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Daily Newsletter, Monday, 02/12/2001

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The Option Investor Newsletter                   Monday 02-12-2001
Copyright 2001, All rights reserved.                        1 of 1
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        02-12-2001        High      Low     Volume Advance/Decline
DJIA    10946.80 +165.40 10953.60 10771.60 1.01 bln   1950/1133
NASDAQ   2489.66 + 18.69  2508.27  2435.36 1.75 bln   2007/1780
S&P 100   692.06 +  9.71   692.32   682.11   totals   3957/2913
S&P 500  1330.31 + 15.55  1330.96  1313.64           57.6%/42.4%
RUS 2000  505.35 +  8.30   505.36   495.51
DJ TRANS 3039.23 + 25.81  3039.28  3010.15
VIX        24.55 -  0.60    26.31    24.30
Put/Call Ratio      0.64
******************************************************************

Waiting For Greenspan

The Dow Jones Industrial Average (INDU) advanced towards the
elusive 11,000 level on strong buying across nearly every sector
of the market.  Meanwhile in the Nasdaq Composite (COMPX), traders
were reminded of the prevalent risks in the technology sector.

Late Friday, Emulex (NASDAQ:EMLX) said it was experiencing a
slowdown in sales.  The maker of fibre channel hubs and switches,
used in the data storage business, held a conference Friday
evening in which its executives effectively warned of lower
revenue growth for the fiscal third-quarter.  The company's
executives said that their customers were pushing orders back,
which is consistent with the overall slowdown in capital
expenditures by corporate America.  Following the warning from
Friday, US Bancorp analyst Ashok Kumar slashed his rating on
shares of Emulex to a hold from a buy rating - the stock lost
nearly half its value in Monday's session.

While I normally try to look forward and not focus on the past
and report old news, I feel that it's prudent to examine the
Emulex blowup a little more closely.  The warning by Emulex
reinforces that great risks remain in the tech sector,
especially in the highly-valued segments of tech.  Companies
like Emulex trade with extremely high valuations because the
expectations built into these types of stocks are so high.
For a long, long time these high-flying companies blew away
estimates and kept raising the bar - they couldn't lose!  But
as we've witnessed recently with the likes of PMC Sierra
(NASDAQ:PMCS) and now Emulex, the slightest misstep is
extremely detrimental to both the company and its shareholders.
My intentions here are not to blast Emulex or its stock.  Just
know that the tech sector still has plenty of risk.




Now let's look forward.  Fed Chairman Alan Greenspan will be
testifying before the Senate Banking Committee Tuesday morning at
10 a.m. EST.  The Fed's semiannual report, formerly known as the
Humphrey Hawkins testimony, is closely watched by the market
because it includes the FOMC's official forecasts for growth,
inflation and unemployment.  The report Tuesday morning is all the
more important in light of the current condition of the U.S.
economy.  Just three weeks ago, Greenspan said that growth was
close to zero and the economy was walking a fine line between
recession and recovery.  Greenspan opined that consumer confidence
was crucial in preventing a recession - the data that followed
Greenspan's remarks suggested that consumer confidence was
slipping.

There are several scenarios that could unfold following
Greenspan's testimony tomorrow morning, and here are three
possibilities that might help to generate trading ideas.  If
Greenspan hints that the Fed will stage another intermeeting
rate cut before its scheduled gathering near the end of March,
interest rate-sensitive sectors will advance sharply.  Pay
special attention to bank, broker, retailer and cyclical stocks.
However, if Greenspan speaks in a convoluted way and does
not give a clear indication of the Fed's future policy on
interest rates, we'll likely witness choppy, difficult trading
in the aforementioned sectors and it might be prudent to stand
aside.  A third possible scenario to watch for is if Greenspan
says the economy is not all that weak and recession threats
remained subdued.  If Greenspan indicates that the Fed will
not be cutting interest rates as aggressively as the market
has discounted, then the aforementioned sectors are likely to
pullback as an aggressive easing policy has already been
factored into the respective stocks.  I don't think the third
scenario I've set forth is likely, but it should be known
nonetheless.

Before I give a list of stocks in each of the aforementioned
sectors, keep in mind that these names should ONLY serve as
a reference.  The individual stocks you choose to trade
should depend upon your individual risk profiles and not my
lists.

