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Daily Newsletter, Tuesday, 12/26/2000

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The Option Investor Newsletter                  Tuesday 12-26-2000
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************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        12-26-2000        High      Low     Volume Advance/Decline
DJIA    10692.40 + 56.80 10701.20 10597.60  804 mln   1747/1172
NASDAQ   2493.52 - 23.50  2548.75  2436.19 1.56 bln   1706/2320
S&P 100   687.00 +  2.77   690.35   679.52   totals   3453/3492
S&P 500  1315.19 +  9.24  1315.79  1301.64           49.7%/50.3%
RUS 2000  466.63 +  3.64   467.00   462.45
DJ TRANS 2839.59 - 10.34  2851.27  2824.30
VIX        32.54 +  1.02    33.56    31.28
Put/Call Ratio      0.95
*************************************************************

Profit taking on low volume provides another entry point!

On a very slow news day a continued trickle of year end tax selling
as well as profit taking from Friday's big gains held the Nasdaq to
a loss but overall the results were very acceptable. Considering
the recent massive selling into every rally the very fact that the
majority of the gains from Friday held was very good news. Sure
there some losers but compared with the gains from Friday they
were only bruised not battered. For example JNPR only lost -5.50
of the +$29 it gained on Friday and I am sure investors holding
JNPR would take those ratios every day. After an opening rally to
+33 the Nasdaq fell intraday to a low of 2436 or -79 points before
bargain hunters started nibbling. Volume picked up into the close as
traders started breathing easier that maybe Friday was going to hold.








The only material tech warning today went to NTRO, a broadband and
wireless access system producer, said orders from major customers
had slowed, primarily from Lucent. This caused some selling in the
sector on stocks like RBAK but it was not significant.

JDSU was downgraded by DB Alex Brown today and traded lower most
of the session but pulled back into positive territory near the
close. This was a bullish sign and we should thank D.B.A.B. for
another entry point into CIEN, which dropped -$11 off its high
before recovering into the close. CIEN was cited in several
industry articles today as a compelling value in the sector.

With holiday retail sales numbers being cussed and discussed all
day by the various analysts it appears that the season was marked
by huge discounts and price wars to unload the huge inventory of
goods. Retailers order product about nine months in advance and
the retail picture was much better last Feb/Mar than it is today.
Retailers stuck with billions in excess merchandise had been
discounting heavily since Thanksgiving. This week retailers do
as much as 10% of their yearly sales and analysts are concerned
what they can do to top -50% off pre-Christmas sales. Margins are
sure to suffer and Wal-Mart took the first high profile hit today.
After WMT said sales were weaker than expected JP Morgan downgraded
estimates for the retailer. WMT dropped -$3 to $49 on the news but
recovered some by days end. Expect more of the same of others as the
reporting of seasonal sales continues. Federated (FD) slipped
slightly on a warning as well.

Online retailers pinned their hopes on YHOO which said online sales
were twice as strong as last year. YHOO jumped +$5 on the news but
sold off on worries that even that would not be enough to pull others
like AMZN and EBAY out of their slide. YHOO gets most of its revenue
from advertising, not product sales, but the increased sales could
not hurt. Still, the buy the rumor, sell the news, trend is alive
and well and Internet retailers are likely to trend down now that
their year is over.

The Nasdaq has only three days left to gain +149 points to prevent
posting its worse year ever. Currently down -39% for the year it
is beating 1974 as the worst year ever. The Nasdaq needs to close
above 2640 to avoid setting a new record. With the volume picking
up into the close and bargain hunters feeling a little more
confident, we have a good chance to better that number. After the
close today there were no major warnings and most of the big caps
gained in after hours trading. CSCO, SUNW, MSFT, JNPR, CIEN, INTC
all gained ground slightly from their close.

The key here is still volume and you could definitely tell traders
were shopping instead of trading today. With only 1.5 billion shares
on the Nasdaq and only 800 million on the NYSE it would be very
tough to forecast any real trends from today's action. Still, only
losing -23 on the Nasdaq should count as a win in our book after
the very strong +177 point gain on Friday. In these market conditions
only a -12% retracement of the Friday's gains is a win!

For the rest of the week we can look forward to much lighter tax
selling since most of the major sellers are done. Only the holdouts
still in denial are left on the fence. With the Santa Claus rally a
no show, traders are now focusing on a real January effect for a
change. In recent years the January effect had been front run into
November and December by eager traders attempting to capitalize on
fund buying as the retirement cash flowed in January. Without a
Nov/Dec pre-rally we could see an accelerated bounce over the next
week or two. Funds that have been sitting on cash in anticipation of
possible redemptions will now start to put that cash to work. The
conditions are ripe for a rally. The Fed is on our side with the
next move expected to be a rate cut. The Nasdaq has hopefully put
in a bottom and the Dow has held 10300 numerous times. The only
fly in the ointment is the expected rash of warnings next week.
Historically over 40% of 4Q warnings occur in January but with the
almost 800 pre-warnings for this quarter already it remains to be
seen who is left of consequence. We still have SUNW, CSCO and IBM
as front runner candidates but those expectations are already
factored into the market to some extent. Traders are going to be
holding their breath as the 2000 clock runs out on the markets.

Like a severely lopsided football game with the winners in possession
at the two minute warning, the losers are just trying to hold the
line and prevent another penetration and score from adding further
insult to injury. Traders just want to get out of 2000 alive and
with the Nasdaq over 2400. A close over 2640 to avoid Y2K going
into the record books as the worst year ever for the Nasdaq is
immaterial. One only needs to look at their trading account to
know it was a tough year and that is the only record book that
counts. The bright side continues to be future. As traders we are
all smarter, quicker and more resilient than we were a year ago and
we will be even smarter, quicker and more resilient when 2001 draws
to a close. What does not kill us makes us stronger. I don't know
about you but I am pumped! Let's get ready to rumble!

There is only FIVE days left to take advantage of our special
annual renewal offer and get all the free stuff. Don't wait any
longer!

http://secure.sungrp.com/01renewal.asp

Happy holidays!

Jim Brown
Editor


********************
TIME IS RUNNING OUT !      !! ONLY 5 DAYS LEFT !!

2001 Renewal Offer!!!
Our best offer ever!!
********************




Long time readers know that each December we offer our
subscribers an extra value package as a thank you for their
support. The package this year contains:

1.) Two of our 2001 Option Expiration Calendar Mousepads
     (one for home and one for your office)

2.) The expanded 2001 Stock Traders Almanac

3.) A one month subscription to www.IndexSkybox.com

4.) A three month subscription to www.SplitTrader.com

5.) And of course the annual subscription to OptionInvestor.com

This package has a retail value of almost $519 which includes
$169 of free merchandise in addition to the annual subscription
to the Option Investor Newsletter. The total price for this
offer is still only $349 which is the regular annual subscription
price for the newsletter. The additional $169 of merchandise and
subscriptions are free as an added value!

Click here for more info:

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The terms of the offer are simple. Just renew your OptionInvestor
subscription for the annual rate of $349 ($29.08/mo) by Dec-31st
and you will get all the free stuff.

The supply of mousepads and almanacs is limited so renew now
to avoid any delay.

You know the newsletter is the best source for option plays,
timely market commentary and educational articles. Don't
wait until the supplies are gone! Renew now!

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


****************
MARKET SENTIMENT
****************

Seasick
By Austin Passamonte

Watching each tick of today's market action left us queasy once
more. We expected low volume & high volatility and sure weren't
disappointed.

Another high/low, high/low, high/close session is behind us. Not
exactly the bullish follow-through hoped for to sustain a serious
rally but neither did the bottom fall out as well. The Dow showed
strength in refusing to roll over and recovered from several
rounds of selling to close near its high. NASDAQ's didn't fare
quite as well.

We thought tax selling might abate with hopes of a rally birthed
last Friday but sellers remain alive & well. We may not be clear
of them yet and the week could be a continued struggle between
anxious buyers and eager sellers.

Window-dressing, last-minute losses and low volume could give us
a bumpy ride. Historical bias is to the upside and daily chart
signals are turning positive as well. The VIX also remains in
bullish territory itself.

