The Option Investor Newsletter Monday 04-02-2001 Copyright 2001, All rights reserved. 1 of 1 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/040201_1.asp Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 04-02-2001 High Low Volume Advance/Decline DJIA 9777.90 -100.90 9992.50 9705.10 1.21 bln 1182/1861 NASDAQ 1782.97 - 57.29 1852.49 1769.66 1.85 bln 1022/2724 S&P 100 584.40 - 7.23 597.18 579.47 totals 2204/4585 S&P 500 1145.87 - 14.46 1169.51 1137.51 32.5%/67.5% RUS 2000 439.76 - 10.77 450.53 439.51 DJ TRANS 2745.02 - 26.34 2791.87 2739.23 VIX 34.75 + 0.93 35.85 32.41 Put/Call Ratio 0.75 ****************************************************************** New Quarter, Old Story Spring is here. Birds are chirping and the boys of summer took the field today. However, the spring promise of beautiful days to come was put on hold as the winter doldrums extended into the second quarter today. Clearly, there remains a decided lack of confidence in the stock market as we head into the next earnings season. The positive momentum that carried us through the end of last week was severely damaged today by bad news from the pharmaceutical sector. Schering-Plough (NYSE:SGP) and generic drug companies American Home Products (NYSE:AHP) and Upsher-Smith Laboratories were sued by the Federal Trade Commission today, which charged that the drug companies violated Anti-trust laws by conspiring to keep generic drugs off the market. The drug sector had been a relative safe harbor for investors but if these accusations have merit, more drug companies could be scrutinized for similar violations. The Pharmaceutical Index (DRG.X) dropped 10.24 points to 374.87. SGP lost $1.07 to $35.46 and AHP lost $2.25 to $56.50. Meanwhile, American Express (NYSE:AXP) lost $1.59 to $39.71 following a warning that first quarter profits should be about 39 cents. Previous estimates were calling for profits of 51 cents. The company cited diminishing revenues from its Financial Advisors Group as well as a deteriorating economy for the shortfall. Honestly, though, the Dow Jones Industrials (INDU) actually held up pretty well considering all of the bad news. For the day, the INDU lost 100.75 and closed at 9778.03. The INDU had traded as low as 9,705. The broader NYSE saw decent volume of 1.2 billion shares. Decliners trumped advancers by 19 to 12. The NASDAQ (COMPX) dove to a new 29-month low following another ugly day for technology stocks. Weakness was pronounced in the semiconductor sector, as the (SOX.X) fell 41.90 points to 503.15. For the record, the NASDAQ lost 57.29 points and closed at 1782.97. Volume was pretty solid for a Monday, coming in at 1.83 billion shares. Losers crushed winners by a 27 to 10 ratio. The NASDAQ's most active list saw declines from Dell Computer (NASDAQ:DELL), Applied Materials (NASDAQ:AMAT), JDS Uniphase, (NASDQAQ:JDSU) and Qualcomm (NASDAQ:QCOM). Software company Acxiom (NASDAQ:ACXM) was the disaster du jour, as it fell $9.38 to $11.50 following an earnings warning. The company said that fourth-quarter earnings are likely to fall into the 10 to 12 cent range while previous estimates were calling for profits of 36 cents a share. As for the broader and smaller markets, the S&P 500 (SPX) dropped 14.50 to 1145.85 while the Russell 2000 (RUT), which had been somewhat stronger than the big stock indices, collapsed 10.77 to 439.76. As for the bond arena, Treasury prices did not respond favorably to today's economic news. The National Association of Purchasing Management Index rose to 43.1% in March. Estimates were calling for a level of 42.5%. The numbers indicate the beginnings of an economic recovery, which may hamper the Fed's inclination to continue easing. The 10-year Treasury note dropped 14/32 to a yield of 4.97% and the 30-year government bond fell 17/32 to a yield of 5.48%. There appears to be no rest for the weary in the after hours, especially among NASDAQ traders. Software firm Ariba (NASDAQ:ARBA) released disturbing news that its second quarter earnings will be well below expectations and as a result the Company will slash a third of its workforce, or 700 jobs. ARBA is pre-releasing losses of about 20 cents while previous estimates were looking for a loss of about 5 cents. ARBA finished the regular trading session down $1.41 to $6.50 and is down more in after hours trading. This former high-flyer has a 52-week high of $173.50. Another former high-flyer of the software world, Inktomi (NASDAQ:INKT), also announced that it will slash 25% of its workforce as its business continues to crumble. The company expects a loss of 23 to 25 cents and analysts had been expecting a loss of 4 cents. INKT closed at $6.22 during regular trading hours but is trading as low as $4.60 in after hours. Inktomi has a 52-week high of $195.12. There are obviously continuing problems in the networking and fiber-optic equipment world, as