In the broader finance sector, keep an eye on Citigroup
(NYSE:C), J.P. Morgan Chase (NYSE:JPM), US Bancorp (NYSE:USB),
Mellon Financial (NYSE:MEL), American Express (NYSE:AXP),
Merrill Lynch (NYSE:MER), Lehman Brothers (NYSE:LEH) and
Goldman Sachs (NYSE:GS).  In addition to the aforementioned
individual names, traders might want to take a look at the
trends and support and resistance levels in two indexes:
Philadelphia Bank Sector Index (BKX.X) and Amex Securities
Broker/Dealer Index (XBD.X).

To monitor the retail sector, watch the CBOE Retail Index
(RLX.X).  Some individual companies include Wal Mart (NYSE:WMT),
Home Depot (NYSE:HD), Kohls (NYSE:KSS), Gap (NYSE:GPS), Costco
(NASDAQ:COST) and American Eagle Outfitters (NASDAQ:AEOS).

And for the cyclical stocks, it might be worth while to watch
the Morgan Stanley Cyclical Index (CYC.X).  In this industry
group, keep on an eye on International Paper (NYSE:IP),
General Electric (NYSE:GE), Georgia Pacific (NYSE:GP) and
General Motors (NYSE:GM).

Keep in mind that the strong rally in the INDU, led by the
three aforementioned sectors, could prove to be a buy the
rumor sell the news event, depending on exactly what Greenspan
says tomorrow morning.  Since the risk is very real in the
three sectors, make sure to have a risk management plan in
place before entering any trade, i.e. stops!

Additionally, retail sales for January are scheduled for release
before the bell tomorrow, with the market expecting a bit of a
rebound.  The market expects retail sales to have risen by 0.7
percent in January.  A weaker-than-expected number could throw
the retail sector for a loop so be cognizant of the number.

As I previously mentioned, the three aforementioned sectors
helped to carry the INDU back towards 11,000.  If Greenspan
delivers pleasing comments tomorrow morning, the INDU has a
shot at closing above 11,000.  Keep in mind, however, that the
INDU has failed on four separate occasions to close above
11,000 thus far in 2001.  For the more risk averse traders with
the inability to quickly maneuver in and out of positions, it
may be more prudent to wait for the INDU to settle above
11,000 before initiating positions.




I still think the Nasdaq is a bit more difficult to gauge and
operating in the tech sector requires far more on the part of the
trader to manage risk.  However, I was encouraged with the
Nasdaq's ability to shrug off bad news and close higher today.
The Emulex blowup was far reaching and dragged down shares of
QLogic (NASDAQ:QLGC) and Brocade (NASDAQ:BRCD) - those two stocks
got whacked.  On top of the Emulex-related badness, the Nasdaq
was able to digest bearish comments bestowed upon the optical
networking sector, with CIENA (NASDAQ:CIEN) taking the brunt of
the selling.  Let's step back for a minute: huge losses in shares
of Emulex, Brocade and CIENA yet the COMPX closes higher.  From
where I sit, today's action in the Nasdaq was very constructive.
But be cautious in the tech space, if you're going to venture
into the Nasdaq in an attempt of trading the long side, I think
it's most prudent to stick with the names that have come down to
earth and try to avoid the high-flyers.  I think the risk/reward
is much more favorable in the downtrodden tech names as opposed
to the highly-valued stocks, but that's just my take.




In my humble opinion, the best place to look for downtrodden
tech stocks is in the chip sector.  I'll beat the SOX.X to
death until I discern a better risk/reward opportunity in the
tech sector.  But for the time being, I think the SOX.X
represents the best opportunity in tech.  Some might disagree
with me on that view, but for what it's worth, Thomas Weisel
Partners boosted their ratings on several chip stocks this
morning, which included Applied Materials (NASDAQ:AMAT),
Lam Research (NASDAQ:LRCX), Novellus Systems (NASDAQ:NVLS),
Teradyne (NYSE:TER) and Micron Technology (NYSE:MU).
Applied Materials, the chip equipment giant that it is, will
report earnings after the bell tomorrow - plan any trades
in the chip sector accordingly and take into account that
although the semis acted well today, overnight risk remains.

