The Option Investor Newsletter Wednesday 05-30-2001 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/6999_1.asp Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 06-06-2001 High Low Volume Advance/Decline DJIA 11070.24 -105.60 11179.68 11059.64 1.06 bln 1217/1858 NASDAQ 2217.73 - 15.9. 2249.72 2204.88 1.74 bln 1613/2195 S&P 100 655.07 - 7.02 662.09 654.32 totals 2830/4053 S&P 500 1270.03 - 13.54 1283.85 1269.01 41.1%/58.9% RUS 2000 512.58 - 3.90 516.48 512.52 DJ TRANS 2898.39 - 19.03 2917.47 2896.79 VIX 22.38 + 1.16 23.13 22.02 Put/Call Ratio 0.58 ****************************************************************** The Sun Rises Amid Warnings Shares of Sun Microsystems (NASDAQ:SUNW) attempted to bolster the Nasdaq Wednesday morning. But another not-so-friendly piece of guidance stymied the tech-laden index's advance. Influential Goldman Sachs (NYSE:GS) computer hardware analyst Laura Conigliaro issued a modestly positive report on Sun Micro, which was enough to induce early morning buying in the tech space. Conigliaro suggested that Sun Micro's business is beginning to show signs of stabilization. What's interesting is that Conigliaro has been bearish on shares of Sun Micro for quite some time and her report follows the company's warning just last week. But, Conigliaro reported that her checks among Sun's distributors showed signs of an up-tick. Several hardware stocks benefited from Conigliaro's call early Wednesday, including shares of EMC (NYSE:EMC), Dell Computer (NASDAQ:DELL) and IBM (NYSE:IBM). However, the Hewlett-Packard (NYSE:HWP) analyst meeting that we addressed in Tuesday night's Market Wrap snuffed the early morning momentum in the tech space. Carly Fiorina, CEO of H-P, delivered ominous guidance at the beginning of the conference call this morning. Fiorina reported, "While it is still early in the quarter, May was softer than expected and [H-P] is now addressing what is clearly becoming a global slowdown." Fiorina elaborated on the slowdown in European and Asian markets, which Sun Micro addressed last week. Now we know that H-P has been struggling for quite some time. We can conclude that much by observing price action in its shares - the stock is only a few points off its 52-week low. Nevertheless, Fiorina's cautious remarks induced a combination of profit taking and shorts pressing their bearish bets in the tech space, which erased the majority of the hardware sector's earlier gains. Although, Sun Micro did manage to finish 3.5 percent higher. For the most part, the Nasdaq Composite (COMPX) traded alright considering H-P's warning. The COMPX traded in a narrow range of only 45 points, on volume that was about in-line with the 50-day average volume. The index did find buyers at the 2200 level following H-P's warning, but couldn't manage to eclipse the big retracement resistance level at 2250 that we highlighted in Tuesday's Market Wrap. In fact, the COMPX's day high was 2249. I think it would be worth while to continue to monitor the 2250 resistance level in the coming days for a breakout. As well, keep an eye on support at 2200 established Wednesday. For an ancillary support zone concerning the tech sector, I thought I'd pass along an observation I made this morning. The Nasdaq-100 (NDX.X) attracted buyers every time it dipped down to the 1890 level Tuesday morning. Each time the NDX dipped down to 1890, I noticed that buyers stepped into each of the big-cap Nasdaq stocks I was monitoring. Interestingly, I tooled around with a few retracement levels and found a fit from the reversal day on February 15th to the NDX's relative low. I don't know if market makers are using this retracement to manage risk, but I thought it would be worth mentioning. As if H-P wasn't enough, another warning from the tech sector was delivered after the bell. Broadcom (NASDAQ:BRCM) warned that its second-quarter would fall further than previous guidance had suggested. However, Broadcom's CEO, Henry Nicholas, offered, "Although current demand conditions continue to be soft, [Broadcom] is starting to see some signs of stabilization in the business for the second-half of the year." Broadcom's warning was issued after the after hours session of trading closed, so we'll want to monitor the market's reaction Thursday morning. Recent suggestions of stabilization, such as the Sun Micro report this morning, have been well received by the market, so the actual warning from Broadcom may be a moot point. (Remember, always forward-looking.) Away from the tech sector, J.P. Morgan Chase (NYSE:JPM) warned on the revenue front. The shortfall by J.P. Morgan had a double-whammy impact on the market. The stock is a component of the Dow Jones Industrial Average (INDU) as well as the KBW Bank Sector Index (BKX.X), which I've been detailing recently. Shares of the stock finished lower by $1.66. The Dow is likely to see continued weakness Thursday morning in light of the after hours news concerning Phillip Morris (NYSE:MO). A Los Angeles jury awarded a smoker $3 billion in punitive damages from Phillip Morris. Shares of Big Mo fell $2 in after hours trading. Going into Thursday's trading, market participants will be awaiting guidance from chip giant Intel (NASDAQ:INTC). The company is scheduled to hold its mid-quarter analyst update after the bell at 5:30 PM EST. Keep in mind that when Intel last reported, it forecasted a pretty wide range of revenue estimates, between $6.2 and $6.8 billion. The current consensus is pegged at the lower-end of that range. The market will be listening for signs of improvement in the chip business, which would give the Philadelphia Semiconductor Index (SOX.X) and the Nasdaq the green light to advance. But, if the company guides lower, the two aforementioned indexes could be poised for an extended pullback. In either case, be aware of the Intel call Thursday AFTER THE BELL and plan your trades accordingly. Also worth noting, National Semiconductor (NYSE:NSM) will release earnings at 1:00 PM EST, during market hours. On a final note, those interested in learning how to use retracement brackets to improve your trading should consider signing up for my online seminar this Sunday, June 10th at 8:00 PM EST. I'll show you why retracement brackets work and how to use them to better manage risk, pick entry and exit points and increase profits. You can learn more about the seminar through the link below. Questions are welcome: email@example.com Eric Utley Editor ================================================================== Advanced Chart Reading with Retracements Online Interactive Seminar This Sunday ================================================================== Eric Utley, Contributing Editor for OptionInvestor and IntradayTrader, will be presenting a two hour interactive online seminar at 8:00 PM EST, on Sunday June 10th. Eric will teach attendees how to use Fibonacci retracement brackets to better manage risk and increase profits. The seminar will benefit both investors and traders and Eric will incorporate current examples in his presentation, along with requests from attendees. Click here for more information: http://www.premierinvestorseminars.com/onlineseminars/eric061001.asp ================================================================== June Online Seminar Calendar ================================================================== You can take the following seminars without leaving the comfort of your home or office. They are interactive and allow you to question the presenter during the presentation. You do not need any special software to take 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 these seminars please click here for more information. http://www.premierinvestorseminars.com/seminarcalendar.asp Thr Jun-7 Using Volatility to Pick Stocks - John Seckinger Sun Jun-10 Advanced Chart Reading & Retracements - Eric Utley Sun Jun-10 Basic Technical Analysis - Austin Passamonte Tue Jun-12 Starting with Point & Figure Charts - Jeff Bailey Wed Jun-13 Ask the Analyst - Eric Utley Wed Jun-13 Basic Option Strategies - Jim Brown Thr Jun-14 Using Volatility to Pick Stocks - John Seckinger Thr Jun-14 Basic Candlesticks - Jon Farnlof Sun Jun-17 7 Steps to Play Picking - Eric Utley Mon Jun-18 Zero Cost Leaps - Mark Wnetrzak, Ray Cummins Tue Jun-19 Profiting From Failed Technical Patterns - John Seckinger Wed Jun-20 Chart Patterns, Flags, Pennants, Wedges - Derek Baltimore Wed Jun-20 Entry Point, Exit Point - Jim Brown Thr Jun-21 Day-Trading for People WIth Day Jobs - Jon Farnlof Sun Jun-24 Determining Support and Resistance - Derek Baltimore Sun Jun-24 Ask The Analyst - Eric Utley Tue Jun-26 Assessing Risk with Point & Figure - Jeff Bailey Tue Jun-26 Charting, Stage Analysis - Mark Wnetrzak, Ray Cummins Wed Jun-27 Big Cap Strategies - Jim Brown Wed Jun-27 Conservative CC/NP - Mark Wnetrzak, Ray Cummins Click here for a detailed explanation of each: http://www.premierinvestorseminars.com/seminarcalendar.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 ************************************************************ ************* NEW CALL PLAY ************* SEBL - Siebel Systems $51.15 +1.82 (+5.27 this week) Siebel Systems is a provider of eBusiness applications. The company's products enable organizations to sell to, market to, and service their customers across multiple channels, including the Web, call centers, resellers, retail, and dealer networks. SEBL's eBusiness applications are available in industry-specific versions designed for the pharmaceutical, healthcare, telecommunications, insurance, energy, apparel, automotive, and finance markets. Through SEBL's applications, companies can create a single source of customer information that sales, service, and marketing professionals can use to tailor product and service offerings to meet each of their customer's unique needs. Investors looking for companies in the Technology sector that have weathered the current economic weakness better than most, would be hard-pressed to not look favorably on