Option Investor
Newsletter

Daily Newsletter, Tuesday, 07/17/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                  Tuesday 07-17-2001
Copyright 2001, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/425_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       7-17-2001          High      Low     Volume Advance/Decline
DJIA    10606.39 +134.27 10628.48 10438.66 1.22 bln   1841/1204 
NASDAQ   2067.32 + 38.20  2067.44  2006.80 1.66 bln   2125/1593
S&P 100   626.91 +  6.31   627.62   616.45   Totals   3966/2797
S&P 500  1214.44 + 11.99  1215.36  1196.14
RUS 2000  490.57 +  6.77   490.57   481.65
DJ TRANS 3007.08 + 44.29  3007.81  2957.78
VIX        25.36 +  0.05    26.87    25.12
Put/Call Ratio      0.63
******************************************************************

A Mixed Bag Of Earnings Brings Confusion To Markets.

Intel, Apple, Biogen, Veritas and Merril Lynch. These were only
a few of the companies that announced earnings on Tuesday and
produced a mixed bag of results. They were the leading edge of
the flood of over 850 announcements this week and set the stage
for market volatility with a capital "V".







Leading the parade after the close was the biggest chip company
to report, Intel. They initially excited investors by beating
estimates by two cents but warned that gross profit margins would
be down the rest of the year. INTC gave revenue guidance that fell
generally inline with analysts estimates but dropped the low end
to only $6.2 billion. AMD is causing problems and the price war
is having an impact on margins which are narrowing. Intel said
sales of microprocessors were stronger than expected which helped
maintain their revenue numbers. Still the P4 ramp is not moving
as fast as analysts expected. Many had thought Intel would sell
20-25 million this year and current estimates are only in the 10
million range. Intel did express confidence that the seasonal
bounce would occur in the fall. Intel jumped after the announcement
but then fell in after hours as the conference call wore on.

Apple Computer also announced profits that beat the street after
the close but then said things looked gloomy. Contrary to the Intel
guidance Apple said they "did not" see a seasonal recovery and no
upturn in consumer spending anytime soon. AAPL dropped almost -$3
in after hours to $22.50.

Veritas announced earnings that beat the street but warned that
the second half of the year would fall. Analysts had expected $.84
earnings for the year and VRTS is now expecting $.73 to $.75 and
revenue growth in the 25% - 35% range which was a drop from close
to 50% this year and compared to 75% in prior years. VRTS took a
serious -$7 hit in after hours.

Merrill Lynch announced earnings that dropped -41% and was not
very exciting. Commissions were down -17%, transaction revenue
-41% and underwriting was even worse. They said the future did
not look promising until the economy improved. Schwab also
announced and profits dropped -26%. They missed earnings by a
penny and said online trading was off substantially. They said
it might be next year before they see any positive signs. They
also said there was not anything they could do until the market
came back. Come on - tell us something we don't know!

Not all the news in after hours was bad. RFMD announced earnings
inline with estimates at a nickel but said they saw business
conditions improving in the next quarter. Revenue grew +27% in
a tough environment. They said orders increased during June and
they were now 100% booked. They make chips for communication
devices and this could be a leading indicator for the recovery.
They also said they expected gross margins of 28-33% in the Sept.
quarter. Traders liked what they heard and RFMD gained almost
+$3 to $22.16. Increasing visibility? What a concept!

The good news for the day was the semiconductor rebound. After
several chip companies said dire things on Monday, chip stocks
actually rebounded on Tuesday. All the bad news priced in? It
would appear many traders felt that was the case with NVLS
falling to $43.70 at the open but rebounding to $48.85 at the
close. AMAT fell to $39.87 before rebounding to close at $44.57.
These chip equipment makers are immune to the price wars going
on between the retail chip makers like AMD and INTC. This type
of business environment leads equipment makers to spend money
on R&D to be able to offer leading edge products when the next
economic revival appears. AMAT and NVLS have significant support
at $40 which would indicate that there are ready buyers whenever
the price dips to near those levels. Not a bad sign and somewhere
you could put a limit order to buy and be comfortable if you were
filled.

