The Option Investor Newsletter Sunday 03-25-2001 Copyright 2001, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/032501_1.asp Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 3-16 WE 3-9 WE 3-2 WE 2-23 DOW 9504.78 -318.63 9823.41 -207.87 10644.62 -213.63 + 24.41 Nasdaq 1928.68 + 37.77 1890.91 - 49.80 2052.78 -115.95 -144.88 S&P-100 580.71 - 7.28 587.99 - 12.72 633.40 - 18.06 - 8.75 S&P-500 1139.83 - 10.70 1150.53 - 23.03 1233.42 - 31.32 - 11.68 W5000 10475.30 - 84.07 10559.37 -223.31 11331.73 -282.18 -126.30 RUT 443.27 + 1.47 441.80 - 10.36 473.65 - 7.84 - .82 TRAN 2645.34 + 13.97 2631.37 - 71.64 2942.17 - 75.12 - 14.88 VIX 34.91 - .38 35.29 + 2.66 29.35 + 2.89 + .52 Put/Call .52 1.08 .83 .80 ****************************************************************** Lions and Tigers and Bears...Oh My! Somebody please show us that yellow brick road! By Jim Brown The markets on Friday had trouble picking a direction but after trading on both sides of the line the major indexes finished the day with decent gains. The S&P and the Dow both finished near the highs of the day. The bulls were encouraged but the bears were not convinced. Volume was decent and advances beat declines by a 2:1 margin on both the Nasdaq and the NYSE. A collective sigh of relief was heard by all at the closing bell. Volatility collapsed with the VIX falling back under 35 and Abbey Cohen was pounding the table again about the techs being undervalued. What else could we ask for? That was obviously a trick question. We could ask for more volume, a stronger Nasdaq, cancellation of the coming earnings warning season and a BMW in every garage. About the only one of those items we are guaranteed to get is the stronger volume. The question of course is whether it will be up volume or down volume. Next week is the start of the three week earnings warning period where those companies who have not confessed for this quarter will do the dirty deed. You may be thinking that there are none left that have not warned but in reality there are quite a few. We will get to suffer through the anxiety of waiting and guessing. Will they or won't they and will the market care? IBM for instance has not yet warned and after holding $88 all week turned in a big gain, +4.58, on Friday. The reason for the bounce was the announcement of some new server hardware. With analysts dueling over the possibility of an IBM warning I was surprised by the reaction to the news. One of the other factors that will impact next weeks trading is the end of the quarter window dressing by mutual funds. The million dollar question is what stocks will they want to add to their portfolios and which ones will they drop to appear more attractive to their clients. Do they want tech names like CSCO, INTC, ORCL, HWP and IBM or blue chip names like MRK, GE, MMM and WMT. Are financials like JPM, C, BAC to be avoided like the plague because of the worry over recession loan worries? Obviously if we had the answer to these questions we could profit handsomely over the next week. Financials were strong on Friday after a 10 day drop. This could simply be an oversold bounce or it could be the start of fund buying with the expectations of continued Fed rate cuts. If the recession fears continue, the lure of cheaper interest rates will not be able to overpower the worry about loan losses. Still with financial equity prices dropping back to levels of 6-12 months ago they are a compelling value to funds with billions of dollars to spend. In any real market rally the financial stocks are expected to lead and institutional traders will be looking at this sector for rally confirmation. Another small indication that we could see some buying next week was the bond market on Friday. Investors sold bonds to raise cash. Billions of dollars had been parked in bonds during the tech crash over the last few months. Some of this money started flowing backwards on Friday. Defensive stocks like Philip Morris and drug stocks like PFE and MRK have also been selling off as institutions raised cash to put back into the tech sector if the rally proves to have legs. Some funds were forced to sell winners to raise cash because recent redemptions had put a drain on their available funds. The Nasdaq has performed admirably for the last three days considering the Dow's action. Since the end of the Fed meeting on Tuesday to Thursday's low the Dow fell almost -900 points. This is a huge drop even in modern day terms. The close Friday was +402 points off the Thursday low. The Nasdaq in this same period is only -40 points below Tuesday's high. This was the first positive week for the Nasdaq in the last seven weeks and the Dow was dying. This is a good sign. A reader emailed me to note the extreme volume on the QQQ. Over 95 million shares traded on Friday which was about twice the average volume from early February. However there have been five days with over 100 million in the last month and Thursday traded over 129 million shares. The most important fact in this scenario to me was that the QQQ closed unchanged. A dead heat between the shorts and the longs. I would have preferred to see some upside pressure but it failed to appear. Don't get me wrong, compared to the last seven weeks I will take a stand off every time. The Dow Diamonds had their highest volume day ever on Thursday with more than double their average volume. Several analysts are now calling Thursday the capitulation day everyone wanted while others are holding their breath hoping there is not a bigger pothole in our future. Some of the selling pressure Friday was prompted by margin calls from Thursday's drop. The 570 new lows on the Nasdaq finally pushed many investors to the breaking point which is the sign of a near bottom. Many of those investors were either forced to close tech positions of did so out of disgust only to see those same stocks rise on Friday. Hope is also riding on the sector that is seen as a leading indicator for economic cycles. The semiconductor sector continued to post gains even after Motorola said they were going to cut jobs again. Rambus was by far the biggest gainer with a +63% rise from last Fridays close under $16. Not everything was rosy however with AMCC, PMCS and BRCM giving back their gains from the short covering on Thursday. Part of the semiconductor rebound was based on the Micron Electronics claim that PC component inventory problems were over and orders were starting to return. This claim is being met with skepticism by some. Part of the news released on Friday revealed that the PC business that Micron claimed was bottoming is now being sold for an undisclosed amount. The company is essentially discontinuing operations and chose to provide no data about the sale. The businesses they are selling had sales of about $300 million and lost about -$159 million. They also announced they were merging with Interland Inc, a web hosting company. The combined company will be called Interland and be based in Atlanta. Nothing was said about what would happen to the 2,700 employees in Idaho. So where is that yellow brick road? Let's review the facts. Investors sold bonds on Friday. Why? To raise cash for stocks? The Nasdaq has performed very well over the last three days in spite of the Dow. Market internals were good on Friday with a 2:1 ratio in favor of advancers. Dead cat bounce? Maybe. Next week is the last week of the quarter and funds are faced with a tougher than normal window dressing event. Tougher because there are no leaders to throw money into. CSCO & SUNW, still weak. IP, AA, DD still weak. CIEN, JDSU, EMLX still weak. XOM, TX, CHV still weak. What is a fund to do? Where is the least risk for the three week earnings warning period that begins on Monday? Techs and financials are so beaten up that the downside risk is minimal. This is where I would expect buying. Still there is no conviction in the markets. High volume on the buy side should be causing an increase in prices. However, as I mentioned before there was 94 million QQQ shares traded and they closed unchanged. There are still sellers in this market. The sellers may be decreasing however and this basing period is actually the start of a decent bottom. The commercial S&P traders are quietly closing their short positions that had been at historically high levels. For two weeks now those positions have been shrinking. This could be a sign that the bottom on the S&P has been reached. Bear in mind however that just because the commercial traders are taking a profit does not mean they have called a bottom. They have no crystal ball that picks turning points exactly. They do however tend to make these decisions in the general area of a market turning point. Considering the huge paper profits they have booked over the last six months, wouldn't you want to convert that to cash as well? If the market is close to a bottom they need that cash to go long. I had several emails claiming I was too bearish last week. If I gave that impression I am sorry. I also get emails from readers that thank me for suggesting they stay out after the market drops for several days later. There is no way I can please everyone and it is not my job to predict market direction. It is my job to try and paint the picture to the best of my ability and let the reader make his own investment decisions. We see analysts on CNBC/CNN every day that are wrong and have been wrong for years. We see others that phrase their comments in so much double speak that you are never sure exactly what they said. We see others that change directions weekly. I don't want you to look back on my market wrap the next day and say "Wow, Jim really hit it" or "Jim really blew it." I want you to make your investment decisions based on the facts as we know them, good or bad, positive or negative. I have been saying "don't open long term call positions" on the Nasdaq for the last 700 hundred points. Trading bounces yes but not buy and hold positions. I have people sending me emails for the last six weeks telling me to wake up and saying they were buying every dip and were fully invested for the rally that was starting any day. I wonder if they are still investors? Every day is a new day in the markets. That is why they show the change for the day on the Nasdaq/Dow and not the change for the week or month. Imagine turning on the news on Monday morning and seeing the Dow at -987 at the open instead of zero. (That is the change for the month of March) It would definitely change the way you looked at the markets. My closing point here is we need to trade the ACTUAL trend next week, not the trend we want to see. There may be a difference. Dick Arms, Market Technician Award winner and market analyst for 35 years, (ArmsInsider.com) says the TRIN indicator hit numbers last week that have only been hit SIX times in the 32 years he has been tracking this data. Each time was a huge buying opportunity followed by a strong rally. Ralph Bloch has used the same indicator twice in the last two weeks to forecast a market bottom on CNBC. Abbey Joseph Cohen was on CNBC yet again on Friday saying the market was severely oversold. She has had so much face time on CNBC in the last two weeks they need to put her on the payroll. Does market bottom calls by major market names mean Monday will be a +500 point day? Of course not. This creates our bias on market direction but does nothing to the actual market. We need to start each day just like the market averages. Flat. Zero. No bias. Then execute the trades we planned ONLY if the market is going our way. I know I am not the only person who ever planned a bullish play only to have the market go south at the open. Instead of waiting for the market to go my way I simply convinced myself that I was getting a better entry point and played anyway. Until we learn this lesson we are doomed to failure. This is why I "suggest" long call buyers not open new positions until the Nasdaq closes over resistance at 2000. The strategy is simple and requires no degree in market science to implement. A simple red light/green light, go - no go, indicator. Long over 2000, short or flat under 2000. Temporary bounces from oversold conditions have cost dip buyers billions since the January high. Using this very simple benchmark strategy to decide when to go long will save you money. Market sentiment appears to be bullish and building. Most of this is based on expectations that the Fed will make another rate cut in the next three weeks, the same three weeks that correspond with earnings warning season. There is a strong slate of economic reports over the next two weeks culminating with the non-farm payrolls on Friday April-6th. If the Fed is going to cut again the smart money is betting they will wait until the payroll numbers are known. This sets the market up for failure as well. As each day goes by without a cut and the more earnings warnings we are forced to endure then the greater the chance of another market event. The last three years produced a severe market drop in mid-April corresponding with the actual earnings releases. Institutional investors with long term memories will remember these drops. This memory coupled with the hundreds of expected warnings could keep the lid on any rally. Pick your plays with optimism but execute them ONLY if the market agrees! Trade smart, enter passively, exit aggressively! Jim Brown Editor ************************************ TOPICS and SPEAKERS 3rd Annual Trading Expo April 5th-9th, Denver Colorado ************************************ OptionInvestor is proud to announce our third annual Spring option workshop in Denver Colorado. This power packed five-day event is structured to fully educate you on advanced option strategies and will make you a better and more profitable trader. ------------------------------------------------------------------ Jeff Bailey, Editor, PremierBriefing.com Learn the basics of Point and Figure Charting while analyzing how supply and demand on an institutional level affects the markets and the stocks you want to trade. Mark Skousen, Ph.D., Editor, FORECASTS & STRATEGIES The Global Economy and its Impact on Us. Learn from a professional economist who turns his understanding of economics into highly valuable investing advice. Harry Browne, Author of Fail-Safe Investing Sixteen Golden Rules of Failsafe Investing. A powerful session that translates the essence of the book into guiding principles. Jim Brown, Founder, OptionInvestor.com Austin Passamonte, Editor, IndexSkybox.com Jeff Bailey, Editor, PremierBriefing.com Preparing for Battle. This is a very popular session where multiple speakers team together offering insights on: planning your trades and the combination of research, market factors, and choosing your hot list. Tom DeMark, Author of three books on DayTrading Options Day Trading Options. An extremely popular subject taught by one of the world's foremost authorities on chart analysis. Tom wrote the book on day trading options, literally. Steve Nison, Author, Japanese Candlestick Charting Techniques Candlestick Charting. Is that a doji or an evening star formation? How can this benefit your trading success? Candlestick chart analysis is another hot topic that traders are always eager to learn. Nison is internationally recognized as the "Father of Candlesticks" and has written two books on the subject. Austin Passamonte, Editor, IndexSkybox.com Buzz Lynn, Contributing Editor, IndexSkybox.com Beating the Market with Indexes. This is another tag team event where you'll hear from two of our staff from IndexSkybox.com as they discuss topics like: Don't Pick Stocks, Pick Markets; and Market Timing Equals Sector Profits. Rance Masheck, President, SpreadTrader.com Calendar Spreads & Bull Call Spreads. Some of the first strategies a beginner will encounter in spread trading are these two spreads. Both simple and effective they continue to draw experienced traders over and over again. Mark Skousen, Ph.D., Editor, FORECASTS & STRATEGIES Scrooge Investing - The Best Bargains in Beaten Down Stocks for 2001. This is a great topic and Mark's background as an economist really offers some new insight into the challenge of choosing your investments. Jeff Bailey, Editor, PremierBriefing.com Calculating the Bullish Percent. Applying your new knowledge in Point and Figure charting to decipher how many stocks in a sector are showing buy signals. Jim Brown, Founder, OptionInvestor.com Austin Passamonte, Editor, IndexSkybox.com Pre-Market Analysis. A very popular session where multiple speakers team together offering insights on: Pulling the Trigger, Amateur Hour, and Market Hype. Dick Arms, Inventor of the Arms Index, Founder, ArmsInsider.com Increase your profit potential with Equivolume Charting, volume adjusted moving averages and the TRIN Derek Baltimore, Co-Editor, IntradayTrader.com Risk Management in a declining Market Buzz Lynn, Contributing Editor, IndexSkybox.com Sector Trading with IShares. You may know of DIAMONDS for the Dow Jones, SPDRs for the S&P 500, and the QQQs for the NASDAQ but there is a growing list of IShares and HOLDRS that offer great trading potential. Jon Najarian, Founder, Mercury Trading, Floor-Trader CBOE Successful Option Trading. "Doctor J" is the name and options is the game. Jon has twenty years of experience as a professional option trader. His firm makes markets in over 90 high-tech and biotech stocks and trades up to 40,000 options per day. Matt Russ, Editor, OptionInvestor.com How to Profit from Option Pricing, Market Making and Volatility Rance Masheck, President, SpreadTrader.com Straddles. An excellent strategy for today's markets. Traders should be very familiar with the proper execution of a straddle to benefit from expected volatility. Jeff Wright, Preferred Trade Understanding Option Basics and the roll of an options floor trader. Buzz Lynn, Contributing Editor, IndexSkybox.com Slump Busting. Are you on a losing streak? Learn what you need to do to BUST out and break the pattern. Jim Brown, Founder, OptionInvestor.com Big Cap Strategies, Naked Puts, Zero Risk Trading, Making Dollars not Dimes. Jim Crimmins, President, TraderAccounting.com Tax Strategies for the Active Trader. It's that time of year again and Uncle Sam wants a cut of your trading profits. Let Jim offer some advice on how traders should handle such taxing issues. Molly Evans, Writer/Trader, IndexSkybox & OptionInvestor.com The Organized Trader. Rance Masheck, President, SpreadTrader.com Five Point Star Trader System. Learn what you need to know about a stock before making a decision to trade. Austin Passamonte, Editor, IndexSkybox.com Swing Trading & Day Trading Index Options. Many consider Index option trading to be the pinnacle of equity options. Learn more about the do's and don'ts for Index Option trading. Eric Utley, OptionInvestor.com & IntradayTrader.com Psychology of trading and the Importance of the top down approach to trading. Buzz Lynn, Contributing Editor, IndexSkybox.com Trading with Qcharts. Learn how to properly set up, use, and deploy the best features and techniques. Derek Baltimore, Co-Editor, IntradayTrader.com Exit Strategies, knowing when to quit Tim Taylor - Preferred Trade Using Direct Access Trading Platforms Each topic will be covered in 1-2 hr general sessions taught by one or more OptionInvestor staff and presented on three giant screens. In the evening we will offer five of our popular chalk talk sessions for that personal question and answer interaction. Unlike other seminars with only two or three instructors, you will get in-depth knowledge from many different instructors who are experts in their field. The cost for the four-day workshop, April 6th to 9th is only $2995 (spouse only $1495). This includes breakfast, lunch and supper each day. All course materials, a CD of all the presentations and a professional video package of the entire seminar so you can review the material at home in the comfort of your living room. There is also a $500 discount if you have attended a prior OIN seminar. This is not a prepackaged presentation that gets repeated over and over with stale information. This is a one-time production and everything is fresh, live and as current as we can make it. The videos will have your real time questions and answers and not some from a prior class. Where else can you get intensive yet personalized options education like this? Do not delay as seating is very limited. We