Redback Networks (NASDAQ:RBAK) also decided to cut its workforce. Redback will eliminate 150 jobs, or 12 percent of its workforce. The company will have to take a restructuring charge of $27 million over the next couple of quarters. Redback closed the day at $11.70 and is trading down to $10.15 in after hours trading. With so many former high-flyers now approaching zero, one has to ask the question, when will it all end? It is important to point out that when the Internet high-flyers starting falling into single digits many people started trying to pick a bottom. Most of them are very sorry, as many of these Internet stocks are either in bankruptcy or close to it. If you have to bottom fish in the technology sector it would behoove you to stick with the big boys that are extremely unlikely to go belly up. Dell Computer (NASDAQ:DELL), IBM (NYSE:IBM), Sun Microsystems (NASDAQ;SUNW), Microsoft (NASDAQ:MSFT), Cisco Systems (NASDAQ:CSCO), Oracle (NASDAQ:ORCL), Corning (NYSE:GLW), Intel (NASDAQ:INTC) and EMC Corp (NYSE:EMC) all come to mind. It would also probably be a good idea to avoid buying the shares of any company that is still not profitable. It is becoming increasingly unlikely that these companies will ever show a profit. If they cannot make money when the economy is flying, how are they going to make money in a slowdown? At some point these companies will likely go broke, especially since there is clearly no money available in the secondary market to keep them afloat. Until the longer term trend improves for the Nasdaq, traders will simply have to take quick profits. The short term technical picture for the NASDAQ is suggesting that we are near a bottom. The RSI is indicating a very oversold condition and the MACD is trying to put in a bottom. However, momentum is a powerful force, and we could see a quick drop to 1,500 if we get some more bad news. If this occurs, it would likely present an excellent buying opportunity. Otherwise, be cautious about getting caught up in bear market rallies. The technical picture for the Dow Jones Industrials looks to be improving a bit. Some money seems to sloshing back and forth between drugs, cyclicals and some financials. There generally has not been much progress, but we could see a decent rally if the Dow can climb back over the 10,000 resistance. Be careful with long Dow positions if the average drops back below 9550 because it could spark a quick retest of 9000. Good luck and may all of trades be winning ones! Jim Booth Research Analyst www.OptionInvestor.com ************************************ TOPICS and SPEAKERS 3rd Annual Trading Expo April 5th-9th, Denver Colorado ************************************ If you have not reserved your seat at the Spring Trading Expo here in Denver on April 5th-9th then you are missing the best seminar we have ever held. This power packed four-day event is structured to fully educate you not only on advanced option strategies but stock analysis as well. This 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************************* What will your strategy be for 2001? The VRTrader.com Annual Forecast Model Your road map to the 2001 market! Forecast is prepared by 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. Order your today! click here: http://www.sungrp.com/tracking.asp?campaignid=1939 ************************************************************** ************* NEW CALL PLAY ************* WFC - Wells Fargo Corp. $49.69 +0.22 (+0.22 this week) Wells Fargo is a $272 billion diversified financial services company providing banking, insurance, investments, mortgage, and consumer finance services through 5400 stores, the nation's #1 internet bank, and other distribution channels across North American and elsewhere internationally. The banking index has been in an upward channel since its low point of 486 a year ago, and today, while the rest of the market was selling off, BIX.X poked its head through its 50 dma of 639 and closed just a quarter point below it. As a money center bank, WFC is one of the premier financial institutions which has demonstrated its ability to maneuver through difficult times. WFC's daily chart shows a neutral wedge which developed since October, and as WFC just cleared its 50 dma of $49.36, it appears that the stock is well poised to break out to the upside with momentum. The wave of consolidation which has been sweeping the financial service industry is drawing additional attention to the banking and insurance sector. WFC made a dramatic rebound from a low of $42.55 on March 22 when the Dow rebounded, as the market responded well to news released regarding WFC's purchase of HD Vest. WFC is purchasing HD Vest, the nation's largest provider of financial services for tax professionals, for $127.5 million. Prior to this announcement, WFC reported that they had signed an agreement to purchase