Economic reports today were headlined by the Industrial Production
Report which came in much weaker than expected at -0.7%. This
was the ninth consecutive decline and impacted all the major
industry groups. June was the worst decline since January and
contained no positive signs. Capacity fell to 77%. This is a
major reduction of inflationary pressure. With every manufacturer
begging for business it is very hard to command higher prices.
There are worries now that GDP growth will be negative due to
the seriousness of the 2Q decline in production. Wednesday will
bring us the CPI report which is expected to be basically flat.
The good news here, if any, is that the Fed will almost surely
continue their current rate cut program.

Greenspan will get a chance to talk to the markets through
his report to Congress on Wednesday. He will be grilled on
interest rates as well as his view of the economy and projections
for a revival. This can be a market moving event and in light
of the current market conditions it could be explosive. Alan
needs the markets to rally in order to maintain consumer
confidence, fuel future growth and provide that tax surplus.
The fourth quarter recovery has now moved into the 2Q of 2002
in econo speak and we may hear it slide even further on Wednesday.

Papa tech announces earnings on Wednesday. I am referring to IBM
and there has been no shortage of speculation on their numbers,
hit or miss. Many say they will beat since they did not warn.
Others think they will miss due to currency problems and the
softening global economy. Either way the most critical part of
their report will be the guidance. Since they have major business
in most countries around the world anything they say about a
global slowdown will be believed.

The recovery by both major indexes on Tuesday was impressive.
The Dow bounced off support at 10450 on profit taking from last
weeks gains and then headed for higher ground. The Dow jumped
from support at 10450 to resistance at 10600 in one trading day.
The test of course is now to the upside where 10600 has been
resistance for over a month. The Nasdaq was slower to respond
after coming within seven points of support at 2000. It was not
until after 1:PM that the Nasdaq started moving upward with any
conviction and then only weakly. The Nasdaq has 33 points to
regain before hitting resistance at 2100-2140. Stock movement in
after hours has given no indications as to direction tomorrow.
The news from APPL and INTC has depressed equipment stocks.
VRTS has depressed storage stocks ahead of the EMC earnings
tomorrow. The RFMD positive guidance did not appear to impact
anyone but RFMD.

Traders will be watching the next 200 or so earnings reports on
Wednesday as well as the Greenspan show on TV. Direction is far
from settled but volume is good for a July week. Technically
the Dow over 10600 is in buy territory but the Nasdaq is still
in the "wait and see" zone until it breaks 2140. Aggressive
traders could nibble on techs here but without some strong news
a breakout could still be in jeopardy. The markets today showed
that traders want to buy. Money is coming into the markets but
still without conviction. Shorts are covering but longs are
not convinced. I doubt we will get another "irrational exuberance"
comment from Greenspan but I would look for him to try and talk
the markets up instead of down and that cannot be all bad!

Enter passively, exit aggressively!

Jim Brown
Editor


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.IndexSkybox.com
************************************************************


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

Yearning For Earnings
By Jeffrey Canavan

Of the 52 companies that reported earnings during the day, 34
beat estimates, 9 met, and 9 missed.  Of the nine companies that
came up short, only two finished the day in negative territory.
Overall the market responded well to earnings, but tomorrow is a
new day.

Intel was able to beat expectations by 2 cents a share, but the
stock is trading 75 cents lower in after hours trading.  The
details from the conference call aren't in yet, but profits fell
by 76 percent, and it looks Intel was only able to post better
than expected earnings by excessive expense reduction.  Gross
margins are also expected to be lower in the 3rd quarter.

Veritas posted a "pro forma" profit of 18 cents a share, which
met analysts' expectations, but take away the creative
accounting and it was a 32 cents a share loss.  The software
maker also lowered its revenue growth by 30% for the rest of the
year.  The stock is getting pummeled in after hours, down $7.