guarantee you will not be disappointed! You can pay for your education one bad trade at a time or you can invest less money one time to learn how to do it right. Click here for more info: https://secure.sungrp.com/workshop/april01/index.asp *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1901 ************************************************************ ************** EDITOR'S PLAYS ************** A Reader Writes Dear Mr. Brown, I have been following your approach to trading utilizing selling naked puts for 2 years now. I have been doing the same with a difference. I only sell puts on "quality" stocks. for example my basket of entities against which I sell puts includes EMC, ORCL, GE, CSCO... I know that they are not as volatile as many that you trade against but I feel more secure with them- they will not go to zero! Also, if they get put to me I simply sell calls against them. I have considered using some more volatile entities but may buy a put further down for protection (a bull put spread). How do you feel about that? Would you simply put your stop loss on instead? Please compare the strategies. Please tell me about some of your draw downs and losses! I am a grown man and a physician, its not good to see you as superman! Please prove to me that you are human. if you have had "bad days"... as I am sure you have, what have you learned, how will you do it differently in the future? Thank you Marc *********** Marc, I am sorry to say I am not a superman, just a trader trying to use the knowledge I have found over the years to gain an edge over the markets. I lose constantly, but when I win I tend to win in bigger numbers. The naked put writing strategy only works consistently in bull markets and we have not had one of those in some time. I have lost a ton buying the dips and getting stopped out over the last couple of months. DO as I SAY not as I DO. I am a dip buyer and dip buyers lately have been killed. Just last month I took significant hits on MUSE, CIEN, JNPR and SUNW to name a few. I have turned on my computer many times to unpleasant surprises. The worst of which was a naked put position on MSTR when they announced their accounting problems. The stock was cut in half at the open, from $220 to $110 and then to a low of $62 before bouncing over the next couple days. I was down almost $300K in that position at the worst point. Fortunately it bounced and I was able to manage it to only a $15K loss but the memory is burned into my brain forever. It is not necessary to have large draw downs to learn important lessons but those events tend to stay with you much longer. Using stop losses works well in regular markets that are not gapping down a hundred points at least once a week. That tends to trigger your stop losses and leave you with a loss while the stock rebounds. I strongly suggest protecting yourself with a long put on the down side. I teach this in my seminars. That way a gap down does not kill you and you are not as likely to close the position for a loss. Typically about $5 out of the money costs $5-$7 dollars but a $10 gap down will increase the value the same amount as the put you are short. The only problem with this strategy (and in my mind it is not really a problem is the premium spent). If it costs you $6 then your short position has to decrease by $6 just to break even. If you are familiar with the deep in the money stuff I write then $6 is not a problem if there is a $20 move. Lately there just has not been a $20 move... You are thinking correctly in analyzing this strategy and appear to be on the right track. However your approach to simply accept the put and write covered calls to recover your investment scares me more than writing the puts without a stop loss. Getting put Lucent at $60 for instance and having it fall to $12 would take years to recover your capital and you would undoubtedly be called out in the process. Use stop losses or cover your risk with a long put instead! Once the bull market returns this is the best strategy in my opinion. Jim ****************** Here is a sample play for Monday that would use the strategy mentioned above. Nvidia has been rising from the early March lows and looks like a strong performer in a weak market. By writing a June $90 naked put you can capture any gain between today's price and $90 over the next three months. Normally I would not go out this far on the naked put but this was the closest month with a strike over $75. The risk is you may be put the stock at $90 at any time between now and June. As long as the stock price is over today's price you would just sell the stock for a profit. Being put is not always a bad thing. I have been put stock that was $20 over where I wrote the put and I just sold it and pocketed the profit. The only problem you face is if the stock falls under the price at where you wrote the put. In this case $66.88. If the stock price falls your short put will increase in price dollar for dollar with the stock drop. Setting a stop loss will prevent a major loss but will not prevent against a serious gap down opening. Your stop could be at $65 in this case but a gap down to $55 at the open would trigger your stop loss for a $12 loss instead of a $2 loss as expected. To protect against this problem you can buy the April $65 put at $5.63 and a $10 gap down to $55 would increase the value of the long put to something in the $13 range and you maximum loss would only be a couple of dollars. When the April put expires you can make a decision to replace it with a May put or go naked depending on the price of the stock. If NVDA was at $80 for instance, you could either set a stop loss at some safe number between $75-65 or buy the May $65 put which, being -$15 out of the money, would probably only cost $1-$2. The ideal situation would be a close over $90 by NVDA in June which would give you a $26.50 profit from the put you sold minus the $5.63 premium you spent on the long put and any future long put. Margin required for this strategy is normally about 20%-25% of the stock price. Preferred Trade requires $1350 per contract. I will gladly allocate $1350 in margin to possibly make $2000 in profit! ************* I would be happy to answer any questions you may have on this strategy. Good Luck. Jim Brown *************************ADVERTISEMENT********************* Mark Leibovit, the #1 market timer in the nation. Mark is Chief Market Strategist for VRTrader.com, a Premier Investor Network website, a technical consultant and former 'Elf' on Louis Rukeyser's Wall Street Week for 7 years. His Annual Forecast Model has been subscribed to by Wall Street's most elite. Mark is presently ranked #1 timer in the nation by TIMER DIGEST and #2 on AmericasBestTimers.com. For information on his extremely accurate Annual Forecast Model for your own viewing, click here: http://www.sungrp.com/tracking.asp?campaignid=1893 ************************************************************ **************** MARKET SENTIMENT **************** Fleeting Or Lasting Relief? By Austin Passamonte Thursday's +300 point recovery from session lows in the Dow had bulls licking their hooves for Friday's strong follow through. Pre-market futures were predicting a considerable pop at the open and CNBC celebrity voices & spirits were up several octaves. We honestly expected to witness a wild explosion to the upside, but expectations are seldom met in the markets. It was a struggle all the way for more than five hours before a late-session rally managed to persevere. Market bulls may chalk this up as a fine victory considering where the Dow came from one session ago. Actually, market bulls really don't care what the Dow manages to do; all eyes remain fixated on the COMPX. That's where money was made before and by gosh will most assuredly be done so again. Won't it? Jury's out on that one, the Nasdaq indexes could easily be close to their ultimate lows. Which would be nice, considering they went from inflated bubbles to pancake-flat tires in less than one year's time. How's The Dow? Questionable. Even though every technical study known to man now reads grossly oversold, most insiders remain skeptical. These readings have been screaming for reversal the past few weeks and -1,800 Dow index points along the way. Market moves of historical proportion skew overbought/oversold readings to historical levels. Trying to trade them based on lesser extremes can be an exercise in frustration and futility. The best market barometer when all else fails in our opinion remains the CME commercial traders and what they perceive to be probable odds. Those in the DJIA arena got really short heading into Wednesday's open and for good reason, considering how the next two sessions fared. Nice move on their part! The big arena over in the S&P 500 commodities pit continues to see net reductions on the historical net-short position there. This is a key long-term indicator, so let's figure out what that move means. Keep in mind the scale-in, scale-out process these pension funds, hedge funds and institutions use. They sell short while markets are near a relative top and buy long while markets are near a general bottom. What they do at the time does not mean a pinnacle extreme is reached. The massive number of contracts they trade necessitate accumulation and distribution over wide zones. Now that they seem to be finishing up their distribution phase, it tells us broad markets are believed to be in the latter zone of a long-term bottom. It does not mean we have reached the apex yet! That point in time will likely arrive when the total open interest position goes from net short to flat or slightly net long. Then and only then will we know that the long-term bottom measured by historical standards is likely to be in place. That may also be the exact moment in time when everything has crashed, no upside hope lies in sight and it seems no one will ever buy any stocks again. That's how it worked in October's 1987, 1988, 1997 and 1998 when this study called the pin-point bottom each of those times before. When all hope was lost, the big boys switched to accumulation and bought their way up to the next market top, when the endless cycle repeated once again. Market Sentiment believes we are near such a point but does not expect the customary "V-bottom" all market bulls are inwardly or outwardly hoping for. We saw that type of action in year 2000 when numerous dip-buyers & momentum players swooped in when markets looked cheap. A vast majority of these bias bulls have since retired from our profession, much of which explains these weaker recoveries witnessed each successive new market low. Our opinion? A sustained rally is possible but must shore up some weakness from here. A strong close on Monday near session highs would be key. Second to that is a pullback to support on hourly charts above the 20-period moving average and close above there. A "doji" stalemate close near Monday's open or break below these 20- period moving average values on hourly charts would be weak and may signal a revisit to recent lows or beyond. Could be a rally, should be a rally... is it a rally? The next two sessions will surely tell, but we remain skeptical. Still we keep a bearish bias until strength proves itself to us otherwise. We're waiting. Trade the daily trend with care! P.S. - Is There Still Room? A number of readers have asked us if there is still room to attend the OI Spring Seminar Expo, is it worth the time & price, etc. The answer to all is a resounding "Yes!" First of all, there is no other seminar anywhere in the world like this one. We attended last year's in March and went in there as an experienced & successful trader already. In all honesty we even had a bit of cockiness about how much we knew versus information there. We humbly admit that false pride got slapped silly from the first day forward as we took prodigious notes and learned things never dreamed existed. That applies to trading in general. Yes it is option specific but the general trading methods & inside tips apply equally to stocks and futures as well. Plenty of attendees do not trade options at all; they are strictly stocks or e-mini futures traders who know advanced info when they see it. Will it contain more information than you can possibly handle? Count on it! Like drinking from a firehose, much of it will flow right past but it's the vital, priceless methods, tidbits and "little things" that matter. Without question, every attendee there will advance their learning curve light years from where it is and we speakers expect it to do the very same for us! ******** VIX Friday 03/23 close: 34.91 VXN Friday 03/23 close: 70.71 30-yr Bonds Friday 03/23 close: 5.31% 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. A reading above 10.00 is considered viable resistance or support respectively within that general strike price range. Friday (03/23/2001) (Open Interest) Calls Puts Ratio S&P 100 Index (OEX) Resistance: 620 - 605 7,207 3,014 2.39 600 - 585 10,137 6,008 1.69 OEX close: 580.71 Support: 575 - 560 2,153 8,288 3.85 555 - 540 781 8,382 10.73 Maximum calls: 600/ 4,692 Maximum puts : 520/ 8,262 Moving Averages 10 DMA 589 20 DMA 616 50 DMA 663 200 DMA 736 NASDAQ 100 Index (NDX/QQQ) Resistance: 52 - 50 105,795 14,410 7.34 49 - 47 149,086 40,024 3.72 46 - 44 184,900 50,852 3.64 QQQ(NDX)close: 42.80 Support: 41 - 39 117,972 106,673 .90 38 - 36 4,060 62,620 15.42 35 - 33 7,164 38,120 5.32 Maximum calls: 45/115,886 Maximum puts : 43/76,273 Moving Averages 10 DMA 42 20 DMA 45 50 DMA 54 200 DMA 76 S&P 500 (SPX) Resistance: 1200 13,108 14,982 0.87 1175 5,461 7,115 0.77 1150 13,953 17,008 0.82 SPX close: 1139.85 Support: 1125 1,263 7,632 6.04 1100 2,047 18,299 8.94 1075 207 20,789 100.43 Maximum calls: 1275/19,161 Maximum puts : 1075/20,789 Moving Averages 10 DMA 1156 20 DMA 1202 50 DMA 1279 200 DMA 1385 ***** CBOT Commitment Of Traders Report: Friday 03/20 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 S&P 500 (Current) (Previous) (Current) (Previous) Open Interest Net Value +70479 +78245 -69490 -94842 Total Open Interest % (+38.13%) (+29.35%) (-9.63%) (-11.74%) net-long net-long net-short net-short DJIA futures Open Interest Net Value -2516 -1981 -2696 -1491 Total Open interest % (-19.73%) (-15.88%) (-11.17%) (-4.35%) net-short net-short net-short net-short NASDAQ 100 Open Interest Net Value +3555 -8928 Total Open Interest % (+21.46%) (-12.57%) net-long net-short What COT Data Tells Us ********************** Indices: For the second week in a row the Commercials have reduced their net-short positions on the S&P 500. In addition, Commercials have added substantially to their net-short positions on the DJIA. Currencies: Commercial traders continue to build net-long positions in the Japanese Yen Metals: Commercials in the silver market are near a five-year net long extreme. 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 03/20 by the CFTC. ************** MARKET POSTURE ************** Please visit this link for Market Posture: http://www.OptionInvestor.com/marketposture/032501_1.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1914 ************************************************************** *************** ASK THE ANALYST *************** Uncanny By Eric Utley The Dow Jones Industrial Average and Nasdaq Composite reversed roles last week in the wake of the Fed's decision on interest rates. In short, the Dow is feeling parabolic pain. I appreciate the fact that the Dow Jones Industrial Average is a price weighted index, as opposed to market weighted such as the S&P 500 and Nasdaq Composite. Nevertheless, I'd like to make a few observations concerning the Dow in an attempt to position my readers for profits. The Dow's zenith traced on September 9th, 2000 lay at the 11,401 level. The subsequent sell-off in the Dow, which ended on October 18th, carried the index down to 9656. The difference between the high and low of this move (11,401 - 9656) was 1745 and its duration was roughly five weeks. The Dow's most recent parabolic move lower began with a relative high at 10,859 on March 8th, 2001. Its low, last Thursday, was traced at 9106. The difference from relative high to low (10859 - 9106) was 1753 and its duration was about two weeks. In a word: uncanny. I don't know if this "coincidence" carries any credence. But, the Dow did rally nearly 1000 points following its parabolic move lower last fall, so I think that this "coincidence" is worth writing about. The only difference, obviously, is that the Dow's most recent parabolic move lower was accelerated. I want to say that I'm bullish on the Dow and its components such as Citigroup (NYSE:C) and Phillip Morris (NYSE:MO), as predicated by this "coincidence" in parabolic moves lower. But, I'm neither unequivocally bullish nor bearish, although I'm leaning on the former. Rather, my aim is to set forth a few levels to monitor for either going long the Dow (its components) or shorting it (them). If the Dow repeats history, and moves higher in similar fashion to its parabolic move lower last fall, it could work its way up to the 10,100 level (9106 relative low + 1000 points)... obviously this is a very rough bullish price objective! However, there are two levels that lay in front of 10,000 for the Dow, which could provide traders with excellent shorting opportunities. By excellent, I mean good risk-to-reward characteristics. First, watch for the Dow to fail around the 9656 level - the relative low from last October. If that level is hurdled, watch for the Dow to fail around the 38 percent retracement at roughly 9775. A rollover at either of the two aforementioned levels might create an excellent opportunity to profit from the short side. As for the Dow at current levels, I'm leaning to the bullish side for a trade. But I could be proven wrong early Monday morning. Although my thesis concerning the Dow and its moves lower by roughly 1750 points may sound odd, I think it's worth considering in the short term. Send your stock requests to Contact Support. Please put the symbol of your requests in the subject line of the e-mail. ---------------------------- Enron - ENE As many of my readers well know, there are mutual funds that have suffered drastic losses last year and again this year. And even though investors in those funds actually lost capital, they may end up having to pay taxes on distributions. I worked for a large fund family, and know that these distributions are a source of frustration among investors, especially when they coincide with capital losses. In my experience, when investors have to pay taxes on a fund they actually lost money in, they generally move their money elsewhere, hence the dreaded word among fund managers: redemptions. Unless fund managers have adequate cash on hand, they have to sell positions in order to meet redemption requirements; they have to raise cash. Finally, the redemption issue is exacerbated as the tax deadline approaches as investors sell holdings to pay the IRS. Early last week, I could see that redemptions were beginning in a big way as measured by price action in the Dow Jones Industrial Average and several widely held stocks. So I made a list of widely held stocks among certain fund families, which I felt could be targets of cash raising tactics (read: selling). I came up with a list of about a dozen stocks and zeroed in on shares of Enron (NYSE:ENE), which are widely held among some of the largest mutual funds. In fact, there's a certain fund here in Denver that holds nearly $1 billion worth of Enron - a fund, by the way, which hasn't done too well this year. Following the Fed's cut by 50 basis points Tuesday, I figured that the fund managers who were hoping for a rally would finally concede and begin selling stocks to raise cash to meet redemptions. After witnessing the disappointment following the Fed Tuesday, I was ready to buy puts on Enron Wednesday morning. I bought puts as soon as the stock broke from its early morning consolidation and held them to the close of trading as the Dow plummeted. I closed my position at the close of trading Wednesday. My thinking worked Wednesday, so I tried the same trade again Thursday. I bought the same puts on Enron right at the opening bell Thursday morning, and the stock subsequently sank very quickly. I have to admit, I don't like it when a trade goes in my direction very quickly because my emotions tend to increase. The puts I bought on Enron