SEBL. Although revenue growth has slowed and earnings have dropped, the company has given investors what they crave, notably reasonable guidance going forward in an uncertain market. Investors have rewarded the company by pushing the stock up for more than 100% gain in the past 2 months and the daily chart continues to look favorable. SEBL has been posting higher highs and higher lows since the April lows, allowing investors to profit from buying the dips. After confirming support at $43 a little over a week ago, SEBL has been gradually heading higher and daily Stochastics are once again pointed towards the sky. Intraday support at $50 and $48 should provide support on short-term pullbacks, allowing aggressive investors to enter the play. We have more significant support near $46, confirmed by the 30-dma (currently $46.94), and a drop below this level would be a significant technical failure for the stock. Accordingly, we are giving our play some room to move by placing our stop at $46. More conservative players will want to wait for continued buying volume to push the stock through today's highs near $52 before taking a position. Expect mild resistance at $53.50, and then $55.50, before the bulls take a shot at the $60 level. Along with historical resistance, it is the site of the 62% retracement of the drop from the January highs as well as the 38% retracement from the all-time highs of last November. ***June contracts expire next week*** BUY CALL JUN-50*SGW-FJ OI=11637 at $3.30 SL=1.75 BUY CALL JUN-55 SGW-FK OI= 9272 at $1.10 SL=0.50 BUY CALL JUL-50 SGW-GJ OI= 938 at $6.50 SL=4.50 BUY CALL JUL-55 SGW-GK OI= 2562 at $4.10 SL=2.50 BUY CALL JUL-60 SGW-GL OI= 5640 at $2.45 SL=1.25 SELL PUT JUN-50 SGW-RJ OI= 4689 at $1.80 SL=3.50 (See risks of selling puts in play legend) Average Daily Volume = 18.4 mln http://www.premierinvestor.com/oi/profile.asp?ticker=SEBL ************ NEW PUT PLAY ************ No new puts today ***************** STOP-LOSS UPDATES ***************** No Stop Adjustmets Tonight! ************ DROPPED CALL ************ XOM $89.40 -2.15 (+0.45) Well, we expected yesterday's crude oil and gasoline inventory report to exert some downward pressure on XOM today, and were looking for it to deliver us a nice entry point near our $90 stop. Unfortunately, this level didn't hold as support, and we have another failed breakout in the stock. It's a busted play and rather than wait and hope, we'll remove it from our radar screen to make room for healthier plays. *********** DROPPED PUT *********** ISSX $53.78 +5.12 (+5.76) No matter how you slice it, ISSX showed incredible relative strength today. With the NASDAQ flat to down all day, our play charged higher from the open and never looked back, posting better than a 10% gain. Adding to the move's strength was volume that more than doubled the ADV. Merrill Lynch helped the bulls case today too, starting coverage of the stock with an Accumulate rating, and with our busted stop clear down at $50, we have no choice but to drop coverage of the stock. ************** TRADERS CORNER ************** Follow the sectors By Mary Redmond Most savvy traders realize that they need to pay very close attention to the movement in a particular sector when trading a stock. In addition, it is also important to monitor the action of the various sectors when trading an index, or shares of an index, like the QQQ or DIA. For example, the QQQ can be a good trading vehicle, as the shares are highly liquid which makes execution easy. There are several sectors which comprise the Nasdaq 100, including software, GSO.X, networking NWX.X, biotechnology BTK.X and semiconductors SOX.X. Over the last several weeks, the semiconductor sector and biotech sectors seem to have had the most significant influence on the Nasdaq, as they have both made significant gains in relatively short period of time. Specifically, the semiconductor sector is often regarded as the sector which seems to have the most influence on the Nasdaq. The SOX.X is perhaps a leading barometer of the overall health of the technology stocks traded on the exchanges, as their cycle tends to lead the tech cycle. On a long term chart of the SOX.X, you can see how the series of higher lows last year led to a serious fall which started last August, and predicated the rapid drop in the Nasdaq. The reasoning for this is easy to understand, as chips are an integral part of almost every piece of technological equipment we use today. This sector, as well as the others, can be useful to short term traders as well as longer term investors. On a daily basis, the SOX.X frequently leads the Nasdaq up or down, and traders who follow this trend are at an advantage. As an example, lets take a look at what happened on Tuesday, which was a very important day for both the Nasdaq and the semiconductor sector. This is because Xilinx, a leading semiconductor stock, reported that their earnings would be on target with the previously stated forecasts, and that the inventory buildup in