Option Investor
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Daily Newsletter, Thursday, 07/12/2001

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The Option Investor Newsletter                 Thursday 07-12-2001
Copyright 2001, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
         7-12-2001        High      Low     Volume Advance/Decline
DJIA    10480.41 +237.97 10496.64 10269.31 1.38 bln   1944/1166	
NASDAQ   2075.62 +103.70  2080.13  2031.84 1.85 bln   2510/1203
S&P 100   622.60 + 15.45   623.72   607.01   totals   4454/2369
S&P 500  1208.39 + 27.96  1210.25  1180.18
RUS 2000  488.78 + 13.21   489.12   475.83
DJ TRANS 2901.65 + 82.55  2902.72  2822.95
VIX        24.52 -  2.46    26.17    24.42
Put/Call Ratio      0.51
******************************************************************

Curbs In On The Upside - Outstanding!

GE, YHOO, MOT, MSFT! Pick your favorite reason for the market rally.
Positive earnings news from each helped to overcome the negative
news from the past week and power the Dow to a solid gain and a
close well over resistance at 10400. "Curbs in to the upside" is
not something we have heard often in the last several months.
Shorts must experiencing a huge headache brought on by the need
to cover and cover quickly. This is even more distressing for them
considering Argentina is getting closer to imploding as each
minute passes. What would be a normally be the mother of all
shorting opportunities turned into the father of all short
squeezes!







Where to begin? The news events are flying faster than mosquitoes
in Minnesota and there is no way to cover them all. The short
squeeze began after the close on Wednesday with an announcement
by Microsoft that it was changing license requirements to allow
resellers to remove the Explorer icon from the Windows desktop on
future systems sold. This is equivalent to closing the barn door
after the horses already escaped but it is the first in probably
many steps that will bring them into the good graces of the Justice
Dept. A settlement is looking like a sure thing and investors
celebrated with a +5.10 gain for the day. After the close they
announced a settlement with New Mexico. In a statement, New Mexico
Attorney General Patricia Madrid called for a speedy resolution of
the case and warned against trying to extract a penalty that could
have far-reaching and detrimental effects on consumers and businesses.
"I am no longer persuaded a break-up remains appropriate or will
ultimately be ordered by the courts," Madrid said. With statements
like this can a settlement be far away? MSFT also said sales would
exceed estimates for the quarter putting aside any worries of an
earnings miss.

SunMicro is rumored to be in talks to sell Hitachi Data Systems
storage products. This powered SUNW to a +10% gain and helped
add points to the Microsoft juiced Nasdaq index.

Motorola said that the slow down in some areas of their business
were coming to an end. After posting their first loss since 1985
Motorola said the restructuring was beginning to show results and
cell phone sales were showing early signs of recovering. MOT
spiked +16% on the news and was the main factor in the
semiconductor index recovery on Thursday.

Yahoo! beat the street by a penny with earnings of a penny but
the street was encouraged that the damage was not any worse. A
year ago YHOO earned nine cents. Beating estimates that had already
been lowered twice was not a spectacular event but investors were
looking for anything to cheer about. Even less, they said they did
not see a pickup in advertising until the middle of next year.
YHOO gained about +8% but provided a bigger help to overall
sentiment.

GE announced earnings which were inline with estimates even though
revenue dropped slightly to $31.98 billion from $32.86 billion.
Even though Jack Welch said the U.S. was in a definite recession,
regardless of what the economic numbers showed, GE reaffirmed their
numbers for the full year. GE gained +2.39 to $47 after hitting
a three month low of $44.30 on Wednesday.

Harley Davidson said they were upping production targets by +12%
and building a new plant in York PA. The economy cannot be too
bad if they can sell all they can make at huge prices. Wal-Mart
said same store sales jumped +6.9% which was more than the +5.9%
from last year. This spiked a rise in retailers after a series
of bad news recently.

After the close today Juniper announced earnings that beat the
streets lowered estimates and while not overly optimistic
about the current business environment they did think revenue
would not fall any further. They beat the same period last year
by +80%. Analysts think flat visibility means things are looking
better and the bottom in tech spending may have arrived. JNPR
gained almost $4 on the day to $28.50 and spiked over $30 in
after hours.

Rambus also announced earnings which met the streets lowered
estimates of four cents. Unfortunately the many royalty suits
currently in progress will cap earnings for the next three
quarters at zero. Things are not looking up for RMBS right now
and the +13% gain during regular trading was erased in after
hours.

AMD said they gained market share from Intel in the last quarter
but that share was hard fought. Average selling prices were down
but they are confident that they will continue to gain share
going forward. While Q3 does not look exciting they do expect
a return to solid profits in the fourth quarter if seasonal
buying patterns hold true. AMD was up slightly in after hours.
AMD said the drop off in business was the worst they had ever
seen.