Apple beat estimates, but cautioned that they will fall short of
full-year estimates.  Traders didn't like the news, and are
making applesauce out of the stock, down $2.35.

So we have two tech companies that lowered future guidance, and
one that gives a mixed outlook.  Theoretically that should lead
to a lower open tomorrow.

Sentiment indicators are neutral, with a slightly bias to the
downside.  While still neutral, advisory sentiment is starting to
creep towards overly bullish levels.  The percent of bullish
advisors has moved up 3% over the past three weeks to 51%. The
net percentage now sits at 26%, and has jumped 8% over the same
period.

===

Market Volatility
VIX   25.36
VXN   54.84

===

          Put/Call Ratio  Call Volume   Put Volume
Total           .63        721,413       451,645
Equity Only     .54        633,524       341,453
OEX             .83         23,992        19,811
QQQ             .84         41,689        34,902

===

Bullish Percent Data

           Current   Change   Status
NYSE          36       -      Bear Confirmed
NASDAQ-100    26       -      Bear Confirmed
DOW           30      -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  1.20

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      1784           1259
NASDAQ    1925           1682

        New Highs      New Lows
NYSE       86             56
NASDAQ     92             82

===

Advisory Sentiment

Bullish  Bearish  Correction   Net
  51%     25.0%      24.0%    26.0%

A bearish reading of 25% to 30%, combined with a bullish reading
greater than 55% is typically considered bearish by contrairians.
A net percentage greater than 30% is also viewed as bearish.

===

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
Commercial traders have stopped their bearish trend, but no enough
to signal any meaningful reversals.

Commercials   Long      Short      Net     % Of OI
6/26/01      307,889   379,955   (72,066)   (10.48%)
7/03/01      316,543   395,410   (78,867)   (11.08%)
7/10/01      309,374   385,178   (75,804)   (10.91%)

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
6/26/01      130,914     56,269   74,645     39.88%
7/03/01      133,098     54,865   78,233     41.62%
7/10/01      135,587     59,889   75,698     38.72%

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

NASDAQ-100
Institutions have decreased their net bearish position for seven
straight weeks, and small traders are about to turn net bearish.
The overall picture is still net bearish, but things are looking
up.

Commercials   Long      Short      Net     % of OI
6/26/01       26,263     35,690   ( 9,427)  (15.22%)
7/03/01       26,544     34,880   ( 8,336)  (13.57%)
7/10/01       26,688     34,640   ( 7,952)  (12.97%)

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
6/26/01       10,519     6,064    4,455      26.86%
7/03/01       10,443     7,063    3,380      19.31%
7/10/01        9,073     7,486    1,587       9.58%

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
Institutions have quickly reversed their position back to net
bullish.  I would like to see this trend persist for a few more
weeks before I buy it.

Commercials   Long      Short      Net     % of OI
6/26/01       11,371    12,759   (1,388)    (5.8%)
7/03/01       12,761    14,623   (1,862)    (6.8%)
7/10/01       13,743    12,999      744      2.8%

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     % of OI
6/26/01        4,756     6,341    (1,585)   (14.28%)
7/03/01        4,708     5,715    (1,007)   ( 9.66%)
7/10/01        5,048     7,835    (2,787)   (21.63%)

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


************************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=2214
**************************************************************


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:
*****

JCI $81.55 +1.55 (+2.80) JCI traded according to plan ahead of
the company's earnings report Tuesday.  The stock steadily
advanced throughout the session Tuesday and closed near its
day high, which offered those with previously established
positions plenty of opportunities to exit with profits in hand.

CD $20.52 +0.00 (-0.29) After 2 weeks of patiently waiting,
we have no choice but to move CD to the drop list.  The stock has
stubbornly refused to break out of the $20-21 range and we have
now run out of time.  The company will release its earnings
report tomorrow after the market close, and it is time to close
out any open plays to avoid any earnings-related surprises.

