The Option Investor Newsletter Sunday 09-03-2000 Sunday 2 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/090300_2.html ************** TRADERS CORNER ************** High Cash Flows Propelled The Markets By Mary Redmond CMGI appeared to awaken from the dead slumber it had been in for the entire summer on Wednesday, when the internet sector started to take off. This will be an interesting stock to watch in the coming weeks. CMGI successfully cleared the 50 DMA of 43.81 on Wednesday on strong volume. The arrow points to what would have been a successful entry point when the stock moved out of the Bollinger bands. Jan 02 50 leaps purchased two weeks ago at $12.5 sold for $18.5 on Thursday. The company had experienced extreme selling since April, and had seemed to reach a bottom between 35 and 38. The stock had basically stayed between 35 and 50 since July, and the volume had consistently been declining on the down days which indicated that selling was dwindling down. A two year leap had relatively low downside risk at this point, and would retain most of its time value for the next six months. However, one issue will be whether or not the company will clear the 200 DMA which is a long way off at 66. It will take alot of strength to hold above the 50 DMA and power up to this level. If it does, the implied volatility of the options should increase which could make the options highly profitable. If it can't reach the 200 DMA the stock may exhibit further weakness. It is also interesting to note the change in implied volatility from the price move this week. The implied volatility of the October 50 call options last week was 85.7. The current implied volatility is 82.5. However, the implied volatility of the Jan 02 50 leaps increased to 88.4 on Thursday. The leaps have a delta of approximately 64, which means the leaps should move about 64 of a point for every point move in the stock. Since the leap moved up 6 points for a 7 point move in the stock part of the gain in the option's price may be due to an increase in the implied volatility. In addition, it is important to note that the implied volatility of the leap increased while the implied volatility of the near term option went down. Another interesting situation developed this week with NXLK. You can see in the chart below the extreme tightening of the Bollinger Bands when the stock almost stopped moving. One way or the other, the probability of the stock moving out of this range was very high. The question was in which direction. The stochastic and MACD indicators seemed to point to a general downward move. This seems to be a situation in which there are both strong bullish and strong bearish indicators. Many options traders and other short term traders have been worried about the VIX.X for weeks now, and some are starting to wonder if it even matters anymore. This reminds me of last winter, when the Nasdaq was roaring to new highs every day and we heard the same story about the advance/decline line deteriorating daily. On the other hand, the Fed's program of interest rate hikes seems to have been effective in slowing the rate of economic growth to a level which satisfies them. It is also important to note that the levels of cash on the sidelines have been increasing to astronomical levels, and the market has rallied at the same time. What can this indicate? Maybe an even stronger rally could come later on. We may need to consider that the ipo market was practically non existent for the last two weeks, which freed up cash to enter the market. That is going to end in September. After Labor Day the ipo market is going to heat up big time. Over 280 companies are scheduled to go public this fall, with over 80 in September alone. In addition, over $50 billion in previously restricted ipo stock will be unlocked for sale in September by over 40 new companies. We might need to see higher cash flows to the markets in order to counter the impact of the ipos and newly unrestricted stock. It is important to note that this was the first week in over two months when the money market funds experienced a net outflow of over $7 billion. Retail money market funds experienced a net outflow of $2.38 billion, and institutional money market funds experienced a net outflow of $5.25 billion. This can indicate that retail and institutional investors are entering the markets. There is still plenty of money left, as the Investment Company Institute reported that over $1.74 trillion is still safely tucked away in money market funds. In addition, AMG Data Services reported that over $4.9 billion in cash went into equity funds last week, with the majority of the money going into growth funds. So we had an inflow of over $12 billion in cash going into the market, and very little going out in the form of ipos. If the ipo schedule heats up we may need an even higher level of cash to keep the markets rallying. Contact Support ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=377 ************************************************************** *********** OPTIONS 101 *********** ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* INKT - Inktomi Corp $130.75 (+6.81 last week) See details in sector list Put Play of the Day: ******************** AT - Alltel Corp $49.81 (-1.00 last week) See details in sector list ************************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 ************************************************************** ************* DAILY RESULTS ************* Dow 11238.78 22.47 Nasdaq 4234.33191.65 $OEX 829.83 6.28 $SPX 1520.77 14.31 $RUT 541.91 16.80 $TRAN 2712.92-66.54 $VIX 19.45 0.40 Calls CIEN 230.13 32.19 Networking index nearing an all-time high JNPR 221.63 30.69 How can you argue with this return?? CHKP 149.44 17.06 A long awaited breakout has begun NEWP 168.94 14.94 Wild ride last week culminated w/ purchase NTAP 115.50 14.69 Emerging gorilla in the storage sector?? IDTI 92.56 14.31 Analyst comments propel stock IWOV 98.00 13.00 $90 to $100, the path of least resistance ITWO 179.25 12.75 B2B has once again captured investor hearts QLGC 116.00 12.13 Nice post-EMLX recovery for Q-logic TIBX 108.06 11.81 Nice recovery with the Nasdaq rally BEAS 70.75 11.13 Right sector at the right time ISSX 84.13 11.13 Security sector picking up again MRVC 80.38 10.25 Starting to perk up above resistance VRSN 185.94 9.56 A little profit-taking, but still ok ORCL 92.63 8.00 Moving up without even a stutter DISH 53.06 7.94 Strong subscriber based growth continues SNDK 88.50 7.75 Storage sector has been strong INKT 130.75 6.81 The ascent continues on Internet momentum AAPL 63.44 6.63 Excitement over the release of the OS X NEON 37.75 5.19 Four out of five up days isn't bad VRTS 121.75 4.81 Trying to find footing above $120 LSCC 77.69 3.44 Stock split announcement fuels stock Puts MMM 92.50 -3.25 Short-term rotation out of the cyclicals KO 54.25 -1.75 Seems to have lost some carbonation UK 39.56 -1.50 An exodus from chemicals continues AT 49.81 -1.00 Earnings may be a touch below forecasts NTLI 48.38 4.13 Dropped, the trend is at an end ************************** 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 No dropped calls this weekend. PUTS NTLI $48.38 (+4.13) NTLI confirmed in Friday's session it was on the rebound. After spiking on news of a competitive marketing alliance with ON Digital and topping out at $44.44 on Thursday, the stock returned center-stage Friday for an encore performance. It bullishly climbed straight up from the open stopping short just under the $50 mark. NTLI's previous breakdown on acquisition scuttlebutt is obviously no longer effecting the share price. The bright side of the scenario is that you likely weren't given the opportunity to begin a play and therefore, avoided getting the proverbial pie in the face. *********** 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 ************** CHKP - Check Point Software $149.44 (+17.06 last week) Check Point Software Technologies, Ltd is in the Internet security business. They develop, market and support Internet security solutions for enterprise networks and service providers, which also include Virtual Private Networks and Managed Service Providers. There are three main product lines for CHKP and they are security products, traffic control for bandwidth management, and finally management products. In a nutshell, Check Point delivers solutions that enable secure, reliable and manageable business-to-business communications over any Internet Protocol network including the Internet, intranets and extranets. Check Point was the first company to offer easily installable software designed to place a firewall between a corporate network and the Internet. This company is growing like a weed! Revenue for the second quarter this year came in at $90.7 mln compared to $50.1 mln for the second quarter last year, representing an 81% increase in revenues. Furthermore, they are truly a leader in Internet security with a reported market share of 52%, in the VPN market. On April 4th, CHKP hit an intraday low of $57.97. Trading then remained choppy until May 30th, at which time CHKP closed at $94.38, above its 50-dma ($87.10 at that time). From there, it has remained somewhat range-bound between $102 and $132. This recent assault at new highs began on August 17th, as CHKP closed above its 10-dma. Since then all closes have settled above the 10-dma (currently at $137.80). This baby can trade! We saw four nice up days last week, with the only exception being a small $2.50 pullback on Wednesday. Wednesday’s pullback was on the heels of Tuesday’s explosive $8 move to the upside. Thursday saw a nice $3.19 move to the upside on 2.2 mln shares (1.4 times ADV) and Friday CHKP traded up $3.63 to close at an all time high of $149.44. Conservative traders may want to look for a pullback on light volume to the 10-dma (currently at $137.80), along with a bounce, for an ideal entry point. You will be waiting until $121.80, if you want to see a pullback to the current 50-dma. Aggressive traders might find an intraday pullback to $144-$145, as a suitable entry point. Look for a continued upside move with strong volume, as there is now no overhead resistance on this chart. This stock is volatile at times so keep an eye out for profit taking, both in CHKP and the NASDAQ. This week CHKP and Intrusion.com announced a partnership to jointly develop and deliver a new class of low-cost security appliances targeted at the small and medium business (SMB) market. On August 4th, further accolades were given by the brokerage Community as Sands Brothers reiterated coverage with a Strong Buy and price target of $170. BUY CALL SEP-145 KGE-II OI=396 at $ 9.50 SL= 7.00 BUY CALL SEP-150*KGE-IJ OI=428 at $ 6.75 SL= 5.00 BUY CALL SEP-155 KGE-IK OI=125 at $ 4.75 SL= 3.50 BUY CALL OCT-155 KGE-JK OI= 83 at $14.88 SL=11.00 BUY CALL JAN-160 KGE-AL OI= 11 at $24.63 SL=18.50 SELL PUT SEP-140 KGE-UH OI=186 at $ 3.50 SL= 6.00 (see risks of selling puts in play legend) Picked on Sep 3rd at $149.44 P/E = 194 Change since picked +0.00 52-week high=$149.63 Analysts Ratings 13-4-0-0-0 52-week low =$ 14.40 Last earnings 06/00 est=0.21 actual=0.25 Next earnings 10-20 est=0.25 versus=0.15 Average Daily Volume = 1.58 mln MRVC - MRV Communications, Inc. $80.38 (+10.25 last week) MRV Communications is in the business of creating and managing growth companies in optical technology and Internet infrastructure. The company has created several start-up companies and independent business units in these areas. MRVC's core operations include the design, manufacture, and sale of products in these areas, primarily Network Element Management, and physical layer, switching and routing management systems in fiber optic metropolitan networks. The company also produces fiber optic components for the transmission of voice, video and data across enterprise, telecommunications and cable TV networks. August has been a great month for most tech stocks, and MRVC is no exception. A post-earnings sell-off saw the stock end the month of July in the red. Bouncing off the $48 area and its 100-dma to begin the month, the stock quickly recovered above its 50-dma. From there MRVC has been moving higher and now as we begin September, the stock finds itself back in the area it was at before reporting earnings. For the second quarter, MRVC posted revenues of $73,935,000 compared to $73,251,000 in the previous year. While the earnings report was nothing to write home about, investors have been excited at the prospect of MRVC repositioning itself as an incubator of optical networking companies. With almost insatiable interest and demand for fiber stocks these days, MRVC seems to be making the right moves. A major force likely to drive the stock in the near term is the anticipation of MRVC's spin-off of its Luminent division, which filed for IPO on July 26th. For the year, Luminent's sales have grown 78% and has been profitable for the past five years. After clearing the $80 level to end the week, the next level of resistance for MVRC will be $82. A conservative trader will want to wait for MRVC to clear that level with conviction before making an entry. For aggressive traders, there are a number of possible ways to gain entry. A bounce off support at $75 is one possibility. Make sure there is volume to confirm a bounce before jumping in. Aside from the upcoming Luminent IPO, there has been little specific news for MRVC. Watch for the stock to move in sympathy with the NASDAQ as well as with its peers in the fiber-optics industry such as CIEN, GLW and JDSU. BUY CALL SEP-75 RVY-IO OI=2329 at $ 8.38 SL= 6.00 BUY CALL SEP-80*RVY-IP OI=1677 at $ 5.38 SL= 3.50 BUY CALL SEP-85 RVY-IQ OI= 450 at $ 3.25 SL= 1.50 BUY CALL OCT-80 RVY-JP OI= 229 at $11.63 SL= 8.75 BUY CALL OCT-85 RVY-JQ OI= 293 at $ 9.38 SL= 6.50 Picked on Sep 3rd at $80.38 P/E = N/A Change since picked +0.00 52-week high=$97.44 Analysts Ratings 1-0-0-0-0 52-week low =$ 8.25 Last earnings 07/27 est= 0.03 actual= 0.02 Next earnings 10-26 est= N/A versus= 0.01 Average Daily Volume = 2.56 mln SNDK - SanDisk Corporation $88.50 (+7.75 last week) Founded in 1988, SanDisk pioneered industry development of flash memory cards for data storage and played a key role in setting many flash industry standards. It was the first company to introduce a removable flash MultiMediaCard, an ultra-small size form factor memory card. SanDisk embedded flash data storage devices also are widely used for numerous commercial and industrial applications in various markets. Market research firms have concluded that SanDisk is the flash card market leader with approximately 28% share of the market. To say that it's been a great month for SNDK would be an understatement. From basement to ceiling, SNDK gained over 63% in August. Finding a bottom in the early part of last month at the $55 level, the stock had a lot of work to do to erase a bumpy and volatile July. Sitting below its 50-, 100-, and 200-dma (now at $67, $70.68 and $71.40), there was a lot of overhead resistance to overcome. First to go was the 50-dma. It took a week and a half for SNDK to move above that level. From there, the 200-dma was surpassed a day later. A day after that SNDK broke through its 100-dma. From there the stock took off, breaking through resistance not only at $75 but at $80 as well. Since then the stock has been trading in a range from $80 to $85. After spending the better part of the week trading sideways, SNDK finally broke out on Friday, closing above the $85 mark. Throughout SNDK's rally, it has been using the 5-dma (currently at $84.25) as a launching pad for its sudden bursts of strength. A successful bounce off that level would be a great entry point for an aggressive trader, as would a bounce off $85. Additional support can be found at the 10-dma at $81.20 as well as the key support level of $80. With its all time high at $169.63, there is a lot more room to move up, with the next levels of resistance in increments of $5 at $90, $95 and then psychological level of $100. Conservative traders looking for confirmation of continued upward momentum will want to see SNDK clear $90 on high volume before entering. Company-specific news this week was abundant. On Monday SNDK was recognized by Fortune magazine as one of the top 100 fastest growing companies in the nation. Tuesday saw SNDK extend its reach as it signed its first product distributor in China with World Peace Industrial Co., Ltd. Wednesday's announcement of a new PDA by Sony helped SNDK as demand for Sony's new PDA would likely mean increased demand for SNDK's flash memory products. SNDK was also helped by the Seybold conference in San Francisco as many of the new products displayed are dependent on SNDK's storage solutions. BUY CALL SEP-80 SWQ-IP OI=2360 at $9.50 SL= 6.50 BUY CALL SEP-85*SWQ-IQ OI= 980 at $6.50 SL= 4.50 BUY CALL SEP-90 SWF-IR OI= 784 at $4.25 SL= 2.50 BUY CALL OCT-90 SWF-JR OI= 672 at $9.63 SL= 6.50 BUY CALL OCT-95 SWF-JS OI= 172 at $7.63 SL= 5.25 Picked on Sep 3rd at $88.50 P/E = 23.19 Change since picked +0.00 52-week high=$169.63 Analysts Ratings 2-2-0-0-0 52-week low =$ 18.88 Last earnings 07/19 est= 0.22 actual= 0.33 Next earnings 10-18 est= 0.27 versus= 0.10 Average Daily Volume = 2.69 mln AAPL - Apple Computer $63.44 (+6.63 last week) Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the colorful Macintosh. Other products include the Mac OS operating system, the portable iBook, and a variety of multimedia tools. Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings. The company is still run by the original founder, Steve Jobs. The "Apple" is ripening to revisit its old highs. In recent months, the press concerning an industry wide slowdown knocked AAPL down more than a few notches as well as other key players including Dell (DELL), Gateway (GTW), and Compaq (CPQ). It sure has been a tough go for the PC stocks. But AAPL, with its strong growth prospects it's apparently escaping from the carnage. After missing analysts' whisper numbers in the 2Q, management quickly justified the shortfall. Consumers were simply holding off purchases in anticipation of the newer iMac models expected later in the year. Steve Jobs subsequently received bullish reviews after his presentation at the MacWorld conference that followed that earnings release. And so here we are in the midst of a strong recovery. Regardless of the broader industry outlook, AAPL is steadily returning to price levels not seen since early March. The brass ring at $75.19 isn't too far out of reach. On Monday, shares of AAPL jumped in excitement in anticipation of another keynote address by its CEO, this time the Seybold conference in San Francisco. According to David Bailey at Gerard Klauer Mattison, "whenever Steve speaks, it generates a lot of excitement, which could be contributing to the stock running up." By Thursday's session, AAPL broke the formidable resistance at $60. Take a look at a three-month chart and you can visually confirm how AAPL failed to penetrate this level both in June and July. The next task is to move through light opposition at $65 before it challenges the $70 level. The strong close just a fraction from its intraday high on Friday and the positive economic outlook should foster more gains over the short-term. Take aggressive entries off the 5-dma line (currently at $60.24) if AAPL retraces. Else use the developing intraday support at $62 as a launching point to gain entry in a rising market. Apple's CEO, Steve Jobs, announced plans to release a public test version of the much delayed OS X operating system on September 13th. Earlier in the month, analyst Jason Wells at Wit SoundView upped his rating on AAPL to a Strong Buy from a Buy. He maintained a 2000 EPS of $1.85 and his six-month price target of $76. BUY CALL SEP-55 AAA-IK OI=3538 at $9.00 SL=6.25 BUY CALL SEP-60*QAA-IL OI=6240 at $4.63 SL=2.75 BUY CALL SEP-65 QAA-IM OI=1428 at $1.75 SL=1.00 BUY CALL OCT-60 QAA-JL OI=5094 at $7.75 SL=5.50 BUY CALL OCT-65 QAA-JM OI=2549 at $5.13 SL=3.00 BUY CALL OCT-70 QAA-JN OI=1892 at $3.00 SL=1.50 Picked on Sep 2nd at $63.44 P/E = 31 Change since picked +0.00 52-week high=$75.19 Analysts Ratings 10-7-2-0-0 52-week low =$28.72 Last earnings 07/00 est= 0.44 actual= 0.45 Next earnings 10-13 est= 0.45 versus= 0.26 Average Daily Volume = 4.57 mln /charts/cahrts.asp?symbol=AAPL ***********************ADVERTISEMENT************************ Save Up To 80% Off At Everything Wireless! Click On The Link Below For Store Wide Discounts. 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.sungrp.com/tracking.asp?campaignid=352 ************************************************************ ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html
The Option Investor Newsletter Sunday 09-03-2000 Sunday 3 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/090300_3.html ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=377 ************************************************************** ****************** CURRENT CALL PLAYS ****************** NEON - New Era of Networks, Inc. $37.75 (+5.19 this week) NEON, otherwise known as New Era of Networks Inc., currently supplies over 2500 customers worldwide with Internet infrastructure software and services. Their products and services enable the integration of Internet-facing appliances and core operational systems for goods and services providers. Through the use of these products, businesses can automate their end-to-end processes such as fulfilling an order at the speed and volume their respective e-business environment requires. Their customers encompass all the major industries including, financial services, healthcare and telecommunications, to name a few. Established reseller and joint marketing relationships with complementary e-business entities such as a BEA, BroadVision, Commerce One, IBM, Microsoft and Sun Microsystems, further strengthen and fuel NEON's business. Four out of five ain't bad! Technically, Neon is beginning to show improvement. After hitting an intraday high of $95.25 on March 14th, NEON plummeted to an intraday low of $17.88 on April 17th. Since April, trading in NEON has been choppy and as a result it has been stuck in a trading range between $21 and $45, the current 200-dma. This week NEON closed higher every day except for Thursday, but most impressive has been NEON's ability to crossover and close above its 50-dma (currently $32.30) every day this week. Wednesday, the stock hit an intraday high of $39.13 before pulling back late in the day to close at $37.25, followed by a day of rest for the stock on Thursday. This was the only down day for the week as it closed $2.19 lower to finish at $35.06. Friday's advance of $2.69 was on lighter than normal volume to close at $37.75. Future moves in NEON may meet with some minor resistance at the $40 level, however, if it surpasses that level on strong volume, it should be clear sailing to $45, the current 200-dma. Conservative traders might look for a low-volume pullback to intraday support of $34 or to the 50-dma, along with a bounce, for a nice entry point. Aggressive traders should watch for any reasonable intraday pullbacks for entry or possibly a break above Wednesday's intraday high of $39.13 with volume as a possible entry point. Carefully monitor NASDAQ movement and sentiment before entering any trades as we may be faced with profit-taking at any time. NEON's customer list is impressive with the likes of IBM, Citibank, GTE, JP Morgan and Monsanto Company. On August 14th, IBM and NEON further strengthened their alliance with major customer wins. Analysts expect that the continued public proclamations of this alliance confirm the health of their relationship. On Tuesday, Webvertising selected NEON as their strategic partner for their XML and Internet-Based Solutions. BUY CALL SEP-30 QNO-IF OI=763 at $8.13 SL=6.00 BUY CALL SEP-35*QNO-IG OI=872 at $4.00 SL=3.00 BUY CALL SEP-40 QNO-IH OI=242 at $1.50 SL=1.00 BUY CALL OCT-35 QNO-JG OI=941 at $6.38 SL=4.75 BUY CALL JAN-40 QNO-AH OI=363 at $8.00 SL=6.00 Picked on Aug 29th at $36.44 P/E = N/A Change since picked +1.31 52-week high=$96.25 Analysts Ratings 3-6-0-0-0 52-week low =$12.13 Last earnings 06/00 est=0.04 actual= 0.06 Next earnings 10-18 est=0.07 versus=-0.17 Average Daily Volume = 867 K DISH - Echostar Communications $53.06 (+7.94 this week) DISH is commonly known as the company that sells those great satellite dish television systems that give you access to 500 channels of digital video and CD quality audio programming. However, DISH currently operates three interrelated businesses, with over 8,000 employees worldwide including the DISH Network, Echostar Technologies Corporation and Satellite Services. DISH network is the subscription based portion of the business(i.e. paying them monthly for T.V. cable service). The other two divisions deal with the design of the set top boxes/satellite receivers and the delivery of the video, audio and data services to business television customers and other satellite users. DISH has been blessed this year with strong growth of their subscriber base. They reported during the second quarter of this year, that their subscriber base grew to 4.3 million subscribers, up from 2.6 million in the second quarter last year. In an effort to continue their growth momentum, DISH has negotiated further distribution agreements, for their satellite dish television systems, with the likes of Bradlees (a 105 store retail chain), H.H. Gregg (an electronics retailer in the Midwest), and P.C. Richard & Son (a 42 store chain in New York and New Jersey). However, DISH has struggled technically since March. The stock hit a 52-week high of $81.25 on March 27th and then drifted lower, for the next few months, to an intraday low of $30.75, on June 28th. On July 6th, DISH moved up convincingly and closed at $35.94. Since then, DISH has been stuck in a trading range between $36 and $46.63, held captive by its 200-dma (currently at $47). After a slow start to the week for DISH on Monday, Tuesday and Wednesday, the Bulls decided they were ready to take this baby higher, with the broader market. On Thursday, DISH crossed over and closed above its 200-dma for the first time since June 2nd. Volume Thursday came in at 3.1 mln shares (1.3 times ADV) as it closed near the top end of its intraday trading range, at $48.25. Friday, DISH looked even more impressive advancing $4.36 on volume of 4.6 mln shares (2 times ADV), to close near its intraday high at $53.06. It has definitely benefited from the recent bullish moves in the NASDAQ. Conservative traders may want to look for a low-volume pullback to the 200-dma (currently at $47), along with a bounce, before entering a trade. However, if the NASDAQ keeps climbing, a pullback to that level may not be in the cards. Aggressive traders may want to look for a pullback to around the $49 level and enter a trade there, in conjunction with a volume backed bounce. In any case, keep a watchful eye out for profit taking after such strong gains in the NASDAQ. There was no material news regarding DISH this week, however, during the month of August the brokerages came out and showed their love for DISH. CIBC World Markets reiterated coverage with a Strong Buy and a $60 target, Merrill Lynch resumed coverage with a NT Buy/LT Buy and a target of $56 and finally Lehman Brothers reiterated their Buy rating and target of $85. BUY CALL SEP-40 UAB-IH OI= 984 at $13.63 SL=10.00 BUY CALL SEP-45 UAB-II OI=2773 at $ 8.63 SL= 6.50 BUY CALL SEP-50*UAB-IJ OI= 330 at $ 4.50 SL= 3.25 BUY CALL OCT-50 UAB-JJ OI=1328 at $ 7.75 SL= 5.75 BUY CALL DEC-55 UAB-LK OI=1093 at $ 8.88 SL= 6.50 Picked on Aug 31st at $48.75 P/E = N/A Change since picked +4.94 52-week high=$81.25 Analysts Ratings 9-7-0-0-0 52-week low =$14.00 Last earnings 06/00 est=-0.32 actual=-0.28 Next earnings 11-01 est=-0.34 versus=-0.28 Average Daily Volume = 2.3 mln TIBX - TIBCO Software $108.06 (+11.81 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%. TIBX got some traction this week as it advanced over $11 for the week, finishing higher every day last week except for Tuesday. Good fundamental news and a climbing NASDAQ helped TIBX this week. IWOV and TIBX announced a strategic alliance to provide comprehensive solutions in the B2B marketplace. Furthermore, TIBX also inked a multi-year agreement with ARBA to bundle its infrastructure software with ARBA's buy-side application, Ariba Buyer 7.0. From a technical perspective TIBX is starting to look better and better, keeping its head above water as it traded comfortably above its 100-dma, (currently at $86.80) all week. However, most impressive this week was its ability to crossover and close above its 50-dma, (currently at $104.50) for the first time since August 11th, on Friday. Volume was light all week, but, that may change as TIBX has cleared resistance and should look to stabilize over that key technical support line. Further advances here may be met with overhead resistance at the $114 level and again at $122. TIBX's trading range can whip you around like a bad carnival ride, so, conservative traders should watch for a pullback to the 50-dma, currently $104.50, along with a bounce, to serve as an entry point. The more aggressive trader may want to use an intraday pullback to $106 or the 50-dma to enter a trade here. In any event, I would watch for confirmation of this move through increasing volume as we continue to stabilize above the 50-dma. Furthermore, keep a watchful eye out for profit- taking or sentiment shifting in the NASDAQ. Thursday, TIBX announced the opening of its new KOREAN Technical Learning in Seoul. This will help TIBCO meet the growing demand from its Asia Pacific customers, including Samsung and Hyundai. BUY CALL SEP- 95 PIW-IS OI= 335 at $15.75 SL=11.75 BUY CALL SEP-100*PIW-IT OI= 489 at $11.75 SL= 8.75 BUY CALL OCT-100 PIW-JT OI= 725 at $18.63 SL=14.00 BUY CALL OCT-105 PIW-JA OI= 33 at $16.13 SL=12.00 Picked on Aug 27th at $96.25 P/E = N/A Change since picked +11.81 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. $70.75 (+11.13 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. Those who have been playing BEAS couldn't have asked for a better week. A flat Monday provided a perfect entry for those looking to enter early into this play. Tuesday saw the stock clear the $60 mark. This set BEAS up for a Wednesday break through the $62.50 level, a high last seen over six weeks ago. From there the bulls took control on Thursday, helped by a strong NASDAQ, as late-day buying propelled the stock sharply higher. Ending the week on a positive note, BEAS moved ever higher on Friday, closing up $2.69 or 3.95% on over 135% of ADV. Speaking of volume, there's been plenty of it for BEAS this past week as advances in the stock price have been accompanied by strengthening in trading volume. This is a good sign as momentum has clearly been in BEAS' favor. Aside from a strong market, sector sympathy also played a key role as the so-called "stealth rally" in high-quality B2B stocks became much less of a secret, with leaders such as ARBA and CMRC tallying impressive gains for the week. Add to that a string of positive announcements and you've got a solid week of rallying for BEAS. The 5-dma (now at $64.67) has provided support for BEAS' move higher these past couple of weeks, with bounces off that line almost daily. On Friday BEAS skipped that line all together and just gapped higher. A visit to the 5-dma is possible and aggressive buyers may want to enter on a bounce off that level. There is also support at $70 and $65.50. A break above $75 will likely see BEAS challenge its all-time high at $78.88. In the news this week, on Monday the company unveiled a new web site for the e-generation as well as a new partner in dynamic commerce solutions provider Moai Technologies Inc. Tuesday saw British Telecommunications selecting BEAS as Its Global E-Commerce Platform. Wednesday saw news of a strategic alliance with e-commerce software company Access Commerce Inc. BUY CALL SEP-65 BUC-IM OI=1615 at $7.13 SL=5.00 BUY CALL SEP-70*BUC-IN OI=1510 at $3.50 SL=1.75 BUY CALL SEP-75 BUC-IO OI=1655 at $1.75 SL=1.00 BUY CALL OCT-70 BUC-JN OI= 78 at $7.25 SL=5.00 BUY CALL OCT-75 BUC-JO OI= 154 at $4.75 SL=2.75 Picked on Aug 27th at $59.63 P/E = N/A Change since picked +11.13 52-week high=$78.88 Analysts Ratings 1-4-0-0-0 52-week low =$ 5.81 Last earnings 08/15 est= 0.04 actual= 0.05 Next earnings 11-14 est= 0.06 versus= 0.03 Average Daily Volume = 5.86 mln IWOV - Interwoven, Inc. $98.00 (+13.00 last week) Interwoven is a leading provider of software products and services that help businesses and other organizations manage the information that makes up the content of their Web sites. In the Internet industry, this is often referred to as "Web content management." Interwoven designs software products to help companies rapidly and efficiently develop, maintain and extend large Web sites that are essential to their businesses. Interwoven's principal product, TeamSite, incorporates widely accepted Internet industry standards and is designed with an open architecture that allows it to support a wide variety of Internet software products, including Web authoring tools and Web application servers. Ever since starting this play on Tuesday, it's been a nice ride up. Traders who were watching IWOV closely on Wednesday were able to take advantage of a quick bounce off the 5-dma. After spending the whole of Tuesday trading sideways and flirting with resistance at $90, IWOV took off on high volume as late day buying on Wednesday propelled the stock higher, closing not only above $90 but above $95 as well. The move put IWOV in position to challenge its all-time high at the psychological resistance level of $100. On Thursday the bulls attempted to take the stock into brand new territory. Getting as high as $99.75 brought in the sellers, eager to take profits gained from the previous day. From there IWOV found support at $95. Friday saw IWOV touch the century mark for the first time since March. Unfortunately the stock was not able to maintain that level to the close. Despite this, IWOV gained $2 or 2.08% on average volume. Conservative traders looking to enter this