The good news was great and the bad news was not that bad! This
is as good as it gets for bulls who have been beaten severely in
recent sessions. The positive sentiment rallied Dow component
IBM to a +3.40 gain and seemingly erased fears that they would
miss earnings estimates. Added to the $5.10 gain by MSFT, WMT
+3.00, UTX +2.70 on the GE news as well as gains by all but six
Dow stocks it was a great day. However, as we all know we did
not close Wednesday on a strong note at 10238 so the odds are
that few people were able to capitalize on it.

The trading patterns on Thursday were strongly suggestive of
serious short covering, not a flood of new buyers coming into
the market. The gap up at the open on the MOT/MSFT news was
a result of those short the semiconductor index or a chip
stock component. With good news from Motorola, the poster
child for mismanagement and bad product mix, those short
chips feared the worst from AMD/RMBS tonight. Get flat quick
would have been the mission. With MSFT announcing that profits
were going well and making concessions in advance the Nasdaq
was ready to rock at the open. The SUNW - Hitachi rumor only
fueled the flames. QCOM soared on the Motorola news and added
+6.91 points. It was reaction trading with huge gap opens.
The Dow gapped to resistance at 10400 and traded on both sides
of that level for hours. Shorts again tried to establish
positions and when there was no afternoon sell off they were
knocked for another loss as short covering started again.
The Nasdaq was a mirror image at 2050 until shortly after
2:PM when the positive sentiment and a lack of a sell off
prompted new buyers to come off the sidelines. The S&P-500
shot to 1200 at the open and struggled until just before the
close.

Do you see the pattern here? Dow 10400, Nasdaq 2050, S&P 1200.
All serious resistance levels and all served as price magnets
during the day as bears kept repeating "what about Argentina?"
and bulls kept saying "the earnings are not as bad as we thought."
Afraid of being on the wrong side of the PPI on Friday morning
the bears surrendered and covered. The bears could not get an
economic break. The jobless claims soared to 445,000 and the
highest number since 1992. The number was seen on the surface
to be even more ominous since last week only had four days.
Nearing the 450,000 recessionary level you would have expected
the markets to tank, or so the bears thought, but analysts were
quick to grab an excuse to justify a positive spin. The excuse?
They blamed it on the retooling at auto plants which normally
occurs during this time period. My question? If it "normally"
occurs in July then why were the estimates not higher to take
this into account? Investing minds want to know! Quick to
capitalize on the positive spin were expectations that the Fed
will be forced to cut another 50 points in August to offset
not only jobs and consumer confidence but Argentina as well.

What is a bear to do? We can't feel sorry for them since they
rode the recent dips down over -1000 points on the Dow since
May-22nd and -400 points on the Nasdaq. Austin and the IndexSkybox
team have been knocking off some decent bucks on the down side
as well. Now, where do we go from here? Friday should be
interesting after the AMD, JNPR, EFII earnings and positive
comments. There has got to be thousands of discussions underway
around the country on investment direction. Investment, not
trading direction. There is still a huge amount of money on
the sidelines, nearly $6 trillion by some accounts, and this
is not trading money. If everyone starts thinking the worst
is over then the buying could begin. Most are probably thinking
tonight that Thursday could be a one day wonder with Argentina
still a weekend wildcard. I would bet on Monday as the day to
think about re-entering the market. I would assume many others
are thinking the same thing. If Friday holds and nothing happens
in the currency markets over the weekend then maybe we really
have seen the bottom and its "buying time" again. The earnings
reports are going just like I speculated last week. The warnings
of gloom and doom were painted with the biggest brush possible
to protect companies from missing the actual numbers. Now the
actual earnings are not as bad as they were painted thus the
upside surprises.

While the good news has been better than the bad news we have
to realize that investors were looking for ANY light in the
tunnel. Abbey Joseph Cohen went public again after the close
with her Dow 12500, S&P 1550 year end targets in an attempt
to describe that light in the tunnel as something besides a
train. All of these things help but an unexpected miss by
a headliner like IBM could instantly change the sentiment
landscape. The decisions to cover shorts were made in the
face of soaring futures and positive press. Traders tonight
are taking a deep breath and looking at the damage from any
busted trades and deciding if the original premise for the
short still exists. Investors who jumped into the rally today
are reconsidering their moves in light of the after market news.
Both groups will trade differently on Friday than they did in
the market explosion that occurred on Thursday. Option premiums
exploded with the market and need to deflate before going long.
Be patient, but nibble if you must. The best case could be stocks
a couple dollars higher on Monday. The worst case could be a
South American meltdown and a new "buying opportunity." You
decide which risk you are willing to take.

Enter passively, exit aggressively!

Jim Brown
Editor


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

La Corrida De Toros
By Jeffrey Canavan

Throughout history bulls have been revered by civilizations, and
modern day Wall Street is no different.  But also popular
throughout history are the brave soles that participate in
Corridas, or bullfights.

