Option Investor
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Daily Newsletter, Thursday, 05/24/2001

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The Option Investor Newsletter                 Thursday 05-24-2001
Copyright 2001, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        05-24-2001        High      Low     Volume Advance/Decline
DJIA    11122.40 + 16.90 11173.40 11045.00 1.11 bln   1585/1461 
NASDAQ   2282.02 + 38.54  2282.19  2226.26 1.84 bln   2133/1667
S&P 100   668.30 +  3.11   668.74   661.01   totals   3718/3128
S&P 500  1293.17 +  4.12  1295.04  1281.22           54.3%/45.7%
RUS 2000  510.40 +  3.04   510.41   503.85
DJ TRANS 2951.01 - 18.15  2969.99  2928.03
VIX        22.94 -  1.71    24.65    22.84
Put/Call Ratio      0.59
******************************************************************

Bad News Priced In!

After much crying and whining the Senate deed was done and the
markets decided the economy was not going to self destruct and
we moved up again. Actually the move was broader than indicated by
the major averages. The Nasdaq dipped back to 2226 after the opening
spike and then rallied to close back over resistance at 2250 again.
The Dow tested 11050 twice but that was as close as bears could push
it to 11000.






The Senate guessing game is over and there was no economic meltdown.
Traders bought the dip on things like drugs, health care and some
defense stocks. All the bad news, which was really uncertainty about
what would actually occur, was quickly absorbed by traders and fund
managers quickly put more money to work. They had money to spend
according to TrimTabs.com which said in the week ended yesterday
+$7.2 billion in cash came into equity funds. That to me is a sure
sign that retail investors think the market has bottomed. Remember
last week there was actually fund outflow as people worried there
would be a post Fed drop.

The market choked for a moment on the New Home Sales numbers which
were announced this morning. The -9.5% drop was the largest decline
in four years and showed that despite decreasing interest rates
consumers had pulled back from buying that new home on concern for
the economy and their jobs. The market dipped on the news and then
rallied because it would put pressure on the Fed to continue cutting
rates to bolster consumer confidence and create new jobs.

Then there was the semiconductor sell off that was stopped in its
tracks by Intel. Thank you Intel! Intel said they were still on
track to spend $7.5 billion on capital expenditures this year. This
was $1 bil more than last year and is 20% of the spending for the
entire sector. They also said their Internet initiative was alive
and well and doing fine. They said that PC penetration in Europe
was only half that in the U.S. and growth was still strong. The
SOX stopped on a dime at 640 and started back up again. That was
exactly the point that the Nasdaq recovery started. Thank you again
Intel!

Microsoft is slowly crowding strong resistance at $72 and appears
ready to breakout. The cause is the persistent rumor that they are
going to announce a settlement with the Justice Dept. Should that
occur the stock could see $120 very quickly. The price depression
for the last year has been severe on a stock that is adding literally
billions of dollars in profit going forward. If this is really about
to come to a conclusion leaps could be a wise investment. Somebody
else thought so as well. Look at the volume today on the Jan-03 $100
leaps, 17,045 and 8,200 on the Jan-03 $90 and 2,164 of the $120.
That is a huge chunk of speculative change!

Oil stocks suffered some today after Lehman analyst Jim Driscoll
said prices were already 10% too high based on oil under $30 a
barrel. Gasoline futures however were heading in the other direction
and soaring in advance of the summer vacation season. Oil was not
the only commodity under pressure. Gold stocks took a dive after
the Russian president said he might sell some of their reserves
and give the proceeds to flood victims.

Probably the foremost thing on investors minds tonight is Fedspeak.
Governor Meyer was out in front today saying the risk was still
for a weak economy (bullish) but then he said the Fed must calibrate
the rate cuts to prevent overshooting the economy and increasing the
risk of inflation. Speculation all day has been that Greenspan was
going to be more bullish on the economy in his speech to the Economic
Club of New York tonight. Meyer is a known inflation hawk and it is
possible he was taking a pre-emptive shot at a bullish Greenspan
speech in an effort to blunt any optimism. A little infighting here?

Friday we get a couple more economic reports, the first quarter GDP
estimates and Durable Goods. GDP is estimated at a 1.4% rate and a
drop in Durable Goods of -2.2%. Both should be a non-event assuming
they come inline with estimates.

The breadth of the markets was better than the surface numbers would
reflect. Advances beat decliners on both major indexes but just as
important there was significantly higher new highs than new lows
on both major exchanges. The NYSE was 122 to 22 and the Nasdaq
managed 131 new highs to 24 new lows. I looked at a couple hundred
charts tonight and there were far more moving up strongly than were
moving down or sideways. While the battle between the bulls and bears
is taking place in the bigcaps, the small and midcaps are gaining
ground. If Greenspan does not give us another "irrational exuberance"
speech tonight then we could see another breakout attempt on the
Nasdaq in our near future. That is a big "IF" but Greenspan needs to
bolster consumer confidence and a bullish speech is cheaper for the
Fed than another rate cut. Greenspan is not stupid, late to the party
but not stupid. The week after Memorial Day has been kind to investors
in the past and hopefully that trend will continue.

Unfortunately the week after Memorial Day also signals the start of
summer and the beginning of the earnings warning period for the second
quarter. With pre-warnings already at record levels investors are
betting that it cannot get any worse. Actually if things are starting
to get better in certain tech sectors we could actually see some
positive comments which could really spark the market if they occur.
Volume has been light recently and even lighter summer volume could
be the depressing factor. Volume on the Nasdaq Thursday was only 1.8
billion and 1.1 billion on the NYSE. Not good but not as bad as several
days recently. Several brokerages have said they were seeing more retail
investor activity and the +$7.2 billion inflow last week is a very
bullish sign. Could it be there is a rare summer rally in the making?
Time will tell!

Away from your computer? Call 900-378-PICK and get this
information along with the intraday updates and plays.

Enter passively, exit aggressively!

Jim Brown
Editor


****************************************************
Capturing Stock Appreciation With Leap Puts - Repeat
****************************************************

The Leap Put seminar was held on Sunday to rave reviews.
However dozens of people for one reason or another were
unable to attend. We are going to repeat this seminar one
more time at 9:PM ET on Wednesday May-30th. If you are
interested in attending an online seminar on my strategy
of capturing stock appreciation by selling Leap Puts this
is the last time it will be presented. It will last 2 hours
and be interactive. You will be able to ask questions and
I will answer your questions in real time with charts and
diagrams. You do not need any special software to view the
seminar but you must have a 56K Internet connection or
faster for best results and a separate phone for the audio
portion.

