The Option Investor Newsletter Sunday 06-24-2001 Copyright 2001, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/3469_1.asp Entire newsletter best viewed in COURIER 10 font for alignment Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 6-22 WE 06-15 WE 6-08 WE 6-01 DOW 10604.59 - 19.05 10623.64 -353.36 10977.00 - 13.41 + 78.47 Nasdaq 2034.82 + 6.39 2028.43 -186.67 2215.10 + 65.66 + 38.95 S&P-100 636.15 + 9.52 626.63 - 25.29 651.92 + 2.31 + 3.38 S&P-500 1225.35 + 10.99 1214.36 - 50.60 1264.96 + 4.28 + 4.85 W5000 11312.45 + 74.45 11238.00 -498.70 11736.70 + 65.13 + 61.20 RUT 488.65 - 6.48 495.13 - 16.51 511.64 + 9.92 + 5.22 TRAN 2676.49 - 17.13 2693.62 -188.47 2882.09 - 4.96 - 58.85 VIX 22.50 - 3.83 26.33 + 4.92 21.41 - 2.55 - 2.00 Put/Call .69 .73 .54 .53 ****************************************************************** Merck Joins Symantec in the Valley of Death! MRK spoiled the party with an announcement this morning that their arthritis drug VIOXX was struggling and they would miss their prior estimates. Analysts were quick to jump on the downgrade bandwagon and said that Merck's other major drugs were also experiencing stiff competition from generics. The Dow component lost -6.75 in very heavy trading. Schering Plough was also hit since they have a competing drug for VIOXX. Just another fun day in the markets! The Symantec warning produced a haircut of epic proportions. SYMC lost -22.41 to close at $38.90 on news that earnings would drop about 30% for the quarter. While Micron gained +.67 on actual earnings that were over 200% worse than expected. Do we have a perception problem here? The software makers had been doing relatively well until this week while the semiconductors have been beaten to a pulp. The turn around in MU came after comments that they saw a greater demand than ever in a new wave of new products launching over the next several years. The new wave of chips are not expected to hit markets until 2003 but investors appeared to feel that it could not get any worse. The book to bill ratio was slightly higher for May at .46 but still under estimates of .50. The Merck announcement must have put defensive traders into a quandary. If their favorite defensive sector, drugs, was suffering just like the tech sectors then where should they put their money? MRK, SGP, AHP, PFE, all darlings of the defensive crowd were bleeding money as investors ran for cover expecting more warnings to come. SGP was under fire separately by the FDA for continued manufacturing problems. Biotechs did not fare much better. Biogen took a serious hit of -6.93 after detrimental drug claims from a competing company were brought to court. Serono and Biogen are arguing over which MS drug works better. This news as well as the MRK announcement caused many high flyers to give back recent gains. PDLI led the biotech loser list with almost a -$7 loss. The retail sector was doing great on the expectations of another Fed rate cut until the Gap announced that it will be forced to cut between 500 and 700 jobs in its first ever wave of layoffs. The company will reduce its 10,000 worker office staff by -5% to -7% through attrition and layoffs. They are also shrinking their aggressive expansion program as well. GPS lost -1.51 on the news. Surprisingly networkers were also higher Friday along with telecommunication stocks. Lucent and Ciena were both higher with CIEN adding +2.25 to $41.50 after analysts speculated that CIEN might make a bid for Lucent's fiber optic business. Investors and analysts believe that things can't get any worse in the optical networking sector and they even bought TLAB, NT and SCMR on bottom fishing speculation. JDSU and MCLD were also on the high side but MFNX lost again and is heading for penny stock status at $1.43. Despite the ups and downs for the week the Dow closed only 19 points from where it started the and the Nasdaq was within six points. Stuck in a range appears to be the keywords prior to the Fed meeting. The Oracle news slapped the Nasdaq down and then propped it back up again with a slightly positive outlook. Micron painted a bleak picture with their actual results but then talked themselves out of a hole with forward looking comments that remind us of the Internet stocks with PE ratios based on 2005 to 2010 expected earnings. Still investors bought the story. The brokerage group is still generally on the upside with only slight profit taking on several stocks. The Airline stocks took another hit on Friday after reports from the Middle East that the U.S. was taking seriously terrorist threats related to the military barracks bombing in 1996. If oil supplies slow then higher prices and lower travel volume will continue to impact profits. Ironically gas prices had been heading down by as much as -$.50 a gallon from where they were just a couple weeks ago. Earnings next week include COMS, PALM, CS, CWTR, FDX, NKE and LBRT. The street is sure to form and discard several opinions about the tech sector as further warnings and the COMS, PALM and LBRT numbers are made public. The real focus for the week is of course the Fed meeting. I hate repeating this dry facts over and over each month but as traders we are faced with losing money if we do not pay attention. The consensus (100%) favor a +25 point cut and there is a 44% chance of a -50 point cut as evidenced by the Fed funds futures. A 25 point cut would not be good for the market as it would paint a picture of a Fed that thinks its work is done even though the economy is still at the bottom. A -50 point cut would likely create a short rally until the next major earnings warning. If IBM, MSFT or some other major company which had not previously shown weakness were to warn then the cycle could start all over again. Baring any major warning and a -50 point cut by the Fed there is ample cash on the sidelines to expect a Fourth of July rally. The real test is whether any rally would have any legs. The leading indicator I quoted on Thursday night performed a perfect swan dive at the open on Friday. I am speaking about the Russell-2000 RUT.X which now looks like a break through of support at 485 is possible. The oversold/Fed bounce on the Nasdaq suffered profit taking due mostly to the damage in the Dow and traders going flat before the summer weekend and Fed meeting. The selling was not that heavy but it was there. The Dow bounced off support at 10575 for the third time this month. I have to say the Dow does not look good. The weakness in MRK overwhelmed the index where only eight stocks finished positive with none up over a dollar. If the Dow falls much below 10575 we could see another round of selling as the bears enjoy their summer fling. The Dow is right on support built over the last two weeks and should this fail the next support level is 10450 and we do not want to go there. The wildcard is the defcon Delta in the Middle East. With the navy taking ships out of port and Americans being warned to stay out of the area, there will be a level of uneasiness which traders will be watching. The Fed is still the key. Greenspan has gone on record this week that he is still going to the wall to stop this recession from happening. Lyle Gramley said he felt that Greenspan would be pounding the table to get at least one more 50 point cut. The contrarians feel the prior hikes have already done the trick and stopped the drop and more cuts will be pouring gas on smoldering coals. This war of words should keep a lid on the market but a lid is the least of our problems. We need a bottom not a top! The VIX is near its six month low and that could mean traders are still too complacent for a meaningful rebound. Earnings are dead for the second quarter. They appear DOA for the third quarter as well. Funds are probably thinking they can sit back and watch until September and maybe get a better entry point. The "I have got to get into this market before it runs away" syndrome from several weeks ago has completely disappeared. There appears to be no urgency to go long and the chart on the Dow, which should be in rally mode after five 50 point rate cuts, paints the real picture. It is struggling to hold support and any negative news the market is not expecting, could be the last straw. Next week could be exciting. Buckle your seat belts when you climb aboard on Monday morning. The first few hours may be boring, like the ride up the first hill on a roller coaster, but after the Fed announcement the rest of the week could be real exciting! Enter passively, exit aggressively! Jim Brown Editor ************************************ New Online Seminar Schedule for July ************************************ Many different seminars from the comfort of home! Imagine being able to learn the tips and tricks of investing without leaving your home. You can do that with our new online seminar product. Taught by the professional traders you read every day and now those traders are available to answer your questions. The seminars average 2 hours and are interactive. You will be able to ask questions and the presenter will answer your questions in real time with charts and diagrams. Click here for the complete list! http://www.premierinvestorseminars.com/seminarcalendar.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=2217 ************************************************************** *************** ASK THE ANALYST *************** Adaptability By Eric Utley A recent question from a reader piqued my interest this weekend. And it's a very good question. When do you think the good days will return when every earning run will give you handsome profits? Do you think it will be December 2001/January 2002? - Sunil Sunil, let's qualify "good days." If you're referring to the period between October 1998 to March 2000, I don't think those days will return, at least in my lifetime. And I'm relatively young! It was a period of excess created by a technological boom, multiplied by the excitement of the Internet and taken parabolic by the cheap cost of money. And now we're paying for the excesses. Will good economic times return, and support a broad-based advance in the equity markets? Yes. And that's how I define "good days." Will a new batch of Yahoos and CMGIs surface that allow traders to take $20, $30 even $50 on an earnings run? I doubt it. There's no doubt that many, many market participants were lured into the game of trading over the last several years. And as fate would have it, those relatively new market participants witnessed one of the greatest bear markets in history. But, as history clearly shows, the market never really changes, only the faces in the game. That's because human nature hasn't really evolved in the space of time that the stock market has existed. The market goes through its cycles of excess, both to the upside and downside, its goes through periods of stability and instability, and at times it does nothing. So it's up to those traders who want to stay in the game and succeed to adapt to the current conditions. Trading isn't easy. But, in my very biased opinion, it's one of the most rewarding activities in terms of psychological accomplishment and financial reward. To digress from my rambling, we're putting together the schedule for July Online Seminars and I have a couple of good ideas and would like some feedback from my readers. I thought about giving a class on Short Selling/Put Buying to help educate those eternal bulls on how to trade the "other" side of the market. I also thought about giving a seminar on Straddle strategies. Please let me know if these ideas would be of interest, or if you have any requests for online seminars, please let me know via the following e-mail address. Thanks. Send your stock requests to Contact Support. Please put the symbol of your requests in the subject line of the e-mail. ---------------------------- Amgen - AMGN AMGN looks like a good short at $66-67 with a view of the $60 or below area. The BTK looks to be forming the last leg of a right shoulder of a very negative H&S pattern. Even if the neckline is not broken AMGN would probably see $60. If it is broken AMGN could see the recent April lows. - Rob Shares of Amgen (NASDAQ:AMGN) do appear to be forming some sort of an intermediate-term top. Whether or not the stock has traced a head-and-shoulders (H&S) top is debatable. And the reason I might argue that it's not a H&S is because of its open below the $65 level and subsequent rejection of that move back above $65 on June 12th. If it weren't for that move, I'd unequivocally agree with your observation, Rob. From where I sit, if Amgen's recent price behavior is, in fact, indicative of a H&S top, I would place its neckline at $65. (That's why I place credence on Amgen's move back on June 12th - it was right around the neckline.) However, for the sake of argument, let's agree that Amgen has traced a H&S top. The neckline of the pattern lies at $65, the left and right shoulders appear to lie around $67 and $68, respectively, and the head was formed at $70. I can take the difference from the head to the neckline ($70 - $65) to come up with $5. In turn, I can take that number and subtract if from the neckline ($65 - $5) to arrive at a bearish price objective of $60, which is the level you alluded to, Rob. The $60 bearish price objective generated by the H&S top coincides with a significant retracement level of Amgen's advance from its relative lows in late March. For those that might argue that the retracement bracket above is nonsensical because of the extreme nature of Amgen's move in late March, I've laid another retracement bracket on the chart below. This time, I anchored from the stock's relative low in early April around the $50 level. But again, we observe that the $60 level is reinforced by the 50% retracement level. What's more, we can also observe that the 38.2% retracement level lies around the $63 level, which, not by coincidence, was Amgen's low on that move on June 12th. Wait, this Amgen conundrum gets more interesting. Just for the helluva it, I pulled up a point & figure chart for Amgen and discovered something quite interesting. As you can see on the chart below, Amgen has a significant ascending support line, starting from its relative low at $45...that support line currently sits at $63 - the site of the 38.2% retracement level on the chart above! Judging from the various support levels I've set forth, the reward in shorting Amgen at its current levels may be somewhat small relative to the potential risk. The one thing that does favor shorting the stock right here is that the S&P Healthcare Sector, of which Amgen is a component, is relatively overbought. So there may be some more downside in the sector and Amgen. But, if you're going to short the stock, I'd just say be careful! Of course, if Amgen does breakdown below the $60 level, I'd probably agree with you, Rob, in that the stock could retest its April lows. ---------------------------- UnitedHealth - UNH There appears to be a very negative pattern forming on UNH. Possible 80-90% profit on a short at $61. This stock looks to have formed a H&S pattern as follows: Left Shoulder in March, Head in April and May, Right Shoulder in late May and June, Neckline at $51...It's a medium- to long-term bet but I wouldn't mind betting some big $$$ on this one. Any thoughts? - Rob I'm taking two of Rob's requests this weekend because I intended to get to UnitedHealth (NYSE:UNH) last week. Sorry for the delay, Rob. Maybe I should've titled this weekend's column: Heads, Shoulders, Knees and Toes...WHOA! Shares of UnitedHealth have traced a protracted head-and-shoulders pattern over the course of about five or six months. The stock has had several fluctuations during that time, between tracing its left shoulder and head, but now appears to be tracing its right shoulder. The neckline of this pattern is imperfect, and I'd probably place it around $50 or $52, so your judgment is perfect, Rob, at $51. We can observe the head of this particular pattern was traced on April 27th at $67. To use our formula again, we take the value of the head and subtract if from the neckline ($67 - $51) to arrive at our reference of $16. We, in turn, subtract $16 from the neckline ($51 - $16) to arrive at our bearish price objective of $35. That would be an awful BIG move for a stock such as UNH! While the Daily chart of UNH does clearly depict a H&S top, I think it would be prudent to view the stock on a longer time frame, especially in this instance. The Weekly chart below