play will want to see IWOV break above $100 on strong volume before entering. Another likely scenario is that IWOV could regroup at its 5-dma (now at $93.65) or support at $95 before making another attempt to break out. A bounce off support confirmed by volume may serve as an aggressive entry point. News in the early part of the week, along with a strong market, likely contributed to IWOV's gains. Monday was a busy day as the company announced that Taiwan Semiconductor selected IWOV's products to manage its web content. This came on the heels of news that ChipCenter had successfully integrated IWOV's TeamSite solution. Along with this came an announcement of a partnership with leading broadband media company Chuckwalla. On Tuesday IWOV announced a strategic alliance with TIBCO software to supply products and services to the B2B market. BUY CALL SEP- 95*IQG-IS OI= 71 at $ 7.25 SL= 5.00 BUY CALL SEP-100 IQG-IT OI=156 at $ 4.63 SL= 2.75 BUY CALL SEP-105 IQG-IA OI= 34 at $ 2.88 SL= 1.50 BUY CALL OCT- 95 IQG-JS OI= 12 at $14.25 SL=10.75 BUY CALL OCT-100 IQG-JT OI= 44 at $12.00 SL= 9.00 Picked on Aug 29th at $90.25 P/E = N/A Change since picked +7.75 52-week high=$100.00 Analysts Ratings 4-2-0-0-0 52-week low =$ 18.38 Last earnings 07/18 est=-0.09 actual=-0.02 Next earnings 10-17 est=-0.02 versus= N/A Average Daily Volume = 743 K NTAP - Network Appliance $115.50 (+14.69 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. Where the NASDAQ leads, NTAP follows. Or is it the other way around? As part of the Nasdaq 100, this emerging gorilla in the storage industry affects, and is affected by the fortunes of the bluest of the blue chip tech stocks. So with the NASDAQ moving higher this past week, where else could NTAP go but up? This past week has been a successful campaign not only for the tech index, but especially for NTAP. Monday saw the stock successfully test support at the psychological $100 level. From there the stock rebounded strongly, which allowed NTAP on Tuesday to break through resistance at $105, while encountering resistance at $110. Wednesday saw the stock clear the $110 area, only to find formidable resistance at $112. This was a level not seen since July before a steep sell-off. This was not a problem however, as NTAP gapped up above that area on Thursday thanks to a strong NASDAQ. On Friday NTAP encountered its next formidable level of resistance at $120. Hitting a ceiling at $119.88 in the early hours of trading, profit-takers and bears alike came in to sell the stock. Finding support above its previous resistance level of $112, the stock recovered to close down only $1.50 or 1.28% on 77% of ADV. At this point a break above $120 on strong volume would be the buy signal for conservative traders. Aggressive traders will look for a bounce off support at $112, $110 or the 5-dma at $111.30 with confirmation before entering. Breaking above $120 will find NTAP ready to challenge its all-time high at $124. Positive news in the early part of the week helped lift the stock higher. On Monday, NTAP joined the Content Alliance, which includes companies such as CSCO, ISLD, EXDS, NAVI and PSIX. As well, Continental Airlines selected NTAP products and solutions for their storage needs. On Tuesday NTAP entered into an alliance with Zack Networks, whereby the two companies will work to co-develop an Internet content delivery product by combining information applications from Zack with caching hardware from NTAP. BUY CALL SEP-110 ULM-IB OI=3303 at $ 9.25 SL= 6.25 BUY CALL SEP-115*ULM-IC OI=1784 at $ 6.13 SL= 4.00 BUY CALL SEP-120 ULM-ID OI=1453 at $ 3.75 SL= 2.00 BUY CALL OCT-115 ULM-JC OI= 250 at $14.13 SL=10.50 BUY CALL OCT-120 ULM-JD OI= 419 at $11.88 SL= 9.00 Picked on Aug 24th at $101.69 P/E = 650 Change since picked +13.81 52-week high=$124.00 Analysts Ratings 17-4-0-0-0 52-week low =$ 15.63 Last earnings 08/14 est= 0.07 actual= 0.09 Next earnings 11-13 est= 0.09 versus= 0.05 Average Daily Volume = 5.36 mln VRSN - VeriSign, Inc. $185.94 (+9.56 last week) VeriSign is the leading provider of Internet trust services and digital certificate solutions needed by Web sites, enterprises and individuals in order to conduct secure electronic commerce and communications over IP networks. VRSN has used its secure online infrastructure to issue over 100,000 of its Website digital certificates and over 3.5 million of its digital certificates for individuals. 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 organization's 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. Four steps forward, one step back. Despite the give back on Friday, investors in VRSN had much to be thankful about. Four straight days of rallying on increasing volume gave way to profit-taking before the long weekend. Monday was business as usual, with VRSN making its almost routine bounce off the 5-dma before moving higher. In doing so VRSN broke through resistance at $180. Tuesday was more of the same - a bounce like clockwork off the 5-dma followed by a break through resistance at $185. While the stock encountered resistance at $190, this was but a memory by Wednesday's close. Breaking its trend of touching the 5-dma before moving higher, VRSN gapped higher on Thursday to challenge formidable resistance at the bicentennial level of $200. Getting as high as $199.63, the stock closed at $198.88. On Friday morning, VRSN hit $199.88 before the sellers came in force, selling down the stock before it bounced at $182.38 to close above support at $185. This put VRSN below its 5-dma at $189.34. At this point conservative traders will wait for VRSN to move back above $190 with strong buying interest before entering. Aggressive traders will likely look for a bounce off support at $185 or $180. Whether aggressive or conservative however, Friday's loss of $12.94 or 6.51% on over twice the ADV should elicit caution when considering this play. The close below the 5-dma may suggest that the current up-trend may be over so it is important for VRSN to close above this level. As well, staying above the 10-dma near key support at $180 is vital to the health of this play. On the news front, on Tuesday VRSN announced partnerships with two companies. First with B2B portal eConstructors to offer a low-cost web site solution, and then with online reverse auction service netgenShopper to expand its network of sellers. BUY CALL SEP-180 QVZ-IP OI=1095 at $13.00 SL= 9.75 BUY CALL SEP-185*QVZ-IQ OI= 740 at $ 9.88 SL= 7.00 BUY CALL SEP-190 QVZ-IR OI=1302 at $ 7.88 SL= 5.75 BUY CALL OCT-185 QVZ-JQ OI= 68 at $23.25 SL=18.75 BUY CALL OCT-190 QVZ-JR OI= 216 at $21.13 SL=15.75 SELL PUT SEP-175 QVZ-UO OI= 799 at $ 4.38 SL= 6.50 (See risks of selling puts in play legend) Picked on Aug 24th at $178.44 P/E = 1420.54 Change since picked +7.50 52-week high=$258.50 Analysts Ratings 14-11-1-0-0 52-week low =$ 47.75 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 CIEN - Ciena Corp $230.13 (+32.19 last week) Ciena makes multiplexing systems that increase the capacity of long-distance fiber-optic telecommunications networks. The company's systems transmit signals simultaneously over the same circuit. Customers such as Sprint, Bell Atlantic, and MCI Worldcom, use its lines for long-distance optical transport and for shorter distances. The company is expanding its product and geographic breadth as it transforms itself from niche market specialist to optical networking supplier. The Networking Index ($NWX) flirted with record territory last Friday, lead by a charge in CIEN. With record profits, upbeat conference calls, and Wall Street's praise, the Optical Networking sector has taken off into the blue sky over the past month. In fact, last Friday's rally marked a nearly $100 gain for CIEN during the month of August. In spite of CIEN's recent rally into record territory, Goldman Sachs called the stock cheap late last week. Goldman said CIEN represented a compelling value relative to next year's revenue estimates. With no signs of growth slowing in the Optical Networking sector, CIEN is positioned to lead the NASDAQ higher into the end of the year. Also blowing in CIEN's sails of momentum is the upcoming 2-for-1 stock split. The payable date for the split is a mere three weeks away. We might see a split run develop in the coming weeks, which might be a key catalyst in carrying our play higher. Speaking of higher, CIEN is coming off back to back days of new 52-week highs. The stock's charge higher late last week might lead to some consolidation in the coming days. If the profit takers return from their holiday retreat early next week, look for CIEN to find support first at $225, next at $220, or lower near its 5-dma at $216.75. Aggressive traders might look to gain new entry into the play if CIEN falls on light selling then bounces off one of its several support levels. CIEN did finish last Friday right at its day and new 52-week high. If the buyers show up again after the holiday, watch for a bounce off the $230 level or target shoot for entry on a quick rally out of the gates early in the day. The news from the National Fiber Optical Engineers conference provided a few fireworks for our play early last week. CIEN will be appearing at several other investor conferences in the coming weeks, which might provide an additional catalyst to carry our play into the profit zone. CIEN will visit with Dain Rauscher, DLJ, and SG Cowen in the coming weeks. A positive presentation from CIEN might lead to upgrades by the preceding brokers, and higher prices for our play. BUY CALL SEP-220 UEE-ID OI=1018 at $16.88 SL=12.25 BUY CALL SEP-230*UEE-IZ OI= 769 at $11.13 SL= 8.25 BUY CALL SEP-240 UEE-IH OI= 443 at $ 7.00 SL= 5.00 BUY CALL OCT-230 UEE-JZ OI= 881 at $23.25 SL=17.50 BUY CALL OCT-240 UEZ-JH OI= 126 at $18.13 SL=13.00 Picked on August 24th at $201.06 P/E = 554 Change since picked +29.06 52-week high=$230.13 Analysts Ratings 9-10-1-0-1 52-week low =$ 29.38 Last earnings 07/00 est=0.17 actual=0.19 Next earnings 10-20 est=0.25 versus=0.03 Average Daily Volume = 5.00 mln IDTI - Integrated Device Technology $92.56 (+14.31 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). Judging by the recent analyst comments bestowed upon IDTI, one might speculate that Wall Street has officially returned to its bullish love affair with the Semi sector. In the last week no less than three major Wall Street firms have commented on IDTI's promising future. SG Cowen got the ball rolling a week ago with the reiteration of their Strong Buy rating and establishment of a $100 price target, based on IDTI's solid tracking of its current quarter. Then came Chase H&Q last Thursday, who initiated coverage on IDTI with a Strong Buy and $125 price target, citing the company's stronghold on the communications chip market. Finally, Salomon Smith Barney jumped on the bullish bandwagon Friday morning by reiterating their Buy rating on IDTI and throwing in a $110 target price, after raising their year-end EPS estimates. The reports issued by Chase and Solly late last week spurred a buying binge in IDTI, which culminated with a bolt into record territory Friday. IDTI's two day bull stampede late last week might lead to a pullback early next week if the profit takers return from vacation. IDTI established solid support just below at $92 and has help again at the $90 level. A light round of profit- taking might provide a solid entry on a bounce off either of IDTI's near-term support levels. If the profit takers sell heavily, watch for IDTI to stabilize at $85, or lower near its 5-dma at $82.31. On the other hand, if IDTI extends its late-week rally, target shoot for entry upon an advance past the $93 level. Make sure to confirm any IDTI rally with healthy volume before entering the play. And, although IDTI bucked the sell-off in the $SOX last Friday, watch the direction in the broader Semi sector before initating new positions. Also, watch for new OTM contracts to be added to IDTI's options chain early next week, and wait of OI to build before jumping in. Only three more weeks until IDTI holds its Annual Meeting of Shareholders. On the schedule of events is a vote to increase the number of authorized shares to 360 mln. An increase in authorized shares can often preceed a stock split. And, given IDTI's recent - and impressive - rally, a split announcement might not be too far off. BUY CALL SEP-80 ITQ-IP OI= 539 at $13.00 SL= 9.75 BUY CALL SEP-85*ITQ-IQ OI= 623 at $ 9.00 SL= 6.25 BUY CALL SEP-90 ITQ-IR OI= 162 at $ 5.88 SL= 4.00 BUY CALL NOV-85 ITQ-KQ OI=2743 at $16.13 SL=11.50 BUY CALL NOV-90 ITQ-KR OI= 386 at $13.63 SL=10.25 Picked on August 15th at $66.88 P/E = 48 Change since picked +25.69 52-week high=$93.56 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 = 3.26 mln ITWO - I2 Technologies $179.00 (+12.50 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 B-2-B sector has once again captured the interests of investors in a big way. This time around, though, Wall Street is doing their buying a little more carefully. Investors are focusing on the B-2-B players with proven business models and, more importantly, profits. Of the B-2-B universe, the supply chain managment providers are benefitting the most in terms of business growth and Wall Street adoration. ITWO, of course, is the clear leader in the supply chain management space, which comes with no surprise given the stock's recent performance. After suffering from a rumor-based analyst report early last week, ITWO rebounded quickly to charge onto new highs in its ascending channel. Momentum appears to be building as ITWO distances itself from the nearly five month consoldation it has been stuck in. The company will be presenting at several investor conferences over the course of the next two weeks, which might act as a catalyst to take our play higher in the near-term upon the release of any bullish news. ITWO finished the week strongly last Friday, near its day high. If the B-2-B bulls show up early next week, watch for an ITWO rally with strong volume above the $180 level to gain entry into the play. ITWO has not seen levels above $180 since early March, which leaves minor resistance above current levels. A conservative trader might wait for ITWO's momentum to build and target shoot for entries on a rally above $185. Make sure to confirm any rally attempt with healthy volume, and watch the direction in the broader Tech sector, before entering new positions. A pullback on profit taking to support at $175 or lower at $170 might also provide the aggressive traders with a solid entry into the play. Wait for any light selling to subside before buying an ITWO dip. ITWO's big rally last week carried the stock further into split territory. The company has plenty of shares to authorize a 2-for-1, and my do so if the stock continues its climb. The recent host of split announcements have been received by the market in general, which bodes well for our ITWO play should the Board decide to declare. BUY CALL SEP-175 QYI-IO OI=1137 at $11.75 SL= 8.75 BUY CALL SEP-180*QYI-IP OI= 358 at $ 9.00 SL= 6.25 BUY CALL SEP-185 QYI-IQ OI= 556 at $ 6.88 SL= 5.00 BUY CALL OCT-180 QYI-JP OI= 106 at $20.00 SL=14.50 BUY CALL OCT-185 QYI-JQ OI= 11 at $17.88 SL=12.75 Picked on August 27th at $166.50 P/E = 520 Change since picked +12.50 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 = 3.56 mln NEWP - Newport $168.94 (+14.94 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. NEWP's wild ride last week culminated with the announcement of an acquisition Friday morning. NEWP said it would buy Unique Equipment CO., a specialized systems company that makes products for the fiber optics and semiconductor industries. Not by conincidence, the two aforementioned industries are among the hottest in the economy. For that very reason, investors applauded the announcement from NEWP by rallying the stock to an all-time high on relatively impressive volume. We might hear it from the analysts early next week regarding NEWP's acquisition of Unique. If the brokerages bestow their approval on the proposed acquisition, NEWP might be headed higher early next week. Another possible catalyst for our play in the near-term is the possibility of a split announcment. With Friday's surge into record territory, NEWP is trading well into split territory. The company last split its stock back in February, when NEWP was trading around $112. Also with Friday's surge came the inevitable threat of profit-taking. NEWP's two consecutive days of big rallies might prompt the vicious profit takers into selling the stock lower early next week. If NEWP falls on light trading, watch for the stock to find support first at $164 then lower near $160. Aggressive traders might target shoot for entry on a bounce off one of the aforementioned support levels after the profit-takers run out of steam. If, however, NEWP extends its rally from last week, consider entering the play on a bounce off current levels at $168, or wait for a momentum-based rally to carry NEWP to new highs above $172. Confirm the return of healthy volume with any attempted rally to new highs before entering the play. Also, look