If you are interested in this seminar please click here
for more information.

http://www.premierinvestorseminars.com/online/052001_jbrown.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.IndexSkybox.com
************************************************************


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

Opportunity Cost
By Matt Russ

Yesterday's pullback in the Nasdaq gave us a great chance to jump
into some long positions.  It feels like we are getting back to
that environment where the reward to buying the dips outweighs
the risk.  It's been a long time, but we are thrilled to have
this type of opportunity.  I even grabbed some QQQs today for
the long-term account.  Like last Friday, we got some good buying
late in both the Dow and the SPX after wandering down to support.
The buyers are there and the opportunity cost of NOT jumping on
this train might be too great to ignore.

NASDAQ & QQQ
Wednesday's pullback in tech and biotech issues offered a prime
opportunity for entry into the recent rally.  The usual work-
horses for the Nasdaq like Ciena(NASDAQ:CIEN) and JNPR(NASDAQ:JNPR)
have been relatively quiet lately.  Biotechs and Internets led
the way today after a test of previous resistance on the Nasdaq
near 2232.  The actual low was 2226, but the Nasdaq rallied
back to finish at the high, 2281.  On the chart below, I've taken
a retracement from the relative high of 2892 set on January 24th
this year to the low on April 4th of 1619.  Those levels can be
seen justified to the right on the chart.  We have gained back
about 50% of the losses incurred during that time.  From the
shorter-term bracket, the Nasdaq closed right near the projected
resistance of 2280 (127.2%).  Next resistance will be near
Tuesday high of 2328 with support at 2255 and 2230.  On the QQQs,
$48.50 has been attracting buyers, with resistance at $50.66
and $51.64.




SPX & OEX
The SPX closed right on a key retracement level, which is actually
a bracket within a bracket.  1315 is a critical resistance level
overhead and a break would be a bullish signal.  Immediately in
sight is the 1296 level which had sellers before and after the
break to 1315.  There also may be sellers lurking just above 1300
to 1302.  The good news was that the SPX gave a fantastic entry
point today off of support at 1281 once again.  Last Friday we saw
a similar rally into the close off of 1281.  With a bullish bias,
we could see higher support established in the 1284 - 1287 area.
On the OEX.X, support was retested at 661 before the late-day
rally, with resistance above at 670 and 673.






DOW 30
Okay, new levels for the Dow.  Wednesday's close was exactly on
a key retracement at 11105.  Taking a bracket from all the back in
January 2000 when the Dow made its all-time high at 11723 to the
recent low near 9100, we break up the ranges.  The next bracket
anchored at 10723 to that all-time high gives us levels to look at
within that void.  While the Dow dipped to 11044 today, it rallied
to close above that key support of 11105.  Next resistance will
be at 11224, which is the 50% level of the short-term bracket.
Above that is 11342, the relative high from Tuesday which also
happens to be the 38.2% level.  While most of the market is
waiting on the revised GDP numbers tomorrow, the bullish sentiment
is there and will likely continue after the holiday weekend,
regardless of the initial reaction.




Today's rally into the close for all the major indices shows that
investors want their chance too.  The fear has shifted to not
participating in this stealth rally.  The simple fact that
buying the dips is coming back in vogue tells us something.  While
volatility has imploded and the VIX.X closed today at 22.94, we
are seeing a definitive shift to the bullish side.  It wouldn't be
surprising to see the markets continue their upward momentum as
volatility settles lower, just like last year between May and
July expiration.  The worst case scenario has been priced in.
Determine your opportunity cost and manage those positions.

Trade Smart,

Matt Russ


**********************
CBOT Commitment Of Traders Report: Friday 05/18
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         +65713     +47090         -72034      -49689
Total Open
Interest %       (+32.56%)  (+21.09%)      (-10.15%)   (-7.33%)
                 net-long   net-long       net-short   net-short

DJIA Futures
Open Interest
Net Value          -7166      -7572          +8151       +7468
Total Open
Interest %       (-54.70%)  (-62.11%)      (+22.89%)   (+21.83%)
                 net-short  net-short      net-long    net-long

NASDAQ 100
Open Interest
Net Value          +4578      +2657         -12711       -9986
Total Open
Interest %       (+26.20%)  (+13.59%)      (-21.87%)   (-17.20%)
                 net-long   net-long       net-short   net-short


What COT Data Tells Us
**********************
Indices: Commercials added significantly to their net-short
positions on the S&P 500 while the Small Specs increased their
net-longs. Divergence was also seen increasing on the NASDAQ 100
with the Small Specs adding to their net-longs and the Commercials
going further net-short.

We need to keep in mind that this data was compiled on the
session's close prior to Wednesday 5/16 short-squeeze rally. These
figures may have changed since the time of government compilation.

Gold: Commercials have switched from net-long to net-short as they
now seem to have gold under distribution at higher prices after
accumulating during lower prices. Expect the current gold rally
and XAU index to top out soon.

Copper: Commercials have been building extreme net-long position
in this industrial metal, a bullish sign for economic health.

Eurodollars: Commercials are at a five-year extreme net-short on
an interest rate play in reflection of lowered rates currently and
ahead.

Summation: Commercials are looking for lower interest rates, lower
gold and higher copper prices based on their positions here. Of
particular notice was the switch in gold from net-long last week to
net-short this week, a warning sign that large users are now
selling into the current retail rally.

Data compiled as of Tuesday 05/15 by the CFTC.


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

Please visit this link for Market Posture:

http://www.OptionInvestor.com/marketposture/052401_1.asp


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

Feathers for Your Hat
By Molly Evans

If timing is everything in trading, then it is far better to have
a precise plan for entries and exits to increase the probabilities
for a profitable trade.  Most traders have their pet technical
indicators: stochastics, moving averages, MACD, relative strength,
directional movement and rate of change to name a few.  Those
are all great for specific chart movements.  However, traders
should know that when determining an entry or exit point, there
are a couple of other very good indicators for quantifying the
probability of being "correct" in their action.

Having converted to index trading for the most part, I monitor
the action of the S&P 500 and Nasdaq 100 futures closely.  The
symbol for the S&P contract is ES01M (that's the E mini - the
quote is better on it because it's not traded in the pits)
while the symbol for the Nasdaq is NQ01M.  These contracts can
be traded in a futures account, which is a lot different than
trading options on the indices.  The futures are dominated by
professionals, action is swift and risk is unlimited.  It's
a tough game and can be very lucrative or very expensive if a
trader is not disciplined in getting out when wrong.

What I do the first thing in the morning is pull up the charts
and tape action of the futures contracts through the night.  I
note where the previous day's high and lows were, action around
those numbers and then look at the highs of lows of the night
session on the Globex (the electronic format that the futures
trade through.)  The market will so very often go back to test
the range on either side if there's nothing making it push right
through those levels on a gap secondary to news and events.