shows that UNH has had a very nice advance from the $20 level back in October of 1999. So the question is: Is the stock topping out and ready to roll or merely consolidating its gains? If it turns out to be the latter, we obviously want to approach any short with caution. But if the stock is ready to roll, we can monitor several levels to discern that much. On the chart below, I've laid a retracement bracket over UNH's advance. Now, it's normal for a stock to pullback and consolidate its gains, as UHN has been doing during this year. The retracement below indicates the stock has significant support right around $50 - a level that UNH has bounced from. But, if UNH falls and, more importantly, settles below $50 we may conclude that there's further downside in the stock. (Interestingly, the 61.8% retracement level is not too far from the H&S bearish price objective...) To take this a step further, as with the Amgen review above, I discovered a very interesting development on UNH's point and figure chart. Last Friday, the stock advanced right up to its descending supply (resistance) line at $62. If, in fact, UNH does complete its H&S top next week, it should rollover from current levels, providing traders with an excellent entry point in terms of risk/reward. For example, a trader can short the stock at current levels and set a relatively tight stop at $64 (left shoulder), giving up less than $3 in risk. On the other hand, if UNH does pullback, it could fall as low as $55 or $56 in the short-term, giving the potential of $5 or $6 in reward. In terms of risk/reward, UNH is currently at the possibly "best" level to short the stock for a short-term trade, because it's extremely easy to know if and when you're wrong - UNH advances above its descending resistance line at $62! Whether or not the stock does complete its right shoulder next week remains to be seen, and like I suggested earlier, for it to decline down to the $35 price objective would require UNH to first break below $50. And I think something fundamentally would have to change for the worse for that to happen...just a thought! ---------------------------- Williams Communications - WCG ..I get a lot of news and feedback on Williams Communication Group here in [Tulsa]. The stock is way down right now and it appears that they are leaders in fiber optic network systems or so they say. Can I get you all to switch gears and tell me what you think about this for the long term (3-5 years) and writing covered calls or leaps on this, or just plain old buy and hold? I have read that Williams insiders are purchasing 11% coupon bonds @ 0.33 on the dollar. Considering that I'm very ignorant on what this means, is this a revealing event or just typical? I'm willing to do my part and dig for some more info, but I haven't found anything yet that yields clues. How do you interpret that? - Thanks, Kyle Thanks for the question, Kyle. Williams Communications (NYSE:WCG) is concerned with the great telecom debate: When will demand return? At what levels? How much overcapacity exists? Unfortunately, we do not yet know the answer to these questions as the story is still being written. More unfortunate, perhaps, was that this story took a major turn for the worse recently in the wake of Level 3 Communications' (NASDAQ:LVLT) earnings blow-up. Bankruptcies are appearing left and right in the telecom space, and that has investors expecting the worse for some of the remaining companies, such as Williams Communications. Kyle alluded to the fact that some of Williams' debt recently traded for 33 cents on the dollar. Such depressed levels suggest that debt market participants expect Williams itself to declare bankruptcy. But the market's perception of Williams is in stark contrast to what its CEO said last week. He opined that the overcapacity of fiber currently is "not accurate," especially dark fiber, which is optical cable in the ground. The CEO went on to suggest that the recent debacle within the telecom space created a larger opportunity for Williams, and opined that the company is "perfectly positioned" to supply network capacity to carriers in the future. Reports suggest that Williams has financing that will carry the company through the next year or so, at which time the company expects to become cash flow positive (Read: Profitable). Unfortunately, I could not substantiate what you read, Kyle, concerning the purchase of debt on the cheap by Williams insiders. I would think that that would be a positive development as the insiders are putting their money where their mouths are. I'll do a little more digging over the coming week and pass along any findings. I could see how it would be tempting to buy Williams, after all, the stock finished Friday at $2.72 and it can only go as low as zero. But, I have a rule of NEVER buying a stock at or near its 52-week low, let alone its ALL-TIME low. And, I never argue with the market - the market is portending bad things for Williams currently. Further, Kyle, you alluded to using options in the form of covered calls. From what I saw in Williams' options, it was hard to find a bid - literally - going out to 2002 contracts. I don't mean to be too negative, but money is money. And there are innumerable places in the market that are easier to put that capital to work than in a struggling telecom. At the very least, I would wait for Williams to stop falling before buying the stock. A little basing, actually a lot of basing, might portend the stock is not going to zero, at which time it may be worth while to revisit. In the meantime, go where it's easier to make money from the long side. ---------------------------- NVIDIA - NVDA Can you please advise your views on this stock. Since you last wrote about NVDA it has had nothing but an erratic behavior. Trading up and down between 80's and 90's. Is this a rollover or consolidation? Look forward to your expert advice. - Sunil As always, thanks for the astute question, Sunil. We (Option Investor) added NVIDIA (NASDAQ:NVDA) to the Put List over the weekend. Why, you ask? Just two weeks ago, I reviewed NVIDIA and addressed the significant resistance it faced just above its current levels, at that time, at $100. The stock failed to get above $100 since our last review and actually broke and, more importantly, settled below its long standing ascending support line last week. The chart below is the same I used two weeks ago, only the prices have changed. I think that if NVIDIA breaks below $90 early next week, it should see the $83 level in short order. But much of NVIDIA's trading next week, I would guess, will be predicated upon the Fed's actions. ---------------------------- DISCLAIMER: This column is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The Ask the Analyst picks are not to be considered a recommendation of any stock or option but an information resource to aid the investor in making an informed decision regarding trading in options. It is possible at this or some subsequent date, the editor and staff of The Option Investor Newsletter may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable, but is not guaranteed as to its accuracy. ************************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=2224 ************************************************************** ************* COMING EVENTS ************* For the week of June 25, 2001 Monday ====== Existing Home Sales May Forecast: 5.13M Previous: 5.2M Tuesday ======= Durable Orders May Forecast: -0.5% Previous: -5.0% Consumer Confidence Jun Forecast: 115.0 Previous: 115.5 New Home Sales May Forecast: 900K Previous: 894K Wednesday ========= Oil/Gas Inventories 6/22 Forecast: N/A Previous: 315.5 MBA Mortgage App 6/22 Forecast: N/A Previous: 510.3 FOMC Meeting Thursday ======== Initial Claims 6/23 Forecast: N/A Previous: 400K Help-Wanted Index May Forecast: N/A Previous: 65 Online Help Wanted Jun Forecast: N/A Previous: 99 FOMC Minutes 2:00 pm Friday ====== GDP - final Q1 Forecast: 1.3% Previous: 1.3% Chain Deflator-final Q1 Forecast: 3.2% Previous: 3.2% Chicago PMI Jun Forecast: 39.0% Previous: 38.7% Mich Sentiment-rev. Jun Forecast: 91.0 Previous: 91.6 Week of July 2 ================= Jul 02 Auto Sales Jul 02 Truck Sales Jul 02 Personal Income Jul 02 PCE Jul 02 Construction Spending Jul 02 NAPM Index Jul 03 Factory Orders Jul 05 Initial Claims Jul 05 NAPM Services Jul 06 Nonfarm Payrolls Jul 06 Unemployment Rate Jul 06 Hourly Earnings Jul 06 Average Workweek *************************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=2205 ************************************************************ 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. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-24-2001 Sunday 2 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/3469_2.asp ************** TRADERS CORNER ************** Point and Figure Chart Construction By Jeffrey Canavan We use point and figure charting quite often on this site, and I'm sure some new readers, as well as long time subscribers, often look at the chart and wonder if this is a chart of a stock, or a game of tic tac toe. While bar charts decipher a stock by using price, time, and volume, point and figure charts measure supply and demand by recording a series of Xs and Os to track the movement of a stock. When you break trading down to its simplest form, it is merely an open auction that is governed by the laws of supply and demand. If demand exceeds supply, prices go up. To show how a point and figure chart is constructed, let's assume that Zaphod, a hypothetical stock, goes public at $20. Since Zaphod is close to finding a cure for the common hangover, the initial public offer is a success, and the stock jumps $5 dollars on the first day of trading. The point and figure chart would look something like this. 25 X 24 X 23 X 22 X 21 X 20 A new X is added each time the stock rises by $1, so to climb another X, Zaphod has to have a high, not a close, of $26 or greater. So if on the second day Zaphod has a high of $29 and closes at $27, this is what the chart would look like? 30 29 X 28 X 27 X 26 X 25 X 24 X 23 X 22 X 21 X 20 Even though the stock closed at $27, 4 more Xs are recorded to a level of $29, since that was the high of the day. So what happens if on day three the stock has a high of $29, and a low of $28? It didn't have a high of $30, so we can't add another X, and it didn't fall far enough to give a three-box reversal (coming up next), so nothing is done to the chart. This is one of the differences between a point and figure chart and a bar chart; a bar chart must print something everyday, where an inactive stock's point and figure chart can go unchanged for days. If the supply/demand picture hasn't changed, why change the chart? On day four, Zaphod is subjected to some profit taking, and had a high of $29, and a low of $26. The first thing we look at is the high to determine if one more box is added. If Zaphod would have traded $30, we would have added another X, and not worried about the low. But it didn't, so now we must look at the low to see if the stock dropped enough for a three-box reversal. To change a column of Xs into a column of Os the stock must trade 3 boxes lower. So when Zaphod had a low of $26 that was enough to reverse the current column of Xs into a column of Os. 30 29 X 28 X 0 27 X 0 26 X 0 25 X 24 X 23 X 22 X 21 X 20 On day five the first thing we want to check is if Zaphod had a low of $25 or less. It had a low of $24, so the chart would now look like this. 30 29 X 28 X O 27 X O 26 X O 25 X O 24 X O 23 X 22 X 21 X 20 With our stock currently sitting in a column of Os at 24, what would tomorrows high have to be to reverse this stock back into a column of Xs? 27 is correct. 30 29 X 28 X 0 27 X 0 X 26 X 0 X 25 X 0 X 24 X 0 23 X 22 X 21 X 20 Those are the basics of point and figure chart construction, so lets take a little quiz to see if we've got it. With a stock currently trading at $30, update the following chart with this information. High Low Day 1 34 29 Day 2 35 31 Day 3 35 32 Day 4 32 27 Day 5 28 25 Day 6 29 25 36 35 34 33 32 31 30 X 29 X 28 X 27 X 26 X 25 X 24 X Your update chart should look like this: 36 35 X 34 X O 33 X O 32 X O 31 X O 30 X O 29 X O X 28 X O X 27 X 0 X 26 X O X 25 X O 24 X How did you do? Once you get the basics down, we can move on to the fun stuff like bullish catapults, bearish price objectives, and bullish percent data. Questions are welcome: email@example.com *************************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 ************************************************************ ************** BROKERS CORNER ************** Trading Rule Book By Robert Ogilvie This article is intended to offer a few helpful hints that will hopefully benefit you in the future. While the markets appear to be in a perpetual trading range, it is becoming more and more frustrating to trade in these conditions. Many investors have either given up as indicated by the anemic volume or are looking at new trading strategies for an answer to why they haven't been making the gains they once were. Before you start a new strategy, develop and write down some sound trading rules that are easy to follow. You should begin by establishing your investment goals and objectives. Ask yourself, "why am I trading?" and/or "what (realistic) short and long term rate of return do I want to achieve?" Are you investing for fun, to build wealth, to earn a living, and/or to retire? An example would be, "I want to make 50% per year. To do this, I have to average 4% per month." A lot of people like the idea of 10% or 20% per month. But it comes at a cost. Higher returns come with higher risk. There is no way getting around it. In concert with your investment goals, you need to determine your risk tolerance. What amount can you afford to lose? Stocks are risky. Options on stocks are even riskier. After you have determined your goals and risk tolerance, you have a choice of many investment strategies. This article is a little vague because I can't cover every possible variable for every type of investor. Just because some person is successful shorting stocks doesn't mean it is the strategy for you. You might be eligible for something even riskier and more complex. The amount of time you have to monitor your investments also determines the strategies you can use. Some people can spend all day and night at their computers analyzing charts and trading while others barely have time to stop and eat. Depending on your circumstances, choose a strategy that not only fits your goals and risk tolerance, but also your time frame and your understanding. Some people just don't comprehend the concept of various strategies. It isn't because they are dumb. It is similar to how some people are whizzes at calculus while others have a hard time with algebra. Another tip is to use a variety of strategies for your overall portfolio. Cash allocation is important to diversification. For instance, allocate the majority of investment capital in lower risk instruments, while dedicating a smaller portion to more aggressive strategies. Everyone's cash allocation model is different. You're model should represent your goals and risk tolerance. Determining how much cash to invest in various strategies is key to achieving those goals. For instance, if you have an annual return goal of 20%, with 80% of your capital in a money market account earning 4% annually and 20% invested in options, the small amount in options will need to be very successful to make about 100% annually. Now that the boring tedious stuff is out of the way we can get to the hard part. Choosing a research method can be very frustrating. With so many indicators to choose from, which ones are the best? The best indicators are the ones that work for you in all market conditions. I have read that statistically, only 1 out of 4 stocks goes up in a bear market. If you are buying or going long as an investment strategy, then you will have to find the stocks going up. The same is true for the stocks going down. The problem with so many stocks going down is that you have to determine which will continue to go down. Some investors use only technical or fundamental analysis. I think both should be used. I think the key to using technical indicators is to find a few that work well for you. If you use too many, the signals may conflict. KISS - Keep It Simple Stupid is what I tell my clients. Just as investment objectives are different for each investor, so are the tools for each