Thursday morning increased in value by more than 50 percent in just twenty short minutes. In all honesty, I don't like gains that quickly because it clouds my judgment and I usually end up selling too soon. Fortunately, I did close my position Thursday morning as Enron approached the $52 level. ---------------------------- Emc - EMC There have been some downgrades in the sector and especially for this stock. Simple put I LOVE THIS STOCK. I want to add for the long term since it also has great premiums for covered calls. With more and more information being created by the second, I cannot see a downplay in the storage sector. Just looks like a great buy (I even like MCDT). Your thoughts? - Shane Shane, your point about "more and more information being created by the second" is the general premise behind the bulls' argument for shares of EMC (NYSE:EMC). Despite the general slowdown in information technology spending, the insatiable demand for data storage products and services is relatively stable. In fact, late last week, Michael Ruettgers, Chairman of EMC, said his company was on track to grow sales by 35 percent this year, which is a testament to the strength in demand for data storage products. If you recall in early February, EMC lowered guidance for sales growth to a range of 25 to 35 percent for 2001. If EMC does, in fact, hit the high end of its target, as Ruettgers suggested last week, I think the stock represents a compelling buy at current levels. I think the market has discounted closer to 25 percent sales growth - the lower end of EMC's revised guidance. Assuming the U.S. economy DOES NOT slip into a protracted recession in the latter half of 2001, I think shares of EMC can be bought at current levels and sold at a higher price six to nine months in the future. However, recognize the fact that the stock will pull back from current levels. But, I think any retreat in the stock is a buying opportunity over the next two or three months. EMC is one of the few tech stocks that I'm BULLISH on right here and now. But, I CANNOT predict the future and my bullish stance on EMC is predicated on several unknowns. As such, I still think it would be prudent to employ some sort of risk management strategy in EMC. ---------------------------- Check Point Software - CHKP How about an up to date on CHKP since the 3 for 2 split. I like your column. - Thanks, Ben Thank you for the compliment, Ben. The Internet security software sector is one of the few technology spaces that has not yet exhibited weakness in light of the information technology spending slowdown. And by weakness, I mean that the leading security software firms have not yet warned of lower revenues or profits. For its part, Check Point Software (NASDAQ:CHKP) recently reaffirmed guidance, which was verified by several analyst comments. If the company does continue to meet or exceed estimates, I think the stock may form a bottom at current levels. However, I don't know if Check Point can stage a significant rebound in the coming months. I have two reasons for my cautious comments concerning Check Point. First, I think there exists a fear that the company, along with its peers, will eventually warn - after all, every other tech-related sector is mired in profit warnings. Second, despite the recent and sharp pullback in shares, Check Point still trades with great expectations as measured by its valuations - 35 times sales and 67 times earnings, on a trailing twelve month basis. With that lofty valuation, I would think a shortfall in earnings and/or sales would be detrimental to the stock, hence the fear factor. However, there are several factors in Check Point's case, and the nature of its business, which may present a bullish argument. First, the security software sector is considered a necessity for obvious reasons. Second, the cost of Check Point's software is relatively cheap, and less likely to be cut out of an information technology budget. In conclusion, for the investor types among my readers, I think there exist better buying opportunities in the market away from Check Point with better risk-to-reward characteristics, at least over the next six months. ---------------------------- Lincare - LNCR The chart for this one looks a lot healthier than most. Could you look at the short, medium and long term position for Lincare. - Mark Thank you for the non-tech request, Mark. Lincare Holdings (NASDAQ:LNCR) provides oxygen and respiratory therapy services to patients at their homes. Lincare mainly serves patients who suffer from emphysema, bronchitis and asthma. I think that Lincare epitomizes a good investment away from the tech sector. The company has a very stable earnings history, its shares trade a modest valuation relative to future earnings expectations and its business is not adversely impacted by the economy. The company is expected to grow earnings by 20 percent year-over-year, its balance sheet is relatively clean and its shares may benefit from defensive posturing if, indeed, the economy takes a turn for the worse. The price action in shares of Lincare has been relatively impressive for the past six months. In my mind, the stock is consolidating its recent gains in a trading range between the $50 and $60 levels. Having said that, Mark, let me now fulfill your request. In the short-term, I would expect shares of Lincare to continue trading sideways in their range. As long as the $50 level holds (give or take $5), I think the chart looks great. The stock has been consolidating for about three months now, and I would expect similar price action for another two, maybe three months. In the medium term, for the investor types among my readers, look for a breakout above the $60 level on heavy volume as a sign new buyers are pursuing the stock. A breakout above the pivotal point at $60 would be the best risk-to-reward entry into the stock, but it's crucial that HEAVY volume accompanies the move. Lincare may need a catalyst to breakout, so pay close attention to future earnings announcements. My long-term view of Lincare is definitely a bullish one because of the shifting in demographics in the United States. It's a theme that I've written about before, but as the population of senior citizens increases in the U.S., I would think the demand for health care would also increase. ---------------------------- DISCLAIMER: This column is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The Ask the Analyst picks are not to be considered a recommendation of any stock or option but an information resource to aid the investor in making an informed decision regarding trading in options. It is possible at this or some subsequent date, the editor and staff of The Option Investor Newsletter may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable, but is not guaranteed as to its accuracy. ************* COMING EVENTS ************* For the week of March 26th, 2001 Monday ====== Existing Home Sales Feb Forecast: 5.04M Previous: 5.13M New Home Sales Feb Forecast: 912K Previous: 921K Tuesday ======= Durable Orders Feb Forecast: 0.50% Previous: -6.00% Consumer Confidence Mar Forecast: 105 Previous: 106.8 Wednesday ========= Oil & Gas Inventories 26-Mar Forecast: NA Precious: 290.3MB Thursday ======== Initial Claims 24-Mar Forecast: NA Previous: 379K GDP-Final Q4 Forecast: 1.10% Previous: 1.10% Chain Deflator-Final Q4 Forecast: 1.90% Previous: 1.90% Help-Wanted Index Feb Forecast: NA Previous: 76 Agricultural Prices Mar Forecast: NA Previous: 2.1% Online Help-Wanted Index Mar Forecast: NA Previous: 112.0 Friday ====== ECRI Wkly Leading Idx 23-Mar Forecast: NA Previous: -4.6% Personal Income Feb Forecast: 0.40% Previous: 0.60% PCE Feb Forecast: 0.30% Previous: 0.70% Chicago PMI Mar Forecast: 44.00% Previous: 43.20% Mich Sentiment-Rev. Mar Forecast: 90.5 Previous: 91.8 Week of April 2nd ================= Apr 02 Auto Sales Apr 02 Truck Sales Apr 02 Construction Spending Apr 02 NAPM Index Apr 03 Factory Orders Apr 04 NAPM Services Apr 05 Initial Claims Apr 06 Nonfarm Payrolls Apr 06 Unemployment Rate Apr 06 Hourly Earnings Apr 06 Average Workweek Apr 06 Wholesale Inventories Apr 06 Consumer Credit ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1922 ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. 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The Option Investor Newsletter Sunday 03-25-2001 Sunday 2 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/032501_2.asp ************** TRADERS CORNER ************** What Do You Do When Everything Feels High Risk? By Renee White At this point, many traders are probably trying to decide if they dare risk entering the market. I'll share some of the things I consider when making decisions during these difficult times. I started writing this article Wednesday, expecting to finish early this week. Initially, my key points cautioned readers to beware of buying the dip on the Dow, and to be alert to the European Central Bank cutting interest rates in order to stave off a global recession. I didn't expect my thoughts to come to fruition so quickly. The DOW has been in an uncomfortable pattern since early last year. Even though there was a clear rotation that occurred out of tech and into the more value oriented equities, it failed all year, to take out its high of 11,750 on January 14, 2000. The slam in March of 2000, took us down to 9731, with a lower low in mid October to 9656. We broke that level Thursday with a new lower low of 9106, followed by a quick afternoon recovery attempt to hide the damage. The good news: the NASDAQ held up well. Lower lows are never good if you are a bull. Now that the DOW has clearly expressed its ills, it seems pertinent to discuss some of the things I consider when evaluating the risk/rewards of equity decisions. Keep in mind that all traders approach the markets uniquely. Tons of information is filtered unconsciously, leading to decisions. Reading the general health of the markets, the prominent concept in my mind for both the NASDAQ and the DOW, is that a bottom isn't a real bottom, until recovery occurs followed by a re-test of the low, that stops before it gets there. I want to see sellers pushing the index down, then a clear sign that buyers came in to beat the rush causing it to bounce higher than that previous low. The first flurry of trading you see will be short covering. The follow-thru is what's important. A bounce without a follow-thru rally lasting for several days with volume behind it, in this market, would still be suspect to me. The follow-thru rally may not initially occur the very next day, but it should occur within the next several trading days and hold. Any pull back from that take-off bounce, should be light and on low volume. Having said that, both of these indices are still trending lower until they retest and prove otherwise. They must be able to take out new resistance levels on the upside. I can personally attest to how painful buying-the-dips became last year, so I caution anyone buying into the DOW recovery prematurely. If I were loaded with value stocks that have enjoyed a large run-up since last spring, I would have taken profits on the fattest ones on Thursday. A reactionary positive closing on Friday does not change my thought. Better to take profits early, than to hold too long and watch them vaporize like the techs. We are getting to some critical junctions in the market. In my article February 10th: "Who Says Real Men Don't Do Laundry", I described my concern that the DOW looked shaky, like it was soon to roll over. That is occurring and I don't think it is over. I do not expect the same destruction in non-techs as we've seen in NASDAQ because values were not as inflated. The good news is; eventually we may get to where both indices trade in unison, with realistic PE ratios and expectations of growth. Time will tell. We may actually get there this year. At this point, I think it is important to ask yourself every day, if you are wanting to "trade" or "invest". I approach these two styles differently, when making decisions. Investing decisions require more homework because the time horizon is extended. Since no one can pick an exact bottom, dollar cost averaging for investing, should prove successful over the longer term. I will probably wait till late May or June before I start. If I am looking to invest, I will be looking for great companies that have been slaughtered recently, most will be in tech land. I would choose those with the highest estimated profit and sales growth, compared to the same quarter last year. Given two companies with similar growth, I would choose the lowest PE ratio and the lowest beta (a measure of volatility) comparatively. This is not the time to take risks with high PE stocks. A particular equity may be worthy, but if high, it is still vulnerable to a steeper fall than the overall market. I would choose the best companies, with the lowest PEs I could find. Right now, I have a personal bias away from global companies, until this potential global economic crisis clears up. If I am wanting to "trade", timing takes on a different edge. As a trader, reading support and resistance levels is imperative in addition to having the freedom to watch the markets intra-day. Things change quickly. I am looking for fast movers, which typically have a high beta and high PE ratio. In this environment, these plays are very risky because quick reversals can quickly vaporize your play within minutes, leaving nothing but feathers in your pocket & a frown on your face. Still, for the agile trader who thinks quickly and reads charts, profits can be had on both sides of the market. It requires a higher level of concentration to profit and trading short-term options are even trickier. Those who remember my wild trading days from late 1999 and early 2000, need to know that I have been tamed....for now anyway. Still, with the markets jittery and whipping back and forth, I believe I am starting to see signs of clearing in the distance. It's still questionable and too early to call for sure. So we'll see. What makes me say that? Well, in my January 27th article this year, I said I would feel better if global interest rates started to come down. This week, rumblings turned to a roar, with talks of the European Central bank possibly decreasing rates as early as next week. This could prove to be the kick-start our markets need to realize it's not dead. Both the VXN and VIX indicators have been reading extremely high levels this week indicating a high bearish sentiment, with puts far outnumbering the number of calls purchased. This could be used as a contrarian indicator, although a VIX of 45 and VXN of 80 may still be seen. I've had my alert set to a VIX of 40, which was hit yesterday before the bounce. My bottom line is this: techs may get a tradable follow-thru rally starting this week. An interest rate cut by any monetary center may cause an impressive rally. I'm on the sidelines, but may enter selective short-term high-risk plays early week in anticipation of pending news. If the markets fall, I'm out. If we do rally for several days, I'll be watching for resistance levels that can't be taken out, for potential covered call and put opportunities. Just remember, techs and financials tend to lead out of recessions. The markets will begin recovering while some companies continue to warn. Periods like this test the strength of CEOs leadership abilities. Even if good news comes this week, more bad news is expected to hit the general markets in the months to come, which will keep our markets choppy and insecure even if they are trying to recover. Take profits early. Use both daily and weekly charts with common technical tools, and make sure that all look to be turning up before entering plays. Watch your VIX too and make sure it is coming down, not going up. Contact Support *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1902 ************************************************************ *********** OPTIONS 101 *********** The Trend Is Your Friend By Lynda Schuepp Trade with the trend my friend, and you will have the wind at your back instead of "in your face." Of course, you first have to define your trading time frame. If you are an intraday trader, then use a daily or 60 minute chart to determine the trend. Then, use a 15 or 30 minute chart to confirm the trend and determine your entry point. If you are a swing trader, look at a daily chart and look at the 20 and 50 period moving averages. If the 20 is above the 50 and they are both heading up, then the stock is in an uptrend. It is even better if the 200 day moving average is below the 20 and 50 day moving averages. However, it's hard to find many of these charts these days. If you are a buy and hold investor, then you probably aren't reading this article, but your time frame would be monthly, followed by daily. I know this sounds very basic, but this is options 101 and it's a concept most of us fail to follow. You will greatly improve your odds of success, if you simply follow this rule, with some additional guidelines below. UPTREND: If your stock is in an uptrend, then when do you buy or sell? That depends on your time frame again, but the concept is the same in all time frames. In an uptrend, you buy the dips. It's nice to have confirming signals, like a bounce off of support, or touching the 20 moving average, and maybe a bullish candle set up, and it's really nice if volume confirms your entry. You should sell after 3 to 5 periods of upward movement and/or after your get conflicting signals. A "period" would be a day if you are a swing-trader, or an hour or 30 minutes if you were day trading. Remember, stocks don't go up in a straight line forever. Which option strategies are best in an uptrend? The obvious is to buy calls. However, if you bought calls on Thursday when the VIX got to a high of 42, you would have been paying a large premium for the option. If your time horizon was longer term (greater than 7 days), the implied volatility will probably come back down and it is less likely that you would be profitable. When volatility, as measured by the VIX, is high, it is better to be a seller of options. In this case (an uptrending stock) you would sell puts, with the anticipation that the stock would go up and the volatility would go down, both of which would contribute to a lower option price for you to buy back the put at a profit. If you can't or won't sell naked puts then you could put on a bull put spread. A bull put spread, consists of a long put and a short put at a higher strike. That way, the extra premium you are paying for the long leg would be offset by the premium you are taking in on the short put. It is best to use at-the-money strikes for the short put, because this is where you get the most money for time value. DOWNTREND: If your stock is in a downtrend, as are most of them these days, then you need to short the rallies (short stock or buy puts). This is where most of us have been going wrong. We are used to buying the dips and the stocks always went up. Well, that strategy works in an up trend, NOT in a downtrend. After 3 to 5 periods of a rally, if your stock is in a downtrend, get ready for a signal to short. Again, confirming signals such as a doji (candle stick pattern), volume decreasing as price is increasing, failing to make a new high (failed tops) are all very good reasons to short in this scenario. The more reasons, the more likely you will be successful. You would then hold for 3 to 5 periods and/or a sign of a reversal and close your position for a profit at the first sign of strength. I particularly like failed tops. Let's look at an example of a downtrend. The first step is to determine your trading time frame. I usually swing trade and day trade, using hourly charts for day trading with a 30 min chart for entry points. We will look at trading the OEX on an intraday basis. First, we need to look at the next longer time frame to determine the overall trend. Below is the daily chart and you can clearly see that the OEX is in a downtrend. Notice the 20 and 40 period moving averages are down and heading lower and the 20 period is below the 40 period, which is our criteria for a downtrend. Next, we go to a shorter term chart. DAILY CHART OF OEX: 60 MINUTE CHART OF OEX: In the 60 minute chart above we see that the averages are down, with the 20 below the 40. So if the trend is down on the 60 minute then we will look to short the failed rallies. For entry points we look at the 15 or 30 minute charts, depending on how long you like to hold. I like to look at the 30 minute charts and make my entry and exit based on them, so that I am not whip sawed out of a trade intraday. Sometimes that means I hold over night. The exception to this if there is surprise news and the stock is going to move fast, then I will look at a shorter time-frame like a 5 or 15 minute. We have already determined that the OEX is in a downtrend on the daily and hourly so we then look at the 30 minute chart. 