Action at each of those points is important.  The futures
will often define the strength or weakness of the index.
Continuously throughout the day, I'm watching the time and sales
tape of both contracts.  You learn so much just by watching the
bids and asks while paying special attention to the sizes of
those bid and ask lots.

There are a couple of other things that if I didn't have on my
screen I'd feel like I was driving blind.  These are the
intraday Arms Index (symbol TRIN.NY and TRIN.NQ) and the tick
charts (symbol TICK.NY and TICK.NQ).  These indicators have
been discussed in previous columns here but nevertheless, it
doesn't hurt to review.

The Arms index is the indicator often referred to as having
called the intermediate bottom of the latest down trend in
the market.  Don Hays, an increasingly popular market analyst,
made it known loud and clear that the ten-day Arms Index was
flashing its buy signal on March 16th.  Historically, when
the ten-day average of that indicator reaches 1.5, the market
has bottomed within twenty days at the most, often within
just a few days. Of course, Dick Arms too was on CNBC to
proclaim the same sentiment.

TRIN stands for Trader's Index.  However, since Dick Arms
was the man to formulate it, he would like to see it called
the Arms Index.  In any event, this indicator is based upon
two of the most important factors of the market:  advancing
issues over declining issues which is then divided by the
value of advancing volume over declining volume.  Many market
strategists follow variations of the Arms Index, tweaking it for
their individual analysis and these make for interesting
observations when the market is closed.

During the day however, I look at the raw Arms.  It gives me a
sense of the breadth and volume.  This one is easy, there's no
magic to learning it.  If the TRIN is trending up, there's an
air of selling in the air.  If it's trending down, there's
buying pressure.  What's nice is when you see the TRIN moving
one way but the index is moving the other.  Which way do you
think is right?  Yes.  Go with the TRIN.  It's a market internal.
Price can diverge but not for long.  Like every indicator there
are extremes and no, I don't know specific numbers but know
that when I see it turn sharply that I want to be thinking about
getting in a position to go along with it or exiting the one
that is going against it.

Take a look at the chart.  I've marked it up to illustrate
my convictions.  I'm not saying this is the greatest trading
tool ever, it's just another feather for your hat.  It will
help you to understand the market internals better.  Follow
it for a few days and see what you think.




The other indicator I keep up on my screens are the TICK
charts.  Now I know I couldn't live without these.  The tick
is the number of advancing issues minus declining issues at
that very moment in time.  When the tick is on the high of
the day, the market ideally should be too.  When it's not,
there's a divergence and suggestive of weakness and vice
versa.




Notice that today, the second low of the S&P 500 was not
confirmed by a more negative tick reading?  The selling
pressure had abated as was also being told to us by the
TRIN.  Toss those two factors in with price level sitting
on prior support, oversold short term oscillators and
wah-lah!  You have the makings for a rally.  We can't know
when the rally is actually going to materialize but we
could have seen that at this same time the Nasdaq was
putting in a higher low, and there were buy divergences
on the thirty and sixty minute charts for all three indices.
The buyers always come back because oscillators must
oscillate and sellers aren't going to sell when their
oscillators are sitting on the bottom.  That's just
the way it works.  Can you be patient enough to await
all the alignments?

The best thing to do is just sit back and watch.  Look
at those charts and compare action of the moment to when
it looked like that before.  What happened before?  What
do you think will happen now then?  History repeats itself.
Gosh.  Where have you heard that one before?  *VBG*

Everyone have a great three day holiday weekend.  The market
has an upwards bias going into such a holiday, so keep that
in mind in your trading.  Good luck!

MKE


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


PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

WM $35.63 -0.92 (-1.31) WM failed to gain sufficient momentum
in today's market to merit its continuation on our call play
list.  This could have been attributed to a rotation into
technology, as well as post split profit taking.  Despite the
fact that WM rallied slightly toward the close, it could not
break above our stop level, and as such, we are dropping it
tonight.

CAT $54.40 -0.60 (-0.85) A down day for the NYSE translated into
a down day for CAT yesterday, with the stock retreating $1.20 or
2.14 percent on 1.47 times the average daily volume.  In doing
so, CAT closed right on our stop price of $55.  Today, a
downgrade by ABN AMRO from an Add to a Hold rating led to more
selling, as CAT continued lower on stronger than average volume.
Throughout the rally over the past two months, the 5 and 10-dma
(now at $55.30 and $54.68 respectively) acted as support.  Now
below both these levels, we are taking our profits on this
successful call play.


PUTS:
*****

WLP $85.49 +2.49 (+0.59) Thursday, Goldman Sachs upgraded HCA,
as well as a number of health management organizations including
UHS and HMA.  The bullish upgrade spilled over to WLP and others
in the HMO sector.  While some analysts speculated that a change
in power in Washington DC could impact health care legislation,
we may not know what if any impact this could have on health care
stocks for some time.  However, WLP closed above our stop level,
and as such, we are dropping it tonight.

UHS $78.90 +3.27 (-2.44) This one just didn't go our way.  An
early rise and mild rollover near $78 hinted at the possibility
that UHS wouldn't be able make headway, but unfortunately the
$77 level offered support on the decline.  A spunky reversal in
late afternoon trading bumped UHS through our $78 closing stop
mark and killed the play.  Fellow healthcare provider, United
Healthcare (UNH) also made a swift change in direction tacking
on over 4% amid its recovery.  If you have open plays and are
planning on watching this stock's trend lines, make sure you
mark your calendars.  On June 1st, the company is splitting its
stock 2:1, an event that may or may not effect its trading
behavior.


*************************ADVERTISEMENT*********************
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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:
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************************************************************


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The Option Investor Newsletter                 Thursday 05-24-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/052401_2.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.IndexSkybox.com
************************************************************


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

QCOM $69.99 +1.89 (+3.54) QCOM has found strong support at $67,
which held during the Nasdaq sell off on Wednesday and Thursday,
and is encountering heavy resistance at $70, just above the
200-dma at $69.49.  If the Nasdaq cooperates, QCOM's continuing
stream of good news may possibly provide the catalyst necessary
to break and close above $70, particularly with heavy volume.
On Thursday, QCOM announced another new license agreement with
Telieon Inc., a cellular communications equipment manufacturer.
Telieon will pay QCOM royalties in exchange for the use of their
CDMA technology to be used in modem cards.  Traders could take
positions at the 5-dma of $68.73, which has acted as intra day
support as an aggressive positions.  Alternatively, a strong move
above $70, with heavy volume could signal a more conservative
trader to jump on board.  Remember to monitor the telecom
equipment sector, and set closing stops at $67.

