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Daily Newsletter, Wednesday, 11/22/2000

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The Option Investor Newsletter                Wednesday 11-22-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        11-22-2000        High      Low     Volume Advance/Decline
DJIA    10399.30 - 95.20 10493.30 10371.60  969 mln    939/1831
NASDAQ   2755.37 -116.11  2872.64  2754.14 1.89 bln   1065/2882
S&P 100   700.72 - 12.98   713.75   700.39   totals   2004/4713
S&P 500  1322.36 - 24.99  1346.66  1321.89           29.8%/70.2%
RUS 2000  457.90 -  8.89   466.79   454.26
DJ TRANS 2799.55 - 52.37  2851.92  2788.42
VIX        31.21 +  2.28    31.68    29.39
Put/Call Ratio      0.83
******************************************************************

Tale of the tape, Nasdaq new highs 12, new lows 615.

The markets did not like the Florida Supreme Court decision to
allow the recounts to continue and the reaction this morning was
swift. The election has been playing out like a daytime soap opera.
Just today for instance, the Supreme Court overruled Florida law
to allow selective recounts to continue and be counted. Gore made
a speech with a completely new tone and stopped just short of a
victory speech. The pendulum swung 100% in his direction. Then
Cheney is admitted to the hospital with a heart attack. Bush makes
a speech which could have been a concession speech and acted as
though the election was over because the law had been broken.
Then Miami-Dade decided to stop the recount. The pendulum swung
back again. Gore is hysterical and now threatening to sue everybody.
"We only want the law to be followed." Funny, they did not want
the law to be followed the day before. Now the focus is even more
on the absentee votes and the new war begins. Wait, the pendulum
swings back again, the dimple votes now count! Suddenly Gore is
the assumed winner again and the speeches are sugar coated with
righteousness and legal superiority. If a play writer had scripted
this event for TV it would have been impossible to anticipate all
the twists and turns that occurred in this real life drama. The
end result of course was yet another serious market sell off as
the indecision not only lingers but intensifies. The selling
continued after hours after the dimple decision. A sure sign
that the markets wanted Bush and not Gore. If the dimple decision
stands then Friday could be rocky again.










The tale of the tape was a nightmare not a bedtime story. With
advances being beaten significantly by declines on heavier than
expected volume for the day before Thanksgiving the outlook is
grim. The incredible imbalance of the Nasdaq new highs (12) to
the number of new lows (615) is staggering. There was no rally
into the close as you would expect. With the day after turkey
day up about 87% of the time the trend would be to buy the close
and sell on Friday. Even the hardiest of traders skipped that
program this year. The Nasdaq closed at the low of the day and
the Dow faired only slightly better with a close less than a
point under support at 10400. The Nasdaq has now lost -9% in
the last three days.

The selling was intensified after several earnings reports on
Tuesday carried over into today's trading. Portal Software,
PRSF, announced earnings Tuesday and did not please investors.
Four analysts downgraded PRSF today on the basis of lackluster
revenue. PRSF lost almost -$12 or -64% of its value to close at
$6.69. This revenue shortfall hammered the rest of the software
stocks as guilty by association. Intuit also added to the selling
after warning that lower sales were in their future. NEON fell
even farther after the news from Tuesday that they took stock
instead of cash in exchange for software. They lost another -2.75
to close at $6.63 after dropping from over $20 on Tuesday. CFLO
followed through with Tuesday’s after hours drop with a -$39 drop
today. Reactions like this are making investors very skittish.
There was a rumor today that even GE was going to warn in December
and they dropped over -$2. Come on, GE? If they warn it is
lights out on any fourth quarter rally. GE strongly denied the
rumor and said they were comfortable with estimates. Don't look
now but Yahoo took another hit today with another analyst warning
that the future may hold an earnings warning. YHOO dropped another
-3.50 to $38.19. The rumors are continuing that YHOO will start
charging for services soon to replace falling advertising revenue.

The pregnant chad ruling aborted the recent rally by MSFT which
dropped around -$1 in after hours trading. As the outcome is
more clearly seen as a possible Gore win the MSFT gains have
been changing dramatically on a daily basis. With $3 gains and
losses on alternating days depending on the news, MSFT has been
seen as a proxy for the election outcome. A Bush win has been
seen as a kinder gentler Justice Dept and a Gore win as lights
out for the software company as we know it.

I am going to cut this short tonight since tomorrow is a holiday
and Friday is a short day. My bullish side is broken and bleeding
but still optimistic about the rest of the year. Unfortunately
the bears are queuing up for yet another round and all the votes
are pointing to them as probably the winner of the next round.
The S&P-500 closed at a 52-week low dating back to mid-Oct 1999.
The Nasdaq hit another 52 week closing low. The Dow closed right
on the 10400 support line I drew last night. The intraday Nasdaq
held 2750 on three attempts. My bullish bias is trying vainly to
hang onto that fact as the possibility of a bottom. Unfortunately
bottoms are not formed with 615 new closing lows. I looked at
a several hundred charts today and there were only a few, less
than 20, that appeared to have bottomed. Most were biotechs.
The rest of the charts looked like a very strong PUT candidate
list. This was not encouraging.