some semiconductor equipment had started to decline. This was all investors needed to hear. Everyone knows by now that things are bad in the economy. We are in an economic contraction, and various sectors of our economy are in a recession. Investors expect to hear that things are bad. For months now, we have been hearing, "Things are bad, they are getting worse, and no one knows when they will get better." Now, we have had a few companies say "Ok, things are bad, but at least they aren't getting any worse and it looks like they might be getting a little better." It seems like this was all we needed to hear. For day traders, it was fairly obvious that the odds favored an upside move on Tuesday. The stochastic oscillators were giving strong upward signals. The futures were higher, and the QQQs opened on the upside. Tuesday was one of the few days in which traders who bought at the open could have taken a profit later on. However, for those who prefer to hone their skills, and take less risk, lets look and see what the charts told us during the day. The QQQ quickly moved up from its open at $46.30, as the SOX.X moved up from 606 to 639. Around 10:20 the Dow was lagging the Nasdaq, and actually was actually down slightly for the day. At 10:25 traders who bought the QQQ at the open could have taken a half a point profit when QQQ traded at $47.15. However, it looked like the index might not have had sufficient strength to rally for the rest of the day. This is the point at which the action of the SOX.X came in. At 10:15 the SOX.X was 636, and by 10:25 the SOX.X had jumped up to 643. The Nasdaq followed, and by 10:40 the QQQ had jumped up to $47.68. It is important to note that the tick.nq had dropped to -100 around 10:30, after opening on the plus side. While this is not an extraordinarily low level for the tick, on a strong day in the market, the Nasdaq often rebounds from any negative tick. A similar situation occurred on Wednesday, whereby the action of the Nasdaq and the QQQs followed the action of the SOX.X. While the Nasdaq opened higher on Wednesday, by 11:30 the QQQ had dropped to $47.19. The SOX.X had dropped to 635 at that point. The tick.nq had reached a low point of -350. However, the SOX.X promptly rebounded to 647, and the QQQ followed, rising to $47.75 by 11:45. The more technical indicators a day trader uses, the more precise and profitable the trades are likely to be. Individual stocks also respond very strongly to the movement in the sector, and sometimes have a delayed response, whereby the sector moves first and the stock follows. This phenomenon can be useful to long term investors as well as short term day traders and scalpers. ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=2216 ************************************************************** ********************* PLAY OF THE DAY - PUT ********************* NEWP - Newport Corp. $32.58 -0.57 (+0.50 this week) Newport is a global supplier of test, measurement and automation systems and subsystems that enable manufacturers of fiber-optic components, semiconductor capital equipment and aerospace products to automate manufacturing processes, enhance product performance and improve manufacturing yields. The key Fiber Optics and Photonics division offers a broad line of automated manufacturing systems that address a spectrum of applications in the fiber-optic component manufacturing process; from pre-test to assembly and packaging, to final device testing and burn-in. Most Recent Write-Up NEWP got left behind in the rally in the Networking index (NWX.X) today, keeping it a prime candidate on the put list. Sure it managed to eke out a gain today, but it wasn't very impressive in the face of the strong sector-wide move. That's just what we want to see in our put plays -- pick on the weakling in the sector. Over the past week, the lows have been getting lower, and resistance at $35 is looking stronger on a daily basis. We are keeping our stop at $35 and aggressive traders can target new entries at this level or at the $34 intraday resistance level. Conservative traders will want to wait for more weakness to materialize before playing; a drop through the $31 support level on increasing volume will be just the ticket. Keep an eye on the NWX index, as weakness there will likely renew selling pressure in NEWP. Comments Shares of Newport appear to be forming a classic long-liquidation 'b' pattern, which is clearly displayed on its daily chart. The stock has been coiling this week on decreasing volume and is poised to break lower. Look for a breakdown below the aggressive ascending support line, which is most easily mapped on the 30-minute chart. Conversely, considering fading any advance up to resistance at the $34 level, which has produced sellers on four separate occasions very recently. ***June contracts expire next week*** BUY PUT JUN-35*NZZ-RG OI=1250 at $3.80 SL=2.50 BUY PUT JUN-30 NZZ-RF OI= 473 at $1.25 SL=0.50 BUY PUT JUL-30 NZZ-SF OI= 167 at $3.50 SL=1.75 Average Daily