FFIV $13.41 +0.20 (+2.25) Tuesday's nice jump into the higher
realms sent a bullish message that FFIV could make a healthy
recovery off its lows.  But at this point in the consolidation
period, look for the NASDAQ to break 2300 and for FFIV to follow
suit with a move through its own upper resistance.  The tight
trading pipeline doesn't offer much room to target shoot for an
entry and quick exit.  Remember that time is money - you don't
want capital tied up as the stock trades sideways.  It may be
wiser to wait for a visible run through $14 before initiating
new plays.  The last minute buying in both BRCD and NTAP does
however, forecast a positive disposition for the computer
networking group.  Be patient for definitive confirmation.

DELL $26.67 -0.14 (-1.88) The company's bold declaration on
Wednesday to take advantage of tumbling component prices in a
slowing economy and engage in a full-scale price war coupled
with an insinuation that there might be an acquisition on the
horizon is obviously getting the interest of investors.  This
announcement and new coverage by Goldman Sachs and Merrill
Lynch launched DELL through its technical resistance in
yesterday's marketplace.  And today, the share price held firm
at $26.50, the developing near-term support.  Look for volume to
remain robust as DELL consolidates above the 5 & 10 DMAs at
$26.04 and $25.46, respectively.  A bullish move through 360 in
the Computer Hardware Index should alert traders, too.  You
might consider buying into subsequent strength as DELL makes a
big breakout through $27 and $28 in an advancing marketplace.

ABGX $43.99 +4.15 (+3.23) It was off to the races today as
Biotech stocks led the NASDAQ higher again.  After an early
morning dip, ABGX attracted buyers near the $39 level.  The
initial surge consolidated above $41 before heading higher
throughout the day, ending with a 10% gain on the day.  Not
only that, but volume confirmed the rally, topping the ADV by
20%.  ABGX handily outpaced the Biotechnology index (BTK.X)
which 'only' managed a 4% gain.  Taking a breather near the
$44 resistance level, ABGX's next overhead challenge will be
the $46.50 resistance level, the high from earlier this week
before profit taking set in.  Given the solid performance today,
we are increasing our stop to $40, and aggressive traders will
want to target shoot new entries on an intraday dip near $40 or
$41.  More conservative entries will materialize as the stock
rallies through the $46.50 level, assuming volume is still
strong and the BTK.X remains in ascent mode.

EXTR $35.95 +0.24 (+0.26) Networking stocks had a largely
uneventful day on Thursday, with most posting slight gains for
the day.  EXTR managed to eke out a slight fractional gain at
the close after spending much of the day underwater.  As a
matter of fact, the play was in danger of finding its way onto
the drop list until buyers started showing up after 2pm ET.
Their enthusiasm helped to push the stock off the $34 level
enroute to a close just under $36.  Now the bulls are faced with
trying to close the gap from yesterday morning between
$36.50-37.50.  The 10-dma (currently at $34.15) has been
providing support lately and aggressive traders can consider
buying intraday dips bounces near this level.  Just make sure
that EXTR closes above our $35 stop.  The more conservative
approach may serve you better at this point, initiating new
positions as the stock pushed above $37.50, accompanied by
solid volume.

IMCL $49.05 +1.85 (+4.12) Biotechs ruled the day, and although
it couldn't really get moving until after lunch, IMCL finally
attracted some buyers this afternoon.  Even better than the 4%
gain was the fact that it came with the support of strong
volume, 50% over the ADV.  It would have been hard to lose money
in Biotech stocks today as the entire Biotechnology index
(BTK.X) tacked on a 4% gain, dragging the rest of the NASDAQ
into positive territory.  Although it managed a solid gain for
the day, IMCL was stymied once again be the $50 resistance
level.  This will be the trigger point for conservative traders
looking to initiate new positions.  Wait for a solid move
through $50.50 before stepping aboard and watch the BTK index
for evidence of continued sector strength.  Consider aggressive
entries on a bounce from intraday support near $47 or near our
stop, now resting at $46.

BAC $59.99 +1.38 (+2.99) Since Tuesday's breakout move, BAC has
continued to display remarkable relative strength.  While Old
Economy stocks were sold off yesterday on fears of political
uncertainty, shares of the banking giant managed to hold on
firmly.  Today, the stock continued its upward ascent, gaining
2.35 percent on above-average volume.  The $60 level of
resistance proved to be formidable today, but with positive
sector sentiment, as measured by the S&P Banking Index, a break
above this point on high volume could allow conservative traders
to enter this play.  However, be aware that there is also
resistance just ahead, with the 52-week high at $61.  Pullbacks
intra-day to support at $59.30, $58.50 and the 5-dma at $58.14
may offer aggressive traders potential entry points.  We are
moving our stop price up from $57 5o $58.  Make sure that BAC
continues to close above this level.  Track sector sentiment by
keeping a close eye on peers FTU and JPM.

CSCO $22.91 +0.55 (+2.71) Our call play on Cisco was initiated
yesterday due to a number of reasons, including bullish
price/volume action, improved sentiment in macro economic
conditions and positive technicals.  After a strong rally on
Monday, the stock has been digesting its gains so far this week,
pulling back on decreasing volume.  Today's advance of 2.46
percent closed the stock above Monday's closing price, a sign
that despite the breather, the bulls may have the edge.  If this
is the case, then conservative traders may wait for a surge above
$23 to signal a possible entry point.  Higher risk players
looking enter on dips may find moving average support from the 5
and 10-dma, at $22.36 and $20.80 respectively.  Horizontal
support may also be found at $22.50, $21.80, $21 and our closing
stop price of $20.  Correlate entries with movement and direction
in AMEX's Networking Index (NWX).

MCDT $39.21 +1.36 (+2.52) Profit-taking on the NASDAQ yesterday
meant a pullback in Tech stocks yesterday, with shares of Storage
Area Network (SAN) equipment maker MCDT declining $1.95 or 4.9
percent on Wednesday.  Volume on the dip however, was light, only
92 percent of the average daily volume.  Today, the stock managed
to gain back 3.59 percent of yesterday's losses on above average
volume.  It appears that MCDT may be trading in a range for now
between support below at $36 and resistance overhead at $40.  A
close above $40 would be a bullish sign for the stock, allowing
conservative traders to take a position.  From there it could be
a quick trip to $43.  For entries on pullbacks, bounces off
intra-day support at $39, $37.50 and our new closing stop price
of $37 may provide higher-risk players with an opportunity to
make a play.  Just make sure that industry peers BRCD and VRTS
confirm the bounce.

QLGC $59.00 +3.25 (+4.88) Weakness in the Chip sector yesterday
had an effect on QLGC's stock price, with the shares of the
storage related equipment maker giving up $3.15 or 5.35 percent
on 77% of the average daily volume.  Today, the stock managed to
more than make up for yesterday's losses, rallying 5.83 percent
on heavier than average trading volume.  At this point it appears
that QLGC may be ready to make another attempt at taking out
resistance at $62.  Continued buying pressure, leading a strong
break above $60 may give conservative traders a chance to enter,
but only if the Philadelphia Semiconductor Index (SOX) is also
showing strength.  To further protect our profits, we are moving
our closing stop price up from $55 to $56.  Intra-day dips to
support from the 5-dma near $58, $57 and $56 may provide
aggressive players with targets to shoot for.