While the election is given as the primary reason for the market
drop it is really the earnings picture that is causing the problem.
This will not go away just because a president is chosen. The Fed
has raised rates six times in the last year with the last hike in
June. It takes 6-9 months for each hike to filter through the
economy. This means several hikes have yet to be fully felt. The
same is true with rate cuts and with the next cuts now expected
in the first or even second quarter of next year the outlook for
earnings is shaky. The financials, normally perceived to be a
leading indicator of a broad market rally, are heading south at
a high rate of speed based on the earnings picture. The market
rallied on the news of the Miami-Dade decision to stop the recount
but quickly sold off when it was apparent that the final results
could now drag out two or three more weeks with legal battles.
Earnings warning season starts again in a week and tax selling
season for individuals and institutions will start picking up
speed in December if the market does not show a pulse soon.
The picture I am painting here is one of multiple factors
impacting the market negatively. There is no positive news.
The market needs positive news to rally.

The only bullish points continue to be the amount of money piling
up on the sidelines. We are getting closer daily to the massive
amounts of money that pour into funds from retirement contributions
at year end. Add this to the hundreds of billions still idle due
to the down market for the last several months and you have a real
possibility for a strong rally. The question is when. As long as
all the major stock charts end on the bottom right hand corner of
the page these fund managers will wait. They do not get paid to
try and pick bottoms. They get paid for results and they want
someone else to get bloody trying to catch those falling knives.
When the trend reverses they will invest, not until then. Our task
as traders today is to do exactly the same thing. We need to see
a bottom and a rebound before committing our funds. Yes, some
of you will end up being chad on some trading floor from jumping
in before the bottom and some of you will be lucky enough to
actually pick the bottom.

Our task as call only players is to wait for a clear direction
before starting new plays. We have had enough bear trap trading
rallies in the last three months to train everyone to wait for
confirmation of a real rally before committing the majority of
your funds. Sure you can speculate before then if you want but
do it sparingly. Save your major purchases for the real thing.
For those of you who can play puts the good news is our put pick
list recently has been doing very well. I am sure you have noticed
we have been very overweight in Puts lately and for good reason.
The highlights this week include VRSN -$28 since picked, NEWP -20,
SLR -11, ARBA -10, HAND -8.50.  There is money being made daily if
you are playing the right side. From surveys I know most of you
don't play puts and that is okay. It just means you need to be
more patient in waiting for the bounce. We are very oversold and
pressure is building. It may not be Friday but there has to be a
pressure relief rally soon. Think about it, did you really want
to trade on Friday anyway? Eat some turkey, take a nap, make out
your Christmas list. Yes, you can put some SDLI, JNPR, PDLI calls
on that list but don't rush out and buy them just yet!

Good luck and don't buy too soon.

Jim Brown
Editor


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*************
NEW CALL PLAY
*************

EXTR - Extreme Networks $70.25 +0.25 (-3.06 this week)

Extreme Networks is committed to delivering switched broadband
networks that adapt swiftly to change and empower the delivery of
future applications for service provider data centers, networks,
Web content providers, and e-commerce businesses.  Extreme
leverages Ethernet and the Internet protocol - today's most
dominant and stable network technologies.

The Networking sector has been hit hard recently over concerns of
slowing telecom spending and subsequent analyst downgrades.
However, despite the recent attacks, EXTR has been mounting a
recovery.  Since establishing support at $63 early Monday
morning, (after having its price target lowered by Morgan Stanley
Dean Witter) EXTR has been climbing back in the face of a weak
overall Tech sector.  In fact, the stock has managed to close
with gains in the last two days, while the NASDAQ continued to
trace lower lows.  With the possibility of an oversold rebound,
or a relief rally transpiring in the NASDAQ in the coming days,
EXTR's recent strength could very well portend higher prices in
the near-term.  We'll be looking for EXTR's recent relative
strength to boost the stock further with cooperation from the
broader Tech sector.  There are several possible entry
strategies for this play.  First, look for EXTR's recent pattern
of higher relative lows to hold and consider entering new
positions on a pullback to support at the 200-dma at $69, or
slightly lower near the $68 level.  Also, consider entering
new positions at current levels only if the NASDAQ and
Networking sector show signs of strength.  Use EXTR's
competitors CSCO, JNPR, and RBAK as confirmation.  Finally,
for the more conservative traders, watch for EXTR's rebound
to build steam and consider entering on a breakout above
resistance at $73, but make sure to confirm strength in the
NASDAQ and aforementioned networkers.  In light of the market's
nervousness and EXTR's volatile trading, we're giving the
stock room to operate and will set our stop at the $63 level -
EXTR's relative low traced last Monday.

BUY CALL DEC-65 EUT-LM OI= 405 at $11.38 SL= 8.25
BUY CALL DEC-70*EUT-LN OI=2143 at $ 9.00 SL= 6.25
BUY CALL DEC-75 EXR-LO OI= 577 at $ 7.88 SL= 5.75
BUY CALL JAN-70 EUT-AN OI=   4 at $14.00 SL=10.50
BUY CALL JAN-75 EXR-AO OI=  34 at $11.75 SL= 9.00

http://www.premierinvestor.com/oi/profile.asp?ticker=EXTR

CELG - Celgene $56.75 +2.25 (+4.63 this week)

Celgene is a pharmaceutical company with a major focus on the
discovery, development and commercialization of small molecules
for cancer and immunological diseases.  Celgene's medical
research and development team is working to extend the boundaries
in the areas of small molecule immunotherapeutic and biocatalytic
chiral chemistry by developing pure versions of existing drugs.

