The Option Investor Newsletter Thursday 11-30-2000 Copyright 2000, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/113000_1.asp Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 11-30-2000 High Low Volume Advance/Decline DJIA 10414.50 -214.60 10610.50 10292.40 1.51 bln 1002/1885 NASDAQ 2597.93 -109.00 2641.75 2523.04 2.74 bln 1312/2760 S&P 100 697.28 - 15.19 709.05 684.30 totals 2314/4645 S&P 500 1314.95 - 26.98 1334.55 1294.90 33.3%/66.7% RUS 2000 445.94 - 8.66 454.60 440.76 DJ TRANS 2751.19 - 48.23 2797.33 2749.65 VIX 32.92 + 2.72 34.88 32.20 Put/Call Ratio 0.75 ****************************************************************** Please let this be capitulation! Is it possible we could be thanking Gateway a week from now for finally creating the environment we needed for a long awaited capitulation event? Maybe so, but this morning Gateway shareholders were not excited. After warning that sales over the holiday weekend were much slower than in past years GTW lost over 1/3 of its value and the news rippled through the markets like a title wave. Altera also warned for the second time and the 1-2 punch sent analysts racing to downgrade the entire PC sector, Chip sector, Retail sector and almost any company that could spell PC. The result was a massive drop with the Dow dropping over -320 points and the Nasdaq -180 points at the low of the day. The Dow bottomed at 10300 and the Nasdaq just above 2500 on heavy volume and the bargain hunters finally arrived. The volume was very heavy with both the Dow and Nasdaq posting the 2nd largest volume days ever. The sentiment at the open was one rarely seen but also one which has a good history of causing changes in market direction. The multiple downgrades of everything PC had traders running for cover before the open. The negative sentiment finally caused strong selling on heavy volume. This is what is needed to create a market bottom. The small traders and traders with limited capital finally had to close positions or face being hit with even larger losses if the drops continued. This final capitulation is what traders wanted to see and it did not hurt a bit to have it occur exactly at -50% off the highs for the year. Normally these big news events which occur after long periods of directional market movement tend to reverse the market trend even if only for a short time. If this was not the capitulation day they were expecting then we have a really bad day somewhere in our future. For it to qualify now it would need to be below 2500 and involve a point drop of something close to -200 points. Neither of those possibilities thrill me tonight. The possibility still exists that someone bigger than Gateway will warn and cause even a worse reaction. The most discouraging thought I can give you tonight is we are just now approaching earnings warning season. The next four weeks are the real problem for warnings. Not a pretty picture but is there anybody left that does not understand the economy is slowing and earnings are down? The news is out and any future warnings will simply be more of the same. Yes they will impact the market and make headlines but it will take a very big warning to create a worse reaction than today. The biggest losers from the Gateway warning included GTW -10.50, INTC -4.63, IBM -6.31, HWP -2.19, DELL -2.63. Even non-PC makers fell as MSFT lost -8 on the expectation of weaker software sales following weaker PC sales. CSCO lost -4 and broke the low intraday of 45.25 from October but recovered some at the close. With the inventory channels and retailers shelves full the possibility of a price war now looms large. Retailers posted big losses as expectations of margin cutting and slower sales came closer to reality. BBY and RSH both lost close to $4 on the news. The sales forecast stretched across the Internet sector as well with prospects of fewer logons, fewer subscribers, fewer DSL sales, etc. The AOL rally which started yesterday was promptly hit with a -2.75 loss. The PC/Chip sectors were the only warnings right? Not really but the most visible. Ann Taylor warned of slowing sales and dropped -$8.69 to $21 but was over shadowed by the PC bomb. The market internals today were bad but not as bad as we have seen on major down days in the past. The new lows on the Nasdaq was near 900 compared to only 41 new highs. At the worst of the day the declines were beating advances by 4:1 but at the close the ratios were back to 2:1 in favor of declines. The 2.69 billion shares traded on the Nasdaq and 1.51 billion on the NYSE was the 2nd largest on both exchanges. Today was painful but there are signs that there may be a change in our future. The rebound from 2500/10300, while not back to even for the day, was encouraging. There were signs if bottom fishing in many tech stocks. ARBA, BRCM, BRCD, JNPR, MUSE, VRTS, BEAS, ITWO, VRSN, EMLX and ORCL all finished with big gains. This is remarkable only because these are the stocks that have been taking the brunt of recent selling. They are also the stocks that appeared to have put in a bottom on Wednesday and investor sentiment has shifted to buy from sell even when the market is moving in the other direction. Another strong indicator was the very strong "buy on close" orders on the NYSE for, are you ready?, LU, Q, HWP, GTW and GE. Hundreds of thousands of shares in tech stocks and the biggest Dow stock GE. GE had almost one million shares to buy at the close or almost 5% of the days volume. Would you bet $50 million on GE if you thought the Dow was going down much farther? Goldman Sachs' chief strategist Abby Cohen told clients today that because valuations have become more appealing, her model portfolio is now overweighted at about 35% in tech and telecom for the first time this year. Thank you Abby! Other positives included the NVLS announcement after the close. The CEO reaffirmed their estimates going forward and said sales looked strong. The BRCM CEO and the VTSS CEO made the same statements today. Hmmmmm. Three chip stocks with no problems. Also there were some interesting developments in defensive stocks. Stocks like MRK, BMY, CAT, WY, IP and MO which are pockets of safety in times of market drops all fell today. When techs are down they are up and most had been moving up steady in contradiction to the Nasdaq drop. Today that trend changed. Nothing is cast in concrete and this can change again tomorrow. The bounce today could have been caused by short covering before the weekend. With the election likely to take a serious turn one way or another before Monday, investors with big short profits figured that covering today at support of 2500/10300 was a wise move. Also, as the last day of the month we could have seen a last minute wave of portfolio window dressing by fund managers. There are as many reasons for the end of day rally are there are analysts. The -50 point fall in the Nasdaq at the close was in my opinion simply fear of darkness. With the recent rash of bad news after every close, even some of the hardiest investors, took their profits from the bounce so they could sleep safer tonight. The markets are looking for good news from the Fed soon. Fed funds futures are now factoring in a 32% chance of a rate cut in December and a +90% chance of a cut in January and February. Is the Fed head listening? We will get a chance to see if he has anything to say on next Tuesday when Greenspan speaks at 10:45AM on banking and the economy. St. Louis Fed President William Pool made a comment today that sounded like he would favor a rate cut if the market started impacting the economy. Well don't look now but the wealth effect is now the wealth defect will millions of investors significantly worse off than they were this time last year. Many have tax liabilities from selling shares for a profit earlier in the year but after reinvesting the proceeds in every dip since they have no cash left to pay the bill. Christmas sale - all Nasdaq stocks -50% off! At the low of the day today, 2523, the Nasdaq was EXACTLY -50% off the March closing high of 5048. While that alone is amazing, it was also a low not seen since August 8th, 1999. This means the entire 100% gain from last fall has been completely wiped out along with hundreds of thousands, if not millions, of new investors. Experienced investors who understand stop losses and money management are now faced with another opportunity to "buy low, sell high." The markets are one of the true battle grounds where anyone, anywhere with as little as $500 can do battle with the giants in the industry. Unfortunately these novice investors do not have the same education, discipline and money management skills as those who have been doing it for a living for decades. Those refusing to spend the time to learn these skills are doomed to go broke. Without learning and practicing these skills on a limited basis before committing all your funds you have about as much chance of success as being picked out of the crowd to go ten rounds with Mike Tyson. New investors are now feeling cheated, frustrated, beaten and broke. CNBC has been running a series all week about trading as gambling. The patterns are clear. Traders that could just buy the next dip or the daily tech rocket last year and recover any profit from that last busted trade, are finding out that that tactic does not work in a bearish market. Traders who lose on 2 call contracts try to double up on the next trade to 5 contracts to WIN it all back, then 10 contracts when that trade goes wrong. Instead of INVESTING with a sensible game plan they are throwing money at every trade they can find trying to make up for losses with volume. It does not work that way as we all know. As an investor you need to have a trading plan that has capital preservation as your number one goal. The number two goal is to make money. Without capital the other goals are impossible. If