That being said, massive blocks of OEX and SPX calls were sold at
"bid" and blocks of puts bought at "ask". Some big money has
lined up to play the downside this week.

Oddly enough, someone scaled into 15,000+ QQQ Jan 60 call/put
straddles near 4 points on each leg, betting we will move big in
one direction or the other. We'll take that bet but not with an
8-point straddle, thanks anyway! Great strategy but we prefer
tying up less capital in time premium when possible. Just goes to
show that someone cannot decide direction but feels we're about
to pop nonetheless.

Stocks are beginning to shrug off bad news and rally from
intraday lows left and right. This price divergence of bad news
failing to further depress prices is very bullish. It all stems
squarely from the growing belief that a January rate cut is
guaranteed and several of them are likely soon.

CNBC is trotting out every bullish rate-cut analyst they can
find. Those with less conviction are steered into making any kind
of bullish forecast that can be coerced. This could effectively
begin a tradable rally beyond the end of tax selling and start
the vaunted "January effect".

Meanwhile, other market pros continue to suggest selling into
rallies and fear ultimate market lows lie below us ahead. Who is
right?

Until Joseph-Cohen, Meeker, Acampora and Battapaglia escape from
the deserted island they're held hostage on, who knows? (Just
kidding). We still feel that any rate cut by/before January 30th
could launch the next sustained rally and no further action by
the Fed might be a crushing blow to expectant bulls who will
certainly by the rumor until then. Time will surely tell.

Meanwhile, choppy seas lie ahead. One or two good entries at most
will be offered this week. Avoiding the wash while trying to find
them can be a challenge. Next week should see a return to high
volume and our next clear market direction. Trade with care using
tight stops and modest profit targets until then!

*****

VIX
Tuesday 12/26 close: 32.54


30-yr Bonds
Tuesday 12/26 close: 5.43%

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.

                                   Tuesday
                                 (12/26/2000)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
725 - 710                9,201        3,310         2.78
705 - 690                9,744        5,127         1.90

OEX close: 687.00

Support:
685 - 670                2,220        9,869         4.45
665 - 650                1,082        5,857         5.41

Maximum calls: 700/5,576
Maximum puts : 600/9,216

Moving Averages
 10 DMA  693
 20 DMA  703
 50 DMA  719
200 DMA  770


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 70 - 68                68,226        18,280         3.73
 67 - 65                93,383        20,052         4.66
 64 - 62                26,991        34,122          .79

QQQ(NDX)close: 60.87
Support:

 59 - 57                11,382        13,730         1.21
 56 - 54                21,498        16,484          .77
 53 - 51                   921        12,641        13.73

Maximum calls: 70/49,019
Maximum puts : 60/20,106

Moving Averages
 10 DMA 62
 20 DMA 64
 50 DMA 72
200 DMA 88


S&P 500 (SPX)
Resistance:
1375                   11,256        10,032          1.12
1350                   35,946        34,638          1.04
1325                    5,754         5,866           .98

SPX close: 1315.19

Support:
1300                    4,087        18,089          4.43
1275                      582        13,886         23.86***
1250                    1,341        16,585         12.37

Maximum calls: 1350/35,946
Maximum puts : 1350/34,638

Moving Averages
 10 DMA 1317
 20 DMA 1331
 50 DMA 1361
200 DMA 1434

*****

CBOT Commitment Of Traders Report: Friday 12/22
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         -588        +179           -1646       -2089
Total Open
interest %      (-7.52%)    (+2.24%)        (-8.22%)    (-5.50%)
                net-short   net-long        net-short   net-short

NASDAQ 100
Open Interest
Net Value         +3385      -1438           -4239       +1316
Total Open
Interest %      (+19.05%)   (-4.45%)        (-8.24%)    (+2.11%)
                net-long    net-short       net-short   net-long

S&P 500
Open Interest
Net Value        +66148      +80633          -81998      -90398
Total Open
Interest %      (+36.56%)   (+29.41%)       (-11.60%)   (-11.61%)
                net-long     net-long       net-short   net-short


What COT Data Tells Us
----------------------
Indices: The disparity remains between Commercial positions and
Small Specs on the S&P 500.

Commercials and Small Specs have reversed their positions on the
NASDAQ 100 with the Commercials now moving to a net-short
position and the Small Specs moving to a substantial net-long
position.

Interest Rates: Commercials are still heavily short T-Bond and T-
Note futures. (Bearish)

Currencies: Commercials heavily short Euro futures. May consider
it artificially propped. (Bearish)

Energies: Commercials are net-long Crude Oil and Unleaded Gas
while net-short Heating Oil & Natural Gas. These producers are
hedgers and almost always take the opposite side of expected
market action to lock-in production prices. Crude Oil and
Unleaded Gas (Bearish), Heating Oil and Natural Gas (Bullish)

Metals: Commercials are moving from net-long towards neutral in
Gold, could be under distribution. Silver, Copper and Platinum
are net-short.

Data compiled as of Tuesday 12/19 by the CFTC.


**************
MARKET POSTURE
**************

Please visit this link for Market Posture:

http://members.OptionInvestor.com/marketposture/122600_1.asp


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

Happy Holidays!
By Lee Lowell

I'm hoping that everyone is enjoying the holiday season and I'd
like to wish all of our readers a healthy and prosperous 2001.

I'd like to use my article this week as sort of a year-end review
of what we've seen and what we can look forward to in terms of
trading options.

It's been a wild ride to say the least in the financial markets
this year.  We came off of one of the most fantastic and shortest
bull moves we've ever seen.  The period of November '99 to
March '00 witnessed a move in Nasdaq that will probably never been
seen again.  50-100 point upmoves was the norm for some of the
tech stocks and it made millionaires for some lucky souls.  But it
also changed the psychology of the investing public in general.
We got very greedy and became oblivious to what really should move
the markets - long-term growth and earnings potential of each
company.  But these incredible moves blindsided us and left us
with the thought that tech stocks will always go up and every dip
should be bought.  That worked for a little while but you can see
where we are now.  All you had to do was buy some out-of-the-money
calls and reap the returns.  Not so anymore.

The smart money took us all for a ride from April '00 - present.
The expression, "it can't go any lower", took on a new meaning.
I know I was caught many a time trying to pick a bottom on some of
my so-called favorite tech stocks.  I'm still hurting from that.
Just look at the price of some past high fliers - YHOO, CMTN, BVSN,
INSP, TERN, INTC, etc, etc.  It was not only contained within the
Nasdaq.  Some Dow components were rocked as well - LU, IBM, MSFT,
T, etc.  These were companies that were supposed to be core
holdings that never went down.  Yeah right.  We've been hit with
earnings warnings up the wazoo.  If someone asked you a year
ago if you wanted to buy YHOO for $30/sh, you probably would've
mortgaged your life for that opportunity.  Well, have fun pal.
Take all you want.

Our thinking has changed from looking for solid growth companies
to "just get me in on the next net stock."  And, "If the Nasdaq
let some people retire early, I want to be a part of that."  We
thought any internet stock that we bought would go to the moon.
Some were smart and sold early while others were left holding the
bag.  "It's a good company, I'll just buy some more on the way
down."  Well, look who's still holding that stock at $2?

Do I sound mad and depressed?  Sure, but at least I've learned a
lesson and how to avoid it in the future.  Before I started trading
stock options I made my living (and still do) by trading commodity
options.  I've learned that there's a world of difference between
the two in terms of what affects the prices of the underlying
securities.  There's nothing inherently different about a stock or
commodity option because an option is an option no matter what the
underlying security.  But there are many more factors to consider
when it comes to trading stock options.

For example, here's what I've found to affect the stock market and
in turn the option prices:  The Fed, interest rates, employment
numbers, government reports (CPI, PPI, Retail Sales,
Housing Stats), overseas markets, Presidential races, day traders,
earnings reports, etc, etc.  That's so much information to absorb
when trying to decide on the future movement of a stock.