Despite the recent weakness in the broader markets, CELG has
continued along its path of relatively higher lows.  The simple
fact that CELG has managed to hold up during the recent market
turbulence bodes well for an extended rebound.  The stock
recently rebounded off its 200-dma at the $50 level and looks
poised to trade higher.  In fact, CELG tacked on a respectable
gain in Wednesday's session despite another triple digit loss
on the NASDAQ.  What's more, several of CELG's competitors in
the Biotech sector managed to follow suit with impressive
relative strength.  As we search for entry points into this
new play, it may be conducive to monitor those very competitors
and their trading before initiating positions in CELG.  Watch
the action in AMGN, CHIR, and MEDI for signs of sector
strength.  After confirming strength in the aforementioned,
traders might consider entering new positions in CELG on a
breakout above resistance just above at $57, or wait for a
volume-backed move above resistance at $58.  On the other
hand, should CELG pull back on light volume selling, consider
target shooting for entries on bounces off key support levels.
Look first for CELG to bounce off support at $55, or slightly
lower near the $53 level.  We'll set a protective stop lower
at the $49 level, which is the site of CELG's double bottom
traced during the past two weeks.

BUY CALL DEC-50 LL-LJ OI= 57 at $9.63 SL=6.50
BUY CALL DEC-55*LL-LK OI=187 at $6.88 SL=5.00
BUY CALL DEC-60 LL-LL OI=410 at $4.50 SL=2.75
BUY CALL JAN-55 LL-AK OI=248 at $9.63 SL=6.50
BUY CALL JAN-60 LL-AL OI=753 at $7.50 SL=5.25

http://www.premierinvestor.com/oi/profile.asp?ticker=CELG


***********
DAILY DROPS
***********

GE $48.56 -2.19 (-3.31) The rumor mongers were out in full force
today and caused detrimental damage to our long-term GE play.
The bears spread rumors this morning that GE would issue a
profit warning for its upcoming fourth-quarter.  Although
officials at GE adamantly denied the rumor, the damage had
been done.  The sellers drove GE below our $50 stop level, and
forced us to drop the play tonight.  If today's rumor is soon
forgotten, GE could easily rebound back above the $50 level.
However, we are no longer initiating new positions.

ADIC $16.31 -0.63 (-1.81) Analysts at First Security initiated
coverage on ADIC with a Buy rating this morning, and added a
12-month price target of $30.  Despite the positive praise
from analysts, ADIC couldn't fend off the bears in the Tech
sector and traded lower.  The selling came with little
conviction though, as today's volume was half of ADIC's ADV.
That said, the stock could rebound quickly if the buyers
return in Friday's shortened trading session.  However, we
are no longer covering ADIC as the stock closed below our
stop at the $17 level.

MSFT $68.25 +0.50 (-0.81) Although MSFT was able to fend off
most of the sellers today and finish slightly higher, we are
dropping the play tonight amid continued election uncertainty
and broader weakness in the Software sector.  MSFT rallied on
the news of the halt of hand recounts in Miami-Dade this
afternoon, but shed some of those gains after Gore's camp
responded.  Furthermore, the stock slipped further in the
afterhours session as the election uncertainty mounted.  We're
preserving the gains we've worked hard for in MSFT and closing
the play tonight.  Look to exit existing positions on strength,
with a rally up to the $69 level providing a good closing
level for our play.  Additionally, pay heed to the sentiment
surrounding the election Friday when searching for exit points.

QCOM $78.88 -8.63 (-9.94) The bulls that we've been trading
with in QCOM left early for the holiday and left the bears free
reign.  The gains we had worked so hard for since picking up
QCOM early last week were quickly erased today as the stock
fell through several key support levels, including our recently
raised protective stop at $81.  Although QCOM rebounded well
off its day low at $78 this afternoon, the stock's close below
our stop, and weakness in the final moments of trading today
leave us no choice but to drop the play tonight.  Look to exit
positions on any strength Friday, which may transpire in the
form of a relief rally.  Conversely, if QCOM continues falling,
consider jumping ship if the stock trades below its intraday
low of $77.50.

CTXS $25.63 -2.38 (-5.25) Our CTXS play was prematurely ended
today as the stock fell in sympathy with the Portal Software
(PRSF).  Anything software, particularly Internet-related,
fell in sympathy with PRSF, which dropped an astounding 63%
after providing bearish guidance.  The bad news caused the
recent CTXS buyers to step aside ahead of the holiday and
let the stock fall under the sellers control.  CTXS attempted
to mount a rally midday and recover its earlier losses, but
failed as the sellers regained control and took the stock
lower into the close of trading.  CTXS finished the day well
below our protective stop at the $27 level, and if the stop
didn't get out, we'd look to exit existing positions on any
strength Friday morning.  Watch for the stock to bounce off
support at $25.50 and look for exit points near resistance
at $26, or higher around the $27 level should the Tech
sector rebound.