LLY $75.05 -0.05 (-0.73) After several attempts to get moving
ahead of its earnings announcement, LLY looks like it is
stalled.  The stock just can't seem to break out of the $74-76
range, and with earnings set to be released the morning of July
19th, it appears unlikely that the bulls will be able to effect
such a move ahead of that critical event.  Rather than hold open
positions right up until earnings, we'll drop the play tonight
so that we can focus on more favorable plays.


PUTS:
*****

HGSI $47.64 +4.26 (-0.85) Following Monday's closing dip near
$43, we tightened up our stop to $46 and tonight we're glad
we're did.  The Biotechs put in a solid rally right from the
open and HGSI followed suit throughout the day, ending the
session slightly below the $48 level.  The early move through
our tightened stop ended the play and it looks like a bottom
is beginning to form.  A perfect time for us to move on to new
plays.


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


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                  Tuesday 07-17-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/425_2.asp


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.IndexSkybox.com
************************************************************


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

BSYS $61.61 +0.37 (-1.68) BSYS was the target of a downgrade
Monday, perhaps unwarranted, by Robertson Stephens.  The analyst
with Robbie Stephens cut BSYS' rating to market perform from buy,
based upon the stock's current valuation.  These type of
downgrades are rather vague and irrational, but nevertheless
pressured shares of BSYS Monday.  But the stock bounced from its
ascending support line Monday, and again Tuesday, which currently
sits around the $61 level, which is the site of our stop.  If
this line holds and the market rebounds, we're likely to see
BSYS lead any rally attempt, no matter the downgrade Monday.
Bullish traders can use a bounce from $61 to gain entry, or an
advance above $62.50 in an advancing market.

BBY $67.50 -0.75 (-0.67) BBY is having problems clearing the $69
level, which is somewhat disconcerting because the Retail Sector
Index (RLX.X) continues to advance.  The under performance on the
part of BBY may stem from its recent rally as fund managers
rotate out of so-called rich retail shares into the cheaper
stocks.  To that end, we'll monitor the price action closely in
BBY in the coming sessions in light of its lackluster performance
relative to the Dow Jones and the Retail Sector Index.  If the
stock does, however, breakout above the $69 level in conjunction
with a rally in the Dow and the Retail Sector Index, bullish
traders might look to get long such a move.

AT $64.90 +0.07 (+0.62) The AT play is working as planned, as
the stock continues to steadily work higher.  However, it
has had problems getting past the $65 level during the last
two trading days, which may be the site that bulls pull this
stock back on profit taking.  That said, bullish traders looking
for new entry points might consider a strong advance above the
$65 level on healthy volume for a new entry point.  Otherwise,
a pullback to support around $64.50 or lower near $63 might
offer entry opportunities for those who prefer to enter call
plays on weakness.

SLVN $26.03 -0.23 (-0.36) SLVN has spent the early part of this
week consolidating around the $26 level, and has yet to give a
clear and definitive entry signal as its momentum has slowed
somewhat.  Its consolidation is not necessarily unexpected, but
we'd like to see the stock start moving over the next couple of
trading sessions.  Momentum trader types can use an advance
above the $27 level in an advancing market to enter new call
plays.  In using that strategy, however, make sure to confirm
direction in sector counterparts such as EDMC, CECO and COCO.
Conversely, a light volume pullback down around the $25 to $25.50
range may offer entries with better risk/reward profiles.

LEA $40.50 +0.57 (+0.80) The path of least resistance remains
to the upside for LEA with the good news emanating from the auto
and auto parts sector.  But as the news comes out, remember the
old adage: "Buy the rumor, sell the news."  As such, a round of
profit taking in the near future is likely, so bullish traders
with open positions might start thinking about exit points on
any further advance above current levels.  If profit taking does
ensue, bullish traders who are keen on buying dips can look for
a light volume pullback down to the $38 level, or a bit higher
around $38.50.