30 MINUTE CHART OF OEX: At #1 on the chart: We see the OEX traded sideways in a narrow range for about 7 candles or 3-1/2 hours in this timeframe. These periods of consolidation, usually lead to nice moves. After the longer red candle, another long red candle followed and closed lower than the previous low, a nice place to enter the short. You could have bought the OEX 600 put for 23 points. At #2: Here we would cover, following the rule of closing after 3 to 5 candles and/or a reversal sign. We got both--5 down candles and a large bullish reversal candle. We would have sold the put at the close of the large green candle for 33 points, a 10 point gain. At #3: Here we have another example of a failed top. We would short on the close of the second long red candle. The put would have cost 35 points. At #4: We would cover here because there were 5 down candles and also a bottoming tail. We would have sold the put for about 49 points for a 14 point gain! At #5: We have a double top, however the double top did not fail, it continued to go up. Therefore, no shorting opportunity here. At #6: We could have a failed top here. Notice the red candle after 3 green ones. Also it is at the same level as the failed top of move #3! If a red candle forms that closes below the previous candle, then I'd be ready to short (buy a put). Using this method, you can have some very profitable moves, with less risk. This past week however, is not typical. The OEX moved 50 points or about 10% in one week. The concept can be applied to less exciting weeks, but the profits will be smaller. P.S. OOPS, I messed up last week in calculating the decline % -- I reversed the numbers when I subtracted and then divided to find the % change. Unfortunately, I copied the formula throughout my spreadsheet. The conclusions however did not change and the concept remains in tact. ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* DELL - Dell Computer Corp $27.44 (+3.75 last week) See details in sector list Put Play of the Day: ******************** LLL - L-3 Communications Holdings $75.00 (-3.13 last week)) See details in sector list ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1915 ************************************************************** ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS SMTC $34.75 +3.44 (+6.35) In a surge of heavy volume, SMTC broke above $31 on Friday morning and never looked back. Strength in the Nasdaq and particularly the SOX.X helped to give call traders lucrative profits in SMTC this week. SMTC now has now poked its head above its 200 dma of $34.43, and has a decent chance of rallying further. However, at this point, we think it is prudent to protect our gains in this play, as SMTC has made a gain of over 18% this week, and may very well consolidate at the $34.75 level in the coming week. PUTS ABGX $18.56 +1.63 (-0.63) ABGX has provided us with good trading opportunities during the sell off in the broad indexes, as well as the biotech sector last week. However, ABGX rallied on Friday on nearly five times the average daily volume, as the market responded well to the news regarding a new alliance with Impath. In addition, the biotech index rallied 17% on Friday, which might be the beginning of a new trend. So, at this point we are taking our gains and moving on. FLEX $20.69 (-0.13) Just when you think you've found a weakling sector (Contract Manufacturers) to pick on, along comes its older sibling (The Semiconductors) to put you in your place. After bearish forecasts by SLR and JBL during the weak, it seemed FLEX had no choice but to head to new lows. Although that is exactly what happened on Wednesday, the recovery over the past two days was fast and furious as the Semiconductor index (SOX.X) tacked on an amazing 15%. In that sort of environment, our play had virtually no choice but to go up, and that's exactly what it did, recovering almost 23% from Wednesday's low to Friday's close. The relative strength of the stock prompts us to drop it this weekend. LH $119.00 (-5.48) The cascade of selling in shares of LH came to an abrupt end Thursday afternoon when selling on the DJIA came to an end and the "old economy" index abruptly reversed course. After 2 weeks of unbridled bearish activity, it was overdue anyways, and the continuation of the recovery on Friday took us out of our play when LH moved up through our $116 stop. While the bears could come back out to resume their orgy of selling next week at the 200-dma, we must follow our money management rules and take our leave of the play this weekend. RIMM $26.93 (+0.74) All good things must come to an end, and after sliding to new lows last week, RIMM looks to be on the mend. The impressive resilience of the NASDAQ, even while "old economy" stocks were taken behind the woodshed and severely beaten, gave RIMM investors hope, and they managed to hold the stock above the critical $23 support level last week. Their refusal to be bullied by the bears prompted us to ratchet our stop downwards to $26, and it looks like it was a good thing that we did, with RIMM rallying right through it at the end of the day on Friday. *********** DEFINITIONS *********** SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1923 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 03-25-2001 SUNDAY 3 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/032501_3.asp *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1903 ************************************************************ ************** NEW CALL PLAYS ************** ELNT - Elantec Semiconductor Inc $31.69 (+7.81 last week) Elantec Semiconductor designs, manufacturers, and markets high- performance analog integrated circuits for OEMs in the video/multimedia, optical storage, communications and power management markets. Their suite of approximately 150 products includes amplifiers, drivers, faders, transceivers and multiplexers. Elantec's global operations span North America, Asia and Europe. Leading clients include Lucent, Globespan, Sony and Hitachi, to name a few. The Philadelphia Semiconductor Index (SOX.X), a benchmark for the sector composite, base-lined in the vicinity of the 550 level while the markets reacted to the economic data of late. In addition to our own domestic affairs, the falling Euro also hindered advances. The suffering Euro negatively impacted the semiconductor-related issues, due to their extensive exposure to global concerns. ELNT, in particular, took a huge hit on February 28th after the company warned of lower 2Q revenue and earnings due to the proverbial "continued economic slowdown" and weakening PC demand; although it had already implemented cost- reduction efforts. However, the SOX's steadfast holding pattern and recent explosion through principal resistance levels (610, 640) now postulates an impending recovery across the board. The NASDAQ's return to favor in the past two sessions further played an important role in ELNT's break through the $30 resistance, at the 30-dma line. If the NASDAQ's rebound truly leads to fruition, the next objective for ELNT is to shatter the ceiling at the resistive 50-dma, near $36. In an effort to stack the odds in your favor, look for viable opportunities in a positive market environment coupled with advances in the Semiconductor Index (SOX.S). Specific entries might be found on intraday dips near our closing stop of $27, which is currently sandwiched between the 5-dma ($27.94) and the 10-dma ($26.04). Momentum oscillations taking ELNT off $30 and $31 also offer reasonable entries, but remember to expect resistance near the $36 level. Lock in gains early to avoid losing existing profits! BUY CALL APR-25 UET-DE OI=232 at $8.75 SL=6.00 BUY CALL APR-30*UET DF OI=105 at $5.75 SL=3.75 BUY CALL APR-35 UET-DG OI=120 at $3.75 SL=2.00 BUY CALL MAY-30 UET-EF OI= 37 at $7.75 SL=5.50 BUY CALL MAY-35 UET-EG OI=112 at $5.63 SL=3.50 http://www.premierinvestor.net/oi/profile.asp?ticker=ELNT NEWP - Newport Corporation $40.10 (+6.95 last week) The Newport Corporation is a global supplier of precision components and automated assembly, measurement, and test equipment for use in the fiber-optic communications, semiconductor equipment, computer peripherals, and scientific research markets. The Company's high precision products enhance productivity and capabilities of the Fortune 500 corporations, government agencies, and the other technology clients it serves. Optical components and devices for vibration and motion control account for about two-thirds of the company's sales. Strength in the Chip sector helped to lift the NASDAQ this past week and with that, shares of Semiconductor and Optical machine manufacturer NEWP. Earlier this month, the company warned of lower revenues for fiscal ', but Robertson Stephens re-iterated their Buy rating, citing attractive valuation relative to peers in the Optical sector. With Chip and Networking companies laying off workers in an attempt to cut costs, the need for automation may increase, which could benefit NEWP, who has among its client base, Nortel and JDSU. Connecting the highs and lows since late January reveals a steep downward trending regression channel, one that has held firmly until the last couple of trading sessions. Having finally broken cleanly above formidable resistance from the 5 and 10-dma (at $36.30 and $35.39), it appears that these moving averages are now acting as support. Pullbacks intra-day to these levels as well as horizontal support at $40, $38 and our closing stop price of $37, may allow higher risk players to make a play, provided that the buyers return to lift the stock higher. More conservative players may jump in if NEWP can take out Friday's intra-day high of $40.77 with conviction. From there, it could be a quick trip up to challenge resistance at $45. Correlate entries with movement in the AMEX Networking Index (NWX) and Philadelphia Semiconductor Index (SOX). BUY CALL APR-35 NZZ-DG OI= 743 at $8.50 SL=6.00 BUY CALL APR-40*NZZ-DH OI= 620 at $5.80 SL=4.00 BUY CALL APR-45 NZZ-DI OI=1566 at $3.80 SL=2.50 BUY CALL MAY-40 NZZ-EH OI= 161 at $7.50 SL=5.25 BUY CALL MAY-45 NZZ-EI OI= 31 at $5.80 SL=4.00 http://www.premierinvestor.net/oi/profile.asp?ticker=NEWP ****************** CURRENT CALL PLAYS ****************** PMI - PMI Mortgage Insurance Company $59.75 (+2.90 last week) PMI Mortgage Insurance company, with headquarter in San Francisco, is one of the largest private mortgage insurers in the United States. In addition, PMI Mortgage Insurance Company and its subsidiaries, provides private mortgage insurance in Australia, New Zealand, and the European Union as well as mortgage guarantee reinsurance in Hong Kong. PMI, along with its parent company, The PMI Group Inc, and its corporate affiliates, is a leader in risk management technology and provides various products and services for the home mortgage finance industry, as well as title insurance. Mortgage insurance companies like PMI and MTG initially fell sharply after the first Fed rate cut on worries that mortgage refinancing could reduce the amount of insurance homeowners were required to buy. However, analysts at Goldman Sachs Lehman Brothers, and Banc of America Securities have upgraded PMI, stating that its business should not be hurt by lower rates, and will probably be helped. 70% of PMI’s book was originated in the past three years, which should result in a low near term cancellation rate of their policies, according to Goldman Sachs analyst Howard Shapiro. In addition, mortgage borrowing is expected to increase by 5 to 9% for the next decade, and mortgage insurance policies should increase by as much as 10% annually for the same time period, according to the research firm Economy.com. PMI broke out above the upward channel established on March 15 on Friday morning, to hit a high of $60.94, just above it’s 200 dma of $60.76. While the momentum was not sufficient to sustain the breakout, PMI has established a weekly pattern of higher lows at $56, $57.50, and today’s low at $59.05. If the broad based rally in the indexes continues next week, PMI could possibly rally and close above $60 on strong volume, which could be an entry point for conservative traders. Alternatively, traders could take positions at current levels if accompanied by strength in the insurance sector, IUX.X. We are moving stops to $58, so close positions if PMI closes below this level. BUY CALL APR-55 PMI-DK OI= 14 at $6.00 SL=4.00 BUY CALL APR-60*PMI-DL OI=130 at $2.85 SL=1.25 BUY CALL MAY-55 PMI-EK OI= 0 at $6.90 SL=5.00 Wait for OI! BUY CALL MAY-60 PMI-EL OI= 4 at $4.10 SL=2.50 http://premierinvestor.net/oi/profile.asp?ticker=PMI DELL - Dell Computer Corp $27.44 (+3.75 last week) Dell Computer is the world's #1 direct-sale computer vendor and one of the world's top PC makers. Therefore it's understandable that the company designs, develops, manufactures, markets, services, and supports a variety of computer systems including desktops, notebooks, workstations, network servers, and storage products. Dell's clients include the government, corporations, the medical and education industries, as well as the individual consumer. Founder Michael Dell is still the CEO and maintains a 14% stake in the company. The stars returned to NASDAQ center stage! Shares of NASDAQ bellwethers and other computer-related companies lifted the technology market from the trenches. On Thursday, Dell rose 6.3% with the #1 software company (MSFT) gaining 7.9%, and the biggest semiconductor-equipment company (AMAT) rocketing a whopping 10.2% as investors surmised that perhaps the worst was over. The Goldman Sach's Computer Hardware Index (GHA.X) has since returned to a more respectable level (319); although better assurances of the sector's strength are found above 325 and 350. This week, news also bolstered DELL's fantastic high- volume breakout through $26. On Tuesday, DELL's volume topped 37 mln shares exchanging on the heels of Michael Dell's announcement that his company was "on track" for the 1Q. While other competitors like Compaq Computer (CPQ) and Gateway (GTW) are issuing profit warnings and dismal forecasts, Michael Dell soothed investors concerns at the Las Vegas Show. Going forward, a $16 bln four-year supply pact with Korea's Samsung further fueled the momentum. On Thursday, DELL experienced a crucial turning point in trading. Shares of DELL traded on volume of 59.8 mln, or 1.8 times the ADV as it broke out of its shackles and moved to the upside of the $26 with conviction. Continued action above $26 and $27 portends relative strength, but recall there's heavy resistance near $30 and $32, at the 200-DMA ($31.57). An advancing NASDAQ combined with sector strength signals traders to jump into this play. Traders with a higher-risk portfolio might target shoot for lower entries off the relative support near $24 and $25; whilst more conservative types should instead consider buying into momentum waves as DELL moves through the immediate resistance at $28. If we don't see bullish action over the near-term and DELL CLOSES below our revised stop of $26, we'll exit the play in despite of all else. BUY CALL APR-20 DLY-DD OI= 3077 at $7.75 SL=5.50 BUY CALL APR-25*DLQ-DE OI=44817 at $3.50 SL=1.75 BUY CALL APR-30 DLQ-DF OI=10767 at $0.81 SL=0.00 BUY CALL MAY-20 DLY-ED OI= 4695 at $8.20 SL=5.75 BUY CALL MAY-25 DLQ-EE OI=15793 at $4.25 SL=2.50 BUY CALL MAY-30 DLQ-EF OI=23186 at $1.75 SL=0.75 http://www.premierinvestor.net/oi/profile.asp?ticker=DELL ADBE - Adobe Systems $35.69 (+7.06 last week) A long-time leader in desktop publishing software, ADBE provides graphic design, publishing, and imaging software for Web and print production. Offering a line of application software products for creating, distributing, and managing information of all types, the company generates nearly 75% of sales through publishing software products such as Photoshop, Illustrator, and PageMaker. Its Acrobat Reader, which uses portable document format (PDF) is popping up all over the Internet, as businesses shift from print to digital communications. In addition, ADBE licenses its industry standard technologies. When one thinks of leaders in the Software sector, companies such as Microsoft and Oracle come to mind, because of their industry-standard applications and market-share leading sales figures. And so it goes with Adobe Systems. As the bellwether of the desktop publishing software industry, its suite of programs such as Illustrator, In-Design, Photoshop are considered standard issue in the field of graphic design, not to mention their vast font library and typeset management utilities. What's more, the company has been aggressively leveraging its installed customer base from the world of print to the Internet, with web design applications such as GoLive. And now, with the introduction of Apple's next generation operating system, ABDE has licensed out their graphics rendering engine, the heart of their Portable Document Format (PDF) that is used in their Acrobat application. ADBE's stock has displayed tremendous strength this past week, spurred on by a recent earnings report, which relative to current economic conditions was considered a blowout. While analysts remain cautious due to lack of earnings visibility going forward, the stock has moved up on good volume. With the 5-dma has acting as support throughout this past week, a bounce off this moving average (now sitting at $33.76) as well as horizontal support at $35 and our closing stop price of $34, may provide aggressive traders with potential entry points, but confirm with volume. A bullish surge through $36 may set ADBE up for a challenge of major moving average resistance from its 50-dma, now at $39.14. Keep an eye on competitors CORL and MACR to measure sector sentiment. BUY CALL APR-30 AEQ-DF OI=4509 at $7.13 SL=5.00 BUY CALL APR-35*AEQ-DG OI=4638 at $3.88 SL=2.50 BUY CALL APR-40 AEQ-DH OI=1400 at $1.88 SL=1.00 BUY CALL MAY-35 AEQ-EG OI= 216 at $5.13 SL=3.00 BUY CALL MAY-40 AEQ-EH OI= 200 at $3.13 SL=1.50 http://www.premierinvestor.net/oi/profile.asp?ticker=ADBE SEBL - Siebel Systems $30.06 (+4.44 last week) Providing sales automation and customer service software through its main product, Siebel Sales Enterprise, SEBL offers its customers the ability to access client information and decision- making support across a corporation's global computer network. The company's e-commerce applications deliver the first entirely Web-based, enterprise class family of sales, marketing and customer service applications. Among the company's heavyweight clientele are Lucent Technologies, Glaxo Wellcome, and Prudential Insurance. The reduction in capital expenditures due to a slowing economy hit the Software space especially hard, as this component of the Technology sector has under-peformed the NASDAQ so far this year. A warning from Oracle of lower than expected revenues only served to confirm the situation. However, the sharp declines of last month have settled into a period of consolidation, between support below at $25 and resistance overhead at $32. A major deal with healthcare giant Abbott Laboratories helped the stock to gain about 18 percent on Thursday and with that, it appears that the bulls may finally be regaining some control. In fact, the company has been signing up a number of high-profile customers, including AT&T Wireless and France’s Banque Transatlantique. While SEBL did experience some profit-taking on Friday, the stock did manage to stay above the psychological $30 mark. A surge back above resistance at $32 may allow the more risk averse to enter on strength. From there, SEBL could attempt to take out resistance at $35. Higher risk players looking for entries on intra-day pullbacks may find support at $30, $29 and the 5 and 10-dma at $28.61 and $27.83 respectively. We are placing a protective stop at $29. A close below this level will mean that we will drop coverage of this play. Sentiment in the Software sector may be tracked using Merrill Lynch's Software HOLDR (SWH). BUY CALL APR-25 SGQ-DE OI= 3808 at $6.63 SL=4.50 BUY CALL APR-30*SGQ-DF OI= 6591 at $3.63 SL=1.75 BUY CALL APR-35 SGQ-DG OI=18679 at $1.75 SL=1.00 BUY CALL MAY-30 SGQ-EF OI= 4837 at $5.13 SL=3.00 BUY CALL MAY-35 SGQ-EG OI= 1862 at $3.25 SL=1.75 http://www.premierinvestor.net/oi/profile.asp?ticker=SEBL ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1916 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