for a new series of options to be issued next week, and wait for OI to build in the OTM contracts before initiating new positions. NEWP will be attending CS First Boston's Technology Group Communication Technology Conference in the latter half of next week. NEWP is slated as a headline presenter at this year's event. Positive press from the gathering might lead to analyst praise late next week, which could carry NEWP even higher. BUY CALL SEP-155 NOQ-IK OI=63 at $20.63 SL=15.00 BUY CALL SEP-160*NOQ-IL OI=75 at $17.38 SL=12.50 BUY CALL SEP-165 NOQ-IM OI= 0 at $13.88 SL=10.50 BUY CALL OCT-160 NOQ-JL OI=11 at $30.00 SL=22.50 BUY CALL OCT-165 NOQ-JM OI= 0 at $27.63 SL=20.75 Picked on August 27th at $154.00 P/E = 359 Change since picked +14.94 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 VRTS - VERITAS Software $121.75 (+4.81 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. This "comeback kid" of the computer storage industry is once again attempting to find a foothold on the topside of $120 and $125 and it looks like it's going to make it this time around. Ever since VRTS dived off a cliff at $171 and smashed headlong into a ledge at $82 in mid-April, VRTS has struggled to regain its seat on a pristine pedestal. In recent times, the staunch opposition at $120 proved to be too much for VRTS to overcome. But that all changed towards the end of this week. The strong challenges to the above mentioned mark on Thursday and Friday confirmed however the momentum is alive and well. The intraday highs at $122.03 and $123.88, respectively, hint VRTS is poised to break to the upside in the short-term. Plus intraday support is currently establishing itself at $120 and $122, which further indicates a growing momentum. There's also the sentiment of some analysts who think the share price is under-valued by the market. Salomon Smith Barney analyst H. Clinton Vaughn, for example, says VERITAS is "one of the four horsemen of the computer storage industry, alongside such heavyweights as Brocade Communications (BRCD), EMC Corp (EMC), and Network Appliance (NTAP). Solid entries into this pure momentum play are still considered viable off light support at $118 and the 5- dma ($118.60). More aggressive pullbacks may be too risky for some, but an entry off the 10-dma at $116 could prove lucrative if we're afforded such a deep cut. In the news this week, Mark Leslie, Chairman and CEO of VERITAS, was recognized as Entrepreneur of the Year in the technology category by local Silicon Valley business professionals. VERITAS and Infogain, a leader in eCRM and eBusiness connectivity, also announced they have completed over 100 nationwide High-Availability projects in the last six months within the manufacturing, financial service, telecommunication, and wireless technology industries. BUY CALL SEP-115 VUQ-IC OI=12812 at $ 9.88 SL= 7.00 BUY CALL SEP-120*VUQ-ID OI= 2320 at $ 6.50 SL= 4.50 BUY CALL SEP-125 VUQ-IE OI= 3203 at $ 4.25 SL= 2.50 BUY CALL OCT-115 VUQ-JC OI= 355 at $14.63 SL=10.75 BUY CALL OCT-120 VUQ-JD OI= 146 at $12.13 SL= 9.00 Picked on Aug 24th at $115.69 P/E = N/A Change since picked +6.06 52-week high=$174.00 Analysts Ratings 11-12-1-0-0 52-week low =$ 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 = 5.38 mln LSCC - Lattice Semiconductor $77.69 (+3.44 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. Scaling yet another level of resistance, LSCC is continuing its pattern of higher highs and higher lows. The stock doesn't move in a straight line, shooting sharply higher and then consolidating for a few days in order to make the next run up. Prompting the latest surge was Thursday's 2-for-1 split announcement (see news below). This enabled the stock to bounce from support at $71-72, and handily clear resistance at $76, all in one day. After Thursday's strong $5.81 run, the bulls took time for a breather on Friday, and it was encouraging to see that the profit taking didn't drop LSCC below its newfound support at $76. The Stochastics have been buried in overbought territory for the past 2 weeks, MACD continues to head north, and each pullback just serves to pull the price off of the upper Bollinger band to make room for the next leg up. The volume picture over the past week has become a bit erratic, but we think that is more a product of the last week of summer than any indication of weakness in the stock. With the return of more normal volume on Tuesday (we hope), look for volume to be a more reliable measure of buying and selling pressure. Look at pullbacks to support or the 5-dma ($74.06) as buying opportunities, and initiate new positions as buying volume returns. Since leaving the 10-dma (now at $71.88) behind in mid-August, LSCC hasn't touched it on any of its pullbacks, so a violation of this moving average would likely be a bad sign for our play. Waiting to enter on strength is the more conservative strategy and a move through resistance at $80 will be your cue that LSCC still has room to run. Just when investors were looking a little tired, LSCC pulled another rabbit out of their hat on Thursday, announcing a 2-for-1 stock split. The dividend will be payable on October 11th to shareholders of record as of September 20th. BUY CALL SEP-75 LQT-IO OI=797 at $ 5.63 SL=3.50 BUY CALL SEP-80*LQT-IP OI=751 at $ 3.13 SL=1.50 BUY CALL SEP-85 LQT-IQ OI=322 at $ 1.56 SL=0.75 BUY CALL DEC-80 LQT-LP OI= 89 at $12.00 SL=9.00 BUY CALL DEC-85 LQT-LQ OI=162 at $ 9.50 SL=6.75 Picked on August 15th at $62.44 P/E = 34 Change since picked +15.25 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 = 1.18 mln ORCL - Oracle Corporation $92.63 (+8.00 last week) According to the company's ads, "Software powers the Internet". ORCL is a supplier of software for information management, servicing two broad product categories - systems software and business applications software. Systems software is a complete Internet platform to develop and deploy applications for computing on the Internet and corporate Intranets. Business applications software automates the performance of specific business data processing functions for customer relationship management (CRM), supply chain management, financial management, procurement, project management, and human resources management. Now that's a nice breakout! Without so much as a stutter, ORCL powered through the $90 resistance level on Thursday, closing the day at $90.94 and posting above average volume. Then on Friday, as if the major indices were still in strong rally mode, the bulls pushed the stock up another $1.69 to close very near the high of the day. For those of you just joining us, Friday's close represents a new all-time high and more importantly, a breakout above a resistance level that has been in place since March. Volume was a bit weak on Friday, but this is likely due to the fact that traders wanted to leave early for the holiday weekend. If traders come back in a buying mood, ORCL is likely to be one of the key beneficiaries. The company is sitting in that sweet spot of the Internet, providing the building block software that powers the non-stop innovations. As if demand for their products wasn't enough to get investors' attention, earnings should do the trick. ORCL confirmed on Friday that their first quarter results would be reported September 14th after the close. Want more? How about a possible split? That's right, ORCL is typically a split candidate over $80, and the company has more than enough shares authorized to effect a 3-for-1 split. We think a 2-for-1 is the more likely outcome, but we'll take whatever we happen to get. The company is expected to have strong earnings, and that would seem to be an ideal time to announce a split. ORCL is now in blue-sky territory, and enthusiasm over the next two weeks could very well propel the stock higher. Entering on strength (continuing higher from current levels) looks like a pretty good strategy right about now, although we sure wouldn't turn our nose up at a pullback and bounce at the $90 level. As always, keep your eye on the volume. If our play is going to shoot further into the stratosphere, its going to need strong volume to power those engines. Continuing to innovate, ORCL turned the Sales Automation market upside down on Monday by offering free online sales software. The new product, OracleSalesOnline.com, delivers the core sales application of the Oracle E-Business Suite as a free, online service. This radically changes the sales force automation (SFA) market by offering basic SFA services free to medium and large-size enterprises. On Friday, Frost Securities initated coverage of ORCL with a Buy rating and a price target of $125. BUY CALL SEP- 90 ORY-IR OI=28306 at $ 5.75 SL=3.75 BUY CALL SEP- 95*ORY-IS OI=18443 at $ 3.00 SL=1.50 BUY CALL SEP-100 ORY-IT OI=10676 at $ 1.31 SL=0.75 BUY CALL OCT- 95 ORY-JS OI= 2299 at $ 6.50 SL=4.50 BUY CALL OCT-100 ORY-JT OI=15019 at $ 4.13 SL=2.50 BUY CALL DEC- 95 ORY-LS OI= 9866 at $10.00 SL=7.00 SELL PUT SEP- 90 ORY-UR OI= 2472 at $2.56 SL=4.00 (See risks of selling puts in play legend) Picked on Aug 29th at $87.75 P/E = 44 Change since picked +4.88 52-week high=$92.94 Analysts Ratings 12-15-4-0-0 52-week low =$19.44 Last earnings 06/00 est= 0.26 actual= 0.31 Next earnings 09-12 est= 0.13 versus= 0.04 Average Daily Volume = 18.80 mln JNPR - Juniper Networks Inc $221.63 (+30.69 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. Lots of excitement and price-moving events sparked an explosive momentum run this week! On Monday the party began with a strong break out of its consolidation period and a nice pop over the $200 level. From then on, JNPR stretched into new territory each session. The fifth consecutive 52-week record at $222.63 was set as the week long gains extended ahead of the long weekend. JNPR closed like a champion just a mere fraction away from that pinnacle. Traders are buying up shares of JNPR as they relish the bias that the Feds are done with the adjusting the interest rates. Besides the broad view of a positive economic situation, Juniper Networks, whose share price has climbed almost 35-fold since its first came aboard in June 1999, JNPR was named a component of the NASDAQ-100 Index on Wednesday. Trading was heavy all week, but peaked at 9.6 mln shares exchanging on that day. Juniper will join the NASDAQ-100 on September 7th and replace Visx, a maker of laser eye-surgery equipment that's delisting from the NASDAQ. This news ultimately ignited the explosive moves at the end of the week, which are likely to extend as JNPR is officially added to the NASDAQ-100 list next Thursday. Look for near-term support to hold up at $210, just above the 5-dma ($206.85). If the current trend maintains its velocity, enter on intraday dips, but keep a tight rein on the play. An unforeseen market event could cut the legs off JNPR in minutes. JNPR is, without a doubt, a HIGH- RISK momentum play and not for the more cautious traders. Juniper's overall success is obvious. It has emerged as the leading competitor to the #1 network-equipment maker, Cisco Systems (CSCO), in the Internet router market. Recently Senior VP and Portfolio Manager for Sentinel Advisors Company, Robert Lee, noted in his examination of portfolio strategies that the market is, by some estimates, doubling every four months and currently Juniper is growing faster that Cisco. BUY CALL SEP-200 JUD-IT OI=1964 at $26.00 SL=20.25 BUY CALL SEP-210*JUD-IB OI=1341 at $18.63 SL=13.50 BUY CALL SEP-220 JUD-ID OI= 627 at $13.13 SL= 9.75 BUY CALL SEP-230 JUD-IF OI=1527 at $ 8.50 SL= 6.00 BUY CALL OCT-220 JUD-JD OI=1422 at $24.75 SL=19.25 BUY CALL OCT-230 JUD-JF OI= 355 at $20.00 SL=14.50 Picked on Aug 15th at $169.75 P/E = 2608 Change since picked +51.88 52-week high=$222.63 Analysts Ratings 15-3-0-0-0 52-week low =$ 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 = 6.25 mln QLGC - QLogic Corporation $116.00 (+12.13 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. Like a phoenix rising from the ashes, QLGC managed to shake off the deleterious effects of the EMLX hoax this week. By Wednesday, buyers had returned in sufficient numbers to push the price back above the closing price on the previous Friday. Although Thursday's stellar $8 gain was largely due to strength on the NASDAQ, news that the perpetrator of the EMLX hoax had been caught in less than a week may have helped to lift investors' spirits. Thankfully, we can now put that story behind us and get on with the business at hand. Thursday was certainly an encouraging day, as the bulls charged right through the $110 resistance level as though it wasn't even there. The pullback on Friday was to be expected as investors were more interested in heading out for the last weekend of summer. Given the supposed lack of interest, it was certainly encouraging to see all the major indices close positive on Friday, and QLGC's picture mirrored that of the NASDAQ in that profit takers were unable to push prices below Thursday's closing price. Going forward, QLGC is almost out of the congestion zone created by the market turmoil that began this past spring. Resistance at $117.50 is the next level to scale, followed by $125. The next formidable level sits at $145, and QLGC will need all engines on full to clear this level as we head into the fall. The best entries will be had if QLGC decides to take a break and retest support before heading higher. The first and most logical target will be $110, with the rapidly ascending 5-dma at $107.63 backing it up. Over the past month, the 10-dma (currently $105.13) has provided consistent support on pullbacks (EMLX hoax day excluded), and we wouldn't rule out another test of this level before our play heads higher. Of course, if investors and traders come back next week in a buying mood, all bargain hunting ideas will be out the window, and we would look to open new positions as buying volume pushes our play through resistance at $117.50. More analysts are coming into the fold, recommending shares of QLGC. On Thursday, Salomon Smith Barney came to the party, initiating coverage of the company with a Buy rating and a $140 price target. This follows BB Robertson Stephens' Buy rating which came on August 20th. BUY CALL SEP-115*QLC-IC OI= 338 at $ 8.13 SL= 7.50 BUY CALL SEP-120 QLC-ID OI= 490 at $ 5.63 SL= 5.75 BUY CALL OCT-115 QLC-JC OI=1022 at $16.13 SL= 4.00 BUY CALL OCT-120 QLC-JD OI= 586 at $13.75 SL=10.25 BUY CALL OCT-125 QLC-JE OI= 161 at $12.00 SL= 8.75 BUY CALL JAN-120 QLC-AD OI= 255 at $25.75 SL=16.50 SELL PUT SEP-105 QLC-UA OI= 249 at $ 2.69 SL= 4.25 (See risks of selling puts in play legend) Picked on Aug 22nd at $98.00 P/E = 142 Change since picked +18.00 52-week high=$203.25 Analysts Ratings 5-2-0-0-0 52-week low =$ 32.50 Last earnings 07/00 est= 0.24 actual= 0.27 Next earnings 10-18 est= 0.25 versus= 0.35 Average Daily Volume = 2.79 mln INKT - Inktomi Corp $130.75 (+6.81 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. We started coverage on INKT as its momentum perked up on news of a "Content Bridge" alliance it entered to improve the delivery and efficiency of Internet content over networks. America Online (AOL), Digital Island (ISLD), and Exodus Communications (EXDS) were also involved and the news woke INKT from its recent respite. 