person. Personally, I like using Stochastics, MACD, and Bollinger Bands as a confirmation tool for the bar chart and the 10 and 40 DMA. After you have found a few candidates for your strategy, develop strict entry parameters. This should reflect your research method. If all of your criteria are met, then proceed with caution. If one of the criteria doesn't meet your parameters, don't enter the position. This is where having too many indicators can burn you. We are emotional creatures that will find a reason to enter if we find a conflicting indicator that matches our emotion. There is a reason the average investor is considered "the sheep" and the institutional money is the "smart money." The "smart money" trades without emotion. Once you have committed to entering this position, it is important to have a strict exit strategy. Again, some require tighter stop loss parameters than others. It all depends on your tolerance. Because you have determined your goals, you know how much you need to profit on the trade to help meet those return goals. Don't let your emotions get the better of you. If you entered the trade because of technical and fundamental reasons, then you should exit the trade if any of those reasons change. Do not get greedy. That is the worst emotion. After you have determined your sell parameters and written them down, write "3 ways to lose money - hope, fear, and greed." Write down all of your trading rules and keep a copy of the list on hand at all times. Laminate it if necessary. Keep a copy near your computer and a copy in your wallet. The reason to have the rules is to be consistent. If you are consistent, and your results aren't meeting your goals, it may be easier to pinpoint the problem. This is a little vague for a reason, if you need help with your rule book, I am happy to help you get through the steps. As a financial consultant, it is my job to help determine an investor's needs and develop a strategy to help them reach their goals. Except for our ego, there are no consolation prizes for succeeding on our own. Robert John Ogilvie firstname.lastname@example.org Neither Cutter & Company, Inc. nor Robert J. Ogilvie makes any representation as to the accuracy, reliability or completeness of any charts, formulas, and /or research opinions presented herein. This article is intended solely for educational purposes. Nothing herein should be construed as an offer or solicitation to buy or sell any securities. Cutter and Company is a Member of the NASD, MSRB, and SIPC. Please read the Optioninvestor's Disclaimer: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* QCOM - Qualcomm, Inc. $54.03 (+4.68 last week) See details in sector list Put Play of the Day: ******************** NETE - Netegrity Inc $30.14 (-2.71 last week) See details in sector list ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.sungrp.com/tracking.asp?campaignid=2218 ************************************************************** ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS CB $77.55 (-1.45) Old economy stocks spent another day in the doghouse on Friday, and although selling in the Insurance sector was mild, CB continued its disappointing behavior of the past week. After tagging a high of $79.37 a week ago, the stock has been gradually drifting lower. While it could resume its ascent any day now, the rollover in the daily Stochastics seems to point to a more extended decline in the days ahead. Rather than wait to be stopped out, let's take a more proactive approach, exiting any open plays on Monday. Use any rally as an opportunity to close open positions at a more favorable level. PUTS CMVT $57.81 (-2.12) Aggressive traders that were waiting for CMVT to rollover below our $56 stop to initiate new positions were sorely disappointed on Friday. Shooting through that level before amateur hour was done, our short-lived play dropped back to test that level three times throughout the day, but the bulls held their ground, finally invoking a late-day rally to close near the high of the day. All positions should now be closed, but if you happened to miss your exit point, look for a dip near the $56 level on Monday to provide for a less painful exit. *********** DEFINITIONS *********** SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************** NEW CALL PLAYS ************** AHC - Amereda Hess $83.60 (-0.60 last week) Amerada Hess is an integrated oil and gas company engaged in the worldwide exploration for and the production of crude oil and natural gas. Amerada Hess also engages in refining and markets refined petroleum products, natural gas and electricity in the United States. The broader energy sector is deeply oversold. As of last Friday, the Bullish Percent of the S&P Energy sector had fallen to 28 percent. That tells us that only 28 percent of the stocks within the S&P Energy sector are currently in bullish patterns. Furthermore, amid increased tensions in the Middle East - a huge oil exporting region of the world - the recent slip in energy prices may reverse and advance. The combination of deeply oversold conditions and the threat of unrest in the Middle East may set up a potentially bullish trade in the energy sector next week. In order to game this potential event, we're initiating bullish coverage on AHC. The stock, despite the pullback in the broader energy sector, still trades relatively well. Furthermore, the risk to reward in the play is favorable as AHC bounced from a key demand (support) level last week at $81, as evidenced on its point & figure chart - not by coincidence, $81 is our stop. As for upside, AHC could advance up to the $87 level next week. But, we have to concede that this is a very aggressive play and predicated on speculation of an oversold bounce combined with news. As such, please consider your risk tolerances when examining this play and realize that gaps are very likely as news filters out from the Middle East over the weekend. BUY CALL JUL-80 AHC-GP OI= 10 at $5.20 SL=3.00 BUY CALL JUL-85*AHC-GQ OI= 55 at $2.45 SL=1.25 BUY CALL JUL-90 AHC-GR OI=334 at $0.95 SL=0.00 Average Daily Volume = 729 K CEPH - Cephalon $68.60 (+0.61 last week) Cephalon seeks to discover, develop and market innovative products to treat neurological disorders, sleep disorders and cancer. The company is committed to providing patients and the medical community with novel therapies to treat unmet medial conditions through its proprietary research programs and by acquiring promising products for clinical development and commercial sale. CEPH, unlike many of its cohorts in the biotech sector, is expected to burst into profitability during fiscal 2001. That's because the company has three primary products that are sold in the United States, which are expected to produce revenues of around $240 million during the current fiscal year. Perhaps its financial out performance lends to CEPH's exceptional share price performance this year, in addition to the broader biotech sector trading relatively well. Aside from the company's fundamentals, we noticed a very enticing price pattern on CEPH's point & figure chart Friday, which begged that we initiate bullish coverage on the stock. CEPH has traced several bullish patterns on its point & figure chart, which most certainly indicate the stock is under heavy accumulation. The stock needs only to breakout above the $71 level early next week in order to complete a most bullish buy signal. If it does, we could very well see the stock work its way up to the mid $90's over the intermediate-term. On the other hand, if your style is to enter on pullbacks, look for support as low as $66. But, if CEPH settles just below that level at $65, we'll drop coverage on the play as that level marks the line in the sand. Getting back to the pivotal breakout point, those who prefer trading momentum and breakouts will simply watch for CEPH to decidedly advance above the $71 level early next week on volume of at least 2 million shares. But, make sure to confirm direction in the Biotechnology Sector Index (BTK.X) before entering on any breakout. Look for the BTK to get above 625. BUY CALL JUL-65 CQE-GM OI= 250 at $6.40 SL=4.50 BUY CALL JUL-70*CQE-GN OI=1464 at $3.60 SL=1.75 BUY CALL JUL-75 CQE-GO OI= 279 at $1.85 SL=1.00 BUY CALL AUG-70 CQE-HN OI=1409 at $6.30 SL=4.50 BUY CALL AUG-75 CQE-HO OI=1062 at $4.30 SL=2.75 SELL PUT JUL-65 CQE-SM OI= 765 at $2.50 SL=4.00 (See risks of selling puts in play legend) Average Daily Volume = 1.91 mln MWD - Morgan Stanley Dean Witter $65.05 (+7.53 last week) Morgan Stanley & Co. is a preeminent global financial service firm with well recognized brand names including Morgan Stanley and Discover Card, among others. Morgan Stanley combines the strength of innovative financial products and services with powerful distribution capability to individual and institutional cliens. Morgan Stanley's products and services include underwritten public offerings of securities, mergers and acquisitions and other financial advisory services, securities sales and trading, research and asset management services. A week ago, we had been gaming MWD from the short side, and had some success in that endeavor. However, following its better-than-expected earnings report last week, we're picking up bullish coverage on the play this time 'round, going into next week's trading. Speaking of next week's trading, the Federal Reserve conveys early next week to determine the direction of short-term interest rates, culminating with an official announcement on Wednesday. Following several key and disconcertingly weak economic reports recently, many economists expect the Fed to cut by 50 basis points, which was unheard of just two weeks ago. But, currently, the consensus expects a 50 percent chance of a 50 basis point cut. In the event of a 50 basis point cut, we want exposure in a financial stock going into next week, which is where MWD comes in. Although, the stock's momentum last week on the heels of the company's earnings report may continue to carry MWD higher going into next week. Now, we appreciate that gauging the Federal Reserve is risky, but we can use MWD's technicals as a guide. For those who have the risk tolerance, consider entering at current levels ahead of the FOMC announcement Wednesday. There exists some meaningful resistance at $68, so those earlier in their entries might use any advance up to that level as an exit point, at least for partial positions. Conversely, those wanting confirmation of trend might use any advance above $68 as an entry point, as that breakout should allow MWD to retest its relative highs. Insofar as support in concerned, dip buyers might consider using a bounce off $63, or lower near $62.50 support to gain entry. Stops are initially being set at $61, and we would drop MWD if it CLOSED below that level. BUY CALL JUL-60 MWD-GL OI= 5826 at $6.60 SL=4.50 BUY CALL JUL-65*MWD-GM OI=13019 at $3.40 SL=1.75 BUY CALL JUL-70 MWZ-GN OI=14504 at $1.50 SL=0.75 BUY CALL AUG-65 MWD-HM OI= 306 at $4.80 SL=3.00 BUY CALL AUG-70 MWZ-HN OI= 472 at $2.60 SL=1.25 SELL PUT JUL-60 MWD-SL OI=11632 at $1.40 SL=3.00 (See risks of selling puts in play legend) Average Daily Volume = 5.85 mln OPWV - Openwave Systems $28.67 (+0.67 last 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. Reflecting the recent trend in the broad Technology market, OPWV is managing to lead a recovery in the Wireless sector due to their strong position in wireless-enabling software. Recall that one of the leading sectors in the NASDAQ last week was Software, due to the better than expected earnings report from ORCL, coming on the heels of ADBE's better than expected results. With the bad news already out from many of the players in the Wireless market (such as NOK, PALM and RFMD), investors seem to be taking the attitude that the bad news is out and they are ready to rally. While we are early in the move, we can see that the $25 level once again provided support, and an opportunity for the daily Stochastics oscillator to stabilize and begin to emerge from oversold territory. Look for an intraday dip to the $27-28 level, or even solid support near $25 to provide entry, if you like to buy the dips. Otherwise, hold on and wait for OPWV to clear the $32 resistance level before playing. Keep in mind, there is a gap between $34-38, which will need to be filled by the bulls. But the bears will be lying in wait to sell into that rally, so keep a tight reign on your position until you see the $38 level in your rear-view mirror. Above that, resistance will be waiting near $40, confirmed by the bearish resistance line on the Point and Figure chart. Place stops at $24. BUY CALL JUL-25 UGE-GE OI= 984 at $6.00 SL=4.00 BUY CALL JUL-30*UGE-GF OI=1565 at $3.30 SL=1.75 BUY CALL JUL-35 UGE-GG OI=5230 at $1.75 SL=0.75 BUY CALL AUG-30 UGE-HF OI= 123 at $4.60 SL=2.75 BUY CALL AUG-35 UGE-HG OI= 42 at $3.00 SL=1.50 SELL PUT JUL-25 UGE-SE OI=1995 at $1.90 SL=3.75 (See risks of selling puts in play legend) Average Daily Volume = 6.41 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=OPWV *************************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. 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The Option Investor Newsletter Sunday 06-24-2001 Sunday 3 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/3469_3.asp *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.IndexSkybox.com ************************************************************ ****************** CURRENT CALL PLAYS ****************** MEDI - MedImmune $45.30 (+3.06 last week) MedImmune Incorporated is a fully integrated biotechnology company focused on developing and marketing products that address medical needs in areas such as infectious disease, immune regulation and cancer. Headquartered in Gaithersburg, Maryland, MedImmune has manufacturing facilities in Maryland and the Netherlands. MEDI's weekly chart clearly displays an ascending trend that has carried the stock higher since it traced a bottom in mid-March. Indeed, the biotech sector, as measured by the Biotechnology Sector Index (BTK.X), has traded relatively well during that time. An aggressive, ascending trend line can be drawn on MEDI's weekly chart by anchoring near its bottom around the $28 level. When reduced to the daily chart, MEDI's ascending trend line has clearly provided support since mid-March. We can use this trend line, which currently resides around $42 (our stop), for approaching entry points on any future pullbacks. Although, the stock's breakout Thursday above the $45 level may make that price a platform of sorts, as was the case Friday. The earnings warning from drug giant Merck adversely impacted the broader biotech sector Friday, including MEDI. But our play pulled back on rather light volume, which was somewhat of a condolence. If the $45 level is retested again early next week and again holds, traders might consider gaming entries on any subsequent bounce off of $45. Conversely, if the $45 level breaks early next week, look for support to materialize around the ascending support line at $42, assess the direction of the BTK, and consider taking entries off that ascending support line, which should offer a favorable risk/reward dynamic should it hold. On the flip-side, those who prefer trading momentum might look for entries on any advance above the $47.50 level on healthy volume, after confirming strength in the BTK. But, keep an eye on MEDI's 200-dma just above at $48.85. MEDI's peak open interest in July calls currently lies in the 40 and 45 strikes. If the stock can continue to advance early next week, that open interest may help to perputate any rally attempt. BUY CALL JUL-40 MEQ-GH OI=3249 at $6.70 SL=4.50 BUY CALL JUL-45*MEQ-GI OI=2191 at $3.50 SL=1.75 BUY CALL JUL-50 MEQ-GJ OI=1338 at $1.35 SL=0.75 BUY CALL AUG-45 MEQ-HI OI= 155 at $4.90 SL=3.00 SELL PUT JUL-45 MEQ-SI OI= 671 at $2.80 SL=5.00 (See risks of selling puts in play legend) Average Daily Volume = 3.23 mln RATL - Rational Software $26.30 (+2.31 last week) Rational Software provides a platform for software development that speeds time-to-market while improving software quality. This integrated full life-cycle solution combines software engineering best practices, market-leading tools, and professional services. Ninety of the Fortune 100 build software with the Rational solution. RATL's price and volume action Friday was very indicative of consolidation. The stock traded in a range of only $1.40, on a mere 1.6 million shares - its 30-day average volume is