Volume = 3.75 mln http://www.premierinvestor.com/oi/profile.asp?ticker=NEWP ***************************************** BIG CAP COVERED CALLS & NAKED PUT SECTION ***************************************** Batten-down the hatches as the warning season begins... By Ray Cummins Industrial stocks retreated today on weakness in the technology segment after Hewlett-Packard issued some cautious remarks about future revenues. The popular Dow component said it has become concerned regarding third-quarter profits and that it sees the economic slowdown becoming global. The company also announced it must cut expenses further to match consensus estimates for the upcoming quarter. The news weighed heavily on other stocks in the computer hardware group with Dell (NASDAQ:DELL), Gateway (NYSE:GTW) and Compaq (NYSE:CPQ) among the losers. Elsewhere on the Dow, J.P. Morgan Chase (NYSE:JPM), Alcoa (NYSE:AA), United Technologies (NYSE:UTX), Philip Morris (NYSE:MO) and Coca-Cola (NYSE:KO) moved lower while shares of Procter & Gamble (NYSE:PG) and McDonald's (NYSE:MCD) limited its downside. Lehman Brothers upgraded PG to a "buy" rating, saying the cyclical issue offers a good trading opportunity ahead of its June 15 outlook meeting. McDonald's was also among the upside movers after analysts said a favorable Internal Revenue Service ruling on REITs could spark speculation that McDonald's may unlock value by spinning off its multi-billion dollar real estate portfolio. On the NASDAQ, chip shares headed higher on strength in Intel (NASDAQ:INTC), which closed near $30 on speculation ahead of its mid-quarter update. A Merrill Lynch analyst said a view of the bellwether's inventory levels in the supply chain suggests that "things may not be as lean as many investors think." Salomon Smith Barney analyst Jon Joseph also reiterated comfort with his above-consensus numbers for Intel's second quarter number. Select software and Internet issues edged higher due to solid performances by Citrix Systems (NASDAQ:CTXS) and Priceline.com (NASDAQ:PCLN). Citrix announced it expects revenue for the second quarter and full year to be 5% higher than previously forecast and Priceline was bolstered by news that two Hong Kong-based investors had raised their stakes in the company. Networking stocks enjoyed a small rally on the heels of Sun Microsystems (NASDAQ:SUNW). Sun shares climbed amid positive comments from Goldman Sachs' Laura Conigliaro, who said that the worst part is probably over for the company and recent checks indicate their U.S. business is stabilizing. Weakness in the energy and financial industries hurt the broader market with natural gas, oil, oil service, utility and brokerage shares among the worst performers. Summary of Previous Candidates: Covered Calls: (Margin not used in calculations) Stock Strike Strike Cost Current Gain Potential Symbol Month Price Basis Price (Loss) Mon. Yield IMCL JUN 40 37.85 54.84 $2.15 5.8% Naked Puts: Stock Strike Strike Cost Current Gain Potential Symbol Month Price Basis Price (Loss) Mon. Yield RMD JUN 50 49.20 53.25 $0.80 9.0% KKD JUN 40 38.75 69.32 $1.25 9.0% KKD JUN 50 49.05 69.32 $0.95 8.5% KKD JUN 50 49.35 69.32 $0.65 8.3% THQI JUN 40 39.25 51.05 $0.75 7.5% NVLS JUN 40 39.20 53.01 $0.80 7.1% IMCL JUN 35 34.35 54.84 $0.65 6.9% ENZN JUN 50 48.85 76.56 $1.15 6.8% FCEL JUN 60 59.05 81.79 $0.95 5.7% APWR JUN 35 34.30 50.90 $0.70 5.5% PDII JUN 80 79.30 87.70 $0.70 5.4% Close? Positions Closed: ADVP, CMVT (both currently positive). Sell Strangles: Stock Strike Strike Cost Current Gain Potential Symbol Month Price Basis Price (Loss) Mon. Yield HGSI JUN 45p 44.00 75.31 $1.00 7.6% HGSI JUN 80c 81.30 75.31 $1.30 9.7% Ready to Cover? NVDA JUN 55p 53.65 94.02 $1.35 7.4% NVDA JUN 115c 116.25 94.02 $1.25 6.9% BGEN JUN 55p 54.25 63.27 $0.75 7.2% BGEN JUN 65c 65.65 63.27 $0.65 6.3% Key Moment! Naked Calls: Stock Strike Strike Cost Current Gain Potential Symbol Month Price Basis Price (Loss) Mon. Yield CMVT JUN 70 70.65 67.32 $0.65 10.3% Upgrade = Close? EXFO JUN 50 50.75 28.25 $0.75 10.2% CIEN JUN 70 70.40 59.48 $0.40 7.0% Credit Spreads: Stock Pick Last Position Credit C/B G/L Status LEH $76.75 $71.65 JUN60p/65p $0.70 $64.30 $0.70 Alert MER $69.98 $65.53 JUN55p/60p $0.60 $59.40 $0.60 Alert BAC $58.61 $59.69 JUN50p/55p $0.65 $54.35 $0.65 Open BRL $64.60 $75.45 JUN55p/60p $0.75 $59.25 $0.75 Open FNM $79.81 $82.30 JUN70p/75p $0.50 $74.50 $0.50 Open BBY $54.29 $58.76 JUN65c/60C $0.70 $60.70 $0.70 Alert Debit Straddles: Stock Pick Last Position Debit Value Target Status NUE $49.80 $54.00 JUN50c/50p $3.90 $3.90 $4.90 Closed* FLR $60.54 $52.80 JUN60c/60p $5.40 $7.40 $6.48 Closed* On Tuesday, June 5, the Nucor (NYSE:NUE) straddle traded for a credit of $6.45 when the stock was near $56.50, the high of the day. The Fluor (NYSE:FLR) straddle reached a credit of $7.40 at the close today. Both positions have surpassed our targets and will be shown closed. New Candidates: This following group of plays is simply a list of candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies are suitable for your skill level, risk-reward tolerance and portfolio outlook. In addition, we recommend that you avoid any strategy or technique in which you are not completely comfortable with the potential loss, the necessary adjustments and the common entry-exit strategies. (We monitor the positions marked with ***). *************** BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations *************** ADVS - Advent Software $67.58 *** Technicals Only! *** Advent Software (NASDAQ:ADVS) is a provider of unique Enterprise Investment Management solutions that automate and integrate a number if mission-critical functions of investment management organizations through software products, services and data integration. The company's solutions enable organizations of all sizes to run their business more effectively, enhance client service and performance as well as improve productivity and communication throughout their organization. Advent Office, its suite of integrated products, addresses the demand to automate the entire range of investment management functions. There is little news to explain the recent rally in ADVS shares but the technical outlook for the issue is obvious. Advent has recently completed a "double-bottom" formation and the rally has been supported by heavy volume. The neckline at $55 is now a strong technical support area as the stock makes a run for a new, all-time high. Traders who want to profit from that movement may speculate on the future activity of ADVS with these positions. ADVS - Advent Software $67.58 PLAY (sell naked put): Action Month & Option Open Closing Cost Target Req'd Strike Symbol Int. Price Basis Mon. Yield Sell Put JUL 55 UIV SK 0 1.20 53.80 5.3% *** Sell Put JUL 60 UIV SL 20 2.20 57.80 7.0% Sell Put JUL 65 UIV SM 5 4.00 61.00 9.7% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=ADVS ***** HGSI - Human Genome Sciences $75.31 *** Genome Leader! *** Human Genome Sciences (NASDAQ:HGSI) researches and develops novel compounds for treating and diagnosing human diseases based on the discovery and understanding of the medical usefulness of genes. The company has used automated, high speed technology to discover the sequences of chemicals in genes and generate a collection of partial human gene sequences. HGSI believes its large collection includes most of the genes responsible for producing proteins in the human body. The company also possesses one of the largest databases of the genes of humans and microbes, which they refer to as its genomic database and it has created a range of product opportunities based on its genomic database. The company intends to focus primarily on the research and development of proteins for the treatment of human disease. Speculation on new developments in "genome discovery" have pushed stocks in the Diagnostic Substances group higher over the past few sessions and HGSI is now trading at a 6-month high. The bullish activity began after company's new protein Albutropin was cleared for testing in human clinical trials by the U.S. FDA. Albutropin is a new kind of protein that fuses the human growth-protein gene to another gene called Albumin in order to extend the life of the compound in the body. The unique protein design requires less frequent injections, lower doses and offers potentially improved side effects. Analysts say the news is extremely positive for HGSI and the whole series of products the company has in early development. Investors apparently agree with the optimistic outlook and we will use the target position to establish a favorable cost basis in the issue. HGSI - Human Genome Sciences $75.31 PLAY (sell naked put): Action Month & Option Open Closing Cost Target Req'd Strike Symbol Int. Price Basis Mon. Yield Sell Put JUL 55 HHA SK 1164 1.05 53.95 4.5% Sell Put JUL 60 HHA SL 1996 1.80 58.20 7.4% *** Sell Put JUL 65 HHA SM 266 2.90 62.10 8.8% Sell Put JUL 70 HHA SN 254 4.50 65.50 10.6% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=HGSI ***** LNCR - Lincare Holdings $65.40 *** Split Rally! *** Lincare Holdings (NASDAQ:LNCR) is one of the nation's largest providers of oxygen and other respiratory therapy services to patients in the home. The company's customers typically suffer from chronic obstructive pulmonary disease, such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen or other respiratory therapy services in order to alleviate the symptoms and discomfort of respiratory dysfunction. Lincare currently serves over 225,000 customers in 42 states through 429 operating centers. Lincare shares have rallied over the last two sessions as investors continue to buy into the issue prior to the record date for the company's upcoming stock split. Lincare's Board of Directors recently declared a two-for-one common stock split, payable on June 22, to shareholders of record on June 7, 2001. The stock split will be effected as a dividend distribution of one additional share of common stock for each share of common stock outstanding. John