The Option Investor Newsletter Sunday 08-27-2000 Copyright 2000, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/082700_1.html Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 8-25 WE 8-18 WE 8-11 WE 8-4 DOW 11192.63 +146.15 11046.48 + 18.68 11027.80 +260.05 +256.58 Nasdaq 4042.68 +112.34 3930.34 +140.87 3789.47 + 2.11 +124.36 S&P-100 823.55 + 9.91 813.64 + 8.89 804.75 + 8.90 + 19.67 S&P-500 1506.46 + 14.74 1491.72 + 19.88 1471.84 + 8.91 + 43.04 W5000 14091.20 +183.80 13907.40 +210.60 13696.80 + 84.90 +359.60 RUT 525.11 + 9.60 515.51 + 5.24 510.27 + 6.64 + 13.41 TRAN 2790.17 - 46.97 2837.14 - 90.36 2927.50 + 40.69 +117.28 VIX 19.10 - .32 19.42 - 1.77 21.19 - .35 - 2.76 Put/Call .50 .57 .41 .59 ****************************************************************** Welcome to the Twilight Zone Mr. Folino! The economy is rolling right along neither gaining nor slowing more than expected according to the GDP report on Friday. The economy grew +5.3% in the second quarter meeting economists expectations and only slightly faster than the +4.8% first quarter rate. No big deal in terms of market movement. Existing home sales dropped -9.8% in July, much lower than expected. The Fed is on hold and the reports just keep confirming their decision. The report made public before the market open set the stage for the Nasdaq to finally achieve liftoff at the open. Just as the Nasdaq appeared destined to hit 4200 before the day was out, a severe case of bad news stopped it dead. Just like it hit a brick wall. News that the EMLX CEO had resigned and they would restate earnings showing a loss instead of a profit was such a shock to the market that those traders who were not on vacation quickly started clearing the decks of not only EMLX but QLGC and BRCD, which are in the same sector, on fear that the virus might be catching. After dropping -$67 from $110 to a low of $43 Nasdaq halted trading. A -61% drop, billions in market cap, gone in a heartbeat. The rest of the story is history. The press release was bogus. CEO Paul Folino showed up at his office around 7:30 and turned on CNBC only to discover on TV that he had resigned and EMLX had lost over half its market cap. Can you hear the twilight zone theme playing in the background? So much for a sleepy, casual Friday. Thousands of investors lost millions of dollars to a hoax. Savings accounts, IRAs, funds, nobody was safe. Whoever did this better hope he can find a deserted island and hide. When the FBI, SEC and friends find this person they will be voted off the planet, not just the island. The most amazing part? The market did not die. Yes, the story pulled the plug on a very promising rally but the market did not die. A Friday in late August is not normally a rip roaring trading day but the possibility of profit taking day was good. But, it still did not happen. Earnings warnings, bogus press releases, vacation Friday, but the market held. A miracle in my book! If that sounds bullish it is. We dodged a very big bullet on Friday. Even though the announcement was a hoax it could have had serious market consequences. Even CSCO dropped on the news. When news comes out of left field completely unexpected the first reaction is to sell quickly and wait for the smoke to clear and see what the fall out will be. Yes, there was a lot of broad selling but it was quickly stopped even before the real news was clear. The knee jerk reactions were met with strong buying and that was market positive. There is a bottom under this market boys and girls. That is the silver lining in today's cloud. This doesn't mean there will not be any dips in our future but the evidence is pointing to only small ones. Now that I have gone out on the limb is that a chainsaw I hear? The VIX hit another 52 week low intraday at 18.89. I think we have passed the point where anybody cares anymore. Volatility is so low it is off the scale but that does not mean it can't go lower. The low point in 1999 was in July with a 17.70 and the low for 1998 was also in July with 16.73. We are a month late but the patterns are almost identical. Using that as a guide it is entirely possible we can see much lower numbers in the next couple weeks as the market responds to a Fed on hold and traders coming back from vacation. There are no negative market factors other than the coming earnings warning season. Confessions started trickling in today with Lear Corp (LEA) and Lowes Cineplex (LCP) announcing after the close that earnings will not be up to par. These were in addition to downgrades on several stocks by analysts faced with a slowing economy. Coke (KO) earnings estimates were cut by Salomon Smith Barney after they said volume growth was slowing. Several analysts talked about the shift from carbonated to non-carbonated beverages and the impact on KO and PEP as the major players. It is a strange turn of events when bottled water sells for more than a Coke. For that matter water costs more than gasoline even at the current inflated prices! KO dropped -$2 on the news. The only two lurking problems which may become major market problems in September are oil prices and slowing earnings. At least these are the only two that traders are willing to talk about. Oil rose +$.40 to settle at $32.03 today and the time to start laying in those supplies of heating oil is fast approaching. At $32 oil is a nuisance, at $35-$38 it starts to be a major problem and over $40 a disaster. Like the VIX, oil is just a smoldering ember which under the right conditions could blossom into a raging fire and consume the current market momentum. The other problem is about two weeks away. Earnings warning season. It starts officially Sept 11th. Unofficially there is no real date but confessions will start in earnest about 30 days before earnings are announced. Smack dab at the end of Labor Day week. With the economy slowing earnings estimates must drop. Someone will be the leader in every sector and once they confess, estimates for every one else in the sector will drop as well. It is a cascade effect. Add the fact that summers are normally tough on sales and that is why September is typically a rough month. In the last 49 years September is the worst performing month with a total loss of -10.5% based on the S&P-500. Compare that with December which is up +87.6% over the same period. Mr. Fed himself, Alan Greenspan, gave a speech on Friday in Jackson Hole, Wyoming and made some bullish comments. He said increasing productivity is showing no signs of tapering off but then qualified it by saying that when it did the problems would begin. Come on Alan. Be a sport! Trees grow to the sky, really! http://www.bog.frb.fed.us/boarddocs/speeches/2000/20000825.htm Even in spite of the economic reports, news hoaxes and speeches the Dow traded in only a 55 point range. 55 points! The Nasdaq only managed two points more with a 57 point range. The Volume was positively anemic with only 676 million shares traded on the NYSE and 1.2 bil on the Nasdaq. This low volume is adding to the lack of volatility but also building the pressure. The major indexes are slowly creeping up and passing previous resistance points without much fanfare. By slowly overcoming resistance points without those wild spurts we have seen in the past it is setting the stage for a blowout soon. Investor confidence is growing by leaps and bounds and traders burned in the spring and summer are starting to come back into the market. Retail volume at brokers is starting to grow and anticipation is building. Stocks which have been pounded this year are slowly breaking out again. Take a look at all the charts for the calls this weekend. This is an incredible group of plays. There are so many good plays it is impossible to pick just one or two. My personal play list for next week is huge. Way more than I could ever play. My personal sentiment indicator, subscriptions, is growing. Stock split announcements are increasing with dozens more due out soon. You would think it was the fall rally already! Somebody pinch me please! There has to be a dip here somewhere! Enough bullishness! Even the best laid plans fail for unexpected reasons. With the Nasdaq closing over 4000 for three days now it has all the appearances of impending acceleration. Trade it if it comes but consider closing those positions if we break 4000 again. The Nasdaq has been up 9 of 11 days and those two down days were minimal. Low volume could exaggerate any profit taking should the market makers want one more test before Labor Day but Friday would have been a prime opportunity and they passed. Any dip should be considered a buying opportunity. The major economic reports for next week are the Personal Income/Spending on Monday and the Employment Report for August on Friday. Sectors in which to be most careful would be biotech and semiconductors due to their recent strong gains. The sector to watch for the upside would be the fiber optics. There is a major fiber optic conference this week which could have market moving news. (markets move both ways on this news, not just up) Have fun but always be watchful. Speaking of watching, watch for the beginning of decimalization on Monday. Decimalization is the changing of the way stock prices are reported from fractions to decimals. No more trying to figure out what 15/32 or 23/64 actually means. This was scheduled for last year but delayed until after the dreaded Y2K event to avoid problems. Now that the date is upon us the SEC is overseeing the change to ensure an orderly transition. Hopefully it will have about as much impact as Y2K. Notice they chose the last week in August to implement the first test? Obviously they can read volume charts too. The SEC has picked 13 NYSE stocks and 3 options for the test. No, they did not pick IBM, T, C or AXP for this test. High volume stocks were avoided. Several of the candidates you probably never heard of. Here is the list in order of Fridays share volume: Forest City Enterprises A&B (FCE.A, FCE.B), 600 shares MSC Software (MNS), 10,000 Media General (MEG.A), 10,500 Psychemedics (PMD), 16,000 Regal Beloit (RBC), 17,000 eMagin (EMA), 21,300 Hughes Supply (HUG), 34,800 Global Light (GBT), 137,900 ON2.com (ONT), 159,700 FedEx (FDX), 691,000 Anadarko Petroleum (APC), 1,002,000 Gateway (GTW), 1,663,000 These stocks will begin trading in pennies on Monday instead of the 1/8 or 1/16 increments. Options on FDX, APC and GTW will also be decimalized with options over $3.00 trading in $.10 increments and options under $3.00 will trade in $.05 increments. The test is expected to expand on Sept-25th to include another 50-100 NYSE stocks. The conversion for all stocks and options is expected to begin as early as December but the deadline is April 9th, 2001. Expect that to be beaten once the initial hurdles are overcome. Bored in Chicago? Have lunch with on us Thursday August-31st. OptionInvestor.com, Preferred Trade and DTN-IQ will hold a FREE seminar on Thursday complete with handouts, freebies, door prizes and over six hours of solid information which can improve your trading results. Lightning trades, real time quotes and the best option strategies and a FREE LUNCH! How can you go wrong? It is free but you have to register so we can order food. http://www.OptionInvestor.com/seminar/dtn Trade smart, sell too soon. Jim Brown Editor **************** SEMINAR SCHEDULE **************** Here we go again! Here is your chance to learn from the pros. The three day Technical Analysis Stock and Option Fall Seminar Series. Three days of in-depth education. Don't miss it! We guarantee you will not be disappointed. The class size is small so you will get plenty of individual attention from Chris Verhaegh, Steve Rhoads and staff. At less than the cost of a bad trade you can learn how to analyze stocks and trade options like the pros. Don't wait, do it now. Date City Aug 28-30 Detroit Sep 14-16 Chicago Sep 21-23 Austin TX Sep 28-30 Boston Oct 12-14 Charlotte NC Oct 19-21 San Francisco Nov 02-05 Phoenix Nov 09-12 Miami FL Dec 07-09 Philadelphia Dec 14-16 San Antonio Australia coming soon! Has the market been beating you up? Did you give back your gains from April? Would you like to understand all the technical indicators our writers use? Does the alphabet soup of technical terms like RSI, DMA, MACD, ROC, Stochastics, Bollinger bands, sound like Greek to you? You can learn from the experts how to interpret all these indicators, read charts, pick stocks and which option strategies to use on those stocks for less than the cost of one bad trade. Reserve your seat now for one of our regional seminars. Click here for more info: http://www.OptionInvestor.com/seminar/seminar.asp ************************Advertisement************************* GEventuremine.com. Where ideas meet money. Announcing GE Venture Mine, the meeting ground for ideas and money. New on-line technology identifies the kind of opportunities you want to invest in. No more crisscrossing the country looking for the next break through idea. Find entrepreneurs, from start up to early stage business, in a search customized to meet your individual criteria. In privacy. On-line. http://www.sungrp.com/tracking.asp?campaignid=302 ************************************************************** ************** EDITOR'S PLAYS ************** What an exciting week - NOT! The EPNY play broke out - to the down side! The EXDS play worked just like we scripted it. 50/50 is not bad since we never got the entry on EPNY. The new play tonight is a stock play for those with IRA accounts. Actually, we have an IRA stock site in the works and will be announcing that real soon! ************** EXISTING PLAYS ************** EPNY $99 Call play Prior week Last week EPNY broke down instead of out but came to rest exactly on support at $88 and then started up again. I think this is bullish but we do not have enough trend to make an intelligent decision. Risk takers could enter this play now after confirming upward movement but the wise play would be to wait for our $101 target. Once EPNY breaks out then it wold be a safer play. EXDS - $60.44 Call play Previous week Last week Exodus is heading for $70 which could be the next resistance point. We got the breakout we were expecting after $60 served as a price magnet for options expiration. If you are in the play I would consider setting a sell at $70 and wait for a break through before re-entering the play. Next stop $90. ********* NEW PLAY ********* HUF - Huffy - Long stock play Huffy is not optionable but margin on HUF is only $6 at this level and you can play this in your IRA. Huffy is riding the current scooter craze. I am sure you have seen them in your neighborhood. Those compact light weight scooters that are the current rage for the 7-12 yr old age bracket. Analysts estimate that sales of the scooters alone could add $500 million to Huffy's revenue not counting all the helmets, pads and accessories. Huffy had been depressed with dropping sales as the higher dollar bicycle consumer over looked their "cheap" offerings. The scooter boom is an unexpected windfall for Huffy. I only bring this to your attention because of the email I get complaining that many brokers will not let you trade options in your IRA. Stocks like options have risk and HUF is a risky play because of the recent gains. Be sure to use stop losses. ************ The key to the market this week will be volume. If volume continues to drop it is likely to be a boring week. The employment report on Friday will be a focus but most will be looking for Labor Day weekend as well. There will be a battle between those leaving the market to concentrate on the holiday and those trying to sneak into the market before the post Labor Day rush. 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 ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** **************** MARKET SENTIMENT **************** Small Range Days Lead To Large Range Days By Austin Passamonte That's an adage we learned fifteen years ago. It's so true. Look at any chart/any symbol and this fact is apparent; a series of small-range days inevitably spawns a string of large range days soon after. That being the case, we're due for some serious market swings following this week's non-action. Small range, doji days occur during "rests" in the market due to uncertainty of near-term and future direction. This is a nervous market. Such coiling builds pressure that leads to significant moves when it breaks. Which way is the question. We've always felt that a good salesman or attorney (is there a difference?) can take either side of a case and debate with equal conviction. Let's do our best to perform that straddle for market direction right here. Market Sentiment believes we are very close to a dramatic move. Based on the arguments below, your job is to act as a jury of one to weigh evidence presented. No weaseling your way out of this duty! Market Rally: The Fed is done raising rates for good. Economy on track for a soft landing, inflation signs are nil. Even Greenspan admits new economy productivity thwarts previous inflation pressure and growth ceilings. Next step; rate cuts. It's an election year. Adage is stocks always rise during these times, especially in the fall. Summer doldrums are nearing an end. Big players end vacation and return to buy up everything in sight. High volume before long. Money pours into market funds. Tons of cash sits on sideline waiting to be unleashed. Much of that might be yours. Bell-weather leaders showing considerable strength. GE leads the pack, other Dow heavyweights enjoying new-found highs. Fundamental behavior is excellent. Numerous stocks reaching or surpassing all-time highs. Market Decline: Earnings season is over. Pre-warning is next and could be an ugly one. Shades of P&G last time around and more. September and October historically toughest months of the year. Worst crashes ever occurred then. Election year bias is a myth. Studies show it's a coin-toss at best. Just enjoyed large percentage gains in all major indexes with very little profit taking. Commercial traders in S&P 500, DJIA futures arena remain at five year net-short extremes or greater. Market giants bet heavily on nearby decline. Small specs extreme net-long. Commercial traders in Ten-year Note and 30-Year Bond futures arena at five year extreme net-short positions. Market giants bet heavily on interest rates going up. Small specs extreme net-long. Oil prices above $30 per barrel with no relief in sight. U.S. stockpiles at historical lows. Astronomical heating & fuel bills are certain. VIX indicator riding at 19 level for days. Almost never returns to high 20s without significant market correction in overall process. Technical chart indicators show broad markets overbought, ROC & Momentum indicators losing steam. Overwhelming bullish sentiment in the media/public. Everyone piled heavily to one side of the canoe. A slight tip rolls it instantly. How deep is the water below? Prosecution and defense rests. We await the jury's verdict. MARKET SENTIMENT INDICATORS --------------------------- VIX 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 8/24 close: 19.10 Sat 8/26 close: 19.10 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 (8/22) (8/24) (8/26) ************************************************************* CBOE Total P/C Ratio .55 .43 .50 Equity P/C Ratio .47 .38 .43 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 (8/22) (8/24) (8/26) ************************************************************** All index options 1.47 1.22 1.52 OEX Put/Call Ratio 1.77 .71 .81 OEX Maximum Open Interest Strikes/Contracts: Puts 800/4,291 790/6,293 790/5,665 Calls 810/4,796 800/4,852 800/4,846 Put/Call Ratio .89 1.30 1.17 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: (8/22) (8/24) (8/26) Overhead Resistance: (920-865) 1,483 1582.75 1620.67 (860/840) 52.59 49.34 47.10 (835/820) 5.13 2.11 1.56 OEX close: 818 825 823 Underlying Support: (815-800) 1.06 1.25 1.30 (795-780) 2.44 2.84 2.79 What the S/R measure indicates: Net open-interest ratios are firm above 840 and ridiculous above 865 while very light all the way to 780. A large index move has downside clearance to 780 or below with relative ease. We would consider a failed test near the 835 range an excellent put entry. 30-yr Bond: 5.71% 5.66% 5.67% Light, Sweet Crude, Barrel: $31.22 $31.63 $32.03 200 Day Moving Average (as of 8/08) The 200 DMA is widely considered the major benchmark for critical support in a market. DOW: 10,792 11,067 11,182 11,192 NASDAQ: 3,936 3,851 4,053 4,042 NDX: 3,672 3,722 3,949 3,931 SPX: 1434 1484 1508 1506 OEX: 773 811 825 823 CBOT Commitment Of Traders Report: Friday 8/25 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; +1249 (long) - 2542 (short) Total Open Interest % 25.24% net-long 8.5% net-short NASDAQ 100 Net contracts; - 1613 (short) +38 (long) Total Open Interest % 11.85% net-long .098% net-long (flat) S&P 500 Net contracts; + 44,989 (long) -47,946 (short) Total Open Interest % 25.24% net-long 8.5% net-short What COT Data Tells Us: Commercial positions in S&P 500 and DJIA remain at or above five-year extreme short levels. Small specs continue to build net-long extremes. NDX commercials went from net-long to flat while small specs went from net-short to net-long the past two weeks. (Not Shown) Commercial positions in 10-Year Note and 30-Year Bond markets at or near five-year extreme net-short levels. Small specs build net-long. Summary: "Smart money" insiders expect stock market to decline and interest rates to rise. Small traders directly opposite, creating diverse set up favoring commercial sentiment for near-term market direction. BULLISH SIGNALS Interest rates 5.66% on the 30-year Treasury Bond make equity markets the only game in town. Fed-Fund futures are pricing slight chance of further rate hikes and dwindling. Benign Government Reports Latest statistics hint the economy is cooling and no further rate hikes may be needed. All reports included Strength In Financial Sector, Many Dow Components Financial leaders approach or exceed all-time highs as plenty of old-economy stocks enjoy strong price leadership Broad Market Strength All major indexes are well above 200 DMAs and enjoying solid gains almost every day. ****** BEARISH SIGNALS VIX Thursday’s close near 19 has us in EXTREME danger zone. End Of Earnings Season Earnings season has all but ended with pre-warning cycle to begin in two weeks. It may not be pretty this time, due to.. 