you have a losing track record you should be investing less and less and be much more picky about each trade. When your track record turns around then gradually make bigger trades. If you go into a casino with $500 and the thought when I lose it I will quit, you will lose it. Only on rare occasions will anyone win with that concept. I have stood at tables for years and watched players win hundreds of dollars over an hour or two only to give it all back within minutes when they got too cocky from several big wins. Those with some money left when they bore of the game are likely to bet it all on the last roll and go home broke. If they win that roll, suddenly it was not the last roll and the last hour repeats itself until they do lose it. Since the odds in a casino are ALWAYS in the favor of the house successful gamblers have to practice money management. The same is true in the market only we can always wait until the odds are in our favor. Many traders don't wait and that is why money management is so critical. If you have not been successful recently we strongly suggest you reconsider your trading plan. Sit out and watch for several days. Pick several stocks that you want to trade. Understand how they move intraday? What are the normal trading ranges? Where is support/resistance? If you only had money left for one play where would you want to place your buy? When would you get out? (don't cheat) How does the market cycles impact your stock? This is not a dart board game. It is real life, your life, your future! When you sit down in front of your PC you are playing with real money. Many traders lose sight of that fact. Consider this. How much money is your family going to spend on Christmas? How much could you lose on that next bad trade? Which is the better investment? Do you feel I am picking on you? I am not. I get letters from time to time when people blow up their accounts asking what they did wrong and I got one today. This person ran their account up to almost $500,000 and back down to $500.00 since April. I know of multiple traders with over $1 million each in options expiring worthless soon. Obviously the concept of entry points, stop losses and money management was lost on them. Hopefully your case is far better than those and I can shock you into rethinking your trading plan while you still have capital to trade. These last three months have been great months for option traders. Not call buyers but option traders. Which are you? Friday may be an exciting day. We could see a continuation of today's bounce and the futures are pointing in that direction. The Chicago Purchasing Managers Report today showed a huge drop from 48.7 in Oct to 41.7 in November. Below 50 is a contraction and 40 would be nearing recession status. Friday we get the National version and should it mirror the one today it would provide more pressure for the Fed to cut rates. The Personal Income/Spending Report confirmed what we all know. Income dropped by -0.2% and spending rose by +0.2%. The pressure is on to trade more and make up the difference! Any morning bounce on Friday could be pressured by the many court cases racing to conclusion in Florida. Gore only needs to win one to change the outcome significantly. Will it impact the markets? Who knows but the point is that many traders will want to enter the weekend flat. This could cause trouble at the close. Hopefully traders will be smelling a rally after a strong day and be throwing money at the market. Either outcome is a possibility. I am long. I bought BRCM, BRCD and JNPR on the dip. I would be really excited to see a long play last for more than 24 hours but I am ready to jump out if things turn ugly again. Are you? Expect the best but prepare for the worst BEFORE it happens. Good luck and don't buy too soon. Remember it is "buy low, sell high", not "buy at the lowest, sell at the highest." Jim Brown Editor Would you rather be lucky or good? The Associated Press told the story today of a man in Boston who thought he had sold his 3,000 shares of EMC in the early 90s, when in fact he had unloaded only 2,000 shares. Since the shares were purchased in 1989, they have split 6 times and appreciated approximately 80,000%. The Forgetful One's windfall from his 1,000 rediscovered shares: $4 million. The lesson for stock investors: Don't panic, time changes things a lot. ************************* REGIONAL SEMINAR SCHEDULE ************************* Only one seminar left. Here is your chance to learn from the pros. The three day Technical Analysis Stock and Option Fall Seminar Series. Three days of in-depth education. Don't miss it! Date City Dec 07-09 Philadelphia Has the market been beating you up? Did you give back your gains from April/August? Would you like to understand all the technical indicators our writers use? Does the alphabet soup of technical terms like RSI, DMA, MACD, ROC, Stochastics, Bollinger bands, sound like Greek to you? You can learn from the experts how to interpret all these indicators, read charts, pick stocks and which option strategies to use on those stocks for less than the cost of one bad trade. Reserve your seat now for one of our regional seminars. Click here for more info: http://www.OptionInvestor.com/seminar/seminar.asp ************************Advertisement************************* Get 10 FREE Issues of Investor's Business Daily, the research tool for self directed investors. http://www.sungrp.com/tracking.asp?campaignid=1039 ************************************************************** **************** MARKET SENTIMENT **************** Just Another Day By Austin Passamonte Thursday, November 30th 2000 was just another day in the markets. For those who played the upside it was bad. For those who played the downside it was good. For those who did neither it was neutral. Simple as that. The market was indifferent. The approach we chose to take created our own individual perception. For some traders it was their last day in the market before going bust. Margin calls exact a toll each day with significant drops. Some choose to ignore the bear and continue bullish plays regardless of market trend. What worked before will surely work again but one can't expect the same approach to perform straight through an entire career from start to end. Market Sentiment is merely a market forecast tool. We do not enter emotion our hindsight into our forecasting role. That would compromise the very purpose served. More than a few question how we remain market-neutral while witnessing stocks in IRAs and 401Ks decimated. We're of the thought that these are long-term holdings without plans of liquidation near-term. Paper gain, paper loss is merely perception instead of realization. Value appreciation makes us feel good (wealth effect) and subsequent depreciation makes us feel bad (loss effect) but it's only gain or loss when sold. We offer the following example forwarded to us as perspective: "...The Associated Press told the story today of a man in Boston who thought he had sold his 3,000 shares of EMC in the early 90s, when in fact he had unloaded only 2,000 shares. Since the shares were purchased in 1989 they have split 6 times and appreciated approximately 80,000%. The Forgetful One's windfall from his 1,000 rediscovered shares: $4 million. The lesson: Don't panic, time changes things a lot..." Wonder what he sold the first 2,000 shares for? That pretty much sums up short-term emotion tied to long-term investments. Back to short-term trading. Each session like today is followed by questions of, "Is this the bottom?" Our answer is "depends." For this session? Yes. For the week? Probably. For this year & beyond? Not even close. We could have easily begun our year-end rally today. This remains to be seen. What we need to witness for a new multi-year bottom follows: Cessation of earning warnings and shortfalls. Pre-warn season returns soon and further bad news will result in subsequent market declines. 2. Economic stability - Fed easement. The first interest rate reduction will be a step in this direction. 3. Lower oil prices. This could happen early next year but not likely to be sooner. 4. More market pain. Margin debt is still too high. We've not seen total washout of all weakness yet. Equity Armageddon will not be pretty for those who refuse to prepare for it. We've had ample fair-warning for months now, how we choose to handle these market conditions are strictly up to us. Traders ask how much lower many stocks can go. The truth is they can fall further. INTC at $38... how much lower CNBC asks? They said the same thing from $75 to $60. What happened since? Are there any tech stocks still with p.e. ratio valuations above 200? Share price past & current is irrelevant on judgment day. 5. S&P 500 Commercials moving from all-time historical net-short to neutral. This will happen after the previous four events and likely not sooner. They have amassed unbelievable fortunes since shorting futures from the 1400 level up to 1550 and back down. The fact that they continue to short further is evidence enough of big money conviction on our future. Some say the SPX will reach 1650 within twelve months and we believe that is very possible. More possible we will do so from below 1250 first. Talk of 1575 by year's end has silently faded away. Is the great bull dead? Nope, just chewing cud and biding time. The markets will rally long & hard both directions from now until far beyond our time in the sun. Fortunes were made and lost in the markets today. The same opportunity exists tomorrow and every session beyond. How we choose to approach that shall dictate what our financial fate will be. Trade the right direction (if any) and follow the trend if even for that day. The trend is always your friend during rallies both North and South. ***** VIX Thursday 11/30 close; 32.92 30-yr Bonds Thursday 11/30 close; 