I still think the best strategy to employ in the current
market is to be nimble and quick to take profits.  The Nasdaq
continues to be a tough market to trade and will be until the
visibility in corporate America improves along with the
fundamentals in the tech sector.  But if you must trade the
tech sector, from the long-side that is, I would argue to
stick with stocks that are trading at modest valuations and
have already fallen.  Moreover, rather than aggressively
pursuing breakouts in tech stocks, a more prudent strategy
might be to wait for pullbacks to support levels.

The blue chip, old economy stocks continue to produce profits
for traders with patience and discipline.  Entering on
pullbacks in sectors such as finance and retail has been
working recently and will probably continue to work as long
as the Fed stays on the offensive.  Greenspan can act either
as a catalyst tomorrow morning, a non-event, or a detriment
to the market.  But whatever transpires, know your risk
profile and profit objectives before entering any trade.

Eric Utley
Assistant Editor


************************************
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April 5th-9th, Denver Colorado
************************************

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

BRCM - Broadcom Corporation $80.44 +3.25 (+3.25 this week)

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data to and throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.

Shares of BRCM have certainly seen better days, but strong
support below could make this play a bargain hunter's dream.
Between rival PMCS' bearish conference call, BRCM's own narrowing
of revenue growth estimates for the near term and a lukewarm
reception on the part of analysts, the stock has been bombarded
by bearish sentiment and selling pressure.  Lehman Brothers
initiated coverage with a Market Perform while WR Hambrecht
maintained their Buy rating, but reduced their price target from
$200 to $125.  CE Unterberg followed Lehman's lead, also
maintaining their Buy rating and cutting their price target to
$125.  UBS Warburg maintained their Strong Buy rating but cut
revenue estimates.  However, we are initiating coverage on BRCM
as an aggressive call play in anticipation of a bounce off key
support. Since slipping below its 50-dma ($106.68), the stock has
headed lower, with pressure from the 5-dma, now at $82.36. The
$75 support level has been twice tested successfully late last
year, providing aggressive traders with an entry point for a
highly profitable play.  It is here that we are placing our
protective stop, so make sure BRCM continues to close above this
level.  A bounce off key support would be an ideal entry point,
with additional support at $80, but confirm with volume.  For the
more conservative, look for a break above the 5-dma with
conviction before taking a position.  From there, it could be a
quick trip up to resistance overhead at $90 and the 10-dma at
$93.60.  Correlate entries with strength in the Philadelphia
Semiconductor Index (SOX) as well as the NASDSAQ 100 (QQQ).

BUY CALL MAR-75 RDZ-CO OI= 633 at $13.38 SL=10.00
BUY CALL MAR-80*RDZ-CP OI= 568 at $10.75 SL= 8.25
BUY CALL MAR-85 RDZ-CQ OI= 404 at $ 8.38 SL= 6.00
BUY CALL MAY-80 RDZ-EP OI= 216 at $16.50 SL=12.00
BUY CALL MAY-85 RDZ-EQ OI=  70 at $14.63 SL=10.75

SELL PUT MAR-70 RDZ-ON OI=1156 at $ 5.00 SL= 7.00
(See risk of selling put in play legend)

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


****************************
NEW LOW VOLATILITY CALL PLAY
****************************

WM - Washington Mutual Inc. $52.49 +1.49 (+1.49 this week)

With a history dating back to 1889, Washington Mutual Inc. is
a national financial services company that provides a diversified
line of products and services to customers and small and mid-size
businesses.  On December 31, 2000, Washington Mutual and its
subsidiaries had assets of $194.72 billion.  Washington Mutual
currently operates more than 2,000 consumer banking , mortgage
lending, commercial banking, consumer finance, and financial
services offices throughout the nation.