around 4.50 million. Its consolidation is constructive, make no mistake about it. In light of the Symantec's and Micron's earnings blow-ups late last week, the fact that RATL finished slightly lower Friday bodes very well for our play going forward and hopefully portends a breakout above the increasingly critical $29 level. To review, an advance above $29 would generate a bullish breakout on RATL's point & figure chart, as well as clear a significant retracement level on the daily chart. But for a breakout to occur, we need to see the Software Index (GSO.X) rebound early next week. In the wake of Symantec's warning late last week, the GSO pulled back Friday to support around the 212 level. Ideally, we'd like to see the GSO rebound and advance above the 225 resistance level, coinciding with RATL breaking out above $29, which would give the green light for entries into the play. However, for those whose style is to enter on weakness, turn to the $25 first when looking for significant support levels from which RATL might bounce. The $25 level is currently the site of RATL's 10-dma. Thereafter, significant demand (support) levels lie between $23 and $24. Keep in mind that the former level is the site of our stop. If the stock does pullback early next week, make sure that light volume, such as Friday's, accompanies any weakness as a sign the weakness is market related! BUY CALL JUL-22.5 RAQ-GR OI= 207 at $5.10 SL=3.00 BUY CALL JUL-25.0*RAQ-GE OI=1252 at $3.50 SL=1.75 BUY CALL JUL-30.0 RAQ-GF OI=1625 at $1.40 SL=0.75 BUY CALL AUG-25.0 RAQ-HE OI= 52 at $4.40 SL=2.75 BUY CALL AUG-30.0 RAQ-HF OI= 292 at $2.40 SL=1.25 SELL PUT JUL-22.5 RAQ-SR OI= 373 at $1.15 SL=2.00 (See risks of selling puts in play legend) Average Daily Volume = 4.50 mln ADBE - Adobe Systems $43.58 (+4.02 last week) A long-time leader in desktop publishing software, ADBE provides graphic design, publishing, and imaging software for Web and print production. Offering a line of application software products for creating, distributing, and managing information of all types, the company generates nearly 75% of sales through publishing software products such as Photoshop, Illustrator, and PageMaker. Its Acrobat Reader, which uses portable document format (PDF) is popping up all over the Internet, as businesses shift from print to digital communications. In addition, ADBE licenses its industry standard technologies to major hardware manufacturers, software developers, and service providers, as well as offering integrated software solutions to businesses of all sizes. Shooting higher last week on the heels of ORCL's better than expected earnings report, ADBE was due for a break after scaling the $45 level on Wednesday. While the stock held its ground on Thursday, fear of darkness on Friday led to the desired pullback as profit taking dropped the share price right down to the $43 support level before a mild bounce into the close. Volume was rather light, adding credence to the theory of a pullback before the stock launches higher in the days ahead. While ADBE recently beat earnings estimates by a nickel, don't forget the big unknown on Tuesday - we get the results of the latest FOMC meeting, and the decision on interest rates could drive the NASDAQ (and ADBE with it) in either direction. Timid traders may want to lock in gains before the announcement and consider re-opening positions after the unknown becomes known. ADBE is on the cusp of a breakout over the $46 level, after which the bulls will need to conquer the stubborn $48 level which has thrice turned them back since mid-April. Momentum players can consider new positions as the stock pushes through $46, while dip-buyers will want to target the $42-43 support level, near the converged 10-dma ($41.97), 30-dma ($42.03) and 50-dma ($42.47). Real risk-takers can even try to pick up an entry near our $40 stop, but make sure the rebound comes on strong volume. Watch for continued strength on the Software index (GSO.X) before playing, and keep one ear to the newswires. ADBE is presenting at the Thomas Weisel Partners conference Monday evening. BUY CALL JUL-40 AEQ-GH OI=3997 at $5.30 SL=3.25 BUY CALL JUL-45*AEQ-GI OI=4715 at $2.10 SL=1.00 BUY CALL JUL-50 AEQ-GJ OI=3338 at $0.80 SL=0.00 BUY CALL AUG-45 AEQ-HI OI= 228 at $3.70 SL=2.00 BUY CALL AUG-50 AEQ-HJ OI= 311 at $1.90 SL=1.00 BUY CALL AUG-55 AXX-HK OI= 65 at $0.85 SL=0.00 SELL PUT JUL-40 AEQ-SH OI=4630 at $1.25 SL=2.50 (See risks of selling puts in play legend) Average Daily Volume = 4.39 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=ADBE FRX - Forest Laboratories $72.10 (+1.87 last week) One of many specialty pharmaceutical companies, Forest Laboratories develops, manufactures and sells both branded and generic forms of ethical prescription and non-prescription drug products. . Some of the company's more notable products are Celexa (for depression), Tiazac (for hypertension and angina), and respiratory products Aerobid, Aerochamber and Tessalon. Additionally, the company produces Infasurf, a lung surfacant for the treatment and prevention of respiratory distress syndrome in premature infants. FRX markets its products directly to physicians using the company's own specialized sales force. Market participants couldn't decide what to do with FRX on Friday, but in the end it was very encouraging, as the stock posted only a fractional gain. While not exciting for those holding calls, it sure was a relief, when compared to the Pharmaceutical index (DRG.X), which gave up more than 3.5%. Thanks to Merck warning of an earnings shortfall due to less-than-stellar sales of Vioxx, the entire sector was under pressure. In a bold show of relative strength, FRX reversed its early loss on the MRK news to close nearly unchanged. While the uptrend has definitely been weakened in the past 2 days, this could be just the rest break the bulls needed before resuming the rally. Dip-buyers will look for a bounce near the 10-dma (currently $71.69) or even a return to the $70 level to provide entry into the play. Just make sure buyers defend those levels by pushing up the volume before playing. Those who prefer to follow the herd (read: momentum players) will want to wait for FRX to scale the $74 level on strong volume before playing. The real test will be whether FRX can clear $76, and this will provide for more entries, as the bulls prepare for their assault on the all-time high of $78.28. Keep in mind that the Point and Figure chart is forecasting a bullish price target of $88. So if FRX reaches new highs, it will likely still be healthy enough to provide a profitable play. BUY CALL JUL-70 FRX-GN OI= 319 at $4.60 SL=2.75 BUY CALL JUL-75*FRX-GO OI=1090 at $2.00 SL=1.00 BUY CALL AUG-70 FRX-HN OI= 313 at $6.10 SL=4.00 BUY CALL AUG-75 FRX-HO OI= 688 at $3.30 SL=1.75 SELL PUT JUL-70 FRX-SN OI=1608 at $1.95 SL=3.75 (See risks of selling puts in play legend) Average Daily Volume = 1.40 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=FRX GE - General Electric $51.86 (+3.05 last week) As one of the largest and most diversified industrial companies in the world, GE's products include major appliances, lighting products, industrial automation equipment, medical diagnostic equipment, electrical distribution and control equipment and power generation and delivery products. Additionally, GE provides commercial and military aircraft jet engines, locomotives and nuclear power support services. Through the National Broadcasting Company (NBC), GE delivers network television services, operates television stations and provides cable, Internet and multimedia programming and distribution services. GE finally shook off its malaise associated with the Honeywell merger, which is likely to be blocked by European anti-trust regulators. Despite poor news on that front, the bulls found new life mid-week and pushed the share price solidly through the important $50 level on continued strong volume. GE is now above all its moving averages, and the 50-dma ($49.25) is just about to cross up through the 200-dma ($49.57), generally a solidly bullish sign. The next obstacle will be the recent high near $53.50 and resistance between there and $54. Clearing that level will create new entry points as the bulls take aim at $55 and then $56 resistance levels. Those that like to get in a bit cheaper will still want to target the pullbacks, now in the vicinity of $50, followed closely by that 200-dma. Since GE normally moves in sympathy with the broader non-tech market, it has been really encouraging to see the bulls remain in control while the DJIA continues to struggle with keeping its head above water. With daily Stochastics now entering overbought, watch out for profit-taking as the stock approaches the $54 level. If it can clear that level on strong volume, GE could soon be taking aim on the $60 level. Keep stops set at $49 for the time being. BUY CALL JUL-50 GE-GJ OI=65412 at $3.00 SL=1.50 BUY CALL JUL-55 GE-GK OI=17312 at $1.75 SL=0.75 BUY CALL AUG-50*GE-HJ OI= 1428 at $3.80 SL=2.25 BUY CALL AUG-55 GE-HK OI= 7062 at $1.25 SL=0.50 BUY CALL SEP-50 GE-IJ OI=29499 at $4.40 SL=2.75 BUY CALL SEP-55 GE-IK OI=29580 at $1.85 SL=1.00 SELL PUT JUL-50 GE-SJ OI=29308 at $1.00 SL=2.00 (See risks of selling puts in play legend) Average Daily Volume = 21.9 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=GE QCOM - Qualcomm, Inc. $54.03 (+4.68 last week) Based on its proprietary CDMA technology, QCOM is engaged in developing and delivering digital wireless communications services. The company's business areas include integrated CDMA chipsets and system software and technology licensing. QCOM owns patents that are essential to all of the CDMA wireless telecommunications standards that have been adopted or proposed for adoption by the worldwide standards-setting bodies. Currently, QCOM has licensed its CDMA patent portfolio to more than 80 telecommunications equipment manufacturers around the world. There's nothing quite like picking the bottom on a successful play to put a smile on your face, and that is exactly what QCOM allowed us to do last week. Based on historical support and a bearish price target from the Point and Figure chart, we were looking for a bottom to form near $48. While the initial bottom formed near $48.50, patient dip-buyers got a chance on both Wednesday and Thursday to enter the play right at $48. We are close to achieving our initial $55 bullish price target as well, but based on the stock's current strength, we think it might have a bit more upside in store. This is confirmed by the Point and Figure chart, which is now forecasting a bullish price target of $67, just one point above the bearish resistance line. QCOM fans will recall this is the area which QCOM has repeatedly struggled with in recent months, making it a great place to take profits. But first the bulls will have to scale the $56-57 resistance level and then the even tougher obstacle at $60, the site of the converged 30-dma ($60.34) and 50-dma ($59.73). We have moved our stop up to $50, but dip buyers can continue to target bounces above this level (preferably near $52) for new positions. Friday's advance came to a halt right at $54.50, the 38% retracement of the stock's loss since June 8th. If the bulls can clear this level on solid volume next week, that would also make for an attractive entry into the play. BUY CALL JUL-50 AAO-GJ OI= 4750 at $6.90 SL=5.99 BUY CALL JUL-55*AAO-GK OI= 7255 at $3.90 SL=2.50 BUY CALL JUL-60 AAF-GL OI=10679 at $1.85 SL=1.00 BUY CALL AUG-60 AAO-HK OI= 1432 at $3.80 SL=2.25 BUY CALL AUG-65 AAF-HM OI= 534 at $2.30 SL=1.25 SELL PUT JUL-50 AAO-SJ OI= 9657 at $2.20 SL=3.75 (See risks of selling puts in play legend) Average Daily Volume = 14.6 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=QCOM *************************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=2207 ************************************************************ ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-24-2001 Sunday 4 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/3469_4.asp *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.IndexSkybox.com ************************************************************ ************* NEW PUT PLAYS ************* HGSI - Human Genome Sciences $62.50 (-2.60 last week) Possessing one of the largest human and microbial genetic databases, HGSI licenses its database of knowledge to pharmaceutical heavyweights like GlaxoSmithKline and Merck. Management has chosen to forgo the race to decode the entire human genome, and has instead focused on finding and patenting genes involved in developing gene-based therapeutics. Its four compounds currently in clinical trials are intended to limit the toxic effects of chemotherapy, promote the repair of damaged cells, stimulate antibody production, and spur regrowth of blood vessels. If you've been viewing the recent Biotech rally with some suspicion, you aren't alone, or without good reason. A quick glance at the daily chart of the Biotechnology index (BTK.X) reveals a possible Head & Shoulders formation, with the neckline resting near $580. Should the BTK fall through this level, the weakest players in the Biotech group should fall first and heaviest. Which brings us to our new put play on HGSI. The stock just can't seem to clear the 200-dma (currently $65.75), also the site of significant historical resistance. Not only does this help to define our risk, but it also gives us an easy location for our stop loss, namely $66. The pivotal level on the play though is $61. $61.50 is the 38% retracement of the April-May gains, and also the level at which HGSI has been recently finding support. This support is confirmed by the bullish support line that appears on the Point and Figure chart. A drop through $61 will provide attractive entries and open the door for a test of the next support level, $57.25, which also just happens to be the 50% retracement level. While target-shooters can attempt to gain a more profitable entry by buying a rollover near the 200-dma, bear in mind that the proof of the play will be when it falls through the $61 level. Let the BTK index be your guide. When it falls through it's own support, it is a pretty safe bet that HGSI will follow suit. BUY PUT JUL-65 HHA-SG OI= 537 at $6.40 SL=4.50 BUY PUT JUL-60*HHA-SF OI=2506 at $4.00 SL=2.50 BUY PUT JUL-55 HHA-SE OI=1488 at $2.40 SL=1.25 Average Daily Volume = 3.47 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=HGSI NVLS - Novellus Systems $51.97 (+0.76 last week) Providing equipment for advanced Semiconductor manufacturing, NVLS focuses on advanced, high-productivity thin film deposition systems and surface preparation systems used in the fabrication of integrated circuits. Utilizing Chemical Vapor Deposition (CVD), Physical Vapor Deposition, electroplating, photoresist strip and residue removal systems, the company's products provide high film quality while attaining the high levels of productivity required to meet the semiconductor industry's need for high-volume, low-cost wafer production. Although that noisy daily chart may be hard to decipher at first, drilling down to the hourly chart reveals a compelling Head & Shoulders top that points towards a breakdown in the days ahead. Semiconductor equipment stocks are by no means shining brightly, and NVLS looks like it presents an attractive risk/reward ratio. Although the top of the current shoulder rests at $56, it seems like a fairly safe approach to target failed intraday rallies to the $53-54 level for new entry points. We are starting the play with our stop at the $54 level, and just the downside to the neckline takes NVLS to $46. While this level seems to provide pretty solid support, we've seen the damage an unexpected earnings warning can have. With the declining fundamentals in the Semiconductor sector, the odds favor a surprise to the downside in the next couple weeks. The converged 10-dma ($52.08), 30-dma ($51.99) and 50-dma ($51.91) will provide a pivotal trading point. A break below this level (nominally $52) on solid volume will make for another good entry point. Finally, those that would prefer to trade a breakdown may want to wait for a drop through the $49 support level before playing. At any rate, let the strength of the Semiconductor sector (SOX.X) be your guide. If it continues to weaken, NVLS should too. BUY PUT JUL-55 NLQ-SK OI=2293 at $6.00 SL=4.00 BUY PUT JUL-50*NLQ-SJ OI=2937 at $3.40 SL=1.75 BUY PUT JUL-45 NLQ-SI OI=2249 at $1.75 SL=1.00 Average Daily Volume = 9.36 