5.65% Support/Resistance Indicator The Index Support/Resistance(S/R)Ratio is a formula used to gauge possible support or resistance based on open-interest disparity. Ratio listed is percentage of calls to puts or puts to calls respectively. Support is factored from dividing puts by calls at strike levels beneath index closing price. Resistance is factored from dividing calls by puts at strike levels above current closing price. Thursday (11/30/2000) (Open Interest) Calls Puts Ratio S&P 100 Index (OEX) Resistance: 735 - 720 11,154 5,973 1.87 715 - 700 4,505 8,987 .50 OEX close: 697.28 Support: 695 - 680 180 8,951 49.73 675 - 660 3 7,616 2538.67*** Maximum calls: 750/5,458 Maximum puts : 640/10,133 Moving Averages 10 DMA 711 20 DMA 725 50 DMA 736 200 DMA 774 === NASDAQ 100 Index (NDX/QQQ) Resistance: 72 - 70 55,087 43,457 1.27 69 - 67 27,492 15,999 1.72 66 - 64 26,313 35,691 .74 QQQ(NDX)close: 62.98 Support: 61 - 59 6,052 8,186 1.35 58 - 56 30 4,595 153.17 55 - 53 37 743 20.08 Maximum calls: 70/42,587 Maximum puts : 75/33,846 Moving Averages 10 DMA 68 20 DMA 72 50 DMA 79 200 DMA 91 === S&P 500 (SPX) Resistance: 1375 32,452 27,429 1.18 1350 15,561 33,936 .46 1325 4,906 16,692 .14 SPX close: 1314.95 Support: 1300 7,197 18,617 2.59 1275 1,921 16,199 8.43 1250 7,285 32,351 4.44 Maximum calls: 1400/64,370 Maximum puts : 1400/51,101 Moving Averages 10 DMA 1343 20 DMA 1372 50 DMA 1390 200 DMA 1437 ***** CBOT Commitment Of Traders Report: Monday 11/27 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts on the Chicago Board Of Trade. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs are not. Extreme divergence between each signals a possible market turn in favor of the commercial trader’s direction. Small Specs Commercials DJIA futures (Current) (Previous) (Current) (Previous) Open Interest Net Value -138 +100 -2462 -2436 Total Open Interest % (-1.94%) (+1.42%) (-9.76%) (-9.60%) net-short net-long net-short net-short NASDAQ 100 Open Interest Net Value -363 -733 -223 -77 Total Open Interest % (-1.76%) (-3.58%) (-0.42%) (-.16%) net-short net-short net-short net-short S&P 500 Open Interest Net Value +68303 +61563 -79145 -72376 Total Open Interest % (+34.74%) (+32.17%) (-11.76%) (-10.91%) net-long net-long net-short net-short What COT Data Tells Us: Commercial positions in S&P 500 remain at their ten-year extreme short levels with the disparity between small specs and Commercials increasing. Small specs have now gone to a net-short position on the DOW. Data compiled as of Tuesday 11/21 by the CFTC. ************** MARKET POSTURE ************** Please visit this link for Market Posture: http://members.OptionInvestor.com/marketposture/113000_1.asp ************** TRADERS CORNER ************** The Nature Of The Beast By Molly Evans Is it my imagination or do my nights to write always fall on some of these huge market days? I try to write these up the day before it comes out so that I can be trading during the day. However, it then seems we have huge moves or news that take place and the article seems silly in light of current events. What do you say about current events anyway? It's sick! I agree! I told them out at the Denver conference that the Nasdaq, by my own admittedly amateur drawn trendlines, projected out to be 3150 by the end of the year. Someone commented that just couldn't be as that's what the Nasdaq was at right now. I told him that 3150 might look really good coming up from the depths of where it would find itself prior to year-end. We'll see. The problem is that there has been so much incessant pain inflicted that people have become stubborn. Let me give an example: one doctor I know commented that his portfolio was now down 40% on the year. Furthermore, he was now maxed out on margin because his broker had persuaded him to buy in big the day before the election to catch that "post election rally" that "everyone" knew was going to happen. I told him that this was no longer a bull market and that we'd see lower lows and some heart stopping days in the days and weeks ahead but he shook that off saying, "Well I'm not going to sell now! Maybe if it got to where I was looking at needing to just preserve a little capital to be able to stay in I would but I'd have to be down 70% to do that!" Suit yourself doc. Multiply him by millions of investors who won't cut their losses until they just can't stand it one moment longer. That cut off point is a little different for everyone and this drip, drip, drip of selling is the manifestation of investors reaching their uncle point. They've been redeeming their shares of mutual funds and those big guys are now trapped. They're having to sell to pay out the money. Each big down day like today results in more margin calls and selling and the cycle is perpetuated. If you've ever studied bear markets, you would find that this is what happens. No long term buy and hold creature ever emerged on the other side of a real bear market. People are a little caught in the headlights by this one because the last eighteen years have been so good to them. That's why this could drag on for a while yet too. I still hear, "Yeah, well, I made good money last year and have so throughout my whole investing career, so I don't mind having to give a little back this year. That's just the price you have to pay when you're in it for the long term." You don't mind? Oh! Ok. At what point do you mind then, sir? The good news is that the VIX is finally starting to move off its duff. My data showed a high of 34.73 for the day, a move of more than 4 points. It did finish down from that but it didn’t finish red on the day at least. It's a bad thing for the VIX to drop on a down day in a bear market. The nine-month cycle lows that Carl Swenlin of DecisionPoint tracks are due December 1. If today was an intermediate low, my hat is off to Carl for his finesse in timing. There's no buzzer that goes off saying that such and such a day is the start of the nine-month cycle -- that's determined by crunching the numbers and understanding market cycles. When I started studying the nature of bear markets, I actually started to feel better. Why? Because they too go away. Just as the public gets in a happy drunkenness with a run away bull market; that "this time it's different" and it'll never end; a bear market is the mirror image of that. When the doom and gloom is so oppressive and everyone thinks, "Well, this time it's different." so too, does it end. In my humble opinion, we're not there yet, not for the bigger picture. So, we're reduced to what we love to do best. Trade it. Up, down, and things in between. That's ok. It's still easy to get caught on the wrong side as the whipsaws are a plenty but that's why we have to hone our skills as traders. I try to get in my own way on a daily basis. There's no greater challenge than being in the business of trading for yourself if you ask me. Now, no article of mine would be complete without at least a little bit of economic drivel to enlighten the mind. We didn't have a newsletter go out last Thursday in respect to Thanksgiving so I got relegated to the backseat in terms of getting my chance to talk to all of you. I had much to tell you as I had just been to Chicago for my yearly pre-holiday shopping escapade. Now that I'm fully immersed in the market, I can never again look at shopping in the same way as I had previously. When I go into a store these days, I'm looking around wondering how this store might make me some money instead of me leaving bits of my net worth with them. As we go just before the standard holiday season, it's more difficult to gauge the quality and amount of Christmas spirit by the populace of shoppers and bags they're carrying. Yet, I can't help but to put out my feelers and people watch. Shopping on Michigan Avenue in Chicago is in itself a skewed study. There are no Wal Marts (WMT) on Michigan. This is where the Saks (SKS), Bally's, Nieman-Marcus', and Tiffany's (TIF) reside. People frequenting these stores typically are in the higher income brackets of the nation but just the same, it's a great place to walk, look and play. I can't say as I saw throngs of people rushing in to buy anything though. Crate and Barrel, which I believe is a private company, seemed to be selling a lot of candles but the $75 Turkey platters were in full stock. They're going to have to sell a lot of candles to pay for all the Christmas help they had too. C & B has beautiful merchandise and two floors of chic furniture but it appears to me, the furniture is going to lay in inventory for some time. My husband likes to visit a friend he has worked with through the years when he shops at Mark Shale. When Dan asked him how business was in their new sprawling and opulent store, "Jack" told him that business "couldn't be better" . . . but there was no one in the store on a Saturday afternoon. As Dan said his goodbyes and turned to leave, Jack asked him in a more hushed voice if he was coming back as "We need your business." Down the street, at Abercrombie and Fitch I couldn't find a worker to corner to ask how business was going so I found a shirt for my son on the sale rack. During the sales transaction I then got to the real business of inquiry. He said sales had been steady but if you follow the retail sector at all, it would interest you that ANF just a few days ago was challenging its 52 week highs but reported last night that same store sales had dropped 8% for November. Well, shareholders showed them what they thought of that! ANF was down 40% on its lows today. Nike (NKE) looked busy; Sony (SNE)usually looks busy but people like to play with the toys in there and the Sony Playstation 2 is sold out. Walgreens (WAG) is always crowded and cash registers sing there. Consequently, the stock is hitting new highs this week. Sharper Image (SHRP) was packed with people and the clerks were busy but the guy helping me was