Option Investor Newsletter Sunday 03-25-2001 Sunday 4 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/032501_4.asp *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1904 ************************************************************ ************* NEW PUT PLAYS ************* MDT - Medtronic, Inc. $44.25 (-3.15 last week) Medtronic, Inc. is a medical technology company, providing lifelong solutions for people with chronic disease. Primary products include those for brachycardia pacing, tachyarrhythmia, management, atrial fibrillation management, heart failure management, coronary and peripheral vascular disease, heart valve replacement, minimally invasive cardiac surgery, spinal and neural surgery, and neurogenerative disorders. The company's operating business units include cardiac rhythm management, vascular, cardiac surgery, and neurological, spinal and ENT. Medtronic rallied last fall to a high of over $60 in December. However, since that point, the stock has been in a serious downward trend which is not likely to be reversed in the near future. The medical products and devices sector is a defensive sector which rallied during the sell off in technology stocks in 2000. In fact, many stocks in this sector doubled last year, and are now starting to be considered overvalued by investors. After falling below its 50 dma of $55 in January, subsequently its 200 dma of $52 in February, MDT has formed a series of lower highs, and has been unable to rally on good news. On March 20, at the American College of Cardiology meeting, MDT presented data for one of their new products, the InSync device used for cardiac resynchronization therapy for patients with congestive heart failure. The data for the trial was positive, the device was device was demonstrated to be safe, and the implant was a success in 93% of the cases. MDT has filed with the FDA for approval of the product, and they expect to have an answer sometime this summer. As far as the market's response, this seems to be a classic case of buy on the rumor and sell on the news. After failing to rally past $52, the next major lower highs were $50, and $48. MDT formed a double top at $48 last week, possibly rallying in anticipation of positive data which was expected to be released at the meeting. On Thursday, MDT made a serious fall to $43.88, and on Friday MDT was unable to rally past $44.50 during the rally in the major indexes. If this pattern continues, MDT will most likely roll over again from $44.50, which could be an entry point for aggressive put players. Alternatively, a drop below $42.50 on heavy volume would likely lead MDT to the next major support level at $40. Watch others in the sector, like BAX, and GDT, and set stops at $47. We will exit positions if MDT closes above this level. BUY PUT APR-50 MDT-PJ OI=2361 at $6.50 SL=4.50 BUY PUT APR-45*MDT-PI OI=2130 at $2.80 SL=1.50 http://www.premierinvestor.net/oi/profile.asp?ticker=MDT LLL - L-3 Communications Holdings $75.00 (-3.13 last week) As a leading supplier of sophisticated secure communication systems and specialized communication products, LLL provides critical elements of virtually all major communication, command and control, intelligence gathering and space systems. The company's high data rate communication, avionics, telemetry and instrumentation systems and components are used to connect a variety of airborne, space, ground-based and sea-based communication systems. While it has been a safe harbor in recent months, shares of LLL took a nosedive over the past 2 weeks, giving up nearly 17%, and the selling volume is on the rise. Forget about the buying seen on the major indices over the past 2 days - LLL investors just want out. Early last week, it looked like the $78 level might provide some support, but the heavy volume on Friday (triple the ADV) put an end to that notion, as the stock duplicated the trajectory of the Mir Space Station plunging back to earth. Although the daily Stochastics have entered the oversold region, the stock looks like it is ready to ride the lower Bollinger band for awhile, possibly as low as the 200-dma (currently $67). Intraday support has appeared near $74, helping to stem the selling at the end of the week, but fresh selling next week is likely to make short order of that obstacle. We may need to see a bit of a bounce, preferably on light volume, before plunging into the play. Look for the relief rally to fail near the $78 resistance level, and then nibble at new positions as the sellers return. Should the bounce turn into a bonified recovery, trading through our $80 stop will be our signal to stand aside from the play. More conservative entries should materialize as LLL falls through the $73 support level, enroute to challenging the 200-dma. BUY PUT APR-80 LLL-PP OI=155 at $7.40 SL=5.25 BUY PUT APR-75*LLL-PO OI= 58 at $4.50 SL=2.75 BUY PUT APR-70 LLL-PN OI= 33 at $2.55 SL=1.25 http://www.premierinvestor.net/oi/profile.asp?ticker=LLL VRTS - Veritas Software $53.88 (-0.75 last week) As an independent supplier of storage management software, VRTS develops and sells products that protect against data loss and file corruption, allowing rapid recovery after disk or computer system failure. The company's products provide continuous data availability in clustered computer systems with shared resources. This enables IT managers to work efficiently with large file systems, making it possible to manage data distributed on large computer network systems without harming productivity or interrupting users. VRTS provides products for most popular operating systems, including UNIX and Windows NT, as well as a full range of services to assist its customers in planning and implementing their storage management solutions. Slowing its descent after a 50% loss over the past 2 months, VRTS still looks vulnerable to another mauling by the bears. As buyers came into the broader market Thursday afternoon and continued their shopping spree on Friday, our new play couldn't attract enough buying interest to advance with broader NASDAQ. The pitched battle between the bulls and the bears has brought VRTS to a point of decision as the bearish wedge, which has been solidifying over the past 3 weeks is coming to a point. With the base of the wedge (support) sitting at $51-52, and the descending trendline now resting near the $58 resistance level, we have clearly defined entry points to work with. Those with a conservative approach will want to wait for renewed selling next week to drive the stock below $51 with the help of strong volume. Aggressive traders will focus on the descending upper trendline, and will initiate new positions as VRTS rolls over from this level. Place stops at $60, as a close above this level will represent a bullish breakout from the bearish wedge, indicating that there is more upside in store for VRTS. Watch the movement of the broader Computer Software index (GSO.X) before playing. While it has been strong the past 2 days, VRTS' relative weakness will leave it vulnerable to the bears should the index fail to continue moving higher next week. BUY PUT APR-55*VIV-PK OI=6698 at $7.00 SL=4.00 BUY PUT APR-50 VIV-PJ OI=5278 at $4.63 SL=2.75 BUY PUT APR-45 VIV-PI OI=2213 at $2.75 SL=1.50 http://www.premierinvestor.net/oi/profile.asp?ticker=VRTS ***************** CURRENT PUT PLAYS ***************** OPWV - Openwave Systems Inc. $23.55 (-2.20 last week) Openwave Systems Inc., the combination of Phone.com and Software.com, is the worldwide leader of open Internet-based communication infrastructure software and applications. Openwave's customers are communication service providers worldwide, including wireless network operators, wireline carriers, internet service providers, portals, and broadband network providers. Openwave was formed in November of 2000 following the merger of Phone.com Inc. and Software.com Inc. It seems that OPWV wasn't invited to the relief rally party which took place on Friday in the technology sector. After falling below $40 the first week in March, OPWV fell below support at $30 last week, and was only able to rally to $27.20 on Friday, before falling sharply to close at the low point of the day with a very bearish candlestick pattern. While investors seemed to start cautiously testing the waters in the technology sector last week, the established names in the semiconductor and software sectors were the recipients of most of the action. As a newly formed and non profitable company, OPWV may have an uphill battle attracting investors who have become increasingly skeptical of companies which might require additional financing. If the strong downward channel continues, OPWV should roll over from current levels to the $20 level next week, and possibly drop below its 52-week low of $19.20. Traders could take positions at current levels, particularly with weakness in the communications software sector. A more aggressive position could be taken on a failed rally past $25.50. We are keeping stops at $27, so exit positions if OPWV closes below this level. BUY PUT APR-30 UGE-PF OI=523 at $8.00 SL=5.75 BUY PUT APR-25*UGE-PE OI=846 at $4.10 SL=2.50 http://www.premierinvestor.net/oi/profile.asp?ticker=OPWV AETH - Aether Systems Inc. $16.44 (-0.13 last week) Aether Systems Inc. is a leading provider of wireless and mobile data products and services allowing real time communications and transactions across a full range of devices and networks. Using its engineering expertise, the ScoutWare family of products including the Aether Intelligent Messaging (AIM) software platform, and its network operations and customer care center, Aether seeks to provide comprehensive, technology independent wireless and mobile computing solutions. Aether develops and delivers wireless and data mobile services across a variety of industries and market segments both in the United States and internationally. The promise of the pervasiveness of wireless communications that helped shares of Aether to rise upwards has now turned into disappointment. Hitting an all-time high of $345 early last year, the stock has since crumbled under the weight of the expectations that had been priced into the stock. The slower than expected deployment of next generation wireless networks has in part contributed to AETH's decline. As well, analysts and shareholders have put firms in general under a harsher microscope, favoring companies with reasonable valuations and positive earnings. While AETH does have $875 million in cash as of its last earnings report, excessive costs have been taken on to generate what analysts have called "low quality revenues", resulting in negative earnings. On February 24th, a lockout period expired in which almost 35 percent of the company's float was available for sale. This sharp increase in supply likely continues to act as a lodestone on the stock price. Even comments from the President this week that the company was considering a share buyback program could not light a fire under the stock. At this point, a failed rally above our stop price of $17 may allow aggressive traders to take a position, but make sure the stock closes below this level. Resistance may also be found from the 5 and 10-dma at $16.73 and $17.59 respectively. A break below $16 on heavy selling may allow more cautious traders to make a play, but be aware of support at $15 and confirm direction with weakness in peers CMVT and OPWV. BUY PUT APR-17.5*HIZ-PW OI=384 at $3.25 SL=1.75 BUY PUT APR-15 HIZ-PC OI= 96 at $1.94 SL=1.00 http://www.premierinvestor.net/oi/profile.asp?ticker=AETH BMC - BMC Software, Inc. $20.59 (+1.42 last week) Founded in September 1980, BMC Software is one of the world's largest independent software vendors. They deliver the most comprehensive Service Assurance strategy for e-business systems management with the fastest guaranteed implementation. This strategy enhances availability, performance and recoverability of companies' business-critical applications. The BMC typical customer is an enterprise confronted with the task of managing billions of data entries essential to the daily activity of hundred, thousands and even millions of individuals. The company is headquartered in Houston, Texas, with offices worldwide. For the most part, it's been a quiet week of trading for BMC Software. The steep downward movement of BMC earlier this month has given way to a period of sideways trading, as volume as dried up and the stock attempts find a bottom. News of an expanded partnership with information systems firm Unisys along with a good day for Tech stocks helped BMC to move higher on Monday but since then, the stock been range-bound. On Thursday the sellers attempted to take BMC lower but finding support at $18, the stock bounced strongly and followed through on Friday with a gain of 6.13 percent. In doing so, BMC closed above its 5-dma (now at $20.32). However, the 10-dma near $20.75 continues to loom overhead, as does resistance from $22 and our closing stop price of $21. As well, the gap made in early January is still wide opened. If sector sentiment weakens, this may lead to the stock attempting to close this gap, which could mean a trip below the $16 mark. A break below $20 on volume may provide conservative traders with an entry on weakness, while failure to break through resistance, both horizontal and moving average support, could allow higher risk players to take a position. Sector sentiment can be tracked using Goldman Sachs Software Index (GSO) as well as Merrill Lynch's Software HOLDR (SWH). BUY PUT APR-22.5 BMC-PX OI=155 at $3.30 SL=1.75 BUY PUT APR-20 *BMC-PD OI=200 at $1.80 SL=1.00 http://www.premierinvestor.net/oi/profile.asp?ticker=BMC ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1917 ************************************************************** ***** LEAPS ***** Back From the Brink? By Mark Phillips Contact Support Alright, I can't restrain myself any longer. I need to make a few comments about the wild market we have seen over the past week before delving back into the massive changes we are going through here in the LEAPS section. Although it was encouraging to see some life in the markets towards the end of the week, those looking at it as the ultimate bottom are likely to be sorely disappointed in the weeks ahead. Our precious NASDAQ has been buried in bear country for months now, but things really got interesting this past week when the S&P500 and DJIA accelerated their precipitous plunge. The DJIA had been falling sharply for more than a week when the Fed stepped in with a 50 basis point interest rate cut. As though Uncle Alan had said the world was coming to an end, the selling picked up steam, slicing nearly 900 points from the index from Tuesday's high to Thursday's low. Not able to avoid the pain, the S&P500 joined the bearish party dropping as low as 1081 on Thursday before the miraculous spurt of buying appeared. The real clue that there might be some relief soon came from an unlikely source, the good old NASDAQ. Despite rampant selling and one shattered support level after another on the DJIA and S&P500, the NASDAQ seemed unwilling to go any lower. Looking below the surface, we could see new life in the Semiconductor sector, as it proceeded to tack on an impressive 15% rally in the latter half of the week. Of course, we also had our good friend, the VIX standing in the corner and screaming to be heard. After gradually climbing into the mid-30's, the market lows on Thursday were accompanied by a VIX spiking as high as 42 before the relief buying began. So, is that the bottom, you ask? Not so fast, Sparky! After spending several hours looking at charts, and peeking over Austin Passamonte's shoulder over at our sister site, Index Skybox, we see some disturbing developments (at least for the bulls), in virtually every sector with a chart available. While we have daily charts on the NASDAQ, S&P500, DJIA, Semiconductors, Biotechs, Financials, Retailers and Healthcare all breaking out of extreme oversold conditions, drilling down to hourly charts paints a vastly different picture. Every one of the above sectors contributed to the relief rally late last week, but they are all showing bearish divergence on the Stochastics oscillator. Combined with the fact that much of the buying was actually short-covering by the institutions (check out the new COT data in the Market Sentiment section), leads us to the conclusion that weakness in most sectors of the market is looming just around the corner. While we don't normally use intraday charts as a cornerstone of our entry strategy for LEAPS, keeping an eye on them can give us a preview of underlying near-term strength or weakness in the market. With that being said, there were some attractive entry points to be had on our Watch List over the past 2 days, and these are detailed below. You'll notice that we actually initiated 5 plays, which has to be some kind of record. Take note of the fact that we added each of these plays on a bounce from recent lows, as the stock either bounced at or moved back up through our Entry Trigger prices. We also have 4 new plays (some of which are old favorites) making their way onto the Watch List to replace those that have migrated to the Portfolio. Unfortunately, we have 2 casualties this week as well, with C and BGEN getting the axe due to violating the specified Stop on the Watch List. Despite admirable bounces near the end of the week, it looks like we painted ourselves into a corner with listing 'Stops' for plays that we have not yet initiated. So while we have to follow our discipline and drop these plays - both from the old Playlist and our Watch List, it points out that we need to make a change to the structure of the Watch List. It seems a bit too restrictive (and possibly confusing) to list a 'Stop' on the Watch List, as well as stops on the Portfolio. So our solution is as follows. Watch List plays will have an entry target price listed, but not a stop. Once a play is initiated, then a stop will be put in place and will be shown in the Portfolio. Providing details of our entry strategy should make this approach much easier to utilize during the week. There are two possible ways in which an entry point can be taken, and we received both of them this week. The first case would be when the price of the stock falls through our target price, and then rallies back through it, as in the case of GENZ. We would not try to catch the falling knife on the way down, but if there is sufficient strength in the stock for it to rally back through our target, that is an acceptable entry point. The second possible entry is where the stock drops to our target price and bounces from there. A good example of this action is seen in the entry point we received in our old favorite, WM. The dip in Financials dropped the stock right to our entry zone between $46-47 before the buying interest returned Thursday afternoon. As buyers came back into the stock, we took our entry, and by Friday's close we were sitting on a tidy profit. One last clarification is necessary on how we will book entries to the Portfolio. Although this is not an actual portfolio, we are endeavoring to treat it as one. In the interest of tracking performance of our plays, we want to be fair and accurate in both the entry prices and the Percent Change reported in the Portfolio. This can sometimes be difficult if the LEAP that we intend to purchase had no active trades on the day that we received the entry point. Also, we would like to err on the conservative side with respect to calculating returns in the Portfolio, so here is the policy to which we will adhere. If the LEAP did trade, the entry price listed in the Portfolio will be the high trade for the day. If the LEAP did not trade on the day in question, then we will use the highest Ask price as our entry price and track gains/losses from that point forward. In either