ACO, the parent company of Acordia, one of the nation's largest independent property and casualty insurance agencies. On Monday, WFC dipped to $49.12 during the height of the sell off, which confirms the pattern of higher lows formed since March 22 at $42.55, $46, $48, and $49.12. With a little help from BIX.X, WFC should be able to clear $50 on strong volume, which could be an entry point for conservative traders. More aggressive traders could take positions on a pullback to $49, if BIX.X is rallying. WFC is scheduled to report earnings on April 17, which gives traders time to scale in to an earnings run. Monitor others in the sector like BAC, and FTU, and set stops at $48. We will close positions if WFC closes below $48. BUY CALL APR-45 WFC-DI OI= 7826 at $5.20 SL=3.00 BUY CALL APR-50*WFC-DJ OI=21720 at $1.55 SL=0.75 BUY CALL MAY-45 WFC-EI OI= 775 at $6.00 SL=4.00 BUY CALL MAY-50 WFC-EJ OI= 1079 at $2.70 SL=1.25 http://www.premierinvestor.net/oi/profile.asp?ticker=WFC ************ NEW PUT PLAY ************ MRX - Medicis Pharmaceutical $43.99 -0.83 (-0.83 this week) Focused primarily on the treatment of dermatological conditions, MRX is an independent, specialty pharmaceutical company, based in the United States. Targeting major segments within dermatology, MRX provides products for the treatment of acne, rosacea, aczema, hyperpigmentation, pediculosis, psoriasis, and dermatitis. The company offers a long list of targeted products both by prescription and for the over-the-counter (OTC) market. The recent selling frenzy of stocks drove home the point that in a sharply declining market, there really is no safe haven. Even Drug stocks, normally a defensive sector, took a beating less than 2 weeks ago as all the major indices set new lows for the year. The bounce back was just as swift as the decline, due in large part to short covering. Although not a member of the index, our new play, MRX, has been tracking right along with the Pharmaceutical index (DRG.X). Crashing down 2 weeks ago and then recovering last week, MRX is ready to slide down the slippery slope again. Resistance in the $45-46 area has been too much for the bulls to handle, as the stock has fallen back from that level on each of the past 4 days. The bears have been helped by the 2-month descending trendline, which is now sitting at $45.50. Throw in a daily Stochastics oscillator which is rolling over from overbought to complete a pattern of bearish divergence, and this looks like a compelling trade based on the combined bearish technicals. The first level of intraday support that we need to contend with is $43, and a break below there would be the trigger point for conservative traders to initiate new positions. The more aggressive approach will be to target another failed rally to the $45-46 level. Once it is clear that the stock is rolling over again, feel free to jump into the play, as long as the rollover is confirmed by weakness in the DRG.X. In either case, protect your position by setting your stop at $46; if the price can push through that level, it will be a strong signal that the bulls are getting bold again. BUY PUT APR-50 MRX-PJ OI=34 at $6.80 SL=4.00 BUY PUT APR-45*MRX-PI OI=20 at $3.10 SL=1.50 BUY PUT APR-40 MRX-PH OI=31 at $0.90 SL=0.00 High Risk!! http://www.premierinvestor.net/oi/profile.asp?ticker=MRX ***************** STOP-LOSS UPDATES ***************** PMI - call play Adjust from $63 up to $64 AETH - put play Adjust from $14 down to $13 AMGN - put play Adjust from $62 down to $60 DPMI - put play Adjust from $45 down to $44 ISSX - put play Adjust from $30 down to $29 NSM - put play Adjust from $28 down to $27 SONS - put play Adjust from $23 down to $21 XLNX - put play Adjust from $38 down to $36 ************* DROPPED CALLS ************* ERTS $53.44 -0.81 (-0.81) After the stellar run that ERTS has had over the past couple of weeks, it's no surprise that there are those eager and willing to take some profits. With that in mind along with a down day for the NASDAQ, shares of the video game software maker pulled back today, retreating 1.5 percent. While the volume was average, the stock encountered resistance from its 5-dma line (now at $54.88). Although the 10-dma at $52.77 provided support today, the close below our stop price of $54 takes this play off our recommended list. UVN $37.33 -0.83 (-0.83) It appears that resistance from the 50-dma is proving to be formidable. Shares of the Latin broadcasting giant have flirted with this moving average for the past five trading sessions. With weakness in the broader markets, the stock slipped 2.18 percent today. Volume was just over half the ADV, suggesting that it was not so much strong selling conviction that caused the pullback but rather, tentativeness on the part of the buyers. However, with the 5, 10 and 50-dma clustered together between $38 and $39, resistance overhead is heavy. Add