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 $31.63 today. All petroleum expected to be extremely high this fall. Prices in low $20s would be welcome relief but remain just a dream. COT Report - S&P 500 & DJIA 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. COT Report - NASDAQ 100 Sentiment reversal with small speculators switching to net- long while commercials go flat may suggest near-term weakness. ************** MARKET POSTURE ************** As of Market Close - Sunday, 08/27/2000 Key Benchmarks Broad Market Last Support/Resistance Alert **************************************************************** DOW Industrials 11,191 10,950 11,400 ** SPX S&P 500 1,507 1,475 1,520 COMPX NASD Composite 4,042 3,650 4,100 OEX S&P 100 823 814 830 RUT Russell 2000 524 485 540 NDX NASD 100 3,931 3,500 4,050 MSH High Tech 1,098 975 1,110 BTK Biotech 750 640 770 ** XCI Hardware 1,586 1,450 1,620 GSO.X Software 459 405 470 SOX Semiconductor 1,143 1,000 1,200 NWX Networking 1,325 1,290 1,350 INX Internet 563 495 600 ** BIX Banking 589 550 610 XBD Brokerage 614 570 635 IUX Insurance 689 680 725 RLX Retail 830 805 860 DRG Drug 398 365 415 HCX Healthcare 822 795 855 XAL Airline 159 148 168 OIX Oil & Gas 310 280 320 The DOW, BTK and INX hit our resistance levels on Friday, but were not able to close above those levels. All in all, 15 alarms were triggered this week, with 13 of them at resistance. Only the XAL and RLX triggered support alarms, and both of these indexes closed higher from those levels. Raising support (DOW, OEX, NWX, INX) Raising resistance (DOW, BTK, INX) Lowering resistance (NWX). ***********************ADVERTISEMENT************************ Up To 60% Off At EverythingWireless.com The online super-store for your active lifestyle. Select from the largest range of accessories and products you use every day including Cellular and PCS phones, batteries, chargers, hands-free kits, wireless data products and more. http://www.everythingwireless.com/wireless/homepage?id=1601002 ************************************************************ ************* SECTOR TRADER ************* Peak Over My Shoulder By Austin Passamonte Well, it's my final set of downs in the backup role here at Sector Trader. We've had some fun, picked a few dud plays, passed up a nice one but caught part of the next move. Why not spend this session playing it safe before taking off our helmet and grabbing the clip board once again. (Forgive the football metaphors for non-fans. I'm limited in scope but will work on figure-skating knowledge soon) The very first thing I do before considering any trade at all is take the underlying temperature. I want to see how its technical tools line up and look for price behavior and chart patterns within as well. Here's exactly what I see for three of the most liquid and tradable HOLDRs heading into next week; (Daily Chart, BBH) Biotechs offered another nice advance added to Thursday. Did I mention how that call play got screened out on Wednesday? It was a very strong 4th in a three-play contest. Ouch! BBH broke its neutral wedge to the upside and shows no sign of stopping yet. Those who feel late to the party can see the slow bar stochastic (red line) and MACD still have plenty of room to run. If this play breaks 200 it's new territory and who knows where the top is? We might measure call/put option ratios to find out. Open interest at 200 and 210 strikes runs heavy to calls as we'd expect. If 200 is broken, BBH might reach 210 before serious drag occurs. Overall option O/I is light compared to major indexes but it still gives insight to current trader's sentiment. I'd still be a buyer here although it may be late. Very high odds of at least a few more points to the upside lead me to feel a test of the market should be a win or par exit on trailing stops. A positive BBH market past 10:30 on Monday will tempt me greatly. (Daily Chart, BDH) BDH is an interesting event about to unfold. It has coiled into the very point of a neutral wedge. Daily tech studies lean a bit to the negative side: MACD is fading and might roll over. The stochastic lines show negative divergence to actual price action. Stochastics reach higher highs from last extreme but actual price comparison isn't even close. Stochastic is overbought as well, indicating limited upside left. This neutral wedge has a wide-end range from 82 to 102. That gives us a 20-point spread target objective from the break out of this pattern. Prudent traders would go long or short at a convincing break and target 74 area to the downside or 114 area to the upside. Watch, wait and jump in when BDH makes its choice! (Daily Chart, SMH) SMH just won't give up the ghost! We picked the short side of this one twice to no avail. Still can't convince us it isn't due for a drop with one caveat. The last three sessions traded within tight support/resistance. Half a long candle pattern and two small dojis prove that. It can't remain here forever, decision time draweth nigh. Negative stochastic divergence remains and MACD histogram is on the decline showing momentum on the wane. Stochastic deep in overbought range indicates limited upside left without correction. Can you see any long-term positive indication? I can't but that doesn't mean SMH won't rise from here. Not shown are the 30/60 minute charts both converging with buy signals to the upside. What that means to me is SMH has very short-term potential to pop up a few more points before all three charts align. Long-term players could buy SMH puts and weather a few points move against them with wider stops. Would that make sense? We'd rather wait until all three top out for the best odds of buying puts right at the very crest of a market top. Again, sit the fence and wait for clear confirmation of change. A price close outside the three-day wedge or large intraday move might be enough to convince me. I'd like to personally thank Buzz for entrusting me to sub for him in this role. I had fun, learned a bunch and look forward to the return of our resident expert. Hope your vacation was incredible and look forward to your guidance again next Tuesday! Gimme my gatorade and point me to the showers...game day is finished. ************* COMING EVENTS ************* For the week of August 28, 2000 Monday Personal Income Jul Forecast: 0.3% Previous: 0.4% PCE Jul Forecast: 0.5% Previous: 0.5% Tuesday New Home Sales Jul Forecast: 840K Previous: 829K Consumer Confidence Aug Forecast: 141.5 Previous: 141.7 Wednesday Leading indicators Jul Forecast: 0.0% Previous: 0.0% Thursday Initial Claims 8/26 Forecast: 305K Previous: 314K Chicago PMI Aug Forecast: 53.5% Previous: 52.0% Factory Orders Jul Forecast: -3.8% Previous: 5.4% Help-Wanted Index Jul Forecast: N/A Previous: 81 Friday Auto Sales Aug Forecast: N/A Previous: 6.8M Truck Sales Aug Forecast: N/A Previous: 7.4M Nonfarm Payrolls Aug Forecast: -20K Previous: -108K Unemployment Rate Aug Forecast: 4.0% Previous: 4.0% Hourly Earnings Aug Forecast: 0.3% Previous: 0.4% Average Workweek Aug Forecast:34.4Hrs Previous:34.4Hrs NAPM Index Aug Forecast: 52.5% Previous: 51.8% Construction Spending Jul Forecast: 0.2% Previous: -1.7% Michigan Sentiment Aug Forecast: 108.2 Previous: 107.8 Week of September 4th Sep 05 NAPM Services Sep 06 Productivity-Rev. 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The Option Investor Newsletter Sunday 08-27-2000 Sunday 2 of 5 To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/082700_2.html ************** TRADERS CORNER ************** Looking For A Real Rally By Mary Redmond There seems to be a dwindling of opportunities to make money in the market, and some indicators which point to a possible consolidation or correction ahead. Many traders have been worried about the VIX.X for weeks now. It is often said that the two emotions which move the market are fear and greed. Of the two emotions, fear is the more powerful. This is perhaps why the VIX.X can spike sharply when put buying is at high levels. The volatility increases because the movements to the downside are usually faster and more intense than slow, gradual movements to the upside. There are a number of companies which made very large run ups from last Fall to Spring, and had major corrections following. Some of these stocks are trading at or near their 52-week lows. For example, both CMGI and QCOM had dramatic run ups and double top chart patterns this Spring before making sharp corrections. For the last two months, both stocks have been relatively flat. I have been watching the implied volatilities of these options, and this month is the first time this summer when the implied volatility of the options is lower than the historical volatility of the stocks. A stock's options can reflect a large downward movement in the implied volatility numbers, which can increase the price of call options even though the stock may be near a low. For example, in September of 1999 CMGI had an historical volatility of 64. This means the market was anticipating that the stock would move 64% above or below its current price in the coming year. QCOM had an historical volatility of 70 in the same month. By April of 2000, CMGI's historical volatility had moved to over 155, and QCOM's had moved to over 103. The historic volatility stayed high with both stocks until just recently, as they have both been basically flat this summer. The implied volatility of CMGI's October call options is 85.7 and the historic volatility of the stock was 94 last month. QCOM's call options have an implied volatility of 66 while the historic volatility last month was 97. Basically, this means that the market is now anticipating that these stocks will not move the way they did in the past. If they surprise the market, the call options could be highly profitable. However, if the stocks stay flat, the implied volatility could go even lower, which means the call options would lose even more value. The volatility numbers can be useful in combination with other analytical tools, but are not indicative of possible future stock performance. Since Sycamore reported earnings Thursday night, there were some wild swings in the stock price this whole week. During the after-hours trading Thursday evening and Friday morning, the stock sold down below $150 at one point. If you had been highly nimble, there was an opportunity to make several points Friday morning after the stock opened, as the red candlestick shows a clear move way outside of the Bollinger bands before the market even opened, from which the stock moved up over 4 points. They key here is that as soon as the market opened, the stock jumped up from 151 to over 155 before settling down into a range. This would have been a trade to get in and out of very quickly. It will be interesting to see what type of pattern develops in this stock, as it has not been a publicly traded stock for very long. The whole week has just been pretty boring in the markets as people who started trading in the last couple of years may not be used to markets which only move 20 to 50 points a day. It can feel like an aberration from the real rallies of the past. While there are a few stocks making big daily moves, we may need higher cash flows to the market to see the Dow and NASDAQ move up over 100 points a day. The IPO schedule was practically non-existent this week with only a few issues raising under $200 million. This was helpful to the market, as the cash flows to equity funds continue to be slow. AMG Data reported that last week's cash flows to equity funds totaled $3.3 billion. The weekly moving average of cash to equity funds is approximately $2.25 billion. In addition, the cash keeps pouring into money market funds. The Investment Company Institute reported that over $9 billion went into money market funds last week. The weekly moving average of cash to money market funds is over $12 billion. The total cash in money market funds is currently $1.747 trillion, up over $70 billion from a couple of months ago. There is no shortage of cash out there. People just aren't putting as much into the market. It is important to note that 13 stocks will begin trading in decimals on Monday, August 28. These are APC, FCE A, FCE B, FDX, GTW, HUG, MNS, RBC, PMD, GBT, ONT, EMA, and MEG.A. Some market analysts have raised questions about the possible impact of decimalization on the equity markets and brokerage firms. The most obvious impact will be in the spread between bid and ask. Previously, the current spread on the NYSE between bid and ask was generally 1/16, although there have been stocks which traded in 1/32 and 1/64 of a point. Now the spread between bid and ask could be as low as one cent. This may result in more competitive pricing. APC, FDX, and GTW have options, so we will have an opportunity to see how decimalization impacts options. Contact Support ****** These Grapes Taste Sour By Molly Evans The bogus release of damaging news about EMLX is obviously the story of the week. Approximately half an hour into the trading day Friday, the stock began a steep plummet that left those of us watching the descent questioning our vision. EMLX began red on the day, down only about 3 - 4 points. The darling of the past several days was due for a pullback so there was no surprise in how it initially opened. However, within moments of an official looking, yet very damaging press release on InternetWire, Comtex and then Bloomberg, the stock fell into a tailspin. The author of the press release had written all the buzzwords: "revised earnings from profits to loss," "accounting irregularities" and "CEO stepping down." The stock plummeted 62% within a fifteen minute time span at which time trading was halted for over two hours. For those of us watching at home on our screens, there was first no news, then there was THE news, and then there was the REAL news. What an utterly confusing time. Not only were fortunes being lost and amassed in EMLX trading within that one half-hour, portfolios containing IMNX, QLGC and BRCD were gyrating wildly too. IMNX, symbol for the biotech company Immunex, dropped over confusion about the similar sounding names. QLGC and BRCD, same sector companies, fell in sympathy but then recovered rather quickly, though both were still down on the day. I was caught up personally in this debacle and I'm sorry to say, I was on the wrong side. Somebody wins so somebody has to lose. There were lots of both. The person or persons responsible for the fraud will most likely have a lot of time to marvel at their 15 minutes of fame locked in a jail cell, but for those of us swept up in the drama, the trades stand and a lot of money traded hands over this saga. Personally, I sold EMLX longs and bought puts on Thursday afternoon. "Great!" you say? I suppose. But I am not a greedy trader. EMLX is a strong stock and buying puts is pretty risky when the market has been so strong. Sure, it was overextended and was due for a pullback, but nutsy gets nutsier sometimes, therefore I am reticent to overstay my welcome in put land. I had my order in for two points above my buy point and couldn't get back in fast enough to change it when I saw it plummet. My puts, just sold for $8.00, were bid at $53.63 by the time the stock was halted. Trying to be smart and capitalize yet another way, I wanted to sell naked puts but couldn't get through to the broker on the phone so I went in to buy calls. I'd just had a big cup of coffee and the adrenalin was pumping so I could barely get my hands to steady my little roller ball mouse to put in the darned order! I got it in, saw twenty contracts for the UML-II (Sept 45 calls) go through for $5 and was so pleased. Pleased until I found out that wasn't my fill. I did get through to my broker then and lo and behold, wouldn't you know it? I was informed that trading had been halted just thirty seconds before my market order hit their desk. I'm not crying about missed money. What I AM crying about is the loss of my QLGC shares when it got trashed in sympathy. I saw it dropping fast too and not knowing what the news was dumped my long QLGC shares for $93.50. In fast markets like this, who knows how far it can go down and why? I've learned my lesson both ways, staying in and getting out. This "lesson" cost me $6 Grand. It's the chicken or the egg story. There was no news; was there a sector problem? Was there a shady deal going on between Emulex and QLogic? Who knew? I could find nothing on the news sources at that moment. Finally, a friend on a chat line told me about restated earnings and blah, blah, blah. Nothing about QLGC of course, but the facts spoke for themselves; QLGC had been slightly down within amateur hour and now it was torpedoing its way into deep waters too. I wasn't going to watch my QLGC drop 60% as, in my mind, inevitable questions would surface regarding the sector and tech stocks in general. How can you think when the red bars are just getting longer and longer? I did feel a sense of relief when I glanced at QLGC trading at $75 and went in to buy back there - but no, it was $100 range within seconds. Unbelievable. My story is very small potatoes here. The fact that all trades on the stock and options were being honored, points to the dramatic opportunities and risk of the market. It's a whole new world when some sick schmuck can pen one page of blasphemy and bring a stock crashing down 60% of its market value. InternetWire itself issued a statement of apology for running the story and they're crying that they too are victims of fraud. They ran the story; I don't want to hear it. CNBC later had guests who lectured viewers about trading on rumor. Excuse me but when someone's portfolio is being sliced up, he is not a cool head. People see their stock plummeting and they're trying to stop the hemorrhaging like EVERY investment and trading advisement recommends. Save your lectures. I'm not dissing the ones who legitimately warn about buying on "hot tips," that's a whole other issue. These were lectures about how investors should check out the story before they act. Even Emulex CEO Paul Folino had the audacity to tell the viewing public that people should have checked out the story before trading. I'll give the guy a break, I'm sure it was one heck of a day, but Sir, these are your shareholders! They see a story on an otherwise apparently reputable news service, they're not going to call up and say, "Hey Paulie, what's goin’ down there besides my entire IRA?" What about all of those people who had conservatively placed GTC stop loss orders while they trudged off to work everyday? Sometimes you do everything right and you still get spanked. Only one other time, with PAIR, has a false story been leaked sending the shares tumbling. How many times has the story been true? Let's look at some of those equities. Let's see...umm... does MSTR, CTXS, PG, LGTO, LHSP, DIAL, or VISX ring any bells? I wonder how many of those shareholders paused to wonder if it was really true that their company was issuing a warning. If they did, they choked on the dust of their fellow shareholders who left them holding the bag. So once again, it is the little guys who take the fall while the older and wiser and pompous and arrogant berate us all for sins of trying to make a dollar in their world. And what about the press? The press tells us that oh no, they're not in any way a part of this problem. Well, is this the first or even second time that a false press release has caused market turmoil? Are there no safeguards in the media industry? They don't have to check fax numbers, especially on something that is truly BAD news like that? Wow. I guess we all just live and learn the hard way. In retrospect, I made a bad split second decision in selling my QLGC, but this is the market we are faced with and seconds can mean thousands of dollars. Nobody said it had to be fair. It can be a pretty mean sandbox. Actually, maybe we should look at it this way: in a business where you can lose it that quickly, it means you can also win just as quickly. By the end of the day, those Sept 45 UMLII $5 calls that I tried to scoop were bid at $60.63. Austin, I now have my own fish story for you...but he got away. Contact Support ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* SDLI - SDL, Inc. $402.13 -9.75 (+6.88 this week) See details in sector list Put Play of the Day: ******************** UK - Union Carbide $41.06 (-1.75 last week) See details in sector list ***********************ADVERTISEMENT************************ Up To 60% Off At EverythingWireless.com The online super-store for your active lifestyle. Select from the largest range of accessories and products you use every day including Cellular and PCS phones, batteries, chargers, hands-free kits, wireless data products and more. http://www.everythingwireless.com/wireless/homepage?id=1601002 ************************************************************ ************* DAILY RESULTS ************* Index Last Week Dow 11192.63 146.15 Nasdaq 4042.68 112.34 $OEX 823.55 5.81 $SPX 1506.46 5.55 $RUT 525.11 9.60 $TRAN 2790.17 -46.97 $VIX 19.10 -0.31 Calls CIEN 197.94 21.25 Increasing its stronghold on optic-networks JNPR 190.94 20.13 Pure momentum equals pure profits VRSN 176.38 16.63 Continuation of last week's uptrend ITWO 166.50 16.50 New, stair-step rally over the $160 level INKT 123.94 15.00 New, "Content Bridge" kickstarts interest NEWP 154.00 14.75 New, institutions accumulating with fervor PLXS 142.50 11.88 Splits after Friday's close, August 31st IMCL 99.88 11.38 New, on the verge of a breakout from $100 QLGC 103.88 10.88 Quite a dose of volatility from EMLX news BRCM 268.13 10.00 Infrastructure stocks see incredible growth VRTS 116.94 9.81 Since clearing $115, looking for momentum TIBX 96.25 7.31 New, residual move from positive B2B news VTSS 89.25 7.19 New, having had a great month, $90 is next SDLI 402.13 6.88 Looking for it to hold its head above $400 NTAP 100.81 6.88 Making it to higher ground above $100 level LSCC 74.25 6.63 Definitely a brighter Semi star on Friday DIGX 86.00 5.44 In the midst of a powerful momentum run IDTI 78.25 5.38 Semi sentiment bringing new highs for IDTI BEAS 59.63 5.13 New, B2B stocks have enjoyed stealth rally EXDS 65.19 4.75 Future growth prospects not factored in? GSPN 133.00 2.63 Bouncing around the $130s in techical trade SUNW 124.75 2.38 Profit takers we warned about showed up EMC 91.50 -3.44 Dropped, lack of strength may be early sign Puts AT 50.81 -5.25 A simple repeat of February outlook hurts KO 56.00 -4.31 New, has lost some of investors' fizz UK 41.06 -1.81 Distaste for Chemicals is clearly evident QCOM 58.88 -0.88 Recent bounces just not convincing yet ************************** PICKS WE DROPPED THIS WEEK ************************** 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. CALLS EMC $91.50 (-4.44) Meandering