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. I think it demonstrates our leadership and innovation in bringing all the parties together". As far as trading, all was going well after INKT moved through the first line of opposition at $115 and $120. But then Cisco dropped a bomb. News hit the wire that Cisco (CSCO) may be entering Inktomi's market. As it turned out, this was a minor setback. Convincing comments from analysts and INKT took off with a vengeance. Share prices have increased 9.7% since the pair of brokerage firms upgraded the stock to a Buy rating on Wednesday. First Union Securities raised its recommendation to a Buy from a Market Perform while Lehman Brothers started INKT in new coverage and issued a 12- month price target of $150 p/s. The momentum should stay intact after the long holiday too. Typically the bulls come charging back from vacation and prompt a fall rally. Take entries off the 5-dma ($124.85) on a deep dip, otherwise use the near-term support at $128 as your take-off point into this momentum play. If INKT stays on course, then its historical split-level of $150 could be attained sooner than expected. Earlier in the month, INKT got also received a Buy reiteration from analysts at Friedman, Billings, Ramsey & Co. BUY CALL SEP-125 KYQ-IE OI= 776 at $ 9.75 SL= 6.75 BUY CALL SEP-130*KYQ-IF OI=2676 at $ 7.50 SL= 5.25 BUY CALL SEP-135 KYQ-IG OI=1837 at $ 5.13 SL= 3.00 BUY CALL OCT-130 KYQ-JF OI= 504 at $15.50 SL=11.25 BUY CALL OCT-135 KYQ-JG OI= 474 at $13.00 SL= 9.75 Picked on Aug 27th at $123.94 P/E = N/A Change since picked +6.81 52-week high=$241.50 Analysts Ratings 11-7-1-0-0 52-week low =$ 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 = 2.90 mln ISSX - Internet Security Systems $84.13 (+11.13 last week) Internet Security Systems, formerly ISS Group, is the pioneer and leading supplier of adaptive security management systems. They provide enterprise-wide information protection software and are a worldwide innovator of security solutions designed to augment the security performance of existing systems by complementing security safeguards such as firewalls, authentication and encryption. The ISS SAFEsuite family of products empowers organizations to proactively monitor, detect and respond to the growing number of network vulnerabilities and threats to enterprise information. The Company is based in Atlanta, GA. We added ISSX as a recovery play on the merits of its strong climb from a recent low of $51.13 to current price levels above the $80 mark. Above $80 ISSX is also considered a split- candidate too, which is always a nice feature to pump up the existing momentum. As of Thursday, the current trading price was at a precarious point. Take a look at a three-month chart and you can visually confirm the "V" formation that existed. Past tense. In Friday's session, ISSX opened strong and tackled higher territory at $86.25. Consistent and steady trading near the $84 mark deemed this level should evolve as short-term support from which entries could be had going into next week's market. However $80, at the converged 50 & 200 DMAs, provides a better entry on a pullback. If your more conservative, then wait for the stock to advance through $85 and challenge $90. Internet Security Systems announced its acquisition of privately held ISYI, an Italian leader in advanced network security services for large network and eBusiness environments. This acquisition represents an important development in the Italian security industry. Also in the news this month, Individual Investor, in its seventh annual ranking, announced ISSX is among this year's list of 100 fastest growing companies in the US. They gave ISSX a "thumbs up" vote too, which means they expect the share price to continue to grow. BUY CALL SEP-80 ISU-IP OI=155 at $ 8.38 SL=6.00 BUY CALL SEP-85*ISU-IQ OI= 37 at $ 5.88 SL=4.00 BUY CALL SEP-90 ISU-IR OI= 57 at $ 4.00 SL=2.50 BUY CALL OCT-85 ISU-JQ OI= 42 at $11.13 SL=8.25 BUY CALL OCT-90 ISU-JR OI=101 at $ 9.13 SL=6.25 Picked on Aug 31st at $81.00 P/E = 331 Change since picked +3.13 52-week high=$141.00 Analysts Ratings 6-4-0-0-0 52-week low =$ 22.50 Last earnings 07/00 est= 0.08 actual= 0.09 Next earnings 10-23 est= 0.10 versus= 0.05 Average Daily Volume = 691 K ************************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. 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The Option Investor Newsletter Sunday 09-03-2000 Sunday 4 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/090300_4.html ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=377 ************************************************************** ************* NEW PUT PLAYS ************* MMM - Minnesota Mining and Manufacturing $92.50 (-3.25 last week) Commonly known as the maker of the ubiquitous, adhesive-backed Post-It Notes, MMM is also a leading manufacturer of a variety of industrial, consumer, and medical products. Reflective sheeting on highway signs, respirators, spill-control sorbents, and Thinsulate brand insulations are just some of the company's industrial products. MMM also makes microbiology products, making it easier for food processors to test for the microbiological quality of food. Failing once again to penetrate resistance at $97, MMM is headed south once again. Concerns over a slowing economy will not be good for cyclical stocks and bearish analyst comments last week about the paper sector are not helping. If the stock repeats its performance from this past spring, we could get a ride all the way down to support at $85. But before we get ahead of ourselves, $90 is the next support level that needs to be penetrated. After putting in a double top at $97 on Monday, shares of the Post-It maker headed south in a hurry, and every day last week represented one more failure to close above the 10-dma (now $94.63 and falling). Friday's trading represented yet another technical failure, as the price fell to close below the 30-dma ($92.88) on heavy volume. The $90 level is looking like it will provide some support as the 50-dma ($90.44) and the 200-dma ($90.25) have converged to reinforce the historical support found at this level. If last week's pattern continues, a rollover near the 10-dma looks like the best entry. If the decline continues from here though, we wouldn't be opposed to opening new positions as MMM fails to move above the 30-dma. Keep your eye on the volume as it will be your indicator of the strength of any move, whether up or down. BUY PUT SEP-95*MMM-US OI=234 at $3.38 SL=1.75 BUY PUT SEP-90 MMM-UR OI=472 at $0.94 SL=0.00 High Risk! Average Daily Volume = 1.21 mln ***************** CURRENT PUT PLAYS ***************** KO - Coca-Cola Company $54.25 (-1.75 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. Have you ever had a Coke after all the carbonation is gone? It's really hard to enjoy the experience, as KO investors found out this week when Sanford C. Bernstein analyst William Pecoriello siphoned off the last of KO's fizz. Following the recent reduction in volume growth by Salomon Smith Barney, Pecoriello lowered his 2001 earnings forecasts for KO and revised his outlook onsoft drink companies based on summer sales and currency weakness. This helped to push KO shares down by as much as $2.75 on Thursday, before buyers stepped in late in the day. Although it was a marked improvement from Thursday's decline, Friday's action clearly didn't have much conviction behind it. After gapping up at the open, KO traded flat for most of the session, as sellers took advantage of the recovery to get out of their position before the holiday weekend. Although dropping off considerably from Thursday's level, more than 5 million shares traded hands Friday in a fairly active session. With the bulls and bears essentially fighting to a standstill, we are left with a technical picture that is essentially unchanged. Stochastics are buried deep in oversold territory, and MACD is continuing south at a steady rate. More consolidation is possible before KO resumes its decline, as the stock waits for the 5-dma ($54.88) to catch up and continue exerting downward pressure. It is worth noting that even with the high volume recovery that occurred on Friday, buyers couldn't drive the price high enough to test even the 5-dma, much less the 200-dma (now at $55.50), which has once again turned south. Look to initiate new positions as KO rolls over from the vicinity of the 5-dma and selling volume picks up. Although another rollover from the 200-dma would provide a better entry point, we don't think the stock has the strength to get there. The 10-dma (currently $56.50) is headed south in a hurry, and once it crosses through the 200-dma, the technical picture will be even darker for KO shareholders. More conservative players may want to wait for the bears to take out Thursday's closing price of $52.63 on the downside before playing. Below current levels, support should be decent near $50, and then very solid between $45-46. BUY PUT SEP-60 KO-UL OI=3436 at $6.13 SL=4.00 BUY PUT SEP-55*KO-UK OI=4000 at $1.81 SL=1.00 Average Daily Volume = 4.24 mln AT - Alltel Corp $49.81 (-1.00 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 downward pressure is weighing heavy on AT's share price and all because the company gave an honest and respectable earnings outlook. On August 16th, AT was cut a hefty 9.3% after 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 and expected the company to raise theirs as well. But Alltel remained firm on its numbers. And so the butchering has persevered. On Monday we saw a nice slide to the underside of $50, however it wasn't to happen again until Friday's session. Mid-week some good news, consolidation, and strong market sentiment kept AT afloat. News came on Thursday of a 10-year software pact between Alltel and Bank One Corp (ONE) announced they entered into. Bank One will utilize Alltel's Advanced Loan System (ALS) for its key lending functions in an effort to reduce turnaround time and maximize cost efficiency. But despite it all, AT's upper resistance continues to moves to the downside from $52 to Friday's lower ceiling at the $50 mark. And the series of new all-time lows continues to rage on as AT loses more ground. High volume at over 2 mln shares exchanging marked the strong downtrend in that session with intraday lows reaching $48.75 and near-term support developing at $49. Look for the selling to remain in high gear and enter on downward bounces of the 5-dma ($50.60), which has proved to be a reliable gauge for entries. Keep stops tight to protect profits and capital. BUY PUT SEP-60 AT-UL OI=715 at $10.13 SL=7.00 BUY PUT SEP-55*AT-UK OI=577 at $ 6.13 SL=4.00 BUY PUT SEP-50 AT-UJ OI= 42 at $ 2.06 SL=1.00 Average Daily Volume = 1.14 mln UK - Union Carbide $39.56 (-1.50 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. The exodus from the Chemicals sector continued late last week as traders fled to the flashier Technology sector. Both UK, and its proposed acquirer DOW, fell to new yearly lows. What's more, the trading activity continues to remain robust as UK sinks. Volume eclipsed the ADV last Friday, which was quite a feat given it was the day before the last big Summer holiday weekend. Unfortunately for UK, a few institutional sellers hung around the office to unload their stock. There was no major news to spur the sell-off late last week, rather, the renewed strength in the Tech sector continued to draw investors' attention away from the old-line names such as UK, along with their trading capital. Going forward, as long as the Tech sector continues to move higher, investors should continue to leave the Chemicals sector to the bears. Of course, the proposed merger between UK and DOW could potentially have an impact on our play if the deal is closed in the coming weeks. However, the merger has not yet received government approval, and until it does, an arbitrage-induced spread will likely keep UK modestly depressed from the actual rate of exchange for DOW shares. If the Tech sector shows signs of strength early next week, wait for traders to start their counter-selling in the Chemicals sector. Target shoot for entry into UK if the stock falls below $39.50, or wait for heavy selling to drive the stock below $39. If the Tech sector pulls back on profit taking next week, traders might buy the Chemicals sector in an attempt to hedge their bets. If UK rallies, aggressive traders might consider entering the play on a bump against resistance at $40, or near the descending 5-dma at $40.50. Confirm any rally with weak volume and wait for the big sellers to return before entering the UK play on strength. BUY PUT SEP-45*UK-UI OI= 88 at $4.88 SL=3.00 BUY PUT SEP-40 UK-UH OI=114 at $1.75 SL=1.00 Average Daily Volume = 800 K ************************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 ************************************************************** ***** LEAPS ***** OK, September's Here, Let's Rally! By Mark Phillips Contact Support Summer is officially over, the economy is making a convincing case that it is slowing enough to keep the Fed off our backs, all the major indices are testing resistance, and we could see the return of some serious volume as early as next week. Thursday's nearly 1.9 billion share day was nothing to sneeze at and hopefully is just a taste of more to come. Sure, we have the nagging negative factors to deal with, not the least of which is the VIX continuing to lurk in the danger zone south of 20. The respectable gains over the past 2 weeks have only managed to push it further down, closing out the week at 19.59. Lest you forget how long it has been down here, it hasn't closed above 20 in two and a half weeks. The last time we were able to make a statement like that was in July 1998. Do you remember what happened to the major indices in the succeeding 6 weeks? Well, to refresh your memory, the NASDAQ dropped 25%, while the DJIA lost nearly 20%. There's nothing to say that history will repeat itself, but ignoring it can be hazardous to your financial health. Before you start thinking I have been loitering in Bear Country, let me reassure you that I think the recent rally actually has some legs to it. But I also think we will have pockets of weakness and profit taking until we clear the Ides of September, also known as earnings warning season. Then we have the psychological spectre of fear associated with October before putting on those rally shoes and sprinting for NASDAQ 5000. In the meantime, we need to be judicious in picking our entry points as we position our portfolios for the much-anticipated fall rally. Your first clue to our sentiment going forward should be the high flying stocks we have added to the playlist over the past 2 weeks - INKT and BRCM last week and VERT this week. The key to stellar returns is to pick this year's high flyers, not the tired heroes from last year. Even though they would have been very profitable last year, the likes of YHOO and QCOM just don't belong in our LEAPS portfolio any more. We need fresh young stocks that are ready to run if our portfolio is going to have another stellar year. While we are talking about the playlist, there are some housekeeping items to cover. Since August is over, you will notice that we have jettisoned all of our 2001 LEAPS. As we have mentioned several times in recent months, these strikes are too short-term to qualify as LEAPS, and if you are still holding them, you are thinking more like a short-term option trader than a LEAPS investor. Stay vigilant on those plays, because any pullback will likely have an unpleasant effect on the premiums. We have also dropped some of the 2003 LEAPS from the playlist. We had been listing 2003 LEAPS on all of our plays, even on those plays that haven't been updated since the 2003 strikes became available. Examples of this are EMC, NT, CSCO, and SUNW. These plays just hadn't pulled back enough to qualify as a Spotlight play, so there was no way to list a 2003 LEAP and logically track the return. So this week, you will only find 2003 LEAPS listed in the playlist that have been listed in a play writeup. If you own 2003 LEAPS on any of our active plays that no longer have a 2003 LEAP listed, don't worry. This doesn't mean that we are not recommending the purchase of these long-term LEAPS; it is just a housekeeping item so that we can realistically track the returns on all of the LEAPS listed in the portfolio. Some other recent changes to the playlist involve C and AMD. Both stocks have recently split - AMD on August 21st, and C on August 25th. Therefore, the symbols and strike prices have changed, and the playlist has been updated accordingly. So where do we go from here? While it looks like the next week or two could see some decent gains in the market, the looming earnings warnings that are bound to occur are likely to cause a hiccup or two. Keep this in mind as you continue to look for entry points on your favorite plays. Although I know it sounds like a broken record, I'll restate it once again - pick your plays and entry points while the markets are closed. This makes it much easier to pull the trigger during market hours and feel comfortable that you did the right thing. Trying to shoot from the hip during market hours can be dangerous to your account as entry decisions are more likely to be based on emotions than sound judgment. This process applies equally well to exit strategies too. When you enter a new position, you should know exactly what conditions (profit or loss) would make you want to exit the position. If you take the time to record these conditions in your trading journal (all serious traders should have one), and preferably place GTC orders with your broker, you will find yourself trading with more confidence and suffering less from indecision when the time for action arrives. This type of discipline will free you to be on the prowl for new trades instead of continuing to nurse losing positions that should have been cut loose weeks ago. Molly Evans made a convincing case for keeping an investing journal in her Trader's Corner article on August 24th. How many of you were motivated by her article to start keeping a trading journal, or renew your efforts in this department? I know she refocused my attention. If you are serious about making money in the stock market and you don't have a trading journal, I would strongly recommend reading her article. Having a written record of your actions and the reasoning behind them can be invaluable in the long run. Now that summer is over, I would recommend finding one of the fall seminars to attend. Chris and his team are obviously doing a fantastic job, and the glowing comments from recent attendees is proof of the value provided in one short weekend. I'm counting the days until the Boston Seminar, so that I can spend some time soaking up new trading ideas for the fall rally. As always, plan your trades and stick to the plan. Current Plays SYMBOL SINCE LEAPS SYMBOL