P. Byrnes, Lincare's Chief Executive said the split is intended to increase the trading volume and liquidity of LNCR common shares. He also noted that Lincare's long-term shareholders have enjoyed compounded annual rates of return in excess of 35% per year over their nine-year history as a public company and that favorable demographics along with a commitment to clinical excellence and high quality customer service will drive future growth in their core businesses. That's a very optimistic outlook and traders who want to profit from any additional upside activity in LNCR shares can do so in a conservative manner with this bullish combination. Target a higher premium initially, to allow for a brief consolidation in the issue. LNCR - Lincare Holdings $65.40 PLAY (very conservative - bullish/credit spread): BUY PUT JUL-50 LQN-SJ OI=17 A=$0.50 SELL PUT JUL-55 LQN-SK OI=12 B=$0.90 INITIAL NET CREDIT TARGET=$0.55-$0.60 PROFIT(max)=12% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=LNCR ***** MANU - Manugistics $41.30 *** Own This One! *** Manugistics Group (NASDAQ:MANU) is a worldwide provider of smart supply chain optimization solutions for enterprises and evolving eBusiness trading networks. Its solutions, which include client assessment, software, consulting services for implementation and solution support, can be optimized to the unique supply chain requirements of companies. The company's solutions provide its clients with the business intelligence to participate in various forms of trading relationships, from traditional linear supply chains to eBusiness trading networks. Their newest generation of proven solutions help enable businesses to work in concert with their trading partners via the Internet, expanding their supply chains to eBusiness trading networks. These solutions assist customers in anticipating trading requirements in both fixed and dynamic environments to anticipate and meet the needs of customers, thereby maximizing client satisfaction. Manugistics received some positive news about one of its major products this week from Delta Airlines (NYSE:DAL). Delta said they are seeing significant benefits from Manugistics NetWORKS Airline Revenue Optimizer, a unique revenue optimization system developed for the passenger airline industry. Since last year, the solution has helped the airline increase passenger revenues while providing visibility into future demand. Delta's VP of revenue management commented that "Delta has seen a significant upside in our revenues since the introduction of The Phoenix System" and improved revenue management coupled with stronger demand were cited in Delta's annual report as contributing to an 11% increase in North American passenger revenues. In other news, MANU announced today it is acquiring SpaceWorks, which makes software that lets manufacturers share their inventory, planning and purchasing details with suppliers over the Internet. MANU said it was acquiring SpaceWorks for its order management technology, which lets companies receive and process customer orders on the Web. Manugistics has always been one of our favorite companies in the Application Software group and investors who want to establish a discounted cost basis in the issue should consider these positions. MANU - Manugistics $41.30 PLAY (sell naked put): Action Month & Option Open Closing Cost Target Req'd Strike Symbol Int. Price Basis Mon. Yield Sell Put JUL 30 ZUQ SF 305 0.75 29.25 5.8% *** Sell Put JUL 32.5 ZUQ ST 2071 1.15 31.35 8.4% Sell Put JUL 35 ZUQ SG 96 1.75 33.25 10.1% Sell Put JUL 37.5 ZUQ SU 40 2.55 34.95 11.5% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=MANU ***** MSCC - Microsemi $63.23 *** On The Move! *** Microsemi (NASDAQ:MSCC) is a designer, manufacturer and marketer of analog, mixed-signal and discrete semiconductors. Microsemi's semiconductors manage and regulate power, protect against any transient voltage spikes and transmit, receive and amplify signals. MSCC's products include individual components, as well as complete circuit solutions that enhance its customers' end products by providing battery optimization, reducing size or protecting circuits. The company's commercial products are used in dynamic high growth mobile connectivity applications as well as mobile phones and hand-held Internet devices, and broadband communications applications such as base stations, wireless LAN, cable and fiber optic systems. Microsemi has been "on the move" since the company's board of directors announced that it has approved a 2-for-1 stock split of Microsemi's common stock, to be accomplished by way of a stock dividend. The upcoming split is subject to stockholder approval to increase the number of authorized shares of MSCC's common stock by 80 million shares and the announcement of the official record and pay dates will likely occur in the near future. In addition, Standard & Poor's recently reported it will replace Silicon Valley Group (NASDAQ:SVGI) in the S&P SmallCap 600 Index with Microsemi