CSC $35.30 -0.45 (-0.98) CSC isn't setting any speed records, as
it has spent the first 2 days this week gently falling back
towards the $34 support level.  Even with the broad markets
finally advancing this afternoon, the stock posted another
fractional loss.  The $35 level seems to be providing some
intraday support, and it was encouraging to see buyers step up
at that level several times during the day.  But what we really
need to see is buying volume push the stock above the $37 level
to provide evidence that there are some serious buyers.  We have
nearly 2 weeks until the firm reports earnings on July 30th, so
buying the dips can provide some attractive entries, so long as
our $34 stop remains intact.  Solid volume that pushes the
price through $37 will prove we have a momentum run in progress
and will provide other entry opportunities.

EFDS $23.18 +0.54 (+0.47) It took several attempts, including a
failed rally on Monday to push EFDS through the $23 resistance
level, but the bulls finally managed to pull it off today.
Despite anemic volume that barely topped one-third of the ADV,
buyers can consider it a victory, but now need to see some
follow through.  Recall from our initial writeup that by
trading over $21 (also the site of the 50-dma), EFDS completed
a triple-top breakout on the Point and Figure chart.  That
breakout gives us a tentative bullish price target of $28,
although we'll need to contend with the $24 and $26 resistance
levels first.  Look for new entries to appear on a low-volume
dip near $20-21 or even $22.  Or if you are so inclined, wait
for volume to return, propelling our play through the $24 level
before initiating new positions.  Earnings are set for next
Friday, allowing just enough time for a nice earnings run to
develop.  Move stops up to $20

KOPN $12.49 +0.28 (+0.08) After meandering around unchanged for
much of the session on Monday, KOPN finally gave bullish
investors a decent entry point this morning when the stock
dipped to the $11.50 and promptly rebounded.  The afternoon
rally in the broader market helped the bulls push KOPN right to
the $12.50 intraday resistance level at the close.  Once they
clear that level, they'll be targeting the $13 and finally $14
levels.  Volume has been on the rise recently, which points
towards a pending breakout.  Strength in Semiconductor stocks
ahead of INTC's earnings helped lift KOPN on Tuesday and well
need to see that enthusiasm continue on Wednesday if the stock
is going to continue it winning ways.  The Point and Figure
chart is forecasting a bullish price target of $24, and trading
$13 will give us another double top breakout, adding to the
bullish picture.  Target fresh entries on a pullback and bounce
above our $10 stop, preferably near the $11 support level.
Pushing above $13 should get the momentum going and will provide
solid entries, provided the move is accompanied by continued
heavy volume.  Keep in mind that earnings are set for July 26th
after the market close.

LH $86.40 +1.20 (+2.42) Continuing their march higher, the bulls
pushed LH through a couple more levels of mild resistance so far
this week.  Clearing the $84 level on Monday left bullish
traders poised to propel the shares through $86, bringing them
within striking distance of the $90 level, where LH peaked at
the end of December.  Sure volume is only meandering around the
daily average, but that seems to be enough to get the job done.
The daily highs are getting higher and so are the daily lows.
With the solid move the past couple days, our support level has
now moved up to the $83-84 level.  With our stop moving up to
$83, we want to target intraday dips above that level for new
positions.  Of course a continuation of the current rally can
be considered as an opportunity to ride LH higher.  We'd be
cautious though, looking to take profits near the $90 level.
Keep in mind we only have until July 23rd to play, as that is
when the company will release earnings.

TGH $68.26 +1.01 (+0.15) Although they decided to take a brief
rest after pushing TGH above $68 on Friday, the bulls were back
in a buying mood today, pushing the stock to another recent
closing high.  While it is nice to see the stock gradually
creeping higher, the fact that volume has been substantially
weaker the past 2 days, raising a warnings flag for bullish
traders.  The stock appears to have successfully cleared the
$68 level and should now be aiming at $70, so long as the
Healthcare Payor index (HMO.X) can keep from breaking down.
With our stop now resting at $66, we can still target new
entries on intraday dips to support at $67 and then $66, so
long as the rebound comes on solid volume.  With the oscillators
buried deep in overbought territory, keep those stops in place
to protect those profits.