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

JNPR $54.57 +1.26 (-0.24) Keeping the downtrend alive, JNPR
headed back down to test the $53 support level this morning,
before the NASDAQ clawed its way back into positive territory
in the afternoon.  Resilience in the Networking sector is
keeping our play from dropping through support, and at this
point, the most prudent strategy is to wait for the stock to
fall below the $52 before taking a position.  The bulls have
defended this level relentlessly since mid-April.  A failure
at this level will likely be met with follow through, taking
JNPR significantly lower in short order.  The lows continue to
get lower, but the stock is threatening to close above our stop,
currently sitting at $55.  While more aggressive traders can
consider new positions on a downward bounce from this level,
only do so if the Networking index (NWX.X) is seeing solid
selling pressure.


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

AGGRESSIVE:

IBM - Int'l Business Machines $119.60 +2.20 (+1.65 last week)

International Business Machines Corporation (IBM) uses advanced
information technology to provide customer solutions. The Company
operates using several segments that create value by offering a
variety of solutions, including, either singularly or in some
combination, technologies, systems, products, services, software
and financing. Organizationally, the Company's three hardware
product segments are comprised of Technology, Personal Systems and
Enterprise Systems. IBM's other major operations consist of a
Global Services segment, a Software segment, a Global Financing
segment and an Enterprise Investments segment.

Within the technology sector, the hardware stocks have begun to
show signs of life over the last couple of weeks, and few are
as well positioned as IBM.  Big Blue has been riding high on
strong company forecasts, as well as new contracts announced
this week, and a few signs of visibility within its hardware and
services divisions.  At an analyst meeting earlier in May, IBM's
Chairman and CEO Lou Gerstner reiterated his previously stated
expectations for high single digit revenue growth, and double
digit earnings growth.  Despite the economic slowdown, Gerstner
appeared undaunted, but did not exaggerate expectations, in his
usual straight talking and realistic style.  Since that point,
IBM has been trading in a steady upward channel, and is solidly
positioned above its 200-dma of $106.81 and its 50-dma of $105.75.
An independent Dataquest report released on May 16th stated that
IBM's share of the U.S. server market rose significantly over the
last year.  This week, the good news continued, as IBM signed a
$2 billion outsourcing deal with NTL, Britain's largest cable
group.  In addition, figures released by the multimedia research
institute showed that Dell and IBM Japan had both gained
significant market share in the Japanese PC market.  Since the
beginning of May, IBM has made several attempts to clear the
$119 level.  Having cleared this level, IBM is now poised to make
an attempt to cross the next resistance level at $120, which
has eluded IBM since October of 2000.  Traders could take a
position at the current level, if the overall indexes and others
in the hardware sector such as DELL and HP are strong.  A more
conservative trader might want to wait for a break and close
above $120 with strong volume before jumping in.  We are
setting closing stops at $117, so be prepared to end the play
if it closes below this level.

BUY CALL JUN-115 IBM-FC OI=14465 at $6.70 SL=4.50
BUY CALL JUN-120*IBM-FD OI=11528 at $3.50 SL=1.75
BUY CALL JUL-115 IBM-GC OI=15808 at $9.40 SL=6.50
BUY CALL JUL-120 IBM-GD OI=24108 at $6.40 SL=4.50

Average Daily Volume = 9.85 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=IBM


OPWV - Openwave Systems $44.78 +2.74 (+7.73 this week)

Openwave Systems is a provider of Internet-based communication
infrastructure software and applications, serving over 150
communications service providers with over 500 million
subscribers.  Among OPWV's customers are wireless network
operators, wireline carriers, Internet Service Providers
(ISPs), portals, and broadband network providers.  OPWV has a
broad portfolio of products, including wireless Internet
infrastructure and browsers, unified messaging, mobile email,
directory services, voice processing and instant messaging

Formed when Software.com and Phone.com joined forces late last
year, OPWV spent the first several months of its life in a
persistent downtrend.  Simply put, OPWV provides the software
that enables web-browsing, messaging and electronic commerce
using wireless devices.  Maintaining its impressive rate of
revenue growth throughout the overall economic downturn and
continuing to hit its earnings numbers has definitely kept the
company in a position to move up with the broader technology
market.  Sure enough, the price of OPWV has more than tripled
since the early April lows, and with positive comments from the
CEO on Monday, it looks like there is more room to run.
Claiming that the timeline for the buildout of 3rd generation
wireless systems is immaterial to his company's success, CEO
Don Listwin reiterated his expectation of 10-20% sequential
revenue growth for the June quarter.  The bulls rejoiced at this
news, sending the stock as high as $45.50 on Tuesday before
profit takers began to appear.  The buyers were lining up again
this afternoon, supporting OPWV near the $41 level, and pushing
the stock up to close fractionally below Tuesday's highs.
Although volume today was slightly below the ADV, this can
likely be attributed to lighter volume ahead of the holiday
weekend.  Support looks solid at $40, giving us an easy level
for placing our stop.  Target new entries either on a bounce
from the $41 support level or wait for a strong (volume-backed)
rally to push through $45.  OPWV will likely find significant
resistance near $50 (the site of the long-term descending
trendline), so protect your profits accordingly.

BUY CALL JUN-40 UGE-FH OI=1234 at $7.00 SL=5.00
BUY CALL JUN-45*UGE-FI OI=2408 at $3.70 SL=2.25
BUY CALL JUN-50 UGE-FJ OI=1841 at $1.80 SL=0.75
BUY CALL JUL-45 UGE-GI OI=1349 at $6.70 SL=4.75
BUY CALL JUL-50 UGE-GJ OI=2811 at $4.50 SL=2.75
BUY CALL JUL-55 UGE-GK OI=2414 at $3.10 SL=1.50

SELL PUT JUN-40 UGE-RH OI=1256 at $1.70 SL=3.50
(See risks of selling puts in play legend)

Average Daily Volume = 6.00 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=OPWV


MSFT - Microsoft Corporation $71.72 +2.02 (+3.63 this week)

Microsoft Corporation develops, manufactures, licenses and
supports a wide range of software products for a multitude of
computing devices. Microsoft software includes scalable operating
systems for servers, personal computers and intelligent devices,
server applications for client/server environments, knowledge
worker productivity applications, and software development tools.
The Company's online efforts include the MSN network of Internet
products and services and alliances with companies involved with
broadband access and various forms of digital interactivity.