after the close of trading on a date to be announced. Regardless of the reason for the activity, MSCC shares are a HOT item and traders who want to participate in the bullish movement may attempt to profit with these short-term positions. MSCC - Microsemi $63.23 PLAY (sell covered call or naked put): Action Month & Option Open Closing Cost Target Req'd Strike Symbol Int. Price Basis Mon. Yield Sell Call JUN 55 QMS FK 135 8.90 54.33 4.2% *** Sell Call JUN 60 QMS FL 142 5.10 58.13 10.9% Sell Call JUL 55 QMS GK 6 11.50 51.73 4.4% Sell Call JUL 60 QMS GL 36 8.50 54.73 6.7% Sell Put JUN 55 QMS RK 72 0.55 54.45 10.6% *** Sell Put JUN 60 QMS RL 4 1.55 58.45 22.2% Sell Put JUL 50 QMS SJ 10 1.70 48.30 8.2% Sell Put JUL 55 QMS SK 4 2.90 52.10 10.0% Sell Put JUL 60 QMS SL 5 4.70 55.30 12.1% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=MSCC ***** THC - Tenet Healthcare $48.50 *** New Trading Range! *** Tenet Healthcare (NYSE:THC) is the second-largest investor-owned healthcare services company in the United States. Tenet's many subsidiaries and affiliates own or operate over 100 hospitals with more than 25,000 licensed beds and other related healthcare facilities serving urban and rural communities in 17 states, and they also hold investments in other healthcare companies. The company's general hospitals offer an array of medical services and serve as the anchors for its regional healthcare delivery networks. These regional delivery networks, designed to provide a full spectrum of care throughout a community or region, may include a variety of types of ancillary services. Shares of Tenet rallied to a new, all-time high today on strength in the Health Services sector. Traders say the move was expected as THC was due to break-out of a recent trading and news that the company was beginning to show operating profits from some of its hospitals in Pennsylvania simply added to the optimism. The new report prompted praise within the health-care community that the company could so quickly turn around a group of hospitals that had previously been losing up to $1 million a day. In addition, Goldman Sachs recently started coverage of a number of hospital chains and placed Tenet on the "recommended for purchase" list, citing prospects for solid earnings growth. The Goldman analyst said Tenet, the second largest hospital chain, offers investors a compelling risk/return tradeoff given the company's operational momentum, its strong free cash flow and the potential for EPS out-performance and positive revisions to earnings. THC - Tenet Healthcare $48.50 PLAY (very conservative - bullish/credit spread): BUY PUT JUL-40 THC-SH OI=0 A=$0.25 SELL PUT JUL-45 THC-SI OI=205 B=$0.70 INITIAL NET CREDIT TARGET=$0.55-$0.60 PROFIT(max)=12% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=THC *************** BEARISH PLAYS - Naked Calls & Combinations *************** JPM - J.P. Morgan $46.84 *** Bearish Outlook! *** J.P. Morgan Chase (NYSE:JPM) conducts business in two broad spheres of activity: global financial services, provided to business enterprises, institutions, and affluent individual investors; and retail banking. Global financial services, provided under the J.P. Morgan brand, encompass: Investment Banking, Global Markets, Treasury and Securities Services, Asset Management, Private Banking, Private Equity, and also E-finance. Retail and commercial banking, provided under the Chase brand, includes: Regional Consumer and Small Business Banking, Card-member Services, Home Finance, Diversified Consumer Lending, Community Development, and Commercial Banking. Shares of J.P. Morgan slumped today after the #2 U.S. bank holding company said it expected trading revenues for the second, third and fourth quarters to be substantially lower than the first-quarter due to seasonal patterns and market conditions. Indeed, meager share values continue to plague three of the company's key businesses; trading, investment banking, and JPM's private investment portfolio. The drop in new stock offerings and mergers mean less banking fees, while lower market volatility means the company doesn't make as much money on trading commissions. In addition, their investment portfolio is also taking a hit as write-downs of expenditures in private companies have more than offset gains from its publicly held issues in the first two months of the second quarter. Traders who think the downward trend will continue can profit from that outcome with this bearish combination. JPM - J.P. Morgan $46.84 PLAY (conservative - bearish/credit spread): BUY CALL JUL-55 JPM-GK OI=2234 A=$0.20 SELL CALL JUL-50 JPM-GJ OI=4172 B=$0.85 INITIAL NET CREDIT TARGET=$0.70-$0.75 PROFIT(max)=16% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=JPM *************************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=2204 ************************************************************ ******************* 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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