between support and resistance all week on low volume, EMC's lack of strength this week was disappointing. As the major indices managed to claw their way higher, EMC managed to take one step forward and two steps back. Wednesday morning did see our play trace a new intraday high, but there was no conviction to the move, and the profit taking that ensued took the price down to $91 before finding any support. Although support at $90 is still intact, the fact that our play couldn't hold above the 10-dma ($91.91), leads us to think the stock may be weaker than it looks on the surface. With so many other great plays out there, we decided to drop EMC this weekend and take our profits. PUTS No dropped puts today. *********** DEFINITIONS *********** 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. RISKS of SELLING PUTS: 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. ************** NEW CALL PLAYS ************** TIBX - TIBCO Software $96.25 (+7.31 last week) TIBCO's ActiveEnterprise enables businesses to connect resources with customers and automatically deliver event-driven information across networks and the Web in real-time. The company also offers e-commerce, consulting, and support services. Customers license the software to integrate, personalize, and distribute content. TIBCO is enhancing its business-to-business trading capabilities. Reuters owns more than 60% of the company, and Cisco holds a minority stake of 7%. This B2B software company has seen its stock gyrate along with the rangebound NASDAQ during the past month. Since peaking at $129 on July 14th, TIBX has followed the lead of the general market in a whippy, trade-range fashion. The most recent decline brought TIBX below its 100-dma on Monday, August 21st on heavy volume, indicating that many of the weak hands have been shaken out. The very next day, TIBX came roaring back with strong buying volume, fueled by positive comments by a Bear Stearns analyst. While TIBX was not directly mentioned in the commentary to Bear Stearns clients, the analyst believes that the sector will exploit network scale economies and reduce costs of intensive business tasks. TIBX saw a residual move from the comments that has revived this B2B favorite. Since then, TIBX has been trading along a modest upward trendline with heavy volume. Friday's dip to $90.50 just touched that trendline to bounce back and climb above intraday resistance at $96. Aggresively, bounces from $95 could provide entry. Yet, considering the intraday price swings, look for enter off of bounces near intraday support at $93-$94. This would be near the current trendline, and also the 10-dma at $93.43. Below this, $92 has provided intraday bounces, with the 5-dma at $91.16. Overhead, $100 will be resistance and conservative players may want to wait until TIBX surges through the century mark on stronger volume before entering. The 50-dma at $102.94 will be the next level of contention. Use the NASDAQ sentiment as an indication of TIBX's direction, as well as the other B2B stocks like ARBA and CMRC. Last Monday, TIBX made another stride at making B2B e-commerce easier with its launch of TIB/RendezvousTX (RVTX). It is a robust backbone that enables rapid development and deployment of real-time, reliable e-business systems that can manage customizable B2B transactions. This proves TIBX's continued efforts to provide comprehensive, reliable, and dynamic software to the business community. BUY CALL SEP- 90*PIW-IR OI=409 at $11.75 SL=9.50 BUY CALL SEP- 95 PIW-IS OI=239 at $ 8.75 SL=6.75 BUY CALL SEP-100 PIW-IT OI=439 at $ 6.50 SL=4.75 BUY CALL OCT-100 PIW-JT OI=422 at $12.00 SL=9.50 BUY CALL OCT-105 PIW-JA OI= 18 at $10.00 SL=7.50 SELL PUT SEP- 85 PIW-UQ OI= 72 at $ 2.50 SL=3.50 (See risks of selling puts in play legend) Picked on August 27th at $96.25 P/E = N/A Change since picked +0.00 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 BEAS - BEA Systems, Inc. $59.63 (+5.13 last week) Founded in 1995, BEA Systems, Inc. has become widely known as a leading provider of middleware for enterprise applications. This is largely because of the success of BEA Tuxedo and BEA WebLogic, which together comprise approximately 46 percent of the transaction server market (according to IDC). But the vision of BEA's founders has always been bigger than middleware. Their goal from the beginning was to provide a comprehensive infrastructure for development and deployment of reliable, scalable business applications for e-commerce. With so much talk this month about the semiconductor and biotech sectors driving the market higher, the business-to-business stocks have largely been ignored in the public eye. Despite this, B2B stocks have enjoyed a sort of stealth rally. Contributing its fair share to help the NASDAQ higher, shares of B2B companies have quietly appreciated so far this August. While previously B2B issues needed the help of the media to generate excitement and momentum for price appreciation, the move up this time is with little controversy or fanfare. Noticeably missing are the debates on the viability of the B2B business model. And while the volume in general has quieted down compared to last month's feeding frenzy(thanks to ARBA's blowout earnings report), the buying interest is there. In the B2B space, BEAS has been one of the more volatile issues lately, much to a trader's chagrin (or delight). Much of this volatility can be attributed to BEAS reporting earnings on August 15th. BEAS's month started off with a bounce off the $40 area after a late-July sell-off. From there, the stock had a mini earnings run. Encountering resistance at $57, BEAS headed lower as profit-takers took their money off the table early. BEAS found support and closed right on its 50-dma (now at $51) on the eve of its earnings report. For the quarter, BEAS more than tripled its profit from $6 mln, or 2 cents a year ago to $21.9 mln, or 5 cents per share. Despite only beating the Street by a penny, the Street was pleased and the next day, the stock jumped higher. It was likely aided by an upgrade from Deutsche Banc Alex Brown. This past week has seen BEAS bounce above its 50-dma support. Since that successful test on Monday, the stock has been heading higher, using the 5- and 10-dma (near $57 and $55.50) as support. A bounce off those levels could serve as an aggressive entry point. A break through resistance at $60 on strong volume would be an ideal conservative entry point. Above that, there is resistance at $62.50 and then $64. It's been a busy week for BEAS. On Tuesday, the company made a presentation of WAPBuyBeans, its wireless commerce application, at the Intel Developer Forum. Wednesday was an announcement of the expansion of an alliance with AMS Inc., as well as a significant customer milestone reached with partner Driveway.com. BUY CALL SEP-55 BUC-IK OI=1616 at $ 6.38 SL=4.50 BUY CALL SEP-60*BUC-IL OI=2423 at $ 3.38 SL=1.75 BUY CALL SEP-65 BUC-IM OI= 942 at $ 1.50 SL=0.75 BUY CALL OCT-60 BUC-JL OI= 221 at $ 6.75 SL=4.75 BUY CALL OCT-65 BUC-JM OI= 367 at $ 4.75 SL=2.75 Picked on August 27th at $59.63 P/E = N/A Change since picked +0.00 52-week high=$78.88 Analysts Ratings 11-4-0-0-0 52-week low =$ 5.50 Last earnings 08/15 est= 0.04 actual= 0.05 Next earnings N/A est= 0.06 versus= 0.03 Average Daily Volume = 5.57 mln VTSS - Vitesse Semiconductor $89.25 (+7.19 last week) The name Vitesse, French for speed, expresses what the company epitomizes: the pursuit of ever faster integrated circuits for high-bandwidth, high-performance communications systems. Today, virtually every long distance call passes, at some point, through a Vitesse IC. Most of the world’s telecom systems use Vitesse 2.5Gb/s chips. Vitesse plays a critical role in the superhighway, leading the industry in gigabit datacom and 10Gb/s telecom ICs. Since 1984, the company has pioneered volume manufacturing of gigabit per second VLSI. It's been a great month for the semiconductors, and VTSS is no exception. Since bouncing off the $50 level in early August, the stock has pretty much moved steadily up, with regular visits to the 5-dma and once in awhile short dips near the 10-dma. While VTSS started the month below its 50-, 100-, and 200-day moving averages (now at $73, $66 and $65), it has since cleared them all successfully and moved strongly forward. At this point, VTSS is right about where it was before reporting earnings last month on July 13th. For its third quarter, VTSS reported profits of $32.1 mln, or 17 cents a share. This was more than double last year's net income of $15.2 mln, or 8 cents per share. Despite the strong earnings, expectations on the Street were high and the company was only able to match Street estimates. In a market where merely matching consensus number, no matter how unreasonable, is viewed as a sign of disappointment, the stock spent the rest of the month selling off. This past week saw VTSS attempting to get through resistance at $85. After four attempts, the fifth time was a charm as VTSS cleared that resistance point on Friday, moving up 5.31% on 153% of ADV. For those looking to enter this play, there are numerous opportunities. For traders looking enter on a bounce, support can be found at $85, the 5-dma at $83.30 and the 10-dma in the $80 area. Make sure buying volume confirms a bounce before entering though. Conservative traders will want to see VTSS clear $90 on strengthening volume before entering. Looking ahead, resistance can be found at $95 and then the psychological $100. In the news this week, VTSS along with Intel, Seagate Technology and APT Technologies premiered the first Serial ATA disc drive, providing a taste of things to come in the future of ATA disc drive technology. BUY CALL SEP- 85*VQT-IQ OI=1255 at $ 8.50 SL=6.00 BUY CALL SEP- 90 VQT-IR OI= 974 at $ 5.38 SL=3.50 BUY CALL OCT- 90 VQT-JR OI=1089 at $ 9.75 SL=6.75 BUY CALL OCT- 95 VQT-JS OI= 370 at $ 7.63 SL=5.25 BUY CALL OCT-100 VQT-JT OI= 619 at $ 5.63 SL=3.50 SELL PUT SEP- 80 VQT-UP OI= 125 at $ 2.00 SL=3.75 (See risks of selling puts in play legend) Picked on August 27th at $89.25 P/E = 141.25 Change since picked +0.00 52-week high=$115.69 Analysts Ratings 11-6-0-0-0 52-week low =$ 32.25 Last earnings 07/13 est= 0.17 actual= 0.17 Next earnings 10-12 est= 0.19 versus= 0.13 Average Daily Volume = 4.4 mln NEWP - Newport $154.00 (+14.75 last week) Newport makes precision components and automated assembly, measurement, and test equipment used in the aerospace, fiber- optic communications, and semiconductor manufacturing industries, and by researchers. Industrial components, including lenses and other optics and devices for vibration and motion control, account for two-thirds of sales. With its key markets booming, Newport is expanding its production facilities. Looking for the next QCOM? NEWP is up over 900% in 2000. Although NEWP provides a wide array of products over a broad spectrum of Tech-related industries, it's the company's Fiber Optic-related operations that has caught Wall Street's attention. The company is benefiting from the explosive growth in the optical networking arena. NEWP makes the test equipment and components that are necessary in the manufacturing of high-speed optical networking equipment. Wall Street has caught onto NEWP's blistering earnings growth, which has lead to institutions accumulating the stock with great fervor. NEWP has been under heavy accumulation since late May, which has carried the stock into the stratosphere. Most recently, NEWP broke out of triple top resistance at $120 a little over two weeks, and hasn't looked back since. Wall Street bestowed encouraging words on the stock last week, which boosted NEWP to higher highs. Warburg Dillon Reed reiterated their Buy rating on the stock and raised their price target to $170. The stock has run 30% since breaking out of resistance two weeks ago, and with such rallies, the threat of profit taking remains. However, the momentum investors appear to be willing to take NEWP higher. The stock finished strongly last Friday, and if the buyers return early next week, you might look for an entry if NEWP rallies above its day old 52-week high at $155.50. If, on the other hand, the profit takers rear their ugly heads, NEWP has strong support just below at $150, and again near its 5-dma at $149. Aggressive traders might look to any pullback to gain entry into the play after a round of profit taking runs its course. NEWP joined the list of split candidates by breaking above the $120 level two weeks ago. The company has plenty of shares to authorize a 2-for-1 should the board decide to declare a split. The last time NEWP split its stock was back in February of this year, when it was trading at $112.13 BUY CALL SEP-145 NOQ-II OI=242 at $18.25 SL=13.25 BUY CALL SEP-150*NOQ-IJ OI= 87 at $15.00 SL=11.00 BUY CALL SEP-155 NOQ-IK OI= 0 at $11.50 SL= 8.75 Wait for OI BUY CALL OCT-150 NOQ-JJ OI= 4 at $25.00 SL=18.75 BUY CALL OCT-155 NOQ-JK OI= 0 at $22.00 SL=16.50 Wait for OI Picked on August 27th at $154.00 P/E = 359 Change since picked +0.00 52-week high=$155.50 Analysts Ratings 2-3-0-0-0 52-week low =$ 5.00 Last earnings 06/00 est= 0.12 actual= 0.14 Next earnings 10-19 est= 0.21 versus= 0.08 Average Daily Volume = 1.33 mln ITWO - I2 Technologies $166.50 (+16.50 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. The ITWO breakout that alluded us a week ago finally transpired last Friday. We dropped ITWO last Tuesday after a round of profit taking stopped our play out. However, the selling has since subsided and ITWO subsequently rallied in a stair step fashion to breakout above $160. The news that boosted ITWO into breakout mode was the company's formation of three auto industry exchanges last week. ITWO said it would provide DaimlerChrysler (DCX) with software to form its FastCar program, which is expected to ramp the auto giant's manufacturing. ITWO also said it would build a parts marketplace for Toyota (TM). Finally, the third exchange created was for Volkswagen, who requested ITWO's assistance in building a private supplier network. The three contracts reinforced ITWO's leadership role in the B-2-B sector. The news scared away the profit takers and prompted the bulls to take charge. ITWO has moved convincingly higher over the last three sessions on relatively healthy volume, despite the waning Summer trading activity. But, given ITWO's three consecutive sessions of substantial rallies, the ever-present threat of profit taking looms. If the annoying profit takers do return to ITWO early next week, the stock has near-term support at $165 and major support near its breakout point at $160. Traders might consider entering the play on a pullback confirmed with light volume with a bounce off either support levels. On the other hand, ITWO did finish Friday near its day highs on a surge of volume in the final moments of trading. Although ITWO faces some congestion above its current levels, an aggressive trader might consider entering the play early next week at current levels if Friday's late day buyers return to take the stock higher. ITWO will be attending two high-profile events in the coming weeks. First, the company will be presenting at the Ariba 2000 conference in Miami. Second, ITWO is slated as a headline presenter at the eB-2-B Marketplace World, which is attended by industry consultants and analysts. BUY CALL SEP-160*QYI-IL OI=562 at $13.63 SL=10.25 BUY CALL SEP-165 QYI-IM OI=373 at $10.50 SL= 7.75 BUY CALL SEP-170 QYI-IN OI=544 at $ 8.25 SL= 5.75 BUY CALL OCT-165 QYI-JM OI= 20 at $20.38 SL=14.75 BUY CALL OCT-170 QYI-JN OI= 44 at $17.88 SL=12.75 Picked on August 27th at $166.50 P/E = 520 Change since picked +0.00 52-week high=$223.50 Analysts Ratings 10-18-3-0-0 52-week low =$ 15.13 Last earnings 06/00 est= 0.08 actual= 0.10 Next earnings 10-20 est= 0.11 versus= 0.06 Average Daily Volume = 3.55 mln IMCL - Imclone Systems $99.88 (+11.38 last week) Engaged in the research and development of novel cancer treatments, IMCL focuses on growth factor inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors. The company’s lead product candidate, IMC-C225, is a therapeutic monoclonal antibody that inhibits stimulation of a receptor for growth factors upon which certain tumors depend. Phase I/II clinical trials have been promising. The lead candidate for angiogenesis inhibition, IMC-1C11 is an antibody that binds selectively and with high affinity to KDR, a principal Vascular Endothelial Growth Factor (VEGF) receptor, thus inhibiting angiogenesis. Despite patent-related concerns in the drug sector, the Biotechs have been on fire again this past week. IMCL is an example of what it takes to shine in this sector. Earnings are still secondary as investors try to value the companies according to expected future revenues, so any positive surprises in the development cycles of major products has a tendency to boost the stock price. Accordingly, IMCL got a nice FDA-related injection of emotional capital a couple weeks ago (see news below), and the company's actual earnings announcement 3 days later went largely unnoticed. Since the gap up on August 14th, positive sentiment has been in abundance and the stock is using the 5-dma (currently at $94.91) as support for its ascent. The action on Thursday and Friday brought shares of IMCL right up to resistance at $100-$102, and the light volume was insufficient to scale that wall. Historical support sits at $95, and $92, with the $90 level backed up by the rising 10-dma at $89.94. Volume in the markets is expected to be light next week, so it looks like we could see some consolidation ahead of the Labor Day weekend. Use any weakness as an opportunity to enter the play at a discount, and target shoot new entries on any bounce at support, determined according to your risk tolerance. Should IMCL go against the conventional wisdom and surge higher from current levels, wait for the conviction of strong buying volume to push the price through $103 before playing. On August 15th, IMCL reported a wider-than-expected loss for the second quarter, but the stock held its recent gains and within days had resumed its uptrend. The major reason investors were buying so vigorously was that 4 days earlier, the company met with the FDA to present results from its ongoing Phase II clinical trials of its leading drug candidate, C225, in patients with refractory head, neck, and colorectal cancers. According to Merrill Lynch analyst Eric Hecht, the interim data leads the FDA to believe that the Phase II studies may qualify for accelerated approval for the indications listed above. This could allow the company to bypass Phase III trials, speeding the time to market, putting C225 on the market as soon as the fourth quarter of 2001. BUY CALL SEP- 95 QCI-IS OI=286 at $ 9.75 SL= 6.75 BUY CALL SEP-100*QCI-IT OI=687 at $ 7.25 SL= 5.25 BUY CALL SEP-105 QCI-IA OI= 8 at $ 4.88 SL= 3.00 BUY CALL NOV-100 QCI-KT OI=202 at $14.25 SL=10.50 BUY CALL NOV-105 QCI-KA OI=158 at $12.25 SL= 9.25 SELL PUT SEP-90 QCI-UR OI= 93 at $ 2.63 SL= 4.00 (See risks of selling puts in play legend) Picked on August 27th at $99.88 P/E = N/A Change since picked +0.00 52-week high=$171.98 Analysts Ratings 3-3-0-0-0 52-week low =$ 16.25 Last earnings 08/00 est=-0.43 actual=-0.46 Next earnings 11-14 est=-0.04 versus=-0.44 Average Daily Volume = 552 K INKT - Inktomi Corp $123.94 (+15.00 last week) Inktomi develops and markets scalable software applications to intensify and strengthen larger networks. Their Internet search engine, which provides a fast and customizable Web search, is used by Yahoo! Other products include a large-scale network caching application for ISPs (like AOL) and corporations that need help addressing capacity constraints in high-traffic network routes. Inktomi operates in the US and UK. Shares of INKT jumped 8.2%, or $9.13, Wednesday on news of a "Content Bridge" alliance it entered to improve the delivery, intelligence, and efficiency of Internet content. Other major players include America Online (AOL), Digital Island (ISLD), and Exodus Communications (EXDS). Under the agreement, Inktomi will deliver the network infrastructure technology, which will let customers deliver information across each other's private distribution networks. CEO and president of Inktomi remarked that "the industry is saying it's standardizing Inktomi's architecture, this is what enables the networks to communicate with each other. It says the Internet is growing so fast that no one player can do it themselves, it's going to take the collective efforts of all the major players." Bottom-line: this news launched INKT out of its lull and propelled it through the tough resistance found at the $115 and $120 levels. The volume, at two to five mln shares exchanging hands, is currently backing the moves. Look for similar activity to confirm future upside action. If you want to play conservatively, look for old resistance at $120 or the current level at the 100-dma ($123.30) to develop as short-term support before entering aggressively on deep pullbacks. Keep a tight rein on INKT. This Internet can be a quick mover! On Thursday, INKT got a boost from analysts at Friedman, Billings, Ramsey & Co with a Buy reiteration. BUY CALL SEP-120*KYQ-ID OI=1079 at $10.00 SL= 7.00 BUY CALL SEP-125 KYQ-IE OI= 691 at $ 8.00 SL= 5.75 BUY CALL SEP-130 KYQ-IF OI=2118 at $ 5.75 SL= 3.75 BUY CALL OCT-125 KYQ-JE OI= 609 at $15.88 SL=11.50 BUY CALL OCT-130 KYQ-JF OI= 401 at $13.75 SL=10.25 Picked on August 27th at $123.94 P/E = N/A Change since picked +0.00 52-week high=$241.50 Analysts Ratings 10-6-2-0-0 52-week low =$ 46.91 Last earnings 06/00 est= 0.69 actual= 0.73 Next earnings 10-23 est= 0.05 versus=-0.05 Average Daily Volume = 2.95 mln **********************ADVERTISEMENT************************* Free voicemail, email, fax, and paging - all in one place! Accessible over the phone & Internet. Free Local & 800 Phone Number for Life! Send & receive faxes & email via the web or phone. ThinkLink charges no monthly fees. Plus, for a limited time, sign up now and receive an airline voucher worth up to $100 dollars off any major airline. FREE NOW! 