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

MYGN $41.72 +0.35 (-6.87) MYGN offered several entry
opportunities Monday and plenty of potentially profitable exit
points during its more than $7 drop Monday.  But that much is
in the past, and if bearish traders didn't get in Monday, there
still appears to be some profit opportunity on the downside.
That's because the stock's paltry performance relative to the
AMEX Biotechnology Index (BTK.X) Tuesday may portend under
performance on the part of MYGN in the short term.  For new
entries, bearish traders can look to enter puts on a breakdown
below the $40 level if the Biotechnology Index is declining.
Those who prefer to fade advances and go against the trend can
look for a low risk entry on any rollover near the $45 level,
which is the site of our recently lowered stop.

AES $37.82 -0.17 (-0.60) Although concerns about the South
American currency issue seem to be waning a bit, shares of AES
are continuing to decline.  Setting new yearly lows on a daily
basis, the $40 and $38 support levels are no longer intact,
opening the door for the bears to attack the $36 support level.
The daily Stochastics oscillator has reached oversold, and
selling volume appears to be waning a bit, so the stock may be
due for a bit of an oversold bounce in the days ahead.  Look for
it to roll over below the $40 level (also the level of our
stop), providing for fresh entry points.  Earnings are currently
set for July 26th, but it doesn't look like that event is
garnering much buying interest.  Even with the broad markets in
rally mode on Tuesday, AES continued to lose ground, a
confirmation of the stock's inherent weakness.

AMGN $55.06 +1.05 (-0.58) Just as we would expect, the
Biotechnology index (BTK.X) fell to the $500 support level on
Monday, only to be followed by a solid rebound on Tuesday.
AMGN followed suit, falling to $53.50 before rebounding on
Tuesday.  But there sure wasn't much follow through, with the
stock falling back shortly after the lunch hour, settling for
the day just above the $55 level.  AMGN is still looking pretty
weak and until it proves us wrong, we'll continue to ride the
stock lower.  Our stop is currently resting at $56 as AMGN has
been unable to crest this level recently.  Continue to use
failed rallies to enter the play in anticipation of more
weakness ahead of the company's earnings announcement on July
26th.  A volume-backed drop through the $53.50 support level
will provide fresh entries, especially if it is accompanied by
the BTK index falling through the $500 level.

CIMA $63.42 -1.27 (+0.53) You sure wouldn't know the broad
markets had a positive day by looking at the CIMA chart from
Tuesday, as the stock continues to languish just above the
200-dma ($62.18).  Yesterday's dip below this level, as well as
$60, was met by buying interest, continuing to keep the stock
above the 200-dma on a closing basis.  Still, CIMA is looking
vulnerable to a continued decline, and a good trigger for new
entries will be another push under the $60 level, this time on
heavier volume.  No matter how you slice it, the bears are in
charge here, and they are just looking for the right conditions
to push CIMA down through support again.  Intraday resistance
seems to be forming near $65, so we would look for new entries
to materialize on a failed rally below this level.  Our stop is
sitting at $66, as a move above that level would point towards
a weakening of the bears' grip on the stock.  We've still got
some time to ride the stock lower before the company announces
earnings on August 2nd, so pick your entry and get ready to ride
the stock to its next support level near $53-55.

SRNA $23.89 +0.76 (-2.05) After Monday's continuation of SRNA's
sharp decline, it should come as no surprise that there was an
oversold bounce today, especially with impatient bulls bidding
stocks up in advance of the long list of earnings announcements
due out tonight after the close.  Starting with an opening dip
below the $21 level, SRNA saw solid buying volume (more than
double the ADV) throughout the day, bringing the stock up to
close just south of the $24 level.  It isn't necessarily an
entry point yet, but it could get really attractive if the bears
start to exert their influence before the stock can clear the
$25.50 resistance (previous support) level.  While the Software
index (GSO.X) did manage to advance today, it is fast
approaching the $210 resistance level.  A rollover of the GSO
near this level would combine with a rollover of SRNA near
$25.50 to make for a high-odds entry point.  Keep stops set
at $27.50.