Like many other savings and loan institutions, Washington Mutual
has performed exceptionally well since last fall.  WM has stayed
above its 200 dma since last June, and only dipped below its
50 dma briefly in January.  Investors continue to stay attracted
to these stocks, as they offer a combination of stable, high
earnings growth, and low volatility, which is an added bonus
for options traders.  In addition, the ongoing program of
interest rate cuts by the Federal Reserve will directly impact
these companies earnings, by reducing the rate at which they
borrow money.  On January 16, WM reported record fourth
quarter and annual earnings of $3.54 per share, as well as
an increased cash dividend.  However, the really big news is
the fact that the Office of Thrift Supervision approved WM's
proposed takeover of Bank United Corp on January 22.  Bank
United Corp is the largest publicly traded depository
institution headquartered in Texas, with $18.3 billion in
assets, and $8.7 billion in deposits.  Bank United Corp's
shareholders overwhelmingly approved the deal, which will net
the shareholders 1.3 shares of WM for each share of Bank United.
On Friday, the transaction was completed, and the investment
community expressed its approval by trading three times the
average daily volume of WM.  Today, the buying continued with
strength in the financial sector, and particularly the saving
and loans institutions.  Traders could take positions at
current levels, or possibly at a pullback to $52, after
assessing the market's reaction to Chairman Greenspan's
testimony tomorrow.  If the S & L sector retains its strength,
WM could make a push for its 52-week high at $55.93.  Watch
others like ASFC and GPT for sector strength, and set stops
at $50.

BUY CALL MAR-45 WM-CI OI=   1 at $8.10 SL=5.75
BUY CALL MAR-50*WM-CJ OI= 810 at $4.00 SL=2.50
BUY CALL MAR-55 WM-CK OI=1061 at $1.30 SL=0.75
BUY CALL APR-50 WM-DJ OI=1967 at $5.00 SL=3.00
BUY CALL ARP-55 WM-CK OI=1553 at $2.40 SL=1.25

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


************
NEW PUT PLAY
************

FCEL - FuelCell Energy $56.31 -3.19 (-3.19 this week)

Poised to benefit from the world's increasing thirst for power,
FCEL is a developer of electrochemical technologies for
electric power generation and has developed a proprietary
patented fuel cell known as the Direct FuelCell.  A fuel cell
is a device that electrochemically converts the chemical energy
of a fossil fuel, such as natural gas, into electricity without
the combustion of fuel or the production of any harmful
emissions.  The company produces carbonate fuel cells, generally
on a contract basis.

Under pressure over the past several months, along with the
broader Technology sector, FCEL has been valiantly attempting
to keep its head above water.  The bulls have been fighting a
losing battle though, as the rallies can't seem to break through
the formidable resistance near $80.  The latest move down got
started on Friday with a more than $8 drop.  Heavy volume
accompanied the decline, and based on today's additional $3.19
loss, the bears are not done having fun.  After falling through
the $65 and $62 support levels on Friday, sellers continued to
rule the day today, pushing our new play below the $57-58
support level and even deeper into the lower Bollinger band.
The recent selling has dragged the daily Stochastics into
oversold now, but there really isn't any indication that the
stock is done falling.  Current downside targets that we can
focus on are the 200-dma (currently $53.75), followed by $51.
Finally, we have the December low of $45.25 as the stock's
final hope of support before heading into territory not seen
since August of last year.  Earnings are approaching on February
27th (unconfirmed), but it appears unlikely that event will
provide any hope for the bulls.  FCEL is another of those
companies that doesn't have any earnings yet, and is currently
projected to lose 32 cents this quarter.  Last year, investors
were willing to ignore losses and focus on growth potential,
but not this year.  As long as the broader technology market
remains under pressure, not even FCEL's association with the
energy market is sufficient to provide a lift to the share
price.  Conservative traders can consider new positions on a
drop through today's low of $56 as an opportunity to open new
positions, but beware of a bounce due to the proximity of the
lower Bollinger band.  A bounce up to the $60 level (now acting
as resistance) may be a better choice for new entries, so long
as sellers show up to keep the impatient bulls in check.  Set
stops at $62, and watch the direction of other fuel cell stocks
like BLDP and PLUG for confirmation of weakness in the sector.

***February contracts expire this week***

BUY PUT FEB-60 FQG-NL OI=609 at $4.88 SL=3.00  High Risk!
BUY PUT FEB-55 FQG-NK OI=831 at $1.94 SL=1.00  High Risk!
BUY PUT MAR-60*FQG-OL OI=441 at $8.63 SL=6.00
BUY PUT MAR-55 FQG-OK OI=317 at $5.88 SL=4.00
BUY PUT APR-55 FQG-PK OI= 62 at $8.38 SL=5.75
BUY PUT APR-50 FQG-PJ OI= 76 at $5.88 SL=4.00