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The Option Investor Newsletter Sunday 08-27-2000 Sunday 3 of 5 To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/082700_3.html ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ****************** CURRENT CALL PLAYS ****************** SDLI - SDL, Inc. $402.13 -9.75 (+6.88 this week) SDL's products power the transmission of data, voice, video and Internet information over fiber optic networks to meet the needs of telecommunications, cable television and satellite communications applications. They enable customers to meet the bandwidth needs of increasing Internet, data, video and voice traffic by expanding their fiber optic communications networks much more quickly and efficiently than would be possible using conventional electronic and optical technologies. SDL's optical products also serve a variety of non-communications applications, including materials processing and printing. SDLI hasn't given up yet! On July 10th, JDS Uniphase proclaimed its intent to acquire SDLI in a stock-for-stock transaction worth $41 bln. Ever since then, the stock has been on a roller coaster, climbing to a 52-week high of $460.50 on July 24th. Clearly, the profit takers took their cue at that point, sending the stock as low as $315 on July 31st. SDLI peaked at $421.75 last Tuesday, and the stock continues to go up and down like a yo-yo. That about sums up this play: volatile and risky. Wednesday, SDLI traded in a range of $13.63, hitting a low of $393 and a high of $406.63. Following a similar pattern Thursday, the stock hit a low of $399.31 before noon on strong volume. It then regained steam on a second volume surge late in the day, which pushed the stock to the day high of $413 moments before the bell. Following the broader markets Friday, SDLI was relatively quiet, making no strong volume moves after the first half hour of the day. Although the stock violated the 5-dma of $405.49, hitting a day low of $398.88, it recovered midday, peaking at $408. We were encouraged to see SDLI hold its head above the $400 level, which has been offering intraday support. Below that, $398 has also been providing some buying bounces. The nearest technical support is the 10-dma at $391.69. Continue to look for entries to the play on dips towards the day lows, which consistently seem to occur before noon. If you are feeling hesitant, look for a convincing drive through $410 as an indication of continued strength in the stock before taking action. As we have stated previously, stops are a must on this play! On Thursday, Antitrust regulators requested additional documentation from both JDSU and SDLI concerning the proposed merger. Both companies dropped on the news. Calling the request rare, but not unexpected in a deal that could foster significant concentration in an industry, both companies committed to respond promptly to the inquiry. Watch the sector for clues of profit taking. As always, a strong NASDAQ and strong volume in the stock will be indicative of favorable conditions. BUY CALL SEP-400 OSL-IT OI=1244 at $24.13 SL=18.50 BUY CALL SEP-410*OSL-IB OI= 587 at $19.00 SL=14.75 BUY CALL SEP-420 OSL-ID OI=1471 at $14.88 SL=11.50 BUY CALL OCT-400 OSL-JT OI= 1 at $42.75 SL=33.50 BUY CALL DEC-400 OSL-LB OI=1454 at $59.13 SL=47.00 SELL PUT SEP-360 OSL-UL OI= 258 at $ 6.13 SL= 8.00 (See risks of selling puts in play legend) Picked on August 17th at $383.38 P/E = 549 Change since picked +18.75 52-week high=$460.50 Analysts Ratings 12-8-0-0-0 52-week low =$ 30.83 Last earnings 07/20 est= 0.30 actual= 0.33 Next earnings 10-26 est= 0.37 versus= 0.10 Average Daily Volume = 5.5 mln GSPN - GlobeSpan, Inc. $133.00 (+2.63 last week) GlobeSpan, Inc. is a leading provider of integrated circuit, software, and system designs for digital subscriber line (DSL) applications which enable high-speed data transmission over existing copper wire telephone lines at rates over 100 times faster than today's 56 Kilobit modems. Globespan's business is accelerating communications through high-speed solutions based on DSL technologies. The company's innovations make it possible to do the things that technology companies have been promising for years - real-time video conferencing, telecommuting, high-speed Internet surfing, and video-on-demand. Unlike cable, wireless, and direct broadcast satellite transmission services, DSL operates over the "local loop," the vast network of over 800 million copper telephone lines that connect end users to central office switching centers. For the most part, it's been a week of sideways movement for GSPN. Monday was a low-key day which saw the stock trade in a narrow range on low volume. On Tuesday, an early morning sell-off provided traders with an opportunity to enter on a bounce from support in the $125 area. Just after lunch, the stock rallied in an attempt to get through resistance at $135, but some late-day profit-taking brought GSPN back to the $130 area. Another attempt at $135 on Wednesday was unsuccessful, but on Thursday, strong buying during amateur hour allowed the stock to finally clear $135. Encountering resistance at $140, GSPN headed lower but managed to bounce off the $135 level. On Friday morning, GSPN made another attempt at $140, yet without volume to support the move, the stock spent the rest of the day heading lower, closing down $5.25, or 3.80%, on only 47% of ADV. In doing so, this put GSPN below the $135 mark as well as its 5-dma at $133.53. So we're pretty much right back where we started last week. While the close on Friday below the 5-dma could be a cause for concern, the light volume indicates little conviction. Those looking for an aggressive entry may want to targetshoot for a bounce off $130, which is just above its 10-dma. A move above the 5-dma would also be another aggressive entry point. Those looking for some confirmation of strength before entering will want to see GSPN clear $135 on high volume before making a play. Above $135, resistance for GSPN can be found in increments of $5 at $140, $145 and $150. As there has been little material news for GSPN lately, the stock has for the most part moved in step with the NASDAQ. Make sure market direction is in your favor before entering. BUY CALL SEP-125 GHY-IE OI= 50 at $15.63 SL=11.25 BUY CALL SEP-130*GHY-IF OI=280 at $12.88 SL= 9.75 BUY CALL SEP-135 GHY-IG OI=221 at $10.25 SL= 7.00 BUY CALL OCT-135 GHY-JG OI= 1 at $19.50 SL=14.50 BUY CALL OCT-140 GRX-JH OI= 6 at $17.25 SL=12.25 SELL PUT SEP-125 GHY-UE OI= 12 at $ 6.50 SL= 9.50 (See risks of selling puts in play legend) Picked on August 17th at $129.38 P/E = N/A Change since picked +3.63 52-week high=$167.00 Analysts Ratings 3-6-0-0-0 52-week low =$ 16.31 Last earnings 07/31 est= 0.04 actual= 0.11 Next earnings 10-30 est= 0.10 versus= 0.00 Average Daily Volume = 1.20 mln NTAP - Network Appliance $100.81 (+6.88 last week) As indicated by its name, NTAP pioneered the concept of the network appliance, an extension of the industry trend toward specialized devices that perform a specific function in the network. NTAP designs, manufactures, markets and supports high performance network-attached data storage and access devices. These products, including the company's NetApp file servers provide fast, simple, reliable and cost-effective file service for data-intensive network environments. The company is also embracing online business through its NetCache Web caching appliances, which are designed to ease Internet bandwidth demands by storing information physically closer to users. Though a volatile ride, the storage sector has been where it's at. While the rally this month in shares of NTAP has not been as fast and furious as month's, there also hasn't been the deep profit-taking like the one served up in the last week of July. From a low in the $70's to a high in the $110's and back again, July could be described as one wild rollercoaster ride. Whereas August has been more of a steady climb. Beginning the month under its 100-dma (now at $78), the stock made a dip to test $70 support before powering up to resistance at $95. While it took a few attempts to break above that point, NTAP was finally successful this week, managing to close above the psychological $100 level. Reporting earnings on August 14th, NTAP sold off the next day to close right below its 50-dma(now at $90). Since then, the stock has moved to higher ground. At this point, there are a number of support levels contributing to the strength of the stock. Traders looking to enter on intraday bounces have found the 5-dma at $98.25 to be the target to shoot for. There is strong support at former resistance level of $95 which is further reinforced by the 10-dma at the same level. Those looking for a little more confirmation will want to wait until NTAP makes it past $105 with strong volume to confirm continued upward momentum. Above that is resistance at $110 and then $115. As mentioned on Thursday, news this week was good, with FastLane Technologies Inc. announcing support for NTAP products through their FastLane DM/Consolidator 2.5 applications and a Wednesday announcement of a new customer in OpenGrid Inc. BUY CALL SEP- 95 ULM-IS OI=1004 at $11.25 SL= 8.50 BUY CALL SEP-100 ULM-IT OI=2460 at $ 8.13 SL= 5.75 BUY CALL SEP-105*ULM-IA OI=2499 at $ 5.88 SL= 4.00 BUY CALL OCT-105 ULM-JA OI= 141 at $12.13 SL= 9.00 BUY CALL OCT-110 ULM-JB OI= 134 at $10.00 SL= 7.00 SELL PUT SEP- 90 ULM-UR OI= 451 at $ 2.50 SL= 4.00 (See risks of selling puts in play legend) Picked on August 24th at $101.69 P/E = 564.93 Change since picked -0.88 52-week high=$124.00 Analysts Ratings 17-4-0-0-0 52-week low =$ 14.56 Last earnings 08/14 est= 0.07 actual= 0.09 Next earnings N/A est= 0.09 versus= 0.05 Average Daily Volume = 5.5 mln VRSN - VeriSign, Inc. $176.38 (+18.69 this 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. The company also offers the VeriSign Onsite service, which allows an organization to leverage the companys trusted service infrastructure to develop and deploy customized digital certificate services for use by an organizations employees, customers and business partners. 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. This past week has seen the continuation of the uptrend that began in the previous week. Using the 5-dma for support, VRSN has been moving steadily up. Encountering resistance at the $162-163 area during the prior week, VRSN started the week and remained above that level. Spending the better part of the week in a mini consolidation, the stock touched its 5-dma on Wednesday and from there, blasted upwards to close just below resistance at $175. The next day, that level was easily surpassed on a Thursday morning gap up. From there, the stock attempted unsuccessfully to break through resistance at $180. This level is clearly the next hurdle to overcome as Friday's attempt failed to clear it. This led to a move lower as profit-takers stepped in before bouncing off the $173 level. Ending the week on a quiet note, VRSN closed down $2.06 on 56% of ADV. If the current trend continues to hold, then a successful bounce off the 5-dma (now at $171.43) could provide for the ideal entry point. For the more aggressive, a bounce off the $173-174 area could be the target to shoot for. Conservative traders will want to see VRSN clear that hurdle at $180 with convincing volume before making an entry. After $180, resistance could be encountered $183, $185 and $188. Connecting the highs and lows since finding a bottom in mid-August at the $140 level, the stock has traded higher in an upward regression channel spanning 15 points from top to bottom. The 5-dma has closely followed the bottom of the channel, currently near $169, putting the top of the channel near $184 and moving up fast. Nonetheless, even the aggressive player looking to buy a bounce off the lower part of the channel will want to see the stock clear the 5-dma as confirmation before entering. In the news this week, VRSN received an upgrade from Merrill Lynch analyst Mark Fernandes from Accumulate to Buy and a price target of $210. Tuesday was news of an alliance with Response Marketing Group to market matching web site addresses with toll-free numbers in a cross-marketing deal. As well, an announcement of multilingual domain names may extend VRSN's reach in the international market for web addresses. On Friday, competitor Register.com responded to VRSN's Tuesday cross-marketing deal with a similar one with TeleDomains.com. BUY CALL SEP-170 QVZ-IN OI= 976 at $13.88 SL=10.25 BUY CALL SEP-175*QVZ-IO OI=1380 at $11.25 SL= 8.50 BUY CALL SEP-180 QVZ-IP OI=1156 at $ 8.75 SL= 6.00 BUY CALL OCT-180 QVZ-JP OI= 122 at $20.63 SL=14.75 BUY CALL OCT-185 QVZ-JQ OI= 43 at $18.63 SL=13.75 SELL PUT SEP-170 QVZ-UN OI= 496 at $ 6.38 SL= 9.50 (See risks of selling puts in play legend) Picked on August 24th at $178.44 P/E = 1274.55 Change since picked -2.06 52-week high=$258.50 Analysts Ratings 14-11-1-0-0 52-week low =$ 43.75 Last earnings 07/26 est=-0.01 actual= 0.07 Next earnings 10-25 est= 0.05 versus= 0.01 Average Daily Volume = 4.1 mln SUNW - Sun Microsystems $124.75 (+2.38 last week) SUNW is a leading maker of UNIX-based, number crunching computers, storage devices, and servers for powering corporate computer networks and Web sites. The company is the largest to make computers that use its own chips and operating systems. SUNW's most talked about product is Java, a programming language intended to create software that can run unchanged on any kind of computer. We certainly hadn't been missing it, but the inevitable profit taking we had been warning of showed up last Friday. SUNW's 3 point drop last Friday came with volume that was less than half the ADV, hardly convincing. In fact, weakness was rampant across the recently rallied Tech sector, with SUNW taking the brunt of the selling because of its recent, and very impressive, run-up. The Goldman Sachs Computer Hardware Index ($GHA) slipped into the red after a week-long rally. But, like we have been mentioning during the duration of our play, buying SUNW's dips has been working. Going forward, the main catalyst for our play will be the health and direction of the broader Tech sector, with particular emphasis laid on the NASDAQ. The chance for a split run is still a little off in the distance, given the payable date is later in November. But, as long as the NASDAQ continues to edge its way higher, SUNW should continue to lead the charge. There are several possible scenarios to watch for next week in order to gain new entry into our play. SUNW stopped right at its 5-dma last Friday, which is located at $124.69. An aggressive trader might look for a quick bounce off that level early Monday morning if the Tech sector shows signs of rallying. If the sellers continue to lock in their profits, SUNW has major support just below at the $124 level, and again at its 10-dma, which is currently at $121. Make sure to confirm any continued dip with light volume, and wait for the selling to cease before entering on a bounce. A more conservative trader might wait for SUNW to resume its rally and target shoot for an entry on any move above resistance at whole levels, including $125, $126, and $127. Confirm a rally with the return of volume as a sign traders are ready to take SUNW to higher highs. SUNW will kick off its Fall conference season next week with the Real-Time Computer Show, which will focus on data applications. The company will then holds its second Dot-Com Your Business Conference and Exhibition, which will demonstrate SUNW's products that create new opportunities for businesses on the Internet. BUY CALL SEP-120*SUX-ID OI=7461 at $ 8.25 SL=5.75 BUY CALL SEP-125 SUX-IE OI=5236 at $ 5.25 SL=3.25 BUY CALL SEP-130 SUX-IF OI=5043 at $ 2.94 SL=1.50 BUY CALL OCT-125 SUX-JE OI=3377 at $10.63 SL=8.00 BUY CALL OCT-130 SUX-JF OI=3227 at $ 8.25 SL=5.75 SELL PUT SEP-120 SUX-UD OI=6091 at $ 2.44 SL=4.00 (See risks of selling puts in play legend) Picked on August 13th at $112.19 P/E = 116 Change since picked +12.56 52-week high=$128.63 Analysts Ratings 12-10-1-0-0 52-week low =$ 36.38 Last earnings 06/00 est= 0.33 actual= 0.39 Next earnings 10-16 est= 0.25 versus= 0.17 Average Daily Volume = 13.7 mln IDTI - Integrated Device Technology $78.25 (+5.38 last week) The company's high-performance semiconductor products and modules are found in computers, peripherals, and communications and networking devices. About 70% of sales are from communications and high-performance logic components, specialty memory, clock management circuits, and networking devices. IDTI also makes static random-access memories (SRAMs). What a difference a month makes. Think back to July, you might remember the downgrade heard around the Semi sector by Jonathan Joseph. It's safe to say he was early. July's "Chip correction" proved to be nothing more than extended profit taking and a brief pause in the Semi sector's incredible renaissance. Leading Chip stocks have moved on to new highs, including our lovely IDTI. Last week marked a complete reversal of sentiment in the Semi sector. Wall Street's outlook for the Chip stocks had much more of a bullish ring. SG Cowen and AG Edwards issued favorable reports on the entire group, which argued a convincing case for higher prices. Contained within the AG Edwards report, analyst Christopher Chaney said, "Fundamentals within the Semiconductor sector remain quite strong." If it's fundamentals Wall Street is after, IDTI has got them. The company maintains enviable earnings growth with the specialty communications chips it manufactures. IDTI's fundamentals are in place to extend the stock's recent breakout. IDTI ran as high as $80 last week, which marked an all-time high. Of course, the profit takers had to show up last Friday, who took a little steam out of IDTI's momentum. But, buying IDTI's dip might prove to be a profitable proposition. The stock has major support just below its current level at $78, again at $76, and at its 5-dma near $75.50. A bounce off one of IDTI's support levels might provide a solid entry into the play after any light selling subsides. Another possible way to gain entry into the play is to watch for a rally to new highs, past the $80 level. Make sure to confirm direction in the Semi sector, and look for strong volume on a rally above $80 before entering new positions. IDTI received plenty of praise in the latter half of last week. Robinson Humphrey reiterated their Strong Buy rating based on IDTI's tracking of their third-quarter and added a $100 price target. And, SG Cowen also reiterated their Strong Buy rating along with adding a $100 price target. BUY CALL SEP-75 ITQ-IO OI= 439 at $ 7.00 SL=5.00 BUY CALL SEP-80*ITQ-IP OI= 378 at $ 4.38 SL=2.75 BUY CALL SEP-85 ITQ-IQ OI= 359 at $ 2.31 SL=1.25 BUY CALL NOV-80 ITQ-KP OI= 259 at $10.88 SL=8.25 BUY CALL NOV-85 ITQ-KQ OI=2741 at $ 8.50 SL=6.00 SELL PUT SEP-75 ITQ-UO OI= 786 at $ 3.13 SL=5.00 (See risks of selling puts in play legend) Picked on August 15th at $66.88 P/E = 43 Change since picked +11.38 52-week high=$80.00 Analysts Ratings 6-1-0-0-0 52-week low =$15.06 Last earnings 06/00 est= 0.47 actual= 0.58 Next earnings 10-16 est= 0.70 versus= 0.18 Average Daily Volume = 3.17 mln EXDS - Exodus Communications $65.19 (+4.75 last week) Exodus provides Internet system and network management solutions for companies with mission-critical Internet operations. The company offers sophisticated systems along with technology professional services to provide optimal performance for customers’ Web sites. Exodus has a long list of customers, including: EBAY, YHOO, SUNW, and AMAT. The company continues to expand its business through acquisitions and expansion overseas. The Internet sector is re-emerging as a leader of the broader markets. After suffering painful losses last Spring, momentum investors are moving back into the group with haste. The fact is the Internet is big, and it's still growing at a breakneck rate. The explosive growth of the Internet is clearly seen in the Web hosting and services segment, in which EXDS dominates. The company continues to win high-profile contracts and line-up equally lucrative partnerships. Just last week, EXDS teamed up with two of the biggest Tech heavyweights in the sector, SUNW and EMC. EXDS hopes to collaborate with the two Tech giants in an attempt to make the Web an even bigger and better place. Investors applauded EXDS's efforts, and so did Wall Street. Paine Webber reiterated their Strong Buy rating, spurred by the announcements of the alliances, and set a $112 price target on EXDS. Despite its 45% run since the beginning of August, many on Wall Street feel that future growth prospects are not fully factored in the EXDS's stock price. That fact might lead to an extension of EXDS's recent rally. The stock pulled back ever so slightly last Friday on extremely light volume. Buying the dips has been profitable over the last month, and Friday's might provide the aggressive trader with a good entry into the play. If the profit takers show up again early next week, watch for a bounce off current levels at $65. An extended pullback might take EXDS back down to its support at $64, which might be a solid spot for entry. EXDS did finish Friday on another burst of late day buying, which might position the stock to test its channel highs. Watch for a rally in conjunction with robust volume back above the $66 level for an entry into the play if EXDS resumes its climb early Monday. Don't believe the Internet sector is back? Greg Kyle does. The analyst from Pegasus Research recently published a book titled, "100 Best Internet Stocks to Own." Among Kyle's favorites are AOL, YHOO, AMZN, and, of course, EXDS. BUY CALL SEP-60*QED-IL OI=4966 at $7.13 SL=5.00 BUY CALL SEP-65 QED-IM OI=5645 at $3.88 SL=3.00 BUY CALL SEP-70 QED-IN OI=4725 at $1.75 SL=1.00 BUY CALL OCT-65 QED-JM OI= 432 at $7.25 SL=5.25 BUY CALL OCT-70 QED-JN OI= 333 at $5.13 SL=3.00 Picked on August 15th at $57.13 P/E = N/A Change since picked +8.06 52-week high=$89.81 Analysts Ratings 26-5-1-0-0 52-week low =$15.06 Last earnings 06/00 est= -0.12 actual= -0.10 Next earnings 10-23 est= -0.17 versus= -0.07 Average Daily Volume = 8.36 mln CIEN - Ciena Corp $197.94 (+21.31 last week) Ciena makes multiplexing systems that increase the capacity of long-distance fiber-optic telecommunications networks. The company's systems transmit signals simultaneously over the same circuit. Customers such as Sprint, Bell Atlantic, and MCI Worldcom, use its lines for long-distance optical transport and for shorter distances. The company is expanding its product and geographic breadth as it transforms itself from niche market specialist to optical networking supplier. CIEN's stronghold on the optical networking market appears to be increasing. Rival equipment maker, SCMR, reported its quarterly results late last Thursday, which confirmed CIEN's dominance. Despite beating consensus estimates by two pennies, SCMR's recurring revenues actually fell by 4%. Furthermore, during the conference call, analysts questioned whether SCMR had lost a crucial contract to supply networking gear to Williams Communications (WCG), who