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=NVLS ***************** CURRENT PUT PLAYS ***************** NETE - Netegrity Inc $30.14 (-2.71 last week) Netegrity is a provider of software and services that manage and control user access to Web-based e-commerce applications. The company's SiteMinder product is a directory-enabled secure user management system, which is used to build and manage what is commonly known as a portal. Netegrity also offers professional services that support its software product offerings. We were pleased to see NETE lose 10 percent Friday on volume that was exceptional. The stock's advance Thursday was a cause for concern for those of us on the short side, but the subsequent weakness Friday offered some redemption. NETE's decline on heavy volume Friday was most likely a product of Symantec's earnings debacle. Nevertheless, although NETE popped higher last Thursday, the daily chart still reveals a series of relatively lower highs, in descending fashion. This development is most encouraging, and may very well lead to NETE breaking down below its remaining major support level early next week. The support level that we're going to want to monitor closely next week is $28. For it is not only the site of NETE's 61.8 percent retracement level, but it also marks a level of demand on the point & figure chart. A decline below the $28 level early next week could very well shift the risk/reward dynamic in this stock and force longs to liquidate and shorts to add to their bearish bets. So, for those not yet in this play, watch for a heavy volume breakdown below the $28 level next week in order to gain entry into this play. For those who prefer to add on strength and go against the trend, consider gaming an entry on any rollover near $31. That is, if NETE advances on light volume up to that level. For those already in this play, keep in mind that we've captured about $8 in the underlying since initiating bearish coverage. Whether or not you've made money during those 8 points obviously depends upon specific entry points. But, if you're in at higher prices consider booking some gains. In fact, the $28 level may offer an exit point for those with gains. BUY PUT JUL-35 UPN-SG OI= 23 at $7.00 SL=5.00 BUY PUT JUL-30*UPN-SF OI=927 at $4.00 SL=2.50 BUY PUT JUL-25 UPN-SE OI=120 at $1.65 SL=0.75 Average Daily Volume = 1.45 mln EMLX - Emulex Corporation $32.70 (-0.18 last week) A leading networking company, EMLX designs, builds and distributes three types of connectivity products: network access servers, printer servers, and high-speed fibre channel products. It's fibre channel products, which are based on internally developed ASIC technology, are deployable across a variety of network configurations and operating systems to support increasing volumes of stored data. EMLX sells its products directly throughout the world to OEMs and end users, as well as through system integrators and industrial distributors. Have you noticed that EMLX just can't seem to catch a break? Even when the stock posts a small gain (like it did on Thursday), the bears come along to quickly snatch it back. Even though the stock has gone virtually nowhere since we picked it on Monday, its trading pattern has made for consistent day-trading profits between $34-31. Thursday's action provided the most recent opportunity to play, as the rally fell apart in the afternoon, falling sharply back through our $35 stop and keeping the play alive for the bears to play again on Friday. While the price is being supported by the $30.88 level (50% retracement of the April-May gains), rallies are being kept in check by the 38% retracement level, $35.22. Failed rallies near the $35 level still make for attractive entry points for short-term trades, while we wait for support to fail. When it does, we'll have a fresh opportunity to play, because a drop through $30 will open the door for a test of the 61% retracement level near $26.50. And for you point and figure aficionados, the current bearish price target falls at $12, coincident with the April lows. One possible catalyst for price action next week will be the company's presentation Tuesday evening at the Thomas Weisel Partners conference. BUY PUT JUL-35 UMQ-SG OI=2873 at $5.30 SL=3.25 BUY PUT JUL-30*UMQ-SF OI=2194 at $2.70 SL=1.25 BUY PUT JUL-25 UMQ-SE OI=1816 at $1.35 SL=0.50 Average Daily Volume = 6.37 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=EMLX NVDA - NVIDIA Corporation $91.30 (-3.75 last week) NVIDIA Corporation designs, develops and markets 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop personal computer user. Used in a wide variety of application including games, the Internet and industrial design, the company's products were the first to incorporate a 128-bit multi-texturing graphics architecture. This design approach delivers to users a highly immersive, interactive 3D experience with compelling visual quality and stunning effects at real-time frame rates. NVDA sells its products to major PC manufacturers such as Compaq, Dell, Gateway, Hewlett-Packard and IBM. Our NVDA play got off to a good start on Friday, as volume continued to diminish and the bulls were unable to penetrate the $94 resistance level. The stock definitely looks like it is in a topping formation, and while only time will tell, with a little imagination; we can see the beginnings of a Head & Shoulders top forming with a neckline at $83. So long as our $96 stop isn't violated, entries on failed intraday rallies near the $94-95 level should provide for attractive entries. Of course, you might want to wait for the bears to prove they are in control before playing. In that case, wait for volume to increase with the price falling through first the $89 and then $85 support levels. According to the Point and Figure chart, the $82 level looks like a good first-order price target and a good place to take profits. By then, we can focus on the H&S pattern. IF it proves itself true, then we'll get a high-volume breakdown as NVDA falls through $82, completing the pattern and opening the door for a more protracted decline. Let's face it; when the leading maker of video cards for PCs (have you seen DELL's chart lately?) sports a PE ratio just under 70, it is pretty clear that the bears see some easy pickings ahead. All we want to do is grab our chunk out of the middle. Keep one ear open for any company guidance as it presents at the Thomas Weisel Partners conference Monday evening. BUY PUT JUL-95 RVU-SS OI= 407 at $9.70 SL=6.75 BUY PUT JUL-90*RVU-SR OI=1178 at $7.10 SL=5.00 BUY PUT JUL-85 RVU-SQ OI=1183 at $5.20 SL=3.25 Average Daily Volume = 5.52 mln http://www.OptionInvestor.com/charts/chart.asp?symbol=NVDA SRNA - Serena Software $27.72 (-0.03 last week) Serena Software is a provider of eBusiness software change management (SCM) solutions. The company's products and services are used to manage and control software change for organizations whose business operations are d3ependent on managing information technology (IT). SRNA's product offerings support the industry standard IBM mainframe platforms, including MVS, and are marketed under the brand name Full Cycle mainframe. This product suite automates the software application life cycle and creates an IT environment that facilitates concurrent development efforts by separate programming teams, improves process consistency, enhances software integrity and protects valuable software assets. Despite positively-received earnings reports from ORCL and ADBE, the Software sector seems to be in trouble. One look at the GSTI Software index (GSO.X) confirms this conclusion, as the highs are getting lower, and the index appears to be having a hard time scaling the combined 50-dma ($223.10) and 30-dma ($224.83). Should the GSO index remain under pressure, stocks like SRNA are likely to follow suit. We can already see that the bulls have been repeatedly turned back at the 200-dma (now at $30.06). Every attempt to rally higher is met by the bears, who are ever ready to engage in some selling. Resistance near $28 and then $29 produces selling, while buying tends to appear first at $27, then $26, and finally $25.50. With our stop still resting at $30, we can enter new plays on each failure to penetrate resistance and then ride the position down to support, harvesting a couple points each time. If support breaks down, then we get a longer ride, and an opportunity to add to our position. Especially if it is accompanied by increasing volume. Recall that Uncle Alan will be announcing his verdict on interest rates on Tuesday, an event that is sure to increase volatility in the market in the near-term. That could be just what we need to shake SRNA out of its recent trading pattern and push the stock down towards its next support level near $20-21. BUY PUT JUL-30.0*NHU-SF OI= 74 at $4.20 SL=2.60 BUY PUT JUL-25.0 NHU-SE OI=154 at $1.60 SL=0.75 BUY PUT JUL-22.5 NHU-SX OI= 78 at $0.95 SL=0.00 Average Daily Volume = 594 K http://www.OptionInvestor.com/charts/chart.asp?symbol=SRNA ************************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=2219 ************************************************************** ***** LEAPS ***** Hold on and Don't Forget the Dramamine! By Mark Phillips Contact Support Did anyone else feel like the markets were being buffeted by stormy seas the past couple weeks? We had sharp violent rallies that suckered the Portfolio into new plays last week, just in time for the bottom to fall out again, putting those very same plays far underwater before I could even report to you what we had done. More craziness appeared this week, kicked off by Oracle's (NASDAQ:ORCL) better-than-expected earnings report. That put software stocks into rally mode and we saw the effect in a recovery to nominally unchanged on our Adobe Systems (NASDAQ:ADBE) play. The changing tide in the Software sector ushers ORCL onto our Watch List, an event many have been clamoring for. The sharp one-day rally that pushed Texas Instruments (NYSE:TXN) from the Watch List to the Portfolio is little more than a memory, and so is that play, relegated to the Drop list this weekend. This is a perfect example of why it is dangerous to buy breakouts for long-term positions in this market. You frequently end up buying at or near the high, only to watch your premium melt away faster than a Popsicle on a hot summer day. See the drop below for further details, but my recommendation is to study the chart of TXN for a picture of what NOT TO DO in the current market environment. A sharp and vigilant reader caught me with mismatched strikes on the AOL play last week. In my cleanup efforts, I found errors on the strikes listed for a couple other plays. All the errors have now been corrected, so verify correct symbols with this week's Portfolio and Watch List before playing next week. A rarity in the Portfolio this week, Washington Mutual (NYSE:WM) actually had a nice rally. While we are tightening our stop to the $36 level, keep in mind that we have had a heck of a run in the stock since we began playing it near the $16 level. Those of you that have been with us since then may be thinking about locking in profits near current levels, and I can't say I blame you. The stock has more than doubled, and the PE ratio is now over 15, and you'll never go broke taking a profit. On the other hand, the weekly chart shows that WM has just broken out of a bullish wedge formation, indicating we could be poised for further upside. While I wouldn't initiate new positions at current levels, I don't want to cut off the possibility of further gains; hence, the beauty of stop losses - set and forget protection. Speaking of those volatile moves, did you notice what happened to Verisign (NASDAQ:VRSN) this week? As of last weekend, the new position was off by more than 20%, while this week it is in the green to the tune of better than 10%. Thanks to a strong mid-week rally, the stock is back near the $60 resistance level. The bulls will need to take a run at this level to overpower the bears, but last week was definitely encouraging! So where are we in terms of the big picture? It looks like a holding pattern in advance of Tuesday's FOMC meeting. The NASDAQ Composite is flopping around the 2000 level with very little sense of direction. At the same time, we have watched the DJIA give up its battle with the 11,000 level, and it is now trying to keep its head above water. With another close right on the 10,600 level on Friday, and below the 200-dma, it doesn't look very encouraging. The bulls are hoping that these support levels will hold (possibly with assistance from the Fed), while the bears are getting ready to pile on to the downside on the heels of any devastating earnings warning (haven't we had enough already?) or an indication from Uncle Alan that the interest rate reduction gravy train is coming to an end. Have you noticed the action of the VIX lately? If this is an accurate reading of fear in the market, then I'm a little concerned. We get a very mild rally in the S&P500 (actually more of a weak bounce) and the VIX drops from almost 29 to less than 22 in only 5 days? I'm sorry, but that just smacks of overeager bulls ignoring all the bad news. When the VIX gets this low, we want to be extra-careful in contemplating new long-term positions -- when everyone is lined up on one side of the boat (calls) it doesn't take much of a disturbance to tip it over. For the record, the VIX closed out the week at 22.50. My fearless forecast for the summer? Although we will likely see some little rallies, with expectations for the recovery to be pushed out to the first half of 2002, I'm looking for rangebound action to persist through much of the summer. Of course that is the perfect environment in which to target shoot some attractive entries into 2003-2004 LEAPS. To occupy your time and make a little extra cash, consider writing covered calls against LEAPS to reduce their cost basis. For those of you that missed it, I wrote the first of 2 articles on that topic last week in the Options101 column. The second installment will appear on Tuesday, complementing the theoretical with actual examples. Observant readers will notice that the 2002 LEAPS have all been pulled from the Watch List this week. While still eminently tradable in the short term, they no longer make a good vehicle for the strategy we employ here in LEAPS. Of course, we are in that no-man's land where not all equities have had their 2004 LEAPS released by the CBOE. If they are available, we will list the 2004 strikes, but until then we will have some new plays listed with only the 2003 strikes. For plays currently listed with only the 2003 strikes, we will add the 2004s when they become available over the next month or so. They should have all been released by the end of July. As redundant as it sounds, my advice remains largely unchanged. Pick those entry points you want while the markets are closed. Then when the conditions are right, you will have the confidence to strike, filling your 'recovery portfolio' for the recovery that will begin to appear in earnest over the next several months. Have a profitable week! Mark Phillips Contact Support LEAPS Portfolio Current Open Plays SYMBOL OPENED LEAPS SYMBOL ENTRY CURRENT CHANGE STOP CLX 03/13/01 '02 $ 35 CLX-AG $ 3.50 $ 3.50 0.00% $ 33 '03 $ 35 VUT-AG $ 6.10 $ 6.10 0.00% $ 33 WM 03/22/01 '02 $33.8 BWT-AY $ 4.00 $ 7.30 82.50% $ 36 '03 $33.8 OBN-AY $ 6.13 $ 9.70 58.24% $ 36 JWN 03/30/01 '02 $ 20 JWN-AD $ 1.65 $ 1.45 -12.12% $17.50 '03 $ 20 VNZ-AD $ 3.30 $ 3.10 - 6.06% $17.50 FON 04/09/01 '02 $ 25 FON-AE $ 2.80 $ 1.10 -60.71% $ 19 '03 $ 25 VN -AE $ 4.40 $ 3.20 -27.27% $ 19 DELL 04/27/01 '02 $ 25 DLQ-AE $ 6.20 $ 3.40 -45.16% $ 23 '03 $ 25 VDL-AE $ 9.00 $ 6.30 -30.00% $ 23 ADBE 05/16/01 '02 $ 40 AEQ-AH $11.00 $10.40 - 5.45% $ 37 '03 $ 40 VAE-AH $14.60 $15.90 8.90% $ 37 AOL 05/16/01 '02 $ 55 AOO-AK $ 9.60 $ 8.60 -10.42% $ 48 '03 $ 55 VAN-AK $14.60 $14.00 - 4.11% $ 48 LRCX 06/01/01 '02 $ 30 WMJ-AF $ 6.60 $ 5.90 -12.12% $ 25 '03 $ 30 VPC-AF $10.30 $10.40 - 1.94% $ 25 BRCD 06/05/01 '02 $ 45 UBF-AI $10.70 $ 8.20 -23.36% $ 35 '03 $ 45 OMW-AI $18.40 $14.30 -22.28% $ 35 BRCM 06/05/01 '02 $ 40 RCQ-AH $ 9.70 $ 7.40 -23.71% $ 30 '03 $ 40 OGJ-AH $14.00 $12.90 - 7.86% $ 30 SEBL 06/12/01 '02 $ 45 SGW-AI $13.00 $ 9.70 -25.38% $ 34 '03 $ 45 OIE-AI $18.40 $15.40 -16.30% $ 34 VRSN 06/12/01 '02 $ 50 YXO-AJ $17.10 $18.90 10.53% $ 42 '03 $ 60 OVX-AL $20.40 $23.40 14.71% $ 42 GE 06/21/01 '02 $ 53 WGE-AX $ 3.70 $ 4.00 8.11% $ 47 '03 $ 55 VGE-AK $ 6.80 $ 6.90 1.47% $ 47 LEAPS Watchlist Current Possibles SYMBOL SINCE TARGET PRICE TARGETED LEAP SYMBOL EMC 04/22/01 $21-22 JAN-2003 $ 25 VUE-AE JAN-2004 $ 30 LUE-AF IBM 06/17/01 $100-102 JAN-2003 $110 VIB-AB JAN-2004 $110 LIB-AB MRK 06/17/01 $65-66 JAN-2003 $ 70 VMK-AN JAN-2004 $ 70 LMK-AN BEAS 06/24/01 $27-28 JAN-2003 $ 30 VZP-AF ORCL 06/24/01 $15-16 JAN-2003 $17.5 VOC-AW New Portfolio Plays GE - General Electric $51.25 Shaking off the Honeywell merger uncertainty, the bulls ended the week with a flourish, pushing GE to close solidly above our $51 entry target. This gave us another clean entry into the portfolio, and given its excellent management, the stock should continue to perform well when the economy recovers, whenever that is. In the meantime, all appears healthy, as the buyers are getting ready to challenge the recent high near $53.50. The 50-dma is just about to cross over the 200-dma, normally a solid bullish sign. With the 38% retracement of the April-May gains providing support near $47.40 on this latest round of profit taking, $47 seems a good location for our stop loss. It has been encouraging to see GE outperform the DJIA, and we would expect a rally on the old-economy index to provide more high-octane fuel for GE's ascent. Another pullback and bounce in the $50-51 area will provide entries for those that missed their opportunity last week, but make sure that there is solid buying volume on the bounce. BUY LEAP JAN-2002 $53.00 WGE-AX $ 3.70 BUY LEAP JAN-2003 $55.00 VGE-AK $ 6.80 New Watchlist Plays BEAS - BEA Systems $32.07 Finding a profitable niche in the online world, BEAS is an e-business infrastructure software company whose customers use its products as a deployment platform for Internet-based applications. In diversity is strength, and BEAS has taken this to heart, capturing business in a wide variety of industries; from commercial and investment banking to telecommunications and software and then to airlines, healthcare and utilities. While it may seem a bit premature to target LEAPS in the company with the weekly Stochastics still declining steeply, it is precisely that near-term weakness we want to exploit before the stock resumes an upward trend. The long-term future is bright, but there should be some near-term weakness this summer as the overall market struggles with the task of identifying the bottom of the current economic downturn. Look for market weakness to provide entry on a bounce from the $27-28 support level, and then hold on as the bulls take control. BUY LEAP JAN-2003 $30.00 VZP-AF ORCL - Oracle Corp. $17.48 I've had several requests from readers, asking if LEAPS on ORCL made sense yet. Although I put you all off at the time, on the heels of Larry Ellison's characteristic ebullience when his company announced earnings last Monday, I must say the answer is an unequivocal "Yes". The Software index (GSO.X) is trying to get into rally mode, but still isn't quite firing on all cylinders. That should provide enough weakness to allow us into the play on a pullback, without risking a sharp selloff. While we don't want to buy strength (I think we have ample evidence of exactly what can go wrong), I think a pullback to the $15-16 level looks very attractive for new positions. ORCL has continued to weather the recent economic downturn well, enhancing its revenue stream with its e-Business suite of software, successfully moving into new markets, while maintaining a dominant position in the database market. Be patient waiting for your entry point, and then place your stop at $13, just below the April lows. BUY LEAP JAN-2003 $17.50 VOC-AW Drops TXN $29.60 Ouch! Man, that was painful! If ever there was an example of how a well laid plan can blow up in your face, TXN was it. We got a handful of entries on that head-fake rally on June 7th, and when things started coming apart at the seams again (read: earnings warnings), all we could do is hold on and hope that our stops would hold. While other plays are holding in there, TXN closed fractionally below our $30 stop last Tuesday, and we had to pull the plug. While it is painful for me to chalk up another loss in the Portfolio, hopefully this is another reminder of the price we pay every time we chase breakouts in the current market. As I lamented last weekend, pullbacks are the most consistent method of trading rallies until the great bull returns. *************************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=2208 ************************************************************ ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-24-2001 Sunday 5 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/3469_5.asp ************* COVERED CALLS ************* Technical Analysis 101: Defining The Trend by Mark Wnetrzak With the upcoming seminar on basic technical analysis and the four stages of a stock's movement, now is a great time to review one of the fundamental areas of charting; Trends and Averages. To be successful in the stock market, it's important to understand how to evaluate historic trends. In any exchange system based on supply and demand, there are three primary stages or phases of movement. These three phases consist of a basing or range-bound condition; an upward slope or growth stage and finally, a segment where buying interest becomes exhausted. Some experts refer to these conditions as the accumulation, markup and distribution phases. The first step in any analysis is look beyond the daily gyrations to identify the overall trend. The changes in the rate of upward and forward movement can be approximated with the smoothing effect of a moving average. The basic definition of a moving average is: the mean price of a security or financial instrument at a specific point in time. With this type of analysis tool, a shorter time span produces a more sensitive indication while a longer time span reflects a smoother history. There are a number of ways to determine a primary trend but very few technical analysis tools are as versatile as a moving average. The moving average offers an objective method for defining support and resistance and it can also help isolate cycles and identify overbought or oversold conditions. Traders often use moving averages to render buy and sell signals based on multiple histories plotted on one chart. The crossing of moving average lines, a major topic in the study of Stochastics, is a very popular method of recognizing trend reversals. Unfortunately, for a trader to depend solely on a moving average is comparable to using the hour hand of a watch to check the time of day. It provides a good approximation of the time but offers little guidance for specific appointments. In market terms, a moving average will help you discern whether the primary trend is up or down but it does little to help you with timing entry and exit points with regard to a particular issue. To be profitable on a consistent basis, you need to know where the instrument is in its current cycle. Is it in the accumulation phase, markup phase or distribution phase? The movement of a specific issue is generally determined by the intensity with which the shares are bought or sold. One method of measuring this effect in a prolonged trend is to use a moving average on transaction or trading volume. Trading volume, or the number of shares traded, is an important indicator in interpreting market direction and stock price. The change in stock price is the result of supply and demand; those who want to buy versus those who want to sell. The key point is that a rise or fall in price on a small volume of shares traded is far less important than a move supported by heavy volume. If there is heavy trading on an upward movement, buyers control the market, and their enthusiasm for the stock often pushes it far beyond a reasonable value. Experienced traders know that rising volume generally accompanies any substantial change in a stock's price and that is an important characteristic to be aware of when when reviewing market trends. When combined with a moving average of trading volume, a simple moving average can help confirm that the market is transitioning into a condition of accumulation or in the case of a failed rally, a new distribution stage. Of course, there are often chaotic and choppy transition phases between each cycle or trend and those can be very difficult to evaluate. The type of indicators that work best during transition periods include the Moving Average Convergence-Divergence system (MACD), or exponential (weighted) averages that are designed to be more sensitive to quick changes in market direction. Investors who develop a background in various technical analysis tools can use intricate moving average combinations to formulate different timing methods for entering and exiting the market. One popular entry technique is based on signals from a short-term MACD and confirmation from the moving average of the volume indicator. A number of exit strategies use the convergence between the price action and the volume average or diversions among different moving averages. Blending diverse combinations of indicators is one way to discover the best system for your style of trading and for new investors, this can create a unique set of tools and intuitive techniques to help you profit in the market on a regular basis. Good Luck! SUMMARY OF PREVIOUS CANDIDATES ***** Note: Margin not used in calculations. Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield ROS 5.49 5.55 JUL 5.00 1.05 *$ 0.56 7.8% AMLN 14.42 14.12 JUL 12.50 3.00 *$ 1.08 6.8% WEBX 20.31 26.30 JUL 17.50 4.00 *$ 1.19 6.3% LEXG 11.66 10.28 JUL 10.00 2.45 *$ 0.79 6.2% CCRD 8.60 9.45 JUL 7.50 1.60 *$ 0.50 6.2% ORCH 5.65 5.43 JUL 5.00 0.95 *$ 0.30 5.5% MCAF 11.90 10.50 JUL 10.00 2.70 *$ 0.80 5.4% BTX 8.50 7.11 JUL 7.50 1.90 $ 0.51 4.8% Z 15.54 14.99 JUL 15.00 1.30 $ 0.75 4.6% CWST 10.92 10.90 JUL 10.00 1.40 *$ 0.48 4.4% TCNO 9.25 9.35 JUL 7.50 2.10 *$ 0.35 4.3% WCNX 31.50 33.00 JUL 30.00 2.90 *$ 1.40 4.3% OCPI 14.86 11.41 JUL 12.50 3.30 $ -0.15 0.0% GNSL 5.40 4.05 JUL 5.00 0.90 $ -0.45 0.0% VLNC 9.06 6.31 JUL 7.50 2.15 $ -0.60 0.0% TIVO 8.40 5.95 JUL 7.50 1.55 $ -0.90 0.0% MCAF 14.56 10.50 JUL 12.50 2.90 $ -1.16 0.0% MRVC 12.35 7.73 JUL 10.00 3.20 $ -1.42 0.0% *$ = Stock price is above the sold striking price. Comments: What's up with WebEx (NASDAQ:WEBX) and why didn't we just buy calls? Maybe it is all those OIN seminars! Biotime (AMEX:BTX) is a good example of a stock testing a key moment (make a trend- line with the MAR and APR lows). Venator (NYSE:Z) just may fill the gap - monitor the position closely. Optical Communication (NASDAQ:OCPI) is offering a low loss exit with a technical bounce (provided by an upgrade Friday) or you could roll-down to an OCT $10 call and lower your cost basis to $9.50. Genomic Solutions (NASDAQ:GNSL) is testing support and should be monitored closely. The rally this week in Valence Technology (NASDAQ:VLNC) offered a less painful exit. The technicals are weakening and a test of the April low would surely hurt. TiVo (NASDAQ:TIVO) appears to be holding at the top of its support area after giving back most of its recent gain. A roll-down to a FEB $5 call could lower your cost basis below $5, but not by much. Exit now or wait for a violation of the support area? McAfee.com (NASDAQ:MCAF) retreated in sympathy with the Manugistics (NYSE: NASDAQ:MANU) plunge and is now at a key moment as it sits on its 50-dma. MRV Communications (NASDAQ:MRVC) continues to act horrid and has been closed. ****************************************************************** - UPCOMING SEMINAR - ****************************************************************** On June 27, Mark Wnetrzak (Covered-calls) and Ray Cummins (Naked Puts) will be conducting an instructional seminar for new traders who are interested in the fundamentals of their approach to these conservative strategies. The general topics of discussion will be: - How to earn monthly income through stock ownership - How to reduce the effects of downside market moves - How to purchase new portfolio stocks at a discount You can take the seminar without leaving the comfort of your home or office. It is interactive and you can ask questions after the presentation. You do not need any special software to attend the presentation but you must have a 56K Internet connection or faster for best results and a separate phone to listen to the audio portion. If you are interested in this seminar, please click here for more information: http://www.premierinvestorseminars.com/seminarcalendar.asp ****************************************************************** NEW CANDIDATES ********* Sequenced by Company ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield AMLN 14.12 JUL 12.50 AQM GV 2.65 1084 11.47 28 9.8% CWST 10.90 JUL 10.00 KWQ GB 1.35 61 9.55 28 5.1% DRMD 15.30 JUL 15.00 DUQ GC 1.20 512 14.10 28 6.9% FNSR 14.87 JUL 12.50 FQY GV 3.00 153 11.87 28 5.8% INHL 34.65 JUL 30.00 QNH GF 6.20 616 28.45 28 5.9% PCLN 7.68 JUL 7.50 PUZ GU 0.85 8453 6.83 28 10.7% SONE 13.85 JUL 12.50 FBZ GV 1.85 2287 12.00 28 4.5% Sequenced by Target Yield (monthly basis) ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield PCLN 7.68 JUL 7.50 PUZ GU 0.85 8453 6.83 28 10.7% AMLN 14.12 JUL 12.50 AQM GV 2.65 1084 11.47 28 9.8% DRMD 15.30 JUL 15.00 DUQ GC 1.20 512 14.10 28 6.9% INHL 34.65 JUL 30.00 QNH GF 6.20 616 28.45 28 5.9% FNSR 14.87 JUL 12.50 FQY GV 3.00 153 11.87 28 5.8% CWST 10.90 JUL 10.00 KWQ GB 1.35 61 9.55 28 5.1% SONE 13.85 JUL 12.50 FBZ GV 1.85 2287 12.00 28 4.5% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** AMLN - Amylin Pharmaceuticals $14.12 *** Drug Speculation! *** Amylin Pharmaceuticals (NASDAQ:AMLN) is engaged in the discovery and development of potential drug candidates for the treatment of metabolic disorders. The company pioneered research of a hormone called amylin and is also developing Symlin, a synthetic analog of the human hormone amylin for the treatment of people with diabetes who use insulin. The company's second drug candidate, synthetic exendin-4, which is a naturally occurring peptide derived from the salivary secretions of the Gila monster is now in Phase II studies. The company is also evaluating another drug in for potential use in the treatment of metabolic disorders relating to cardiovascular disease. Amylin shares rallied in late May on optimism over the company's presentation of new information from recent clinical tests. This week the company reported lower blood sugar levels in diabetes patients using its experimental drug in clinical tests. Amylin rallied sharply on the news and this position offers a conservative entry point from which to speculate on the company's future. JUL 12.50 AQM GV LB=2.65 OI=1084 CB=11.47 DE=28 TY=9.8% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=AMLN ***** CWST - Casella Waste Systems $10.90 *** Technicals Only *** Casella Waste Systems (NASDAQ:CWST), headquartered in Rutland, Vermont, provides collection, transfer, disposal, recycling and related services primarily in the northeastern United States. The Waste Management industry has been one of the few strong sectors and with earnings due on June 27, Casella continues to climb higher. The technicals continue to improve as the stock is working up through its resistance area. The rally this year (beginning at the December low) has broken a long-term downtrend and signals a change of character. Favorable speculation for those who are bullish on the sector and the company's future. JUL 10.00 KWQ GB LB=1.35 OI=61 CB=9.55 DE=28 TY=5.1% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=CWST ***** DRMD - Duramed Pharmaceuticals $15.30 *** FDA Approval *** Duramed Pharmaceuticals (NASDAQ:DRMD) develops, manufactures and markets prescription drug products. Duramed's business strategy emphasizes products with attractive market opportunities and potentially limited competition due to technological barriers to entry, focusing on women's health and the hormone replacement therapy market. Duramed's mission is to be the premier supplier of solid oral dose hormone products. Duramed entered a Stage II rally after announcing that the FDA had approved its Abbreviated New Drug Application for Aviane-28 Tablets (Levonorgestrel and Ethinyl Estradiol Tablets USP, 100 mcg and 20 mcg, respectively). The stock broke out of its base on very heavy volume in early May and hasn't looked back since. A reasonable cost basis in a favorable company that is bringing new products to market. JUL 15.00 