The year 2000 was not a kind one to Microsoft.  Like many Tech
stocks, news of decreased capital expenditures was not well
received, as the undisputed king of the Software sector fell,
taking the NASDAQ along with it.  What's more, company-specific
concerns such as the anti-trust case weighed on the stock price.
2001 however, has proven to be a more favorable time for those
long on MSFT.  Up over 65 percent so far this year, a number of
factors contributed to the ongoing recovery.  The aggressive rate
cuts from the Fed have gone a long way in restoring shareholder
confidence.  With many believing that the market has finally
bottomed, the bulls have managed to break the year-long technical
downtrend.  On a more company-specific note, optimism over
upcoming product releases later in the year, including the X-Box
interactive gaming system and an operating system upgrade in
Windows XP, have brought a sense of anticipation and excitement
back to the stock.  Now above all its major moving averages, MSFT
has spent the last 5 weeks in a trading range between $67 support
and formidable resistance at $72.  A break above resistance on
heavy volume could not only take MSFT substantially higher, but
the NASDAQ along with it as well.  This would be the signal for
conservative traders to enter on strength.  Entries on pullbacks
may be forthcoming for higher risk players, with support at $71,
$70.50, $70 and our closing stop price of $69.50.  Make sure to
keep an eye on Merrill Lynch's Software HOLDR (SWH) to gauge
sentiment in the software sector.

BUY CALL JUN-65 MSQ-FM OI=10502 at $7.50 SL=5.25
BUY CALL JUN-70*MSQ-FN OI=73247 at $3.40 SL=1.75
BUY CALL JUN-75 MSQ-FO OI=62987 at $1.10 SL=0.00
BUY CALL JUL-70 MSQ-GN OI=40544 at $5.50 SL=3.50
BUY CALL JUL-75 MSQ-GO OI=34731 at $2.90 SL=1.50

SELL PUT JUN-65 MSQ-RM OI= 5197 at $0.55 SL=1.00
(See risks of selling puts in play legend)

Average Daily Volume = 43.6 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=MSFT


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

AGGRESSIVE:

BMY - Bristol-Myers Squibb Co $53.50 -0.76 (-2.50 this week)

Bristol-Myers is best known as a leader in the personal care
industry as a producer and distributor of familiar items such
as Clairol and Excedrin.  However the company focuses its
primary efforts on pharmaceuticals, which comprise about 70% of
its total sales.  Cardiovascular treatments, anticancer, and
anti-infective drugs top their research-development list.
Through divisions and subsidiaries they also make baby formula,
nutritional products, and medical devices.

After tracing the solid support at the $55 and $56 levels since
its original freefall in March, BMY is once again on the brink
of disaster.  Coincidentally, this week's downward trend was
kicked off on the news that Bristol-Myers was selling its
Clairol business to consumer goods giant Procter & Gamble for
$4.95 bln cash.  The announcement likely didn't create much
additional momentum, but it's noteworthy nonetheless.  The
culprit is rotation; but without a doubt, the decision by
Vermont Senator James Jeffords to leave the Republican Party and
become an independent on Thursday shook the foundation of the
healthcare industry.  BMY and major drug makers like Merck
(MRK), Johnson & Johnson (JNJ) and Pfizer (PFE) are all feeling
the effect; and there appears to be more downside on the
horizon.  New coverage from Prudential Securities on seven of
the major pharmaceutical companies on Wednesday also failed to
incite much of a positive reaction from traders.  It was evident
in today's session that the war waged between the bulls and the
bears is full-scale.  The trading activity for BMY topped over
13.4 mln shares exchanging today, more than 2.7 times the ADV.
BMY quickly violated the 5-DMA at the $54 level; and even with a
burst of buying in the late afternoon, the share price couldn't
recover the critical losses.  We're looking for a bearish
rollover from the current mark, or even a bit higher near the
10-DMA ($55.56) to initiate an aggressive entry.  The $52 level
supported BMY during today's melee, so expect some resistance.
Consider locking in gains early to avoid getting caught in an
upward cycle.  If the bulls get control of BMY and the share
price closes above the $55 mark, OI will immediately drop
coverage.

BUY PUT JUN-60 BMY-RL OI= 2565 at $6.70 SL=4.75
BUY PUT JUN-55* BMY-RK OI=10340 at $2.40 SL=1.25
BUY PUT JUN-50 BMY-RJ OI= 3184 at $0.50 SL=0.00

Average Daily Volume = 4.89 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=BMY


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

CSCO - Cisco Systems, Inc. $22.91 +0.55 (+2.71 this week)

Cisco Systems is the worldwide leader in networking for the
Internet.  Cisco's networking solutions connect people, computing
devices and computer networks, allowing people to access or
transfer information without regard to differences in time, place
or type of computer system.  Cisco provides end-to-end networking
solutions that customers use to build a unified information
infrastructure of their own, or to connect to someone else's
network.  An end-to-end networking solution is one that provides
a common architecture that delivers consistent network services
to all users.

Most Recent Write-Up

Our call play on Cisco was initiated yesterday due to a number of
reasons, including bullish price/volume action, improved sentiment
in macro economic conditions and positive technicals.  After a
strong rally on Monday, the stock has been digesting its gains so
far this week, pulling back on decreasing volume.  Today's advance
of 2.46 percent closed the stock above Monday's closing price, a
sign that despite the breather, the bulls may have the edge.  If
this is the case, then conservative traders may wait for a surge
above $23 to signal a possible entry point.  Higher risk players
looking enter on dips may find moving average support from the 5
and 10-dma, at $22.36 and $20.80 respectively.  Horizontal
support may also be found at $22.50, $21.80, $21 and our closing
stop price of $20.  Correlate entries with movement and direction
in AMEX's Networking Index (NWX).

Comments

CSCO is coming into favor once again, evidenced by Thursday's
advance following a brief pullback earlier this week.  The stock
could very well make its way up to the $25 level in the coming
trading sessions, with a subsequent advance up to $30 in the
near-term.  Traders can look for entries on a pullback to
support at $22 or consider entering on strength with an advance,
on high volume, above the $23 level.

BUY CALL JUN-20   CYQ-FD OI=86070 at $3.50 SL=1.75
BUY CALL JUN-22.5*CYQ-FX OI=55600 at $1.65 SL=0.75
BUY CALL JUN-25   CYQ-FE OI=32530 at $0.60 SL=0.00
BUY CALL JUL-22.5 CYQ-GX OI=39162 at $2.50 SL=1.25
BUY CALL JUL-25   CYQ-GE OI=59022 at $1.40 SL=0.75

SELL PUT JUN-22.5 CYQ-RX OI=33007 at $1.10 SL=2.00
(See risks of selling puts in play legend)

Average Daily Volume = 60.5 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=CSCO


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

A Little Here, A Little There...