has been rumored to have switched to CIEN. The two polar reactions to CIEN's and SCMR's respective conference calls reinforces the fact that the former is emerging as a clear leader in the network equipment space, which could lead our play to higher prices in the near-term. Also, let us not forget that CIEN will be splitting 2-for-1 in about four weeks. While the post-split announcement effect may have run its course last week, there exists the potential for a pre-split run to develop over the course of the next several weeks. Despite the confirming report from SCMR, CIEN's momentum took a breather last Friday just as we had cautioned. The $195 level continues to be strong support, off which CIEN bounced last Friday morning. Aggressive traders might continue to look for entries on bounces from support levels at $195 or near $190, which is near CIEN's 5-dma. Make sure to confirm any pullback with light volume as was the case Friday. A more conservative trader might look for an entry early Monday morning if CIEN resumes its climb and rallies back above the $200 level. Thereafter, the only resistance in CIEN's way is Friday's intraday, and new 52-week high, at $201.38. CIEN executives will be busy on the road in the coming weeks attending several investor and industry conferences. The company is scheduled to be a headline presenter at the National Fiber Optical Engineers Conference, which begins early next week. The company will also be presenting to analysts at Dain Rauscher Wessels, DLJ, and SG Cowen over the course of the next two weeks. Positive press from any of the aforementioned events might boost our play well above the $200 level. BUY CALL SEP-195 UEE-IS OI=2135 at $15.38 SL=11.25 BUY CALL SEP-200*UEE-IT OI=3722 at $12.63 SL= 9.50 BUY CALL SEP-210 UEE-IB OI= 659 at $ 8.25 SL= 5.75 BUY CALL OCT-200 UEE-JT OI=6717 at $22.38 SL=16.75 BUY CALL OCT-210 UEE-JB OI= 700 at $18.00 SL=13.00 Picked on August 24th at $201.06 P/E = 495 Change since picked -3.13 52-week high=$201.31 Analysts Ratings 9-11-1-0-1 52-week low =$ 29.38 Last earnings 07/00 est=0.17 actual=0.19 Next earnings 10-20 est=0.24 versus=0.03 Average Daily Volume = 5.20 mln QLGC - QLogic Corporation $103.88 (+10.88 last week) Somebody has to make the equipment that lets your computer talk to all its peripheral equipment, and QLGC does it well. A leading designer and supplier of semiconductor and board-level input/output (I/O) management products, QLGC has been providing SCSI-based connectivity solutions to this market sector for over 12 years. QLGC’s I/O products provide a high performance interface between computer systems and their attached data storage peripherals, such as hard disk and tape drives, removable disk drives and RAID (redundant array of independent disks) subsystems. The company is also the market share leader in Fibre Channel host bus adapters, a market segment that is receiving tremendous attention from investors. Volatility anyone? In what was shaping up to be a quiet and directionless day in the financial markets, QLGC got quite a dose of volatility due to the EMLX story (see news below). Shares of EMLX were halted during the day, and once the halt was lifted the price skyrocketed above the opening price, making entry points nearly impossible after the news story was exposed as a fraud. QLGC was an entirely different story, as the stock traded continuously all day long. Volume nearly 6 times the ADV accompanied the panic selling and then the ensuing panic buying as QLGC plunged from an opening price above $108 to an intraday low of $74, before rocketing back to $107 -- all within the first 90 minutes of trading! A lot of people got hurt because of the news story, but vigilant investors that could piece together what was happening (a rare breed, indeed), were presented with an unexpected entry point just before 11am EDT. A solid bottom formed near $79 at the same time that stories were coming out on the newswires that the original press release was a hoax and that there was nothing wrong with QLGC. It was definitely a HIGH RISK play, but those that jumped aboard were rewarded with a very profitable day trade. So, enough history, where do we go from here? Ignoring the major dip, QLGC still had a negative day on Friday, but admirably held above the $99 level on a closing basis. This is the level that we were focusing on for a breakout earlier in the week. Not only that, but the close was above the 5-dma (currently at $102.63), which has been providing support to the stock's recent ascent. QLGC still looks like a great play, as the company operates in the red-hot Storage Area Network (SAN) arena, a sector that is showing no signs of slowing down. Below $99, there is support at $94 and then $90, and although intraday dips to support look buyable, make sure volume is confirming the bounce before playing. Friday's action should provide a stark reminder of what can happen when you try to catch a falling knife. Waiting for a breakout may be the most prudent course of action at this point. If that fits your risk profile, wait for buying volume to push QLGC through $107, or even $112 before playing. The major story of the week was the EMLX fake press release, which cratered shares of the stock by more than 60% before the fraudulent story was exposed and the stock recovered to nearly unchanged on the day. At the same time, QLGC saw its share price slashed by more than 30% at its low. The company could provide no reason for the sharp intraday decline, other than the fact that it operates in the same industry group as EMLX. BUY CALL SEP-100*QLC-IT OI= 716 at $12.38 SL= 7.50 BUY CALL SEP-105 QLC-IA OI= 311 at $ 9.63 SL= 5.75 BUY CALL SEP-110 QLC-IB OI= 922 at $ 7.25 SL= 4.00 BUY CALL OCT-105 QLC-JA OI= 229 at $15.88 SL=10.25 BUY CALL OCT-110 QLC-JB OI= 514 at $14.00 SL= 8.75 SELL PUT SEP- 95 QLC-US OI= 263 at $ 5.13 SL= 7.00 (See risks of selling puts in play legend) Picked on August 22nd at $98.00 P/E = 127 Change since picked +5.88 52-week high=$203.25 Analysts Ratings 3-3-0-0-0 52-week low =$ 32.50 Last earnings 07/00 est= 0.24 actual= 0.27 Next earnings 10-18 est= 0.26 versus= 0.35 Average Daily Volume = 2.83 mln BRCM - Broadcom Corporation $268.13 (+10.00 last week) Sitting in the sweet spot between the Broadband and Semiconductor sectors, BRCM is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. These integrated circuits permit the cost-effective delivery of high-speed, high-bandwidth networking using existing communications infrastructures that were not originally designed for the transmission of broadband digital content. Using proprietary technologies, the company designs, develops and supplies integrated circuits for several markets including digital cable set top boxes, cable modems, high-speed office networks, home networking, and digital subscriber lines. Who says Internet stocks are dead? Sure the dot.coms have fallen out of favor, because the revenue streams have become quantifiable, but stocks of the companies that are building out the infrastructure are still seeing incredible growth. BRCM is a perfect example of investors' seemingly insatiable appetite, as it is up more than 133% from the Spring lows. Although Friday was a down day for the stock, before it fell back, the bulls managed to push it up to trace another 52-week high at $274.75, fractionally eclipsing Thursday's new high. Given the light volume (less than half the ADV), the pullback on Friday looks very healthy, as it brought the stock back from the upper Bollinger band to bounce right on the 5-dma ($266.75). This is right below the near-term support of $267-268, and if buying volume comes back on Monday, looks like an acceptable entry point. With expected light market activity next week, ahead of the Labor Day weekend, we could get lucky with a dip to stronger levels of support at $265 and then $258-260. With the VIX still lurking below 20, there is still the potential for a broad market decline, and such an event could produce a drop as low as major historical support at $250. As always, volume will be the key to good entry points. Rather than trying to pick the bottom, wait for buying volume to increase and confirm the bounce before playing. Should BRCM head up from here, consider new entries as the stock clears resistance and moves above $275. Aside from the latest installments of BRCM's ambitious acquisition strategy there has been little relevant news recently. In the past 3 weeks, the company has snatched up Altima Communications, Silicon Spice, and NewPort Communications, a privately-held company not to be confused with NEWP on our play list. BRCM has been very astute in its acquisition strategy up to this point, and the frequent comparisons to CSCO in this arena only seem to further whet investors' appetites for shares of the company. BUY CALL SEP-260 YRL-IL OI=1029 at $19.00 SL=14.75 BUY CALL SEP-270*YRL-IN OI=1035 at $13.50 SL=10.25 BUY CALL SEP-280 YRL-IP OI= 993 at $ 8.88 SL= 6.25 BUY CALL SEP-290 YRL-IR OI= 578 at $ 5.50 SL= 3.50 BUY CALL OCT-270 YRL-JN OI= 13 at $25.63 SL=19.25 BUY CALL OCT-280 YRL-JP OI= 21 at $20.63 SL=15.50 SELL PUT SEP-250 RDU-UJ OI= 885 at $ 5.50 SL= 7.75 (See risks of selling puts in play legend) Picked on August 24th at $273.63 P/E = 425 Change since picked -5.50 52-week high=$274.75 Analysts Ratings 8-12-0-0-0 52-week low =$ 51.56 Last earnings 07/00 est= 0.19 actual= 0.23 Next earnings 10-17 est= 0.23 versus= 0.13 Average Daily Volume = 5.25 mln LSCC - Lattice Semiconductor $74.25 (+6.63 last week) Customization is the name of the game for LSCC. The company makes programmable logic devices (PLDs), logic integrated circuits that manufacturers can program to perform specific functions. The company is one of the world’s top suppliers of in-system PLDs, which can be configured and reconfigured even after being attached to a circuit board. LSCC also sells the software needed to customize its chips, which are used in computing, communications, industrial, and military applications. The company focuses its efforts on design and testing, outsourcing its manufacturing to factories in Asia. Shining like a beacon in the night, LSCC was definitely one of the brighter stars in the Semiconductor sector on Friday. While many of the stocks that have been leading the SOX out of the abyss fell victim to profit taking ahead of the weekend, LSCC continued to soar. Okay, maybe that is overstating it a little, as our play did actually give up a fraction, but it came on anemic volume of less than half the ADV. The final 30 minutes of trading tell a different story as volume ramped up and the stock managed to tack on $1.63 to close out the session very near the high of the day. The Semiconductor sector has had an incredible rally over the last 2 weeks, with the SOX gaining an impressive 22%. In that same time, LSCC has managed to plow through resistance at $68, $70, and $72. These levels should now behave as support levels on any pullback, providing attractive entry points for the next surge higher. The stock is riding the upper Bollinger band, Stochastics are deep in overbought territory, and Friday's close is more than $4.50 above the 5-dma (down at $69.69). All of the other moving averages are far below, with the nearest being the 10-dma and 50-dma, at $66.38 and $67, respectively. The next levels of resistance to scale are $76-77, followed by $80. Although LSCC could charge higher from here, a pullback looks like the more likely scenario in the near term. Wait for the profit taking to subside, and then consider new positions as the buying volume returns. On Wednesday, S&P announced several changes to its indexes, with LSCC moving up from the SmallCap 600 Index to the MidCap 400 Index, replacing Santa Fe Snyder. Other than that, there has been little in the way of company specific news since early August. On August 3rd, First Security Van Kasper released their Select List, where they list LSCC as a Strong Buy. For now, we are focused on the positive commentary coming from analysts about the Semiconductor sector. BUY CALL SEP-70*LQT-IN OI=341 at $ 7.13 SL=5.00 BUY CALL SEP-75 LQT-IO OI=773 at $ 4.38 SL=2.75 BUY CALL SEP-80 LQT-IP OI=492 at $ 2.25 SL=1.25 BUY CALL DEC-75 LQT-LO OI= 35 at $12.50 SL=9.50 BUY CALL DEC-80 LQT-LP OI= 44 at $ 9.88 SL=7.00 Picked on August 15th at $62.44 P/E = 33 Change since picked +11.81 52-week high=$83.38 Analysts Ratings 10-3-2-1-0 52-week low =$14.19 Last earnings 07/00 est= 0.55 actual= 0.61 Next earnings 10-16 est= 0.64 versus= 0.23 Average Daily Volume = 1.08 mln VRTS - VERITAS Software $116.94 (+9.81 last week) VERITAS Software is the industry's leading enterprise-class application storage management software provider. They furnish storage management software for protection against data loss and file corruption, efficient file processing and networks back-up. VERITAS (Latin for "truth") has made its name by partnering with such technological heavyweights as Hewlett-Packard, Microsoft, and Sun Microsystems, all of which have licensed and embedded VERITAS products in their operating systems. Its purchase of the network and storage management software group of disk drive maker, Seagate Technology, doubled VERITAS's size and gave Seagate an approximate 33% stake in the company. Let's talk DMAs when it comes to our momentum play on VRTS. On Thursday, VRTS gave a convincing close above the 50-dma and prompted us to add it to our call list. This technical line, which hovered around the $115 mark, has recently served as a staunch adversary ever since the share price broke down following 2Q earnings on July 18th. No matter how active the trading, VRTS just couldn't penetrate that opposition. Now that VRTS broke to the upside, we're anticipating more traders will start nibbling and generate enough momentum to drive the share price upwards. While the $100 level is solid support, there's a strong base at $108 and $112. Use this level on a pullback, where the 100 & 200-dmas converge, to get a more aggressive entry. Of course, look for respectable volume at about 2+ mln shares intraday to provide bullish confirmation. Immediate resistance is now at $118.50, Friday's intraday peak. Our objective is to move through $125 and return to the price levels seen prior to the 2Q earnings' release. VERITAS announced its family of desktop backup solutions last week. The Simple Backup, Backup Exec Desktop, and Backup Exec Desktop Pro each provide customers different levels of protection and functionality. These next-generation solutions augment the company's offerings of desktop to data center protection. Earlier in the month, Daniel Morgan at Noble Financial Group reiterated a Buy recommendation on VRTS. BUY CALL SEP-110 VUQ-IB OI= 1022 at $11.63 SL= 9.25 BUY CALL SEP-115 VUQ-IC OI=12603 at $ 8.75 SL= 6.00 BUY CALL SEP-120*VUQ-ID OI= 1359 at $ 6.25 SL= 4.25 BUY CALL SEP-125 VUQ-IE OI= 2970 at $ 4.38 SL=2.75 BUY CALL OCT-115 VUQ-JC OI= 77 at $15.13 SL=11.00 BUY CALL OCT-120 VUQ-JD OI= 218 at $12.75 SL= 9.50 Picked on August 24th at $115.69 P/E = N/A Change since picked +1.25 52-week high=$174.00 Analysts Ratings 10-12-1-0-0 52-week low =$ 24.92 Last earnings 06/00 est= 0.12 actual= 0.13 Next earnings 10-12 est= 0.14 versus= 0.09 Average Daily Volume = 5.52 mln PLXS - Plexus Corp $142.50 (+11.88 last week) Plexus provides product realization services to original equipment manufacturers (OEMs) in the telecommunications, medical, industrial, computer, and transportation electronics industries. Its Plexus Technology and SeaMED subsidiaries provide the product design and engineering, while its Plexus Electronic Assembly subsidiary handles manufacturing. Lucent and GE account for over 25% of sales. If you like excitement, then PLXS was your play last week. The intraday gyrations offered the more aggressive traders a multitude of entries on pullbacks to the 5-dma line. The subsequent moves to all-time highs, first on Tuesday and then on Friday, provided the opportunity for hefty profits. Besides the flourishing market environment, it's evident that the company's upcoming 2:1 stock split is generating the momentum. But, time is running out quickly, so pay heed to the split date, August 31st after the close. We never recommend holding over the split date. It's much too risky to expose your positions to the possibility of a post-split decline. If you trade over the next four sessions, it's important to be aware of other potential risks. Recall that PLXS's strong momentum has taken it from $90 to over $140 in less than a month's time. And while Prudential analyst, Ellen Chae's, downgrade of PLXS to an Accumulate last week didn't effectively keep it down for more than a few hours of trading, she made a good point. "Although we are impressed with PLXS' capabilities and are confident in the company's ability to maintain its growth momentum, we are concerned that upside on the shares may be limited by valuation." If you have open positions or are considering jumping in on dips at the 5-dma ($138.73), watch for resistance at $144.38, the new 52-week record. Despite Prudential's rating cut on PLXS last week, it maintained its 12-month price target of $160. BUY CALL SEP-135 QUA-IG OI= 95 at $13.13 SL= 9.75 BUY CALL SEP-140*YQH-IH OI= 83 at $10.50 SL= 7.50 BUY CALL SEP-145 YQH-II OI=116 at $ 7.75 SL= 5.50 BUY CALL OCT-130 QUA-JF OI= 15 at $23.38 SL=18.00 BUY CALL OCT-135 QUA-JG OI= 3 at $20.13 SL=14.50 Picked on August 17th at $132.00 P/E = 86 Change since picked +10.50 52-week high=$144.38 Analysts Ratings 6-8-1-0-0 52-week low =$ 24.44 Last earnings 06/00 est= 0.52 actual= 0.57 Next earnings 10-27 est= 0.59 versus= 0.41 Average Daily Volume = 368 K JNPR - Juniper Networks, Inc. $190.94 (+20.13 last 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. Pure momentum equals pure profits when it comes to JNPR. Give JNPR a favorable environment and watch it prosper! The party went into full swing on Tuesday with a 7.3%, or $12.63 advance. The spike confirmed the momentum on our play and opened the door for JNPR to stretch into new territory. On Wednesday, JNPR catapulted again to set the newest 52-week record at $194.25 before consolidation set in for the remainder of the week. However, JNPR is demonstrating strength at $188 and $191, which provides bullish confirmation that the momentum is intact. For those readers who've been following JNPR, you know the two important variables of this play. Look for exceptional volume levels, at 2+ mln intraday, to forecast an upside breakout and pay attention to the NASDAQ's sentiment. If you're just joining us, BEWARE. JNPR is a HIGH-RISK Internet play and not suited for anyone. A conservative entry for this aggressive Internet play could be attained with a high volume breakout over $195 as it surges toward $200. This week SG Cowen commented that Juniper gained a 6% market share of Core routers from Cisco (CSCO). The firm maintains a Strong buy rating for JNPR. David Toung, on the other hand, analyst at Argus Research came forwarded on Thursday and downgraded the stock to a Hold from Buy, but offered no comment. BUY CALL SEP-185*JUD-IQ OI= 641 at $13.88 SL=10.50 BUY CALL SEP-190 JUD-IR OI=1553 at $11.00 SL= 8.25 BUY CALL SEP-195 JUD-IS OI= 593 at $ 8.63 SL= 5.00 BUY CALL SEP-200 JUD-IT OI=1737 at $ 6.50 SL= 4.50 BUY CALL OCT-190 JUD-JR OI=1136 at $21.13 SL=16.00 BUY CALL OCT-200 JUD-JT OI= 805 at $16.63 SL=12.00 Picked on August 15th at $169.75 P/E = 2246 Change since picked +21.19 52-week high=$194.25 Analysts Ratings 15-3-0-0-0 52-week low =$ 28.25 Last earnings 06/00 est= 0.04 actual= 0.08 Next earnings 10-19 est= 0.09 versus=-0.01 Average Daily Volume = 6 mln DIGX - Digex Inc $86.00 (+5.44 last week) DIGX is a leading provider of hosting services to businesses and organizations operating mission critical, multi-functional Web sites and Web-based applications. Their hosting services are used by some of the leading Internet companies. The company also offers value-added enterprise and professional services, including performance and security testing, monitoring, reporting and networking services. They operate two data centers in the US and one in the UK that house more than 2,300 company-owned and managed servers. Digex clients include Forbes, J. Crew, and Nissan. Recent performance leaves little doubt we're in the midst of a powerful momentum run! After DIGX consolidated at the $80 level for a few days last week, it broke to the upside with a vengeance. The share price stopped just short of the $90 mark on Thursday before settling back to the vicinity of the 5-dma ($84.15). The downgrade to Maintain from Buy and comments by Joe Eshoo at AG Edwards on Friday very likely influenced the trading activity. He believes "the recent strength in Digex shares over the past two days are due to rumors that Exodus is again looking at acquiring Digex" and that "Digex trades up on takeover rumors." In other words, be careful of short-term deflation. Of course, we have to be aware of a downdraft, however, volume remains healthy and light support at $85 firmed intraday despite the analyst's remarks. If still reserved about entering at this level, then wait for a break through $90 before opening new positions. Otherwise, intraday dips to $85 or $80 accompanied by a bounce would provide a nice aggressive entry. There is historical resistance at $95, but the real obstacle is higher at the century mark. Gerard Klauer Mattison started new coverage on DIGX this week with a Buy recommendation and a 12-month price target of $102. BUY CALL SEP-80*UOM-IP OI= 655 at $ 8.38 SL= 5.75 BUY CALL SEP-85 UOM-IQ OI= 252 at $ 6.13 SL= 4.00 BUY CALL SEP-90 UOM-IR OI= 625 at $ 3.88 SL= 2.50 BUY CALL OCT-85 UOM-JQ OI= 195 at $13.00 SL= 9.75 BUY CALL OCT-90 UOM-JR OI= 163 at $10.50 SL= 7.50 Picked on August 20th at $80.56 P/E = N/A Change since picked +5.44 52-week high=$184.00 Analysts Ratings 11-5-1-0-0 52-week low =$ 21.19 Last earnings 06/00 est=-0.56 actual=-0.54 Next earnings 11-01 est=-0.62 versus=-0.36 Average Daily Volume = 882 K ***********************ADVERTISEMENT************************ Up To 60% Off At EverythingWireless.com The online super-store for your active lifestyle. 