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


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

SDS  - call play
Adjust from $51 up to $53

MERQ - put play
Adjust from $79 down to $74

GSPN - put play
Adjust from $30 down to $29

ISSX - put play
Adjust from $72 down to $69

BOBJ - put play
Adjust from $80 down to $78


*************
DROPPED CALLS
*************

CIEN $73.63 -6.25 (-6.25) So much for support.  After a week
of flirting with support near $78 (also the location of our
stop), shares of CIEN took a big tumble this morning, likely
in response to Friday's negative conference call on Friday.
The negative impact was felt across the storage sector and
select Optical stocks felt the pain today.  Although there was
no CEIN-specific bad news, there was a block of 135,000 shares
sold at $74, and that kind of selling volume is bound to have
a negative effect.  Earnings are confirmed for Thursday morning,
and with the technical violation and plunge through our stop,
CIEN is obviously a drop tonight.

LGTO $15.38 -1.13 (-1.13) Up until today, shares of LGTO were
holding up well relative to the rest of the storage sector, which
has selling off on downgrades and valuation fears.  However, the
signs of an impending rollover were already present last week,
with the stochastics curling lower and the cross below the 5 and
10-dma (at $16.70 and $17.17).  The price action volume action of
the last two weeks reveals a neutral wedge formation.  Today's
drop has resulted in a break out of this pattern to the downside.
With continued negative sector sympathy and deteriorating
technicals, we are dropping coverage of this play.


************
DROPPED PUTS
************

HGSI $53.94 +2.88 (+2.88) After riding HGSI down for some tidy
profits, it looks like it is time to move on.  The $50 level
seems to have provided support, and the stock rallied sharply
today on heavy volume.  Although it fell back from its highs
just below $56, the strength that allowed it to trade through
our $54 stop makes it hard to keep as a put play.  Combined with
the fact that they are unofficially set to release earnings
tomorrow, we think the most prudent course of action is to book
our profits and move on.

AETH $32.00 +3.38 (+3.38) Aether offered strong opportunities
for put players since we picked it at $36.84.  However, the
stock regained some strength today in the overall market rally,
and investors' positive response to the introduction of a new
product.  While volume was not as heavy as it was on the days
which experienced selling last week, Aether has closed above
our recently lowered stop price at $31, so we are dropping it
tonight.


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

The Easy Part: Calling Tops & Bottoms
By Austin Passamonte

The biggest mistake I make trading options is picking my own
plays. Problem is that I know too much; I'm my own biggest
liability.

If I were smart, somebody else would pick my trades for me.
Someone who knows nothing about market action and wouldn't drag
an educated bias into the process would be perfect. My darling
wife Wendy comes to mind.

Now here's a girl who couldn't be less interested in day to day
nuances of market action. Just buy cheap and sell dear or vice-
versa is her opinion. Wait until conditions are right, place the
trades and cash out solid profits. Why haven't I thought of that
before?

The tricky part would be getting her to actually look at charts.
If I taught her some simple rules in a five-minute lesson, that
might be all it would take. Maybe I could print out some daily
charts and slip them inside the latest Victoria Secret catalog
lying around, then ask her to show me which three dresses she has
in mind next. She unwittingly flips to the charts and bingo...
I've got her attention and opinion along the way!

Here's what I'd tell her to look for; stochastic values that
reached/entered oversold or overbought extremes now reversing
away. Simple divergence where price action and stochastic action
aren't moving in tandem would be icing on the cake. If prices are
moving one direction and stochastic values another while at or
within extreme value zones, immediate reversal of that price
direction is likely.

We want to go bullish when emerging from oversold and go bearish
when emerging from overbought. Got that, Wen?

Let's peek at some recent daily charts I plucked from archived
Market Wraps at IndexSkybox and see how these simple rules devoid
of all other noise may have treated us.

(January 21st IS Market Wrap) "An idea of where we'll go from
here is the first step. Let's look over the big picture together
and compile a plan of action together, shall we?

(Daily Chart: NDX)



Nasdaq 100 now rests at a critical point. It managed to close
above both the long-term descending trend line (black) and 50 DMA
(pink) for the first time since September 4th. That move could
have now converted both values from resistance to firm support.