A Corrida starts with a parade of contestants dressed in 17th
century costumes, who salute the president of the fight.  The
president, the market in our case, is an important official who
controls the fight and awards trophies to matadors who perform
well.  The matador enters the ring, a trumpet blows, and the
fight begins.

The preliminary phase of the fight consists of capeadores
(bearish retail traders) working the bull with capes to appraise
its agility, intelligence, dangers, and most importantly its
strength.  The matador (professional trader) sits back and
watches while quickly determining whether the bull hooks to the
left or right, or swings its horns up at the end of each pass.
Only when the matador has a feel for the bull tendencies will he
confront it.

When the trumpet sounded on Wall Street this morning, a bull
named Microsoft came out swinging, snorting, and hooking.  Any
capeadores who wished to step in front of this raging beast
definitely ran the risk of getting gored.  The color red, which
is often used to mark resistance, infuriates bulls, and today's
bull charged through those levels with vigor.  Now that we have
determined that this bull is feisty, it's time to move on to the
first stage of bullfighting.

The first stage is when Picadors (profit takers), mounted on
horses, provoke the bull to attack them.  The aim is to plunge
their lances into the bull's neck, thus weakening its strong neck
muscles.  This causes the bull to lower its head, without which
the matador would not be able to slay the animal.

How accurately the profit takers plunge their lances tomorrow
should determine if bears can move on to the later stages of the
bullfight, or are gored to death.

The moral of the story is that if you wish to confront a raging
bull, let somebody else weaken it before plunging your sword into
it.  Matadors get all the money and glory.

===

Market Volatility
VIX   24.52
VXN   54.02

===

          Put/Call Ratio  Call Volume   Put Volume
Total           .51        933,586       477,261
Equity Only     .42        850,651       359,296
OEX            1.07         20,663        22,036
QQQ             .24         91,792        22,229

The put/call ratio on the QQQs looks overly bullish, quite a
reversal from yesterday.  Yesterday call volume was 54,739, and
put volume was 79,319.  Today investors quickly changed their
tune. Call volume jumped to 91,792, and put volume was a paltry
22,229.  Too much change too fast?  The last time the QQQ put
call ratio was down at these levels was on 7/3. The reading was
15, which marked the start of our previous sell off.

===

Bullish Percent Data

With all of today's buying, bullish percent data refused to budge
from bear confirmed status.  The Dow actually dropped two
percentage points thanks to Phillip Morris giving a sell signal.

           Current   Change   Status
NYSE          36       -      Bear Confirmed
NASDAQ-100    26       -      Bear Confirmed
DOW           32      -2      Bear Confirmed
S&P 500       50       -      Bear Alert

Readings above 70 are considered overbought, and readings below
30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

===

10-Day Arms Index  1.18

Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when the do, they can signal significant market turning
points.

===

        Advancers     Decliners
NYSE      1945           1166
NASDAQ    2503           1208

        New Highs      New Lows
NYSE        94            63
NASDAQ      93            49

The Nasdaq trumped the NYSE in both adv/dec and nh/nl

===

Advisory Sentiment   Bullish   Bearish  Correction
                       50%      25.5%      24.5%

===

Commitments Of Traders Report: 07/03/01
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500
The net bearish position of commercial traders increased for the
third straight week.  We are still far away from the most bearish
reading of the year (111,956), but this is a trend bullish traders
want to see reversed.  Also disturbing for bulls is the fact that
small traders, who tend to be wrong, have over twice as many long
positions as short positions.

Commercials   Long      Short      Net     % Of OI
6/19/01      301,376   371,121   (69,745)   (10.37%)
6/26/01      307,889   379,955   (72,066)   (10.48%)
7/03/01      316,543   395,410   (78,867)   (11.08%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: ( 41,144) - 5/1/01

Small Traders   Long      Short      Net      % of OI
6/19/01        128,296    56,038    72,258     39.20%
6/26/01        130,914    56,269    74,645     39.88%
7/03/01        133,098    54,865    78,233     41.62%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100
I must admit that this data is a bit baffling.  Commercial
traders have been slowly reducing their net bearish position for
the past six weeks.  This is the only index where institutions
are getting less bearish.  Could it be that the "smart money" is
getting less bearish on technology?

Commercials   Long      Short      Net     % of OI
6/19/01       23,480    34,097    (10,617)  (18.44%)
6/26/01       26,263    35,690    ( 9,427)  (15.22%)
7/03/01       26,544    34,880    ( 8,336)  (13.57%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long      Short     Net      % of OI
6/19/01       14,284     8,403    5,881      25.92%
6/26/01       10,519     6,064    4,455      26.86%
7/03/01       10,443     7,063    3,380      19.31%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01


DOW JONES INDUSTRIAL
It looks like institutions have given up on the Dow based on the
increase in their net bearish position, and the performance of
IBM lately.  At the same time, small traders are on the brink of
turning net bullish.