to that the close below our stop set at $38 and we have little choice but to drop coverage of this play. ************ DROPPED PUTS ************ No dropped puts tonight ************** TRADERS CORNER ************** The Value of History By Molly Evans Growing up in a small Missouri town in the early seventies, no one had much money and really, no one cared. My parents, younger sister and I lived in a small house but had enough to eat and thought vacations to St. Louis were quite special. My dad drove a '58 Chevy and Nancy and I had to hold our feet up on the back seat because the road could be seen through the floorboards. But that was fine. We had a tree house, a big back yard and a two foot pool. What more could a girl want? I remember a traveling salesman came calling one day. He had a beautiful set of encyclopedias for sale. My dad let him in and perused the sample volumes with wanton desire. He managed to convince my mother that though quite expensive, they were well worth the price. My dad has always had a love for studying history. He'd study those encyclopedias for hours and would encourage me to think of any subject, pick one up and read about my chosen topic. Nah. Forget that. I had playmates outside and a purple bike to ride to the stop sign and back. Little did I know he had a wicked scheme in the works. My mom was part of a card-playing club. Every Tuesday evening, she'd leave my sister and me with Dad for her evening out. I came to dread Tuesday evenings because it was the time for my dad to play out his harassing scheme. My sister and I would from then on lose our Tuesday evening playtime to "lessons." Yes, I knew about Anastasia before it was fashionable to know about Anastasia. I knew who Winston Churchill was at age six. He even had the audacity to test us. Of course, always the rebel, I fought it with all my might. Nancy, who was only 4 or 5 at the time would tell me, "Molly, just listen to him and then we can be done." But no, I couldn't sit quietly and found that my own stubbornness was surpassed only by his. In fact, it's still that way today but admittedly, I do now share his voracity for studying history. Care to guess what I find so engrossing? The market, of course. It's a fascinating read. Right now I'm into John Steele Gordon's, "The Great Game." From Wall Street's beginnings as a Dutch influenced trading post to the super power it is today, Gordon has recounted many interesting tales and brought numerous characters back to life. My dad taught me that if one would learn about historical events, he could foretell future events. History repeats itself. Edwin LeFevre's 1923 classic "Reminiscences of a Stock Operator," is still a very high seller in bookstores today because it is timeless. It captures the very real and persistent frailties and lessons of a trader. Isn't it prescient that Lefevre comments, "Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics, the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature." And that is why markets are susceptible to bubbles and panics, booms and busts. People make up the markets and peoples' emotions, greed and fear surface again and again in the market. The First Recorded Financial Bubble - the Real Story of Tulipomania New York or Nieuw Amsterdam, as it was called, was colonized by Dutch settlers in the early 1620's. The Dutch were quite a progressive breed. They invented modern capitalism in their own city of Amsterdam in the early seventeenth century through the commercialization of banks, stock exchanges, credit, insurance and limited-liability corporations. As a result, the Netherlands exploded with wealth and became a formidable powerhouse in Europe for that time. Within their own stock exchanges, the early techniques of market manipulation were born such as short selling, bear raids, price fixing and cornering. With this level of sophistication already in progress, it should be of no surprise that an equal level of speculation was possible. With the introduction of tulips into Western Europe in the middle of the sixteenth century from Turkey, a craze developed for the flower. The rich paid handsomely to compete with the Jones' for the rarest and richest varieties in their own gardens. By the early 1630's, the competition had developed into a speculative frenzy. Tulip bulbs were purchased not for growing but for the expectation of continued inflation. One could always sell his bulbs at a higher price. By 1635, a rare bulb known as the Childer had an asking price of 1,615 florins. According to Gordon's research, consider that a team of four oxen, the equivalent of one tractor, could be purchased for 480 florins. One thousand pounds of cheese, 120 florins. Yet still, the prices paid escalated. In the next year, a single bulb of a particularly rare variety sold for 4,600 florins PLUS a new carriage, two gray horses, and a