What it must do is hold the line from here. An intraday retest is
allowed but a close below would be bearish. Of great interest are
the stochastic & MACD values. Stochastics are currently posting
higher highs than mid-December while prices are posting lower
highs in relation. Any divergence that occurs between
oscillators/ price action in overbought territory is bearish, but
this pattern is not yet complete.

Price action must reach or exceed the 3,000 level to negate such
bearish divergence. Higher price highs that justify higher
stochastic highs means there is underlying strength in the
market. Should that stochastic slow bar (red) roll over and turn
down below 80% oversold before we reach or break 3,000+ it would
warn us early of another failed rally.

We have the setup in front of us to keep an eye on, now we let
price action prove itself from here.

(Daily Chart: SOX)



The Semi-Conductor Index has lead Nasdaq for a few years and will
continue to do so for awhile. Two closes above solid support near
700 looks bullish, as do stochastic & MACD lines pointing
straight up. No signs of weakness although any close below 700
might fall straight to 628 area where 20 DMA (red) and 50 DMA
(pink) converge."

(February 4th IS Market Wrap) "Daily chart signals clearly warned
us for longer than a week that downside correction lies ahead in
the not-too-distant future. The future just might be now. If our
charts are as predictive into the future as they were in recent
past, what could the week ahead portend?

(Daily Chart: SPX)



The S&P 500 is rolling over and needs to find strong arms below
it fast. 1341 is a critical area as we'll see later on. Daily
stochastic values have just begun to tip over and could cover
lots of ground."

(02/10 IS Wrap...Daily Chart: Dow)



The old index is in trouble..."

Well now, what did we see? Clear signs slowly developing in front
of our eyes that all but pounded us on the head to follow. All
markets behaved according to forecast. If only successful trading
were that easy.

I have the luxury & privilege to hang out with a bunch of veteran
traders who've forgotten more about fundamental analysis than
I'll ever know. They are fine technicians on top of that; well
rounded, experienced people I have the utmost respect for. Add
Jim Brown to the mix who's always correct on picking market
direction exactly half the time... when it's going up! (Sorry
Jim, we all love you dearly but markets sometimes go down too, ya
know).

Anyway, several of us were having a discussion a day or two after
the last FOMC meeting and I was asked why I still felt near-term
bearish. Fed's easing rates, stocks are shrugging off bad news
left & right, etc. By the end of our friendly debate I was
feeling pretty uncertain to say the least.

When asked where I thought the Nasdaq might pull back to if
indeed bearish forecast was correct, I pointed out the 20-DMA for
first stop and lower Bollinger bands for the second. I'm not sure
anyone present thought I was actually serious, to be honest.
Those prices were hundreds of index points lower than where we
sat that night.

These respected friends of mine had numerous valid points about
being bullish and all I had were two or three very basic facts
based on some of the simplest and widest-used technical tools to
rationalize my position.

1. Daily chart stochastic values in the SPX, NDX, SOX and COMPX
were all near or buried above 80% overbought extremes. This tells
us we are due for a correction soon.

2. VIX & VNX were posting lower lows than anytime since early
October, 2000. Tells us we are due for a correction.

3. Tech indexes failed to rally on the .50 basis-point reduction
and were treading water at best. If no rally after that, what
will be the upside catalyst?

Two of those three were incidental. Daily stochastic action was
enough to convince me a top was in place. Just because I was
convinced doesn't mean profitable plays are automatic.

I kept trying to buy OEX & SPX puts and was getting stopped out
on every final-hour rally that suicidal bulls insisted on
staging. Retail or institutional buying, call it what you will,
they all got creamed on that last-hour rally spike into CSCO's
earnings.

Before then I was convinced the charts weren't lying this time
(they seldom do), so I sold a triple handful of SPX at-the-money
call credit spreads for a lot of premium and bought them back one
week later for a pittance.

During that time I experienced the emotional gamut of listening
to CNBC and other media types (clueless about market action)
steering conversations in a bullish direction. Advertising
dollars are way down so they need to "pump up the troops". While
I understand, sympathize and forgive their transgressions it
still does not make harboring contrarian views any easier while
listening to this.

Here I am holding massive (for me) shorts and bullish mantra
surrounds me. You try sleeping 8.5 hours a night under conditions
like that! Hindsight cleared the fog as it always does and again,
chart signals prevailed. Markets fell and the trades worked out.