Now the commodity markets are much simpler.  It's all supply and
demand.  What's Orange Juice going to do this winter?  Just look
at the crop report.  What about Coffee?  Look at the Brazilian
weather.  How about Crude Oil?  Look at the OPEC numbers.  Corn,
Wheat, and Soybeans?  Monthly Government estimates.  Sounds easy?
It's really not.  But there are less outside influences in the
commodity markets than there are in the stock market.  (*Please
don't take this as advice to trade commodity markets).  My point
is:  trading stock options requires lots of work and research.
Found out as much as you can about the underlying stock before you
jump into the options.  In addition to the outside influences I
just mentioned, make sure you check the stock's support and
resistance levels, know when its earnings are released, check on
its stock split calendar (if it's splitting), and always check
implied volatility levels of the options.

So what are we going to do in the new year?  We are going to be
smarter option traders.  We are going to always try to increase
our knowledge base.  Read more books on option trading, make sure
we keep up with this great website, get a good option broker, and
get some good option trading tools.  We will not rely on stock
advice that we heard in a chat room, and we will always research
our picks whether it was a self-made decision or a recommendation
from someone else.  Make sure you realize that option trading
entails risk.  You can lose your entire investment if you don't
take an active role.  You can always hold onto a stock indefinitely
but all options expire at some point.  I've made this point before:
Your money is an asset just like your house, car, and life.  You
insure those with car, life, and health insurance, why not insure
your investments?  Options trading gives you that opportunity.
Whether it is buying puts or selling covered calls, take an active
role and use all the resources.

The life of options trading is maturing nicely.  More and more
brokers are finally realizing that options trading is becoming
increasingly popular and they are revamping their websites to
accommodate this change.  Make sure you are part of this wave.
Don't settle for brokers that charge you an arm and a leg for a
single option transaction.  Direct Access brokers are good and you
can specify which exchange to send your order to.  That is good
for single buy and sell orders.  But as of this writing, Direct
Access brokers don't allow spread orders on a single ticket yet.
You must still use a web-based broker for that.  But there are
excellent brokers out there for that.  My favorite is mrstock.com.
Keep up with the changes.  Periodically surf the web for updated
information on these brokers.  Some brokers even give you free
streaming real-time quotes now.  That's a great perk.

If you do use a real-time quote vendor, make sure they have good
options chains in their system.  I've talked about this in the
past too.  What's the point of paying a few hundred bucks a month
if the data feed can't give you reliable options information.
Once again, a monthly web search can keep you updated on data feed
providers and upgrades.  Don't forget to use the option calculators
that not only give you an estimated fair value of your option but
also the "greeks" that go along with it.  CBOE.com has just what
you need for that.  And of course my favorite - volatility analysis.
Most people don't even know what volatility is when it comes to
options trading.  Volatility helps you figure out the relative
"expensiveness" or "cheapness" of an option premium based on its
past behavior.  I've talked about it before and you know I will
definitely discuss it again.

I look forward to keeping my place here at OptionInvestor.com so I
can supply our readers with quality educational material to enhance
their trading skills.  This is "Options 101" so I will continue
to gear the articles toward the basics and give each reader the
foundation to build a successful options trading career.

Thank you and good luck.


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

New Year's Resolutions for 2001
By Scott Martindale

Dear Santa,

Thank you for the nice Christmas rally.  Everyone else has seemed
to be out to kill the markets this year, including Clinton,
Greenspan, Bush, Gore, corporate CEO's, Wall Street analysts,
Europe, Japan, OPEC, institutional investors, foreign investors,
retail investors.  But not you, Santa.  You came through for us as
always.

Sure, Santa, I agree with Austin P. in that you should take
whatever the markets give you without bias, whether up or down.
In fact, didn't someone once say something like, "...if you can
face both bull and bear, and treat both impostors just the
same...?"  Nonetheless, during market rallies, our friends and
family just seem to have a little extra skip in their step, and of
course our long-term stock portfolios look better, too.  Most of
us who trade this market can't help but feel happier making money
on market strength rather than weakness.

So, thank you, Santa, for giving us all a little holiday cheer.
Oh, and one more thing.  Do you think you can keep it going a
little while longer -- and perhaps hand the baton to Greenspan, so
that he can hand it to Bush, and so on?  Please forgive me if I
hope for a sustained rally, even if I promise not to count on it.

Your friend,
Scott

P.S.  Do you think you can make the Nasdaq hold at 2500?

Okay, I've gotten my thank you note to Santa out of the way.  Now
I'd like to list my New Year's Resolutions.  [I hope you readers
don't mind if I use these annual rituals to make up this week's
article.]

No doubt about it, 2000 was a year for lessons and losses.  For
many, this was the first year to make some really good money on
the short side.  I certainly made more on puts than on calls.
Nonetheless, my naked put strategy worked pretty well up until
October/November, when I ignored the stark technical deterioration
and the predictable October sell off to call a bottom and bet on a
fall/post-election rally.

Here is my list of things that I intend to focus on during the
next year:

1. I will implement firm exit strategies.  I wrote about exit
strategies in a previous article.  There are many ways to design
them, but they certainly don't have to be complicated.  Choose a
couple of indicators that you trust, or merely set a percentage
stop loss and stick to it.

2. I won't bet against the primary market trend.  Calling a turn
in market direction is foolhardy.  If the long-term trend is down
but a short-term rally is underway, it may be fine to play short-
term calls but unwise to buy LEAPS call options for long-term
spread trading.  Also, a short-term rally within a primary
downtrend is not a good time to sell naked puts.

3. I won't ignore the seasonal market cycles.  It seems that every
year we get self-fulfilling market breakdowns in April and
October, with a humdrum summer in between.  We also usually get a
Santa Claus rally and a January effect (although this year's is
somewhat suspect due to some strong external forces).  I intend to
play the seasonality much more conservatively next year (i.e.,
focus on capital preservation).

4. I won't listen to so many different market gurus.  Especially
with the run up in tech of the past few years, many new market
gurus have emerged.  I have subscribed to many newsletters of
various ilks, both on an ongoing and on a trial basis.  They all
have very fine track records, but too many choices and hot tips
can tempt you into over-trading or having an unfocused or poorly
diversified trading/investing strategy.  I will choose a few that
I like the best (including OIN), and use their recommendations to
formulate a focused plan for my short-term trading and long-term
investing.

5. I will plan to attend an OIN seminar.  I've never attended an
OIN event, and I always feel like I really missed something when I
read about them after the fact.  The biggy in Denver is certainly
my target, but I'll also consider attending a road show.

6. Now that the markets are showing signs of finding a bottom,
I'll again start looking at buying LEAPS.  I keep talking about
it, but I can't get comfortable enough with any of the rally
attempts.  Buying shares in my long-term account is more costly,
but at least there is no time value erosion to worry about.  Now
that the downside appears somewhat limited, particularly in tech,
I only need to await two things: an apparent start to a sustained
uptrend and a reduction in these inflated options premiums.  [Of
course, you can avoid high time premiums by buying deep ITM.]

7. I will evaluate every holding by continually asking myself,
"Would I purchase this today, given its current price, technicals,
and fundamentals?"  If the answer is no, then it's time to sell
(or at least tighten up the stops).

8. Perhaps most importantly, I will constantly remind myself that
I am managing money for my family's current income and financial
future.  If I appear to be on a streak of bad decisions, I will
focus on preserving what I have left rather than trying to "win it
back" with increasingly risky moves.

Let's see what 2001, the first year of the new millennium, has in
store for us.  But no matter what it brings, let's each resolve to
be smarter traders.  Make this your mantra: Use fundamentals to
choose your target stocks, use technicals to time the trades, play
with (not against) the primary trend, cut losses short, let
profits run.

Happy New Year to each of you.


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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:
*****

No dropped calls today.


PUTS:
*****

No dropped puts today.