too kind to tell me that "oh no doubt about it, this store brings in the bucks!" When I asked him if he could compare it to last year, he waved his hand saying, "Oh no! No I was a stockbroker out in California this time last year." Oh really? How interesting. SHRP recently beat the street for the second consecutive quarter and sports a PE of only 13.4. The guy didn't lie when he said the folks had been keeping them hopping. Sharper Image reported a 24% increase in November sales over the same period last year. When pressed for other same time last year comparisons, the ladies working Gap (GPS), Limited (LTD) and Marshall Fields all told me that business didn't seem as brisk as they had remembered but they too were steady. The Warner Studios guy was emphatic that this was shaping up to be a great year for them with all the Harry Potter memorabilia, Scooby Doo and Power Puff Girls toys. As to the retail stores, I can't say as I found anything to short or go long. My own observations do jive with what is being reported on the newswires. Managers of shopping centers coast to coast reported to Reuters that they drew a steady flow of crowds but that shoppers seemed to be scouring the stores for the advertised bargain sale items. With the consumer confidence level dropping yet again this month to a 13-month low, all eyes are on the retail customer this year to read a significant aspect of the American economy. Will shoppers plunk down their credit cards and cash once again or should we be bullish on coal futures? They're plunking it down at American Eagle Outfitters (AEOS). That company reported that November same store sales were up 13.4% over 1999 numbers. In keeping with a slowing economy, discount retailer Wall Mart (WMT)is apparently seeing more traffic too. The stock has enjoyed nice gains thus far this week based on their reporting of $1.1 billion in sales on the Friday after Thanksgiving. That was up slightly from the $1 billion reported last year for the same period. K-Mart and Target are not quite as robust but are still enjoying winning months in their stores. Internet retailers see the next week or so as critical. Online buying got off to a one-week late start, picking up the week of Nov. 12, according to Nielsen/Net Ratings Holiday E-Commerce Index. Although traffic from online home users jumped 27 percent on Friday compared to the rest of the week, the momentum needs to continue. "Traffic started out slow, and we need to make up for lost time," said Sean Kaldor, vice president of e-commerce for Nielsen/Net. "Online companies can't be stuck with all the last-minute shipments." The Yahoo! (YHOO) shopping site, home to over 10,000 web-based retailers, saw their order volume double on last Friday over the year ago day. I always enjoy watching Wall Street Week with Louis Rukeyser on public television on Friday nights. Last week they discussed the hot items of the year as well as the hot stores. Hands down, Barnes and Noble (BKS)is the store to succeed as they're selling not only books and music but also video games. Ahh yes, if only we could get that Playstation 2. Here too is a stock hitting intermediate term highs this week but in the last few days has pulled back on declining volume. So what's it all mean? It means that the retail sector and the American shopper is still a piece of the economy pie and must be watched for clues. Shoppers credit habits are being scrutinized to make judgments on how they're handling finances. The consumer credit reports lag two months for what they track. The last one covered September which showed that credit growth had moderated a bit. It was half of what it had been in August showing consumers as a being a little prudent with their willingness to charge. The next report is due November 7th. We'll see just how generous on purchases shoppers were in the terrible market month of October. Until then, you cut losses short and stay here in the game with us. ***********************ADVERTISEMENT************************ From the hottest IPO to the latest market trends, you won't find more extensive business and financial news on the web than by signing up for Individual.com, the personalized FREE service that lets YOU choose what's news. Register at Individual.com now! http://www.sungrp.com/tracking.asp?campaignid=1036 ************************************************************ PICKS WE DROPPED **************** When we drop a pick it doesn't mean we are recommending a sell on that play. Many dropped picks go on to be very profitable. We drop a pick because something happened to change its profile. News, price, direction, etc. We drop it because we don't want anyone else starting a new play at that time. We have hundreds of new readers with each issue who are unfamiliar with the previous history for that pick and we want them to look at any current pick as a valid play. CALLS: ***** WIN $21.63 -0.38 (+0.00) WIN appears to be settling in a trading range between the $21.50 and $22 levels. Try as it might, the stock just cannot settle above $22. The news of WIN filing to sell $1 billion worth of debt last week may have something to do with the stock's lackluster trading this week. In light of WIN's consolidation, we're dropping the low volatility play from the recommended list. We'll take our small profits and search out more enterprising plays. GADZ $18.06 -2.34 (-2.06) The retail sector was a mixed picture during Thursday's trading as November sales reports hit the wires. For its part, GADZ reported a 23% increase in sales over the same time last year. Despite the bullish numbers, the stock sold-off on very light volume. It appeared to be a case of buyers stepping out of the way and letting the sellers take control. Given the light trading on which GADZ fell, the stock could easily bounce back in the coming trading sessions if the buyers return. However, since GADZ closed below our $19.50 protective stop we are not longer covering the play. Look to exit positions on a rally back to the $20 level in the coming trading days. PUTS: ***** VRTS $97.56 +9.56 (-3.31) It's often been said that bearish moves are quicker than rallies, and our play on VRTS certainly bears that out. In the past 3 weeks, the stock has given back all its gains from the prior 3 months, and we are quite happy to have taken some profit out of the move. As the NASDAQ continued to trace new lows today however, VRTS spent the whole day moving higher, gaining more than $9 on more than triple the average daily volume. Vigilant traders got an inkling of this as VRTS began to see strong buying interest going into the close yesterday, prompting us to move our stop down to $91. This has all the earmarks of a bottom being put in place, and since it took out our stop, it seems an appropriate time to leave the software stock to its own devices. FCEL $55.75 -0.31 (-6.36) FCEL provided several good opportunities for day traders to make a profit in the last few days. For example, on Wednesday, the stock reached a high of $56.63, and a low of $48.63. However, FCEL showed uncharacteristic strength in today's bloodbath. After dipping briefly below the 200-dma of $49, the stock recovered and began an ascending move through out the rest of the day. The stock closed just above the converged 5 and 10-dmas of $55.50, which is impressive, as the Nasdaq and Dow both closed near the lows, after rebounding only slightly. If the stock were truly on a downward trend, it would probably have rolled off the 5 and 10-dmas to close down much lower than $55.75. Therefore, we are dropping this put tonight and moving on to other put opportunities which are plentiful in this market. ************************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.sungrp.com/tracking.asp?campaignid=1054 ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. 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The Option Investor Newsletter Thursday 11-30-2000 Copyright 2000, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/113000_2.asp ************************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.sungrp.com/tracking.asp?campaignid=1055 ************************************************************** ******************** PLAY UPDATES - CALLS ******************** CELG $57.06 -0.69 (-3.31) The profit-taking we saw on Tuesday continued into Wednesday as the stock, unable to stay above the $60 level, pulled back $2 on low volume. As well, CELG managed to bounce off support from the 10-dma, now at $56.78. Today, the stock found support at the $55 level and from there, attempted to stage a comeback. Encountering resistance just below $60, the stock closed down fractionally on low volume. With today's close, CELG has formed two-thirds of a reversal pattern, which if confirmed by a strong up day tomorrow, could be a bullish sign. For aggressive traders, a bounce off the 10-dma could allow for an entry but confirm with volume. There is also support at $55 and at our stop price at $52 but make sure the stock closes above this level. A break through resistance at $60 on strong volume would allow conservative traders to take a position. With the American Society of Hematology (ASH) Meeting commencing tomorrow, Positive announcements from the company could be a driving force for the stock price going forward. AMGN $63.63 -4.50 (-2.44) Proof that nothing moves in a straight line, Drug stocks succumbed to the bears today as the major indices sold off sharply. For its part AMGN's defensive stock status wasn't enough to keep the buyers happy as it bounced south again from the descending trendline near $68. After the decline began, it seemed that nothing could stand in the way of the bears, with the stock giving up $4.50 to end the session solidly below the 200-dma ($65.35) again. Today's decline has brought AMGN back down within spitting distance of support at $62, also the site of our $62 stop, and we need to be alert for further declines. If you follow Stochastics, you will notice that they are rolling over on the daily chart, and further weakness in the Drug sector will be a tough obstacle for our play to overcome. This could be just another opportunity for aggressive players to get in to the play at a discount though. If that fits your profile, look to initiate new positions on a volume-backed bounce from support. More conservative players will wait for the stock to move solidly above the 200-dma again before playing. SGP $56.06 -0.38 (+2.56) Even defensive areas like Drug stocks suffered today as the major indices sold off on renewed fears of a hard landing for the economy. SGP actually fared better than some of its defensive brethren, with a fractional loss that only materialized in the final hour of trading. Early in the day, the stock actually moved above $57.50 due to yesterday's positive comments from Goldman Sachs followed by CSFB today. The firms initiated coverage of the stock with Market Outperform and Buy ratings respectively, and although buyers initially responded positively, the conviction of volume just wasn't there. Although daily volume came in 50% above the ADV, most of it came on the sell side as the day wore on. After the strong run over the past 2 weeks, a little profit taking seems natural and the technicals are still pointing to further upside in the play. The first level of support is resting at $54, and this would be a good level for aggressive traders to target new entries on further weakness. Solid support at $52 is where we have set our stop, and while a bounce there would provide an even better entry, don't try to catch a falling knife. Wait for buying volume to pick up again before adding new positions. As always, conservative players will want to wait for a strong move to the upside before opening new positions, and a rally through $57 would fit the bill quite nicely. A $52.19 -1.69 (+1.25) Today in New York City, Agilent Technologies hosted an analyst meeting in which it'll focus on recent contributions it's made to the communications revolution. While this, and yesterday's news of Agilent's wireless manufacturers solutions unit gaining more market share (a hefty 25% more) within the next 18 months bodes well, the share price's finding a tough line of resistance at $54. Although the marketplace itself is amid chaos, it's very encouraging to see A's pattern of higher lows and highs continue to emerge in these trying times. Currently $51 is supporting the share price intraday, which is no doubt a bullish indication. However, we're keeping our stop lower at $44 to provide room for a pullback to the vicinity of the 30-dma. If you'd rather execute the play with a bit more prudence, then consider setting stops higher and only taking positions after A exhibits a convincing breakout above the $54 level. LLY $93.69 -0.81 (+8.88) LLY's strong momentum powered it through the $97 level this morning. The share price toggled at this higher range between $96 and $97 for the better part of the session. And another analyst gave LLY a boost today, too. CSFB issued a $98 price target per share and started the stock with a Hold rating. This new rating follows Goldman Sach's, Robertson Stephens', and ING Barings' positive coverage of the stock earlier in the week. The broader sentiment of the markets however, eventually took its toll on LLY by late afternoon. The advancing issue ultimately suffered a mild bout of profit taking and closed a mere fraction from its intraday low. Despite the bearish close, LLY's current position is still bullish. The stock is almost 4 points above our stop at $90 and the converged 5-dma ($90.69) and 10-dma ($89.39). Conservative players might think of taking entry into the momentum if LLY bounces back through the $95 level and shows strength above $97. Look for robust volume levels at over 100 K shares intraday to signal another break to the upside. Buying on intraday pullbacks is always an option, but keep stops in place to protect capital. And remember, take profits quickly. ******************* PLAY UPDATES - PUTS ******************* YHOO $39.63 +0.56 (-1.25) There isn't much holiday cheer going around down on the Street this week. The Nasdaq continues to suffer and Internet shares are bearing the brunt of the selling. Yahoo is no exception and the stock continues to suffer. While this is good news for our play, it is time to step back and look more closely at the recent action, especially after Yahoo's fractional gain today. YHOO's decline has been somewhat muted in recent sessions relative to other stocks and the volume has begun to dry up. With the VIX sitting at 33, this may be the time to start locking in those healthy gains. So we are dropping our stop loss down once again to $40.00. But remember, there is still no reason YHOO can't trade lower if more negative news hits the wire. We have explained before how the Net sector, and content providers in general, are suffering from this slowdown in spending. Company specific news can still knock this stock down even further. Yahoo still hasn't even touched the 10-dma (currently at $42.50) in three weeks, but did close over the 5-dma today. We will continue to ride the trend lower, but will exit the play on the next up move. SLR $28.50 -4.31 (-7.00) The weak market environment worked out beautifully for our put play in Solectron. An earnings warning from Altera knocked down nearly every stock in the chip sector, as well as many in the electronics components and original equipment manufacturer sector. Today's selling volume was more than double the average daily volume, and the stock hit its 52-week low of $28 near the end of the day. If the trend persists, and there is no reason to believe it won't, SLR will likely make a new 52-week low below $28. With further earnings warnings possible in the near future we could be in for more selling. SLR's pattern has resembled a downward staircase, as it makes futile attempts to rally and falls down. Consider taking a new position on a failed attempt to rally past the 5-dma of $32.68. We have lowered our protective stop to $32, and would exit positions if SLR settled above that level. MVSN $41.50 +2.27 (-7.63) Continuing its decent on Wednesday in sympathy with a falling NASDAQ, MVSN made yet another lower high and lower low. The stock has found resistance intra-day at our stop price at $43. Failure to rally above this level allowed aggressive traders an entry into this put play for a profit by the end of the day, when MVSN closed down $3.27 or 7.68 percent on 140% of ADV. Today, after a gap down at the open, MVSN found willing bargain hunters, who bid up the stock but once again resistance at $43 held strong, while MVSN closed up 5.77 percent on average volume. A failed rally above our stop price as well as the 5-dma at $44 would be aggressive targets to shoot for. For the risk adverse, a break below $40, with the return of selling volume could the signal to enter this play. As news has been light for this stock, confirm direction and sentiment with the NASDAQ when initiating a play. NEWP $57.00 -8.00 (-14.25) Finding support at the $60 level and deeply oversold, NEWP bounced on Wednesday in anticipation of news that the company would be presenting at Credit Suisse First Boston Technology Group's annual conference. With that, the stock was able to buck a weak NASDAQ for the day to close up $3.06 or 4.94 percent. Closing right at $65, volume was light, less than 85% of ADV, suggesting that there was little conviction to the rebound. This was confirmed today as a failed rally above the 10-dma in the morning brought in the bears, who sold the stock down, breaking through key support at $60 to close down over 12 percent, backed by strong volume, 155% of ADV. Depending how the market reacts to NEWP's presentation tomorrow, a failed rally above the 5 and 10-dma (at $63.65 and 67.07 respectively) as well as $60 could be an aggressive target to shoot for. Just make sure NEWP closes below our stop price of $71. If the market does not like what NEWP's CEO and CFO had to say, look for a break below $55 on strong selling for a safer entry. ITWO $96.38 +5.94 (-16.63) On Wednesday, ITWO announced that its global logistics marketplace subsidiary, FreightMatrix, formed an alliance with privately held B2B company NTE. While immaterial news such as this in a bull market could help a stock to rally, negative sentiment in the NASDAQ as well as the B2B sector was the overriding factor. Breaking through $100 in the early going on heavy volume gave traders the signal to sell, which is exactly what they did, as the stock closed down $11.25 on twice the ADV. Today, the stock bounced, helped by a relief rally in B2B stocks. While ITWO closed up 6.57 percent on twice the ADV, there is strong resistance at our stop price of $100. Another failed test of this level could provide for an aggressive entry while a break below $95 on high volume could provide for a conservative entry. SEBL $69.88 -1.88 (-16.56) While the gap down at the open made SEBL tough to play today, the late day rally (likely short covering) brought the stock right up to a probable entry point by the close. With the NASDAQ gapping down over a hundred points, it was a foregone conclusion that our play would follow suit. After finding support near $60, the stock spent the balance of the trading day moving higher, actually closing the gap by the closing bell. The bulls ran out of steam near $74, and it looks like the stock could roll over again tomorrow on any bearish follow-though in the Technology sector. Nothing has really changed, with earnings warnings and economic concerns continuing to heap pressure on high-valuation stocks. With resistance at $78 and then $80, also the site of the 200-dma and our stop, SEBL will have a hard time breaking out of