Commercials   Long      Short      Net     % of OI
6/19/01       12,346    10,470    1,876      8.2%
6/26/01       11,371    12,759   (1,388)    (5.8%)
7/03/01       12,761    14,623   (1,862)    (6.8%)

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short      Net      %Change
6/19/01        3,844     7,555    (3,711)    (32.56%)
6/26/01        4,756     6,341    (1,585)    (14.28%)
7/03/01        4,708     5,715    (1,007)    ( 9.66%)

Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01


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

Retracement Brackets 2.0
By Eric Utley

This is Part 2 of a series on the theory and application of
retracement brackets.  Please read Part 1 if you haven't
already: http://www.OptionInvestor.com/traderscorner/070501_1.asp

We established the theory of Fibonacci numbers and their
relation to the market last week.  So let's apply.  But
before delving into the application of retracement brackets,
let's recall the premise: Generally, no market nor stock advances
or declines in a straight line.  And remember, as a market or
stock retraces its advance or decline, it tends to find support
and resistance levels around the Fibonacci retracement levels we
established last week: 38.2%, 50% and 61.8%.

The Fibonacci retracement bracket essentially measures a
meaningful advance or decline in a market or stock, then
separates that move into the three aforementioned percentages.
But 'meaningful' can be a rather subjective qualification,
along with how it relates to time frames.  When trading stocks,
I generally begin the retracement study on a daily chart.  And
when I'm looking for 'anchor points' I tend to focus on
significant relative highs and lows in a market or stock.
(Anchor points are essentially the relative highs and lows
where we place the retracement bracket - that is, the beginning
and end of the move we're measuring.)

Bullish traders can begin with picking a significant relative
low in a market or stock, and measuring up to the relative
high of a particular move.  For example, the Nasdaq Composite
(COMPX) traced its relative low on April 4 around 1619 which,
in my estimation, is meaningful.  The COMPX continued to
advance sharply throughout the month of April, eventually
topping out around the 2328 level.  I consider that a
'meaningful' level in that it marks the COMPX's relative high
and concede that that much is in retrospect.

Readers might wonder: Why do bullish traders want to retrace
an advance?  If one has a bullish view, then using the
retracement bracket will allow for the establishment of
support levels that should materialize in the event of a
natural reaction following an advance.  In other words, buying
the dip.  The retracement levels can also act as confirmation
in that after a stock or market stages an advance and fails
to find support around its levels, one might conclude that
the move lacks follow-through.

The retracement bracket on the COMPX chart below is an
advancing one that measures the index's move from 1619 to
2328.  Several observations can be taken from this simple
retracement bracket.  Note that before the COMPX reached
its high at 2328, it actually bounced twice from roughly
the 2060 level, which would turn out to be its 38.2%
retracement level.  (Coincidence or natural phenomenon
relating to the Fibonacci sequence?)




Once the COMPX hit 2328, it began to pullback in early June.
On June 14, it broke down below its 38.2% retracement level
and began to bottom, on a short-term basis, around the 1975
level, which is the site of its 50% retracement level.  In
fact, there were two observations in mid-June that were
almost exactly at 1975.

As the COMPX bounced from the 1975 level and the selling
subsided it had trouble getting back above its 38.2% retracement
level in late June.  When it finally broke above, it
continued to advance as market makers shifted inventory along
with the risk/reward dynamic of the market.  And its easy to
observe that as the COMPX has traded into July, it continues to
gravitate around its retracement levels, noting the intraday
high Wednesday of this week and Thursday's breakout.

In contrast to the advancing retracement bracket in the COMPX,
the chart below depicts a declining retracement for the S&P 500
(SPX.X).  I've anchored the retracement bracket near the S&P's
relative high back in January around the 1383 level, down to
its relative low in April around 1081.




Like the COMPX example, the S&P has had the tendency to gravitate
around its levels while retracing its decline from January.
Bearish traders can use a declining retracement bracket such as
the one on the S&P to pick rollover entry points for shorting
stocks or buying puts.  Furthermore, both bullish and bearish
traders can use the retracement bracket to better measure and
monitor risk versus reward.

Whether a trader uses an advancing or declining retracement
bracket will vary with their bias on the market, along with
trading style and strategy.  But I find it beneficial to use
both an advancing and declining retracement bracket.  That way,
I get a better feel for what the bulls and bears are watching,
instead of just one side.

Finally, I get a lot of questions concerning where to anchor
retracement brackets.  And like I mentioned above, I like to
start with a daily chart and generally go back six to nine
months, depending on the time frame I'm trading, in an attempt
to spot a meaningful relative high and low.  My best advice is
for traders to take into account the time frame being
traded.  Day traders can use a one week observation, for
example, in an attempt to determine levels of risk versus
reward.  While investors looking for entry points, be it on
pullbacks or breakouts, can use a weekly time frame.