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The Option Investor Newsletter Sunday 08-27-2000 Sunday 4 of 5 To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/082700_4.html ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************* NEW PUT PLAYS ************* KO - Coca-Cola Company $56.00 (-4.31 last week) The Coca-Cola Company is the largest manufacturer, distributor and marketer of soft drink concentrates and syrups in the world. Finished beverage products bearing the company's trademarks have been sold in the U.S. since 1886, and are now sold in nearly 200 countries. KO also markets and distributes juice and juice-drink products. Of the nearly 48 billion beverage servings of all types consumed worldwide every day, KO products account for more than one billion. Investors in KO have been "having a Coke and a smile" over the last several months, as shares of the beverage company have enjoyed a nice stealth rally. Part of the impetus for the rally was the uncertainty in the broad markets, particularly technology-related issues. Now that the broad markets are breaking out of their recent trading ranges, KO has lost some of its fizz. After putting in a bottom of $42.25 in the middle of March, the stock started moving higher and got into a well defined uptrend by early May. Since the momentum started flowing, KO has been able to post higher highs and higher lows, using the 30-dma (currently $60.38) as support on the pullbacks. Investors started losing their thirst for Beverage stocks in general and KO specifically about 2 weeks ago. The first signs of weakness can be seen on the daily chart where the bulls couldn't push through resistance at $63, and the price fell back. Rather than regrouping at the 30-dma for another push higher, the bulls were nowhere to be found as they let the price fall right through this level of support and then the 50-dma at $58.88. Then on Friday, Salomon Smith Barney lowered its volume growth estimates for the company from the 5.0-5.5% range to a level of 4.5%. Although the firm continues to rate KO a Buy, with a price target of $68, investors were not in wait-and-see mood. KO gapped down at the open, dropped through the 200-dma (currently $55.56) and lost as much as 5% intraday, before finding support just above the 100-dma (currently $54.63). After bottoming near $55, KO shares managed to gradually regain some of their losses, marking the $55 level as new-found support. The 10-dma, 30-dma, and 50-dma are all converging between $59-61, and this will likely create formidable overhead resistance going forward. Use rallies as entry points and initiate new positions as the stock runs out of juice and rolls over. Conservative investors may want to wait for selling volume to confirm the stock's weakness and a volume-backed penetration of support at $55 could be just the ticket. BUY PUT SEP-60*KO-UL OI=3544 at $4.38 SL=2.75 BUY PUT SEP-55 KO-UK OI=2228 at $1.19 SL=0.00 Average Daily Volume = 4.09 mln ***************** CURRENT PUT PLAYS ***************** QCOM - Qualcomm Inc. $58.88 (-0.88 last week) Qualcomm Incorporated is a leader in developing, delivering, and enabling innovative digital wireless communications products and services based on the Company's digital technologies. As the pioneer of Code Division Multiple Access (CDMA), the technology of choice for next-generation wireless communications, Qualcomm continues to lead the industry in the development of voice, data, and wireless Internet products and solutions. Qualcomm is also transforming industries through its various satellite businesses and technology partnerships. Our put play on QCOM just received a stay of execution. After spending the early part of the week riding down the 5-dma, the stock found buyers just below the $55 level. From there, the stock made a strong bounce on Thursday to close not only above its 5-dma (at $58.31), but its 10-dma (at $59.60) as well. In addition to this, QCOM closed above the $60 level. When we last looked at this play on Thursday, we were trying to determine the nature of the bounce. Was this a genuine bounce thanks to strong buyer support or was it of the dead cat variety? At this point the results are...inconclusive, but $60 certainly is resistance. An early attempt to rally on Friday morning was met with selling for the rest of the day. Bouncing off the 5-dma, the stock moved slightly higher in its final hour of trading to close down $1.75 on 42% of ADV. Volume in general was light for the NASDAQ and Friday's close brought QCOM to close again below the $60 level, as well as its 10-dma. While QCOM did bounce strongly on Thursday, it was merely a temporary relief, and we see the stock continuing to drift lower. Aggressive traders looking to enter this play may want to enter on a failed rally to the $60 mark. As well, an inability for QCOM to make it back up above its 10-dma could serve as an entry. Those who want to see more proof of weakness will want to see QCOM break below its 5-dma on strong selling volume before entering. A break below $57 could see the stock re-testing the conviction of buyers who stepped in at the $55 level. A follow-through day on strong volume that sees the stock close well above $60 could be the signal to close this put play. BUY PUT SEP-65 AAO-UM OI=2515 at $7.25 SL= 5.25 BUY PUT SEP-60*AAO-UL OI=4954 at $3.75 SL= 2.00 BUY PUT SEP-55 AAO-UK OI=5598 at $1.44 SL= 0.75 Average Daily Volume = 18.46 mln UK - Union Carbide $41.06 (-1.75 last week) Chemical giant Union Carbide, which Dow Chemical is buying, keeps a hand in basic chemicals and specialty chemicals. The company produces wire insulation, cleaners, catalysts, personal care items, paint and adhesives, and solvents. UK leads the world in ethylene oxide production, which is used in the making of polyester fibers, as well as ethylene glycol, which is used in the manufacturing antifreeze. UK was booted out of the Dow Jones Industrial Average last October and replaced by younger and faster growing companies. It's a good thing. The blue chip index might be a lot lower this year if UK had remained a member of the lustrous group. The lowly Chemicals sector has taken a beating this year for its inability to produce attractive earnings. The bottom-line is that investors want earnings, and UK's 5% EPS next year isn't sufficient. In fact, UK is expected to experience a -36% quarter over quarter decline in profits when the company reports its fourth-quarter results. Consolidation was thought to spur investors' interests earlier this year when Dow Chemical (DOW) made a bid for UK. Unfortunately for UK shareholders, the DOW offer was an all-stock proposition. The same problems that have plagued UK over the past year have also hurt DOW. And, stockholders have suffered. Investors' distaste for the Chemicals sector was clearly evident last week as both UK and DOW fell to new 52-week lows on heavy volume, despite the attempts from several Wall Street brokerages. The big institutional sellers took an early break going into the weekend last Friday as UK edged ever slightly higher on relatively light volume versus what we have seen during the stock's down days. If the light buying continues early next week, an aggressive trader might look for UK to bump against resistance in its descending channel at its 5-dma at $41.50, and consider entering the play if traders fade the stock's rally. A more conservative trader might wait for the professional selling to resume before entering the play. Look for UK to resume its downward ways, and consider entering the play if the stock falls below support at its current level of $41, or lower below its 52-week low at $40.50. BUY PUT SEP-45*UK-UI OI= 57 at $4.50 SL=2.75 BUY PUT SEP-40 UK-UH OI= 15 at $1.25 SL=0.50 Average Daily Volume = 800 K AT - Alltel Corp $50.81 (-5.25 last week) Alltel is an information technology company that offers telecommunication services in the US. Its operations span 23 states, mainly in the Southeast and Midwest. The company offers its wireline and wireless services, which include local, long distance, cellular, as well as Internet access and paging, to over 9 mln customers. The truth may set you free, but that doesn't mean you won't get put through the wringer. Last Wednesday, August 16th, AT dropped 9.3%, or $5.81, after company executives repeated an outlook for 2000 EPS during a conference call with analysts. The estimate at $2.70 a share for the year is currently below Wall Street's forecast. Because Alltel had reported solid results in the first and second quarters of 2000, many analysts upped their estimates to $2.73 a share for the year. However, Alltel is steadfast on their outlook it first put out in February. Inquiries prompted a spokesman for Alltel to reiterate the declaration, "we've said we're going to be $2.70 and we're not changing that." The shares plummeted in heavy trading that day and hit $55.56, the first in a series of new 12-month lows before basing. Frank Louthan at First Union quickly cut his rating on AT down to a Buy from a Strong Buy, but offered no additional comments. Last week, the situation grew dimmer. Volume levels perked up and on Tuesday, AT cracked the $55 base support. By Thursday, even $54 failed to hold. With the Telecom sector not at its best, AT edged even deeper in Friday's session and dug down to $50.50. The bearish close at a mere fraction from that all-time low provides further confirmation that next week's action could be fatalistic. With no historical bottom left to offer support, the million-dollar question is how far can AT fall? Therefore, it's imperative to keep the stops in place for protection against bargain hunters. The nearest DMA to Friday's intraday resistance ($51.50) was the 5-day line at $53.83. Either of these marks could be used as potential entry points. Confirm the downtrend line before opening new positions. BUY PUT SEP-60 AT-UL OI=715 at $9.63 SL=6.50 BUY PUT SEP-55*AT-UL OI=367 at $5.00 SL=3.00 Average Daily Volume = 986 K ***********************ADVERTISEMENT************************ Up To 60% Off At EverythingWireless.com The online super-store for your active lifestyle. Select from the largest range of accessories and products you use every day including Cellular and PCS phones, batteries, chargers, hands-free kits, wireless data products and more. http://www.everythingwireless.com/wireless/homepage?id=1601002 ************************************************************ ***** LEAPS ***** EMLX Hoax Steals The Show On A Quiet Summer Friday By Mark Phillips Contact Support The expected quiet of our next to last summer Friday was shattered by the release of a fraudulent and very damaging press release on EMLX shortly after the open. The details are covered in Molly Evan's Trader's Corner article this weekend and provide a strong reminder of the potential risks and rewards of the arena in which we have chosen to play. I won't rehash any of the details here, but strongly recommend reading her article, as it is a good gut check if you are considering new plays in this market. Much of the story this week remains the same, with the Semiconductors continuing to show strength, and the resurgence in the Biotech sector helping to propel the NASDAQ above the 4000 level. The Internet sector is showing strength, although the real story here is in infrastructure plays (see our new play on BRCD below). Even the DJIA is looking healthy, as it is threatening to break above resistance at 11200. Volume is still weak, but what do you expect for the second half of August? Although there are many factors pointing to more strength ahead, we can't avoid the facts that the Commercials (thanks Austin) are still holding 10-year net short positions and the VIX is continuing to drill into the basement, closing on Friday at 19.10. These two factors combined with the substantial rise on the major indexes lately should have you thinking "DANGER, Profit Taking Ahead". If you have been waiting patiently for new entry points to materialize, the week ahead could be your reward. Just make sure you don't try to jump in and catch a falling knife. The decline this past spring should still be fresh enough in your mind to keep you out of that trap. We are still in the process of weeding out the non-performing plays to make room for those that we think should provide the impressive returns you have come to expect from investing in LEAPS. Accordingly we are jettisoning HD and PCS this weekend, and NXTL is in danger of getting the axe next weekend. As we mentioned a couple months ago, we have continued to track the returns on the 2001 options through the month of August. This is the last newsletter before we usher in the month of September and it is also the last week that we will track those 2001 options. Due to the inherent time decay risk associated with the proximity of those options' short-term status, we can no longer advocate initiating or holding those options, at least not when we are focusing on the long term performance of LEAPS. One final note, and a shameless plug. Have you noticed the glowing comments in the newsletter about the Summer and upcoming Fall seminars? I have, and it really whetted my appetite to further my own education. Therefore, I'll be traveling to Boston to take in the wisdom of Chris and the rest of his team during the weekend of September 28-30. I hope to see you there. In the meantime, trade smart and preserve your capital. Current Plays SYMBOL SINCE LEAPS SYMBOL PICKED CURRENT RETURN EMC 11/07/99 JAN-2001 $ 40 EMB-AH $ 7.69 $52.63 584.33% JAN-2002 $ 45 WUE-AI $ 9.50 $53.13 459.21% JAN-2003 $ 90 VUE-AR $35.50 $34.88 ------ CSCO 11/14/99 JAN-2001 $ 40 CYQ-AH $ 9.56 $27.88 191.58% JAN-2002 $ 45 WIV-AI $11.00 $29.50 168.18% JAN-2003 $ 70 VYC-AN $25.13 $21.75 ------ NT 11/28/99 JAN-2001 $37.5 NT -AU $11.13 $46.75 320.04% JAN-2002 $37.5 WNT-AU $15.13 $50.13 231.30% JAN-2003 $ 80 ODT-AP $28.63 $32.13 ------ SUNW 12/19/99 JAN-2001 $ 80 SUX-AP $17.63 $49.00 177.94% JAN-2002 $ 90 WJX-AR $22.00 $53.13 141.48% JAN-2003 $105 VSU-AA $40.63 $55.63 ------ ERICY 01/30/00 JAN-2001 $16.3 RQC-AO $ 4.94 $ 5.13 3.74% JAN-2002 $16.3 WRY-AO $ 6.75 $ 7.38 9.26% 07/23/00 JAN-2003 $ 25 VYD-AE $ 6.88 $ 5.88 -14.61% NSM 02/27/00 JAN-2001 $ 70 NSM-AN $18.50 $ 3.00 -83.78% JAN-2002 $ 70 WUN-AN $24.25 $10.13 -58.25% JAN-2003 $ 40 VSN-AH $16.50 $22.38 ------ AOL 03/12/00 JAN-2001 $ 60 AOO-AL $14.00 $ 6.88 -50.89% JAN-2002 $ 65 WAN-AM $18.63 $12.50 -32.90% 08/13/00 JAN-2003 $ 55 VAN-AK $17.50 $22.00 35.61% AXP 03/12/00 JAN-2001 $43.3 AXP-AP $ 7.25 $15.38 112.07% JAN-2002 $46.6 WXP-AQ $ 9.33 $18.25 95.61% JAN-2003 $ 60 VAX-AL $18.38 $15.63 ------ WM 03/19/00 JAN-2001 $ 25 WM -AE $ 5.00 $ 9.25 85.00% JAN-2002 $ 30 WWI-AF $ 5.38 $ 8.38 55.67% JAN-2003 $ 35 VWI-AG $ 7.63 $ 8.25 ------ AMD 04/16/00 JAN-2001 $ 70 AMD-AN $17.50 $14.13 -19.29% JAN-2002 $ 70 WVV-AN $26.00 $25.88 - 0.48% JAN-2003 $ 90 VVV-AR $36.75 $27.38 ------ JDSU 04/16/00 JAN-2001 $ 80 XXZ-AP $27.50 $50.63 84.09% JAN-2002 $ 80 YJU-AP $39.63 $64.75 63.39% 08/27/00 JAN-2003 $130 VEQ-AF $55.25 $55.25 0.00% MOT 05/14/00 JAN-2001 $33.3 MOT-AY $ 6.58 $ 6.38 - 3.12% JAN-2002 $36.6 WMA-AZ $ 9.54 $ 9.50 - 0.42% JAN-2003 $ 40 VMA-AH $13.38 $11.25 ------ NOK 05/21/00 JAN-2001 $ 50 NZY-AJ $10.25 $ 3.25 -68.29% JAN-2002 $ 50 IWX-AJ $17.25 $ 9.00 -47.83% 07/30/00 JAN-2003 $ 50 VOK-AJ $17.75 $13.00 -26.76% HD 05/28/00 JAN-2001 $ 50 HD -AJ $ 6.25 $ 6.50 4.00% JAN-2002 $ 50 WHD-AJ $11.38 $12.50 9.84% 08/06/00 JAN-2003 $ 60 VHD-AL $15.25 $12.75 -16.39% NXTL 06/11/00 JAN-2001 $ 60 FZC-AL $12.25 $ 6.50 -46.94% JAN-2002 $ 60 YFG-AL $19.25 $13.25 -31.17% JAN-2003 $ 60 VFU-AL $21.88 $17.75 ------ C 06/18/00 JAN-2001 $ 65 C -AM $ 7.63 $14.75 93.32% JAN-2002 $ 65 WRV-AM $13.75 $22.13 60.91% JAN-2003 $ 75 VRN-AO $20.50 $21.50 ------ AMGN 07/02/00 JAN-2001 $ 75 YAA-AO $10.75 $10.88 1.16% JAN-2002 $ 75 WQY-AO $20.75 $21.75 4.82% JAN-2003 $ 70 VAM-AN $28.75 $31.00 7.83% VRSN 07/02/00 JAN-2002 $190 YVS-AR $66.25 $64.00 - 3.40% JAN-2003 $180 OVS-AP $88.00 $82.50 ------ DELL 07/09/00 JAN-2002 $ 55 WDQ-AK $12.63 $ 5.13 -59.42% JAN-2003 $ 60 VDL-AL $15.38 $ 7.63 -50.42% GENZ 07/16/00 JAN-2002 $ 70 YGZ-AN $17.13 $23.50 37.19% JAN-2003 $ 70 OZG-AN $23.13 $29.75 28.62% HWP 07/30/00 JAN-2002 $110 WPW-AB $28.25 $36.25 28.32% JAN-2003 $120 VHP-AD $32.63 $41.00 25.65% PCS 07/30/00 JAN-2002 $ 60 WVH-AL $11.88 $ 8.25 -30.56% JAN-2003 $ 65 VVH-AM $14.38 $10.75 -25.24% EXDS 08/06/00 JAN-2002 $ 55 WZZ-AK $20.75 $28.50 37.35% JAN-2003 $ 60 VTQ-AL $25.38 $32.88 29.53% MFNX 08/06/00 JAN-2002 $ 40 WOF-AH $13.75 $12.75 - 7.27% JAN-2003 $ 45 VKW-AI $15.63 $15.25 - 2.43% GM 08/06/00 JAN-2002 $ 65 WGM-AM $ 9.88 $17.75 79.66% JAN-2003 $ 65 VGN-AM $13.25 $21.63 63.21% FRX 08/13/00 JAN-2002 $ 95 WRT-AS $31.38 $28.75 - 8.38% JAN-2003 $100 VFB-AT $37.38 $35.00 - 6.37% Spotlight Play JDSU - JDS Uniphase $125.31 Three cheers for our Optical hero! After the exciting times that accompanied JDSU's earnings in July (not to mention being added to the S&P 500), volatility has come back to earth and the stock has resumed its uptrend. Major support near $107 was confirmed on August 3rd, as the stock dropped to put in a solid bounce right on the ascending long-term trendline. Since then, the stock has been tracing higher highs and higher lows as it drags all its moving averages back into ascent mode. The first major support level is at $121-122, which also happens to be the convergence point of the 10-dma ($122.31) and the 30-dma ($121.31). Close behind is the 50-dma (currently at $119.69), reinforcing support near $120. Barring a major negative market event, bounces at these support levels (according to your individual risk tolerance) look like a good time to initiate new positions. Should a more drastic decline ensue (after all, the VIX is barely over 19 now), look for JDSU to bounce on the ascending trendline, currently sitting at $116. Of course the enthusiasm for the Optical sector is showing no signs of letting up and with the benefits of the pending SDLI merger, JDSU could very likely head north from current levels. Although you can consider entering on a breakout over resistance at $128 or $130, we think the more prudent strategy will be to wait for the stock to pull back to confirm these levels as support after the breakout. BUY LEAP JAN-2002 $130.00 YJU-AF at $40.88 BUY LEAP JAN-2003 $130.00 VEQ-AF at $55.25 New Plays BRCD - Brocade Communications $211.88 Brocade is a major supplier of Fibre Channel switching solutions for Storage Area Networking (SANs), which apply the benefits of a networked approach to the connection of computer storage systems and servers. Unless you slept through the market action on Friday (or had to be at work), you saw some incredible action in some of the major players in the SAN market. Sure, most of the action was attributable to the fraudulent news story on EMLX (see Molly Evans' Trader's Corner article this weekend for the detailed story), but what was impressive was BRCD's strength relative to competitor QLGC. Although the fake news and subsequent panic led investors to shave as much as $12 from the share price intraday, the $210 level, with the 10-dma ($209.75) backing it up, held up well as support. The stock has had an impressive run since it last tested the 200-dma (then at $90.13) in late May, and the refusal of investors to jump ship, even at the stock's lofty levels, speaks to its impressive strength. Any return to the vicinity of the $210 support level looks like an attractive entry point, but make sure that buyers are still in abundance before jumping aboard. A more conservative strategy would be to wait for the bulls to propel the stock through resistance at $220 before pulling the trigger. BUY LEAP JAN-2002 $220.00 YNU-AD at $65.38 BUY LEAP JAN-2003 $220.00 OMW-AD at $86.50 INKT - Inktomi Corporation $123.94 It's hard to find a good quality Internet play in today's market, but INKT looks like a good candidate. The company provides scalable software applications designed to enhance the performance and intelligence of large-scale networks, particularly the Internet. Beaten up with the rest of the Internet sector, INKT looks like it is about to get moving in the right direction again. After struggling since the selloff this spring, the stock has made some impressive strides in the past week. After consolidating near $105, shares of the company got a news-related boost last Wednesday and surged through the 30-dma, 50-dma, and 200-dma, then at $113.50, $117.81, and $119.88, respectively. The news that prompted the bullish move centered on an alliance called "Content Bridge" with AOL, ISLD and EXDS, among others, and is focused on ensuring that Internet users receive the most up-to-date information available on the Web. INKT continued to move higher for the remainder of the week, scaling the last of its moving averages, the 100-dma at $123.31 on Friday. The fledgling breakout will need continued strong buying volume to sustain it, and with a quiet week expected ahead of the Labor Day weekend, a pullback to support would seem likely. Support should hold at the 200-dma (now at $120.50) or near $117, where the 5-dma and 50-dma are converging. Unless volume is strong, any move above current levels this week will likely be hard to sustain, as there is substantial resistance at $126 and then $130-133. BUY LEAP JAN-2002 $130.00 XOR-AF at $50.13 BUY LEAP JAN-2003 $140.00 VFR-AH at $60.88 Drops HD $50.50 Giving us three very profitable runs, HD performed exactly as we expected. After we added it in late May near $47, the stock quickly surged to $54, before succumbing to market pressures and falling back for another entry point near where our play started. Then riding the recovery of the DJIA, HD ran up to $57 before falling back near the $50 support level and then ran as high as $58.75 ahead of earnings on August 14th. These last two runs gave us gains of 75-100%, depending on entry and exit points. The company's earnings report essentially spelled the end of our play as recent interest rate hikes and a slowing economy are beginning to take their toll, leading to reduced revenue expectations for the remainder of the year. With the markets continuing to move incrementally higher and HD failing to participate, now looks like as good a time as any to drop the play and move on to more exciting possibilities. PCS $48.94 The Telecom sector continues to look sickly, and our play on PCS has definitely been infected. When we added it at the end of July, the stock was bouncing at the 200-dma and we were playing it for a bounce and recovery with the rest of the market. After 2 up days, the stock rolled over at the 10-dma (near $57) and has continued to be pressured over the past month. Even the 200-dma was largely ignored as a support level, as PCS continued to decline on ever increasing volume. Last week's decline actually began with a rollover at the 200-dma, and although support may hold at $47-48, this is clearly a broken play. There are too many exciting and healthy stocks out there to keep our money tied up in a loser like PCS. *********** SPLIT PLAYS *********** It's Only A Matter Of Time