complete set of harness. But the day of reckoning was inevitable. At some point, someone refused to pay the higher price and soon the craze to buy was surpassed by the craze to sell. Price collapsed and people were financially ruined. And so it was that the people who participated in a mania that settled into a small colony now known as New York. It's amusing to read Gordon's accounting of their establishment. "From the very first it differed from most of the other colonies that were planted on North America's eastern seaboard in that century. The Puritans of New England, the Quakers of Pennsylvania, the Catholics of Maryland, all came to the New World to worship God as they chose. In each case, the colonists' first task as they saw it, was to build a shining city on a hill, a community to be emulated for its piety and morality. But when the Dutch set up shop - quite literally - in their new colony, their purpose was only to make a buck. So busy were they pursuing wealth that they didn't even get around to building a proper church for seventeen years." As New York's origins and character were distinctly different from that of the other colonies, tensions grew from the very beginning. Thomas Jefferson called the city "a cloacina of all the depravities of human nature." Today, things may not be all that different. To the rest of the country, New York resides in a class all its own and is perhaps viewed with disdain for its brisk nature. New Yorkers, it seems, sees the rest of the country as morally smug and obviously, boring. There are many more great stories between the covers of the book. If you like history, check it out. See some of you at the seminar this coming weekend? Please say hello! Looking forward to meeting you. MKE *************************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=1953 ************************************************************ ********************* PLAY OF THE DAY - PUT ********************* XLNX - Xilinx Inc $33.13 -2.00 (-2.00 this week) Xilinx develops and markets complex programmable logic solutions. Their design software allows clients to customize chips to meet specific needs. The company's solutions include advanced integrated circuits, software design tools, predefined system functions delivered as cores of logic, and field engineering support. They primarily market to electronic makers who use the chips in telecommunications and data processing equipment, industrial controls, military and aerospace applications, and networking equipment. Blue chip clients include Alcatel, Cisco, Fujitsu, IBM, Lockheed-Martin and Nokia. Most Recent Write-Up Unnerved investors may have thought the worst was over, but chipmaker XLNX led the semiconductors lower as the NASDAQ continued its slide on concerns of eroding corporate profits. After Palm and Nortel Networks lowered their sales forecasts, XLNX fell off the cliff. The historical support at $40 crumbled under the broad selling pressure. At the moment, XLNX is teetering precariously at the $35 level. Xilinx's counterparts like MXIM, CRUS and MU have also taken severe lashings of late. With the general sentiment of more earnings disappoints to come, we're anticipating more weakness across the sector. The Philadelphia Semiconductor Index (SOX.X) provides traders with a panoramic account of the semiconductors, so look for continued action under the 550 level for bearish confirmation. More specifically, if traders take XLNX through $35 on respectable volume, then get ready to jump on this put play. The more aggressive types might also find an entry if XLNX rolls over near the trailing 5-dma, at $39. Lows of this magnitude haven't been seen since October 1999, which of course leads us to the topic of using stops for protection. We have a closing stop set at $38; although if you're erring on the side of caution or playing a sharp decline, set your intraday stops accordingly. Comments Chip stocks fell under pressure Monday on concerns over future earnings. Those concerns were evident in XLNX as the stock fell to a new 52-week low. In addition, the Semiconductor Index (SOX.X) fell closer to critical support at the 500 level. With concerns mounting, XLNX is susceptible to further weakness. Traders might look for new put entries early Tuesday morning if XLNX falls below $32.50. A more aggressive entry might be offered if XLNX rebounds up to the $35 level and subsequently rolls over. BUY PUT APR-35*XLQ-PG OI=4484 at $4.38 SL=2.75 BUY PUT APR-30 XLQ-PF OI=3253 at $2.00 SL=1.00 http://www.premierinvestor.net/oi/profile.asp?ticker=XLNX Get 10 FREE Issues of Investor's Business Daily. No obligation. Nothing to cancel. http://www.sungrp.com/tracking.asp?campaignid=1930 ************************************************************** ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. 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