case, the entry price listed will almost always be higher than the price you would have paid during the day when the entry point materialized. This puts our Portfolio performance at a disadvantage just after the play is opened, but since these plays are intended to be long-term, in the long run, the difference should be negligible. After initiating a position, the Percent Change will be calculated each week based on Friday's closing Ask price. One last note, before I leave you for the week. I am still very cautious about this market, and you can see that in the very conservative entry targets on all of our Watch List plays. Take the passive approach and make the entry points come to you. Chasing stocks higher in this market is not a smart decision. As conditions warrant, we will consider moving entry targets either up or down on a weekly basis. Have a profitable week, and keep those emails coming. Mark Phillips Contact Support Current Playlist (Old Format) SYMBOL SINCE LEAPS SYMBOL PICKED CURRENT CHANGE AOL 03/12/00 JAN-2002 $ 65 WAN-AM $18.63 $ 1.40 -92.49% 08/13/00 JAN-2003 $ 55 VAN-AK $17.50 $ 6.50 -62.86% WM 03/19/00 JAN-2002 $ 30 WWI-AF $ 5.38 $21.90 307.06% 10/22/00 JAN-2003 $ 45 VWI-AI $ 7.88 $13.40 70.16% C 06/18/00 JAN-2002 $48.8 YSV-AW $10.31 $ 4.80 -53.44% 10/01/00 JAN-2003 $ 60 VRN-AL $12.25 $ 5.00 -59.18% GENZ 07/16/00 JAN-2002 $ 70 YGZ-AN $17.13 $27.50 60.54% JAN-2003 $ 70 OZG-AN $23.13 $35.75 54.56% BGEN 11/05/00 JAN-2002 $ 70 WGN-AN $17.25 $12.38 -28.26% JAN-2003 $ 70 VNG-AN $25.00 $20.13 -19.50% MU 11/26/00 JAN-2002 $ 45 WGY-AI $13.13 $15.60 18.86% JAN-2003 $ 45 VGY-AI $17.25 $21.40 24.06% WMT 12/24/00 JAN-2002 $ 55 WWT-AK $ 9.63 $ 5.30 -44.94% JAN-2003 $ 55 VWT-AK $14.00 $ 9.60 -31.43% DELL 01/07/01 JAN-2002 $ 20 WDQ-AD $ 5.25 $10.25 95.24% JAN-2003 $ 25 VDL-AE $ 5.63 $10.13 79.84% CPN 01/21/01 JAN-2002 $ 40 YLN-AH $10.50 $15.50 47.62% JAN-2003 $ 40 OLB-AH $15.38 $20.50 33.33% JWN 02/18/01 JAN-2002 $22.5 WNZ-AX $ 3.30 $ 1.40 -57.58% JAN-2003 $ 25 VNZ-AE $ 4.10 $ 2.20 -46.34% LEAPS Portfolio Current Open Plays SYMBOL OPENED LEAPS SYMBOL ENTRY CURRENT CHANGE STOP CLX 03/13/01 '02 $ 35 WUT-AG $ 3.50 $ 3.20 - 8.57% $ 28 '03 $ 35 VUT-AG $ 6.10 $ 5.60 - 8.20% $ 28 AOL 03/23/01 '02 $ 40 WIU-AH $ 8.00 $ 8.30 3.75% $ 35 '03 $ 40 VAN-AH $11.60 $11.90 2.59% $ 35 GENZ 03/23/01 '02 $ 85 YGZ-AO $24.50 $24.38 - 0.49% $ 74 '03 $ 90 OZG-AR $27.75 $27.63 - 0.43% $ 74 SWS 03/22/01 '02 $ 18 YWF-AT $ 4.10 $ 4.30 4.88% $ 15 '03 $ 20 VWZ-AD $ 5.00 $ 5.10 2.00% $ 15 WM 03/22/01 '02 $ 50 WWI-AJ $ 6.00 $ 7.70 28.33% $ 43 '03 $ 50 VWI-AJ $ 9.20 $10.80 17.39% $ 43 WMT 03/23/01 '02 $ 50 WWT-AJ $ 7.00 $ 7.20 2.86% $ 41 '03 $ 50 VWT-AJ $11.00 $11.70 6.36% $ 41 LEAPS Watchlist Current Possibles SYMBOL SINCE TARGET PRICE TARGETED LEAP SYMBOL CRUS 03/18/01 $17-18 JAN-2002 $ 20 WUR-AD JAN-2003 $ 20 VUR-AD MU 03/18/01 $38 JAN-2002 $ 40 WGY-AH JAN-2003 $ 40 VGY-AH DELL 03/18/01 $20-22 JAN-2002 $ 25 WDQ-AE JAN-2003 $ 25 VDL-AE CPN 03/18/01 $43-44 JAN-2002 $ 45 YLN-AI JAN-2003 $ 50 OLB-AJ JWN 03/18/01 $16 JAN-2002 $ 20 WNZ-AD JAN-2003 $ 20 VNZ-AD GE 03/25/01 $37 JAN-2002 $ 40 WGE-AH JAN-2003 $ 40 VGE-AH NSM 03/25/01 $23-24 JAN-2002 $ 25 WUN-AE JAN-2003 $ 30 VSN-AF QQQ 03/25/01 $39-40 JAN-2002 $ 40 WD -AN JAN-2003 $ 45 VZQ-AS TXN 03/25/01 $32-33 JAN-2002 $ 35 WTN-AG JAN-2003 $ 35 VXT-AG New Portfolio Plays AOL - AOL-Time Warner $39.52 Now that the AOL-Time Warner merger is complete, we are looking for investors to recognize the unrivaled power of this multi-media giant. Shares of AOL gave us a gem of an entry point this week, as market pressures pushed AOL as low as $35 on Thursday. The snap back in technology stocks on Friday triggered our entry point as the stock rallied sharply through our $38 entry trigger. While technology stocks looked good on Friday, the danger of a retest of recent lows prompts us to place a tight stop at the $35 level. A close below there will open the door for a retest of the January lows. This should not take place without the Technology sector taking a serious turn for the worse, so if it does, it will be a clear signal to stand aside from the play. If you missed this entry, consider watching for another intraday dip into the $35-36 range in the week ahead, which promises continued volatility. BUY LEAP JAN-2002 $40.00 WIU-AH at $ 8.00 BUY LEAP JAN-2003 $40.00 VAN-AH at $11.60 GENZ - Genzyme Corp. $84.25 One of the principal culprits behind the NASDAQ's woes last week was the ailing Biotech sector, with the BTK.X index giving up nearly 25% at its low on Thursday. Cautious bulls stepped in as GENZ plunged below $73 Thursday morning, quickly lifting the stock back over the critical 200-dma (currently $75.92) to close just above the $80 support/resistance level. That left our play candidate in a waiting for confirmation, and we got it on Friday as buyers stepped up, showing their continued affinity for shares of GENZ. Sure enough, they propelled the stock through our $83 entry trigger and we got our entry point just in time to watch the stock consolidate its gains for the remainder of the session. Look for the Biotechs to continue their recovery next week, and consider an intraday dip to the $83 level as a second chance to enter the play. Due to the volatile nature of this stock, we need to give it a bit of room to move, so place your stops at $74, just below the 200-dma. BUY LEAP JAN-2002 $85.00 YGZ-AO at $24.50 BUY LEAP JAN-2003 $90.00 OZG-AR at $27.75 SWS - Southwest Securities $18.95 Well now, that didn't take long. Less than a week after placing SWS on our brand-new Watch List, we were rewarded with a picture perfect entry point. The early dip on Thursday had us a bit worried, but buyers showed up in the afternoon, giving us the trigger we were looking for on the late-day rally. Recall from last week's write-up that we are placing our stop at $15 to protect against the possibility of another bout of selling in the Brokerage sector. Another dip near $18 still looks good for new entries, as long as the bounce comes on solid volume, and the Broker/Dealer index (XBD.X) is headed up. An overall improvement in the equity markets should directly benefit the Broker stocks, and once this recovery gets underway, the bulls can focus on moving SWS solidly out of its year-long downtrend. The first obstacle for our play to scale will be the $20 resistance level. BUY LEAP JAN-2002 $18.00 YWF-AT at $4.10 BUY LEAP JAN-2003 $20.00 VWZ-AD at $5.00 WM - Washington Mutual $50.44 It's been a consistent performer for the past year, and with interest rates headed down, we don't expect things to change any time soon. The worst the bears could manage recently was a mild consolidation, giving us a target level at which to initiate new positions. As if on request, the broad-based market decline on Thursday pressured WM right to our desired $46-47 entry level, and got us into the play as the stock recovered into the close. Confirming our discipline, buyers showed up again on Friday, propelling WM back over the $50 level and putting our play solidly in the black. Additional dips to our entry level can still be considered for new positions, but make sure the bears aren't able to take out our $43 stop on a closing basis. That would be a glaring technical failure, and we would definitely want to step back and re-evaluate the play. BUY LEAP JAN-2002 $50.00 WWI-AJ at $6.00 BUY LEAP JAN-2003 $50.00 VWI-AJ at $9.20 WMT - Wal-Mart Stores $47.57 Proof that the attractive entries last week weren't limited to the Financial and Technology stocks, WMT investors decided to join the party, showing us that Retail stocks are alive and well. As unpleasant as Friday's opening dip was, buyers didn't hesitate to click the buy button quickly propelling the stock off the $45 level, for a quick $2 gain. After consolidating through the lunch hour, buying volume started to pick up again, pushing WMT to close very near the high of the day. Interest rates are still headed down, and we are still waiting for confirmation of a firming economy. In the meantime, it is hard to beat as solid retail play like WMT. Just in case there is a bit more weakness in the sector, we are placing our stop at $41, just below the October lows. BUY LEAP JAN-2002 $50.00 WWT-AJ at $ 7.00 BUY LEAP JAN-2003 $50.00 VWT-AJ at $11.00 New Watchlist Plays GE - General Electric $39.99 As CSCO is the widely-accepted proxy for the NASDAQ market, GE is the regarded as a proxy for the DJIA. There are very few sectors in the market that don't touch an arm of this industrial giant from Finance to Media to B2B e-commerce. The energetic bounce of the "old-economy" index from its lows on Thursday afternoon, lent support to GE, lifting it off of its lows near $36. With interest rates headed down, and GE one of only a handful of companies insisting that they are on target to meet their own revenue and earnings expectations, we could be seeing the beginning of a bottom formation. Although the market and GE are likely to test this week's lows in the weeks ahead, the heavy buying volume seen on Thursday and Friday should go a long ways towards putting in a floor. With the market still in a precarious condition, we don't want to chase any stocks higher, not even GE. Look for a successful retest of the $37 support level, also the site of the 200-week moving average, to provide an attractive entry point when the bears take another shot at support. BUY LEAP JAN-2002 $40.00 WGE-AH BUY LEAP JAN-2003 $40.00 VGE-AH NSM - National Semiconductor $29.65 Leading the NASDAQ higher last week, the Semiconductor index (SOX.X) finally found its legs near the $540 support level, and those that blinked missed the stellar move. Tacking on 100 points in 3 short sessions was just the kind of help that NSM needed to break out of its long consolidation. Ending what turned out to be a stellar week just shy of $30, NSM posted its highest close since its October earnings warning. Adding to the bullish picture is the fact that the Stochastics on the weekly chart recently posted a higher low than in October, confirming the higher low on the price chart. Before you run out to buy into the apparent breakout, we have to caution that this move is more than a little overextended. This is just the first inning in the stock's return to an upward trend, and we have plenty of time to pick up some LEAPS when it drops back to test support. We are still awaiting concrete evidence of improving fundamentals in the Semiconductor sector, but when they do appear, look for this sector to lead Technology stocks out of the depths of this bear market. Target new positions on a pullback to the $23-24 support level, as NSM retraces from its overextended condition. Depending on the voracity of the bear, we could even see a retest of the $20 support level before our play really get moving to the upside, but a drop below that would be a strong signal to stay on the sidelines. BUY LEAP JAN-2002 $25.00 WUN-AE BUY LEAP JAN-2003 $30.00 VSN-AF QQQ - Nasdaq-100 Trust $42.80 Didn't we just yank the QQQ off our LEAPS playlist a couple short weeks ago? Indeed we did, but conditions seem ripe for putting this play on our Watch List, just so we can catch that entry when it arrives. Make no mistake, there is still some more weakness to be seen in Technology stocks, but we want to set this trade up in advance. The rally on the NASDAQ that occurred on Thursday and Friday was just a continuation of the relative strength exhibited by the index all week long. When the current trading rally has run its course, look for the QQQ to retest support between $39-40. If successful, we could be adding new positions on the bounce from this level. We have earnings season looming just around the corner, and lest you've forgotten, it is expected to be far from stellar. But we may actually be close to hearing the first rumblings of actual visibility from leading Technology CEOs. That combined with another interest rate cut in the next few weeks could be just what the QQQ needs to put in a convincing bottom. BUY LEAP JAN-2002 $40.00 WD -AN BUY LEAP JAN-2003 $45.00 VZQ-AS TXN - Texas Instruments $38.81 Another Semiconductor play? Sure, why not! The catalysts for adding TXN to our Watch List are much the same as for NSM, with the necessary cautionary statement that we will more than likely retest support before continuing higher. The stock is already overextended on the daily chart with Stochastics entering overbought, and the price exceeding the upper Bollinger band. TXN also has formidable resistance looming just overhead in the $39-40 area, so now is not the time to be opening new positions. Even the heavy volume of the past 2 days isn't enough to lure us into buying a breakout, especially when the SOX.X is reaching its own resistance near $650. We want to wait for the current bullish move to run its course, and then we can consider new positions on the pullback to the $33-34 support level. Truly patient (and aggressive) traders may even want to wait for a pullback near the $30 level before jumping into the play. Like everything in the Technology sector, TXN is likely to suffer some weakness in the upcoming earnings season, with visibility still non-existent, and the eventual NASDAQ bottom still undetermined. But when that bottom is in place, leading Semiconductor stocks like TXN are likely to lead the way higher, and we want to be there to enjoy the ride. BUY LEAP JAN-2002 $35.00 WTN-AG BUY LEAP JAN-2003 $35.00 VXT-AG Drops BGEN $62.38 The recent selloff in Biotechnology stocks struck a mighty blow to our BGEN play driving it solidly below our $58 'stop' level by Wednesday's close. Adding to the bulls misery on Thursday, the stock declined even further, briefly dipping below the $53 level before buyers stepped in to help BGEN, along with the rest of the Biotech sector recover for the remainder of the week. The recovery came on solid volume, and it really was encouraging to see the stock clear the 200-dma again, but we have a sneaking suspicion that there is more weakness ahead. That, along with our violated stop leaves us no choice, but to drop coverage of BGEN this weekend. If you went bottom fishing on the dip on Thursday, please set stops to protect against a protracted decline in the weeks ahead. C $42.85 It seemed Financial stocks would never find a floor, and testifying to that fact was C, plunging lower last week and actually touching $39. Slicing clean through our $42 stop with Thursday's $40.60 close gave us no choice but to remove C from both the playlist and our Watch List. This is just the latest of several support levels that have failed to keep our play afloat. Despite the encouraging market strength over the past couple days, we see no convincing evidence that the bearish trend is about to reverse. We still like C over the long run, but would prefer to enter the play after seeing evidence of a bottom formation. The Fed likely has more work to do, dropping interest rates, and C will eventually respond to this action. When it, along with the rest of the Financial sector begin to solidify, that will be our signal to start coverage again, searching for that elusive entry point. At this point, it is just too risky to chase the dips lower. ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=1924 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 03-25-2001 Sunday 5 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/032501_5.asp ************* COVERED CALLS ************* Charting Basics: An Introduction to Candlesticks By Mark Wnetrzak Candlestick charts are relatively simple to interpret and the analysis techniques are useful to all types of investors. The study of historical candlestick patterns can be used alone or in combination with other types of charting to provide clues about future market direction. The most significant difference in candlesticks is the manner in which an issue's open, high, low, and close alters the look of the individual chart. This unique and exciting visual depiction is often described as an enhanced, three dimensional bar-chart. The similarities between these two common systems are numerous but the major difference is that candlestick charts can convey signals not available from simple bar charts. In fact, there are a number of patterns that provide much better entry signals than more traditional charting techniques. Drawing a daily bar chart requires an opening price along with a high, low, and close. The same data is used to construct a candlestick chart but the final result is much more revealing. The thick part of the candlestick line is called the "real body." It represents the range between that session's opening and closing prices. When the real body is filled-in (or black), the close of the session was lower than the open. When the real body is empty (or white), the closing price was higher than that of the open. The thin lines above and below the body are called the "shadows." The shadows reflect the high and low price extremes during the day's trading. The top of the upper shadow denotes the high of the session while the bottom of the lower shadow is the low of the session. In most cases, the real body is the essential price movement whereas the shadows are generally considered less relevant fluctuations in price. The chart above illustrates some common candlestick lines. The long, black candlesticks reflect a bearish period in which the market opened near its high and closed near its low. In contrast, the open bodies represent bullish periods. Candlesticks with short bodies (spinning tops) are generally neutral indications of the closely fought battle between buyers and sellers. Lines with horizontal bars instead of real bodies are called doji's. A doji occurs when the issue opens and closes at or very near the same price (although the lengths of the shadows can vary). Some technicians also refer to the candlesticks as yin and yang lines. The yin line, referred to as "in-sen" in Japan, is simply another name for the black candlestick. The yang line or "yo-sen" is the Japanese term for the white candlestick. As with most forms of technical analysis, the key premise is that past price behavior can be used to forecast future trends. The wonderful feature of candlestick charting is most traders can easily discern price tendencies or patterns that would have been difficult or impossible to identify by more conventional means. As with any system, these signals should always be viewed with regard to other indications from the instrument being evaluated. With dedication and commitment, you will discover which patterns work best for your style of trading and the market in which you participate. Next week, we will help you begin that process and investors who are interested in learning more about candlestick charting should consider Steve Nison's classic book, "Japanese Candlestick Charting Techniques," available in the OIN bookstore. Good Luck! SUMMARY OF PREVIOUS CANDIDATES ***** Note: Margin not used in calculations. Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield CLPA 6.22 5.03 APR 5.00 2.06 *$ 0.84 12.5% ELNK 10.38 12.00 APR 10.00 1.38 *$ 1.00 9.7% IGEN 13.31 15.19 APR 10.00 4.25 *$ 0.94 9.0% UTHR 16.94 15.63 APR 15.00 3.25 *$ 1.31 8.3% MTSN 14.00 15.94 APR 12.50 2.44 *$ 0.94 7.1% ADBE 28.63 35.69 APR 25.00 5.13 *$ 1.50 5.5% SHFL 21.25 23.38 APR 20.00 2.44 *$ 1.19 5.5% SHFL 20.94 23.38 APR 17.50 4.38 *$ 0.94 4.1% ATVI 24.63 23.75 APR 22.50 3.13 *$ 1.00 3.4% NRG 30.84 29.25 APR 30.00 2.60 $ 1.01 3.1% GLC 23.73 21.70 APR 22.50 2.35 $ 0.32 1.1% SEI 22.05 18.30 APR 20.00 3.10 $ -0.65 0.0% CPRT 21.81 18.50 APR 20.00 2.63 $ -0.68 0.0% BBBY 28.44 24.63 APR 27.50 2.94 $ -0.87 0.0% *$ = Stock price is above the sold striking price. Comments: Finally, a little relief rally from the prowling Bear. Issues that acted excessively weak during this harrowing time become candidates for an early exit. Seitel (NYSE:SEI), Copart (NASDAQ: CPRT), and Bed Bath & Beyond (NASDAQ:BBBY) may fall into this category. CPRT and BBBY are testing their 150 dma's and any bounce should offer a favorable exit. The technicals on SEI have turned bearish and a move down towards its 150 dma around $16.30 appears likely. Activision (NASDAQ:ATVI) appears "toppy" and should be monitored closely. Nrg Energy (NYSE:NRG) and Galileo International (NYSE:GLC) continue to display positive technical signals as they test into their support areas - monitor the positions closely. Depending on your long-term outlook, rolling down and/or forward to a lower strike may be an alternative. NEW CANDIDATES ********* Sequenced by Target Yield ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield SGSF 8.75 APR 7.50 SUO DU 1.88 4 6.87 28 10.0% VECO 52.31 APR 45.00 QVC DI 9.88 211 42.43 28 6.6% BRKS 43.47 APR 40.00 BQE DH 5.63 651 37.84 28 6.2% LTXX 19.00 APR 17.50 UXT DW 2.31 1397 16.69 28 5.3% IGEN 15.19 APR 12.50 GQ DV 3.25 1100 11.94 28 5.1% ICST 20.13 APR 17.50 IUY DW 3.38 854 16.75 28 4.9% SMTC 34.75 APR 30.00 QTU DF 6.00 181 28.75 28 4.7% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** BRKS - Brooks Automation $43.47 *** Breakout! Brooks (NASDAQ:BRKS) is the leading global supplier of OEM tool automation and factory management software for the semiconductor, data storage and flat panel display manufacturing industries. As an established market leader in hardware and software automation, Brooks continues to pioneer technologies: vacuum and atmospheric robots; cluster tool platforms and modules; ultra-clean mini- environments for isolating processing equipment and wafers; and factory and tool automation software and integration services. Investors must have liked Brooks' presentation at the SEMInvest 2001 on Tuesday. Or, maybe it was the multi-million dollar order from Austria Mikro Systeme Int.AG (AMS) to automate its new 200mm ASIC/ASSP fab in Unterpremstaetten, Austria. We simply favor the break-out above the recent 3-month trading range on high volume. APR 40.00 BQE DH LB=5.63 OI=651 CB=37.84 DE=28 TY=6.2% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=BRKS ***** ICST - Integrated Circuit Systems $20.13 *** Rally Mode! *** Integrated Circuit Systems (NASDAQ:ICST) is a leader in the design, development and marketing of silicon timing devices for communications, networking, computing and digital multi- media applications. Though ICST reported stellar earnings in January, the company joined the "Warning" parade in March. Integrated Circuit Systems said their earnings for the quarter ending March 31 would be lower-than-expected due to weakened demand for its products (yawn). Apparently, the weakness was expected and investors are looking to the future as the stock has rallied over 40% since the warning. The technicals are increasingly bullish and a move above the January high may be forthcoming. APR 17.50 IUY DW LB=3.38 OI=854 CB=16.75 DE=28 TY=4.9% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=ICST ***** IGEN - IGEN International $15.19 *** Bottom Fishing Again! *** IGEN (NASDAQ:IGEN) develops and markets biological detection systems based on its proprietary ORIGEN technology, which provides a unique combination of sensitivity, reliability, speed, and flexibility. ORIGEN-based systems are used in a wide variety of applications, including clinical diagnostics, pharmaceutical R & D, life science research, and industrial testing for food safety and quality control. Last week, IGEN sold 789,075 shares of common stock for $9.5 million to Acqua Wellington North American Equities Fund, Ltd. The company recently announced a joint venture to develop a test for the "mad cow disease" that would allow screening of infected cows in slaughterhouses. Technically, the recent bullish signals and positive divergences suggest that IGEN may be putting in a bottom. Once again, IGEN offers a reasonable cost basis for investors who have a positive outlook on the issue. APR 12.50 GQ DV LB=3.25 OI=1100 CB=11.94 DE=28 TY=5.1% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=IGEN ***** LTXX - LTX Corp. $19.00 *** Semiconductor Rally *** LTX Corp. (NASDAQ:LTXX) designs, manufactures and markets automatic test equipment for the semiconductor industry that is used to test system-on-a-chip, digital, analog and mixed- signal integrated circuits. The Company also sells hardware and software support and maintenance services for its test systems. LTX has broken out of 6-month Stage I base on high volume, closing above its 150-dma. Investors are beginning to nibble on positions in the Semiconductor sector as weak earnings appear to have been already "priced-in." The bullish break-out took out the January high and this position offers a reasonable entry point closer to historical support. APR 17.50 UXT DW LB=2.31 OI=1397 CB=16.69 DE=28 TY=5.3% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=LTXX ***** SGSF - SignalSoft $8.75 *** Cheap Speculation *** SignalSoft (NASDAQ:SGSF) is the developer of Wireless Location Services., a software suite that enables location-based wireless services for information, safety, tracking and billing. Some of the largest U.S. operators, including AT&T Wireless, Cingular, and Sprint PCS, and wireless operators in Europe, such as diAx, Libertel Vodafone, and Orange Switzerland, are SGSF customers. JP Morgan Chase recently started coverage on SignalSoft with a long-term "buy" and set its price target at $19, based on SGSF's strong market position. We favor the positive technical signals as this relatively new issue forms a Stage I base. Speculators only please! APR 7.50 SUO DU LB=1.88 OI=4 CB=6.87 DE=28 TY=10.0% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=SGSF ***** SMTC - Semtech $34.75 *** One more for the Road! *** Semtech (NASDAQ:SMTC) is a leading supplier of analog and mixed- signal semiconductors for the communication, computing and industrial markets. This week, Semtech said that it is exiting the foundry services business and is in negotiations to sell its Santa Clara wafer fabrication facility. A little restructuring and workforce reduction to help the bottom line? Hmmm, another Semiconductor stock breaking out of a Stage I base, imagine that. Yes, the semiconductor sector is once again gaining attention and drawing investor's funds. For those who wish to speculate that the semiconductor downdraft is almost over, this position offers a conservative entry point near technical support. APR 30.00 QTU DF LB=6.00 OI=181 CB=28.75 DE=28 TY=4.7% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=SMTC ***** VECO - Veeco Instruments $52.31 *** Forging a Stage I Base *** Veeco Instruments (NASDAQ:VECO) designs, manufactures, markets and services a broad line of equipment primarily used by manufacturers in the data storage, optical telecommunications and semiconductor industries. CVC, a wholly-owned subsidiary of Veeco, provides cluster tool manufacturing equipment used in the production of evolving tape and disk drive recording head fabrication, optical components, passive components, MRAM, bump metallization, and next generation logic devices. Last month, Veeco's earnings beat Wall Street estimates and in January, the company said its 4th-quarter orders topped estimates. The company recently celebrated shipping the 100th SPECTOR. Ion Beam Deposition System to Spectra-Physics. The technicals continue to improve and this position offers a favorable cost basis for those investors who are bullish on VECO. APR 45.00 QVC DI LB=9.88 OI=211 CB=42.43 DE=28 TY=6.6% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=VECO ***** ***************** SUPPLEMENTAL COVERED CALL CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield SBYN 13.00 APR 10.00 QYS DB 3.75 221 9.25 28 8.8% CTLM 24.56 APR 20.00 UUM DD 6.00 24 18.56 28 8.4% KROG 5.47 APR 5.00 KRQ DA 0.81 0 4.66 28 7.9% TLGD 26.88 APR 22.50 THF DX 5.75 167 21.13 28 7.0% ISSI 13.38 APR 10.00 XUS DB 3.75 214 9.63 28 4.2% ************************Advertisement************************* Get 10 FREE Issues of Investor's Business Daily. No obligation. Nothing to cancel. http://www.sungrp.com/tracking.asp?campaignid=1881 ************************************************************** *********************** CONSERVATIVE NAKED PUTS *********************** Option Trading Basics: Exercise and Assignment By Ray Cummins Our recent discussion concerning early exercise of in-the-money options brought a flurry of questions from new traders. The most common inquiry was related to the possible strategies that can be implemented when a notice of "assignment" is received. Statistics suggest that approximately 10% of equity options are exercised and the majority of these take place relatively close to the expiration date. Option assignment is an acceptable risk in derivatives trading and although it happens infrequently, it can occur. As with any trade that does not progress as planned, there are potentially unpleasant outcomes. The key is to have an exit strategy for every position and when things do not transpire as expected, the decisions involved in any necessary adjustments will be less difficult. Many traders use spreads or combinations to offset specific risks or obligations when a position fails to perform as expected. However, once an option has been assigned to an option writer (even though he may not yet have been notified of the assignment), he can no longer effect a closing transaction in that option but must instead buy or sell the underlying interest for the exercise price. When your broker informs you of an option assignment, there are a number of alternatives available. The method you select will depend on several factors including the current outlook for the underlying issue and the amount of uncommitted funds you have available to apply to future transactions. The easiest course of action is to buy the stock that has been assigned and retain it as a portfolio holding. The brokerage firm looks upon assignment in the same manner as a pending stock purchase. You have three days before funds are required for the actual settlement, thus there is ample time to study the situation and determine the appropriate course of action. If you choose to make an offsetting trade on the day of assignment, there may be no need to allot additional funds to secure purchase of the issue. As with any portfolio stock, you may decide to sell it on a future rally or write covered-calls on the issue until a "break-even" basis has been obtained. There are also recovery strategies such as using a covered write and a debit spread, where the premium from the sold position is used to offset the cost of the long call. If you own the stock at a sizable loss to the initial cost basis, another popular method is to "average down." This technique involves adding new shares to your current position at a lower price. While averaging is an excellent way to lower the break-even price in the issue, it also increases the amount of money at risk in the position. Another popular strategy is to simply sell the stock and write a new option at the same strike price that you were originally short, with a future expiration date. This method is appropriate when a trader believes the underlying stock will eventually rebound and assuming there is additional extrinsic value in new position, the transaction should produce a small profit. If the value of the underlying has dropped significantly below the strike price of the assigned option, the writer may have to choose a position with a distant expiration to recover the lost potential. In this case, the new options are often written at the next lower strike price, and occasionally in greater quantity so as to generate a credit. Using this recovery method, no debits are incurred but a realized loss is taken in the short term. If the stock price continues to decline, the process is repeated. Eventually, the issue should stop falling and the last set of sold (short) options will expire worthless. At that time, the traders' overall profit will consist of the sum of all the previous credits. Obviously, the problem with this technique is that the trader must have enough portfolio collateral to stay with the strategy even if the issue continues to decline. A large portfolio is best for this type of recovery because the collateral required for naked option writing may be in the form of cash or securities and these holdings are not affected unless there is a need for additional funds to close the position prematurely. The most important fact regarding the early exercise of options is that the probability of assignment in positions where the share value is relatively close to the sold strike price is almost nil. In those extreme cases where the stock price falls substantially below the sold option's price, early assignment occurs but only on rare occasions. In addition, the likelihood that it would be your options (through random assignment) is very low and if there is any time value (extrinsic premium) remaining in the position, the probability is even lower because it is better to sell the option rather than exercise it. In those unusual instances when you are "assigned," it's very important to be notified by your broker in a timely manner so that you can use the flexibility of options to to eliminate or offset the obligation without undue losses. Good Luck! *** WARNING!!! *** Occasionally a company will experience catastrophic news causing a severe drop in the stock price. This may cause a devastatingly large loss which may wipe out all of your smaller gains. There is one very important rule; Don't sell naked puts on stocks that you don't want to own! It is also important that you consider using trading STOPS on naked option positions to help limit losses when the stock price drops. Many professional traders suggest closing the position when the stock price falls below the sold strike or using a buy-to-close STOP at a price that is no more than twice the original premium from the sold option. SUMMARY OF PREVIOUS CANDIDATES ***** Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield OATS 9.25 9.00 APR 7.50 0.44 *$ 0.44 13.3% AAPL 19.63 23.00 APR 15.00 0.50 *$ 0.50 9.8% BSX 18.45 17.95 APR 17.50 0.80 *$ 0.80 9.6% THQI 33.88 34.50 APR 30.00 1.38 *$ 1.38 9.0% SCIO 19.38 20.50 APR 15.00 0.44 *$ 0.44 8.9% TMAR 17.31 15.88 APR 15.00 0.56 *$ 0.56 7.8% GLC 23.44 21.70 APR 20.00 0.55 *$ 0.55 7.4% MTON 27.25 31.69 APR 20.00 0.50 *$ 0.50 7.3% ESCM 21.75 21.75 APR 17.50 0.38 *$ 0.38 6.8% OLOG 25.00 25.81 APR 22.50 0.56 *$ 0.56 6.0% ANF 32.30 33.01 APR 25.00 0.55 *$ 0.55 5.7% VTS 36.98 32.90 APR 30.00 0.62 *$ 0.62 5.3% ADVP 49.94 52.81 APR 40.00 0.75 *$ 0.75 5.0% *$ = Stock price is above the sold striking price. Comments: Has the shadow of the Kodiak really passed us by untouched? (A "Kodiak" is a big Alaskan Brown Bear!) Probably not, but any respite will be gladly accepted. Boston Scientific (NYSE:BSX) is acting rather worrisome and exiting the position or rolling down to a May $15 put may be in order. Trico Marine (NASDAQ: TMAR) continues to trade near our sold strike and is forming a Stage III top - definitely nearing a key moment. Does Friday's strong, volume-supported move in Veritas (NYSE:VTS) signal a positive resolution of its recent consolidation? Only time will tell... NEW CANDIDATES ********* Sequenced by Target Yield ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield MCDTA 24.31 APR 17.50 MQG PW 0.56 23 16.94 28 11.2% AAPL 23.00 APR 17.50 AAQ PS 0.44 13805 17.06 28 9.5% DDS 20.30 APR 17.50 DDS PW 0.40 116 17.10 28 7.6% CRUS 24.44 APR 17.50 CUQ PW 0.31 1810 17.19 28 6.5% AMD 29.44 APR 22.50 AMD PX 0.35 10808 22.15 28 6.1% LRCX 29.44 APR 22.50 LMQ PQ 0.31 1765 22.19 28 5.4% MTON 31.69 APR 22.50 KQM PX 0.31 10 22.19 28 5.1% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** AAPL - Apple Computer $23.00 *** A Bullish Move! *** Apple Computer (NASDAQ:AAPL) designs, manufactures and markets personal computers and other personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Most of the company's net sales to date have been derived from the sale of its Apple Macintosh line of personal computers and related software and peripherals. Apple Macintosh personal computers are characterized by their intuitive ease of use, innovative industrial designs and applications base, and built-in networking, graphics, and multimedia capabilities. The company offers a range of PCs and products, including related peripherals, software, and networking and connectivity solutions. Friday's move above a recent resistance area near $22 is bullish and this position offers a reasonable cost basis for traders who are interested in "bottom fishing" the Personal Computer sector. APR 17.50 AAQ PS LB=0.44 OI=13805 CB=17.06 DE=28 TY=9.5% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=AAPL ***** AMD - Advanced Micro Devices $29.44 *** Intel Adversary! *** Advanced Micro Devices (NYSE:AMD) is a worldwide semiconductor manufacturer. The company's products include a wide variety of industry-standard integrated circuits used in applications such as telecommunications equipment, data and network communications equipment, consumer electronics, personal computers and business workstations. The company participates in three technology areas within the digital IC market; microprocessors, memory circuits and logic circuits. These segments are defined as Computation Products, Memory and Communications. AMD recently introduced a pair of faster processors to compete with Intel's chips for tasks such as video encoding and editing. AMD introduced 1.33 and 1.3 gigahertz versions of its Athlon processors and the company says the 1.33 GHz Athlon with double data rate memory outperforms the Intel Pentium 4 platforms in a number of benchmark tests. Maybe that's the reason AMD is trading higher than Intel and investors who wouldn't mind owning the issue at a discount should consider this position. APR 22.50 AMD PX LB=0.35 OI=10808 CB=22.15 DE=28 TY=6.1% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=AMD ***** CRUS - Cirrus Logic $24.44 *** Chip Sector Speculation! *** Cirrus Logic (NASDAQ:CRUS) designs and manufactures integrated circuits that employ high-performance analog and digital signal processing technologies. The company's products, sold under its own name and the Crystal, Maverick and 3Ci product brands, enable system-level applications in many Analog (audio, communications and data acquisition), Internet (embedded processors and optical storage) and Magnetic Storage (disk drive electronics integration and read channels) markets. Cirrus is optimistic about future earnings, saying in January that it expects to meet a previously announced annual revenue goal of $775 million and EPS of $0.90 in fiscal 2001. The company also said it expects revenue in the fourth quarter to be up in a year-over-year comparison and the outlook for 2002 is favorable, based on buying trends that show growth in retail sales of the devices in which their chips are used. Traders who agree with a bullish outlook for the issue can speculate on its future movement with this conservative position. APR 17.50 CUQ PW LB=0.31 OI=1810 CB=17.19 DE=28 TY=6.5% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=CRUS ***** DDS - Dillard's $20.30 *** Retail Sector Hedge! *** Dillard's (NYSE:DDS) operates retail department stores located primarily in the southwest, southeast and Midwest. The company has 340 stores in 29 states, all carrying the recognized Dillard's nameplate. The company's product categories include cosmetics, women's and juniors' clothing, children's clothing, men's clothing, shoes, accessories, and lingerie, and home. Shares of Dillard's Department Stores rallied after the retailer reported quarterly earnings that were well above consensus expectations. Dillard's posted fourth-quarter earnings of $59 million, or $0.69 a share, compared to $26 million, or $0.26 a share, in the same quarter a year ago. Looking ahead, the company said it plans to open seven new stores during the fiscal year and traders who want to have a position in the retail sector should consider this bullish issue. APR 17.50 DDS PW LB=0.40 OI=116 CB=17.10 DE=28 TY=7.6% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=DDS ***** LRCX - Lam Research $29.44 *** Chip Equipment Sector *** Lam Research (NASDAQ:LRCX) designs, manufactures, markets and services semiconductor processing equipment used by fabricators of integrated circuits. The company supplies front-end wafer processing equipment to the worldwide semiconductor industry and its products are used to selectively remove portions of various films to create an integrated circuit. The company sells a range of plasma (dry) etch products to address specific applications. The company also markets both the DSS-200b and Synergy T product lines of post-CMP cleaners, which are used to remove residual slurries and other contaminants from wafer surfaces, both after CMP polishing and before and after essential process steps. The chip