************************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=2215
**************************************************************


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

PG -  Procter & Gamble $69.93 +0.78 (+1.79 this week)

The Procter & Gamble Company manufactures and markets a broad
range of consumer products in many countries throughout the
world.  The Company's products fall into five business segments:
Fabric and Home Care, Paper, Beauty Care, Health Care, and Food
and Beverage.

Shares of Procter & Gamble have been out performing the Dow Jones
Industrial Average recently.  The company is a component of the
blue chip index and has lent strength to its recent rebound.  A
continuation of the Dow's recent rebound should continue to carry
the stock higher, following its breakout Monday.  Traders can take
a quick glance over PG's daily chart and realize this play is of
the momentum variety, in light of the stock's breakout recently.
But with little in the way of overhead resistance and favorable
fundamentals, the stock could work in our favor for an extended
period of time.  That's because the company doesn't announce
earnings until early August, which gives the play time to work
for us.  In addition, the company recently announced that it
would be increasing its quarterly dividend, which is a testament
to the strength of the companies strong cash flow position and,
by itself, may help to propel the stock higher due to the low
level of interest bearing accounts.  As a result, money managers
in search of value and dividends should continue to rotate into
shares of Procter & Gamble, especially if the Federal Reserve
cuts interest rates again this summer.  In terms of entry points,
momentum traders can look to enter new call positions if PG
trades above $70 in the coming sessions.  On the other hand, a
pullback down around the $68 level on light volume would offer
favorable entries in terms of risk should the Dow recede.  We're
initially setting our stop at the $67 level.

BUY CALL AUG-65 PG-HM OI=2839 at $5.40 SL=3.75
BUY CALL AUG-70*PG-HN OI=4525 at $2.00 SL=1.00
BUY CALL AUG-75 PG-HO OI= 281 at $0.45 SL=0.00
BUY CALL OCT-70 PG-JN OI=7257 at $3.80 SL=2.75
BUY CALL OCT-75 PG-JO OI=3213 at $1.85 SL=0.75

Average Daily Volume = 3.16 mln



GMST - Gemstar-TV Guide Int'l $49.83 +2.21 (+4.15 last week)

Gemstar-TV Guide International is a global media and technology
company focused on developing, licensing and providing products
and services that simplify and enhance consumer entertainment.
The company was formed in July 2000 through the merger of
Gemstar International, a technology company focused on consumer
entertainment and TV Guide, a provider of television information
in the United States.  Many of the company's products have a
special emphasis on television-oriented technologies and
services, particularly those marketed under the TV Guide name.

Everybody loves a breakout, especially in the middle of earnings
season.  Although it isn't itself on an earnings run (scheduled
to report August 13th), GMST recently broke out above the $45
resistance level.  Underscoring the move has been strong volume
the past 2 days as the stock has pushed through the 200-dma
(currently $46.44).  Adding to the bullish picture is the Point
and Figure chart which just completed a triple-top breakout as
GMST scaled the $46 level.  With the broader market making a
convincing show of trying to rally on Tuesday ahead of a heavy
slate of earnings, it looks like GMST could be setting up for a
powerful rally.  There is a fair amount of congestion just
overhead, but entering on the intraday pullbacks should give us
an attractive risk/reward ratio for the play as the bulls take
aim on the next serious resistance level at $55.  Beyond that
lies the January highs near $60, a worthy bullish goal.  Place
stops at $44 and target new entries on a pullback near the
200-dma, or even $45 for new entries.  That doesn't mean you
can't enter new positions on a continued rally above $50, but
just beware of profit taking after the recent rally, especially
with the daily Stochastics already well into overbought
territory.