PICKED CURRENT RETURN EMC 11/07/99 JAN-2002 $ 45 WUE-AI $ 9.50 $58.38 514.47% CSCO 11/14/99 JAN-2002 $ 45 WIV-AI $11.00 $31.50 186.36% NT 11/28/99 JAN-2002 $37.5 WNT-AU $15.13 $50.63 234.60% SUNW 12/19/99 JAN-2002 $ 90 WJX-AR $22.00 $56.38 156.25% ERICY 01/30/00 JAN-2002 $16.3 WRY-AO $ 6.75 $ 8.13 20.37% 07/23/00 JAN-2003 $ 25 VYD-AE $ 6.88 $ 6.50 - 5.52% NSM 02/27/00 JAN-2002 $ 70 WUN-AN $24.25 $10.50 -56.70% AOL 03/12/00 JAN-2002 $ 65 WAN-AM $18.63 $11.00 -40.96% 08/13/00 JAN-2003 $ 55 VAN-AK $17.50 $20.00 14.29% AXP 03/12/00 JAN-2002 $46.6 WXP-AQ $ 9.33 $19.63 110.34% WM 03/19/00 JAN-2002 $ 30 WWI-AF $ 5.38 $ 9.38 74.26% AMD 04/16/00 JAN-2002 $ 35 WVV-AG $13.00 $14.75 13.46% JDSU 04/16/00 JAN-2002 $ 80 YJU-AP $39.63 $62.75 58.34% 08/27/00 JAN-2003 $130 VEQ-AF $55.25 $52.88 0.95% MOT 05/14/00 JAN-2002 $36.6 WMA-AZ $ 9.54 $ 9.38 - 1.73% NOK 05/21/00 JAN-2002 $ 50 IWX-AJ $17.25 $12.00 -30.43% 07/30/00 JAN-2003 $ 50 VOK-AJ $17.75 $16.25 - 8.45% NXTL 06/11/00 JAN-2002 $ 60 YFG-AL $19.25 $14.00 -27.27% C 06/18/00 JAN-2002 $48.8 YSV-AW $10.31 $16.88 63.68% AMGN 07/02/00 JAN-2002 $ 75 WQY-AO $20.75 $23.00 10.84% JAN-2003 $ 70 VAM-AN $28.75 $32.25 12.17% VRSN 07/02/00 JAN-2002 $190 YVS-AR $66.25 $70.88 6.98% 09/03/00 JAN-2003 $190 OVS-AR $86.63 $86.63 0.00% DELL 07/09/00 JAN-2002 $ 55 WDQ-AK $12.63 $ 6.75 -46.56% JAN-2003 $ 60 VDL-AL $15.38 $ 9.38 -39.04% GENZ 07/16/00 JAN-2002 $ 70 YGZ-AN $17.13 $24.75 44.48% JAN-2003 $ 70 OZG-AN $23.13 $31.00 34.03% HWP 07/30/00 JAN-2002 $110 WPW-AB $28.25 $40.75 44.25% JAN-2003 $120 VHP-AD $32.63 $45.50 39.44% EXDS 08/06/00 JAN-2002 $ 55 WZZ-AK $20.75 $29.25 40.96% JAN-2003 $ 60 VTQ-AL $25.38 $33.50 31.99% MFNX 08/06/00 JAN-2002 $ 40 WOF-AH $13.75 $13.63 - 0.91% JAN-2003 $ 45 VKW-AI $15.63 $16.25 3.97% GM 08/06/00 JAN-2002 $ 65 WGM-AM $ 9.88 $18.63 88.51% JAN-2003 $ 65 VGN-AM $13.25 $22.75 71.70% FRX 08/13/00 JAN-2002 $ 95 WRT-AS $31.38 $26.50 -15.55% JAN-2003 $100 VFB-AT $37.38 $31.50 -15.73% BRCD 08/27/00 JAN-2002 $220 YNU-AD $65.38 $78.25 19.68% JAN-2003 $220 OMW-AD $86.50 $99.38 14.88% INKT 08/27/00 JAN-2002 $130 XOR-AF $50.13 $54.13 7.97% JAN-2003 $140 VFR-AH $60.88 $65.13 6.97% Spotlight Play VRSN - Verisign $185.94 Showing their enthusiasm for Internet security stocks, investors spent the past 3 weeks pushing shares of VRSN up by as much as 45%. That's some serious buying, when you consider the stock started out north of $135. As the government comes into the digital age, digital signatures and documents are poised to receive the same legal status as handwritten signatures and documents. Companies like VRSN that secure the integrity of these documents will see their business grow by leaps (pun intended) and bounds. After dropping to put in a double bottom near $135 in early August, shares of VRSN have been on a near vertical climb, scaling every one of its moving averages in the process. Friday's action, which involved a loss of almost $13 on extremely heavy volume, finally gave us another opportunity to jump aboard the play. Apparently finding support near $182, just above the 10-dma ($180.56), VRSN looks attractive for new entries as buyers re-emerge and push the price up through resistance near $187-188. For those eternal optimists, market weakness early next week could produce a dip to the next level of support (between $177-180) before the stock heads higher. Use any such dip as an opportunity to buy at a discount, but make sure buying volume is confirming your bullish sentiment before playing. BUY LEAP JAN-2002 $190.00 YVS-AR at $70.88 BUY LEAP JAN-2003 $190.00 OVS-AR at $86.63 New Plays VERT - VerticalNet $54.75 Since the spring decline, VERT has been more horizontal than vertical, but that trend may be ready to change. The B2B sector regained new life this week, and this vigor should rub off on VERT as the sector continues to recover. The company owns and operates 55 industry-specific Wev sites designed as on-line B2B communities, known as vertical trade communities. Each of these communities is individually branded, focuses on one business sector, and caters to professionals responsible for selecting and purchasing highly specialized, industry-related products and services. The challenge for the company will be to see whether it can build depth in these vertical markets, and if it can, the rewards could be exciting. VERT's chart presents some interesting opportunities, as the stock has been trading in a gently ascending channel since the middle of April. The lows are getting higher and the ascending trendline (now sitting at $41) is providing consistent support. On the high side, the 200-dma (currently $65.56) has been capping the rallies in a consistent fashion. This provides a healthy $20 range in which to rake in profits until the stock breaks out to the upside. With the stock now trading in the middle of this channel you may want to use bounces from the supportive 5-dma (currently $54) as an entry point. Any profit taking next week could produce a drop to support near $51, (also the site of the 10-dma), and this would be a good point for aggressive traders to grab a better entry. Keep a tight reign on the play until it clears resistance at $59 and then watch out for profit taking near the 200-dma. If the improving sentiment in the B2B sector has legs, look for a breakout over the 200-dma to be the precursor to a powerful fall rally. BUY LEAP JAN-2002 $60.00 YER-AL at $22.13 BUY LEAP JAN-2003 $60.00 OER-AL at $28.88 Drops None *********** SPLIT PLAYS *********** A View From The Top By Ryan Nelson This market reminds me of hiking in the mountains as we head out of the valley and back near the top. This is where it becomes more exciting too as investor interest climbs with the Nasdaq. In fact, there are so many stocks climbing that we are likely to have another rash of split announcements soon. 52-week highs are now becoming the norm once again. Out of the current split runs, CIEN is hard to overlook. Plus, ERTS and SEBL are beginning to look interesting. We need to confirm the market wants to keep rallying after Labor Day, but it wouldn't hurt to start looking for entry points. Current Split Run Plays CIEN - 09/19 ex-date Current Split Candidate Plays ITWO JNPR INKT NEWP VRSN NTAP CHKP TIBX IWOV ORCL QLGC Candidates That Are Not Current Plays BRCD LEH NVDA ARBA DNA VRSN MUSE EXTR 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 = 1 LSCC For our complete stock split calendar, click here... http://members.OptionInvestor.com/splits/index.asp Symbol Company Name Splits Payable Executable 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 09/30/2000 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 RY - Royal Bank of Canada 2:1 10/05/2000 10/06/2000 SONS - Sonus Networks Inc. 3:1 10/06/2000 10/09/2000 LSCC - Lattice Semiconductor 2:1 10/11/2000 10/12/2000 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************************ Save Up To 80% Off At Everything Wireless! Click On The Link Below For Store Wide Discounts. 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.sungrp.com/tracking.asp?campaignid=353 ************************************************************ ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html
The Option Investor Newsletter Sunday 09-03-2000 Sunday 5 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/090300_5.html ************* COVERED CALLS ************* Trading Basics: The KISS method... By Mark Wnetrzak (Apologies to Paul Stanley and Gene Simmons) Option trading offers numerous opportunities to profit in the market regardless of whether you are a speculator, a hedger, or simply a novice investor. Those who fail to achieve consistent returns are generally guilty of trading the wrong positions or incorrectly timing the market. Inexperienced traders purchase out-of-the-money options because they appear "cheap" but rarely do these positions produce the extravagant rewards that often lure beginners into the options market. At the same time, those participants who gain the crucial knowledge of pricing theory frequently have trouble developing timing systems that provide accurate entry and exit signals. There is however, another type of trading - the complex approach - that repeatedly generates problems for players that are new to the game. Option trading is a diverse, multi-faceted activity that offers a wide range of techniques in which to be successful. One can initiate positions that profit if a stock rises above or falls below a specific price, remains in a given range, or moves with a certain character or volatility. With all of this flexibility comes a high degree of complexity and in many cases, a strategy can be too elaborate to warrant its use by traders with a minimum level of experience. Of course, defining the point at which a strategy becomes "too complex" can only be done on an individual basis. In most cases, a technique should not be used when it is difficult for the trader to understand how he is going to profit, and in what way the risks involved can be reduced or eliminated. The reason most novice traders participate in complex positions is because they believe that a particular strategy entails lower risk or a higher probability of profit. The most popular example of this type of strategy is often referred to as "Combination" or "Spread" trading. Obviously, there is nothing wrong with trading complex option strategies. The most common techniques are sound and can be very profitable if implemented and monitored properly. The problems begin when inexperienced traders combine multiple positions without fully understanding the profit/loss dynamics or the potential implications of margin and collateral requirements. Many conservative investors are drawn to these techniques because of the apparent favorable odds. However, most participants fail to realize that strategies with low risk generally have limited potential. In contrast, techniques that appear most favorable (premium selling is a popular example) often have unlimited risk, if the market moves too far in one direction. There are several things to consider before entering into complex trading strategies. First, regardless of what you have heard (or read), there is no such thing as "risk-free" trading in the retail options market. I repeat, there are no option trading strategies, simple or complex, available to the general public, that guarantee profits, no matter how favorable the odds! With option trading, everything is relative and mathematical. Pricing and potential outcomes are based on statistics and historical probability. For example, a trader can buy inexpensive, out-of-the-money options for increased leverage but the probability of profit will be small. In contrast, he can sell deep-out-of-the-money options with a high expectation of a relatively small return in exchange for virtually unlimited risk. While entering a position with a high probability of success can be very comforting, the most important concept that new traders overlook is not the likelihood of a successful outcome but rather the extent of risk associated with an unexpected move in the underlying issue. To be successful in the options market, a trader must be able to accurately assess their individual experience level and avoid those strategies that are too complex. The primary considerations in evaluating a particular position are relatively simple. First, what is your reason for entering the trade? Second, what is the expected profit and the probability of achieving it? Third, how much downside potential does the strategy entail and what is the likelihood that maximum loss will occur? Finally, will the play need adjustments and if so, what type and at what point will they be initiated? If you cannot answer these simple questions before entering the trade, then the position should be avoided, no matter how attractive it appears. There are many intriguing techniques but when you enter a trade in which you are not fully aware of the potential outcomes or you are unprepared to deal with the negative consequences, you are using a strategy that is too sophisticated. In short, "Keep it simple, stupid!" 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 12.00 SEP 7.50 1.56 *$ 1.25 17.4% GSTRF 8.44 9.63 SEP 7.50 1.63 *$ 0.69 11.0% BOUT 37.63 44.25 SEP 35.00 5.00 *$ 2.37 10.5% SPLN 18.56 17.50 SEP 17.50 2.19 $ 1.13 10.0% PCTL 5.78 9.22 SEP 5.00 1.19 *$ 0.41 9.7% ASKJ 25.13 31.50 SEP 22.50 4.00 *$ 1.37 9.4% OSIP 45.56 48.00 SEP 40.00 7.75 *$ 2.19 8.4% LPTH 41.13 55.25 SEP 35.00 8.50 *$ 2.37 7.9% DRMD 5.72 6.56 SEP 5.00 1.13 *$ 0.41 7.8% PLNR 19.88 18.75 SEP 17.50 3.25 *$ 0.87 7.6% SGNT 12.00 10.50 SEP 10.00 2.63 *$ 0.63 7.3% PCTL 6.03 9.22 SEP 5.00 1.38 *$ 0.35 6.5% NOVN 35.00 41.75 SEP 35.00 2.88 *$ 2.88 6.5% DRXR 18.31 18.38 SEP 17.50 1.50 *$ 0.69 5.9% ECLP 12.00 13.88 SEP 10.00 2.75 *$ 0.75 5.9% SFAM 18.63 18.69 SEP 15.00 4.38 *$ 0.75 5.7% ROBV 13.63 12.44 SEP 10.00 4.13 *$ 0.50 5.7% XLNK 18.00 15.25 SEP 12.50 6.25 *$ 0.75 5.5% (DLK) ORG 14.38 16.25 SEP 12.50 2.75 *$ 0.87 5.4% FHS 16.06 17.31 SEP 15.00 1.94 *$ 0.88 5.4% CLPA 30.25 33.63 SEP 25.00 6.13 *$ 0.88 5.3% CCUR 14.63 17.63 SEP 12.50 2.69 *$ 0.56 5.1% ROS 15.75 14.00 SEP 15.00 1.88 $ 0.13 0.7% Closing *$ = Stock price is above the sold striking price. Comments: Rostelecom (ROS) continues to move lower and weaken technically. Next week, we will show the position closed - a "break-even" exit is a good thing! Noven Pharmaceuticals (NOVN) - now that is what I call a bounce off of the 50 dma! Monitor Sportsline.com (SPLN) and Sagent Tech. (SGNT) as they are both testing support levels. 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 VITR 48.94 SEP 40.00 TKU IH 9.88 340 39.06 12 6.1% MSTR 31.38 OCT 25.00 EOU JE 8.25 988 23.13 47 5.2% NETS 6.25 OCT 5.00 NTU JA 1.75 206 4.50 47 7.2% RHAT 26.69 OCT 22.50 RCV JX 6.00 75 20.69 47 5.7% TIVO 26.88 OCT 22.50 TUK JX 6.13 0 20.75 47 5.5% WDC 5.75 OCT 5.00 WDC JA 1.19 8553 4.56 47 6.2% WGAT 22.88 OCT 17.50 WAQ JW 6.63 55 16.26 47 5.0% Sequenced by Return ***** Stock Last Call Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return VITR 48.94 SEP 40.00 TKU IH 9.88 340 39.06 12 6.1% NETS 6.25 OCT 5.00 NTU JA 1.75 206 4.50 47 7.2% WDC 5.75 OCT 5.00 WDC JA 1.19 8553 4.56 47 6.2% RHAT 26.69 OCT 22.50 RCV JX 6.00 75 20.69 47 5.7% TIVO 26.88 OCT 22.50 TUK JX 6.13 0 20.75 47 5.5% MSTR 31.38 OCT 25.00 EOU JE 8.25 988 23.13 47 5.2% WGAT 22.88 OCT 17.50 WAQ JW 6.63 55 16.26 47 5.0% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, MR-Monthly Return. ***** SEPTEMBER EXIPIRATION ***** VITR - Vitria Technology $48.94 *** On The Rebound? *** Vitria is a leading provider of eBusiness infrastructure software. The company's flagship product, BusinessWare, provides the means to enable incompatible information technology systems to exchange information over corporate networks and the web. After two months of declines, Vitria is finally rebounding from its recent post earnings sell-off. While second-quarter revenues increased 400% from the year-earlier period, investors did not favor the rise in the company's "days-sales outstanding." The recently announced partnership with ActionPoint appears to be the catalyst for the recent rally. Vitria continues to enhance and strengthen its technology which should bode well for the future now that analysts and investors are realizing how important it is for the internal systems at businesses to coordinate with one another, as well as with the systems of online marketplaces. SEP 40.00 TKU IH LB=9.88 OI=340 CB=39.06 DE=12 MR=6.1% ***** OCTOBER EXPIRATION ***** MSTR - MicroStrategy $31.38 *** 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 last 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. This week, MicroStrategy announced it would cut 10% of its workforce, or 234 jobs, in an effort to lower costs by more than $25 million. We favor the opportunity to own this issue at a conservative entry point. OCT 25.00 EOU JE LB=8.25 OI=988 CB=23.13 DE=47 MR=5.2% ***** NETS - YouthStream Media Networks $6.25 *** Breakout! *** YouthStream Media targets the young adult market, with a specific focus on 18-24 year-old college and university students. NETS operates a national network of theaters on college campuses that delivers entertainment and educational events via satellite for display through high-resolution projectors or movie theater-sized screens. They also provide a comprehensive marketing service to advertisers and entertainment companies by helping them target young adults and college audiences. This week, YouthStream made another step towards profitability with the debut of a radically new sixdegrees.com, a leading young adult web community with over 3 million members. The wholly revamped site now includes the unique features of mybytes.com, YouthStream's college destination site, which will allow YouthStream to streamline operations and reduce operating costs. Somebody seems to like this move as the stock rallied strongly, with Friday's rally breaking through near term resistance. This position offers reasonable speculation on a bullish technical "breakout." OCT 5.00 NTU JA LB=1.75 OI=206 CB=4.50 