Next week, we'll get into the subject of how to trade off the
retracement levels.

Questions are welcome:
eutley@OptionInvestor.com


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PICKS WE DROPPED
****************

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


CALLS:
*****

No dropped calls tonight


PUTS:
*****

BEAS $26.08 +2.33 (-0.11) The 'Beazer' gapped higher Thursday
morning, following its slide down to $23.60 during Wednesday's
session.  Depending upon risk tolerance and time frames, the
stock's weakness may have offered bearish traders a solid exit
point.  But its gap higher in the wake of MSFT's guidance has
led to the need for risk management for those still in the play.
We lowered our stop on the play Wednesday to $25 and will be
dropping it this evening.  But traders still in the play might
use any weakness below the $25.50 level Friday to exit positions.
It's worth noting that BEAS saw heavy selling at the open
Thursday and couldn't lift along with broader market into the
close.

PMCS $28.79 +3.30 (+2.49) We were pretty sure there would be an
oversold bounce in shares of PMCS after it dropped so
precipitously on Tuesday.  Sure enough we got it, and our $27
stop took us out of the play this morning with a goodly portion
of our gains intact.  It remains to be seen whether the stock
can continue its advance, as it is currently banging its head
on the 2-month descending trendline.  But with the Semiconductor
index (SOX.X) and Networking index (NWX.X) both moving into
recovery mode, PMCS is being lifted through resistance levels.
That isn't the behavior we want in a put play, so we'll obey
our stop and close the play tonight.

XLNX $40.63 +3.30 (+2.97) Semiconductor stocks were the new
darlings of the market, as the market responded positively to
the bullish MSFT pronouncement last night.  Whether other
technology stalwarts will follow suit remains to be seen, but
XLNX investors wasted no time in casting their votes this
morning.  Pushing through our $38 stop at the open, the bulls
never looked back, effectively preventing us from ever getting
an entry into the play.  With the support of the Semiconductor
index (SOX.X), XLNX rallied throughout the day, rising to
challenge the $41 level before pulling back slightly at the
close.  Clearly, we are discontinuing coverage of this broken
play tonight.


*************************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=2202
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The Option Investor Newsletter                 Thursday 07-12-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
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*************************ADVERTISEMENT*********************
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********************
PLAY UPDATES - CALLS
********************

BBY $67.95 +3.42 (+3.11) BBY dipped down below its 10-dma during
Thursday's session, but never quite reached our downside,
protective stop at $64.  For traders who entered on the dip, the
stock's strong advance Thursday may have provided a good
opportunity to book some gains.  Conversely, the stock did
advance above the $68 level early in the morning, which was the
second action point we addressed last Tuesday.  The problem
with that entry, as it turned out, was that BBY pulled back in
he final 30 minutes of trading on rather heavy volume.
Therefore, traders who entered into strength up around $68 might
want to keep a close watch on positions going into Friday's
session and consider using a tight stop to mitigate risk,
adjusted, of course, to individual risk preferences and time
frames.  For new entry points, trades can look for support to
materialize around the $65 level and play a possible bounce.
On the other hand, those traders who prefer entering on
strength can once again look for an advance back above $68, or
higher near $69.22.  For the time being, we're leaving our
stop at $64.

BSYS $63.40 +1.20 (+4.58) Wednesday, BSYS traded pretty closely to
the action plan we set forth in Tuesday's update.  If the stock's
pullback to around $60 Wednesday, or its advance past $61 allowed
for entries, then traders were in a good position going into
Thursday's session.  That's because BSYS' competitor First Data
reported exceptional earnings Thursday morning, which carried
shares of both companies higher.  Although, BSYS gapped higher
early on, pulled back to the $62 level and then proceeded to
advance to a new 52-week high at the $64 level.  Because of its
wild trading Thursday, it was probably difficult to gain a solid
entry point.  Nevertheless, for those traders who entered calls
down around $60 or $61, Thursday's solid advance may have some
thinking about booking gains around current levels or on any pop
back up to $64.  As for new entries, traders can look to buy
calls on an advance past $64 or a pullback down to $63 or $62,
depending upon style and risk preference and market conditions.
With earnings and price momentum in BSYS and its competitors,
the stock should continue to work higher so long as the Nasdaq
continues advancing.  We're moving stops up to $61.

JCI $78.25 +1.00 (+4.71) JCI's trading over the last two day
has been rather erratic, which has made gaining entry into the
play quite difficult.  Its gap higher Wednesday may have
allowed for entries, but its subsequent rollover that
afternoon may have tested the mettle of bullish traders.
Conversely, its steep sell-off early Thursday morning and
subsequent advance during midday trading may have resulted in
whipsaws and headfakes.  We're keeping the play alive,
nonetheless, and would like to see a trend develop into the
company's earnings announcement next Wednesday.  That leaves
only three trading days to stay in the play.  For entry
strategy, bullish traders can look to buy calls on a pullback
around the $77.50 level, or use an advance above $79 on
strong volume to get long some calls.  We're moving our stops
up to $75.