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The Option Investor Newsletter                  Tuesday 12-26-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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********************
PLAY UPDATES - CALLS
********************

NOK $43.63 -0.06 (-0.06)  Nokia traded in a narrow range of just
over $1.50 on Tuesday's lackluster Nasdaq trading. Nokia
held above support at $43 in the morning, and dipped to $42.69
briefly in the afternoon.  From this level, it rebounded to
close just above the converged 50- and 200-dma of $43.55.  This
is impressive, considering that the vast majority of technology
and telecommunications stocks are deeply below their major
moving averages.  Volume was only 43% of the average daily
trading volume.  Two articles in the Wall Street Journal
published on the 25th and 26th described the growing market in
wireless services for vehicles, and Nokia's role in a joint
venture with IBM, Toshiba and Taiyo Yuden Co.  Our strategy
continues to monitor strength in the wireless telecom industry.
Ideally, we would like to see Nokia break out above the 10-dma
of $45.24, which could lead to the next resistance level of
$47.  A drop below the 5-dma of $42.77 would be worrisome,
accordingly, we are adjusting our stop to $40, and traders should
exit positions if Nokia closes below this level.

COST $36.06 -1.31 (-1.31)  After an attempt to rally past
resistance at $37.38 this morning, Costco fell with the
market indices.  COST spent the last three hours of the trading
day in a very tight range of a quarter point above and below
the $36 level.  Tuesday's volume was only two thirds of the
average trading volume, which was to be expected, as many
traders are vacationing this week.  Costco remains above
support at the 5-dma of $35.47, and below resistance at the
200-dma of $36.94.  We want to see higher volume pushing this
stock out of the narrow range it has been trapped in for over
six months, and it appears poised to breakout upon the return
of heavier volume.  A breakout above $38.38 would be very
bullish, and an excellent conservative entry point.  A fall
below the 50-dma of $34.64 would be dangerous, so we are keeping
our stops set at $34.

LVLT $31.00 -1.81 (-1.81) The CLEC group, which include MFNX and
GX, traded relatively flat during Tuesday's low-volume session.
There wasn't any company-specific news, nor any from the broader
industry to effectively lift LVLT off its $30 support.  Last
week LVLT experienced a double bottom, testing lows in the $26
to $28 range, before resurfacing.  We're now looking for an
advancing market and overall bullish sentiment to incite a
technical bounce.  A high-volume breakout through the immediate
resistance at $33 and the rising 10-dma line ($34.13) warrants
an entry into this risky recovery play.  More aggressive
positions might be found near the current price level, but make
sure the buyer's step in first.  Our stop is firmly set at the
$27 mark.

JNJ $102.38 +0.88 (+0.88) Pharmaceutical giants JNJ and MRK
helped buoy the Dow today as investors once again moved toward
old economy names and the relative security of the drug sector.
Defensive issues are likely to see advances over the short-term
while the techs flounder amid profit-taking and the economic
uncertainty.  Plus, JNJ is reporting earnings in a few weeks.
The company's earnings are scheduled for January 23rd, BEFORE
the bell.  JNJ's break above the $102 mark and strong close
today also renders a bullish outlook going forward; although the
inability to move through $103 does give reason to be cautious.
Pick your entries carefully.  There's time to be patient and
wait for additional upward confirmation.  If you're interested in
an earlier and perhaps more risky entry, consider taking
positions at the 5- & 10-DMAs, near the century mark.  However
take note, we'll exit the play if JNJ closes below $100.

IVGN $79.75 +0.38 (+0.38) Currently in an ascending triangle
pattern, volume continues to dry up as IVGN's stock price trends
higher.  Today was a quiet trading day for IVGN, as it closed up
fractionally on 35% of ADV and in doing so, put itself just above
the 5 and 10-dma (currently at $79.07 and $79.63) respectively.
Pullbacks to both these support levels as well as $77 and $75
could be ideal targets for aggressive traders.  Conceivably, the
stock go as low as the 50-dma at $73 and still maintain its
current uptrend but please note that we are moving our stop price
up from $72 to $75 and as such, we would like to see IVGN close
above this point.  For an entry on strength, wait for volume to
return to the stock to carry it above either $81 or $82,
depending on risk tolerance.  Once through $82, buying momentum
could take the stock quickly to formidable resistance at $85.
When buying a breakout or a bounce, confirm with volume and as
mentioned on Sunday, look to peers such as ABI, AFFX and CRA for
guidance.

TXN $46.69 -0.94 (-0.94) Lack of interest was most likely the
cause of today's movements for shares of TXN, as the stock ended
the day down almost 2 percent on less than half the ADV.  With
little news to drive the stock one way or the other and a
relatively quiet trading session overall for the NASDAQ, TXN
traded in a tight range of less than 2 points.  While the stock
closed below its 10-dma, now at $47.40, support at the 5-dma (at
$45.83) held up well.  Another test of the 5-dma as well as
support at $45 and the 50-dma at $44.72 could provide aggressive
traders with possible entry points.  There is also support at $43
but make sure that TXN doesn't close below our protective stop,
currently at $42.  For a more conservative entry, wait for buying
volume to return, carrying TXN above the 10-dma, before taking a
position.  In either case, confirm sector sentiment with the
Philadelphia Semiconductor Index (SOX) and Merrill Lynch's
Semiconductor HOLDR (SMH).

RFMD $25.75 -0.88 (-0.88) With many traders still on holidays,
volume was light today for the markets overall and as such, in
sympathy with softness in Semiconductor issues, RFMD pulled back
3.29 percent on less than half the ADV.  The 10-dma, currently
sitting at $27.20, continues to act as formidable resistance for
the stock but the good news is, former resistance at the 5-dma,
now at $25.20, is providing support.  With the 50-dma just below
near $23, the stock has also found support recently at $24.25.
Bounces off these levels could be targets to shoot for in
entering this play but make sure there is buying volume to back
the move.  Overhead, $28 is the level that traders will be
watching for a lower risk play.  A rally through $28 with
conviction would not only be a definitive break through the
10-dma, but also take out a formidable resistance level and from
there it could be a quick trip to its next hurdle, the $30 mark.
When targeting an entry, keep in mind out stop price of $22 and
confirm direction with peers BRCM, CNXT and TQNT.

LH $169.50 +3.56 (+3.56) The gift that keeps on giving, LH broke
out again on the day after Christmas, treating investors to a
brief foray above $170 before settling down to end the day with
a solid 2% gain.  While it isn't the 10% gains that many
momentum investors have come to expect, the stock has been a
steady performer during the market gyrations of the past 6
weeks.  During that period of time, the stock has rallied from
the bottom of its ascending channel (near $130), and with
today's move, tested the top of the channel at $170.  The
expanding Bollinger band is now out of the way, as it currently
rests above $173.  The continuing series of higher highs and
higher lows allows us to ratchet up our stop, and it is now
sitting at $163.  After successfully clearing resistance at $165
and $167, look for intraday pullbacks to these levels to provide
for fresh entry points.  The strength in today's trading was
clear, as LH bumped against the $170 resistance level all day.
More conservative players will wait for the stock to clear this
level on strong volume before adding new positions.


*******************
PLAY UPDATES - PUTS
*******************

PMCS $75.00 -4.25 (-4.25)  PMCS remains in a strong short term
down trend which began the first week in December, and today's
persistent weakness in the semiconductor sector provided solid
opportunities for put players.  A steep sell off occurred in the
first hour of trading, and brought PMCS to $72 from its opening
level of $78.  While PMCS rallied from its low point of $70.44,
the stock needs to close above its 5-dma of $79.02 in order to
signal the beginning of an uptrend.  The semiconductor sector
remains under pressure, and we may need to have a prominent
analyst or two upgrade this sector before we see any signs of
real strength.  However, this play has provided us with strong
profits, which we would like to protect, so we have adjusted our
stop downward to $79.00.  Remember to monitor SMH and SOX.X for
weakness before initiating positions.

BLDP $63.00 -1.00 (-1.00) Today was a light volume trading day
for BLDP, as it bounced around various levels of support and
resistance.  Opening right at $65, the stock attempted to rally
in the early going but resistance at $67 brought in the bears,
who sold the stock down sharply.  Finding support at $60, BLDP
enjoyed a small late day bounce but nonetheless, ended the day
down 1.56 percent on less than half the ADV.   Today's close was
just above the 5-dma (now at $62.62), putting BLDP above this
level for the first time in almost two weeks.  But the stock
continues to struggle near its 10-dma line (now at $66.55).  A
failed rally off the $67, the 10-dma and $65 should provide for
aggressive entries but make sure BLDP closes under our stop price
of $64.  A break below the 5-dma should provide for a safer
entry, confirmed with direction in rival FCEL.

CELG $32.05 -4.02 (-4.02) Despite an up day for most Biotech
stocks, CELG's direction was clearly down, as it continued to
head deeper into negative territory on the back of resistance
from the 5-dma (now at $36.24).  As mentioned on Sunday's
write-up, CELG's recent decline has been without news, yet the
volume is telling us the tale of a struggling stock.  Closing the
day down over 11 percent, volume was heavy, almost 150% of ADV.
But CELG did find some support at $30 today, with bargain hunters
buying into the oversold bounce.  At this point the stock could
head higher in the short term, but the 5-dma should provide
formidable resistance for an aggressive entry point.  There
should also be resistance at $35 but confirm a rollover with
volume before making an entry.  For the more risk averse, wait
for CELG to drop below $32 with conviction before jumping in.
When making a play, keep an eye on the AMEX Biotech Index (BTK)
and Merrill Lynch's Biotech HOLDR (BBH).  To protect our profits,
we are lowering our stop price from $45 to $37.

INTU $34.94 -0.31 (-0.31) The PC and software stocks ended
mixed in today's post-holiday session.  As the tech stocks
faltered in midday trading, INTU established a new
intraday bottom at $33.25 and a lower ceiling.  In the
last hour of trading, the bulls stepped in with some
volume, but found the $35 mark impenetrable on the
attempted revival.  This break through the $35 support
level is certainly a bearish indication; however, we're
lowering our stop to $37 for added protection against an
upswing.  News of poor retail sales and specifically,
Intuit's TurboTax income-tax preparation software lagging
behind last year's sales by more than 30% also cast a
shadow going forward.

SFA $35.75 +1.00 (+1.00) Shares of advanced communication
networkers like BRCD, LBRT, and GMST started off the holiday
week with additional losses.  SFA saw a minute gain in narrow
trading, however the $36 upper resistance kept a cap on the
advances.  In an effort to err on the side of caution, we've
lowered our protective stop from $40 to $38.  The trailing 5-
dma, now at $37.58, still offers aggressive entry points
following a high-volume rollover.  But of course, a momentum
move through Friday's intraday low of $33.03 provides better
confirmation that SFA is on its way to pre-millennium prices.
Interactive TV stocks saw incredible gains earlier this year,
but investors have now realized that consumers aren't buying
these services as quickly as anticipated and so, they're falling
hard and fast.

DGX $130.88 -7.13 (-7.13) Aggressive players had a great day
with DGX today.  The excessive enthusiasm that propelled the
stock right through the upper Bollinger band on Friday, had no
choice but to dissipate as the rubber band snapped back this
morning, driving shares down as low as $129.50 before
stabilizing.  Friday's $14 gain was clearly overdone as other
players in the sector, LH (current call play) and PPDI had much
more sedate gains, and there was no news that would have been
responsible for such a surge.  We looked at the probabilities
and saw that the stock needed to come back to earth today.
Keeping a tight reign on this aggressive play, we are ratcheting
our stop down to $138, just above the already-stretched, upper
Bollinger band.  Support held firm near $130, but any drop below
this level would provide for attractive conservative entry
points, but make sure that the stock is truly heading south by
checking for solid volume and monitoring the action in
competitors LH and PPDI.  Additional rallies into the $138 range
are likely to provide aggressive players with more opportunities
for quick profits...wait for the rubber band to get stretched
tight again, and then strike as it begins to snap back.

HAND $35.88 -0.19 (-0.19) The NASDAQ's inability to extend
Friday's gains, weighed heavily on shares of HAND today.  After
rolling over near the $36 level this morning, vigilant day
traders got a nice opportunity to buy puts for the plunge down
to the day's low of $30.25, before the stock recovered in the
afternoon, ending the day nearly unchanged.  For those keeping
score, HAND still looks very ugly in the technical department.
The bulls have been unable to scale even the 5-dma (currently
$38.75), as the stock continues to slide down the lower
Bollinger band, keeping the string of lower lows intact.  We
are leaving our stop at $40 to provide room for the stock to
move.  Aggressive entry points are likely to appear as the stock
fails to penetrate this level; consider new positions as HAND
rolls over, especially if accompanied by a weakening NASDAQ.
Icing on the cake will be if competitors PALM and RIMM are being
mauled by the bears.  HAND has been the weakest of the 3 lately,
so any sector weakness will hit HAND the hardest.  Today's
bounce near $30 may be an early indication that investors are
willing to defend their positions near this major support level.
If they can't manage to fend off the sellers there, consider
initiating new plays as HAND heads down to test its IPO price
near $22.


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**************
NEW CALL PLAYS
**************

AGGRESSIVE:

CIEN - Ciena Corp $74.18 -2.81 (-2.81 this week)

CIENA Corporation's market-leading optical networking systems
form the core for the new era of networks and services
worldwide. CIENA's LightWork architecture enables next-
generation optical services to transmit signals simultaneously
over the same circuit.  This multiplexing system changes the
fundamental economics of service-provider networks by
simplifying the network and reducing the cost to operate it.
About 45% of sales come from outside the US markets.

Any one interested in high-risk recovery potential?  Last week
CIEN fell a whopping 38% after announcing its agreement to buy
closely held Cyras Systems for $2.13 bln in stock and assumed
debt.  CIEN hit a lower bottom of $59.56 while taking its
beating amid the resigning NASDAQ.  Not even new BUY coverage
from ING Barings could keep CIEN afloat.  But then Santa Claus
came to town on Friday.  This large equipment stock rocketed
$17.13, or 28.6% to $77 on the heels of a rallying marketplace.
The momentum was solid and CIEN traded on 1.4 times its normal
volume.  The dynamic breakout pushed the stock through the 5-dma
($69.63) resistance ceiling.  Today the share price consolidated
at $70-$71 and then broke to the upside for a strong showing in
the $72 and $74 range.  Near-term support is established at $70,
but firmer support is near the $65 level.  If CIEN retraces to
$65 for a weak close, we'll the exit the play that evening, so
consider setting stops.  Aggressive traders might consider
taking entries off the supportive $70 mark on strong bounces, or
better yet, buy into strength as CIEN moves above the next level
of opposition at $80.  Look for other optical stocks like JDSU,
GLW, and SCMR to help move the sector higher over the short-
term.

BUY CALL JAN-70 UEE-AN OI=1042 at $11.88 SL= 8.75
BUY CALL JAN-75*UEE-AO OI=2106 at $ 9.38 SL= 6.25
BUY CALL JAN-80 UEE-AP OI=2916 at $ 7.25 SL= 5.00
BUY CALL FEB-75 UEE-BO OI=1032 at $13.75 SL=10.25
BUY CALL FEB-80 UEE-BP OI= 118 at $11.63 SL= 8.50

http://www.premierinvestor.net/oi/profile.asp?ticker=CIEN


COF - Capital One Financial $63.00 +1.31 (+1.31 this week)

As one of the top 10 credit card issuers in the U.S., Capital
One's secret weapon is its vast databases.  The company uses
this data to match a potential Visa or MasterCard customer to
any one of its thousands of cards, varying in annual percentage
rates, credit limits, finance charges and fees.  Ranging from
platinum and gold cards for preferred customers to secured and
unsecured cards for customers with poor credit histories, the
company has a credit card for just about anyone.  The company
also sells wireless phone services, mortgage services, and
consumer lending products.

Investors are breathing a sigh of relief with the Fed moving
to a relaxing interest rate bias.  Although we didn't get an
actual interest rate decrease this year, the moderating economy
is adding fuel to the belief that we may actually get our first
cut before the FOMC meets again at the end of January.  This
optimistic outlook has helped Financial stocks to start moving
higher again, and COF has participated to the tune of a 10% move
since the low last Wednesday.  Today's trading extended the
strong gains from Friday, and our new play is now back over all
of its moving averages, as well as the $61 resistance level, and
is bumping its head on the ascending upper Bollinger band again.
With stochastics just entering the overbought region, it looks
like we could see more upside before the next round of profit
taking.  Any pullback from the upper Bollinger band could
provide a nice aggressive entry point on a bounce in the $60-61
area.  We are playing this one with a nice tight stop, so if the
tone in Financial stocks changes, our COF play could get the
boot in a hurry.  But as long as the strength continues, we will
take advantage of it.  More conservative players will want to
wait for the Bollinger bands to expand and COF to trade through
the next level of resistance near $64.50, before initiating new
plays.  Use the Banking Index (BKX.X) to confirm buying interest
is still strong in Financial issues before playing.

BUY CALL JAN-60*COF-AL OI=1301 at $5.38 SL=3.25
BUY CALL JAN-65 COF-AM OI=1573 at $2.69 SL=1.25
BUY CALL JAN-70 COF-AN OI= 104 at $1.25 SL=0.50
BUY CALL FEB-65 COF-BM OI=  85 at $4.38 SL=2.75
BUY CALL MAR-65 COF-CM OI=1819 at $5.50 SL=3.50
BUY CALL MAR-70 COF-CN OI= 512 at $3.75 SL=2.25

http://www.premierinvestor.net/oi/profile.asp?ticker=COF


LOW VOLATILITY:

ASFC - Astoria Financial Corporation $54.13 +1.63 (+1.63)

Astoria Financial Corporation, the holding company for Astoria
Federal Savings and Loan Association with assets of $22.2 billion,
is the second largest thrift institution in New York, and the
sixth largest in the United States.  Astoria Federal, through its
86 banking offices, provides retail banking, mortgage, consumer
and small business loan service to 700,000 customers.  Astoria
commands the third largest deposit market share in the attractive
Long Island market, which includes counties with a population
exceeding that of 39 individual states.

Astoria shares have performed beautifully since the stock crossed
its 50 dma on October 27.  Since that point, the chart exhibits
a steady up trend with periodic pullbacks.  This is a play on a
leading stock in a sector which seems to be leading the financials
and the overall market, on solid fundamental and technical
strength, as well as the anticipation of lower interest rates.
Despite its 20% gain from early November, Astoria still trades at
a low P/E of 11.9, which is attracting retail and institutional
investors.  Savings and loans, or thrift banks, are generally
not subject to the credit risk which has caused the larger
banks like Chase Manhattan to warn of potential earnings
shortfalls.  Savings and loans typically have much lower exposure
to the volatile capital markets, typically perform well in
a slowing economy, and respond more rapidly to interest rate
decreases than large commercial banks.  Astoria is positioned
solidly above the 200 dma of $35.79, the 50 dma of $42.83, the
10 dma of $49.43, and the 5 dma of $51.41.  Equally importantly,
the savings and loans are in a strong, steady, and slow up trend,
which is unlikely to be broken any time soon.  However, always
watch the sector for strength before initiating positions.
RKH is the regional bank share holding stock, which should give
good indication to the sector's strength.  Watch the other S&L
companies like GPT and WM.  Astoria made a big move from $49.06
on December 20th to over $54 today, so a consolidation may occur.
Traders can take positions at current levels, or consider waiting
for a pullback to support at $52.50.  Set stops at $50, and exit
positions if the stock closes below this level.

BUY CALL JAN-45 AQR-AI OI=440 at $10.00 SL=7.00
BUY CALL JAN-50 AQR-AJ OI=271 at $ 5.13 SL=3.13
BUY CALL FEB-45 AQR-BI OI=  0 at $10.13 SL=7.13  Wait for OI
BUY CALL FEB-50*AQR-BJ OI= 45 at $ 6.00 SL=4.00

www.premierinvestor.net/oi/profile.asp?ticker=ASFC


CTAS - Cintas Corporation $53.56 +2.06 (+2.06 this week)

Cintas Corporation is the leading provider of corporate identity
uniform programs.  Cintas' unique corporate culture has been the
driving force behind this success.  Cintas has grown for 31
consecutive years through all economic cycles.  During this
31-year period their sales have grown at a compound rate of 25%
and our profit has grown at a rate of 33%.  Cintas is Recognized
as one of the World's most valuable companies in The Business
Week Global 1000 and ranked among Best-performing big
corporations in Forbes Platinum 400 List

It's been a long climb, but it's been well worth it for investors
of CTAS.  Ever since hitting an all-time high of $52.25 in early
1999, the stock went on an extended downtrend, going the opposite
direction of rising Tech stocks.  But this year, with many Tech
stocks deep in the basement, shares of CTAS have not only bounced
back, but are once again making new all-time highs.  A
record-breaking earnings report last week that matched Street
consensus was well received by traders, as they bid the stock up
on the news.  While 17 percent year-over-year profit growth may
not excite investors used to triple digit revenue figures from
Tech companies, the key word is profit, something that many of
those once sexy high flyers lack.  The prospect of lower interest
rates going forward will also help an old economy stock such as
CTAS.  Despite a downgrade by Barrington Research from a
Long-term Buy rating to Hold last Wednesday, it appears that
actions speak louder than words as the stock continues to climb
higher with accelerating volume.  Today, CTAS made a new
intra-day and all-time high, closing up 4 percent on over 120% of
ADV.  A pullback at this point is likely, with a bounce off our
stop price and key support at $50 (near the 5-dma) an ideal entry
point for aggressive traders, but the stock may also find support
at $53, $52 and $51.  For conservative traders, wait for buying
momentum to take CTAS to a new all-time high before taking a
position.  Confirm direction with that of the DOW before
initiating a play.

BUY CALL JAN-45 NQQ-AI OI= 655 at $9.13 SL=6.25
BUY CALL JAN-50*NQQ-AJ OI=1284 at $4.25 SL=2.50
BUY CALL JAN-55 NQQ-AK OI=1313 at $1.00 SL=0.00
BUY CALL FEB-50 NQQ-BJ OI=1141 at $5.63 SL=3.50
BUY CALL FEB-55 NQQ-BK OI= 401 at $2.56 SL=1.25

http://www.premierinvestor.net/oi/profile.asp?ticker=CTAS


ENE - Enron Corp $83.50 +2.31 (+2.31 this week)

Enron is a global energy and communications company.  It engages
in all facets of the electricity, natural gas, and communications
businesses throughout the world.  The Company is also developing
an intelligent network platform to facilitate online business, to
provide bandwidth management services and deliver high bandwidth
applications.

I'm sure you've felt energy costs squeeze your wallets as the
winds blew colder and temperatures dropped in recent months.
The already skyrocketing oil prices coupled with the seasonal
change into winter doesn't not bode well for the consumers who
need heat and electricity, but it sure does wonders for energy
stocks like ENE, SLB, and XOM.  Plus in this case, ENE is
confirmed to report solid earnings in just a few weeks.  The
company is confirmed to release its numbers on January 22nd,
BEFORE the bell.  More specifically, ENE's performance in the
past two sessions forecast a run up.  Volume was respectable
while the share price pushed through the $80 resistance in
Friday's session.  The gains not only held today, but ENE
extended another 2.9%.  The strong sector, positive stock
technicals, and an advancing marketplace give ENE a great chance
of success as it approaches its earnings' date.  Consider buying
into strength as ENE moves through the next line of resistance
near $85 and challenges the $90 highs.  If you'd rather buy on
dips, then look to take positions near the 5-dma ($80.70), which
is now just above our protective stop at $79.

BUY CALL JAN-75 ENE-AO OI=1480 at $10.00 SL=7.00
BUY CALL JAN-80*ENE-AP OI=4332 at $ 6.25 SL=4.25
BUY CALL JAN-85 ENE-AQ OI=4495 at $ 3.50 SL=1.75
BUY CALL JAN-90 ENE-AR OI=3938 at $ 1.75 SL=0.75
BUY CALL FEB-85 ENE-BQ OI= 175 at $ 6.00 SL=4.00
BUY CALL FEB-90 ENE-BR OI=1551 at $ 4.00 SL=2.50

http://www.premierinvestor.net/oi/profile.asp?ticker=ENE


*************
NEW PUT PLAYS
*************

AGGRESSIVE:

BOBJ - Business Objects S.A. $55.81 -2.38 (-2.38 this week)

Founded in 1990, Business Objects pioneered the modern business
intelligence industry by inventing and patenting a "semantic
layer" that insulates users from the technical complexity of
database systems.  Business Objects is the world's leading
provider of e-business intelligence (e-BI) solutions.  The
company coined the term e-BI in 1998, to describe the
intersection of business intelligence and the internet.  Using
e-business intelligence, organizations can access, analyze, and
share information across the enterprise network and in extranet
and e-commerce environments, as well as for customer analytics.

Despite a plethora of good news from the company recently, shares
of BOBJ have been declining on accelerating volume.  Ever since
encountering resistance from its 50-dma (now just below $73) in
mid-December, the stock has fallen ever deeper into the red,
riding down resistance from the 5 and 10-dma (now at $60.80 and
$65.70 respectively).  An upcoming vote in February for a 3-for-2
stock split, an entry into the emerging wireless e-commerce space
through an alliance with Palm-based browser software maker
AvantGo and even a successful partnership with IBM all failed to
lift BOBJ above that critical 50-dma line.  With that, investors
have been heading for the exits in increasing numbers.  Last week
the stock was downgraded by Prudential Securities from a Strong
Buy to an Accumulate rating.  This caused a massive volume
sell-off as the stock pierce through a number of key support
levels not seen since late 1999.  At this point there is no
reason why it could not go much lower.  Today, on a light volume
day for the NASDAQ, the stock lost another 4.08 percent on over
145% of ADV.  There is strong support at $55 but with continued
selling, a break below this key level could provide conservative
traders with an entry on weakness.  With the stock in deeply
oversold territory, a technical bounce could take BOBJ back to
its 5-dma, giving aggressive traders a higher-risk but
higher-reward entry.  We have placing our protective stop at $59
so make sure that BOBJ does not close above this level.  When
making a play, correlate entries with direction in Merrill
Lynch's B2B HOLDR (BHH).

BUY PUT JAN-60*BBJ-ML OI=15 at $8.38 SL=6.00
BUY PUT JAN-55 BBJ-MK OI=18 at $5.00 SL=3.00

http://www.premierinvestor.net/oi.profile.asp?ticker=BOBJ


DY - Dycom Industries $32.13 -1.19 (-1.19 this week)

Dycom Industries is a provider of specialty contracting
services, including engineering, construction and maintenance
services , to telecommunications providers throughout the
United States.  Among the company's services are the
engineering, placement and maintenance of aerial, underground
and buried fiber-optic, coaxial and copper cable systems owned
by local and long distance communications carriers, competitive
local exchange carriers (CLECs), and cable television multiple
system operators.

It seems like everyone is feeling the pain of the Telecom
slowdown, and DY is no exception.  Late August saw the stock
challenge its triple-top between $56-58, before heading lower
with the rest of the technology market in the post-Labor Day
slide.  Since then, DY has given back most of its gains of the
year, and the past 2 days spelled the end of $35 as strong
support.  Without so much as a whimper, the stock fell through
this level and looks to be getting set for a run at $30 support
in the near term.  Although volume has been below the ADV of
394K shares during this latest down leg, that doesn't seem to
be slowing the bears down.  As long as the price continues to
drop and volume stays above 250K, put players should enjoy some
easy profits.  While $30 support may temporarily halt the
stock's slide, with so many Telecom players falling on hard
times in recent months, demand for the service the company
provides doesn't show any signs of picking up soon.  Any relief
rally should be short-lived and roll over near the $34-35
support/resistance level.  This will provide aggressive players
with a better entry point for the next leg down on this Telecom
sector infrastructure play.  If $30 fails to hold as support, DY
could easily test $25 before finding enough buying interest to
break the downtrend.  As the bears are pressuring the price
right along the descending lower Bollinger Band (currently $32),
more conservative players can consider entering on continued
weakness, opening new positions as DY drops below $32.  Weakness
in the broader Telecom sector will likely continue to dominate
the price action in DY, so monitor the Telecom HOLDR (AMEX:TTH)
for a reading of sector sentiment.  Any significant change in
sentiment could be all that is needed to push DY back over
resistance, so we are keeping a nice tight stop on our play,
setting it initially at $34.

BUY PUT JAN-40 DY-MH OI=21 at $8.25 SL=5.75
BUY PUT JAN-35*DY-MG OI= 8 at $4.13 SL=2.50
BUY PUT JAN-30 DY-MF OI=90 at $1.63 SL=0.75

http://www.premierinvestor.net/oi/profile.asp?ticker=DY


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

JNJ - Johnson & Johnson $102.38 +0.88 (+0.88 this week)

Johnson & Johnson is one of the world's largest and diversified
makers of healthcare products.  JNJ has three distinct business
segments serving the consumer, professional, and pharmaceutical
markets.  As a consumer you're probably most familiar with their
over-the-counter brands like Tylenol, Band-Aids, and "no tears"
baby shampoo.  But Johnson & Johnson reaches beyond that realm
and expands all aspects of its product lines through acquisitions.

Most Recent Write-Up

Pharmaceutical giants JNJ and MRK helped buoy the Dow today as
investors once again moved toward old economy names and the
relative security of the drug sector.  Defensive issues are
likely to see advances over the short-term while the techs
flounder amid profit-taking and the economic uncertainty.  Plus,
JNJ is reporting earnings in a few weeks.  The company's earnings
are scheduled for January 23rd, BEFORE the bell.  JNJ's break
above the $102 mark and strong close today also renders a bullish
outlook going forward; although the inability to move through $103
does give reason to be cautious.  Pick your entries carefully.
There's time to be patient and wait for additional upward
confirmation.  If you're interested in an earlier and perhaps
more risky entry, consider taking positions at the 5- & 10-DMAs,
near the century mark.  However, take note, we'll exit the play if
JNJ closes below $100.

Comments

JNJ had a nice follow-through day, breaking through resistance at
$102 and maintaining its gains.  Friday's resistance at $102
turned into intraday support today.  Look for entries on bounces
from this level or on a breakout above $103, which is just above
today's high.  If JNJ pullbacks on profit-taking, support at $101
should provide an entry opportunity if accompanied by a bounce.

BUY CALL JAN- 95 JNJ-AS OI= 7462 at $8.75 SL=6.50
BUY CALL JAN-100*JNJ-AT OI=11296 at $4.88 SL=3.00
BUY CALL JAN-105 JNJ-AA OI=10143 at $2.25 SL=1.00
BUY CALL FEB-100 JNJ-BT OI=  138 at $6.75 SL=5.25
BUY CALL FEB-105 JNJ-BA OI=  407 at $3.88 SL=2.25

http://www.premierinvestor.net/oi/profile.asp?ticker=JNJ


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************************
COMBOS/SPREADS/STRADDLES
************************

Blue-chips Save The Day!

The stock market ended mixed today with tax selling pressuring
the technology segment while industrial shares pushed the Dow to
a recent high.

Tuesday, December 26

The stock market ended mixed today with tax selling pressuring
the technology segment while industrial shares pushed the Dow to
a recent high.  The blue-chip average rose 56 points to 10,692
while the Nasdaq Composite index retreated 23 points to 2,493.
The S&P 500 index added 9 points to close at 1,315.  Volume on
the Nasdaq reached 1.5 billion shares as declines beat advances
2,322 to 1,707.  NYSE trading volume totaled 802 million shares,
with advances beating declines 1,775 to 1,162.  In the U.S. bond
market, the 30-year treasury fell 18/32 to 111 30/32, pushing
its yield up to 5.42%.


Sunday's new plays (positions/opening prices/strategy):

SpeedFam     SFAM   APR7.5C/APR5P   $5.88  debit   collar
CV Thera.    CVTX   JAN90C/JAN85C   $0.38  credit  bear-call
Interwoven   IWOV   JAN115C/JA30P   $1.88  credit  strangle
Winnebago    WGO    APR17C/APR15P   $2.00  debit   strangle
Thrre-Five   TFS    JAN20C/JAN15P   $2.50  debit   strangle

Today's volatile trading activity provided some excellent entry
opportunities in our new combination positions.  The only plays
that were difficult to open were CV Therapeutics and SpeedFam.
Perhaps those issues will provide additional entry opportunities
in the coming sessions.


Portfolio Plays:

Another day of tax-loss selling weighed heavily on the Nasdaq as
technology investors opted to unload the most unproductive issues
in the group.  At the same time, new buyers emerged in the broad
market amid optimism of cash infusions into industrial stocks and
a bias toward declining interest rates.  Analysts say the market
has already factored in much of the future's "bad" news and with
stock valuations substantially lower, a recovery rally is likely
to begin with the new year.  Although technology shares were under
selling pressure in the hardware, software and networking groups,
other sectors experienced favorable gains including oil service,
major drug, utility and biotech.  On the downside, retail, paper,
chemical and airline issues declined.  Our portfolio saw a number
of excellent performances today and the leading issues were among
industrial groups.  The big surprise came in the energy sector as
USX-Marathon (USX) announced it will acquire natural gas producer
Pennaco Energy (PN) for about $417 million in cash, including $54
million in debt.  The $19 a share bid represents a 30% premium to
the stock's recent value and Marathon expects to begin the tender
offer on January 8.  Both companies' boards agreed to the merger
and the deal was announced after the close of trading on Friday.
Our bullish collar is now at maximum profit and can be closed for
a favorable gain.  Pharmaceutical Product Development (PPDI) was
another big mover, up almost $4 to a new high near $52 on renewed
momentum from their earnings announcement and a brokerage upgrade.
Prudential Securities identified the issue as a "strong buy" after
the company licensed its lead compound, dapoxetine, to Alza (AZA)
for undisclosed up-front payments and future royalties.  PPD also
announced a plan to step-up ownership in PPGx pharmacogenetics JV
in the coming months.  Our "bull-put" credit spread at $35 can be
closed for a favorable early-exit profit.

Hanover Compressor (HC) is another issue in the industrial group
that has exceeded all possible expectations.  The stock has moved
up 20% since it was selected for a bullish position two weeks ago
and now it is trading at an all-time high near $41.  Today's gain
came on strength in the Energy Services and Equipment segment and
there is potential for further upside activity in the near future.
Waters (WAT) operates in the analytical instrument industry among
other Scientific and Technical Instrument providers and the issue
appears to be attempting a recovery after a recent consolidation.
The stock rallied to a short-term resistance area near $78 and is
now at a key moment, with regard to its technical outlook.  Our
position at $69 is not currently in danger, but the issue should
be monitored closely.  Tektronix (TEK) climbed to a 30-day high
during the session and our new synthetic position is offering a
favorable early-exit profit of $0.88.  Speculative traders might
remain in the position for another few days, but be aware of the
risks as the issue has limited upside potential from this point,
and the call options will quickly lose their time-value premium
on any retreat.  In the small-cap category, there were a number
of favorable rallies including those provided by Aksys (AKSY),
Magnetek (MAG), Pactiv (PTV), and Timken (TKR).  One issue that
consolidated in our favor was Costco (COST) and the neutral credit
strangle is offering a $0.38 profit after just one week in play.
Sepracor (SEPR) is another "premium-selling" position and it is
also currently positive.  Of course we are still monitoring the
bearish spreads in Bowater (BOW) and Pfizer (PFE) for indications
of further upside movement and any significant character changes.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -

One of our readers asked why we haven't offered many "bull-put"
credit spreads in the last few editions.  As always, our readers
come first, so here are three bullish plays on popular stocks in
different industries.  All of these positions offer favorable
risk/reward potential, but they should also be evaluated for
portfolio suitability and reviewed with regard to your strategic
approach and trading style.

******************************************************************
GS - Goldman Sachs  $101.81  *** Rally Underway! ***

Goldman Sachs is a global investment banking and securities firm
that provides a wide range of services worldwide to a substantial
and diversified client base that includes corporations, financial
institutions, governments and high-net-worth individuals.  The
company provides Investment Banking, which includes Financial
Advisory and Underwriting, and Trading and Principal Investments,
which includes Fixed Income, Currency and Commodities, Equities
and Principal Investments.  Goldman Sachs also provides asset
management and securities services.  The company's activities are
divided into two business segments comprised of Global Capital
Markets and Asset Management and Securities Services.  Subsidiary
Spear, Leeds & Kellogg is engaged in the business of securities
clearing and execution, floor-based market making and off-floor
market making.

Analysts say that financial stocks are going to benefit from any
future reductions in interest rates and since Goldman Sachs is
considered one of the best in the banking business, their shares
will likely see exponential gains when the rally finally occurs.
Surprisingly, investors appear to be anticipating the movement as
the company's stock has already recovered significantly from lows
in late November.  Now the issue is clearly established in a new
up-trend and the bullish momentum should easily propel the share
value into the $110-$115 range.  Traders who favor the technical
outlook for the issue can speculate on its future movement with
this conservative position.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-80  GS-MP  OI=2628  A=$1.19
SELL PUT  JAN-85  GS-MQ  OI=1067  B=$1.69
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=14%


******************************************************************
LH - Laboratory Corp. of America  $169.50  *** On The Move! ***

Laboratory Corporation of America Holdings is one the second
largest independent clinical laboratory companies in the United
States.  Through a national network of laboratories, the company
offers more than 2,000 different clinical laboratory tests which
are used by the medical profession in routine testing, patient
diagnosis, and in the monitoring and treatment of disease.  The
company has a network of 25 major laboratories and approximately
1,200 service sites consisting of branches, patient centers and
STAT laboratories, serving clients in 50 states.

Analysts are saying that health care and drug issues will be among
the most productive stocks next year, because these industries are
least likely to get hit by a worldwide economic slowdown and high
energy costs.  Fund managers and global equity strategists say the
safest bets are those stocks that outperformed the broader market
in the last year and pharmaceutical companies are often considered
defensive plays during rough economic times; both factors that
lead us to a bullish position in the issue.  Shares of Laboratory
Corporation of America are likely to benefit from any rally in the
drug group and we see this conservative spread as an excellent
hedge play for traders who favor the short-term outlook of the
pharmaceutical industry.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-135  LH-MG  OI=70  A=$1.12
SELL PUT  JAN-140  LH-MH  OI=72  B=$1.50
INITIAL NET CREDIT TARGET=$0.50-$0.62  ROI(max)=11%


******************************************************************
SII - Smith International  $74.12  *** On The Rebound? ***

Smith International is a worldwide supplier of products and
services to the oil and gas exploration and production industry,
the petrochemical industry, and other industrial markets.  The
company provides a complete line of products and engineering
services including drilling and completion fluid systems, solids
control equipment, waste-management services, three-cone and
diamond drill bits, fishing services, drilling tools, reamers,
casing exit and multilateral systems, packers and liner hangers.
The company also offers supply-chain management solutions with an
extensive branch network providing pipe, valves, fittings, mill,
safety and other maintenance products.  The company's operations
are classified into two segments: Oilfield Products and Services
Group; and Distribution Group.

Oil stocks rallied today on speculation that the industry is
poised for higher valuations in light of the increasing demand
for service and equipment.  Oil and gas companies plan to raise
their worldwide exploration and production spending by 20% next
year, creating a bullish environment for oilfield service stocks.
Salomon Smith Barney recently presented the results of its E&P
spending survey, saying the projected increase would be driven
by continued strong growth in North America, in response to high
natural gas prices, and a surge in spending in the rest of the
world as companies pursue projects that were postponed in 2000.
The projected increase would build on a rise of 18% last year
and the outlook strongly reinforces a widespread view that the
oilfield service industry is in the early stages of a multiyear
growth phase.  Among oilfield companies, Smith International is
one of the issues expected to benefit most from exposure to the
booming North American natural gas market and this play offers
a conservative method for traders to speculate on that outlook.
Target a higher spread-credit initially, to allow for a brief
consolidation from today's gains.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-60  SII-ML  OI=907  A=$0.62
SELL PUT  JAN-65  SII-MM  OI=57   B=$1.12
INITIAL NET CREDIT TARGET=$0.62-0.75  ROI(max)=14%




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