The major indices edged higher today as buyers began to speculate
ahead of Federal Reserve Chairman Alan Greenspan's upcoming speech
and key economic data due out later in the week.

Wednesday, May 23

U.S equities retreated today as investors took profits after a
string of upbeat sessions in the technology group.  The NASDAQ
closed down 70 points at 2,243.  Renewed selling pressure among
blue-chip issues forced the Dow to a triple-digit loss, with the
industrial average closing down 151 points at 11,105.  The S&P
500 index was down 20 points to 1,289.  Volume on the NYSE hit
1.13 billion shares with losers outpacing winners 2 to 1.  The
NASDAQ also saw a decline in activity with 1.85 billion shares
exchanged and declines beating advances 12 to 7.  In the bond
market, the 30-year Treasury fell 8/32, pushing its yield up to
5.79%.

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

Penn Nat.  (NASDAQ:PENN)  JUN22C/JUN22P  $2.35  debit   straddle
MRV Comm.  (NASDAQ:MRVC)  JUL15C/JUN15C  $0.60  debit   calendar
Amer. Exp. (NYSE:AXP)     JUN42P/JUN45P  $0.75  credit  bull-put

The bearish activity in the market produced some excellent
opportunities to participate in our new combination positions.
Unfortunately, today's correction may be the first in a series
of downward moves as stocks begin to consolidate from recent
gains.  Of course, that is to be expected from a market that
saw one of its major indexes rally 10% in one week and these
spikes in upside momentum need to be absorbed before equities
can move higher on a broad scale.

Market Activity:

The NASDAQ posted its first loss in six sessions today with a
number of sectors enduring heavy selling pressure as investors
took profits from the recent rally.  Concerns that Republicans
may lose control of the Senate generated much of the negative
sentiment in Wednesday's trading, as news that Senator James
Jefford will abandon the Republicans and become an independent.
The switch will end GOP control of the Senate but analysts say
the anxiety is overblown because the stalemate will actually
have a favorable effect on the market.  In addition, President
Bush's new $1.35 trillion tax cut will likely be unaffected,
thus increasing the possibility of a future cash infusion for
American consumers.  Inside the technology market, chip shares
fell on news from industry analysis group Semiconductor Equipment
and Materials International, which announced that the April book-
to-bill ratio for North American-based makers of semiconductor
equipment stood at 0.42, well below March's 0.59 level and at its
lowest level in a decade.  SEMI called the severity and depth of
the industry correction "unprecedented" and Lehman Brothers said
April's data set a number of "worst ever" records, indicating that
the current downturn will be the most severe the industry has seen.
UBS Warburg said that while it believes orders will stabilize, it
is anticipating another major leg down in the future, which should
offer more attractive entry points for investors not in the sector.

While computer hardware issues struggled, one bright spot in the
technology group was Dell Computer (NASDAQ:DELL) which rallied on
the heels of positive analysts' notes.  DELL was added to Merrill
Lynch's "Focus One List," based on the brokerage's belief that the
PC maker has outstanding, long-term prospects.  Goldman Sachs also
initiated coverage of DELL, adding the stock to its "Recommended
List" and setting a 12-month price target of $32.  The networking
group finally receded after a series of upward moves.  Fiber-optic
issues were the big losers with Ciena (NASDAQ:CIEN) falling after
it was lowered to a "neutral" rating by Morgan Stanley Dean Witter.
Shares of Corning (NYSE:GLW), Sycamore Networks (NASDAQ:SCMR) and
JDS Uniphase (NASDAQ:JDSU) dropped in sympathy with the news.  The
Dow Industrials experienced a triple-digit loss amid weakness in
financial, major drug and retail issues.  Heading lower were shares
of American Express (NYSE:AXP), Home Depot (NYSE:HD), Walt Disney
(NYSE:DIS), J.P. Morgan (NYSE:JPM) and General Motors (NYSE:GM).
In the broader market, oil and oil service, retail, biotechnology,
financial, gold and cyclical issues slumped while safe-haven stocks
such as paper and utility issues generally ended higher.

Portfolio Activity:

Our portfolio experienced much the same activity as the broader
market with profit-taking in both the industrial and technology
groups.  Stocks in every major segment were lower and there were
few bullish moves during the session.  In fact, only four issues
in the portfolio ended higher; Worldcom (NASDAQ:WCOM), Sinclair
Broadcasting (NASDAQ:SBGI), Watson Pharmaceutical (NYSE:WPI) and
Pepsico (NYSE:PEP).  On a positive note, the renewed downward
pressure helped our credit strangle issues return to the middle
of their respective trading ranges and the bearish position in
Total Fina Elf (NYSE:TOT) is comfortably below the sold (short)
call at $80.  Despite the market's recent volatility, our debit
straddles have not produced any outstanding results.  The reason,
of course, is timing.  The candidates (generally) have reached the
break-even points, but those occasions have occurred near broad
reversals in the market direction, thus producing opposition to
further profitable movement.  Alliance Capital (NYSE:AC), Norfolk
Southern (NYSE:NSC) and Sony (NYSE:SNE) are good examples of this
effect and more recently, the rally in British Air (NYSE:BAB) was
ended by the widespread downturn in equities.  Our newest play in
Penn National (NASDAQ:PENN) may eventually profit only because it
is not trading in tandem with the market, but on its own terms due
to other influences.

Thursday, May 24

The major indices edged higher today as buyers began to speculate
ahead of Federal Reserve Chairman Alan Greenspan's speech late
Thursday and key economic data due out later in the week.  The
NASDAQ closed up 38 points at 2,282 and the Dow was up 16 points
at 11,122.  The S&P 500 was up slightly at 1,293.  Trading volume
on the NYSE was thin at 1.10 billion shares with winners beating
losers 15 to 14.  NASDAQ activity was also muted at 1.83 billion
shares exchanged, with advances outpacing declines 21 to 16.  In
the U.S. bond market, the 30-year Treasury fell 22/32, pushing
its yield up to 5.83%.

Market Activity:

Stocks traded upward today as investors remained cautious over the
recent change in the balance of power in Congress.  Senator James
Jeffords confirmed he's leaving the Republican Party to become an
independent, an unexpected move that gives control of the Senate
to the Democratic Party.  Some analysts say the market is ready
to continue higher and that the situation on Capitol Hill, while
providing a necessary period of consolidation, won't have a major
impact on share values.  In fact, by the end of the day, buyers
were moving back into technology issues and the broader market
also saw new speculation.  Computer hardware and software issues
were among the stronger groups on the NASDAQ and networking stocks
rebounded from a recent sell-off.  Semiconductor shares continued
to struggle in the wake of the unfavorable industry forecasts but
select Internet shares moved higher.  On the Dow, Philip Morris
(NYSE:MO), Citigroup (NYSE:C), Walt Disney (NYSE:DIS) and General
Motors (NUYSE:GM) performed well and blue-chip technology shares
including International Business Machines (NYSE:IBM), Microsoft
(NASDAQ:MSFT), Intel (NASDAQ:INTC) and Hewlett-Packard (NYSE:HWP)
were also popular.  In the broader market, banking, insurance and
biotechnology issues enjoyed small gains while major drug, airline,
utility, paper, chemical and oil service shares generally declined.