CD $20.75 +0.12 (+0.25) The opening gap in the broader markets
pushed CD close to its $21 resistance level, but lacking bullish
conviction, the stock fell back to once again meander in its
recent $20-21 range for the balance of the day.  Yesterday's
bounce just below the $20 level provided the best entry point we
have seen in over a week and we can hope that the bulls can get
something going ahead of the company's earnings report on July
18th.  On an encouraging note, CD found support near $20.50 on
Thursday before moving higher into the close, but the rangebound
action continues.  Target additional bounces from the $20
support level as attractive entry points, or wait for a strong
move through $21 before playing.  Our stop is still resting at
$19, and with the approach of earnings we have just 4 days left
to play before earnings are released.

EFDS $22.95 +1.51 (+4.50) Thanks to the strong rally on the
broader markets today, our EFDS play got off to a strong start.
After a strong open that quickly took the stock to the $23
resistance level, profit-takers pushed the price down to $22,
before the bulls took control again, propelling shares up to
close near the high of the day.  If buyers can maintain control,
a move through the $23 resistance level will provide attractive
entry points on Friday.  Dip buyers could get another chance to
play as well on a dip and volume-backed bounce from intraday
support, first at $22, and then at $21.50.  Of course, with our
stop moving up to $19, a drop to more significant support at
$20 could provide an even better entry point.  Keep in mind that
we want to see the pullback occur on reduced volume, followed by
increasing volume on the bounce.  A perfect example of this
pattern can be seen on EFDS' intraday chart from Thursday.
Judging by the fact that all the major indices moved back above
recent support, EFDS could be set for a continued rally into
its earnings report, scheduled for July 27th

LLY $74.55 -1.25 (-0.56) Continuing its descent, the
Pharmaceutical index (DRG.X) fell below the $378 support level
on Thursday, putting pressure on LLY.  Our play gave up all of
its gains from yesterday, falling back near our $74 stop by the
closing bell.  With the stellar gains across the broader markets
today, it seems that bullish traders were moving money out of
the defensive Drug sector in favor of Technology and Financial
stocks.  While it was disappointing to see the bears wipe out
our gains from yesterday, we could still be setting up for
another entry point.  Target a bounce near current levels for
new positions, but keep an eye on the DRG index.  If it
continues to falter, LLY will likely fall through our stop,
bringing the play to an end.  Make sure volume accompanies any
bounce and we would prefer to see the DRG index regain the upper
side of $378 before committing new funds to the play.  Keep in
mind that earnings are set to be released the morning of July
19th, so if there is going to be an earnings run, it will have
to get moving soon.  A move through $75 could make for an
attractive entry as well, but keep in mind that resistance is
still resting at $77.

TGH $67.46 +0.91 (+1.86) Patient traders have finally gotten the
breakout they were waiting for, as TGH was propelled through the
$67 resistance level late this afternoon.  The bullish wedge
that had been building over the past 2 sessions finally popped
to the upside following 2 solid days of gains in the Healthcare
Payor index (HMO.X), which posted its highest close since June
16th.  With the broad market indices all closing above near-term
resistance, the sector moving to new recent highs and TGH
breaking above resistance, the stock could be set for a more
extended advance.  We are raising our stop to $65 (which looks
like solid support), and are looking for a rally through the
$68 resistance level to provide fresh entry opportunities.
Profit taking could provide for new entries as well, but we want
to see the dip occur on reduced volume, followed by a bounce
preferably from the $66 level on renewed buying volume.


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

ANN $32.78 +1.38 (+0.98) Hopefully, those traders who entered
puts in ANN earlier in the week used its weakness down to
the 200-dma Wednesday to lock in some gains.  The company
warned Thursday morning, but unfortunately traded higher on
the news, following the broader retail sector higher.  Although
the stock traded as high as $34, it did pull back during
midday trading to settle back below our stop at $33.  Normally
we'd drop coverage on the play, but due to its warning and
rollover, we're holding going into Friday's session.  That's
because we'd like to get a more favorable exit point or look
for continued weakness in the wake of its warning.  Traders
who'd like to exit positions can use any weakness down to
$32 to exit.  While a dip back down to $30 would provide an
opportune exit.  We'll revisit the play closely Friday, and if
the selling momentum resumes we may hold it over the weekend.
But any continued strength Friday and we'll drop coverage.