equipment industry is showing signs of a recovery and this issue appears to be one of the better performers. Earnings are due on April 11. APR 22.50 LMQ PQ LB=0.31 OI=1765 CB=22.19 DE=28 TY=5.4% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=LRCX ***** MCDTA - McDATA Class A $24.31 *** EMC Distribution *** MCDTA represents Class A common stock in McDATA (NASDAQ:MCDT), a provider of high performance enterprise switches and other related software for connecting servers and storage systems in a storage area network, or SAN. The company sells its many products through original equipment manufacturers, such as EMC Corporation, other resellers, such as International Business Machines, and systems integrators. McDATA's solutions include hardware and software products, methodologies and education that enable businesses to scale their operations globally through a far-reaching, manageable, flexible data infrastructure that is optimized for application deployment and responsiveness to customer needs. MCDT's products enable business enterprises to deploy a low-cost, highly available and centrally managed storage network to support growing storage capacity requirements. MCDTA is a relatively new issue, due to a distribution of "when-issued" McDATA Class A common stock to EMC shareholders and the options provide favorable speculation on the movement of the parent company. APR 17.50 MQG PW LB=0.56 OI=23 CB=16.94 DE=28 TY=11.2% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=MCDTA ***** MTON - Metro One Telecom $31.69 *** A Solid Recovery! *** Metro One Telecom (NASDAQ:MTON) develops and provides enhanced directory assistance and information services for the telecom industry. Metro One contracts with wireless carriers to provide services to their subscribers. The company's customers include many of the leading wireless telecommunications carriers and the company has expanded into the landline telecommunications market. Shares of Metro One have rallied recently after company officials said first-quarter earnings would surpass analysts' estimates of $0.21 a share by up to 50%, due to improved efficiencies and lower data content costs. The company said it expected revenues to be near $49 million, as it continues to enjoy improved operational performance and gross margins. Traders who want to speculate on the recovery in MTON's share value can do so in a conservative manner with this position. APR 22.50 KQM PX LB=0.31 OI=10 CB=22.19 DE=28 TY=5.1% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=MTON ***** ***************** SUPPLEMENTAL NAKED PUT CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield UTEK 28.13 APR 22.50 UQT PX 0.63 125 21.87 28 10.9% ELNT 31.69 APR 22.50 UET PX 0.63 27 21.87 28 9.8% EFII 26.06 APR 20.00 EFQ PD 0.44 339 19.56 28 8.5% ADVP 52.81 APR 45.00 QVD PI 1.00 64 44.00 28 7.6% THQI 34.50 APR 30.00 QHI PF 0.69 64 29.31 28 7.5% GSPN 26.94 APR 17.50 GLQ PW 0.38 154 17.12 28 7.2% TER 37.88 APR 27.50 TER PY 0.45 394 27.05 28 6.1% IRF 44.03 APR 30.00 IRF PF 0.45 1292 29.55 28 5.3% *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1905 ************************************************************ ************************ SPREADS/STRADDLES/COMBOS ************************ Relief Rally Underway! Equity markets closed higher Friday with financial stocks leading the Dow out of bearish territory and semiconductor issues pacing a recovery in the NASDAQ. ****************************************************************** - MARKET RECAP - ****************************************************************** Friday, March 23 Equity markets closed higher today with financial stocks leading the Dow out of bearish territory and semiconductor issues pacing a recovery in the NASDAQ. The Dow industrial average rebounded 115 points to 9,504 and the NASDAQ composite added 31 points to finish at 1,928. The S&P 500 index climbed 22 points to 1,139. Trading volume on the NYSE hit 1.36 billion shares with advances beating declines 1,986 to 1,040. Activity on the NASDAQ exchange was heavy with 2.29 billion shares trading hands. Winners in the technology group outpaced losers 2,487 to 1,226. In the treasury market, the U.S. 30-year bond slumped 20/32 to 100 31/32, pushing its yield up to 5.30%. Thursday's new plays (positions/opening prices/strategy): Cirrus Logic (NASDAQ:CRUS) SEP30C/APR30C $2.62 debit calendar LSI Logic (NYSE:LSI) JUL25C/APR25C $1.65 debit calendar LSI Logic (NYSE:LSI) APR22C/APR25C $0.55 debit bull-call Cypress Semi (NYSE:CY) APR22C/APR17P $0.06 credit synthetic The upside activity in technology issues did little to help our entry opportunities today. The calendar spreads in CRUS and LSI required higher than expected opening debits (on a simultaneous order basis) and we will monitor the positions for better entry prices. The synthetic position in CY offered an excellent entry point near midday, providing a small credit as the stock slumped to $19.15. Portfolio Activity: After a string of losing Fridays, stocks edged higher today as investors shopped for bargains in a continuation of the recent technology rebound. Blue-chip computer issues were among the big winners and International Business Machines (NYSE:IBM) led the group, rising 5% to $93 after launching a number of new eServer systems based on latest Intel technology. The company said the server systems are faster and offer scalability from one to 64 processors. Software giant Microsoft (NASDAQ:MSFT) was also in the black, climbing to a recent high near $57 even as a Goldman Sachs analyst lowered his estimates on the company. The research note suggested that MSFT may have to preannounce for the March quarter due to the preponderance of negative news from other PC companies. The Dow's other technology issues continued to rally with Hewlett-Packard (NYSE:HWP) and Intel (NASDAQ:INTC) finishing in positive territory after recovering from an earlier dip. The blue-chip rebound was boosted by financial components J.P. Morgan (NYSE:JPM), Citigroup (NYSE:C) and American Express (NYSE:AXP). General Electric (NYSE:GE) also contributed to the upside momentum after two weeks of heavy selling pressure. The Dow's worst performances came from Home Depot (NYSE:HD), Procter & Gamble (NYSE:PG) and AT&T (NYSE:T). Among the NASDAQ gainers, Gemstar-TV Guide International (NASDAQ:GMST) was a big surprise, surging to $35 after company officials announced a 20-year pact with Comcast Cable Communications and said they remain confident with the current financial guidance for the year. Semiconductor issues rallied from midday lows to finish positive and Advanced Micro Devices (NYSE:AMD) and Rambus (NASDAQ:RMBS) were among the leaders in that group. In the broader market sectors, banks and brokerages rose as investors judged recent declines overdone at a time of falling rates and oil stocks also rallied amid a rise in crude prices. Consumer products shares were among the losers as investors continued to avoid defensive and cyclical issues. Today's activity was promising and analysts began to speculate on the potential for a bottom in select technology sectors, with the majority of bullish comments focusing on chip and chip equipment companies. At the same time, traders suggested that the market struggled to extend its gains because of opposition from "short sellers" who believe that stocks have further downside potential. The tug of war between sellers and bargain hunters was apparent in the Spreads portfolio as many of the positions finished with little or no change. However, there was some unique activity in one of our bearish positions. Shares of PolyMedica (NASDAQ:PLMD) fell $16.69 to $17 before being halted late in the session after short sellers plundered the stock on news that the Federal Bureau of Investigation recently conducted an inquiry into the company's billing practices. Apparently, the FBI was looking into claims that PolyMedica and its Liberty Medical Supply operation billed Medicare for supplies that customers returned, delivered supplies that weren't ordered and overstocked supplies. Such allegations of health care fraud aren't uncommon among medical companies that sell supplies to Medicare beneficiaries, but sellers ignored any possibility of honorable practices as they reduced the stock to one-half of its previous market capitalization. That activity is ample proof that fundamental value can mean very little when the public sentiment is overwhelmingly bearish. One the bright side, a number of oil service issues moved higher in the wake of positive news for the industry. The effects of higher energy prices has pushed the number of rigs exploring for oil and natural gas in the United States to a new 10-year high, stretching the drilling industry to its limits as the companies plough their record revenues into additional exploration. The increased demand for equipment has been a blessing to oil service companies and analysts say the increase in rig use this year has yet to peak. Surprisingly, nearly 80% of the current drilling activity is for gas, marking a complete turnaround from the highs of a decade ago when the majority of rigs were searching for oil. The emphasis on gas exploration means the drilling activity has failed to produce extra crude oil reserves, helping to maintain U.S. inventories near their historic lows. This translates into benefits for the entire industry with explorers profiting from increased demand while refiners reap the rewards of robust prices. The outlook for the group remains bullish and that means higher share values; a necessity for many of the plays in the Spreads section including the Shaw Group (NYSE:SGR), Kerr-Mcgee (NYSE:KMG), Amerada Hess (NYSE:AHC), Weatherford (NYSE:WFT) and Patterson Energy (NASDAQ:PTEN). Questions & comments on spreads/combos to Contact Support ****************************************************************** - NEW PLAYS - ****************************************************************** WCOM - Worldcom $16.88 *** LEAPS with Covered-Calls *** WorldCom (NASDAQ:WCOM) provides a broad range of communications, outsourcing, and managed network services to both corporations around the world. WorldCom is a global communications company utilizing a facilities-based, on-net strategy throughout the international community. The company's primary business is the communications service, which includes voice, data, Internet and international services. From private networking; frame relay and asynchronous transfer mode (ATM) to high capacity Internet and related services, to hosting for complex, high-volume mega-sites, to turn-key network management and outsourcing, WorldCom offers one of the broadest range of Internet and traditional, private networking services available from any provider. With many of the technology issues beginning to exhibit signs of a technical bottom, we though it might be appropriate to search for some conservative, long-term plays. Among telecom companies, WCOM stands out as an issue with little downside potential and a surplus of positive attributes. The company's CEO recently suggested that 2001 revenue growth will be in the range of 12% to 15%, based on strong results in both the United States and Europe. Apparently the company is going to focus on consumer voice and Net access, using its popular consumer brand, MCI, while working even harder on making WorldCom a major player in corporate America. In addition, the company plans to spin-off its consumer side to shareholders later in the year, and that should have a positive effect on WCOM's share value. From a technical viewpoint, the recent basing pattern appears to have buying support near $15 and the potential for upside activity is excellent. Those of you who agree with a bullish outlook for WCOM in the long-term should review this low risk, time-selling position. PLAY (conservative - bullish/calendar spread): BUY CALL JAN02-20 WQM-AD OI=19875 A=$2.93 SELL CALL APR01-20 LDQ-DD OI=33328 B=$0.31 INITIAL NET DEBIT TARGET=$2.50 TARGET PROFIT=100% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=WCOM ****************************************************************** CPST - Capstone Turbine $29.94 *** Reader's Request! *** Capstone Turbine (NASDAQ:CPST) develops, designs, assembles and sells Capstone MicroTurbines for worldwide applications in the markets for on-site power production, also known as distributed power generation, and hybrid electric vehicles that combine the primary source battery with an auxiliary power source, such as a microturbine to enhance performance. The Capstone MicroTurbine is a state-of-the-art system that produces about 30 kilowatts of electricity for commercial and small industrial users. The unit operates on the same principle as a jet engine but can use a variety of commercially available fuels, such as natural gas, diesel, kerosene and propane, as well as previously unusable or underutilized fuels. Capstone's micro-turbine combines patented air-bearing technology, advanced combustion technology and other sophisticated power electronics to produce an efficient and reliable electricity and heat production system that requires little on-going maintenance. One of our readers suggested a position in this issue, based on the continued demand for energy in the western United States and the problems with power production among California utilities. The heavily populated areas near Los Angeles and San Francisco have suffered in recent weeks from "brown-outs" and Capstone is exploiting that issue by forming a subsidiary to sell generators to high-tech companies and other customers who need "full-time" power to operate successfully. Industry experts say distributed generation is very possibly a mainstream solution to some of the problems in California and Capstone expects to benefit from the increased demand. The company plans to open three more offices in the state over the next two months and will offer generating systems that use natural gas, propane, diesel and even waste gas from landfills and oil production platforms. With the potential for heightened demand this summer, the company's earnings will likely improve and traders who want to speculate on the recent bullish activity in CPST shares can use this synthetic position. There is an excellent disparity in the relative price of Puts versus Calls and if a reasonable entry point can be achieved, the position will profit exponentially on any significant rally in the underlying issue. PLAY (speculative - bullish/synthetic position): BUY CALL APR-35.00 CZU-DG OI=288 A=$1.19 SELL PUT APR-22.50 CZU-PX OI=222 B=$0.81 INITIAL NET DEBIT TARGET=$0.00-$0.12 TARGET PROFIT=$0.75-$1.00 Note: Using options, the position is similar to being long the stock. The collateral requirement for the sold (short) put is approximately $700 per contract. http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=CPST ****************************************************************** - TECHNICALS ONLY - These plays are based on the current price or trading range of the underlying issue and the recent technical history or trend. Current news and market sentiment will have an effect on these issues so please review each play individually and make your own decision about the future outcome of the position. ****************************************************************** IRF - International Rectifier $44.03 *** Chip Sector! *** International Rectifier (NYSE:IRF) is a designer, manufacturer and marketer of power semiconductors, particularly a type of power semiconductor called a MOSFET, a metal oxide semiconductor field effect transistor. Power semiconductors perform a power management function by converting electricity into a form more usable by electrical products. They increase system efficiency, allow compact end products, improve features and functionality and extend battery life. The company's products are used in a wide range of end markets, including communications, consumer electronics, information technology, automotive, industrial and government/space. Their products are broadly divided among three product categories: Power Integrated Circuits (ICs) and Advanced Circuit Devices, Power Systems and Power Components. The chip sector is driving the recent recovery in technology issues and one of our technical favorites in the group is IRF. The stock has recently completed a short-term consolidation and is moving higher on excellent volume. Friday's closing price eclipsed the resistance area near $41 and a test of the 150-dma is now underway. Traders who believe the rally will continue can speculate on that outcome with this conservative position. PLAY (conservative - bullish/credit spread): BUY PUT APR-30 IRF-PF OI=1292 A=$0.50 SELL PUT APR-35 IRF-PG OI=471 B=$1.00 INITIAL NET CREDIT TARGET=$0.55-$0.60 ROI(max)=12% B/E=$34.45 http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=IRF ****************************************************************** BCHE - Biochem Pharma $30.50 *** Rolling Over! *** BioChem Pharma (NASDAQ:BCHE) is a worldwide biopharmaceutical company involved in the research, development, manufacturing and marketing of products for the prevention, detection and treatment of human diseases. Biochem's most advanced therapeutic product candidates are being developed primarily for use in the treatment of cancers and infectious diseases. BioChem is also engaged in the research, development, production and marketing of vaccines for human use. BioChem's anticancer and anti-infective research and development activities are either done internally, through agreements with CliniChem Development Inc., or through strategic alliances. The company shares commercialization rights for 3TC and Zeffix with Glaxo Wellcome in Canada and has granted to the latter exclusive rights in the rest of the world. 3TC is an orally available formulation of lamivudine for the treatment of patients with HIV infection and AIDS. Here is a bearish position that was discovered with one of our primary scan/sort techniques; identifying potentially failed rallies on issues with bullish options activity. In this case, the premiums for the (OTM) Call options are slightly inflated and the potential for a successful recovery is significantly affected by the resistance at the sold strike price; a perfect condition for a bearish credit spread. PLAY (conservative - bearish/credit spread): BUY CALL APR-37.50 BQX-DU OI=3799 A=$0.69 SELL CALL APR-35.00 BQX-DG OI=2823 B=$1.00 INITIAL NET CREDIT TARGET=$0.38-$0.43 ROI(max)=17% B/E=$35.38 http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=BCHE ****************************************************************** - STRADDLES - ****************************************************************** HNCS - HNC Software $20.97 *** Low Risk - Low Reward! *** HNC Software (NASDAQ:HNCS) provides a range of unique solutions incorporating intelligent response, decision management and analytics for acquiring, managing and retaining customers in the banking, insurance, telecommunications and e-commerce industries. HNC Software's customer insight platform and industry expertise boost businesses speed and accuracy in differentiating between customer value and risk; determining what customers want while protecting their privacy; delivering personalized service and managing customers more profitably and developing loyal business relationships. By analyzing volumes of customer transactions in real-time, their predictive solutions help companies shift the decision-making process from a retrospective to prospective basis. Here is another candidate for traders who participate in neutral strategies. This position meets the fundamental criteria for a favorable straddle; cheap option premiums, a history of adequate price movement and future events or activities (earnings are due April 18, 2001) that may generate volatility in the issue or its sector. This selection process provides the foremost combination of low risk and potentially high reward. As with any position, it should be evaluated for portfolio suitability and reviewed with regard to your strategic approach and trading style. PLAY (speculative - neutral/debit straddle): BUY CALL APR-20 NSQ-DD OI=1005 A=$2.50 BUY PUT APR-20 NSQ-PD OI=340 A=$1.50 INITIAL NET DEBIT TARGET=$3.75-$3.88 TARGET PROFIT=20% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=HNCS ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. 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