DUQ GC LB=1.20 OI=512 CB=14.10 DE=28 TY=6.9% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=DRMD ***** FNSR - Finisar $14.87 *** Bottom Fishing Revenge! *** Finisar (NASDAQ:FNSR) is a technology leader of fiber optic subsystems and network performance test systems which enable high-speed data communications over Gigabit Ethernet local area networks (LANs), Fibre Channel storage area networks (SANs), and wide-area and metropolitan data networking applications (WANs and MANs). The company is focused on the application of digital fiber optics to provide a broad line of high-performance, reliable, value-added optical subsystems for networking and storage equipment manufacturers. Finisar rebounded off the top of its support area this week after stating that it had terminated the proposed acquisition of thermoelectric cooler maker Marlow Industries. Several analysts are also expecting carriers to improve their spending patterns as the market moves through next year. Wit SoundView gave the Fibre industry a boost this week with positive comments; upgrading several stocks as well as reiterating their "strong buy" rating on Finisar. A reasonable cost basis from which to speculate on the movement of FNSR. JUL 12.50 FQY GV LB=3.00 OI=153 CB=11.87 DE=28 TY=5.8% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=FNSR ***** INHL - Inhale Therapeutic Systems $34.65 *** Technicals Only *** Inhale Therapeutic Systems (NASDAQ:INHL) develops advanced drug delivery solutions for the biopharmaceutical industry. Inhale is focused on two main opportunities: improved delivery of macro- molecules, including peptides and proteins, and improved per- formance of drug powders. To address these opportunities, Inhale is pioneering inhaleable delivery of macromolecules, supercritical fluids processing for powder particle production and, upon approval of the acquisition of Shearwater, advanced PEGylation. Inhale is currently collaborating with major pharmaceutical and biotechnology companies, including AstraZeneca, Biogen, Bristol-Myers Squibb, GlaxoSmithKline, Lilly and Pfizer. Inhale continues to show improving technical strength, which suggests the current basing phase will resolve to the upside. An unfavorable English court ruling on Wednesday this week only resulted in a rally. This position offers an acceptable cost basis in the issue. JUL 30.00 QNH GF LB=6.20 OI=616 CB=28.45 DE=28 TY=5.9% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=INHL ***** PCLN - Priceline.com $7.68 *** Is Captain Kirk Back? *** Priceline.com (NASDAQ:PCLN) has pioneered an e-commerce pricing system, known as a demand collection system, which enables consumers to use the Internet to save money on a range of products and services, while enabling sellers to generate incremental revenue. Using its consumer proposition, "Name Your Own Price," the Company collects consumer demand, in the form of individual customer offers, for a particular product or service at a price set by the customer. Hmmm, Delta Air Lines (NYSE:DAL) sells 2.64 million shares of Priceline.com and yet the stock rallies? Earlier this month, Goldman Sachs analyst Anthony Noto upped his forecast for PCLN and two firms controlled by Hong Kong tycoon Li Ka-shing said they would buy an additional 25 million shares of PCLN, raising their joint stake in the company to 30% from 20%. The stock continues to move higher on heavy volume as investors begin to filter back in the few "true" internet stocks. A reasonable entry point on a speculative issue. JUL 7.50 PUZ GU LB=0.85 OI=8453 CB=6.83 DE=28 TY=10.7% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=PCLN ***** SONE - S1 $13.85 *** Earnings Rally! *** S1 (NASDAQ:SONE) is a leading global provider of innovative eFinance solutions and services that are centered on banking, brokerage and insurance. S1 is enabling financial service providers to create a complete Enterprise eFinance Experience(TM) by delivering the tools necessary to meet the evolving demands of their customers across various lines of business, market segments and delivery channels. S1 has been in rally mode since posting better than expected earnings and increasing revenue in early May. Several upgrades followed (better late than never) and the stock has surged above a January high completing a "double-bottom" formation. An expanded alliance with IBM (NYSE:IBM) gives S1 premier partner status within the IBM PartnerWorld for Developers and allows IBM to jointly sell, market, and further integrate the S1 product set. We simply favor an entry point in a bullish stock. Earnings are due near the end of July. JUL 12.50 FBZ GV LB=1.85 OI=2287 CB=12.00 DE=28 TY=4.5% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=SONE ***** ***************** SUPPLEMENTAL COVERED CALL CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield (monthly basis) ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield PCTL 5.16 JUL 5.00 PTQ GA 0.55 2088 4.61 28 9.2% APCS 12.73 JUL 12.50 CUT GV 1.05 55 11.68 28 7.6% CCRD 9.45 JUL 7.50 UCD GU 2.30 96 7.15 28 5.3% VSAT 20.12 JUL 17.50 IQS GW 3.40 18 16.72 28 5.1% SCON 6.23 JUL 5.00 OUP GA 1.45 32 4.78 28 5.0% CYGN 8.64 JUL 7.50 YNQ GU 1.45 338 7.19 28 4.7% *************************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 ************************************************************ ***************** NAKED PUT SECTION ***************** Option Trading Basics: Some Guidelines For Success! By Ray Cummins To be a profitable option trader, it is important to review the most successful strategies on a regular basis. There are always new interpretations or methods to be integrated into your current system but maintaining a structured trading approach is the best way to achieve consistent returns. It is also paramount to have a precise set of rules to govern your actions when positions don't react as expected. These guidelines must be simple enough to recall and implement while monitoring a complex portfolio of plays in a volatile market. In addition, the rules should apply across a wide range of situations and be designed to compensate for one's weaknesses and inadequacies. To be effective in the long term, they must be formulated to help maintain discipline on a general basis and at the same time, offer a timely memory aid for difficult situations. Before you trade again, consider these well-known maxims: 1. Learn to limit losses and your profits will grow. The science of successful trading is less dependent on making profits, but rather on avoiding losses. The need to restrict draw-downs and prevent losing plays from significantly eroding capital should be a dominant theme in any type of trading. To reduce losses, most traders prefer to use a specific plan with pre-determined exits. Stop-loss orders can be used to remove urgent decision-making from the equation and trailing stops can be utilized to follow a position into greater profits while protecting for unexpected reversals. In addition, not only must losses be limited, but all positions must be reviewed regularly to ensure that the total portfolio risk is kept to a practical minimum. 2. Know your limits before you open any position! Just as setting stops on each individual position is an absolute must, a "maximum allowable loss" must be considered when managing portfolio positions. The rule is simple, never trade with more money than you can reasonably afford to lose and always maintain a reasonable cash reserve. When assessing position size and collateral requirements, ensure that funds for active trades are not co-mingled with capital for other functions. It is also very important to set a "loss limit" at the beginning of each month or option expiration period. When this level is breached, trading should be halted for the duration of that period. Of course, if your losses are consistently higher than your gains, stop trading! Step back and take a few days off. When you are ready to try again, evaluate your current trading strategies and review the previous plays (to learn from your mistakes), then move on. When you begin to make money, put some of the profits in a small reserve account, just in case there are any unexpected developments in the future. 3. Know your strategy, its advantages and weaknesses and only use techniques that fit your trading style and portfolio outlook. You can't make good decisions without knowing the mechanics of a specific technique and the best traders are those who are acutely aware of the shortcomings of their particular approach. Focus on positions whose trading characteristics match your ability and risk/reward attitude. Don't use complex or advanced methods simply because they are intriguing. In addition, if the strategy is not appropriate for your financial condition, it must be avoided, regardless of how attractive it appears. Obviously every strategy has risk. The key is to develop an arsenal of profitable methods; use only those that fit the market outlook; and manage each play for maximum potential. 4. Learn the art of patience; entry timing is the key to success! The opening trade is of particular importance. It deserves your best analysis and judgment and it is vital to assess all potential trades well in advance. In the case of stocks, the issue should be one you want to own and the price must be technically favorable with minimal downside risk. Correctly timing the initial purchase requires a thorough knowledge of charting techniques and market trends. The entire process is something a trader must completely understand because a successful exit is by and large the product of a proper entry. Those who are guilty of "over-trading" should assess their past results in this careless practice whenever they are tempted to participate in such activities. 5. Be diligent and after you develop a plan, stick with it! Success will come when you create a favorable balance between hard work, sound judgment and patience. Too many traders give up after a few losing plays, long before they have time to learn and absorb the various methods required for profitable trading... Good Luck! *** WARNING!!! *** Occasionally a company will experience catastrophic news causing a severe drop in the stock price. This may cause a devastatingly large loss which may wipe out all of your smaller gains. There is one very important rule; Don't sell naked puts on stocks that you don't want to own! It is also important that you consider using trading STOPS on naked option positions to help limit losses when the stock price drops. Many professional traders suggest closing the position when the stock price falls below the sold strike or using a buy-to-close STOP at a price that is no more than twice the original premium from the sold option. SUMMARY OF PREVIOUS CANDIDATES ***** Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield AMLN 12.60 14.12 JUL 10.00 0.40 *$ 0.40 11.9% CBST 34.50 34.78 JUL 30.00 1.35 *$ 1.35 11.0% MDCC 22.61 17.49 JUL 17.50 0.80 $ 0.79 10.8% ACTN 22.50 23.40 JUL 20.00 0.95 *$ 0.95 9.2% DMRC 22.95 24.60 JUL 20.00 0.70 *$ 0.70 8.8% UIS 12.94 13.58 JUL 12.50 0.65 *$ 0.65 8.7% ALKS 34.65 37.10 JUL 30.00 1.00 *$ 1.00 8.5% DMRC 18.06 24.60 JUL 15.00 0.65 *$ 0.65 8.4% SCIO 27.03 22.10 JUL 20.00 0.60 *$ 0.60 7.2% PXLW 30.66 28.21 JUL 22.50 0.65 *$ 0.65 6.9% NSM 26.91 25.84 JUL 22.50 0.55 *$ 0.55 6.9% HCR 27.20 28.05 JUL 25.00 0.65 *$ 0.65 6.1% GNSS 33.49 31.53 JUL 25.00 0.60 *$ 0.60 6.0% AVGN 21.25 17.50 JUL 15.00 0.45 *$ 0.45 5.9% PRHC 30.87 33.31 JUL 25.00 0.40 *$ 0.40 5.1% *$ = Stock price is above the sold striking price. Comments: This pre-FED roller-coaster is making me seasick! Molecular Devices (NASDAQ:MDCC) is now an exit candidate as it continue to move towards a new low. Scios' (NASDAQ:SCIO) recent action is a bit suspect and a violation of its 150-dma on a closing basis would be bearish. Monitor the position closely. Pixelworks (NASDAQ:PXLW) continues to form something of a symmetrical triangle leaving a rather ambiguous short-term outlook. Keep an eye on Avigen (NASDAQ:AVGN) as it is acting especially weak after the news of a new vector patent on Wednesday. Merck (NYSE:MRK) sure didn't help the pharmaceutical sector on Friday. Positions Closed: Intermedia (NASDAQ:ICIX), MRV Communications (NASDAQ:MRVC) ****************************************************************** - UPCOMING SEMINAR - ****************************************************************** On June 27, Mark Wnetrzak (Covered-calls) and Ray Cummins (Naked Puts) will be conducting an instructional seminar for new traders who are interested in the fundamentals of their approach to these conservative strategies. The general topics of discussion will be: - How to earn monthly income through stock ownership - How to reduce the effects of downside market moves - How to purchase new portfolio stocks at a discount You can take the seminar without leaving the comfort of your home or office. It is interactive and you can ask questions after the presentation. You do not need any special software to attend the presentation but you must have a 56K Internet connection or faster for best results and a separate phone to listen to the audio portion. If you are interested in this seminar, please click here for more information: http://www.premierinvestorseminars.com/seminarcalendar.asp ****************************************************************** NEW CANDIDATES ********* Sequenced by Company ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield CTXS 31.00 JUL 27.50 XSQ SY 0.85 371 26.65 28 9.5% EXBD 38.57 JUL 35.00 EBU SG 1.05 0 33.95 28 8.8% LPNT 39.70 JUL 35.00 PUN SG 0.70 5 34.30 28 6.4% NKE 44.55 JUL 40.00 NKE SH 0.85 1113 39.15 28 6.5% PPD 19.66 JUL 15.00 PPD SC 0.50 3221 14.50 28 12.3% SLVN 22.14 JUL 20.00 NQV SD 0.45 10 19.55 28 6.8% WEBX 26.30 JUL 17.50 UWB SW 0.40 51 17.10 28 7.7% Sequenced by Target Yield (monthly basis) ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield PPD 19.66 JUL 15.00 PPD SC 0.50 3221 14.50 28 12.3% CTXS 31.00 JUL 27.50 XSQ SY 0.85 371 26.65 28 9.5% EXBD 38.57 JUL 35.00 EBU SG 1.05 0 33.95 28 8.8% WEBX 26.30 JUL 17.50 UWB SW 0.40 51 17.10 28 7.7% SLVN 22.14 JUL 20.00 NQV SD 0.45 10 19.55 28 6.8% NKE 44.55 JUL 40.00 NKE SH 0.85 1113 39.15 28 6.5% LPNT 39.70 JUL 35.00 PUN SG 0.70 5 34.30 28 6.4% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** CTXS - Citrix Systems $31.00 *** CFSB Upgrade! *** Citrix Systems (NASDAQ:CTXS) develops, markets, sells and supports comprehensive application delivery and management software that enables the effective and efficient enterprise-wide deployment and management of applications, including those designed for Microsoft Windows operating systems and UNIX Operating Systems. Their unique products operate by executing the applications on a multi-user Windows NT, Windows 2000 or UNIX server and provide users access to the server from a variety of client platforms through the ICA protocol. The company's primary market for its products is large and medium-sized enterprises that require the ability to securely deploy, manage and access business applications across the extended enterprise. Credit Suisse First Boston recently raised its rating on the software maker to a "buy" and lifted its profit estimate for fiscal year 2002 to $0.92 a share. Separately, Merrill Lynch also started coverage on the company with an intermediate and long term "accumulate" rating. JUL 27.50 XSQ SY LB=0.85 OI=371 CB=26.65 DE=28 TY=9.5% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=CTXS ***** EXBD - Corporate Exec. Board $38.57 *** New Trading Range? *** The Corporate Executive Board (NASDAQ:EXBD) provides unique "best practices" research and analysis focusing on corporate strategy, operations and general management issues. Best practices research identifies and analyzes specific management initiatives, processes and strategies that have been determined to produce the best results in solving common business problems or challenges. The company also provides research and analysis on an annual subscription basis to a membership of 1,480 of the world's largest corporations. For a fixed annual fee, members of each subscription program have access to an integrated set of services, including best practices research studies, executive education seminars, customized research briefs and on-line access to the program's content database and other services. EXBD moved to the top of a recent trading range on Friday and the bullish technical indications suggest that a new yearly high may not be far away. JUL 35.00 EBU SG LB=1.05 OI=0 CB=33.95 