BA $54.50 +1.60 (+0.20) BA dipped back down to roughly $53
during Wednesday's session, which may have offered bearish
traders in at higher prices a favorable exit point.  But the
stock rebounded in Thursday's session, as the Dow tacked on
200+ points.  It's safe to assume that much of BA's gains
Thursday were market related noting its poor performance
recently.  Perhaps a bit of short covering was involved too.
But, the stock has yet to trace a reversal on its point &
figure chart and would do so only if it printed $55.  That
said, $55 is the site of our stop and should BA print that
price, we'd likely drop the play.  Therefore, bearish traders
might look for a rollover from current levels to gain entry
into the play if the stock pulls back Friday.  Additionally, BA
has formed a very short-term ascending trend line, which
currently provides support around $53.20.  A break below that
level, confirmed by a decline below $52.90, would most likely
portend further weakness and also provide an entry point.

AMGN $55.10 -1.91 (-2.06) More pain in the Pharmaceutical index
(DRG.X) drove AMGN lower again on Thursday, bringing shares to
rest just above the $55 level.  A broad rally in Technology and
Financial issues siphoned cash out of Drug and Biotech issues
again with the DRG index falling below the $378 support level
and the Biotechnology index (BTK.X) dropping through the $520
support level.  Even a new Attractive rating from Bear Stearns
on Wednesday was unable to motivate buyers in the stock, as it
continued its descent, reaching its lowest closing level since
mid-April.  The next likely level of support for AMGN will be
$53-54, which may make an attractive level to consider taking
some profits off the table.  Look for new entries to materialize
on any weak intraday rallies that fail to penetrate the $58
level, the new location of our stop.

ANF $40.05 +1.00 (-0.81) After breaking down on Wednesday and
offering some attractive gains to nimble traders, ANF found
support near $38 and followed the broader Retail index (RLX.X)
higher on Thursday.  Supported by the broad market rally, our
play is now at a critical juncture.  A sharp rally in the final
two hours of trading lifted the stock back above the $40 level,
and emboldened bulls could be setting their sights on our $41
stop on Friday.  A failure to follow through on this afternoon's
rally could set the stage for fresh entry points, but only if
ANF rolls over below our stop and resumes its decline on strong
volume.  The RLX index will be key, as a continued advance will
likely propel ANF higher.  Watch the Retail Sales report
tomorrow morning before the open, as this will likely set the
tone for both the sector and our play.  Waiting for more
weakness to emerge seems the most prudent strategy at this
point, and a drop through $38 would be a good trigger for new
entries.

HGSI $45.18 -2.80 (-3.67) Biotech bulls can't seem to catch a
break, even with a broad-based Technology rally.  The
Biotechnology index (BTK.X) has now fallen through the $520
support level, and although some mild support appeared near
$510, it looks like the $500 level will be the next major point
of support.  HGSI continued to flounder among the sector
weakness, despite some early buying interest on Thursday.
Volume was heavy throughout the day, and an attempted midday
rally was put down by the bulls as they handed the stock another
6% loss.  While there may be some stubborn support near current
levels, the recent trend seems to be pointing towards a test of
the $40 support level in the not-too-distant future.  With that
being said, we need to keep an eye out for a relief rally, given
the stock's precipitous decline, down more than 25% in the past
8 sessions.  We are lowering our stop to $49, and would consider
any failed rally below that level as attractive for new entries.
If the bears prevail on Friday and drive HGSI below $45, that
could also provide fresh entry opportunities, but we would
advise caution.  As deeply oversold as the stock is, a relief
rally is likely not too far away.  Let the movement of the BTK
index be your guide.


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*************
NEW CALL PLAY
*************

AT - Alltel $63.25 +0.50 (+2.47 this week)

ALLTEL, with more than 10 million communications customers and
more than $7 billion in annual revenues, is a leader in the
communications and information services industries.  ALLTEL has
communications customers in 24 states and provides information
services to telecommunications, financial and mortgage clients
in 55 countries and territories.

Bullish telecom stock - it's not an oxymoron.  It's Alltel.
The company, surprisingly enough, is the nation's 5th
largest wireless telecom company and the 6th largest local
telephone company, competing with the likes of Verizon
Communications (VZ), XO Communications (XOXO), Qwest
Communications (Q) and SBC Communications (SBC).  These
companies are benefiting from the excess inventory of telecom
and networking equipment.  Yea, that's right, as companies
such as Cisco and Juniper attempt to manage inventory levels,
they're forced to sell their products to the carriers such
as Alltel at much lower prices than were being paid just one
year ago.  That, in turn, is going to boost the margins and
bottom-line of Alltel and its peers.  Alltel should especially
benefit from the lower costs of equipment because its revenues
and profits have been relatively stable.  The stock has been
discounting that much recently, and should continue to trade
higher as long as the Nasdaq and telecom sector continue
advancing.  The chart is strong and the stock is close to
breaking out above a big level at $64, which would generate
a buy signal on its point & figure chart.  Speaking of which,
the current bullish price objective is $70.  That fact,
combined with the gap between $64 and $68 may portend a very
exciting play.  As such, an advance above $64 on healthy
volume would allow for a solid entry into the play.  But
make sure the Nasdaq and the aforementioned competitors are
advancing before entering on strength.  Conversely, a light
volume pullback to $60 - the site of our stop - would allow
for a potentially low risk/high reward trade.