its bearish trend without support from the broader markets, and that doesn't look likely prior to some resolution in the election or come conciliatory comments from the Fed concerning interest rates. Wait for the buying volume to abate before initiating new positions, and then jump in when the bears reassert their control. Aggressive traders can open new positions on a rollover from resistance, while more conservative players will want to see a drop back through the $65 level before playing. VRSN $86.69 +5.94 (-6.56) If you were wondering when VRSN was ever going to bounce, you got your answer today. Although the NASDAQ spent the entire day under water due to heavy selling in the PC and Semiconductor sectors, VRSN spent the entire day recovering from its gap-down open. Prompting buyers to come out of hiding were positive comments from CSFB in the wake of Toshiba and 3Com selecting the company's cable modem authentication services. Analyst Todd Raker said that he believes more customer wins will lead to better than expected fourth-quarter results. Gaining nearly $6 on volume 50% above the ADV was an encouraging sign for the bulls, but we have seen this before. Granted, this was the strongest day the Internet Security firm's stock has seen in the past month, but the downtrend is still solidly in place. Even the rampaging bulls, believing a bottom may be in place, couldn't penetrate our $91 stop, and the stock fell back sharply at the close. Resistance at the descending trendline acted like in impenetrable barrier, and if the recent pattern repeats, look for more selling to appear tomorrow. As buying volume dries up, our play should roll over again, heading back towards today's low of $75.88. As selling picks up again, aggressive traders can consider the rollover from the $91 resistance level to be a good entry trigger for new positions. ************************Advertisement************************* Get 10 FREE Issues of Investor's Business Daily, the research tool for self directed investors. http://www.sungrp.com/tracking.asp?campaignid=1072 ************************************************************** ************** NEW CALL PLAYS ************** AGGRESSIVE: BRCM - Broadcom Corporation $97.50 +2.50 (-19.63 this week) Broadcom Corporation is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. These integrated circuits permit the cost-effective delivery of high-speed, high-bandwidth networking using existing communications infrastructures that were not originally designed for the transmission of broadband digital content. Using unique proprietary technologies and advanced design methodologies, the company designs, develops and supplies integrated circuits for a number of the most significant broadband communications markets. Once a high-flyer and darling of Wall Street, Broadcom has not been immune to the Tech bear. But with positive guidance from the CEO and analysts coming in defense of the stock, could this be the turning point? November has been an especially difficult month for BRCM, as a break through its 200-dma lead to continued selling. Aside from Tech and Semiconductor weakness, BRCM has had to deal with dilution concerns. BRCM has been on a shopping spree this year, acquiring companies with its once high-priced stock. This week, the company bought video compression chipmaker VisionTech. Analysts applauded the move, seeing it as a good strategic fit. With that, it appears that the stock may have also found technical support at the $85 level this week, as bounces off that level have been backed by strong buying volume. A number of analysts have come out with positive comments on BRCM. Morgan Stanley upgraded the stock to a Strong Buy from An Outperform, citing attractive valuation as well as strong business conditions. WR Hambrecht reiterated its Buy rating, anticipating that the stock would outperform its peer group over the next 12 months. Today, BRCM closed up 2.64 percent on almost three times the ADV thanks to CEO Henry Nicholas' upbeat presentation at CS First Boston's technology conference. During his speech, Dr. Nicholas reiterated the company's growth expectations and confidence in the business. That being said, this is a high-risk play, and we would only enter if the NASDAQ is strong. With the Tech index in oversold territory, BRCM would be a likely leader in a relief rally. For those willing to take the risk, a bounce off support at $95, $90 and $85 are possible targets to shoot for but be aware of our stop price at $84. A safer way to enter this play would be to wait for a break through $100, confirmed by strong buying volume and strength on the NASDAQ. BUY CALL DEC- 95 RDZ-LS OI= 244 at $13.38 SL=10.00 BUY CALL DEC-100*RDZ-LT OI=1025 at $10.50 SL= 7.25 BUY CALL DEC-105 RDW-LA OI= 694 at $ 8.50 SL= 6.00 BUY CALL JAN-100 RDZ-AT OI= 683 at $17.00 SL=12.25 BUY CALL JAN-105 RDW-AA OI=2521 at $16.00 SL=11.50 http://www.premierinvestor.net/oi/profile.asp?ticker=BRCM JNPR - Juniper Networks $124.63 +8.88 (-7.75 this week) As a provider of Internet infrastructure solutions, JNPR serves Internet service providers and other telecommunications service providers, helping them to meet the demands resulting from the rapid growth of the Internet. The company delivers next generation Internet backbone routers that are specifically designed for service provider networks. JNPR's flagship product is the M40 Internet backbone router, which complements the recently-introduced M20, which is a router built specifically for emerging service providers. Before you start thinking that we've taken leave of our senses by adding a call play on a high-flying Networking stock, take a look at the late-day action in the Networking sector (NWX.X). JNPR spent the whole day in positive territory, and by the end of the day, its gains had begun to have a positive effect on the entire sector. The gains were likely due in large part to the stellar earnings report from BRCD after the close yesterday, which gave the bulls new hope. We've been wondering when the bleeding would end, and after basing for the past week in the $105-110 area, JNPR looks like it could be ready to reclaim some of its decimated valuation. Buying volume has been nearly double the ADV of 12 million shares over the past two days, and for their efforts the bulls have managed to drag our new play 17% higher in the face of new lows on the NASDAQ. This is obviously an aggressive play and not for the faint of heart. We are placing our stop at the top of the recent consolidation, ($109), as this should provide solid support in the event of more Technology weakness. We would caution against target shooting new entries on the dips however. We have seen one support level after another get blown away, and don't want to try to catch a falling knife in this market environment. We only want to play if the bulls can remain in control, and continue to push the stock back from the brink of double-digit status. The first upside target will be the 200-dma ($148.38), which just happens to coincide with the top of the gap from November 17th. If buyers can't push through the $131-132 resistance level, it will likely be a sign that the stock will need more time to lick its wounds before venturing higher. Strong buying volume that can clear this resistance level will be a good indication that JNPR wants to run higher, and a good trigger for aggressive entries. BUY CALL DEC-120 JUY-LD OI= 761 at $16.00 SL=11.50 BUY CALL DEC-125*JUY-LE OI=3217 at $13.88 SL=10.25 BUY CALL DEC-130 JUY-LF OI= 933 at $11.38 SL= 8.50 BUY CALL JAN-125 JUY-AE OI= 377 at $24.38 SL=18.25 BUY CALL JAN-130 JUY-AF OI= 605 at $22.38 SL=16.75 BUY CALL JAN-135 JUY-AG OI= 637 at $19.50 SL=14.25 SELL PUT DEC-105 JUY-XA OI= 788 at $ 5.25 SL= 7.50 (See risks of selling puts in play legend) http://www.premierinvestor.net/oi/profile.asp?ticker=JNPR BRCD - Brocade Communications $167.94 +14.19 (-21.50 this week) Brocade Communications Systems is a supplier of open Fibre Channel Fabric solutions that provide the intelligent backbone for Storage Area Networks (SANs). Brocade's family of SilkWorm switches enables a company to manage growth of its data storage requirements, improve the data transfer performance, and increase the size of its SAN. Brocade's products are primarily sold in the US with 70% of sales derived from Compaq, Data General, Dell, McDATA, and Sequent. We're initiating coverage on BRCD on the heels of its earnings report and a stock split announcement. Yesterday after the market, BRCD charmed the Street with numbers exceeding analysts 4Q estimates by two cents and predicted sales growth in excess of 150% for the 2001 fiscal year. Brocade reported $27.2 mln net profit, or $0.22 per share, on sales of $132.1 mln and set a 2:1 stock dividend effective December 22nd. There's plenty of shares available with 400 mln authorized and approximately 110 mln outstanding. Today, the stock's performance was nothing less than stellar amid the troublesome marketplace. BRCD gained $14.19, or 9.2% on the day and shot up to $173 at one point in trading. Volume was 3.75 time the ADV on the climb. While one day certainly doesn't make a trend, we're anticipating BRCD to lead any relief rally on the NASDAQ in the coming days. Of course, we would look to enter new positions only after confirming strength and direction in the NASDAQ. It's true, there was literally a slew of positive comments coming from every end of the Street today, but we don't want to add anymore risk to this already hot play. Our stop is set rather high at $159. Today, $160 served as intraday support with promise of higher levels developing higher near $165. A high-volume move through the 5-dma ($172.12) coupled with a break through the 200-dma ($177.34) would provide more bullish confirmation. Look investor excitement to create additional momentum as BRCD approaches its split date on December 