JBL $43.00 -2.56 (-5.31) The weakness in the Philly
Semiconductor Index (SOX.X) finally caught up with our JBL
play and dragged the stock below our stop price at $44.
There was no monumental news to induce the sell-off in JBL
today, rather sector weakness.  The stock fell on volume
that was rather light.  However, JBL did trade higher in the
afterhours session.  In fact, the stock traded as high as
$44.50 on decent volume for a pre-holiday afterhours
trading session.  If tonight's trading is a sing of things
to come on Friday, JBL could be headed for a quick rebound,
which we'd use to exit positions if the close below our
stop at $44 today didn't already do so.


*****************
STOP-LOSS UPDATES
*****************

No stop adjustments today


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

Revisiting Pivot Points
By Mary Redmond

While it has been difficult for traders to profit from taking
positions in this market, there have been many opportunities for
substantial short term profits in trading pivot points.

It is difficult to profit from taking long positions in this
market environment.  Although many individual puts have been
profitable, many strategists have stated that the market is
at or approaching an oversold condition, and is due to rally.

In addition, many beginning traders and some experienced traders
may prefer to trade calls or long positions simply because it
feels more natural.  Almost all optionable stocks have a larger
outstanding interest in call options than in put options.  In
many ways, a rising market seems more natural to people.  A
falling market defies our sense of social order.  When you look
at very long term charts of the Dow and S & P 500, the trend
is up, with a few down turns along the way.  Most people feel
more comfortable looking at the market from the perspective
that it should rally over time.

Everything in the market is an exaggeration.  We have overbuying
on the up side, and overselling on the down side.  As traders,
we want to pin point the key over bought and over sold levels
and use them to our advantage.

Analysts are still divided about whether we will have a soft
landing or a hard landing.  Right now, the market seems to be
anticipating the worst case scenario, an economy which is
destined to crash and the Fed acting like a deer in the
headlights.  It seems that any positive news from the Fed would
likely cause serious short covering.  This might come after
the election is decided.  The Fed may have been hesitant to
hint of policy changes without knowing what policies a new
Treasury Secretary would implement, or what fiscal policies
a new President would try to pass.

A pivot point occurs when a stock has been selling off for a
period of time.  At some point, the selling abates and buyers step
in.  Almost every stock has a strong support point at which
buyers enter the market, unless some news has been released
which states that the stock is destined for bankruptcy.  I learned
about pivot points from an OIN sponsored seminar I attended last
April, and I have found that it is one of the most reliable, low
risk trading strategies for short term daily trading.

A pivot point has several key characteristics.  One is a tweezer
bottom, with a bearish candlestick followed immediately by a
bullish candlestick.  Ideally, the bullish candlestick should
engulf the bearish, which means it should be longer and taller.
At this point, the stock stops selling off, and immediately turns
around.  This usually occurs at a critical support level for the
stock, which is often at one of the longer term moving averages.

The short term technical indicators should indicate that a move
to the upside is likely.  The stochastic oscillator should be
heading higher, with both the short term and long term lines.
The MACD histogram should be moving to the upside after
finishing a downside movement.  I set the time settings on 10
or 15 minutes for short term trading.

Pivot points are often characterized by a movement of the
stock out of its Bollinger bands, or short term trading range.
Stocks sometimes move out of the Bollinger bands if the
company has breaking news, like an earning surprise, and in
these circumstances, the bands often expand to accommodate the
move.  The Bollinger bands are often insufficient indicators
used alone, but can be highly accurate when used in combination
with other indicators







Ideally, a pivot point should accompany a turning point inboth
major indexes, as it is more difficult to trade fighting
the trend of the market.  The Nasdaq has exhibited strong
support at the 2750 level over the last couple of weeks,
although it is certainly possible that this level could be
penetrated.  If the major indexes appear to be turning around
from a critical support level, the probability of success in
a pivot point increases.

The market really wants closure in this election, but we may
need to consider that the ruling of the Florida justices
indicated that Florida’s electoral votes would almost certainly
be determined by Dec. 12.  We should have an answer this
weekend.  We need to start considering that the market might
be worrying about what happens after the election.

The Fed’s cycle of interest rate hikes in 1994, and subsequent
rate cut in 1995, fueled a strong rally in the S & P 500 from
1995 to 1998.  Many market watchers and analysts are hoping
for and expecting a replay of the 1995 rally next year.  It
seems likely, if we have a replay of the other factors.  One
is a decreasing rate of inflation, measured by the CPI.
Another is stable or decreasing interest rates.  Another
important factor is liquidity.

The markets stayed flat in 1994, while we have had one of the
worst bear markets in decades this year.  This year may have
been worse than 1994 because of the Y2K liquidity increase
and subsequent drain, and the flood of IPOs and corporate debt
issued in 1998 and 1999.   Not only did this drain liquidity
from the system, but the corporate debt rates are now so high,
and the IPO market is so dry, that it is becoming almost
impossible for small company stocks to get financing. The patient
(the market) went into the hospital for treatment of a cancer
(inflation) and it seems the chemotherapy almost killed the
patient. So we may need some more nurturing from the Fed to coax
the market back to health.

However, while the psychology of the market is poor right now,
we have a record level of cash in US money market funds
of $1.8 trillion.  Over $100 billion was deposited to money
market funds since August, and the cash keeps pouring in.
$24 billion was deposited since Oct 25.  The money market fund
levels and corporate debt rates usually spike when the VIX.X
rises, indicating a high level of fear.  While it seems as if
the bull market has run out of gas, retail and institutional
investors have enough cash on the sidelines to rally the
market at a moment’s notice.  All we need now is a catalyst.


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

TQNT - TriQuint Semiconductor $42.13 -1.06 (+2.56 this week)

TriQuint's standard products include high-performance, low-cost
digital, analog and mixed signal GaAs RFICs which are used in a
wide variety of communications systems. The company also provides
applications-specific and custom circuit solutions for major
communications system original equipment manufacturers (OEMs).

Most Recent Write-Up

With wireless giant Qualcomm moving higher as of late, TQNT seems
to be following in its footsteps, despite general weakness in the
Tech sector.  Strength in a soft and uncertain market is a good
sign, especially when backed by strong fundamentals.  As a
manufacturer of Gallium Arsenide-based chips, TQNT derives half
its revenues from the mobile phone sector.  Nokia's recent
better-than-expected earnings report has helped the stock push
higher.  Revenues from the broadband and optical networking
sectors make up the remainder of TQNT's business.  Reporting
earnings in late October, the company showed no sign of slowing
down, growing revenues by 90% year-over-year and net income by
191%, handily beating Street estimates by a nickel.
Quarter-over-quarter, gross margins improved by 4 percent to a
highly profitable 55.5%.  But what analysts were interested in
were the revenue growth numbers going forward, and TQNT did not
disappoint.  The company's conference call revealed that TQNT
could exceed expectations by as much as $6 million, with sales
continuing to be robust, as companies ramp up production for next
generation wireless devices.  That sentiment was confirmed last
week by coverage initiated by CS First Boston with a Buy rating.
According to analyst Michael Masdea, TQNT is well positioned to
capitalize on the next-generation wireless boom.  Since bouncing
off support at $25-26, the stock has been on a tear, rallying on
the back of the 5-dma, now at $40.60.  A bounce off this level as
well as support at $40 could allow for an aggressive entry point.
There is also strong support at $36.50 from the converged 10 and
50-dma but make sure TQNT closes above our stop price at $38.
For a more conservative entry, wait for strong buying to carry
TQNT over 200-dma at $45 threshold before making a play.  From
there, it could be a short trip to $50.

Comments

TQNT's wild action Wednesday provided traders with plenty of
entry opportunities.  What's more, while the broader Semi
sector struggled to hold ground, TQNT battled back after its
opening gap lower.  If the volatile trading continues during
Friday's shortened trading session, look for entries on bounces
off support at the $40.50 level.  Additionally, a breakout
above resistance at TQNT's intraday high of $43.63 would offer
a favorable entry point.

BUY CALL DEC-35 TQN-LG OI= 269 at $9.38 SL=6.50
BUY CALL DEC-40*TNN-LH OI=1298 at $6.13 SL=4.00
BUY CALL DEC-45 TNN-LI OI=1053 at $3.63 SL=2.50
BUY CALL JAN-40 TNN-AH OI=   2 at $8.63 SL=6.00
BUY CALL JAN-45 TNN-AI OI= 154 at $6.38 SL=4.50

http://www.premierinvestor.com/oi/profile.asp?ticker=TQNT


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

The "good" news is that stocks can only go to zero!

The stock market plunged lower today, with technology companies
leading the sell-off amid fears of shrinking corporate revenues.
Recent concerns that the slowing pace of economic growth will
hamper company profits were confirmed during the session by a
number of negative earnings reports, and the troubling forecasts
included significantly lower revenue growth.  Potential buyers
also remained on the sidelines due to the undecided outcome of
the U.S. presidency.  The Florida Supreme Court prolonged the
process late Tuesday, saying it would allow hand recounts of
election ballots in the key state.  The decision provides for
acceptance of revised vote tallies through Monday, November 27,
casting a new cloud of uncertainty over the market.  On the Dow,
the biggest losses were seen in shares of Philip Morris (MO),
Citigroup (C), Home Depot (HD), and Honeywell (HON).  On the
upside, Coca-Cola (KO) rallied after the beverage giant pulled
its offer to buy Quaker Oats (OAT).  Investors were elated at
the company's decision to focus on internal growth and shares
of KO rebounded almost $5 to close near $60.  In Nasdaq issues,
software stocks were drubbed after poor quarterly results from
Novell (NOVL) and Portal Software (PRSF).  Both companies said
they had experienced declines in packaged software sales and
analysts were less than optimistic about the group's near-term
future.  Internet companies extended their recent declines as
investors become more concerned about revenue growth among many
of the leading business-to-business issues.  The Semiconductor
sector was one of the few bright spots, achieving a small gain
amid heavy selling pressure across the technology industry.  In
the broader market, weakness in financial shares continued and
also dragging the industrial sectors lower were drug, tobacco,
retail, and defense issues.  Only a few safety sectors, such as
food and beverages, household and consumer products, and utility
stocks enjoyed upside activity.  Overall, the equity market was
dominated by the bears and with the current negative outlook for
earnings growth, there simply isn't a compelling reason to buy
additional stock at this time.

Summary of Previous Picks:

NOTE:  November prices as of Friday's Expiration


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

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

NTIQ    NOV    85    83.75  85.75    $1.25   5.0%

ADBE    DEC    68    64.44  72.31    $3.06   4.8%
EMLX    DEC   120   113.56 121.81    $6.44   4.7%

Naked Puts:

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

NTIQ    NOV    80    79.31  85.75    $0.69  10.7%
DCTM    NOV    25    24.22  41.13    $0.78   9.0% Adj 2-1 Split
AFFX    NOV    70    69.56  70.00    $0.44   8.2%
MANU    NOV    60    59.06 115.44    $0.94   7.4% Splits 2-1 DEC 8
EMLX    NOV   120   119.31 149.00    $0.69   7.4%
EPNY    NOV    40    39.54  51.25    $0.46   6.6% Adj 3-2 Split
HAND    NOV    50    48.75  62.44    $1.25   6.5%
KREM    NOV    65    64.06  81.00    $0.94   6.4%
VRTS    NOV   110   108.13 110.13    $1.88   5.9%
HGSI    NOV    70    68.94  71.13    $1.06   5.1%
PCYC    NOV    45    43.62  43.00   -$0.62   0.0%
CVTX    NOV    70    69.50  67.06   -$2.44   0.0%
HGSI    NOV    75    74.25  71.13   -$3.12   0.0%
AVCT    NOV    60    58.50  54.69   -$3.81   0.0%
APWR    NOV    40    38.56  33.25   -$5.31   0.0%
VRTX    NOV    70    68.81  63.13   -$5.68   0.0%
ELNT    NOV    75    74.25  65.38   -$8.87   0.0%
PDLI    NOV   105   104.12  85.00  -$19.12   0.0% Ouch!

PWAV    DEC    40    39.00  44.75    $1.00   8.3%
SAWS    DEC    35    34.12  48.81    $0.88   8.0%
CMVT    DEC    85    83.37  86.75    $1.63   6.7%
QCOM    DEC    65    63.81  78.94    $1.19   6.7%
ADBE    DEC    55    54.00  72.31    $1.00   5.9%
SCMR    DEC    40    39.31  54.44    $0.69   4.9%
CRGN    DEC    45    43.69  33.44  -$10.25   0.0% Close on Rally?

Sell Straddles:

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

EXAR - Closed at breakeven.

CFLO    DEC    75    71.87  37.81  -$34.06   0.0%
CFLO    DEC   165   172.13  37.81    $7.13  23.2%

Shorting CFLO on Tuesday would have covered the short put and
still allow the profit on the short call.

Naked Calls:

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

RBAK    NOV   120   120.75  80.75    $0.75  14.1%
JNPR    NOV   230   231.50 154.38    $1.50  13.0%
NEWP    NOV   190   191.69  69.56    $1.69   8.9%
NEWP    NOV   165   166.00  69.56    $1.00   8.6%
JNPR    NOV   260   261.56 154.38    $1.56   7.8%
BRCM    NOV   280   282.19 133.00    $2.19   6.3%
JNPR    NOV   280   281.56 154.38    $1.56   5.1%

Credit Spreads:

Stock  Pick    Last     Position   Credit    C/B    G/L   Status

AFFX  $87.25  $59.75   DEC50P/60P  $1.12   $58.88  $0.88   Alert
AGN   $90.75  $88.00   DEC70P/75P  $0.75   $74.25  $0.75   Open
AET   $66.06  $61.69   DEC55P/60P  $0.56   $59.44  $0.56   Open


New Candidates:

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

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

BULLISH - COMBINATION PLAYS

***************
APA - Apache Oil  $62.44  *** Oil Sector Hedge ***

Apache Corporation is an independent energy company that explores
for, develops and produces natural gas, crude oil and natural gas
liquids.  In North America, Apache's exploration and production
interests are focused on the Gulf of Mexico, the Anadarko Basin,
the Permian Basin, the Gulf Coast, and Western Sedimentary Basin
of Canada.  Apache has also exploration and production interests
offshore Western Australia and in Egypt and exploration interests
in Poland and offshore The People's Republic of China.  Apache
holds interests in many of its United States, Canadian and other
international properties through operating subsidiaries, such as
Apache Canada, DEK Energy Company, Apache Energy Limited, Apache
International, and Apache Overseas.

The energy sector continues to receive bullish attention, even as
crude oil trades near all-time highs.  The energy industry offers
a great way to hedge against the downward moves in the broader
market and with the expected harsh winter now beginning in the
Northeast, companies in the industry will receive more attention
in the coming weeks.  Analysts at Merrill Lynch and Morgan Stanley
Dean Witter favor the oil and natural gas producers and the group's
valuation is compelling, with plenty of upside potential.  Traders
who agree with that assessment can use this position to speculate
on the future movement of the underlying issue.

APA - Apache Oil $62.44

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-50  APA-XJ  OI=304   A=$0.43
SELL PUT  DEC-55  APA-XK  OI=4605  B=$0.93
INITIAL NET CREDIT TARGET=$0.56-$0.62  ROI(max)=12% B/E=$54.43



******

BMY - Bristol-Myers Squibb  $67.94  *** Drug Sector ***

Bristol-Myers Squibb, through its divisions and subsidiaries, is
a major producer and distributor of pharmaceuticals, consumer
medicines, nutritionals, medical devices and personal beauty care
products.  The Medicine segment includes sales of pharmaceuticals
and consumer medicines.  The Beauty Care segment includes sales
of haircoloring and hair care preparations and other beauty care
products.  The Nutritionals segment includes sales of infant
formulas and other nutritional products.  The Medical Devices
segment includes sales of orthopaedic implants, ostomy and wound
care products and other medical devices.

Bristol-Myers has been in the news recently, announcing that
Proctor & Gamble (PG) plans to review the company's offering for
Clairol, and considers the brand an excellent "strategic" fit.
Currently, Proctor & Gamble has made no commitment but rumors
suggest that the consumer-products giant, maker of Pantene and
Head & Shoulders, briefly toyed with the idea of swapping its
pharmaceuticals operation for the hair-care products division.
The competition for Clairol is likely to be stiff as P&G's main
rival, Unilever, is also interested.  The Anglo-Dutch concern
holds the #2 ranking for hair-care market share in the U.S. and
its brands, which include Salon Selectives, Suave and Finesse,
are very popular.  Wella AG and Henkel GaA of Germany are also
potential bidders for Clairol, as are Kao and Shiseido, two major
Japanese consumer-products companies, making BMY's position very
favorable.

In addition, BMY recently received a patent that may allow the
company to extend its exclusive marketing rights to anxiety drug
BuSpar.  BuSpar's patent expired in May, but the company received
a six-month extension because it tested the product in children,
and company officials are hoping the patent will prevent the FDA
from approving a generic version of BuSpar.

The technical strength of BMY is obvious and the recent move to
a 6-month high suggests the trend is intact and will continue.

BMY - Bristol-Myers Squibb $67.94

PLAY (aggressive - bullish/credit spread):

BUY  PUT  DEC-60  BMY-XL  OI=5794  A=$0.43
SELL PUT  DEC-65  BMY-XM  OI=631   B=$1.25
INITIAL NET CREDIT TARGET=$0.88  ROI(max)=21% B/E=$64.12


***************
BULLISH - BOTTOM-FISHING PLAYS
***************
CHIR - Chiron  $43.88  *** S&P 500 Addition! ***

Chiron is a biotechnology company that participates in three
global healthcare businesses: biopharmaceuticals, vaccines and
blood testing.  Chiron is developing products for preventing
and treating cancer, infectious diseases and cardiovascular
disease.  The company's unique products include Proleukin, a
recombinant form of interleukin-2, which the Company markets as
a treatment for metastatic renal cell carcinoma and metastatic
melanoma.  The company manufactures recombinant human platelet
derived growth factor, the active ingredient in Regranex Gel,
which is marketed by Ortho-McNeil Pharmaceutical, a Johnson &
Johnson company, as a treatment for diabetic foot ulcers.  The
company also manufactures Betaseron for Berlex Laboratories, and
its parent company, Schering AG, which is marketed by Berlex and
Schering AG as a treatment for multiple sclerosis.  In addition,
Chiron sells a line of traditional pediatric and adult vaccines.

Biotechnology firm Chiron was one of the most active shares
among mid-cap Nasdaq issues in today's session.  The stock
rallied almost $4 in regular trading in the wake of Monday's
announcement that Chiron would replace wood and paper products
maker Fort James (FJ) in the benchmark S&P 500 stock index.
Fund managers bought the majority of Chiron shares during the
afternoon, and volume increased during the last half-hour of
the regular session, pushing the stock price to recent highs.
Volume peaked just after the closing bell with CHIR losing a
portion of the day's gains, but remaining up for the session.

We feel the issue has great future potential and the recent
technicals suggest our cost basis offers a favorable price to
enter a new position.  Target a higher premium initially, to
allow for some consolidation in Friday's trading.

CHIR - Chiron  $43.88

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

Sell Put  DEC 35   CIQ XG  4167      0.69    34.31     9.6% ***
Sell Put  DEC 37.5 CIQ XU  848       1.13    36.38    12.1%



******

FNSR - Finisar  $31.94  *** Big News! ***

Finisar is a provider of fiber optic subsystems and network
performance test systems that enable high-speed communications
over Gigabit Ethernet LANs and Fibre Channel based storage area
networks (SANs).  FNSR's optical subsystems convert electrical
signals into optical signals (light pulses) for high speed,
reliable transmission over fiber optic lines.  The company sells
its optical subsystems to manufacturers of networking and
storage equipment that in turn develop and market systems based
on Gigabit Ethernet and Fibre Channel technology.

Finisar shares rallied today after the fiber-optics systems maker
beat analysts' expectations for the second quarter and announced a
a slew of acquisitions.  Company officials said FNSR earned $7.5
million, or $0.04 per share, for the second quarter, compared with
$1.3 million, or $0.01 per share, in the same period last year.
Finisar also said it was acquiring three technology companies,
Demeter Technologies, Transwave Fiber and Shomiti Systems.  The
results exceeded consensus estimates and prompted a number of
analysts to upgrade the issue.  Wit Soundview today raised FNSR's
earnings estimates and recommended the stock as a "strong buy,"
with a 12-month price target of $57.  AG Edwards upgraded the
issue to a "Buy" with a price objective of $45-$50, based on a
belief that the company will be able to generate very high revenue
growth rates as it is a leading provider of fiber optic components
for the Gigabit Ethernet, Fibre Channel and SONET/SDH markets.

A short-term technical reversal is underway but we will approach
the position from a conservative viewpoint with a favorable cost
basis.

FNSR - Finisar  $31.94

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

Sell Put  DEC 22.5 FQY XN  127       0.56    21.94    10.7% ***
Sell Put  DEC 25   FQY XE  729       1.13    23.88    19.8%


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

BEARISH PLAYS - Naked Calls

The issues are excellent candidates in the premium-selling
category of options trading.  Based on analysis of historical
option pricing and the underlying stock's technical background,
these positions meet our fundamental criteria for profitable
naked-calls.  Each issue has robust option premiums, a well
defined resistance area and a high probability of remaining
below the target strike prices.  As with any recommendations,
these positions should be carefully evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and personal trading style.  Many traders may favor a more
aggressive approach, selling options that are closer to the
current price of the issue, to produce a higher initial return.
While that technique may be more attractive, it also increases
the theoretical risk of loss.  Only you can know what plays are
suitable for your personal risk-reward tolerance and portfolio
outlook.

***************
CIEN - Ciena  $93.25  *** Networking Sector Blues! ***

Ciena is engaged in the optical networking equipment market.
The company offers products for tele- and data-communications
service providers worldwide.  The company's customers include
long-distance carriers, competitive local exchange carriers,
Internet service providers and wholesale carriers.  Ciena also
offers optical transport, intelligent switching and some unique
multi-service delivery systems that enable service providers to
provision, manage and deliver high-bandwidth services to their
customers.  The company has pursued a strategy to develop and
leverage the power of disruptive technologies to change the
fundamental economics of building carrier-class communications
networks, thereby providing its customers with a competitive
advantage.

The recent decline in Networking stocks proves that industries
which were once considered bulletproof are now showing they can
be affected by the economy, and the recent slowdown in spending
patterns.  The weakness has spread to many of the top companies
in the technology group, especially within optical manufacturing.
Ciena is just one of the many issues hurt by the bearish trend
and now it appears there is additional downside potential for
the stock in the near future.

Technically, Ciena appears to be holding at its 150 dma, but the
probability of it moving up through several resistance areas is
low.  Ciena's 30 and 50 dmas should hinder any upside move with
the early October low (and November high) providing the primary
resistance level, well below the recommended sold strikes.

CIEN - Ciena  $93.25

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

Sell Call DEC 130  UEZ LF  1082      2.06   132.06    13.2%
Sell Call DEC 135  UEZ LG  543       1.63   136.63    10.6%
Sell Call DEC 140  UEZ LH  525       1.25   141.25     8.3% ***



******

EMLX - Emulex  $121.81  *** Trading Range? ***

Emulex is a designer, developer and supplier of a broad line of
Fibre Channel host adapters, hubs, application-specific computer
chips (ASICs), and software products that provide connectivity
solutions for Fibre Channel storage area networks (SANs), network
attached storage (NAS), and redundant array of independent disks
(RAID) storage.  Its products are based on internally developed
ASIC technology, and are deployable across a variety of SAN
configurations, system buses and operating systems, enhancing data
flow between computers and peripherals.  Emulex's products offer
customers a combination of critical reliability, scalability, and
high performance, and can be customized for mission-critical server
and storage system applications.

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
near-term EMLX price trend is bearish and reflects a pronounced
negative divergence from an intermediate-period moving average.
In addition, the decline has come on increasing selling pressure
and a recent support level has been violated.  With the failure
at $170, a short-term "triple top" formation is in place and it
appears the share value has little chance of reaching our sold
positions in three weeks.

EMLX - Emulex  $121.81

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

Sell Call DEC 170  UEL LN  625       3.75   173.75    17.6%
Sell Call DEC 175  UEL LO  383       3.13   178.13    15.0%
Sell Call DEC 180  UEL LP  131       2.75   182.75    13.4%
Sell Call DEC 185  UEL LQ  70        2.19   187.19    10.9% ***



******

MANU - Manugistics  $80.25  *** The Thrill is Gone! ***

Manugistics is a global provider of intelligent supply chain
optimization solutions for enterprises and evolving eBusiness
trading networks.  Its unique solutions, which include client
assessment, software products, other consulting services for
implementation and solution support, can be optimized to the
supply chain requirements of companies.  Their solutions provide
its clients with the business intelligence to participate in
various forms of trading relationships, from traditional linear
supply chains to eBusiness trading networks.  The company's
newest generation of proven solutions help enable businesses to
work in concert with their trading partners via the Internet,
expanding their supply chains to eBusiness trading networks.
The solutions assist customers in anticipating major trading
requirements in both fixed and dynamic environments to help
anticipate and meet the needs of customers, thereby maximizing
client satisfaction.

The recent trend in Manugistics is technically unfavorable and
we will use the recent volatility and the overpriced options to
initiate a bearish position in the underlying issue's options.
The probability of the share value reaching our sold strikes is
rather low, but there is always the possibility of a rebound
from the recent trading range, so monitor the position daily for
changes in technical character.

MANU - Manugistics  $80.25

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

Sell Call DEC 125  ZUQ LU  78        2.69   127.69    19.0%
Sell Call DEC 130  ZIU LF  147       2.06   132.06    15.0%
Sell Call DEC 135  ZIU LG  0         1.75   136.75    13.0% ***




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