***July contracts expire next week***

BUY CALL JUL-60 AT-GL OI=780 at $3.60 SL=1.75
BUY CALL JUL-65 AT-GM OI=487 at $0.60 SL=0.00
BUY CALL AUG-60 AT-HL OI= 62 at $4.60 SL=2.75
BUY CALL AUG-65*AT-HM OI=103 at $1.80 SL=1.00

Average Daily Volume = 683 K



************
NEW PUT PLAY
************

AES - AES Corp. $39.19 -2.81 (-3.26 this week)

As a global power company, AES participates in two primary lines
of business, electricity generation and distribution.  The
company's electricity generation business consists of sales from
its power plants to non-affiliated wholesale customers (electric
utilities, regional electric companies, electricity marketers
and wholesale commodity markets known as "power pools") for
resale to end users.  AES' distribution business is
characterized by sales of electricity directly to end users
such as commercial, industrial, governmental and residential
customers.

The persistent downtrend in shares of electricity producers is
continuing to pressure shares of AES, as the stock is suffering
on two fronts.  First, the stock is sagging under currency
concerns in South America, particularly in Argentina.  Secondly,
the company (along with WMB) is under scrutiny by the Department
of Justice for allegedly violating anti-trust laws by agreeing
to limit expansion of some AES plants.  The effect of all these
factors can be clearly seen in AES' price chart, as the stock
once again rolled over right at the 3-month descending trendline
earlier this week.  With the company's earnings release a mere
2 weeks away (after the market close on July 26th), it seems
investors are concerned that AES will be unable to meet its
estimated earnings of $0.30 per share.  To make matters worse,
the stock culminated a 2-day, high-volume, 9.7% slide by falling
through the $40 support level for the first time in over a year.
This looks like a tradable downtrend and we are looking to enter
the play on further weakness as AES drops through the $39 level
on continued strong volume.  Alternatively, target any intraday
bounce that fails to follow through to the upside.  Any bounce
that fails to clear $41 looks attractive for new entries.  We
are initially placing our stops at $43, where AES has
significant overhead resistance.

***July contracts expire next week***

BUY PUT JUL-40 AES-SH OI=3617 at $1.75 SL=1.00
BUY PUT AUG-40*AES-TH OI=9633 at $3.40 SL=1.75
BUY PUT AUG-35 AES-TG OI= 911 at $1.35 SL=0.75

Average Daily Volume = 2.56 mln



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*********************
PLAY OF THE DAY - PUT
*********************

BA - Boeing $54.50 +1.60 (+0.20 this week)

The Boeing Company is the largest aerospace company in the
world, with its heritage mirroring the history of aviation. It
is the world's largest manufacturer of commercial jetliners
and military aircraft, and the nation's largest NASA contractor.
In terms of sales, Boeing is the largest U.S. exporter.  Total
company revenues for 2000 were $51 billion.

Most Recent Write-Up

BA dipped back down to roughly $53 during Wednesday's session,
which may have offered bearish traders in at higher prices a
favorable exit point.  But the stock rebounded in Thursday's
session, as the Dow tacked on 200+ points.  It's safe to assume
that much of BA's gains Thursday were market related noting its
poor performance recently.  Perhaps a bit of short covering was
involved too. But, the stock has yet to trace a reversal on its
point &  figure chart and would do so only if it printed $55.
That said, $55 is the site of our stop and should BA print that
price, we'd likely drop the play.  Therefore, bearish traders
might look for a rollover from current levels to gain entry
into the play if the stock pulls back Friday.  Additionally, BA
has formed a very short-term ascending trend line, which
currently provides support around $53.20.  A break below that
level, confirmed by a decline below $52.90, would most likely
portend further weakness and also provide an entry point.

Comments

Shares of BA were dragged higher by the Dow Thursday, but may
fall back during Friday's session.  The stock has traded in a
pattern of down one day, up the next this week, and if that
pattern continues, it's due for a dip Friday.  But bearish
traders should only look to enter new plays if the Dow is
declining.  If that happens, a potentially high reward/low risk
trade may present itself in BA with a rollover near the $55
resistance level, which is also the site of the stock's 10-dma.

***July contracts expire next week***

BUY PUT JUL-60 BA-SL OI=5997 at $5.70 SL=4.00
BUY PUT JUL-55*BA-SK OI=5619 at $1.60 SL=1.00

Average Daily Volume = 3.32 mln



*************************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=2203
************************************************************


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DISCLAIMER
**********

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