BUY CALL AUG-45 QLF-HI OI=6999 at $7.30 SL=5.25
BUY CALL AUG-50*GST-HJ OI=7399 at $4.40 SL=2.75
BUY CALL AUG-55 GST-HK OI=2991 at $2.45 SL=1.25
BUY CALL NOV-50 GST-KJ OI=1344 at $8.50 SL=6.00
BUY CALL NOV-55 GST-KK OI= 860 at $6.50 SL=4.50
BUY CALL NOV-60 GST-KL OI=1236 at $4.80 SL=3.00

SELL PUT AUG-45 QLF-TI OI= 531 at $1.90 SL=3.75
(See risks of selling puts in play legend)

Average Daily Volume = 3.66 mln



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

FLR - Fluor $35.30 -2.27 (-4.68 this week)

Fluor is one of the world's largest, publicly owned engineering,
procurement, construction, maintenance, and business services
companies.  Fluor has become a trusted global business leader by
providing exceptional industry expertise and technical knowledge
across customer's value chain.

Shares of Fluor have been on the slide in a big way since mid-May.
Along with its engineering counterparts, the company is following
the lead of the broader energy sector.  And that direction, at
least recently, has been down the tubes.  For its part, FLR
continues to slide lower on increasingly heavier volume as it's
rather apparent that longs are liquidating and shorts are
pressing.  At this point, the stock could continue falling down
to the $31 to $32 range, which is the general area we'll target
on the downside from current levels.  For entry points, bearish
traders can look to trade with the trend, so to speak, and enter
new put plays if FLR breaks down below the $35 level on a
continuation of heavy volume.  For those who chose to enter at
or near current levels, make sure to confirm weakness in Fluor's
competitors such as Jacobs Engineering (JEC) and Martin Marietta
Materials (MLM).  Conversely, for those who'd rather wait for a
light volume bounce and subsequent rollover before entering
bearish positions, watch for FLR to advance back up to the $37.50
level before considering entry points.  As for our stop, initially
we're setting it at the $39 level.

BUY PUT AUG-40 FLR-TH OI=88 at $5.60 SL=3.50
BUY PUT AUG-35*FLR-TG OI=14 at $2.20 SL=1.00

Average Daily Volume = 783 K



************************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=2223
**************************************************************


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

MYGN - Myriad Genetics $41.72 +0.35 (-6.87 this week)

Myriad Genetics is creating safer, more effective therapeutics
on the discovery of drug targets in important human diseases.  The
company employs two primary technology resources in this process.
First, Myriad uses its high throughput, automated protein
interaction technology, ProNet, to discover drug targets and
entire disease pathways, which are essential in determination of
the optimal point of therapeutic development.

Most Recent Write-Up

MYGN offered several entry opportunities Monday and plenty of
potentially profitable exit points during its more than $7 drop
Monday.  But that much is in the past, and if bearish traders
didn't get in Monday, there still appears to be some profit
opportunity on the downside.  That's because the stock's paltry
performance relative to the AMEX Biotechnology Index (BTK.X)
Tuesday may portend under performance on the part of MYGN in the
short term.  For new entries, bearish traders can look to enter
puts on a breakdown below the $40 level if the Biotechnology
Index is declining.  Those who prefer to fade advances and go
against the trend can look for a low risk entry on any rollover
near the $45 level, which is the site of our recently lowered
stop.

Comments

Despite the fact that biotech heavyweight Biogen reported
better than expected earnings Tuesday, shares of MYGN fared
rather poorly.  In fact, the AMEX Biotechnology Index (BTK.X)
finished 3.5% higher.  Meanwhile, MYGN managed to eke out a
miniscule 0.84% gain.  Its poor performance may very well
translate into further downside in the coming sessions if
any reaction occurs in the BTK.  Look for weakness in the BTK
early Wednesday and for MYGN to fall below $40, which would
give the green light on new entries.

BUY PUT AUG-50 GSQ-TJ OI=338 at $5.90 SL=4.00
BUY PUT AUG-45*GSQ-TI OI= 55 at $3.40 SL=1.75
BUY PUT AUG-40 GSQ-TH OI= 16 at $1.65 SL=0.75

Average Daily Volume = 677 K



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


**********
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

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives