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Daily Newsletter, Thursday, 01/18/2001

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The Option Investor Newsletter                 Thursday 01-18-2001
Copyright 2001, All rights reserved.                        1 of 2
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************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        01-18-2001        High      Low     Volume Advance/Decline
DJIA    10678.30 + 94.00 10737.20 10567.50 1.37 bln   1626/1283
NASDAQ   2768.49 + 85.71  2769.98  2661.26 2.55 bln   2185/1747
S&P 100   704.00 + 12.02   707.19   691.58   totals   3811/3030
S&P 500  1347.97 + 18.50  1352.71  1327.41           55.7%/44.3%
RUS 2000  494.63 +  1.17   494.75   490.02
DJ TRANS 3046.00 - 16.49  3068.11  3031.96
VIX        27.09 -  1.42    28.77    26.61
Put/Call Ratio      0.59
*************************************************************

Positive earnings surprises power Nasdaq +373 points in seven days!
By Jim Brown

Please don't anybody jinx this rally! All we need now is for Ralph
Acompora to come out and predict Nasdaq 5000 by March and you can
kiss your gains goodbye! After only a brief dip at the open the
Nasdaq and the Dow powered forward in tandem to post strong gains
as earnings continue to please investors. The fact that the Dow
and Nasdaq were both positive on the same day is a minor miracle.
Still, with no negative earnings surprises in the tech world, the
Nasdaq finally broke several resistance levels to close at 2769.
This close over 2700 and a close over yesterday's intraday high
confirms for most traders that the rally has legs.







About the only negative news item today was a warning from CAT
that all of 2001 would be down as much as -10% from 2000 levels.
Analysts had been expecting a gain from last year but the catch
all excuse of slowing global economy was blamed for the shortfall.
UK also warned that it would have a loss of -$.70 for last quarter
which would be reported on Jan-29th.

Earnings after the bell cemented the positive sentiment beginning
with MSFT. Microsoft posted earnings inline with reduced estimates
of $.47 and traders bid the stock up +$3 to $58.88 in after hours
action. The conference call was very positive and they left the
guidance for the full year at present levels which means they
expect a bounce in next quarter to make up for the current dip.

SUNW also announced earnings inline with estimates of $.16 even
though the revenue was slightly less than expected at $5.12 bil.
SUNW does not have long term maintenance and support contracts
like IBM so the recurring income is not as strong. SUNW has to
sell from scratch to meet its targets each quarter. The SUNW CEO
said current market conditions would separate the leaders from
the followers. They grew sales by +32% and forecast the next
quarter to be flat to slightly up but the next quarter would
see a return to +30% to +35% growth. SUNW traded on both sides
of positive in after hours on strong volume. The CEO said sales
were strong across the board and they were gaining market share.

EBAY also announced earnings and beat the street by two cents
with $.09. EBAY also raised analyst guidance going forward and
posted much stronger revenue numbers as well. EBAY was up another
+$4 in after hours. EBAY also just raised rates for some items
sold on their site which will favorably impact the next quarter.
Revenue was up +390% over last year.

Nortel announced inline at $.26 and revenue of $8.82 billion
which was stronger than expected. The forecast was positive
and the CEO John Roth said full year growth rates were expected
to be in the +30% range. He said that if the Fed continued
cutting rates, capital markets would open back up for the
telecom sector and results would increase. He said optical
networking (Internet) sales more than doubled last years numbers.

EMLX also rocked the street with $.25 earnings compared to the
$.18 cents analysts expected. They also raised their guidance
for the next quarter to $.23 from $.19. EMLX gained +11 in
after hours trading.

AOL/TWX announced a $5 billion stock buyback over the next two
years. Are we cash flush as a result of the merger? Sure looks
like it and you can bet investors will like that outlook
compared to other net companies burning cash at record rates.

The semiconductor index shook off the bad mouthing by Dan Niles
and soared another +48 to close at 726, a three month high.
The SOX has now gained +36% since the low on December-21st.
Investors appear to be looking two to three quarters out and
buying chip stocks with abandon. MU soared +13% or +5.19 on
short covering and heavy institutional buying.

IBM gained a whopping +11.63 for the day after their earnings
surprise. This provided a strong foundation for the DOW even
after the warning from CAT. Other leaders were HWP +3 and
INTC +1.69. A surprise gainer was AMD, which missed estimates
by two cents yesterday, but gained +4.19 or almost +23%.

Shares of VIGN took a tumble on a profit warning. Shares
dropped from Thursday's close of $12.63 to less than $7.00
but rallied back slightly by the after hours close to $8.25.

The Philadelphia Fed Index for January fell to a -36.8
from the previous month's -4.2. This is the lowest level
since 1990 and the biggest drop since 1968. The severity of
the drop has analysts expecting a 36.9 reading for the next
NAPM report. Anything below 42.4 is considered a recession.

Volume was good on both the major indexes. With 1.4 billion on
the NYSE and 2.5 billion on the Nasdaq the gains took on more
significance. The last several days of heavy volume and no
major movement on the Nasdaq was starting to worry those with
a cautious bias. The strong volume and strong gains today have
confirmed the advance.

With the Nasdaq up five of the last seven sessions for over
+373 points there is serious momentum building. Shorts are
probably hoping for one last dip to cover but with each day
stronger than the last their outlook must be grim. Remember
that historically there is a dip that begins over the next
two trading days and add the possibility of profit taking
from the +373 points and you have bears pinning their hopes
on Friday. The problem is who wants to sell? With investors
worried the train is going to leave without them there may
not be much of a dip on profit taking. Each day of positive
earnings underscores the future outlook. The Reg-FD impact
is now clear. As we speculated several times in the last
month companies over warned to avoid stockholder suits and
we are now seeing many upside surprises. The chicken littles
had their day over the last month and now they have to pay
as each earnings report proves the sky is not falling.

Trim Tabs reported that margin debt at all NYSE member firms
dropped $20.4 billion to $198.7 billion at the end of December.
Margin debt is down -31.8% from its peak at the end of March
2000. Historically, Trim Tabs said margin debt drops faster
than the market at market bottoms. In fact, margin debt is
down -13.1% since the end of 1999 and more than the -8.2%
drop in overall market capitalization.

Friday has no significant economic reports with only the
International Trade numbers and the Michigan Sentiment. It
is option expiration Friday and we are likely to see a bounce
at the open from the flood of positive earnings reports tonight.
Remember, there may be profit taking as traders clear the books
before the weekend to avoid any unpleasant weekend surprises.
I am holding Jan calls and plan on selling into any morning
spike and then opening new Feb positions if the opportunity
presents itself later in the day. With the big gains from the
last week I would like to see a strong dip on profit taking in
the afternoon to take that problem off our radar for Monday.
I would much rather go into Monday on a dip recovery than
suffering from lingering overhead profit resistance. We should
still be watching for the possibility of the mid-January dip.
It may be a no show but we are better looking for something
that does not happen than being blindsided by something we
don't expect.

We have set the date for the spring Expo Seminar, April
5th-9th in Denver. Spring skiing will be at its best!
Details will be in the Sunday Newsletter.

Enter passively, Exit aggressively!

Jim Brown
Editor


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

Skeptically Hopeful, Hopefully Skeptical
By Austin Passamonte

It's official: There is nothing left in our way for the next
powerful rally to ensue. Earnings are beating the street, guidance
is good and the future looks very bright in tech-land. Fed Fund
futures are pricing a .50-basis cut as a lead-pipe lock next week.
Who can ask for anything more than falling rates and rising
earnings?

Of course, we felt twice as bullish on January 3rd when all the
pieces were in place to go much higher from there. Then we traded
through the next two days and got the bullish kicked right out of
us. This time feels different... but don't they all?

QQQ:   66.50
NDX: 2700.00
CMP: 2800.00
SOX   720.00
OEX   708.00
SPX  1351.00
DJX   10,775

The above figures represent final vestiges of solid overhead
resistance. They include long-term descending trend lines from
last fall, major moving averages and Fibanocci figures alone or in
various combinations. A market close above would negate the
downtrend and convert stubborn resistance to valued support.

This could easily push market bears deep within the confines of
their dank, musty caves. Failure to penetrate and hold this time
could push bulls out of the pasture and off a high cliff.

By now you know tech bell-weather earnings from Microsoft (Nasdaq:
MSFT) Sun Micro (Nasdaq: SUNW) and Yahoo (Nasdaq: YHOO) have
pleased investors and sent the index soaring in post-market
mayhem. Friday's open should be one considerable pop, indeed.

Market Sentiment feels no reason to be anything but bullish in the
near-term. Cautious would be the only caveat since we've recently
been down this road several times to Disappointed Ave. Eventually
the rally must be real and now is good a time as any, wouldn't you
agree?

*****

VIX
Thursday 01/18 close; 27.09


30-yr Bonds
Thursday 01/18 close; 5.51%


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
                                 (01/18/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
740 - 725               15,853          920        17.23
720 - 705               16,282        2,969         5.48

OEX close: 704.00

Support:
700 - 685               21,594       12,231          .57
680 - 665                4,559       11,867         2.60
Maximum calls: 685/7,554
Maximum puts : 640/5,495

Moving Averages
 10 DMA  689
 20 DMA  686
 50 DMA  705
200 DMA  762

===

NASDAQ 100 Index (NDX/QQQ)
Resistance:
 76 - 74                59,414         4,244        14.00
 73 - 71                49,157         7,984         6.16
 70 - 68                73,623        16,432         4.48

QQQ(NDX)close: 66.56

Support:

 65 - 63                68,422        54,508          .80
 62 - 60                95,700        74,304          .78
 59 - 57                28,261        30,494         1.08

Maximum calls: 60/56,065
Maximum puts : 60/35,472
+

Moving Averages
 10 DMA 60
 20 DMA 59
 50 DMA 66
200 DMA 84

===

S&P 500 (SPX)
Resistance:
1425                    9,056         6,047          1.50
1400                   16,562         9,114          1.82
1375                   10,531        10,220          1.03

SPX close: 1347.97

Support:
1325                   29,227        30,674          1.05
1300                    6,451        11,182          1.73
1275                      565         7,372         13.05


Maximum calls: 1350/34,660
Maximum puts : 1325/30,674

Moving Averages
 10 DMA 1319
 20 DMA 1313
 50 DMA 1340
200 DMA 1422

*****

CBOT Commitment Of Traders Report: Friday 01/12
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          -108       -2008          -5438     -2167

Total Open
interest %      (-1.37%)    (-25.35%)      (-21.58%)  (-9.59%)
                 net-short   net-short     net-short net-short


NASDAQ 100      (Current) (Previous)     (Current) (Previous)
Open Interest
Net Value        +1861      -1028          -3982      -1825
Total Open
Interest %      (+11.29%)   (-4.77%)       (-7.13%)   (-3.45%)
                net-long   net-short      net-short  net-short


S&P 500         (Current)  (Previous)     (Current) (Previous)
Open Interest
Net Value        +59586     +59586        -86815       -81851
Total Open
Interest %       (+37.29%)  (+29.89%)    (-11.19%)  (-11.09%)
                 net-long   net-long      net-short  net-short


What COT Data Tells Us
----------------------
Indices: The Commercials show a dramatic increase in their net-
short positions on the DJIA while maintaining their net-short
positions on the S&P 500 and NASDAQ 100.

Small Specs show a substantial reversal in their NASDAQ 100
positions going from net-short to net-long.

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

Currencies: Commercials continue to build heavily short Euro
futures while small specs build net long. Small specs are betting
on interest rate reduction while commercials remain skeptical.
(Bearish)

Energies: Commercials are net-long crude & oil products at
one year extremes. These producers are hedgers and almost
always take the opposite side of expected market action to
lock-in production prices. They expect lower prices from
here (Bearish)

Metals: Commercials are moving to net-long in Gold, Silver
and Copper from short positions.  This has happened quickly
and they expect higher precious metals soon.(Bullish)

COT/CRB: This commodity index measures the entire spectrum of
commodities in overall bullish or bearish outlook.  It is now at a
one-year high for commercial bullishness, meaning the outlook for
commodities is long-term positive while equities as a mirror are
considered long-term negative.

Data compiled as of Tuesday 01/09 by the CFTC.

www.OptionInvestor.com


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

Please visit this link for Market Posture:

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**************
BROKERS CORNER
**************

STRANGLES
By Robert L. Norman

As the NASDAQ flirts with the psychological 2700, we've been
looking for ways to take advantage of it.  Once again, we've come
up with a two-fold play on JDSU.  We are going into a strangle on
this one.  Now, keep in mind that JDSU reports earnings after the
market on January 21st.  First Call has them coming in at 20 cents
per share vs. 9 cents a year ago.  There is always more risk going
into a play that involves holding over earnings, so you may not
want to enter this one, or you may want to close it out before
they actually report.

Specifically, we are looking at selling naked puts and selling
naked calls.  JDSU is currently around $60 per share.  Taking a
look at the Daily chart of JDSU and you should see support at the
$38-41 price level, established from just before Christmas up
until around the 10th of January.  You should also see resistance
from around $60-76 per share established in about the first week
of December or so.

We use this support and resistance as a guide as to what strike
prices we want to use.  Also keep in mind the action of the NASDAQ
itself.  When entering any trade.  What we plan to do is sell the
JDSU February 40 PUT.  We will wait to do this if JDSU and the
NASDAQ start to fail and head down.  We'll wait because we want to
try and capture more premium than what is currently there.  If no
downward movement occurs, we'll go ahead and sell that PUT. We
also want to sell the February 70 call.  Conversely, if the NASDAQ
and the stock start to move up, we'll wait to sell the CALL until
it looks like it is beginning to stall.  Now, keep in mind that
selling naked options is a risky strategy.  You could expose
yourself to large losses if you aren't careful, so use stops or be
prepared to cover if the stock hits either one of your strike
prices.  For example, I may choose to cover my naked CALL if the
stock does hit the $70 price level.  If I originally decided to
sell 10 contracts, I would then cover by buying 1000 shares of
JDSU at about $70.  On the other side of the play, if the stock
failed miserably and went all the way down to my strike of $40 per
share, I would then go short the stock 1000 shares at about $40
per share, in effect, covering my naked PUT.

Lately I personally have chosen not to cover my naked options
because of the extreme volatility in the market.  I have just let
my options ride and I have either closed them out early for profits
or simply rolled them out to the next month (if I were at a loss).
This is always a decision that you have to make on your own or with
your broker, but make sure you have a plan in place BEFORE you get
to that stage of the game.

Good luck,

Robert L. Norman
J. Matthew Ford
J. Michael-Patrick, LLC

RNorman@JMPinvest.com


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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:
*****

PSUN $28.75 -0.88 (+0.38) The broader retail sector took a back
seat to the sexier names in the Nasdaq during Thursday's
session.  The sideways action in the retail sector has been
displayed over the past week and is clearly evident in shares of
PSUN.  In light of its lack of progress, we're dropping PSUN
this evening in search of more movement.  Use any lift or
bounce early Friday morning to exit any open positions.

BVSN $15.19 -2.06 (-0.63) After moving up to kiss the upper
Bollinger band yesterday morning, shares of BVSN followed the
NASDAQ lower, ending at the low of the day.  Today was a
different story though, as the stock refused to follow the
technology market higher.  Gapping down this morning, BVSN
just couldn't get moving higher and actually traded as low as
$13.50 before a late-day buying surge helped the stock to claw
its way back over the $15 level.  Blame VIGN for the decline, as
their earnings warning cast a pall over many of the Internet
stocks.  Sealing BVSN's fate was DB Alex Brown, lowering their
rating from Buy to Market Perform.  So although our play managed
to recover above our stop, the sector sentiment has deteriorated
significantly, and we'll make our exit now, before things get
worse.

MYGN $52.06 -2.00 (-3.94) After dipping below our $54 stop
yesterday, MYGN was saved from the drop list by a late day rally
that helped our Biotech play to close fractionally above this
critical level.  There was no such luck in today's session, as
the stock continued fell again at the open and never recovered.
Even a slight upward move in the Biotechnology sector didn't
help, as MYGN gave up $2, closing right on the $52 support
level.  While the selling abated and the price firmed as the
day continued, the stock's inability to recover today leaves us
no choice but to put the stock on injured reserve until it gets
healthy again.


PUTS:
*****

No dropped puts today


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The Option Investor Newsletter                 Thursday 01-18-2001
Copyright 2001, 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:
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********************
PLAY UPDATES - CALLS
********************

EMC $76.00 +3.69 (+3.00) A flurry of excellent news releases
and a bullish market environment served as catalysts to drive
EMC above the 50 dma of $74.71, and briefly above the 200 dma
of $76.23 today before profit taking ensued.  EMC is now well
positioned to make a strong run into earnings scheduled to be
released January 23rd.  Excellent earnings from IBM helped the
hardware and storage sectors to regain momentum on Thursday.
Previous resistance of $75 is now support, and can be used as
an entry point for new positions.  EMC is likely to clear the
next resistance level at the 200 dma of $76.23, which could
easily lead it above $80 before earnings.  The next major
support levels are $73, and the 5 dma of $71.98, and a pullback
could be an entry point for aggressive traders.  Set stops at
$67, and watch others in the storage sector for strength.

RATL $47.81 -2.25 (-2.25) Rational fell on profit taking today,
after having rallied nearly 40% in the last couple of weeks.
The stock is still in its ascending channel, and above the 200
dma of $43.74, and the 50 dma of $42.38.  Rational is resting
right at its key support level of $47.81, which could be an
entry level for new positions.  After clearing $50, Rational's
next resistance level to clear is $52.44, before beginning its
ascent to $60.  We might see a pullback to $46.50 or $45.50,
which aggressive traders could use as entry points.  Pay close
attention to the software index sector, particularly the market's
reaction to Microsoft's earnings, which were released after the
close today.  Keep stops at $44.

BEAS $63.38 -2.19 (+0.81) Well, you knew it was too good to
last, and unfortunately, BEAS succumbed to the bears today. The
selling actually began yesterday, and looks to be partially due
to the VIGN earnings warning.  Apparently the converged 30-dma
($65.63) and 50-dma ($65.25), combined with bearish sector news,
was too much for the bulls.  Several Internet stocks sold off
sharply on the news, and it is encouraging that our play managed
to hold above our $61 stop today, actually consolidating near
$63.  Possibly helping our play to stay afloat were Bear Stearns
and Morgan Stanley, initiating coverage at Attractive and
Outperform, respectively.  While not exactly screaming Buy
recommendations, it was a bright spot when compared to the
downgrades on other stocks in the sector.  Our strategy for new
entries is still for aggressive players to target shoot new
positions on intraday dips near the $61 level.  Due to the
rollover yesterday above $65, more conservative players will
want to wait for a strong move through $67 before jumping into
new plays.

BRCM $127.81 -0.88 (+4.63) An up day for the NASDAQ and positive
sentiment after Intel and Applied Micro's earnings reports helped
shares of BRCM to rally on Wednesday.  Gapping up at the open,
the stock moved strongly higher on volume early in the day, but
as buying volume eased back, the stock traded lower.
Nonetheless, BRCM ended the day up $10.81 or over 9 percent on
over 160% of ADV, closing above its 50-dma for the first time
since last October.  After such a big run up, the stock took a
break today, trading between support at $120 and resistance at
$130 to close pretty much unchanged on 135% of ADV.  At this
point support can be found at $125, the 5-dma at $122.67, and the
50-dma near our stop price of $120.  Bounces off these levels
could offer aggressive entries but confirm with volume.  A break
through $130 with conviction, confirmed with a rising
Philadelphia Semiconductor Index (SOX) could allow for a more
conservative play.

CMCSK $44.06 +0.13 (+0.38) Like many Tech stocks, shares of
Comcast gapped up on Wednesday at the open on strong volume, so
much so that it began trading well above our planned entry point.
From there, the stock retreated on low volume as sellers were
eager to take profits, with CMCSK closing down just under a
dollar, or a little over 2 percent on over 150% of ADV.  After
yesterday's struggle between the buyers and sellers, both parties
were tired out and took a rest, allowing CMCSK to close flat to
up on 67% of ADV.  The doji candlestick formation today on volume
is a sign of indecision, which suggests that whichever direction
CMCSK chooses next could be a large move.  Support can be found
at the 5 and 10-dma at $43.90 and $42.73 respectively as well as
at $44 and our stop price of $42.  These levels could serve as
targets to shoot for aggressive traders but we recommend a safer
play, waiting for CMCSK to take out today's high of $45 on
volume, confirming positive direction with peers COX and CHTR,
before taking a position.

LRCX $23.06 +0.50 (+2.38) While Intel did not benefit directly
from its earnings report on Wednesday, shares of Lam Research
rose strongly on news from the Chip giant that it would increase
capital spending by over 12 percent, aiding our call play, as
LRCX is a key supplier to INTC.  Traders wasted no time bidding
the stock up $2.38 or almost 12 percent on over four times the
ADV.  Today with an advancing NASDAQ and Chip sector, LRCX added
to its gains, moving up another 2.22 percent on 125% of ADV.
Traders looking to enter on a dip will note support at $23,
$22.50, $22, the 5-dma at $21.68, the 10-dma at $20.30 and our
stop price of $20.  A close below our stop price could mean a
halt in positive momentum so make sure LRCX continues to close
above this level.  More risk averse traders may want to wait
until LRCX breaks through resistance at $24 before initiating a
play, correlating entries with rallying in Merrill Lynch's
Semiconductor HOLDR (SMH).

MER $73.56 -1.00 (-0.69) Resistance and the $75-76 area continued
to be formidable for MER on Wednesday, as the stock made a new
all-time closing high, ending the day up almost a dollar or 1.26
percent on 130% of ADV.  Despite this, the stock was unable to
close above the $75 level, and encountered selling as it neared
$76.  Today, shares of MER pulled back in sympathy after JP
Morgan Chase missed estimates on their earnings report, closing
down 1.34 percent on average volume, trading between support from
the 10-dma and resistance at the 5-dma.  At this point, a bounce
off our stop price at $70, horizontal support at $72, and the
10-dma at $72.84 could allow higher risk players to enter this
play.  For a more conservative strategy, wait for MER to move
strongly back above its 5-dma near $74 before initiating a play,
but only if competitors GS and LEH are also trending higher.

SLR $40.89 +1.70 (+2.27) Positive sentiment in the Tech sector
allowed shares of Solectron to rally yesterday, gaining $1.50 or
3.7 percent on 125% of ADV.  In doing so, resistance at $39 was
broken only to find sellers at the $40 level.  With continued
bullishness in Tech stocks, SLR added nicely to yesterday's
gains, advancing another 4.34 percent on over 160% of ADV to
close at the high for the day.  Price/volume action lately has
been healthy, with up moves on increasing volume and profit
taking on light trading.  Traders looking to enter on a dip may
find support at $40, the 5-dma at $38.87 and the 10-dma near our
stop price of $37.  Make sure buying volume supports a bounce off
these levels before making a play.  If the Tech sector continues
to find strong buying, carrying SLR past $41 with conviction,
this could be the signal for conservative traders to jump in, but
keep an eye on peers CLS, FLEX and JBL to make sure sector
sentiment is confirming positive direction.

UBS $174.40 +3.90 (+4.58) With the gap at $165 now filled, UBS
wasted little time moving higher.  Gapping up at yesterday's
open, the stock found support at the 5-dma and from there, close
up $3.24 or almost 2 percent.  Volume continues to be light, only
30 percent of ADV.  For the day, UBS closed back above its 10-dma
and the $170 level.  The strong performance despite the low
volume set the stage for today's liftoff, with UBS adding another
2.29 percent to its gains.  Volume appears to be increasing, with
today's rally on 88% of ADV.  If the buyers are indeed back, the
look for a break above resistance at $176 with conviction for an
entry on strength, if peers BCS, LEH and MWD also moving higher.
For higher risk players waiting for a pullback, look for support
from the 5 and 10-dma at $170.41 and $171.15 respectively.  There
is also horizontal support at $170 and our stop price of $165 but
as always, confirm bounces with buying volume.

VRSN $91.94 +3.44 (+7.06) A strong day for the NASDAQ translated
into a strong day for shares of Verisign in Wednesday trading.
Excitement over the Tech index as well as news that the company
would make a foray into wireless security helped the stock to
gain over $10 or 13 percent on 123% of ADV.  With another good
day for the Tech index today, VRSN moved higher once again,
gaining $3.44 or 3.88 percent on average volume.  Rival RSAS
released earnings tonight, topping Street estimates.  This could
bode well for our call play tomorrow.  If positive sentiment
lifts carries the stock higher, allowing VRSN to break through
its 50-dma at $93.73 with conviction, this would allow
conservative traders to initiate a play.  For more aggressive
traders, support can be found at $90, the 5-dma at $86.22, $95,
the 10-dma at $93.73, $90, $95 and our protective stop price of
$82, entering only if buying volume returns and rivals CHKP and
RSAS are also bouncing.

WCOM $23.25 +0.75 (+1.50) As one of the Four Horsemen of the
NASDAQ, WCOM certainly pulled its weight in Wednesday's trading.
Opening right on its 5-dma, the stock used the moving average as
it's launching point as WCOM spent the rest of the day advancing
to close near the day's high, up $1.19 or 5.57 percent on average
volume.  Today, with a rallying NASDAQ, WCOM was once again
leading the charge, tacking on another 3.33 percent to its gains.
Though volume was light, clocking in at less than 80% of ADV,
the price was going in the right direction, closing above
resistance at $23.  At this point, aggressive traders looking for
potential entry points could target support in increments of
$0.50 from $23 all the way down to our stop price of $20.  The 5
and 10-dma provide additional cushion, now sitting at $22.15 and
$20.78 respectively.  If positive sentiment in the NASDAQ and the
Telecom sector, using Merrill Lynch's Telecom HOLDR (TTH) as a
gauge, continues to lead the stock higher, then a break above
today's high of $23.38 on volume could allow for an entry on
strength.

AEOS $49.25 +0.25 (+0.00) Strong development at the $49 price
level provides concrete evidence of the stock's relative
strength; but again, a break out of the tight consolidation
would be more convincing.  We're looking for a burst of momentum
to take AEOS higher in the short-term.  The formidable
resistance continues to stand at $51.25, so look for high-volume
moves through that mark if your strategy is to buy into a rally.
Technicals remain good with AEOS tracking above the advancing 5
& 10 DMAs as well as holding firm above our $47 stop.
Therefore, taking entries on intraday dips could provide a more
enterprising approach for those willing to take on the risk.
It's essential at this point in the play to make sure there's
continuing strength across the retail sector and an advancing
marketplace before jumping into additional positions.

ARBA $37.13 +1.13 (+1.94) If trend traders always listened to
the analysts' scuttlebutt, then some might never pull the
trigger.  More upgrades and downgrades continued to cross the
wire this week; and depending on your bias, you could make a
reasonable case either way.  We however, continue to be bullish
on ARBA.  Take a look at a daily chart and it's evident that
ARBA is pressuring the topside resistance at $38 and $39.  It's
also a good sign that the share price is establishing a higher
intraday support at the intersected 5 & 10 DMA lines; and
thereby, keeping the $32 protective stop at a far distance.  A
tightening coil usually precedes a big breakout, and of course,
our play is for a move to the upside.  A convincing rally
through $40 signals the momentum players to take entry and ride
the wave.  In this scenario, consider locking in gains as ARBA
approaches the next line of opposition around $45.

SNPS $49.94 -0.88 (-1.63) Mark your trading calendars.  Synopsis
is confirmed to report earnings on February 21st, after the
market close.  However, if SNPS doesn't get a boost of
adrenaline very soon and provide traders with some upside
action, then it could be curtains long before then.  Going
forward, it's true that the respectable volume and the stock's
strength near $50 bodes well for subsequent advances.  But
please keep in mind that if you choose to take positions prior
to a significant breakout, you're at serious risk for losses.
Time is literally money.  Keep stops tight.  We'll exit on a
close below $49.

NETE $45.00 -1.38 (+2.00) Time is of the essence.  Netegrity is
reporting earnings next week on Thursday, January 25th (after
the market), so be prepared to get in and out of your positions.
You may even want to lock in gains as NETE approaches the $50
resistance, at the 200-dma ($50.49) line.  In other words, play
the current range for safety.  Intraday support is firm at $44,
which is in-line with the 5-dma ($44.10) technical.  On strong
bounces, this level offers an excellent point of entry into the
earnings run; especially if you're the more conservative type
who only likes to buy into a high-volume rally.  Taking a
position on a pullback to the 10-dma ($40.33) is however, not
recommended because of the limited time frame.  Hence, we've
raised our stop to $42 for added protection.


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

DGX $96.75 -0.13 (-0.13) Quest opened with a wide gap down from
yesterday's closing price of almost 8 points.  DGX proceeded to
roll over from $92 to $90, and $93 to $92, before regaining most
of what it lost in the morning.  However, today's end of the day
rally may very well have been a bull trap, as DGX closed just
under the 200 dma of $96.88.  In addition, the stock was unable
to close higher on a very strong day in the market.  The medical
products and services sectors, along with the specialized medical
services, and health maintenance organizations sectors rallied
strongly last year as investors fled from technology stocks.
Now, with technology earnings coming in very well for the most
part, the sector rotation out of the medical stocks is likely to
continue.  DGX has a long way to go, as it rallied from $60 to
$140 last year.  Traders could take positions on a rollover from
$97.38, or $96.25.  A close below $90 would be a very bearish
indicator, and could lead DGX down to the $85 level.  More
aggressive traders could take positions on a roll over from the
5 dma of $102.50 after checking for weakness in the medical
products sector.  Keep stops at $104.

LH $126.50 -3.44 (-8.44) Giving us a nice entry right out of the
gates this morning.  After gapping solidly below the $130
support level, our play consolidated a little during amateur
hour and then rolled over from the $127 level, heading as low as
$120 before a burst of buying in the afternoon helped the stock
to recover and near where it started the day.  Competitor DGX
(another Put Play), gapped down at the open this morning on a
Piper Jaffray downgrade, but managed to recover throughout the
day and this positive sentiment seems to have leaked into
traders' attitude towards LH.  Volume was heavy today at nearly
double the ADV, so we could be looking at a possible short-term
reversal.  We are keeping our stop in place at $138, and are
still looking for the $135 level to provide solid resistance
and a possible entry point for aggressive traders.  Keep an eye
on DGX, as a continued recovery in LH's competition could have
a buoyant effect on shares of LH as we head into the weekend.  A
lack of follow through to the recovery this afternoon could
provide entries on a rollover from the $130 resistance level as
well.

PMI $48.88 -2.63 (-1.50) Confirming that the short rally on
Tuesday was a weak bounce, PMI has continued to decline over the
past two days.  After rolling over yesterday morning near
$52.50, our play fell back through the 5-dma ($51.06), and
finally violated the $50 support level today.  This was a major
support level, and its penetration is a good sign for the bears,
opening the door for further declines as the company's earnings
date (January 24th) approaches.  Daily stochastics are still
deeply oversold, so a bit of short covering is not out of the
question.  In case of a near-term bounce, we are keeping our
stop at the $53 level.  The short recovery earlier this week has
given the lower Bollinger band a chance to drop further,
creating the possibility of a drop to the next level of support,
near $45-46.  Adding emphasis to the stock's weakness today was
volume that tripled the ADV while the Insurance index (IUX.X)
managed a slight gain.  If you're going to pick a fight, make
sure you do so with the weakest kid on the playground, and it
looks like we have.  Aggressive players can continue to add new
positions on an intraday bounce to $50 or even $52, as soon as
the bears reassert control.  At this point, conservative players
may get their entry point first, and falling below today's
$48.38 low will be their signal to step into the play.

CB $70.31 +0.50 (+1.25) On Tuesday we mentioned that the 5-dma
was a key moving average to watch when playing this stock.  This
continued to be the case on Wednesday as a failed rally above
this line of resistance allowed traders to enter this play in
early morning trading.  From there the stock headed lower with a
declining DOW to close down $1.94 or 2.7 percent on 110% of ADV.
Today shares of CB edged back up half a dollar, with a tug of war
between the bulls and bears on 165 percent of ADV.  Aggressive
traders will keep watching the 5-dma, now sitting at $70.93 as a
potential entry point, with additional overhead resistance at $72
and the 10-dma at $73, which also happens to be our stop price.
Make sure CB continues to close below this level to confirm
continued downward momentum.  For an entry on weakness, wait for
CB to take out today's low of $67.75 before taking a position,
using competitors CI and ALL to gauge sector sentiment.

MRK $82.88 +1.63 (+1.44) With Tech stocks rallying yesterday,
money rotated out of defensive issues into the NASDAQ and with
that, shares of MRK fell $2.06 or 2.48 percent.  Volume was
average and it appears that after the large drop earlier in the
year, the stock has been moving sideways, biding its time while
its moving averages catched up with the current price.  Today, a
rising tide in all markets lifted MRK up 2 percent.  However,
volume was light, only 77 percent on ADV and the stock was unable
to close above resistance from the 10-dma.  Another failed test
of this moving average, now near our stop price of $83, could
allow aggressive players to enter this play but make sure the
sellers return before jumping in.  If the continued rallying in
Tech stocks brings back the sellers, driving MRK back below its
5-dma near $82, this could allow conservative traders to make a
play, but make sure sector sympathy is on your side by monitoring
Merrill Lynch's Pharmaceutical HOLDR (PPH).

MMC $100.75 -1.19 (+0.50) You've got to love playing MMC puts.
The consistent rollovers as the share price approaches overhead
resistance at the 10-dma line continues to provide profitable
opportunities for aggressive traders.  However as time passes,
this trading range between $104 and $100 does add upside risk.
Think of it as an elastic band.  The longer it's stretched out,
the bigger the snap back.  Keep protective stops in place.  A
breakout above $104 followed by a bullish close and we'll
quickly exit the play.  The more conservative traders likely
want to stay on the sidelines unless sellers move MMC under the
century mark and the Insurance Index (IUX.X) returns to the
underside of 720.


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

AGGRESSIVE:

NUFO - New Focus $49.00 +4.50 (+14.56 this week)

Taking advantage of Telecom providers' new focus on fiber optic
networks, NUFO makes fiber amplifiers, wavelength management
equipment, and optoelectornics that boost the capacity and speed
of networks over extended distance.  Additionally, the company
makes laser modules and photonics tools used in the manufacture
and testing of fiber optic equipment.  With over 50 end
customers, NUFO sells its equipment to the likes of Agilent,
Alcatel, Corning, Corvis, JDS Uniphase, Lucent and Nortel.

It appears that the worst is over for Optical stocks, as they
are beginning to recover from the painful selloff that engulfed
the sector in recent months.  The Networking index (NWX.X) has
been moving into rally mode since the beginning of the year, and
NUFO has used the improving sentiment to jump start its own
recovery.  In the past week, the afterburners have kicked in,
driven first by positive comments from Thomas Weisel Partners
last Friday.  Then on Tuesday, the company completed its
acquisition of JCA Technology.  Due to potential synergies, the
merger is expected to be accretive to earnings in the first
quarter of combined operations.  This evening, NT announced
solid earnings, adding to the positive sentiment for Optical
stocks, which should continue to drive our new play higher as
earnings on January 30th draw closer.  After completion of the
above-mentioned merger, shares of NUFO moved up sharply
yesterday, and if anything the rate of ascent increased today,
with volume coming in 75% above the ADV.  The stock has now
cleared the $42 resistance level, and is riding the ascending
upper Bollinger band higher.  Since it appears that this rocket
has plenty of fuel left in its tank, we are setting our stop
right at the $42 level now that it has changed to support.  Due
to the sharp decline that occurred last November, the next
serious level of resistance sits at $58, with milder resistance
looming at $52.  A continuation of the rally will open the door
for new entries as the stock clears $50, but make sure that it
is continuing higher on strong volume.  With NUFO closing above
the upper Bollinger band and daily stochastics now in the
overbought zone, keep your eyes peeled for profit taking.  This
would likely produce a drop to intraday support between $45-46,
or even $42, providing aggressive traders with an attractive
entry on the bounce.  Don't forget to watch the Networking
sector (NWX.X) for confirmation that positive sentiment is
helping to buoy the stock.

BUY CALL FEB-45 DBE-BI OI=171 at $ 9.25 SL=6.50
BUY CALL FEB-50*DBE-BJ OI=478 at $ 6.88 SL=5.00
BUY CALL FEB-55 DUO-BK OI= 94 at $ 5.00 SL=3.00
BUY CALL APR-50 DBE-DJ OI= 65 at $12.25 SL=9.25
BUY CALL APR-55 DUO-DK OI= 30 at $10.25 SL=7.25
BUY CALL APR-60 DUO-DL OI= 37 at $ 8.88 SL=6.25

SELL PUT FEB-40 DBE-NH OI= 41 at $ 2.75 SL=4.50
(See risks of selling puts in play legend)

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


PLAB - Photronics Inc $33.75 +1.19 (-0.25 this week)

Photronics manufactures photomasks, which are high precision
quartz plates that contain microscopic images of electronic
circuits.  Photomasks are a key element in the construction of
semiconductors.  The Company's products are used to transfer
circuit patterns onto semiconductor wafers during the
fabrication of integrated circuits.  US chip makers account for
nearly 85% of sales; although Photronics operates manufacturing
facilities in Asia, Europe, and North America.  They recently
acquired rival Align-Rite in a move to become the world's
largest independent maker of photomasks.

Deja Vu?!  Well, not exactly.  We just want to take advantage of
PLAB's continuing run up.  If you had followed the play earlier
in the month, you know that PLAB made explosive moves out of its
trading ranges as the semiconductor index (SOX.X) broke to the
upside.  A clean break through the 200-dma (24.89) followed by
exceptional gains, upwards of 36%, provided a most bullish
environment.  Many traders profited handsomely.  However, last
week we erred on the side of caution and exited the momentum.
Our concern was, of course, the potential of heavy profit taking
going into this week coupled with the declining SOX.X and its
inability to break through the strong resistance at 700. If
foresight was always 20/20, as is the case with hindsight, then
our strategy would have been more aggressive.  Moving forward,
the trailing 5-dma, now at $32.36, continues to be a good gauge
for planning entries on the dips.  A signal of undue weakness
would be if PLAB saw the underside of the 10-dma ($30.05).  Our
protective stop is currently sandwiched between these two
technical lines, at $31.  The adventurous momentum traders might
consider taking entries on pullbacks; although it may be just as
profitable to buy into strength as PLAB rallies through the $35
resistance.  Look for the SOX.X and the NASDAQ to maintain its
bullish disposition as you plan your strategy.

BUY CALL FEB-25 PQF-BE OI=457 at $9.63 SL=6.50
BUY CALL FEB-30*PQF-BF OI=877 at $5.50 SL=3.50
BUY CALL FEB-35 PQF-BG OI=631 at $2.50 SL=1.25
BUY CALL MAR-30 PQF-CF OI=325 at $6.38 SL=4.25
BUY CALL MAR-35 PQF-CG OI=202 at $3.88 SL=2.25

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


LOW VOLATILITY:

OPTV - OpenTV Corp. $18.63 +1.38 (+5.56 last week)

OpenTV is the world's leading interactive television and media
solutions company.  They enable digital TV providers to
seamlessly integrate technology, interactive applications and
professional services into a superior two-way viewing experience
for their viewers.  Pioneers of both web browsing and MPEG
technology, OpenTV engineers were the first to bring the world a
reliable ITV solution.  Today, more than 11 million homes in 50
countries use their technology to make their lives easier, their
entertainment richer and their communication better.

Since encountering local double-top resistance at the $73 level
last July, shares of OPTV had been caught in a pronounced
retreat.  Connecting the highs since that time reveals the
downtrend line, which was finally broken this week.  Helped by a
recent Strong Buy rating from Prudential Securities, who
anticipates a strong earnings report, the stock has been
advancing on accelerating volume.  After piercing the 50-dma (now
at $17.13) yesterday, OPTV closed above this moving average today
for the first time since last September, with a gain of almost 8
percent on over twice the ADV.  At this point the stock appears
poised to make a run for its 100-dma, now sitting at $26.42.
Horizontal support can be found in increments of $0.50 from
$18.50 down to our stop price of $16.  A pullback to the $16.25
level would fill a gap that was made yesterday, allowing
aggressive players an ideal entry.  However, positive momentum
may allow OPTV to find support on higher ground at the 50-dma.
If the bulls continue to assert themselves, taking OPTV above
today's high of $19.21, this would give traders an entry on
strength, provided that competitors LBRT, TIVO and WINK are also
moving higher.

BUY CALL FEB-15   OUZ-BC OI= 68 at $6.13 SL=4.00
BUY CALL FEB-17.5*OUZ-BW OI= 25 at $4.38 SL=2.75
BUY CALL FEB-20   OUZ-BD OI=109 at $3.38 SL=1.75
BUY CALL MAR-17.5 OUZ-CW OI= 13 at $6.13 SL=4.00
BUY CALL MAR-20   OUZ-CD OI=132 at $4.88 SL=3.00

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


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

AGGRESSIVE:

WLP - Wellpoint Health Networks Inc $92.06 -3.44 (-6.81 this week)

Wellpoint Health Networks Inc serves the health care needs of
more than 7.7 million medical and more than 38 million specialty
members nationally through Blue Cross of California and UNICARE.
Wellpoint offers a broad spectrum of quality network-based
health products including open access PPOs , HMOs and specialty
products.  Specialty products include pharmacy benefit
management, dental, utilization management, long term care
insurance, and Medicare supplements.

Wellpoint doubled from $60 to $120 during 2000, with most of
the gains occurring during the rotation out of technology into
defensive stocks last fall.  Now that the tide has turned, and
money is flowing back into technology stocks again, Wellpoint
looks as if it has further to fall.  WLP formed a head and
shoulders formation during December, with the left shoulder
at $106.44, the head at $117.75, and the right shoulder at
$107.13.  since falling below the 50 dma of $104 last week,
WLP has been in a very clear down trending channel.  This week,
WLP tried to rally above $98.50, but fell sharply as the S & P
Managed Care index plummeted.  The majority of the health
care analysts now expect the managed care stocks to grow much
more slowly this year, as premiums are expected to rise in
the range of 10 to 12%, according to analysts at UBS Warburg.
Today's loss of more than three points in a very strong market
is a sign of technical weakness, and Wellpoint could very
easily drop to the $85 level if the trend of this week
continues.  WLP is right in the middle of a downward trading
channel which started January 11.  A failed attempt to rally
from $95 could be a good put entry point.  An important support
level for WLP is the 200 dma of $91.96, and a drop below this
level could be a good put entry point for more conservative
put traders.  Before buying puts, check the movement of other
stocks in the managed care index, like UNH, AET, and OXHP for
weakness.  Set stops at $97.

BUY PUT FEB-100*WLP-NTE OI= 6 at $10.88 SL=8.00
BUY PUT FEB- 95 WLP-NSE OI= 0 at $ 7.50 SL=5.25  Wait for OI!

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


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

RATL - Rational Software $47.81 -2.25 (+0.56 this week)

Rational Software Corporation, the e-development software
company, helps organizations develop and deploy software
for e-business, e-infrastructure, and e-devices through a
combination of tools, services, and software engineering
best practices.  Rational's e-development solution helps
helps organizations overcome the e-software paradox by
enhancing time to market while improving quality.

Most Recent Write-Up

Rational fell on profit taking today, after having rallied
nearly 40% in the last couple of weeks.  The stock is still in
its ascending channel, and above the 200 dma of $43.74, and
the 50 dma of $42.38.  Rational is resting right at its key
support level of $47.81, which could be an  entry level for
new positions.  After clearing $50, Rational's next resistance
level to clear is $52.44, before beginning its ascent to $60.
We might see a pullback to $46.50 or $45.50, which aggressive
traders could use as entry points.  Pay close attention to the
software index sector, particularly the market's reaction to
Microsoft's earnings, which were released after the close
today.  Keep stops at $44.

Comments

Although RATL suffered from a round of profit taking Thursday,
the stock found a big buyer near the $46.50 support level.
With a bullish earnings report from software giant Microsoft
this evening, RATL could be set for a big rebound early
Friday morning.  New entries can be taken on a move above the
$48 level.  The more obvious entry would be a strong advance
past the key $50 resistance level on strong volume.

BUY CALL FEB-45*RAQ-BI OI=881 at $7.13 SL=5.00
BUY CALL FEB-50 RAQ-BJ OI=268 at $4.63 SL=2.75
BUY CALL FEB-55 RAQ-BK OI=202 at $3.00 SL=1.50
BUY CALL APR-50 RAQ-DJ OI=204 at $8.88 SL=6.25
BUY CALL APR-55 RAQ-DK OI=230 at $7.25 SL=5.00

www.premierinvestor.com/oi/profile.asp?ticker=RATL


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

Hope Springs Eternal!

The stock market rallied today amid a belief that the worst is
over for the technology group and optimism that the FOMC will
cut interest rates at its next meeting.


Wednesday, January 17

Technology stocks rallied today as investors reacted favorably to
to the latest round of earnings announcements.  The NASDAQ closed
up 64 points at 2,682.  Some disappointing reports from blue-chip
industrial companies drug the Dow 68 points lower to 10,584.  The
S&P 500 index was relatively unchanged at 1,329.  Activity on the
NYSE was moderate at 1.32 billion shares exchanged, with winners
beating losers 1,601 to 1,339.  Trading volume on the NASDAQ was
a heavy 2.8 billion shares, with advances beating declines 2,377
to 1,598.  In the bond market, the 30-year Treasury rose 1 4/32,
pushing its yield down to 5.52%.


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

Avant!           AVNT   FEB25C/FEB22P   $1.12   debit   synthetic
Household Intl.  HI     FEB60C/FEB50P   $0.38   debit   synthetic
Steven Madden    SHOO   MAR12C/MAR7P    $0.31   debit   synthetic

All of our new issues rallied early in the session, however the
bullish activity prevented any favorable entries in the synthetic
positions.  The prices listed were the best observed debits but
because none of the plays were offered near the suggested targets,
we did not initiate any new positions.  We will monitor the plays
for future entry opportunities.


Portfolio Plays:

Investors flocked to technology shares Wednesday amid optimism
that most of the bad news surrounding quarterly earnings and the
slowing economy have already been priced into stocks.  Analysts
were impressed by early gains on the NASDAQ, which came in the
wake of a revenue warning from Intel (NASDAQ: INTC).  The computer
chip maker said first quarter revenue would decline 15% from the
fourth quarter due to seasonal factors and a slowdown in demand
for semiconductors.  Strangely enough, traders shrugged off the
news and moved quickly into chip equipment and networking issues,
driving the NADSAQ to a positive close.  On the Dow, a number of
companies reported mediocre revenues, prompting a broad exodus
from the industrial group.  Shares of Minnesota Mining (NYSE: MMM),
Boeing (NYSE: BA), The Home Depot (NYSE: HD), General Electric
(NYSE: GE), General Motors (NYSE: GM), and J.P. Morgan Chase
(NYSE: JPM) moved lower after posting quarterly earnings reports.
International Business Machines (NYSE: IBM), American Express
(NYSE: AXP), and Hewlett-Packard (NYSE: HWP), were among the few
blue-chip winners.  In the broader market groups, brokerage shares
edged higher but oil service, major drug, paper and biotechnology
issues generally retreated.

Our portfolio enjoyed a number of favorable moves as technology
issues continued to recover from the recent selling pressure.
Broadcom (NASDAQ: BRCM) and Emulex (NASDAQ: EMLX) were the top
performers in the big-cap category, both with $10 rallies.  We may
have to close the Emulex credit strangle if the bullish activity
continues.  Among lower priced stocks, Advanced Energy (NASDAQ:
AEIS) was a big winner, up $3 to a recent high near $32.  Motorola
(NYSE: MOT) and Worldcom (NASDAQ: WCOM) were popular stocks in
the telecom group and Williams Sonoma (NYSE: WSM) led the retail
segment.  Adelphia Business Solutions (NASDAQ: ABIZ), SpeedFam
Ipec (NASDAQ: SFAM) and Boston Scientific (NYSE: BSX) dominated
the small-cap category.  The Straddles portfolio continued to
enjoy big gains as Mips Technologies (NASDAQ: MIPS), Federated
Investors (NYSE: FII) and Southwest Securities (NYSE: SWS) moved
further from our initial basis.  We were also blessed with a new
winner as Alliance Capital (NYSE: AC) jumped to $54, providing a
$3.88 credit on $2.88 invested.  That position will likely offer
greater returns as the stock has broken to a recent high on heavy
volume.  The only disappointing activity in the "delta-neutral"
section is Orthodontic Centers (NYSE: OCA).  If you didn't take
the favorable early-exit profit last week, or close the position
today (as we suggested), you may become a new owner of the stock.


Thursday, January 18

The stock market rallied today amid a belief that the worst is
over for the technology group and optimism that the FOMC will
cut interest rates at its next meeting.  The NASDAQ closed up
85 points at 2,768 and the Dow rose 93 points to end at 10,678.
The S&P 500 index was up 18 points to 1,347.  Trading volume on
the NYSE reached 1.36 billion shares, with winners edging losers
1,636 to 1,291.  Activity on the Nasdaq was moderate with 2.53
billion shares exchanged.  Technology advances outpaced declines
2,190 to 1,748.  In the bond market, the 30-year Treasury rose
28/32, pushing its yield down to 5.46%.


Portfolio Plays:

Technology stocks led the rally today as investors moved back into
blue-chip computer companies in the wake of a positive report from
International Business Machines (NYSE: IBM).  IBM posted quarterly
earnings of $1.48 a share, slightly ahead of consensus estimates.
IBM also achieved its sales goals, registering a 6% increase in
revenue, year over year, and analysts said the impressive results
reinforce its long-held optimism regarding prospects for IBM in
the coming year.  A number of other technology bellwethers rallied
after the bullish news including Hewlett-Packard (NYSE: HWP),
Intel (NASDAQ: INTC), and Microsoft (NASDAQ: MSFT).  The majority
of tech sectors enjoyed upside activity but many industrial groups
suffered.  Caterpillar (NYSE: CAT) led the Dow on the downside
after reporting that 2001 will be another challenging year for the
industry as many markets continue to be cyclically depressed due
to excess capacity and ongoing price pressures.  Among broader
market groups that fell during the session were; oil and natural
gas service, financial, paper and chemical issues.  Stocks in the
drug, utility, airline, biotech, gold and transportation groups
generally moved higher.

Today's rally was a great way to end all the speculation over the
quality of the recent technology recovery and with the renewed
optimism among investors, the market should be able to establish
a solid bottom for future upside movement.  The leaders in our
portfolio were spread across a number of groups but most of the
big winners were blue-chip technology issues.  We also enjoyed
some outstanding bullish performances in industrial issues even
as investors continued to rotate into the technology stocks.  One
of the best performing strategies this month has been the Debit
Straddle and today we closed another play for favorable returns.
Alliance Capital (NYSE: AC) ended at a recent high near $56, and
our neutral position offered a credit of $5.75, a $1.62 profit on
$4.12 invested in just over one month.  A recent addition to that
section, the US Bancorp (NYSE: USB) straddle is now profitable and
we will monitor the play for favorable early-exit opportunities.
Finally, our new synthetic positions (from Tuesday) consolidated
after Wednesday's gains and the Household International (NYSE: HI)
play offered a small opening credit.  Our target of $0.38-$0.50
may be available during tomorrow's volatile session.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                          - NEW PLAYS -
******************************************************************
ERICY - LM Ericsson Telephone  $12.63  *** Reader's Request! ***

Ericsson Telephone is engaged in international telecommunications,
providing systems and products for fixed and mobile communications
in public and private networks.  The company's broad range of data
communications and telecommunication products includes systems and
services for handling voice, data, images and text in public and
private fixed-line and mobile networks, microelectronic components,
defense electronics and telecommunications and power cables.  The
company adopted a new organization with three customer-oriented
business segments replacing the previous business areas: Network
Operations and Service Providers, Consumer Products and Enterprise
Solutions.  In addition to these segments, the other operations
include Components, Cables, and Defense Systems. The organization
is grouped in four market areas: Europe, Middle East and Africa;
Latin America; North America, and Asia Pacific.

One of our readers asked for some suggestions on how to speculate
conservatively on a recovery in Ericsson's (NASDAQ: ERICY) shares.
With the recent bullish activity in telecom issues and quarterly
earnings due later in the month, we decided to offer two different
approaches.  Our preferred strategy is generally a "time-selling"
technique but with favorable technical support near $10, a basis
at that price (in the synthetic position) also offers relatively
low risk.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  APR-15  RQC-DC  OI=23966  A=$1.12
SELL CALL  FEB-15  RQC-BC  OI=941    B=$0.31
INITIAL NET DEBIT TARGET=$0.62-$0.69  TARGET ROI=50%

- or -

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-15  RQC-DC  OI=23966  A=$1.12
SELL PUT   APR-10  RQC-PB  OI=5458   B=$0.56
INITIAL NET DEBIT TARGET=$0.12-$0.25  TARGET ROI=100%

Note:  We are going to be slightly more lenient in this position,
as many of our synthetic plays have been difficult to enter at
the suggested target.  Using options, the position is equivalent
to being long on the stock.  The collateral requirement for the
naked put is approximately $300 per contract.

/charts/jan01/charts.asp?symbol=ERICY
******************************************************************
LEN - Lennar Corporation  $40.56  *** Interest Rate Play! ***

Lennar Corporation is a homebuilder and a provider of residential
financial services.  The company's homebuilding operations include
the sale and construction of single-family attached and detached
homes, as well as the purchase, development and marketing of
residential land.  The development of residential land is mainly
conducted through its own efforts and its partnership interests.
The financial services operations provide mortgage financing,
title insurance and closing services for Lennar homebuyers and
others, package and resell residential mortgage loans and other
mortgage-backed securities, perform mortgage loan servicing
activities, and provide cable television and alarm monitoring
services to residents of Lennar communities.

Analysts say that a decline in interest rates will keep homebuyers
lining up in record numbers and that bodes well for homebuilders.
The Fed's recent interest rate cut drove mortgages prices to their
lowest level in almost two years and Fannie Mae, the leading U.S.
mortgage finance company, estimates that 2001 could produce the
highest numbers of new mortgages in the nation's history.  Besides
interest rates, homebuilders have a backlog of orders in the first
quarter that will help their results, and even if lower rates fail
to offset an economic slowdown, larger homebuilders will achieve
additional orders as they gain market share.  Lennar (NYSE: LEN)
is one of the leading companies in the industry, having reported
record fourth-quarter earnings and the homebuilder said it expects
another outstanding year in 2001.

Traders who want to speculate on the interest rate outlook can do
so in a conservative manner with this bullish (OTM) credit spread.

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-30  LEN-NF  OI=200  A=$0.12
SELL PUT  FEB-35  LEN-NG  OI=75   B=$0.69
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=14% B/E=$34.38

/charts/jan01/charts.asp?symbol=LEN
******************************************************************
MOLX - Molex  $47.00  *** On The Rebound! ***

Molex is a manufacturer of electronic, electrical and fiber optic
interconnection products and systems; switches; assemblies, and
application tooling.  Molex serves a range of original equipment
manufacturers in industries that include automotive, computer,
computer peripheral, business equipment, industrial equipment,
telecommunications, consumer products and premise wiring.  The
company offers more than 100,000 products.  These electrical and
electronic devices include terminals, connectors, planer cables,
cable assemblies, interconnection systems, fiber optic connection
systems, back-planes and mechanical and electronic switches.  An
array of crimping machines and terminal inserting equipment (also
known as application tooling) are offered on a lease or purchase
basis to the company's customers for the purpose of applying the
company's components to the customers' products.

Molex (NASDAQ: MOLX) rallied into an earnings report today, and
although the company missed its target by a penny, the CEO issued
upbeat comments about the future.  Molex reported it earned $67
million, or $0.34 a share, compared with $54 million, or $0.27 a
share in the same period a year ago.  Revenues rose 15% to $629
million, up from $543 million last year, and the company expects
full-year 2001 earnings at the upper end of its previous forecast
of $1.34 to $1.40 a share.  Molex also has a lengthy backlog of
orders and in several important segments, such as fiber optics,
micro miniature and high-speed products, demand remains strong.

The technical indications suggest that the recent recovery can be
easily sustained and if we can get a brief sell-off to enter the
position, a favorable risk/reward outlook may be established.
Monitor the stock for post-earnings selling pressure and after
the issue trades in a reasonably stable range, target a higher
premium, to allow for any consolidation from Thursday's rally.

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-35  OXQ-NG  OI=103  A=$0.31
SELL PUT  FEB-40  OXQ-NH  OI=40   B=$0.81
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)= B/E=$

/charts/jan01/charts.asp?symbol=MOLX


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