By Ryan Nelson With the VIX trying to move below 19, you can expect some cautious words. The funny thing is, the VIX has been in the danger zone for two and a half months while the Nasdaq has gained nearly 550 points in the past three weeks. Go figure. That is why this Great Game is not an exact science. So while the starring contest with the VIX continues, we will continue to ride the momentum until someone blinks. On another topic, congrats to all who benefitted from the split run moves in PLXS and PLCM that we highlighted last week. PLXS has been moving up steadily, while PLCM broke out on Friday to a big gain. It is time to start looking for an exit on both though as the ex-date is rapdily approaching. Current Split Run Plays PLXS - 09/01 ex-date CIEN - 09/19 ex-date SUNW - 12/06 ex-date Current Split Candidate Plays ITWO JNPR GSPN INKT NEWP VRSN VTSS BRCM IMCL NTAP Candidates That Are Not Current Plays BRCD PVN LEH NVDA SCMR ARBA DNA 10 Most Recent Announcements We Predicted SUNW - 08/17 (most recent announcement) GLW - 08/16 HWP - 08/16 CIEN - 08/15 SEBL - 08/08 SAPE - 08/01 AMD - 07/19 PDLI - 07/11 TXN - 04/20 CMVT - 03/07 Major Announcements So Far This Month = 21 PLCM PLXS SNWL ORBK SAPE NETE SEBL EXBD ABMD PKE ERTS SONS XTO CIEN MYGN PCP HWP GLW SUNW SMTC MCHP For our complete stock split calendar, click here... http://members.OptionInvestor.com/splits/index.asp Symbol Company Name Splits Payable Executable 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 VSAT - ViaSat, Inc. 2:1 08/31/2000 09/01/2000 MER - Merrill Lynch & Co., Inc. 2:1 08/31/2000 09/01/2000 INCY - Incyte Genomics, Inc 2:1 08/31/2000 09/01/2000 PLXS - Plexus Corp. 2:1 08/31/2000 09/01/2000 PLCM - Polycom, Inc. 2:1 08/31/2000 09/01/2000 RATL - Rational Software 2:1 09/01/2000 09/05/2000 NETE - Netegrity, Inc. 3:2 09/01/2000 09/05/2000 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 KVA - K-V Pharmaceutical Co 3:2 09/07/2000 09/08/2000 KVB - K-V Pharmaceutical Co. 3:2 09/07/2000 09/08/2000 PSEM - Pericom Semiconductor 2:1 09/08/2000 09/11/2000 SEBL - Siebel Systems, Inc. 2:1 09/08/2000 09/11/2000 ERTS - Electronic Arts Inc. 2:1 09/08/2000 09/11/2000 PWER - Power-One, Inc. 2:1 09/11/2000 09/12/2000 MYGN - Myriad Genetics, Inc. 2:1 09/11/2000 09/12/2000 LIC - Lynch Interactive Corporation 2:1 09/11/2000 09/12/2000 NDSN - Nordson Corp 2:1 09/12/2000 09/13/2000 FCEL - FuelCell Energy, Inc. 2:1 09/13/2000 09/14/2000 EXBD - Corporate Executive Board Co 2:1 09/15/2000 09/18/2000 SNWL - SonicWALL Inc 2:1 09/15/2000 09/18/2000 ORBK - Orbotech Ltd 3:2 09/15/2000 09/18/2000 BUD - Anheuser-Busch Companies Inc 2:1 09/18/2000 09/19/2000 NSIT - Insight Enterprises Inc. 3:2 09/18/2000 09/19/2000 ACLNF - A.C.L.N. Limited 5:4 09/18/2000 09/19/2000 XTO - Cross Timbers Oil Co. 3:2 09/18/2000 09/19/2000 CIEN - CIENA Corporation 2:1 09/18/2000 09/19/2000 HAR - Harman Intl Industries 2:1 09/19/2000 09/20/2000 IIVI - II-VI, Inc. 2:1 09/20/2000 09/21/2000 SBSE - SBS Technologies, Inc. 2:1 09/20/2000 09/21/2000 PCP - Precision Castparts Corp. 2:1 09/21/2000 09/22/2000 EMKR - EMCORE Corporation 2:1 09/25/2000 09/26/2000 SMTC - Semtech Corporation 2:1 09/25/2000 09/26/2000 MCHP - Microchip Tech. 3:2 09/26/2000 09/27/2000 MAPS - MapInfo Corporation 3:2 09/28/2000 09/29/2000 ABMD - Abiomed, Inc. 2:1 09/29/2000 10/02/2000 CUZ - Cousins Properties Inc. 3:2 10/02/2000 10/03/2000 GLW - Corning Incorporated 3:1 10/03/2000 10/04/2000 SONS - Sonus Networks Inc. 3:1 10/06/2000 10/09/2000 FLEX - Flextronics International Ltd.2:1 10/16/2000 10/17/2000 HWP - Hewlett-Packard Company 2:1 10/27/2000 10/30/2000 PSC - Philadelphia Suburban 5:4 12/01/2000 12/04/2000 SUNW - Sun Microsystems 2:1 12/05/2000 12/06/2000 **********************ADVERTISEMENT************************* Free voicemail, email, fax, and paging - all in one place! 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The Option Investor Newsletter Sunday 08-27-2000 Sunday 5 of 5 To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/082700_5.html ************* COVERED CALLS ************* Trading Basics: Plan for Success... By Mark Wnetrzak The recent volatility in the market has magnified the need for a well designed trading plan. As with any structure, the key to a successful system is in its foundation. In any approach to the financial markets, a number of issues must be resolved. First, how much risk do you want to incur? What ratio of success do you expect to achieve? What style or method of trading will you use to accomplish your goals? Do you plan to utilize technical analysis, trading ranges or trends? Will you focus on volatility or disparity in option pricing, selling premium when the market is active and buying potential when the trend is stagnant? These decisions will significantly affect the fundamental design of your system. As an example, if your stop-loss limits are relatively liberal, then your potential success ratio will be increased. At the same time, the possibility of substantial loss will also be magnified. The best way to find a happy medium is to start with realistic expectations and build a pattern of success before you worry about increasing the potential returns. Regardless of the type of markets you trade, the same fundamental approach can apply to a number of different systems. The basic requirements for a successful design are determined by its core objectives. With trading systems, you need a market outlook, a strategy with which to profit, and a method for timing the entry and exit. Then you must decide on a money management system - a set of rules or guidelines for determining potential risk. Most experts suggest that ideally you should not risk more than 3-5% of your capital on any one trade, to avoid the possibility of a catastrophic loss. In addition to these details, you should also outline a stop-loss policy and a method to determine the correct position size for a particular transaction. The administration of stop-losses will often define the success of your system. In fact, the placement of the stop is vitally important, because if the stop is vulnerable, then so is the entire system. It would follow that the relationship between your entry point and profit target or exit stop is the key to profitability. Unfortunately, this is the essential element that cannot be reached simply by logic, rather it evolves through observation, critical study, and continuous testing and refinement. The ultimate arrangement will be strict yet flexible, with a plan for adjustments as the trade progresses. The ideal process entails far more than a mechanical system that simply follows the trend and waits for a stop to be hit. In every case, it should identify the proper entry point and manage the position for maximum profit. The first step in constructing a profitable system is observation. Study the rhythms and cycles of the market. Examine how specific stocks and sectors are behaving in the current environment and try to identify the best ways to take advantage of the activity. The simplest approach to directional trading is through the use of technical analysis. Identifying trading ranges and trends is a relatively easy task, but then you must define how to profit from them. With trading ranges, it's best to look for extremes and enter opposing positions when these peaks (or valleys) are reached. With trends, traders generally initiate new positions when a particular system indicates that the primary movement is well established and the correct bias is in place. Obviously, trends can be defined in a number of different ways but the most important aspect of this type of trading is selecting the correct time frame. After the time frame is identified, you can analyze the appropriate periods for specific trading signals. Long-term data is more stable and will provide very accurate indications with regard to primary trends or market direction. In contrast, most short-term statistics are generally better for entry and exit timing and strategies that profit from correctly identifying reversals or changes in momentum. Despite the shortcomings of each individual approach, traders have a variety of indicators with which to determine the future character of the market. The most difficult task is to choose those indicators that will best help achieve one's objectives. Next week we will continue our discussion of trading systems and the techniques that professionals use in position management. Good Luck! SUMMARY OF PREVIOUS PICKS ***** NOTE: Using Margin doubles the listed Monthly Return! Stock Price Last Call Strike Price Profit Monthly Symbol Picked Price Month Sold Picked /Loss Return XICO 7.81 11.69 SEP 7.50 1.56 *$ 1.25 17.4% GSTRF 8.44 10.50 SEP 7.50 1.63 *$ 0.69 11.0% PCTL 5.78 6.41 SEP 5.00 1.19 *$ 0.41 9.7% LPTH 41.13 44.31 SEP 35.00 8.50 *$ 2.37 7.9% DRMD 5.72 6.97 SEP 5.00 1.13 *$ 0.41 7.8% SGNT 12.00 11.75 SEP 10.00 2.63 *$ 0.63 7.3% PCTL 6.03 6.41 SEP 5.00 1.38 *$ 0.35 6.5% ECLP 12.00 15.06 SEP 10.00 2.75 *$ 0.75 5.9% SFAM 18.63 19.69 SEP 15.00 4.38 *$ 0.75 5.7% ROBV 13.63 13.25 SEP 10.00 4.13 *$ 0.50 5.7% XLNK 18.00 16.69 SEP 12.50 6.25 *$ 0.75 5.5% (DLK) ORG 14.38 16.03 SEP 12.50 2.75 *$ 0.87 5.4% FHS 16.06 17.19 SEP 15.00 1.94 *$ 0.88 5.4% ROS 15.75 14.88 SEP 15.00 1.88 $ 1.01 5.3% CCUR 14.63 16.13 SEP 12.50 2.69 *$ 0.56 5.1% NOVN 35.00 29.88 SEP 35.00 2.88 $ -2.24 0.0% *$ = Stock price is above the sold striking price. Comments: Keep an eye on Rostelecom (ROS) as it is at key moment. A move lower would violate a trend-line (June low - July low - Aug low) and signal a short-term bearish character change - evaluate your long-term outlook. Noven Pharmaceuticals (NOVN) continues to weaken and has now moved below its 30 dma and is approaching its 50 dma. Those cautious investors who waited for a post-earnings entry point (as suggested), will have a much better cost-basis or would have avoided the sector all together with the LLY induced sell-off. We will exit the Noven position if it violates its 50 dma on a closing basis. Positions Closed: None NEW PICKS ********* Sequenced by Company ***** Stock Last Call Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return ASKJ 25.13 SEP 22.50 AKU IX 4.00 751 21.13 21 9.4% BOUT 37.63 SEP 35.00 AUB IG 5.00 514 32.63 21 10.5% CLPA 30.25 SEP 25.00 QJC IE 6.13 375 24.13 21 5.3% DRXR 18.31 SEP 17.50 RXQ IW 1.50 177 16.81 21 5.9% OSIP 45.56 SEP 40.00 GHU IH 7.75 642 37.81 21 8.4% PLNR 19.88 SEP 17.50 PNQ IW 3.25 70 16.63 21 7.6% SPLN 18.56 SEP 17.50 QSP IW 2.19 568 16.37 21 10.0% Sequenced by Return ***** Stock Last Call Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return BOUT 37.63 SEP 35.00 AUB IG 5.00 514 32.63 21 10.5% SPLN 18.56 SEP 17.50 QSP IW 2.19 568 16.37 21 10.0% ASKJ 25.13 SEP 22.50 AKU IX 4.00 751 21.13 21 9.4% OSIP 45.56 SEP 40.00 GHU IH 7.75 642 37.81 21 8.4% PLNR 19.88 SEP 17.50 PNQ IW 3.25 70 16.63 21 7.6% DRXR 18.31 SEP 17.50 RXQ IW 1.50 177 16.81 21 5.9% CLPA 30.25 SEP 25.00 QJC IE 6.13 375 24.13 21 5.3% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, MR-Monthly Return. ***** ASKJ - Ask Jeeves $25.13 *** FORD asks Jeeves! *** Ask Jeeves provides online personal service infrastructure for companies seeking to target, acquire, and retain customers online. The online personal service infrastructure allows companies to connect users to information through automated search, decision advisory support and interaction with live customer care representatives. Ask Jeeves' answer to the Internet cash-burn-rate concerns was an excellent earnings report, beating the Street by 5 cents. Revenues for the 2Q were $25.9 million, an 817% increase over last year and their cash position totaled $141.6 million, which the company believes will preclude the need for future financing. The stock rallied this week after Ford Motors announced it had selected Jeeves Relevant Answers(SM), Ask Jeeves' intuitive question answering service, to help power its e-commerce and e-support services for Ford Division customers. The details weren't disclosed but it sounds like more revenue to me. SEP 22.50 AKU IX LB=4.00 OI=751 CB=21.13 DE=21 MR=9.4% ***** BOUT - About.com $37.63 *** Internet stocks in vogue? *** About.com operates a Web platform comprised of more than 700 highly-targeted, topic-specific Web sites. The sites provide high-quality original articles, moderated forums and chat rooms, newsletters, tools, and easy access to related sites. According to Media Metrix, approximately 13.2 million unique users visited ABOUT.COM in January 2000, making it the tenth largest Internet property overall. Each of the topic-specific sites is overseen by a guide who is knowledgeable about the site's topic. The Internet stocks appear to be gaining favor and About.com is no exception. The rally over the last few days has pushed About.com above its recent short-term base and has provided a reasonable cost basis for those interested in higher reward (risk) issues. SEP 35.00 AUB IG LB=5.00 OI=514 CB=32.63 DE=21 MR=10.5% ***** CLPA - Cell Pathways $30.25 *** New Drug Speculation! *** Cell Pathways Holdings is a pharmaceutical company focused on the research, development and commercialization of products to prevent and treat cancer. CPI's technology may also prove to have applicability beyond the field of cancer. Their technology is based upon its discovery of a novel mechanism which they believe can be targeted to induce selective cell death in pre- cancerous and cancerous cells without affecting normal cells. Cell Pathways continues to prepare for the commercialization of Aptosyn(TM), its lead drug candidate which has shown to inhibit a novel pattern of over-expressed cyclic GMP phosphodiesterases in cancerous and precanerous cells. The FDA continues to review the pending NDA for Aptosyn. With the recent Chiron buyout of PathoGenesis, there is speculation on who could be the next merger candidate. Could that be the reason for Friday's heavy volume rally? We simply favor the stage I base formation with support near our cost basis. SEP 25.00 QJC IE LB=6.13 OI=375 CB=24.13 DE=21 MR=5.3% ***** DRXR - Drexler Tech $18.31 *** Technicals Only! *** Drexler Technology manufactures LaserCard optical memory cards used for immigration, ID/access, healthcare, automotive and other digital read/write wallet-card applications. The LaserCard product line currently consists of optical memory cards, optical card read/write drives, optical card data systems, chip ready hybrid smart cards and related system software and peripherals. Drexler reported favorable earnings in July, showing net income rising 70%, revenues rising 38%, and cash equivalents of $8.9 million with no debt. Drexler appears to be on the move again as the stock has rallied to a new multi-year high. Though the volume was strong, Drexler is a thinly traded issue. There is no news to explain the move over the last two weeks, but the tape suggests someone is interested in accumulating this stock. SEP 17.50 RXQ IW LB=1.50 OI=177 CB=16.81 DE=21 MR=5.9% ***** OSIP - OSI Pharma $45.56 *** Bracing for a rally? *** OSI Pharmaceuticals is a research and development company that utilizes a comprehensive drug discovery and development capability to rapidly and cost effectively discover and develop novel, small- molecule drug candidates for commercialization by major pharma- ceutical companies. OSI conducts its drug discovery and product development programs independently as well as in conjunction with major pharmaceutical companies. Their efforts are primarily focused in the areas of cancer, diabetes, cosmeceuticals and G-protein coupled receptor, or GPCR, directed drug discovery. In June, OSI announced that Pfizer, in order to meet requirements for its merger with Warner-Lambert, granted all development and marketing rights to OSI for CP-358,774 (OSI-774). The compound is the most advanced clinical development candidate arising from the Pfizer alliance and is currently in clinical trials. Robertson Stephens believes this is a transforming event and a fundamental positive for OSIP, as growth factor inhibitors are the next major wave of cancer therapeutics. Adams Harkness must feel the same way as both investment firms have rated OSI a "strong buy." SEP 40.00 GHU IH LB=7.75 OI=642 CB=37.81 DE=21 MR=8.4% ***** PLNR - Planar Systems $19.88 *** Stage II - What's up? *** Planar Systems is a provider of high performance electronic information displays, display sub-systems and complete display systems. They market a variety of display technologies including active matrix liquid crystal displays, electroluminescent flat panel displays, and several others, which are marketed in Planar's core medical, transportation and industrial markets. What is it about Michael Franzi, Planar Systems' newly appointed VP of North American Sales & Marketing, that was cause for a 5 point rally on heavy volume? Again, not much news out there but the tape rarely lies. Someone is interested in this stock and the technical outlook is bullish, with support near the March and July highs (our cost basis). SEP 17.50 PNQ IW LB=3.25 OI=70 CB=16.63 DE=21 MR=7.6% ***** SPLN - SportsLine.com $18.56 *** Stage I base *** SportsLine.com, is an Internet-based sports media company that provides branded, interactive information and programming as well as merchandise to sports enthusiasts worldwide. SportsLine produces and distributes original, interactive sports content, including editorials, radio shows, contests, games, fantasy league products and fan clubs, as well as distributing a broad range of sports related news and other data. SportsLine.com has been in a stage I base since April and is now showing signs of life. Last month's earnings showed SportsLine had record revenue (up 160%) and site traffic (up 76%). With the Internet sectors gaining momentum as traders speculate on the next merger- buyout candidate or earnings report, this play offers an entry point in a technically improving issue. Besides, we are moving into a seasonably favorable time frame...football, hockey, The World Series, basketball, The Olympics...must I go on? SEP 17.50 QSP IW LB=2.19 OI=568 CB=16.37 DE=21 MR=10.0% ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** *********************** CONSERVATIVE NAKED PUTS *********************** Success Basics: Position Selection, Timing and Management By Ray Cummins Each week we receive numerous E-mails from investors that have an abundance of excellent trading strategies and yet their positions fail to produce consistent profits. The most common traits identified in each of these cases is the failure to select the best possible candidates and manage losses properly. Successful trading is a relatively simple activity. There are very few rules to follow and the process itself is not difficult to comprehend. The reason we find it so hard to succeed is that it is difficult for us to follow those simple rules. Emotions such as hope, greed and fear are integral parts of our existence and each of these instinctual responses has a major influence on our trading decisions. The struggle to overcome these feelings is a constant battle that all traders wage on a daily basis and those who can reduce their adverse affects will find it easier to follow the essential rules. Unfortunately, this task is easier said than done. It is simple enough to devise a sensible set of rules for trading, so why do most investors fail to succeed when the facts appear so obvious? We all know that it is impossible to predict the market in every case so the key is to take small profits regularly and prevent losing plays from significantly eroding capital. Losses are bound to happen and in fact, they are inevitable! However, that shouldn't keep anyone from being successful in the market. The truth is, it's very difficult for novice investors to close out losing positions early and that's a major obstacle to achieving consistent profits. Experienced traders know there is no reason to hang on to a losing position when there are so many other profitable plays that deserve their attention. One of the primary reasons that novice investors lose money is they fail to plan for unforeseen events and the adjustments that are often necessary to ensure a profitable outcome. In addition, the majority of new traders become complacent after the initial position is in place. The temptation to relax is based on the belief that the work has already been completed. Of course, the responsibility to manage a trade does not end until the position has been closed out with a profit or loss. In most cases, the odds of successfully completing a specific task are greatly enhanced when the procedure is rehearsed. By mentally planning for all the possible alternative outcomes, a trader will be in a more objective position to assess the changing conditions and not be overwhelmed by an unexpected setback. Using this technique, a new investor can become better prepared to anticipate potential problems and make the appropriate corrections before substantial losses occur. Trade selection and timing are also fundamental components of a successful trading system. The first step in mastering these concepts is to find a time frame that you are comfortable with and use the appropriate form of analysis to generate trading signals for that particular period. In the stock market, there are a number of cycles (or rhythms) which continuously repeat. These range from the very short term, to the very long term and nearly all of them are non-linear in time. These rhythms help astute traders identify key reversal points and also allow them to anticipate recurring highs and lows in specific time periods. In addition to trading in a time frame that is well suited to your personality and circumstances, it is also important to use only the best signals when entering new positions. Most methods of analysis produce a variety of indications, with the quality of entry and exit signals ranging from excellent to borderline. The key is to overcome the enthusiasm that clouds one's judgment and participate only in the best prospects. In cases where the pattern is clear and well-defined, market activity tends to be much more direct and easy to predict. Conflicting indications are difficult to interpret and generally produce poor results in the long run. Trading only those situations when the outlook is superb allows you to proceed with confidence, and the margin for error is far greater with regard to mistimed entries and exits. Next week, we will review the most common "timing" techniques. 