DE=28 TY=8.8% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=EXBD ***** LPNT - Lifepoint Hospitals $39.70 *** Own This One! *** Lifepoint Hospitals (NYSE:LPNT) operates 21 general, acute care hospitals with an aggregate of 1,988 licensed beds in growing, non-urban communities. The company's hospitals are located in Alabama, Florida, Kansas, Kentucky, Tennessee, Utah and Wyoming. The hospitals usually provide commonly available medical and surgical services. These hospitals also provide diagnostic and emergency services, as well as outpatient and ancillary services, including outpatient surgery, laboratory, radiology, respiratory therapy and physical therapy. In addition to providing capital resources, the company makes available a variety of management services to its healthcare facilities. These services include information systems; leasing contracts; accounting, financial and clinical systems; legal support; personnel management; internal auditing; and resource management. LPNT is one of our favorite companies in the Health Services group and this position offers a great cost basis in the issue. JUL 35.00 PUN SG LB=0.70 OI=5 CB=34.30 DE=28 TY=6.4% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=LPNT ***** NKE - Nike Class B $44.55 *** Consumer Non-Durables *** Nike (NYSE:NKE) designs, develops and markets quality footwear, apparel, equipment, and accessory products. Nike is the largest seller of athletic footwear and athletic apparel in the world. The company sells its products to approximately 19,000 retail accounts in the United States and through a mix of independent distributors, licensees and subsidiaries in approximately 140 countries around the world. Virtually all of its products are manufactured by independent contractors and most of its footwear products are produced outside the United States, while apparel products are produced both in the United States and abroad. The company's earnings are due next week and investors are expecting a favorable revenue report. JUL 40.00 NKE SH LB=0.85 OI=1113 CB=39.15 DE=28 TY=6.5% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=NKE ***** PPD - Per-Paid Legal $19.66 *** On Again - Off Again! *** Pre-Paid Legal Services (NYSE:PPD) was one of the first companies in the United States organized solely to design, underwrite and market legal expense plans (Memberships). The company's legal expense plans currently provide for or reimburse a portion of the legal fees associated with a variety of legal services in a manner similar to medical reimbursement plans. The company had 827,979 Memberships in force with members in all 50 states, the District of Columbia and the Canadian provinces of Ontario and British Columbia. The company memberships allow members to access legal services through a network of independent provider law firms under contract with the company. The love-hate relationship with PPD is on good terms again and traders who believe Friday's rally will continue can speculate on that outcome with this position. JUL 15.00 PPD SC LB=0.50 OI=3221 CB=14.50 DE=28 TY=12.3% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=PPD ***** SLVN - Sylvan Learning $22.14 *** Rally Mode! *** Sylvan Learning Systems (NASDAQ:SLVN) is an international provider of educational services to families and schools. SLVN provides lifelong educational services through five separate business segments. The Sylvan Learning Centers segment designs and delivers individualized tutorial programs to school age children through franchised and company-owned Learning Centers. The Education Solutions segment principally provides educational programs to students of public and non-public school districts through contracts funded by Title 1 and state-based programs. The company's newest segment, Sylvan Ventures, invests in companies developing emerging technology solutions for the education marketplace. SLVN climbed to a two-year high last week and the heavy volume rally suggests there is further upside potential in the issue. JUL 20.00 NQV SD LB=0.45 OI=10 CB=19.55 DE=28 TY=6.8% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=SLVN ***** WEBX - WebEx Communications $26.30 *** Entry Point! *** WebEx Communications (NASDAQ:WEBX) is the leader in Internet infrastructure for real-time business communications. WebEx provides Web-based carrier-class communication services using its multimedia switching platform deployed over a global network. WebEx's services enable end-users to share presentations, documents, applications, voice, and video spontaneously in a seamless environment. In April, WebEx reported record 1st-quarter results with revenues up 568% from last year, and 32% sequentially. WebEx exceeded analysts' expectations for the third consecutive quarter as their strong growth has continued with record bookings. The stock rallied on the last FED cut and pulled back sharply on no news. Now the stock has again rallied on heavy volume and the bullish trend appears to be intact. We simply favor a discounted entry opportunity in the issue. JUL 17.50 UWB SW LB=0.40 OI=51 CB=17.10 DE=28 TY=7.7% http://www.OptionInvestor.com/charts/jun01/charts.asp?symbol=WEBX ***** ***************** SUPPLEMENTAL NAKED PUT CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield (monthly basis) ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield NXCD 7.57 JUL 7.50 DQX SU 0.70 102 6.80 28 20.8% ALTR 25.37 JUL 22.50 LTQ SS 0.95 484 21.55 28 12.5% NTIQ 24.72 JUL 17.50 CDJ SW 0.55 1120 16.95 28 10.9% MATK 25.45 JUL 22.50 KQT SX 0.75 10 21.75 28 10.2% AEM 8.08 JUL 7.50 AEM SU 0.25 148 7.25 28 9.4% IMDC 25.30 JUL 22.50 UZI SX 0.55 20 21.95 28 7.6% ************************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=2220 ************************************************************** ************************ SPREADS/STRADDLES/COMBOS ************************ A Dull And Dreary Market...(I'm Glad I Missed Most Of It!) Friday, June 21 Stocks moved lower today on new concerns over the dismal outlook for corporate earnings. A profit warning from Merck (NYSE:MRK) sent the blue-chip industrial average down 110 points to 10,604. ON Semiconductor (NASDAQ:ONNN) led the chip-equipment group lower and the selling eventually spread to other hi-tech sectors. The technology index fell 23 points 2,034. The S&P 500 index also slumped, falling 11 points to 1,225. On the Big Board, declining issues outpaced advancers 3 to 2 on light trading volume of 1.39 billion shares. NASDAQ volume reached 1.70 billion, with losers topping winners 21 to 15. In the bond market, the U.S. 30-year Treasury rose 24/32, pushing its yield down to 5.576%. Last Sunday's new positions/prices/strategies): Capital One (NYSE:COF) JUL70C/JUL65C $0.80 credit bear-call Teva (NASDAQ:TEVA) JUL55P/JUL60P $0.55 credit bull-put Cadiz (NASDAQ:CLCI) JAN10C/JUL10C $1.10 debit calendar Amerisource (NYSE:AAS) JUL60C/JUL60P $3.85 debit straddle General Dyn. (NYSE:GD) AUG70C/AUG70P $6.40 debit straddle All of our new combination positions were available at acceptable prices during the volatile week. COF rallied with the financials but must still prove the recovery is genuine with a move through our sold strike price. Teva is holding above a recent short-term trend-line but Merck's bearish news is very a negative catalyst for the drug group and may be difficult to overcome. AAS and GD both had excellent movement this week, but are currently still in a range and we will monitor those issues for future activity and any potential changes in character. Due to a much-needed vacation with my family, I have not yet had the opportunity to design a new (static) summary format for the Spreads section, but some of the activity we noticed during the week included; profitable exit opportunities in Health Management (NYSE:HMA) and Costco (NASDAQ:COST) and a favorable closing gain in the John Hancock (NSE:JHF) calendar spread. Among the older positions, Hyseq (NASDAQ:HYSQ) and Freemarkets (NSDAQ:FMKT) have rebounded from recent selling pressure and our adjustments in PepsiCo (NYSE:PEP) and American Express (NYSE:AXP) will likely end profitable. The bearish portion (JUL-$70P) of the straddle in Sony (NYSE:SNE) reached an $11 credit today and those of you remaining in the play must decide whether to take the small gain and retain the "free" call or hold out for additional profit on the downside; a difficult decision. ****************************************************************** - A UNIQUE EXPERIENCE - ****************************************************************** Last Monday, I conducted my first online educational seminar; Calendar Spreads and Zero-Cost Leaps, and the interactive presentation was certainly a unique experience. The web-based conferencing technology is incredible and the manner in which the information can be displayed offers a range of alternatives for sharing ideas and strategies. On the downside, the software is complex and requires a thorough knowledge of its capabilities; something I did not possess at the time. Thankfully, the devoted readers who attended the class were very patient and sympathetic about the learning process that took place as we viewed different applications during the "Questions & Answers" portion of the seminar. After the session ended, I received a number of useful suggestions including some constructive critiques, and many of those ideas are being incorporated into upcoming presentations. To show my gratitude for the wonderful treatment I received, I have arranged for all of you to sit in on the expanded version of this class at no cost. The new seminar will focus on a more interactive approach, rather than the narrative style, and will include additional examples as well as real-time analysis of current candidates using profit-loss graphs and online pricing software . Traders who are interested in the new and improved "Time-Selling Techniques" can send me a request via E-mail or watch for further information in this section. Questions & comments on spreads/combos to Contact Support ****************************************************************** - TRADING STRATEGIES - ****************************************************************** One of the course evaluations included a suggestion that a text based version of the presentation be provided prior to the actual seminar. Of course, that is an excellent idea and since there were many of you who did not have the opportunity to attend the online strategy discussion, I have decided to publish an overview of one of the most popular "time-selling" strategies. Calendar Spreads: Selling Time for Profit The options market offers a number of tools and techniques that can help the astute trader construct a powerful portfolio; one which possesses a high degree of safety with consistent returns. Through the use of combinations, the trader has a vehicle to pursue a wide variety of strategies. The complete option player can profit with bullish and bearish plays in situations that dictate either aggressive or conservative positions. With an understanding of the risk-reward relationships between long and short options at different prices in varying time periods, he can benefit from the most advanced techniques available in the market. The majority of traders utilize spreads to reduce the cost and the risk of option ownership. They construct combination plays with partially offsetting option positions to reduce the potential for capital loss. Spreads can be designed to generate return diagrams of almost any character but unfortunately, the fundamental benefit of this type of trading is also its downfall; the potential gains are limited. One of the most popular combination positions is the calendar or time spread. This type of spread benefits from the rate of decay in the time value of the short-term option. Also commonly known as a horizontal spread, the position involves the purchase of an option with one expiration date and the sale of another option with the same strike price but a different expiration date. The philosophy for using calendar spreads is that time will erode the value of the short term option at a faster rate than it will the long term option. A spread that is established when the stock is at or near the strike price of the target options is a neutral spread and if the stock price remains relatively unchanged until the near-term option expires, the position will earn a profit. It is important to understand how a calendar spread profits from the passage of time. When opening a horizontal spread, we buy a long term option and sell a short term option. Both options have the same exercise price, thus they have the same intrinsic value. Regardless of the movement of the stock, time value will always be less in the near term option. As long as the underlying stock price remains relatively close to the exercise price, the value of the spread will be determined by the time premium of each option. When the position is closed at expiration, the remaining time value in the short term option will be very low relative to that of the long term option. A horizontal spread is completely dependent upon the relative behavior of time value decay in each of the option positions. Since the profitability of this strategy is determined solely by the difference in time values of the options, it is important for the underlying issue to remain near the strike price; where time premium is theoretically the highest. If the stock price is at a high or low extreme, the time values of both options will be relatively small and the position will likely incur a loss; the remaining credit will be less than the opening debit. To the average trader, it would appear that this technique can't lose. One would simply buy the longer-term option and sell the shorter-term option. As both time values decayed, the position would gain value. In reality, it's rarely that easy because the the underlying stock does not remain constant. One way to reduce the negative effects of a volatile stock is to establish the play at least two to three months before the near-term option expires, capitalizing on the ability to sell a second position against the longer-term option. Ideally, the stock price would be just below the sold strike when the near-term option expires, however if the options are in-the-money, they must be re-purchased to preserve the long-term position. Another method commonly used to increase the probability of profit in this type of approach requires an understanding of implied volatility in option pricing. When opening any spread, it's important to take advantage of premium disparities to create the best possible position. Traders should try to initiate new plays when there is excess value in the sold option, or a discount in the purchased option, thus ensuring an entry with a theoretical edge. There is always the risk of early exercise in a calendar spread. The degree of risk depends on which options are bought and sold and the distance to the underlying stock price. The greater the time value in the sold option, the lower the probability of it being exercised. If it does occur, a trader can always fulfill the obligation by simply purchasing the underlying stock or an offsetting option. The more important issue is to be notified by the broker in a timely manner, so that the appropriate action can be taken before the stock price increases significantly. For the investor who is not familiar with spread trading, this strategy offers an excellent opportunity to learn the basics in a low risk environment. The concept of the calendar spread is easy to understand and once established, the position can be managed with little difficulty. The occasional adjustments also provide the necessary background for more advanced techniques. Those who enjoy directional trading can construct positions to fit their style as well. Although the potential for profit is lower than other popular spread strategies, the limited downside exposure and relatively consistent returns in time-selling plays offers a more attractive approach to the options market for the majority of investors. Good Luck! Note: The Spreads editor is on a brief hiatus from the market but he will return next week with a new selection of candidates for conservative combination traders. *************************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=2209 ************************************************************ ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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