The absolute toughest part of calling market turns and using this
knowledge for great gain is actually acting upon the chart
signals at that time without hindsight. I promise you that each
time with no exceptions a market is pressing overbought range on
its daily chart, everyone around you will be bullish. Every time
a daily chart is pressing oversold, guess what sentiment will be?
Bearish!

Can you buck the crowd, trust those charts and stake your claim
against the grain? It will be one of the most difficult things we
will ever attempt to do in the trading arena.

Today's action is a prime example. The Dow's daily chart looks
very vulnerable to me. When it traded near 10,900 today I sold a
passel of DJX March 108/114 call credit spreads for 2.50 net-
credit. My total risk on these plays is 3.50 or 58%/42%
risk/reward ratio. The Dow needs to close below 10,800 on March
16th for maximum profit or below 11,050 for breakeven.

Waiting for an intraday rally to sell into has been the plan
since Friday, but pulling the trigger into a rising market still
isn't easy. Will it work? No way to tell from here but I intend
to blindly trust the charts and see what happens next.

Meanwhile, tech index daily charts are all beginning to look
pretty bullish buried in oversold range and trying to emerge. See
anyone on CNBC anxious to buy techs? We may be closer than they
think. Daily charts in the strongest leading sectors will tell us
when a stealth rally is about to begin.

But I shouldn't be making these choices anyway. Let me print out
some Nasdaq and tech-index HOLDR charts to slip inside that
Vickie Secrets catalog on Wendy's nightstand. There... we stuck
them right next to Tyra in the leopard print jammies. "Hey Wendy,
you got a minute? I need you to show me that new swimsuit you
have in mind. While you're at it, should I be looking to buy
calls soon or not?"

Best Trading Wishes,

austinp@OptionInvestor.com


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

IFIN - Investors Financial Services $86.00 +0.19 (+0.19 this week)

Investors Financial Services Corp. provides asset administration
services for the financial services industry through its wholly-
owned subsidiary, Investors Bank and Trust Company.  The company
provides global custody, multicurrency accounting, institutional
transfer agency, performance measurement, foreign exchange,
securities lending, mutual fund administration and investment
advisory services to financial asset managers, including mutual
fund complexes, investment advisors, banks, and insurance
companies.  Offices are located in the United States, Canada,
Cayman Islands, and Ireland.

Most Recent Write-Up

Shares of IFIN have demonstrated uncharacteristic strength
in a bear market, and have stayed firmly above their 200 dma
for the last twelve months, dipping briefly below the 50 dma
in January.  For the fiscal year 2000, IFIN's net income
rose 58%, as their net interest income rose 64%, driven by
increased client deposits.  As a small cap value stock, IFIN
is benefiting from a sector rotation out of large cap
growth stocks, which suffered serious losses last year.  IFIN's
earnings are driven by assets under management, which shields
the company somewhat from the earnings fluctuations found in
the other financial sectors.  After reaching a 52-week high
of $96 in December, IFIN dipped to $60.75 on January 21, but
has since then re established the upward channel which
commenced last summer.  Investors responded very enthusiastically
to the news that IFIN had completed the purchase of the
Advisor Custody Unit of Chase Manhattan Bank's National
Customer Services Division on February 2, and this week, IFIN
burst through its converged 5 and 10 dma of $81.53, which
had been a sticking point for the stock for nearly two weeks.
IFIN now appears determined to make a run for the next
resistance level at $90, and possibly its 52-week high at
$96.  Traders could take positions on a pullback to $85, or
at current levels.  Watch the investment management sector
for an indication of sector strength, and others like AC
and STT, and set stops at $80.

Comments

IFIN spent the day consolidating its recent gains Monday.  The
stock is now poised to breakout on the heels of positive
remarks from Greenspan Tuesday morning.  Watch for a high-volume
breakout above resistance at $87.50.  Additionally, pullbacks to
support near $85 could provide a solid entry point.

BUY CALL MAR-80 FLQ-CP OI= 0 at $10.88 SL=8.00  Wait for OI!
BUY CALL MAR-85*FLQ-CQ OI=87 at $ 7.75 SL=5.50
BUY CALL APR-80 FLQ-DP OI= 0 at $13.50 SL=9.75  Wait for OI!
BUY CALL APR-85 FLQ-DQ OI= 1 at $10.50 SL=7.75

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


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