Portfolio Activity:

The Spreads section was "back on track" today as renewed buying
pressure in broader-market groups boosted a number of positions.
Bellwether technology issues in the long-term portfolio such as
Microsoft, Intel, AT&T and Hewlett-Packard were among the best
performers and other blue-chip stocks participated in the upward
activity.  In the networking sector, Cisco Systems (NASDAQ:CSCO)
and Network Appliance (NASDAQ:NTAP) moved higher and the telecom
segment produced bullish movement in Sprint (NYSE:FON) and ADC
Telecom (NASDAQ:ADCT).  One of our new speculation candidates,
MRV Communications (NASDAQ:MRVC) was very popular with the issue
closing up almost $1 at $13.65.  The "time-selling" play is off
to a good start.  Another speculative offering in that category,
Alexion (NASDSAQ:ALXN) edged upward and the new calendar spread
in that issue is already profitable.  Among the broader-market
stocks, Watson Pharmaceutical (NYSE:WPI) and Pepsico (NYSE:PEP)
continued higher and select financial shares also rallied with
Merrill Lynch (NYSE:MER) and Mellon (NYSE:MEL) leading the way.
One of our new straddle candidates, Union Pacific (NYSE:UNP) has
reached profitability and now we will look for an opportunity to
pay for the entire play with one option, leaving the remaining
position "risk-free" with unlimited profit potential.  One last
note; two of our recently struggling small-cap plays, Infospace
(NASDAQ:INSP) and Watchguard (NASDAQ:WGRD) appear to be making
recovery attempts and it will be interesting to see if they can
overcome the their respective resistance levels near the current
prices.

Questions & comments on spreads/combos to Contact Support

******************************************************************
                          - NEW PLAYS -

One of our readers asked for some speculative "covered-collars"
on small-cap technology stocks with bullish potential.  Here are
two favorable candidates, 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.  Review each play individually and make your own
decision about the future outcome of the position.

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

NXTV - Next Level Communications  $10.86  *** Motorola Deal! **

Next Level Communications (NASDAQ:NXTV) designs and markets a
range of broadband communications equipment designed to enable
telephone companies and other communications service providers
to cost-effectively deliver a full suite of voice, high-speed
data and digital video services over the existing copper wire
infrastructure.  Service providers that deploy the company's
equipment can offer voice, data and video services in a single
product offering or offer each service separately, depending on
subscriber demand and the service provider's objectives.  Next
Level's products consist of equipment located at the telephone
company's central office or exchange, in the field and at the
subscriber's home or business.  The company's customers include
Qwest, Hutchinson Telephone, Paul Bunyan Telephone, Chibardun
Telephone, Horizon, New ULM, Washington, Wood County, Hickory
Tech, Clearlake, Cablevision, Bell Canada, All West and also
Northstar Telephone.

The recent recovery in NXTV shares began in early May after the
telecom equipment maker reached a sales agreement with Motorola
(NYSE:MOT) that gives it access to a broader customer base and
the strength to serve potential international clients.  Under
the new agreement, Motorola's large sales team will help the
company sell its broadband access systems to a range of global
telecommunications customers.  Next Level and Motorola are also
working together to offer complementary products and services
and the new pact strengthens the existing relationship between
the two companies.  In addition, Next Level recently announced
it would receive a two-year, $60 million loan from the wireless
technology giant.  A company representative said NXTV would use
the loan for research and development programs and also to help
improve production that can later translate into lower product
prices.  In return, Motorola will receive Next Level warrants
that would allow it to boost its stake in the company above the
present level (77%) of ownership.

Traders who agree with Motorola's confidence in the company
can speculate on its future performance with this position.

PLAY (speculative - bullish/collar):
BUY STOCK  NXTV  LAST=$10.86
SELL CALL  SEP-17.50  NUZ-IW  OI=1670  B=$1.30
BUY  PUT   SEP-7.50   NUZ-UU  OI=82    A=$1.20
INITIAL NET DEBIT TARGET=$10.75-$11.00  PROFIT(max)=60%

A collar is an option strategy in which stock is purchased, an
out-of-the-money call is sold, and an out-of-the-money put is
purchased.  The strategy is called a "collar" since both the
potential risk and reward are limited.  This type of position
can be initiated with varying degrees of risk versus reward,
depending on which strikes are bought and sold.

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=NXTV

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

FMKT - FreeMarkets  $15.10  *** Technicals Only! ***

FreeMarkets (NASDAQ:FMKT) creates business-to-business online
markets and provides electronic commerce technology and services
for the procurement of industrial parts, raw materials, unique
commodities and services.  FreeMarkets has created over 9,200
online markets and has enabled its customers to source products
from more than 165 supply verticals.  More than 9,300 suppliers
from over 55 countries have participated in markets created by
FreeMarkets.  In addition to its new FullSource offering, which
provides customers with the full range of FreeMarkets' technology,
services and information, FreeMarkets offers its DirectSource and
QuickSource hosted services, which enable customers to run their
own online markets.  FreeMarkets also operates the FreeMarkets
Asset Exchange for buyers and sellers of surplus assets and
inventory.

FreeMarkets is one of the great speculation issues of the past,
having traded as high as $370 per share during its unprecedented
climb to prosperity in January of last year.  At one time, the
company was worth more than $13 billion.  Now, its market cap is
just $477 million.   The slump led to a barrage of lawsuits from
investors, most of which suggest that FreeMarket officials issued
materially false and misleading information that misrepresented
the company's financial condition and prospects.  Looking forward,
there is excellent upside potential for the issue and the company
has recently signed some new agreements with Texas Instruments,
Raytheon and Schering-Plough.  These pacts allow FreeMarkets to
provide corporate customers with access to its Global Marketplace,
which they in turn use to source a variety of goods and services.
Investors are hopeful that this approach to business-to-business
commerce will yield favorable revenues in the coming months and
those of you who believe ownership of the stock offers little
downside at these levels can speculate on its future movement
with this limited-risk position.

PLAY (conservative - bullish/collar):
BUY STOCK  FMKT  LAST=$15.00
SELL CALL  OCT-20.00  FAQ-JD  OI=597  B=$1.85
BUY  PUT   OCT-12.50  FAQ-VV  OI=37   A=$2.15
INITIAL NET DEBIT TARGET=$15.15-$15.25  PROFIT(max)=31%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=FMKT

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


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