DE=47 MR=7.2% ***** RHAT - Red Hat $26.69 *** The Linux Connection! *** Red Hat is a worldwide developer and provider of open source software products and services. Their product offerings include Red Hat Linux and other related tools, open source software applications, documentation, manuals and general merchandise. Professional services offerings include technical support and maintenance, custom development, consulting, training and basic education, developer support and hardware certification. The company is a leader in the Linux software industry, commanding almost 75% of the market. In a bid to increase its dominance, Red Hat recently disclosed plans to buy C2Net Software, the #1 company in the secure Web server market with a 30% share of the industry. On Wednesday, IBM, NEC, Intel, SGI, Dell Computer and Hewlett-Packard announced they are joining with major Linux companies to develop the operating system for high-end, multi- processor machines. The Open-Source Development Laboratory will provide a location for independent programmers to help the Linux system evolve into a major competitor in the industry. OCT 22.50 RCV JX LB=6.00 OI=75 CB=20.69 DE=47 MR=5.7% ***** TIVO - Tivo $26.88 *** On The Move! *** Tivo is a creator of personal television. The Tivo Service enables consumers control their television viewing by allowing them to watch what they want, when they want it. Using customer selected preferences, Tivo automatically records programs the viewer chooses to see, and enables them to pause, rewind, instant replay and playback in slow motion any live television broadcast. Lots of activity and speculation in this growing niche market and recent developments with Replay TV and Universal Pictures, which announced that it would launch a unique interactive television advertising campaign through the digital set-top box service beginning this fall, have brought traders to the group in droves. The new interest in the industry bodes well for TIVO, which has demonstrated that it's the clear market leader, and recently, the Nielsen Media Research Company has agreed to measure viewers of Tivo's personal video recorder service to determine the potential for the unique viewing/recording technology. We simply favor the technical recovery in the issue and the bullish outlook for the growing industry. OCT 22.50 TUK JX LB=6.13 OI=0 CB=20.75 DE=47 MR=5.5% ***** WDC - Western Digital $5.75 *** Cheap Speculation *** Western Digital is a manufacturer of hard drives used for information storage in desktop computers and home entertainment electronic products. Their hard drives are designed for the desktop PC market and the high-end hard drive market. Recently they have developed hard drives specially designed for audio- visual applications, such as new video recording devices. Disk Drive manufacturers have rallied strongly buoyed by optimism that companies in this sector may return to profitability in the second half of the year. The recent strength in the box-makers may be proof in the pudding. We simply favor the recent bullish move and the low risk entry point as WDC forges a stage I base. OCT 5.00 WDC JA LB=1.19 OI=8553 CB=4.56 DE=47 MR=6.2% ***** WGAT - WorldGate Communications $22.88 *** A Big Day! *** WorldGate Communications is the founder of the WORLDGATE Service, a television-based Internet product that delivers convenient, high-speed Internet access through cable television systems. WorldGate combines the cable infrastructure with the television platform so subscribers are able to reach the Internet without a personal computer or any additional phone lines. Viewers receive the Internet, interactive advertising and programming through a set-top box and a remote control or wireless keyboard. The new system is popular because it provides a simple user interface and is targeted at customers without computer experience, as well as net savvy users. In addition, Motorola's SURFview platform costs only $99 for the set-top box, enabling cable operators nationwide to provide Internet access at a very low monthly fee. WorldGate can also convert the user interface to the language and culture required for an international marketplace. Most recently, WGAT was rated a "new buy" at PMG with a 12-to-18 month target price of $75. OCT 17.50 WAQ JW LB=6.63 OI=55 CB=16.26 DE=47 MR=5.0% ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=377 ************************************************************** *********************** CONSERVATIVE NAKED PUTS *********************** Put Writing: Simple and Effective... By Ray Cummins One of our subscribers requested an explanation of the basic approach to selling Puts for monthly income and stock ownership. Put writing is designed to complement a stock-trading portfolio because it offers two methods for generating profits: collecting premium by selling out-of-the money options and/or acquiring a stock at a reduced price. In our current approach we focus on OTM options with average returns of 5-8% per month. We expect you to initiate our positions at or near the premium that is quoted in the play narrative. That's one way you can guarantee (initially) the overall return we are offering. The easiest way to utilize this section is to take our wide range of candidates and narrow them down through your own due diligence until you find plays that meet your risk-versus-reward tolerance. Always research the company and the calendar; upcoming events, earnings dates, scheduled announcements. When you have reliable, up-to-date information about a stock and its industry, you are way ahead of traders that buy and sell on rumors or comments from the message boards. Quite simply, "knowledge is power!" and with the tools on the Internet, there is no excuse for not being well informed about a company or its industry group. After you have selected a candidate, you must decide how much stock you are willing to potentially purchase through the sale of Puts. Usually it is a minimum of 5 to 10 contracts (to prevent commissions from significantly affecting the ROI) and we suggest that you place the opening order with your broker as a "limit" rather than a "market" because some of the positions are thinly traded. After you are filled, monitor the play until it expires or needs to be closed for other reasons. We track the portfolio on a weekly basis but we won't always make comments about current positions after the initial recommendation. The ongoing narrative is a service we provide to help novice traders understand when and why various plays might be opened and closed. It is not intended as a substitute for your personal trading techniques nor does it replace your duty to manage the positions in your portfolio. Early exits and adjustments... A (naked) Put position generally requires the underlying issue to remain above a specific price in order to generate profits. You must be confident of this outcome before initiating any play on our candidate list. In addition, anytime you participate in an option trade, you should know at what (stock) price the position will reach "break-even." You should also determine the price the underlying issue would have to reach to generate unacceptable losses. Ideally, you will enter a position and then simply wait for expiration. Unfortunately, it doesn't always work that way. To be successful on a consistent basis, option positions must be closed or adjusted if certain risk points are reached. You must be prepared to make these adjustments when they are needed, not after the position has moved beyond a reasonable loss level. Of course, this type of money management requires advanced planning and the discipline to execute predetermined strategies in adverse conditions, regardless of emotional instincts. With this form of trading, there is a large downside potential and and in many cases, failure to adjust a position in a timely manner can lead to catastrophic portfolio losses. We publish the classic "warning" paragraph in each week's play narrative for that reason alone. The last two sentences are paramount to success: "It is also important that you consider using trading STOPS on any 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." It is not uncommon for traders who have enjoyed a long string of winning positions to get "wiped out" by one bad play because they failed to limit their losses when the market moved against them. The problem is, the decision usually has to be made under duress, at the worst possible moment. The only way to avoid this fate is to develop a plan with a target exit (or adjustment) point, and stick to it. This requirement is difficult for new traders to adhere to but the simple fact is, professionals use proven money management techniques to maximize profits and limit losses and that's why they come out ahead in the long run. 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 CYTO 9.03 8.94 SEP 7.50 0.31 *$ 0.31 18.8% GSTRF 7.63 9.63 SEP 5.00 0.31 *$ 0.31 14.6% CTIC 39.25 47.31 SEP 30.00 1.38 *$ 1.38 13.0% IMAX 28.06 26.75 SEP 22.50 0.94 *$ 0.94 12.4% FNSR 29.00 46.00 SEP 22.50 0.94 *$ 0.94 12.1% ICIX 20.88 22.88 SEP 15.00 0.38 *$ 0.38 12.1% JDEC 21.88 25.75 SEP 17.50 0.69 *$ 0.69 11.8% LPTH 41.13 55.25 SEP 30.00 1.00 *$ 1.00 11.8% MSTR 26.88 31.38 SEP 20.00 0.44 *$ 0.44 11.0% FNSR 37.50 46.00 SEP 30.00 0.81 *$ 0.81 10.6% RHAT 23.44 26.69 SEP 17.50 0.50 *$ 0.50 10.5% GZTC 38.00 37.50 SEP 30.00 0.81 *$ 0.81 10.5% SIPX 37.50 43.88 SEP 30.00 0.75 *$ 0.75 9.9% DCLK 41.81 39.56 SEP 35.00 0.69 *$ 0.69 9.4% PL 28.19 28.75 SEP 25.00 0.50 *$ 0.50 8.4% SIMG 32.06 37.44 SEP 25.00 0.38 *$ 0.38 8.1% CLTR 26.56 30.00 SEP 22.50 0.38 *$ 0.38 7.9% TLXN 19.88 20.06 SEP 15.00 0.44 *$ 0.44 7.2% CRUS 27.44 31.31 SEP 22.50 0.50 *$ 0.50 6.6% CS 34.75 37.13 SEP 27.50 0.44 *$ 0.44 6.5% REGN 33.13 34.13 SEP 25.00 0.38 *$ 0.38 5.9% NDC 30.06 29.50 SEP 22.50 0.38 *$ 0.38 5.2% *$ = Stock price is above the sold striking price. Comments: Maybe this section should focus on buying calls rather than selling naked puts! (We never said we were humble...) 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 ADVP 27.38 SEP 25.00 QVD UE 0.44 16 24.56 12 12.3% MSTR 31.38 SEP 25.00 EOU UE 0.38 1327 24.63 12 14.3% TIVO 26.88 SEP 22.50 TUK UX 0.56 10 21.94 12 20.5% WGAT 22.88 SEP 20.00 WAQ UD 0.63 91 19.37 12 23.1% ALLP 16.50 OCT 12.50 QSV VV 0.50 85 12.00 47 8.5% STAT 20.00 OCT 15.00 TAQ VC 0.44 30 14.56 47 6.4% VITR 48.94 OCT 30.00 TKU VF 1.00 0 29.00 47 6.0% Sequenced by Return ****** Stock Last Put Strike Option Last Open Cost Days to Monthly Symbol Price Month Price Symbol Bid Intr Basis Expiry Return WGAT 22.88 SEP 20.00 WAQ UD 0.63 91 19.37 12 23.1% TIVO 26.88 SEP 22.50 TUK UX 0.56 10 21.94 12 20.5% MSTR 31.38 SEP 25.00 EOU UE 0.38 1327 24.63 12 14.3% ADVP 27.38 SEP 25.00 QVD UE 0.44 16 24.56 12 12.3% ALLP 16.50 OCT 12.50 QSV VV 0.50 85 12.00 47 8.5% STAT 20.00 OCT 15.00 TAQ VC 0.44 30 14.56 47 6.4% VITR 48.94 OCT 30.00 TKU VF 1.00 0 29.00 47 6.0% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, MR-Monthly Return. ***** SEPTEMBER EXIPIRATION ***** ADVP - Advance Paradigm $27.38 *** New Yearly High! *** Advance Paradigm is a comprehensive provider of health improvement services, providing its clients a wide range of pharmacy benefit management, disease management, clinical trials and research, web-based marketing support and other health related programs. They generate revenues by providing services to customers such as the Blue Cross Blue Shield plans, insurance companies, government agencies, employer groups, and labor unions. Advance Paradigm expects to complete its $1 billion acquisition of Rite Aid's PCS Health Systems no later than the first week of October and bringing PCS into the fold will catapult ADVP, now the fifth-ranked player in the industry, to the #1 position in the highly competitive business. When combined with PCS, Advance Paradigm will manage $16 billion a year in drug expenditures from more than 75 million insured people. The larger scale ADVP will be able to negotiate more favorable contracts and the resources will allow the company to grow other lines of business. Based on the technical activity in the issue, investors agree with the new outlook for the company. SEP 25.00 QVD UE LB=0.44 OI=16 CB=24.56 DE=12 MR=12.3% ***** MSTR - MicroStrategy $31.38 *** 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 last 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. This week, MicroStrategy announced it would cut 10% of its workforce, or 234 jobs, in an effort to lower costs by more than $25 million. We favor the opportunity to own this issue at a low-risk entry point. SEP 25.00 EOU UE LB=0.38 OI=1327 CB=24.63 DE=12 MR=14.3% ***** TIVO - Tivo $26.88 *** On The Move! *** Tivo is a creator of personal television. The Tivo Service enables consumers control their television viewing by allowing them to watch what they want, when they want it. Using customer selected preferences, Tivo automatically records programs the viewer chooses to see, and enables them to pause, rewind, instant replay and playback in slow motion any live television broadcast. Lots of activity and speculation in this growing niche market and recent developments with Replay TV and Universal Pictures, which announced that it would launch a unique interactive television advertising campaign through the digital set-top box service beginning this fall, have brought traders to the group in droves. The new interest in the industry bodes well for TIVO, which has demonstrated that it's the clear market leader, and recently, the Nielsen Media Research Company has agreed to measure viewers of Tivo's personal video recorder service to determine the potential for the unique viewing/recording technology. We simply favor the technical recovery in the issue and the bullish outlook for the growing industry. SEP 22.50 TUK UX LB=0.56 OI=10 CB=21.94 DE=12 MR=20.5% ***** WGAT - Worldgate Communications $22.88 *** A Big Day! *** WorldGate Communications is the founder of the WORLDGATE Service, a television-based Internet product that delivers convenient, high-speed Internet access through cable television systems. WorldGate combines the cable infrastructure with the television platform so subscribers are able to reach the Internet without a personal computer or any additional phone lines. Viewers receive the Internet, interactive advertising and programming through a set-top box and a remote control or wireless keyboard. The new system is popular because it provides a simple user interface and is targeted at customers without computer experience, as well as net savvy users. In addition, Motorola's SURFview platform costs only $99 for the set-top box, enabling cable operators nationwide to provide Internet access at a very low monthly fee. WorldGate can also convert the user interface to the language and culture required for an international marketplace. Most recently, WGAT was rated a "new buy" at PMG with a 12-to-18 month target price of $75. SEP 20.00 WAQ UD LB=0.63 OI=91 CB=19.37 DE=12 MR=23.1% ***** OCTOBER EXPIRATION ***** ALLP - Alliance Pharmaceuticals $16.50 *** New Trading Range? *** Alliance Pharmaceutical is a research and development company that focuses on developing scientific discoveries into medical products. It then licenses these products to multinational pharmaceutical companies in exchange for fixed payments and royalties. Alliance has developed three innovative products and is in, or has completed, their respective clinical trials. ALLP recently received notice from the FDA that its ultrasound contrast agent, Imagent, is "approvable." Imagent, first used in clinical trials to improve ultrasound images of the walls of the heart, is being developed by ALLP and Germany's Schering AG, and the "approvable" status is typically one of the final steps before the FDA grants clearance for marketing a new pharmaceutical product in the U.S. Alliance also announced earnings on Friday afternoon and we have yet to see how investors will react to the news. Wait for the direction of momentum to be decided next week before entering the position. OCT 12.50 QSV VV LB=0.50 OI=85 CB=12.00 DE=47 MR=8.5% ***** STAT - i-STAT $20.00 *** Back On Track? *** i-STAT develops, manufactures and markets medical diagnostic products for blood analysis that provide health care technicians with immediate and accurate critical diagnostic information. Their "i-STAT" System consists of portable, hand-held analyzers and single-use, disposable cartridges, each of which simultaneously performs different combinations of routinely ordered blood tests in approximately two minutes, providing a dramatic improvement in timeliness compared to lab processed testing. i-STAT recently announced that revenues for the quarter increased approximately 30% to $14.8 million, up from $11 million in the same period in 1999. Regarding the results, the CEO said, "Past quarter revenues and cartridge shipments reached record levels, and our net loss narrowed significantly." In addition, he is also optimistic about the balance of the year and i-STAT is accelerating the planned addition of production capacity