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. SUMMARY OF PREVIOUS PICKS ***** Stock Price Last Put Strike Price Profit Monthly Symbol Picked Price Month Sold Picked /Loss Return GSTRF 7.63 10.50 SEP 5.00 0.31 *$ 0.31 14.6% CTIC 39.25 41.75 SEP 30.00 1.38 *$ 1.38 13.0% IMAX 28.06 27.25 SEP 22.50 0.94 *$ 0.94 12.4% FNSR 29.00 44.00 SEP 22.50 0.94 *$ 0.94 12.1% JDEC 21.88 24.63 SEP 17.50 0.69 *$ 0.69 11.8% LPTH 41.13 44.31 SEP 30.00 1.00 *$ 1.00 11.8% FNSR 37.50 44.00 SEP 30.00 0.81 *$ 0.81 10.6% RHAT 23.44 24.19 SEP 17.50 0.50 *$ 0.50 10.5% GZTC 38.00 39.13 SEP 30.00 0.81 *$ 0.81 10.5% SIPX 37.50 39.88 SEP 30.00 0.75 *$ 0.75 9.9% TLXN 19.88 20.13 SEP 15.00 0.44 *$ 0.44 7.2% CRUS 27.44 28.00 SEP 22.50 0.50 *$ 0.50 6.6% CS 34.75 36.75 SEP 27.50 0.44 *$ 0.44 6.5% REGN 33.13 33.00 SEP 25.00 0.38 *$ 0.38 5.9% NDC 30.06 29.56 SEP 22.50 0.38 *$ 0.38 5.2% *$ = Stock price is above the sold striking price. Comments: Now why didn't we just buy calls on Finisar Corp. (FNSR)? Positions Closed: None NEW PICKS ********* Sequenced by Company ***** Stock Last Put Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return CLTR 26.56 SEP 22.50 QCE UX 0.38 90 22.12 21 7.9% CYTO 9.03 SEP 7.50 UOR UU 0.31 488 7.19 21 18.8% DCLK 41.81 SEP 35.00 QWE UG 0.69 849 34.31 21 9.4% ICIX 20.88 SEP 15.00 QIX UC 0.38 954 14.63 21 11.9% MSTR 26.88 SEP 20.00 EOU UD 0.44 527 19.56 21 11.0% PL 28.19 SEP 25.00 PL UE 0.50 35 24.50 21 8.4% SIMG 32.06 SEP 25.00 GUD UE 0.38 20 24.63 21 8.0% Sequenced by Return ****** Stock Last Put Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return CYTO 9.03 SEP 7.50 UOR UU 0.31 488 7.19 21 18.8% ICIX 20.88 SEP 15.00 QIX UC 0.38 954 14.63 21 11.9% MSTR 26.88 SEP 20.00 EOU UD 0.44 527 19.56 21 11.0% DCLK 41.81 SEP 35.00 QWE UG 0.69 849 34.31 21 9.4% PL 28.19 SEP 25.00 PL UE 0.50 35 24.50 21 8.4% SIMG 32.06 SEP 25.00 GUD UE 0.38 20 24.63 21 8.0% CLTR 26.56 SEP 22.50 QCE UX 0.38 90 22.12 21 7.9% 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 $26.56 *** Big Day! *** 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 primary 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. Coulter's therapeutic antibodies program includes an interferon receptor antagonist. Initial efforts in the targeted oncologics program are based on tumor activated and tumor specific targeting technologies. Coulter intends to seek expedited Biologics License Application review and marketing approval for Bexxar while simultaneously pursuing clinical trials to expand the potential use of the drug to other indications. Coulter and SmithKline Beecham recently announced the start of Phase II investigational trials 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. CLTR rallied $2.38 on Friday with no news to account for the move. We will target shoot the position at $0.50 credit initially, and adjust the price based on Monday's activity. SEP 22.50 QCE UX LB=0.38 OI=90 CB=22.12 DE=21 MR=7.9% ***** CYTO - Cytogen $9.03 *** On The Rebound! *** Cytogen is an established biopharmaceutical company with two principal lines of business, proteomics and oncology. They are extending their expertise in molecular recognition to the development of a new, proteomics-driven drug discovery platform. Cytogen's mission is to set new standards in cancer care. During the first half of the year, Cytogen continued to invest in their oncology and proteomics businesses. Their primary objectives include; AxCell Bioscience, a wholly owned subsidiary, which is attempting to chart the protein signaling pathways in the human proteome as a means of discovering new drug targets, and PMSA (prostate specific membrane antigen) which, because of its unique characteristics as a cancer marker, is expected to be utilized in broad applications in the therapy and diagnosis of prostate cancer and possibly other metastatic cancers. In addition, the company has retained a new sales force in order to market directly its monoclonal antibody-based ProstaScint and OncoScint CR/OV cancer imaging agents. We just like the chart! SEP 7.50 UOR UU LB=0.31 OI=488 CB=7.19 DE=21 MR=18.8% ***** DCLK - DoubleClick $41.81 *** Sector Rally! *** DoubleClick provides comprehensive Internet advertising solutions for advertisers and Web publishers worldwide. Their DoubleClick Network consists of highly trafficked Web sites grouped by categories of interest. Their DART Service provides Web publishers and advertisers with the ability to target, deliver, and evaluate online marketing campaigns on a real-time basis. DoubleClick, often considered the leading online ad serving firm, led the internet group higher last week after the latest Jupiter Communications ad projections forecast online advertising to expand at a compounded annual growth rate of 30% over the next five years. In addition, CS First Boston analyst Rich Petersen said the company stands to benefit from the new relationship between NBC and Quokka Sports (QKKA). He also commented that "things certainly are looking up for the advertising sector, and DoubleClick in particular." Based on the recent bullish activity, investors agree with that outlook and we will use any short-term pullback to increase the position credit. SEP 35.00 QWE UG LB=0.69 OI=849 CB=34.31 DE=21 MR=9.4% ***** ICIX - Intermedia Communications $20.88 *** Bottom Fishing! *** Intermedia Communications provides integrated data and voice communications services to approximately 90,000 business and government customers in the United States. Their subsidiary Digex is a leading provider of managed Web hosting services to businesses. Intermedia recently announced they are beginning to implement the Sonus' complete suite of products, which allows companies to transport voice traffic using packet technologies, expand network coverage into new geographic markets, handle IP-based long distance traffic from international carriers, and offload modem-generated Internet traffic from the company's voice network. The new architecture will provide Intermedia's business customers with a network that is scalable, fast to provision, cost-effective and able to support advanced applications as they are developed. Based on the technical indications, investors believe these new products will help the company get "back on track" and our position allows a favorable way to speculate on that opinion. SEP 15.00 QIX UC LB=0.38 OI=954 CB=14.63 DE=21 MR=11.9% ***** MSTR - MicroStrategy $26.88 *** Own This One! *** MicroStrategy is a worldwide provider of intelligent e-business software and related services that allow business transactions through Web, wireless, and voice communication channels. Their software platform, MicroStrategy 6, allows users to query and evaluate the transaction-level databases, turning data into business intelligence. They also offer a comprehensive set of consulting, education and technical support services. Shares of MSTR rallied this week after IBM announced plans to dedicate as many as 250 people to set up and integrate MSTR's marketing software. When coupled with IBM's database software, MSTR's products will help companies build applications for analyzing large amounts of customer information. It also lets companies deliver targeted messages, including advertisements to customers via the telephones, faxes, and the Internet. IBM is expected to become the company's largest reseller, both in terms of revenue and by the number of outside people dedicated to selling its software. We favor the opportunity to own this issue at a low risk entry point. SEP 20.00 EOU UD LB=0.44 OI=527 CB=19.56 DE=21 MR=11.0% ***** PL - Protective Life $28.19 *** Insurance Sector Hedge Play *** Protective Life is a holding company whose subsidiaries provide financial services through the production, distribution, and administration of insurance and investment products. Protective Life Insurance Company is their principal operating subsidiary. The company operates seven divisions whose principal strategic focuses can be grouped into three categories: life insurance, specialty insurance products, and retirement savings - investment products. A strategic focus of the company is to expand its life insurance operations through internal growth and acquisitions. In late July, Protective Life reported favorable earning with five of their seven divisions achieving earning increases in the first six months compared to last year. While the issue may not be a stellar performer in comparison to technology or major drug companies, this position offers conservative, low maintenance speculation for traders who want to avoid volatile stocks. SEP 25.00 PL UE LB=0.50 OI=35 CB=24.50 DE=21 MR=8.4% ***** SIMG - Silicon Image $32.06 *** On The Move! *** Silicon Image designs, develops and markets semiconductor solutions for applications that need cost-effective, integrated solutions for high-speed data communications. Their PanelLink technology provides scalable, all-digital connectivity between computers, controllers, or other sources of video. Their products have been incorporated into products of leading manufacturers such as Apple, Compaq, IBM, Sharp, Sony, and many others. SIMG appears to be on the right track after beating the street last quarter and then announcing a stock split. Lehman Brothers then initiated coverage with a buy. This week, Silicon Image unveiled its new multi-rate MSLPhy(TM) Serializer/Deserializer technology, which is capable of operating at bandwidths from 1.0625 to 3.125 gigabits/sec. With this versatility, the MSLPhy SerDes is capable of meeting multiple standards in the storage and networking markets. The recent, high-volume rally suggests Silicon Image’s consolidation phase may be ending. SEP 25.00 GUD UE LB=0.38 OI=20 CB=24.63 DE=21 MR=8.0% ***********************ADVERTISEMENT************************ Up To 60% Off At EverythingWireless.com The online super-store for your active lifestyle. Select from the largest range of accessories and products you use every day including Cellular and PCS phones, batteries, chargers, hands-free kits, wireless data products and more. http://www.everythingwireless.com/wireless/homepage?id=1601002 ************************************************************ ************************ SPREADS/STRADDLES/COMBOS ************************ Bracing For A Rally? The market consolidated today after a string of bullish sessions. ****************************************************************** - MARKET RECAP - ****************************************************************** Friday, August 25 The market consolidated today after a string of bullish sessions. The Nasdaq closed down 10 points at 4,042 while the Dow closed up 9 points at 11,192. The S&P 500 ended almost unchanged at 1,506. Trading volume on the NYSE hit 674 million shares, with declines beating advances 1,425 to 1,334. Activity on the Nasdaq exchange was light at 1.27 billion shares traded, with advances outpacing declines 2,140 to 1,763. The 30-year bond was down 6/32, bid at 108 7/32, yielding 5.67%. Thursday's new plays (positions/opening prices/strategy): Protein PDLI SEP67P/SEP70P $0.25 credit bull-put Sapient SAPE SEP140C/SE85P $3.75 credit strangle Maytag MYG JAN50C/JAN35P $0.38 credit synthetic The bullish activity in biotechnology shares boosted PDLI early in the session. The position was not available at the target credit. Maytag moved in the opposite direction, falling almost $2 at the open and the initial credit was slightly higher than expected. Sapient moved in a relatively small range and the neutral credit strangle was available at the target entry price. Portfolio Plays: The major indices were uninspired today, wandering aimlessly in a small range while investors became frustrated with the lack of activity. Subtle bullish indications suggest the market is due for further gains but few participants were willing to commit major funds to support that outlook. Analysts commented that although trading volume has been light, inflows have continued to increase in mutual funds, implying that stocks will rally in the coming weeks. Fed Chairman Alan Greenspan also voiced his optimism about the outlook for the U.S. economy, saying it was hard to find "credible evidence" that the rate of structural productivity growth has stopped increasing. On the blue-chip average, International Business Machines (IBM) led the way, up almost $5 on no apparent news. IBM is now trading at a new high for the year and the recent strength in the bellwether issue is regarded as a bullish sign for the broad market. On the Nasdaq Emulex (EMLX) shocked investors, plunging over 50% early in the session on a report that the company had substantially revised earnings and that their chief executive had abruptly resigned. Emulex later confirmed that the report was a hoax but the damage had already been done, with thousands of shares traded at prices near both ends of the day’s range. Biotechnology stocks boosted the composite index, with the majority of issues in the sector remaining strong after the Clinton administration said earlier in the week that it would support research of human embryonic stem cells. In the S&P 500, brokerage, bank and semiconductor stocks consolidated and oil service shares also retreated after the recent rally. Our portfolio experienced little activity to report during the listless session. Most of the large-cap technology issues ended the day lower but there were few moves of any significance. In the finance group, Ameritrade (AMTD) continued its recent rally up almost $1 to a 4-month high near $18 and we will look for a early-exit opportunity in the bullish, synthetic position. On the downside, Anheuser Busch (BUD) dropped through a key support area and it appears the issue may run out of steam prior to the upcoming two-for-one split on September 19. We will monitor the position for potential adjustments. Previously slumping issues Voicestream Wireless (VSTR) and WellPoint (WLP) both made small technical recoveries, but it remains to be seen whether they can transition into consolidation patterns rather than full scale corrections. Questions & comments on spreads/combos to Contact Support ****************************************************************** - NEW PLAYS - ****************************************************************** PLCM - Polycom $109.31 ** New Trading Range! *** Polycom develops, manufactures and markets a full range of high quality, media-rich communication tools and network solutions. The company's broadband communication solutions enable business users to immediately realize the benefits of video, voice and data over rapidly growing converged networks. The company is a video conferencing and voice conferencing product provider, and has recently entered the DSL access market, particularly in the area of integrated voice appliances and broadband access devices. Polycom resides in one of the hottest sectors in the market and analysts are bullish on the stock. Both Prudential Securities and J.P. Mark, a telecommunications analyst at First Security Van Kasper, have issued favorable recommendations on the company with "Buy" ratings and targets as high as $300. In addition, Polycom recently announced that its Board of Directors has approved a two-for-one split of its common stock, to be effected as a stock dividend. Shareholders of record as of the close of business on August 15 will be issued one additional share for each share of common stock held. The shares will be distributed on August 31 and that’s probably the main reason for the recent interest in the issue. In any case, the current technical outlook is favorable and our conservative position offers a way to participate in the future movement of a volatile stock with relatively low risk. PLAY (aggressive - bullish/debit spread combination): BUY CALL OCT-115 QHD-JC OI=42 A=$10.50 SELL CALL OCT-120 QHD-JD OI=359 B=$8.25 SELL PUT OCT-80 QHD-VP OI=2 B=$1.81 DEBIT SPREAD COST BASIS TARGET=$2.00 NAKED PUT TARGET=$2.00 OVERALL NET DEBIT TARGET=$0.00 TARGET ROI=25% We have received many positive comments about this debit-spread combination strategy. In simple terms, the position is nothing more than a sold (short) PUT and a bullish, debit spread. The play is actually somewhat aggressive, based on a bullish outlook for both components, but we use out-of-the-money options to lower the potential risk. The premium from the sold PUT is used to finance the purchase of the debit spread. In this position, the collateral requirement for the naked put is approximately $2,300 per contract. ****************************************************************** MEA - Mead Corporation $27.31 *** Options Activity! *** Mead manufactures and sells paper, pulp, paperboard, lumber and other wood products. Mead also manufactures and distributes consumer and office supplies. Their Paper division manufactures coated and uncoated papers, form bond and carbonless paper and papers for conversion, cut-size copier paper and other uncoated papers for conversion. The Mead Packaging division designs and produces multiple packaging and packaging systems primarily for the beverage take-home market. The Mead Consumer and Office Products division manufactures and distributes a line of school supplies, a line of office products, and computer accessories. Outside of the United States and Canada, Mead and its affiliates operate a paperboard sheeting facility and are engaged in the manufacture of multiple packaging systems and folding carton packaging in Europe, Asia and Latin America. Mead Specialty Paper also operates a decorative laminating and specialty paper mill in England. Speculators have been out in force, buying call options in this issue while insiders suggest that a merger or buyout may be in the short-term future for the flagging issue. The forest and paper products industry has been in a consolidation period for some time, with a few sizable deals taking place this year. In July, Georgia-Pacific announced its takeover of Fort James and in February, Finnish-Swedish concern Stora Enso announced its acquisition of Consolidated Papers. Finland's UPM-Kymmene is still looking for an asset to buy in the U.S., after it was outbid by industry leader International Paper in a battle for Champion. Those of you that favor disparity plays in merger candidates can participate in this position at a relatively low cost and the generous time frame provides an excellent potential for profit. PLAY (conservative - bullish/calendar spread): BUY CALL JAN-30 MEA-AF OI=365 A=$2.75 SELL CALL SEP-30 MEA-HF OI=1051 B=$1.00 INITIAL NET DEBIT TARGET=$1.50-$1.62 TARGET ROI=50% ****************************************************************** LOR - Loral Space $8.41 *** On The Rebound? *** Loral Space & Communications, together with its subsidiaries, is a satellite communications company with substantial activities in satellite manufacturing and satellite-based communications services. The company has assembled the building blocks that are necessary to provide a seamless, global networking capability for the information age. The company's four operating segments are Fixed Satellite Services; Broadband Data Services; Satellite Manufacturing and Technology; and Global Mobile Telephone Service. On Friday, Loral jumped $1.50 to close above $8 for the first time in two months after Banc of America analyst J. Armand Musey said the company's recent purchase of a satellite to cover the Latin American market was a positive event, showing that LOR was capable of doing deals and growing despite the many problems at Globalstar. The issues with Globalstar (GSTRF) and the recent history of the industry (Motorola’s Iridium) have combined to take this stock to an all-time low but based on the speculation industry experts, the company may finally be turning the corner. For those of you that are bullish on the underlying issue, this is a relatively safe method in which to speculate on the future movement of the share value, as long as you wouldn’t mind adding to your portfolio. Traders who support a favorable, long-term outlook for Loral can use this synthetic position to profit from upside activity, at the risk of owning the issue at a favorable cost basis. We will plan to enter the initial position on a short-term pullback as the issue consolidates from Friday’s gains. PLAY (conservative - bullish/synthetic position): BUY CALL JAN-10.00 LOR-AB OI=6969 A=$1.75 SELL PUT JAN-7.50 LOR-MU OI=2493 B=$1.38 INITIAL NET CREDIT TARGET=$0.00-$0.25 ROI TARGET=50% B/E=$7.25 Note: Using options, the position is equivalent to being long on the stock. The collateral requirement for the naked put is approximately $400 per contract. ****************************************************************** PHCM - Phone.com $88.38 *** Technicals Only! *** Phone.com is a leading provider of software that enables the delivery of Internet-based services to mass-market wireless telephones. The company's software products allow customers to send Internet-based services to mass-market wireless telephones. Their products include: UP.Link Server Suite, a service that network operators use to connect their subscribers' mass-market wireless telephones to Internet services; UP.Browser, a browser that is embedded in mass-market wireless telephones and enables wireless subscribers to access Internet services; UP.Smart, a suite of software applications that delivers personal digital assistant features to smartphones; and UP.SDK, a software development kit that Internet content providers and third-party developers use to create WML-compliant applications. With a majority share in the rapidly expanding wireless Internet arena's user interface software and hardware, Phone.com is the "big dog" in a unique industry. With a dominant market share, exponentially increasing revenues and excellent management, the company is sure to succeed. However, this position is based on the current price or trading range of the underlying issue and the recent technical history or trend. Current news and market sentiment will have an effect on this issue so review the play thoroughly and make your own decision about the future outcome of the position. PLAY (conservative - bullish/credit spread): BUY PUT SEP-70 UGE-UN OI=279 A=$0.88 SELL PUT SEP-75 UGE-UO OI=321 B=$1.43 INITIAL NET CREDIT TARGET=$$0.62-$0.68 ROI(max)=15% ****************************************************************** **********************ADVERTISEMENT************************* Free voicemail, email, fax, and paging - all in one place! Accessible over the phone & Internet. Free Local & 800 Phone Number for Life! Send & receive faxes & email via the web or phone. ThinkLink charges no monthly fees. Plus, for a limited time, sign up now and receive an airline voucher worth up to $100 dollars off any major airline. FREE NOW! 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