosts
them on an outsource basis for corporate customers, so that the
in-house information technology staff doesn't have to do it."  In
one regard, managed application host services is a very important
industry and it will certainly experience growth as the Internet
infrastructure expands.  Most recently, NAVI was rated a near-term
"buy" in new coverage by Merrill Lynch and that recommendation may
be the reason for the recovery in late July.  In any case, we see
this position as a relatively conservative entry point for traders
who are bullish on the Internet Application Services industry.

NAVI - Navisite  $52.00

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

Sell Call SEP 45   UAV II  21        9.13    42.87     5.0% ***

Sell Put  SEP 40   UAV UH  14        1.00    39.00     8.9% ***
Sell Put  SEP 45   UAV UI  0         2.06    42.94    13.2%

Chart =
 

******

SMTC - Semtech  $94.06  *** Chip Sector Play ***

Semtech is a supplier of analog and mixed-signal semiconductors.
Semtech designs, manufactures, and markets a range of products
for commercial applications, the majority of which are sold to
the communications, industrial and computer markets.  Their
semiconductors enable power management, testing, protection and
a range of other functions in products that require analog or
mixed-signal processing.

Semtech is another popular company in the Semiconductor industry
and we simply favor its fundamental outlook and the bullish chart
pattern.  Based on this week’s upside activity in the issue,
investors must believe the company is one track to deliver future
profitability and our position offers an excellent reward potential
at the risk of owning this unique issue at a favorable cost basis.

SMTC - Semtech  $94.06

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

Sell Call SEP 80   QTU IP  71       18.63    75.43     6.1% ***

Sell Put  SEP 70   QTU UN  8         1.38    68.62     6.9% ***
Sell Put  SEP 75   QTU UO  3         2.38    72.62    11.4%
Sell Put  SEP 80   QTU UP  5         3.75    76.25    13.9%

Chart =
 


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