to meet the anticipated growth in demand. That sounds like an excellent outlook for the future but we simply favor the bullish reversal and the long-term technical trend of the issue. OCT 15.00 TAQ VC LB=0.44 OI=30 CB=14.56 DE=47 MR=6.4% ***** VITR - Vitria Technology $48.94 *** Own This One! *** Vitria is a leading provider of eBusiness infrastructure software. The company's flagship product, BusinessWare, provides the means to enable incompatible information technology systems to exchange information over corporate networks and the web. After two months of declines, Vitria is finally rebounding from its recent post earnings sell-off. While second-quarter revenues increased 400% from the year-earlier period, investors did not favor the rise in the company's "days-sales outstanding." The recently announced partnership with ActionPoint appears to be the catalyst for the recent rally. Vitria continues to enhance and strengthen its technology which should bode well for the future now that analysts and investors are realizing how important it is for the internal systems at businesses to coordinate with one another, as well as with the systems of online marketplaces. OCT 30.00 TKU VF LB=1.00 OI=0 CB=29.00 DE=47 MR=6.0% ************************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 ************************************************************** ************************ SPREADS/STRADDLES/COMBOS ************************ Stocks earn a well-deserved Labor Day vacation... ****************************************************************** - MARKET RECAP - ****************************************************************** Friday, September 1 The market edged higher today as tame economic data convinced investors that the outlook for equities was favorable. The Dow closed up 23 points at 11,238 and the Nasdaq ended up 27 points at 4,234. The S&P 500 index finished relatively unchanged at 1,520. Trading volume on the NYSE reached 771 million shares, with advances beating declines 1,631 to 1,171. Activity on the Nasdaq was average at 1.47 billion shares traded, with advances beating declines 2,233 to 1,746. The 30-year Treasury closed up 4/32, pushing its yield down to 5.66%. Thursday's new plays (positions/opening prices/strategy): Engage ENGA DEC12C/DEC15C $1.19 debit bull-call Engage ENGA DEC-10NP $1.69 credit naked put Novell NOVL NOV10C/OCT12C $1.88 debit diagonal Both of these issues dipped during the session, allowing entries at the target prices. A pleasant note from one of our readers suggested that one possibility for the recent move in NOVL could be the article in the Gildertech report, which was released in mid-August. Apparently, it was a very positive article and it outlined the new direction of the company. Portfolio Plays: Stocks continued to rally today even as volume faded ahead of the long holiday weekend. Favorable jobs data provided signs of a slowing economy and analysts expressed views that the FOMC is unlikely to raise interest rates for the remainder of the year. The U.S. non-farm payrolls fell 105,000 in August, which was well above the estimated decline of 15,000. At the same time, jobs rose 140,000, well below the anticipated 190,000 increase. Meanwhile, the NAPM index fell to 49.5 in August, from July's 51.8 reading. A number below 50 indicates that the economy is contracting. In addition, U.S. construction spending fell for the fourth consecutive month and analysts say the indications are favorable for the economy in the long run. On the Dow, Hewlett-Packard (HWP), General Motors (GM) and International Business machines (IBM) led the gainers while J.P. Morgan (JPM), Intel (INTC) and Citigroup (C) slipped lower. On the Nasdaq, semiconductor and Internet stocks suffered from profit-taking but the majority of groups edged higher. In the broader market, retail stocks were particularly strong after weakness in recent sessions. Our portfolio enjoyed a number of bullish moves and most of the activity came in technology issues. EchoStar (DISH), the #2 satellite-television provider, jumped over $4 to $53 after the company said it plans to offer customers free equipment and installation when they agree to buy programming for one year. EchoStar is offering its promotion to compete with DirecTV, the #1 satellite-TV company, and also to win customers from cable-TV leaders, such as AT&T, that are introducing digital service with hundreds of channels, improved picture, and sound quality. Our debit spread combination is now trading at a $4 profit. Red Hat (RHAT) continued higher on momentum from the recent announcement of a new commitment from computing heavyweights to develop the Linux operating system. Our bullish combination position is approaching maximum profit. A number of big-cap technology stocks moved higher during the session. Phone.com (PHCM) and Qlogic (QLGC) were the leaders and Voicestream (VSTR) bounced back, finishing up almost $7 at $119. Infocus (INFS) and Vitria (VITR) topped the group of computer hardware/software issues and in the biotech sector, Protein Design Labs (PDLI) rebounded almost $5 to end at $80. Polycom (PLCM) split 2-for-1 but the stock continued higher after the new shares were issued. Our bullish, combination position is at maximum profit with the share value above $60. The credit strangles in PMC Sierra (PMCS) and Sapient (SAPE) are trading inside the sold positions, but the slump in SAPE shares is threatening to take that position into negative territory on the bullish side of the play. We will monitor the position closely in the coming sessions. The rally in the finance group appears to be coming to an end and with profits in a number of positions, we have decided to close the remaining plays in that category. Ameritrade (AMTD) provided a $0.50 return in the CALL portion of the synthetic position. The sold PUT at $15 is expected to expire worthless. Countrywide Credit (CCR) began to slide early in the session and we decided to take the remaining profit in the position. The bullish diagonal spread provided a $1.00 profit on $6.25 invested. In the healthcare services sector, Caremark RX (CMX) edged up $0.62 to $10.43 and our conservative diagonal spread is offering a $1.12 credit, with over three months remaining until the long option expires. On the downside, Anheuser Busch (BUD) started lower at the open and rather than ride the failing issue to expiration, we exited the bullish credit spread at a small loss. We hate to end the chance for recovery with so much time remaining but in this case, the technical indications suggest a bearish trend is beginning. The day's movement did provide a modest credit in our closing transaction and traders that decided to leg out of the position on the downside should expect to achieve additional gains in the coming sessions. Of course, many times we close a play early for a small loss and then Murphy's Law comes onto the scene and the play unexpectedly recovers for our subscribers. Our Reader's Request positions have not fared very well this month. Polaroid (PRD) has retreated to recent lows and the optimistic outlook has faded with the company's waning revenues. Lucent (LU) managed a small technical recovery in today's session but the issue has yet to establish the renewed up-trend that other stocks in the group are experiencing. Questions & comments on spreads/combos to Contact Support ****************************************************************** - NEW PLAYS - ****************************************************************** TKTX - Transkaryotic Therapies $39.34 *** Speculation! *** Transkaryotic Therapies is a biopharmaceutical company that is building a broad and renewable product pipeline based on three proprietary development platforms: Gene-Activated proteins, Niche Protein products, and Gene Therapy. The company currently has four products in clinical development: a unique, gene-activated erythropoietin (GA-EPO) in Phase III trials for the treatment of anemia; a second gene-activated protein (GA-II) in a Phase I trial; Replagal (alpha-galactosidase A or alpha-gal) completed Phase II trials for the treatment of Fabry disease; and Factor VIII therapy in a Phase I trial for the treatment of hemophilia A. The company has entered into collaborations with Aventis Pharma with respect to its first two Gene-Activated proteins, and with Sumitomo Pharmaceuticals for Replagal in Japan, and with Genetics Institute for Factor VIII gene therapy in Europe. Options have been very active in this issue in recent sessions as there is potential for a resolution soon in the primary patent infringement trial between Amgen (AMGN) and Transkaryotic over Amgen's Epogen anaemia drug. Amgen sued TKTX in 1997 seeking to defend its patents covering the making and selling of Epogen, a drug that uses erythropoietin to boost red blood cells and combat anaemia. TKTX says its EPO drug, which it wants to market under the name GA-EPO, does not infringe Amgen's Epogen patents. The testimony in the trial is complete, except for two witnesses that TKTX wants to question, but who cannot appear until September for personal reasons. The trial is expected to resume on September 5 at the earliest but time is running short. U.S. District Judge William Young allotted 20 trial days for the case and fewer than three days of trial time remain. The lawsuit may or may not be decided prior to option expiration and we are going to speculate on the outcome with this bullish position. In this unique combination, we are going to take a bullish stance, selling the $25 Put for a premium of approximately $1.62. In the event of a negative outcome in the court case, the ensuing drop in TKTX's share value may be substantial. If the stock price falls significantly, the profits from the debit spread will help offset some of the potential loss in the (sold) Put position. PLAY (aggressive - bullish/combination position): SELL PUT SEP-25.00 UFT-UE OI=282 B=$1.62 BUY PUT OCT-22.50 UFT-VX OI=45 A=$1.93 SELL PUT OCT-20.00 UFT-VD OI=100 B=$0.93 INITIAL NET CREDIT TARGET=$0.62 ROI(max)=18% ****************************************************************** SIRI - Sirius Satellite Radio $52.13 *** Media Group! *** Sirius Satellite Radio is building a subscription radio service that will broadcast up to 100 channels of audio entertainment directly from satellites to vehicles throughout the continental United States. Sirius Radio will offer a wide selection of music formats and program types; commercial-free digital quality music; and nearly seamless signal coverage across the continental United States. Sirius Radio will be broadcast over a frequency band, the "S-band," which will augment conventional (terrestrial broadcast) AM and FM radio bands. The company holds one of only two licenses issued by the Federal Communications Commission to build, launch and operate a national satellite radio broadcast system. Their service will offer 50 channels of commercial-free, digital quality music programming and up to 50 channels of news, sports, talk and entertainment programming. They expect to commence broadcasting at the end of the fourth quarter of 2000. Sirius shares slumped last week after the company said its backup satellite was damaged during production. The satellite, Sirius-4, was damaged by Loral Space and Communications and although Loral will be responsible for the cost of repairs, the lack of a spare would reduce the chances of a successful deployment later in the year. Sirius said it needs three satellites to complete its radio system and the remaining two are scheduled to go up in the next 60 days. One analyst following the company said the satellites will be launched from Kazakhstan by a Proton rocket which has a great reliability rate. The Proton has succeeded in all nine of its launches this year and it is unlikely the spare will be necessary. The analyst maintains a "strong buy" rating on the company, with a 12-month target price of $100. While we don't see $100 in the near future, $40 seems like a reasonable price at which to speculate on the near-term movement of the issue. PLAY (conservative - bullish/credit spread): BUY PUT SEP-35 QXO-UG OI=90 A=$0.56 SELL PUT SEP-40 QXO-UH OI=699 B=$1.06 INITIAL NET CREDIT TARGET=$0.62 ROI(max)=14% B/E=$39.38 ****************************************************************** - TECHNICALS ONLY - These plays are based on the current price or trading range of the underlying issue and the recent technical history or trend. The probability of profit from these positions is also higher than other plays in the same strategy based on disparities in option pricing. Current news and market sentiment will have an effect on these issues. Review each play individually and make your own decision about the future outcome of the position. ****************************************************************** NSPK - Netspeak $11.94 *** Very Cheap Speculation! *** NetSpeak Corporation develops, markets, and supports advanced telephony solutions for Internet Protocol (IP) networks. The company's solutions include Phone-to-Phone, PC-to-Phone, Voice E-commerce and Internet Call Waiting. Their unique products include its suite of call management software. The company's call management platform enables service providers to quickly, easily, and cost effectively deploy multiple revenue-generating IP telephony applications. NetSpeak's call management platform offers enterprises the ability to reduce long distance calling charges. The primary end-users of the company's products and solutions are service providers, including traditional and new telecommunications carriers, business enterprises, cable companies and OEMs. Netspeak is in one of the high growth sectors of the market but in the past few months, the issue has fallen from grace, losing over 75% of its share value. Now the company appears to be "back on track" and with the recent investor interest, it may not be long before the stock returns to its old trading range. Traders who support a favorable, long-term outlook for Netspeak can use this synthetic position to profit from upside activity, at the risk of owning the issue at a favorable cost basis. PLAY (conservative - bullish/synthetic position): BUY CALL NOV-20.00 NNQ-KD OI=152 A=$0.38 SELL PUT NOV-7.50 NNQ-WU OI=93 B=$0.31 INITIAL NET CREDIT TARGET=$0.06-$0.12 ROI TARGET=50% B/E=$7.38 Note: Using options, the position is equivalent to being long on the stock. The collateral requirement for the naked put is approximately $275 per contract. ****************************************************************** - STRADDLES AND STRANGLES - ****************************************************************** SDW - Southdown $62.31 *** Merger Speculation Continued... *** Southdown operates cement manufacturing plants located across the United States, plus an extensive network of cement distribution terminals. Southdown also mines, processes, and sells various construction aggregates and specialty mineral products in the eastern half of the United States and in California. The company also installs highway safety systems such as guardrails, traffic signals, highway signage and lighting. In addition, Southdown markets ready-mixed concrete products in two of its largest cement markets, California and Florida. The most recent activity in Southdown began in late July amid hopes that an investment by France's Lafarge (LAF) in Portuguese cement company Cimpor, would help to keep Cimpor independent and free to make a takeover bid for Southdown. Earlier in the year, Cimpor had been preparing a takeover bid for Southdown with the help of Brazil's Votorantim. Unfortunately, Cimpor itself became the target of a takeover bid from Portuguese rival Secil, owned by Semapa, and Swiss giant Holderbank Financiere Glarus AG. Cimpor eventually suspended its talks with Southdown and now the company faces a long battle in its effort to thwart Secil's recent bid. In mid-August, Swiss cement giant Holderbank, recently thwarted in the takeover bid for Portugal's Cimpor, reaffirmed that it remains interested in winning control of the cement group. The company is expected to compete for a 15% stake that the government will sell at the coming auction of the remaining state holdings. Lots of activity in the group but for now it appears that Southdown will go it alone and we will continue to sell premium on the issue until a buy-out offer occurs or the recent chart pattern changes substantially. PLAY (aggressive - neutral/credit strangle): SELL CALL SEP-65 SDW-IM OI=1579 B=$1.50 SELL PUT SEP-60 SDW-UL OI=250 B=$1.38 INITIAL NET CREDIT TARGET=$3.00 ROI(max)=19% UPSIDE B/E=$68.00 DOWNSIDE B/E=$57.00 Note: If you want to participate in the position but don't have the ability to sell naked calls, consider a call-credit spread for the bearish portion of the play. The long option (SEP-$70) will limit the potential for loss on the upside and reduce the overall collateral requirement for the position. ***********************ADVERTISEMENT************************ Save Up To 80% Off At Everything Wireless! 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