22nd. In the meantime, a relief rally on the NASDAQ would bode well for this call play. BUY CALL DEC-165 GUF-LM OI= 99 at $14.63 SL=10.75 BUY CALL DEC-170*GUF-LN OI=1755 at $12.00 SL= 9.00 BUY CALL DEC-175 GUF-LO OI= 683 at $ 9.88 SL= 7.00 BUY CALL JAN-170 GUF-AN OI= 50 at $21.50 SL=16.75 BUY CALL JAN-175 GUF-AO OI= 53 at $19.13 SL=13.75 BUY CALL JAN-180 GUF-AP OI= 333 at $17.00 SL=12.25 http://www.premierinvestor.net/oi/profile.asp?ticker=BRCD LONG TERM: QQQ - NASDAQ 100 Index Trust $63.00 +0.06 (-7.44 this week) The NASDAQ 100 Index reflects NASDAQ's largest companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale and biotechnology. Launched in January 1985, the NASDAQ 100 represents the largest and most active non-financial domestic and international issues listed on The NASDAQ Stock Market based on market capitalization. The possibility that the NASDAQ has finally reached bottom has landed the QQQs on the play list. After falling to the $60 level during the climax of the NASDAQ's sell-off this afternoon, the buyers stepped into the QQQs in a big way and carried them higher near the close. In fact, the QQQs continued their rally into the evening session of trading where they gained another $0.50. If the NASDAQ follows through on its rebound early tomorrow, new entries might be taken if the QQQs break above resistance at the $64 level. Conversely, a pullback to support at $62 and subsequent bounce could provide for an additional entry opportunity. The fact that the NASDAQ is in deeply oversold territory could lead to a rebound or a relief rally into year's end. We've placed the QQQs on the long-term call list this evening in an attempt to profit from a potential rebound. We've also established a protective stop at the $60 level, which many technicians believe to be a strong support area for the QQQs. BUY CALL DEC-63 QUE-LK OI= 1237 at $3.88 SL=2.50 BUY CALL DEC-64 QUE-LL OI=10481 at $3.38 SL=1.75 BUY CALL JAN-64*QUE-AL OI= 613 at $6.00 SL=4.00 BUY CALL JAN-65 QUE-AM OI= 3030 at $5.38 SL=3.50 BUY CALL MAR-66 QUE-CN OI= 475 at $7.13 SL=5.25 http://www.premierinvestor.net/oi/profile.asp?ticker=QQQ ORCL - Oracle $26.59 +3.69 (+2.44 this week) Oracle is the world's leading supplier of software for information management, and the world's second largest independent software company. With annual revenues of more than $10 billion, the company offers its database, tools and application products, along with related consulting, education, and support services, in more than 145 countries around the world. Amidst the ruins across the tech sector Thursday, ORCL provided investors with solace and profits. ORCL's bear bucking rally stemmed from positive comments and upbeat guidance from the company at the CSFB Technology Conference. At the conference, ORCL officials reiterated guidance for the company's upcoming quarter and provided bullish prospects for the firm in the coming year. The positive presentation prompted CSFB analysts to reiterate their Strong Buy rating on ORCL and lift their price target to $48. Today's trading on the heels of bullish news could very well signal a reversal for ORCL, which has fallen nearly 50% off its highs traced in early September. We're looking for the potential turnaround in the stock and attempting to profit from ORCL's low priced options. Given today's big run-up, a pullback may be in order, in which event look to enter on bounces off support levels. First look for a bounce at $26, lower near $25.50, or beneath near the $25 level. Conversely, if ORCL continues to climb, look to enter new positions on an advance above the $27 level. Since we are attempting to play ORCL for a longer time period, we're setting a liberal stop at the $21 level and would close the play should the stock settle beneath its near-term lows. BUY CALL DEC-25 ORQ-LE OI=17338 at $3.88 SL=2.50 BUY CALL DEC-30 ORY-LF OI=16400 at $1.38 SL=0.75 BUY CALL JAN-25 ORQ-AE OI=27032 at $5.38 SL=3.50 BUY CALL JAN-30*ORQ-AF OI=12879 at $3.00 SL=1.50 BUY CALL JAN-35 ORY-AG OI=33405 at $1.63 SL=0.75 BUY CALL MAR-35 ORY-GC OI= 8117 at $3.00 SL=1.50 http://www.premierinvestor.net/oi/profile.asp?ticker=ORCL ************* NEW PUT PLAYS ************* No new puts today ********************** PLAY OF THE DAY - CALL ********************** A - Agilent Technologies Inc $52.19 -1.69 (+1.25 last week) Agilent is a diversified technology company that provides solutions to high growth markets within the communications, electronics, healthcare and life sciences industries. They're a leading maker of analysis equipment with 51% of sales deriving from its Test and Measurement Unit. Recently Philips Electronics agreed to buy Agilent's Healthcare Solutions for $1.7 bln. Customers include AT&T, Cisco, and Pharmacia. Most Recent Write-Up Today in New York City, Agilent Technologies hosted an analyst meeting in which it focused on recent contributions it's made to the communications revolution. While this, and yesterday's news of Agilent's wireless manufacturers solutions unit gaining more market share (a hefty 25% more) within the next 18 months bodes well, the share price's finding a tough line of resistance at $54. Although the marketplace itself is amid chaos, it's very encouraging to see A's pattern of higher lows and highs continue to emerge in these trying times. Currently $51 is supporting the share price intraday, which is no doubt a bullish indication. However, we're keeping our stop lower at $44 to provide room for a pullback to the vicinity of the 30-dma. If you'd rather execute the play with a bit more prudence, then consider setting stops higher and only taking positions after A exhibits a convincing breakout above the $54 level. Comments Agilent has been a recent bright spot in the gloomy tech sector. The stock pulled back early this morning in sympathy with the NASDAQ, but buyers stepped in near support at the $51 level and carried the stock higher into the close of trading. With the potential of a rebound in the tech sector tomorrow combined with the possibility of favorable analyst comments stemming from the above mentioned meeting, A presents a favorable trade. Along with the aforementioned entry strategies, aggressive traders might look to open positions early tomorrow at current levels if the tech sector displays strength. Otherwise, wait for a breakout above resistance at $54 and confirm such a move with healthy volume. BUY CALL DEC-45 A-LI OI=1788 at $7.75 SL=5.25 BUY CALL DEC-50*A-LJ OI=2931 at $4.00 SL=2.50 BUY CALL DEC-55 A-LK OI=3916 at $1.44 SL=0.75 BUY CALL JAN-50 A-AJ OI=5935 at $6.88 SL=5.00 BUY CALL JAN-55 A-AK OI=2058 at $4.88 SL=3.00 http://www.OptionInvestor.com/oi/profile.asp?ticker=A ************************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=1067 ************************************************************** ************************ COMBOS/SPREADS/STRADDLES ************************ The sell-off continues in the equity markets... Stocks fell precipitously today amid a number of downgrades and a slew of profit warnings. Wednesday, November 29 Technology stocks fell again Wednesday amid new concerns over a slowdown in earnings growth. At the same time, the Dow posted triple-digit gains as investors rotated into defensive issues. The Nasdaq closed down 27 points at 2,707 while the Dow ended up 121 points at 10,629. The S&P 500 index finished 5 points higher at 1,341. Activity on the Nasdaq was moderate at 2.04 billion shares, with declines beating advances 2,553 to 1,394. Volume on the NYSE reached 1.10 billion shares, with declines beating advances 1,479 to 1,389. In the bond market, the U.S. 30-year Treasury rose 17/32, pushing its yield down to 5.64%. Tuesday's new plays (positions/opening prices/strategy): Baxter BAX DEC75P/DEC80P $0.56 credit bull-put Forest FRX DEC115P/D120P $0.38 credit bull-put UnitedHealth UNH DEC110P/D105P $0.50 credit bull-put All of our new spread candidates moved higher during the session but in doing so, there was little opportunity to achieve the target credits in each position. Portfolio Plays: Technology issues slumped today while industrial stocks rallied as the flight-to-quality continued. Worries about the slowing economy and lagging earnings weighed heavily on investors and the result was another sell-off among new economy issues. On the Nasdaq, Internet, software and computer hardware stocks all led the index on the downside. In after-hours activity, the news of poor quarterly earnings by Gateway (GTW) and Altera (ALTR) just made the situation worse and tomorrow's outlook for the group is grim. On the bright side, blue-chips enjoyed substantial gains as investors opted for the relative stability of consumer product, financial and drug shares. Boeing (BA), Wal-Mart (WMT) and Merck (MRK) boosted the industrial group while weakness in Exxon-Mobil (XOM), Microsoft (MSFT) and Disney (DIS) limited the rally. In the broader market, biotechnology shares continued a recent rally but transportation stocks slid lower after Merrill Lynch reduced earnings estimates for seven major air carriers due to continued revenue pressures from higher fuel prices. In economic news, a government revision of the gross domestic product showed that the broadest measure of U.S. economic activity grew at its slowest pace in four years during the third quarter. The data renewed hopes the Federal Reserve's recent history of interest-rate hikes is over, but worsened fears that corporate profits will suffer in a slower economy. Our portfolio enjoyed a number of favorable moves in industrial issues with pharmaceutical, consumer products and retail shares leading the way. A number of old economy stocks performed well with Home Depot (HD), Quaker Oats (OAT), Ralston Purina (RAL), and Hershey (HSY) among the strongest issues. In the technology group, Juniper Networks (JNPR) was surprisingly among the upside movers, closing $10 higher at $115. The bullish move provided a great opportunity to roll forward and down to January options, further reducing our cost basis in the issue. Another position that has quickly gone astray, Micron Technology (MU) has yet to recover from the recent chip-sector downgrades and the technical indications suggest that the downtrend has been renewed. Those of you participating in the bullish debit spread might consider selling the long position for a profit with the idea to buy the stock (covering the short option) if the issue moves back through the current resistance level near $35. Our bearish position in Pfizer (PFE) has also provided some exciting activity, with the impending Bush Presidency renewing optimism in the drug group. The issue has moved back to the top of a recent trading range and is now bracing for a rally to a three-month high. The typical roll-out transaction may not be as effective in this case, since there is little time for further upside movement in the event of a break-out, so here is another possible strategy. An alternative would be to buy stock to cover the sold option (a covered-call) and sell the long option while there is still premium available. Based on today's close, the credit for the sold option (DEC-47C) would be near $0.75, bringing your total profit to $1.25. At the same time, the stock could be purchased near $45.50, incurring a debit of $0.50 if the issue is called away at expiration. The overall outlook for the position would be bullish with a new cost basis near $44.25. Of course the issue has yet to demonstrate a breakout character, but this strategy may help you avoid loss in the event that occurs. Thursday, November 30 Stocks fell precipitously today amid a number of downgrades and a slew of profit warnings. The decline in blue-chip technology issues weighed heavily on the broader market, driving the Dow 214 points lower to 10,414. The Nasdaq fell 109 points to 2,597 while the S&P 500 index finished down 26 points at 1,314. The trading activity on the Nasdaq was extreme with 2.72 billion shares exchanged. Technology declines beat advances 2,764 to 1,311. Volume on the NYSE was the second heaviest on record at 1.51 billion shares traded, with declines beating advances by 1,886 to 1,009. In the bond market, the 30-year Treasury rose 15/32, pushing its yield down to 5.61%. Portfolio Plays: The stock market fell sharply today amid new data suggesting the economy is slowing further than expected and profit warnings from key technology issues. The Dow dropped over 300 points during the session and the tech-heavy Nasdaq plunged to an intraday low near 2500, its bottommost level in 18 months. Technology stocks have been steadily falling since September on worries of slumping profit growth and analysts have continued to slash their ratings on bellwether issues. Today's activity was no different and the earnings woes that fueled the flight from technology stocks also affected old economy issues. Computer hardware, semiconductors, networking and Internet shares all moved lower. Meanwhile, the industrial average was fighting its own battle with a number of technology stalwarts including Microsoft (MSFT), Intel (INTC), Hewlett Packard (HWP) and International Business Machines (IBM) falling to recent lows. On the bright side, a few health-care and drug issues were attracting buyers as investors selectively searched for bargains. In economic news, personal income fell in October for the first time in nearly two years, but the decline didn't keep consumers from spending ahead of the holiday season. At the same time, the number of people filing first-time claims for unemployment benefits rose to the highest level in more than two years. Fortunately, evidence of a major slowdown in the U.S. economy may encourage the Federal Reserve to ease its cautionary stance on inflation when policy makers meet later this month and that could eventually lead them to lower interest rates next year. Our portfolio performed much the same as the broader market with technology stocks moving to recent lows while many of the popular pharmaceutical and healthcare issues performed well. Although there were few rallies in the big-cap group, we noticed a number of favorable moves in lower priced issues. Bullish activity was seen in medical transcriptions provider Medquist (MEDQ), drug developer Miravant (MRVT), environmental technology management company EngleHard (EC), and telecom giant AT&T (T). US Air (U), Safeway (SWY) and Pharmacyclics (PCYC) were the leading mid-cap companies and Juniper Networks (JNPR) was again the leader in the higher-priced category. One positive aspect of the recent volatility has been the performance of our debit straddles and almost every position in that category has yielded profitable results. On the downside, many of the blue-chip issues in the technology industry were punished today and one that garnered our attention was Microsoft (MSFT). MSFT's shares plunged $8 to a recent low as traders shunned the personal computer group. Our LEAPS/CCs position will need to be adjusted downward if the slump continues and the resistance area at $70 is likely to provide a solid upside boundary for the next few months. Keep that in mind as you decide which option strike to sell in the bullish diagonal spread. Our recent play in Pfizer (PFE) is once again profitable and it appears (for now anyway) that the trading range is intact. Wednesday's close at $45.62 was not sufficient for technicians to label this week's rally a "break-out" and apparently, investors did not feel the move could be sustained. In any case, we will monitor the issue closely over the next few sessions. Questions & comments on spreads/combos to Contact Support ****************************************************************** - NEW PLAYS - I was one of the lucky ones that missed most of today's bearish session due to other commitments. In addition, I did not have any time to research for plays this afternoon but fortunately, I received requests for potential positions in these stocks from our subscribers. As always, please review each issue thoroughly and make your own decision about the outcome of the position. ****************************************************************** SKYW - Skywest $59.50 *** Reader's Request! *** SkyWest, through its wholly owned subsidiary, SkyWest Airlines, operates regional airlines in the United States. SkyWest offers scheduled passenger and air freight service with approximately 1,000 daily departures to 63 cities in 13 western states and Canada. In a joint marketing and code sharing agreement with Delta Airlines (DAL), SkyWest operates as a Delta Connection in certain SkyWest markets. SkyWest has also recently entered into a new code-sharing agreement with United Airlines, and began operating as United Express in certain California locations. Skywest has been on the move in November after breaking-out of a recent trading range earlier in the month. Analysts say the reason for the bullish activity is a combination of rumors of a potential merger or buyout with the ongoing consolidation in the industry and also the upcoming stock split. The Board of Directors of SkyWest recently declared a dividend distribution of one share of stock for each outstanding share of stock. The dividend will be distributed on December 15, to shareholders of record as of November 30, 2000. Regardless of the reason for the movement, the upward momentum is very strong and with the small disparities in the front-month premiums, this position offers an excellent speculation play for those who are bullish on the issue. PLAY (aggressive - bullish/debit spread): BUY CALL DEC-55 UWQ-LK OI=11 A=$5.38 SELL CALL DEC-60 UWQ-LL OI=70 B=$2.31 INITIAL NET DEBIT TARGET=$2.81-$2.88 ROI(max)=73% B/E=$57.88 ****************************************************************** FISV - Fiserv $55.88 *** Reader's Request! *** Fiserv provides information management technology and related services to banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies, leasing companies, mortgage lenders and savings institutions. Fiserv operates centers nationwide for full-service financial data processing, software system development, item processing and check imaging, technology support and related businesses. In addition, the company has business support centers in Australia, Canada, Indonesia, Philippines, Poland, Singapore and the United Kingdom. In late October, Fiserv disappointed Wall Street with earnings that were more than 20% above those reported a year earlier, but lower than analysts' expectations. The report raised concerns that Fiserv's earnings growth might be slowing and the company's share value took a beating, falling 20% to a 3-month low near $46. A new trading range near $50 was established and over the past few weeks, Fiserv's consistent, long-term track record has begun to attract new investors. Analysts say the company's ability to build on its existing business, service the new economy, and leverage existing relationships are just some of its fundamental strong points. In addition, the company is well positioned to deliver favorable results in the coming quarters and the activity over the past two sessions suggests that investors agree with the bullish outlook. Note: We will target a higher premium initially, to allow for some consolidation after the recent gains. PLAY (conservative - bullish/credit spread): BUY PUT DEC-45 FQV-XI OI=320 A=$0.43 SELL PUT DEC-50 FQV-XJ OI=267 B=$0.75 INITIAL NET CREDIT TARGET=$0.43-$0.50 ROI(max)=9% ************************Advertisement************************* Get 10 FREE Issues of Investor's Business Daily, the research tool for self directed investors. http://www.sungrp.com/tracking.asp?campaignid=1077 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html
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