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Daily Newsletter, Tuesday, 07/24/2001

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The Option Investor Newsletter                  Tuesday 07-24-2001
Copyright 2001, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       7-24-2001          High      Low     Volume Advance/Decline
DJIA    10241.10 -183.30 10423.80 10203.70 1.19 bln    975/2137	
NASDAQ   1959.20 - 29.30  1994.03  1939.28 1.59 bln   1300/2410
S&P 100   603.88 - 10.25   614.41   600.44   Totals   2275/4547
S&P 500  1171.25 - 19.38  1191.03  1165.54
RUS 2000  474.14 -  8.44   482.70   472.53
DJ TRANS 2862.52 - 98.36  2961.81  2839.35
VIX        27.62 +  1.50    28.83    26.39
Put/Call Ratio      0.75
******************************************************************

Is There Light at the End of This Tunnel?

That is the $64,000 question that nobody wants to answer today.
The companies that announced earnings today avoided any discussion
of recovery and simply said it will come someday, we hope. To the
20,000 new layoffs at Lucent the answer did not come soon enough.







Leading the loser list today was a very widely held telecom and
networking stock that nobody expected to hit estimates. They were
right! Lucent missed estimates by mile with a 35 cent loss instead
of the 21 cents analysts expected. While not a surprise that they
would miss, the magnitude of the miss was huge. Had the outlook
been decent the loss would probably not been so bad. Unfortunately
they declined to outline any guidance for the future and said they
would cut 20,000 more jobs and bring the total to almost 50,000
since this time last year. After the current cuts they will only
have half of their prior workforce. When asked directly in a TV
interview about economic conditions the CEO said there was "no
economic turnaround in sight." Thank you for that insightful info
and for being a ray of hope in the current market! Lucent said
they would take up to a $9 billion charge in the fourth quarter
for discontinued operations and layoffs. Ouch! Lucent lost -1.47
to $6.43. JNPR, CIEN and CSCO all finished the day higher. Ciena
was probably up on relief that they are not going to buy the Lucent
fiber unit.

Amazon posted a smaller than expected loss but got hammered to the
tune of -3.97 to $12.06 after lowering guidance going forward. The
long awaited "profitable quarter" is still a distant goal even after
a strong efficiency drive to cut costs in the last quarter. Seems
sales are not growing as fast as the economy weakens. Does that
surprise anyone? They only missed their revenue goals by $10 million
but would need a $1.4 billion fourth quarter to meet prior estimates
for the year. It is not going to happen and AMZN said 4Q sales would
only grow between 10% and 20% this year. EBAY took a beating by
association and lost -3.27 even when they had no trouble in the
current Internet environment.

We can always rely on the semiconductor sector to lead us out of
the bear market when Internet stocks don't, right? Not a giant
in the sector but Microsemi, MSCC, announced earnings after the
close and promptly lost -$15 from its $67 closing price. In an
often repeated scenario they beat the street by a penny but warned
that sales would be flat in this quarter. Ironically they only
said they were cautiously optimistic about the near term and the
flat sales were not that bad relatively speaking. The magnitude of
the drop just shows how scared investors are and how little loyalty
remains. Of course it did not hurt that MSCC was near $70 after a
low of less than $20 only four months ago. A little profit taking?
LRCX also posted earnings and said revenue is likely to decline
another 7-12% this quarter. They said visibility is awful and no
recovery in sight but they lost only 25 cents in after hours. Go
figure!

Titan Pharma, TTP, was the really bad news of the day dropping -56%
or -15.30 to $12.00 after Novartis said they were going to run more
tests on the drug Zomaril before seeking FDA approval. They said
the new trials would delay marketing until late 2002.

Not all news was bad today with PSFT beating estimates and RAISING
guidance. They had their best quarter ever and CFO Kevin Parker
said Q4 would be slightly ahead of their 35% annual growth rate and
the annual earnings would be at the high end of estimates. What
vitamins are their sales people taking and can we have some? PSFT
jumped about $2.50 in after hours. PRGN also announced earnings
that met estimates and reaffirmed guidance and growth targets of
30-40%. Remedy, RMDY, missed estimates slightly but was up on the
PRGN news. RMDY is being acquired by PRGN.

Greenspan had no positive news for the markets Tuesday and many
analysts think the cuts, in hindsight, were too little too late. He
will eventually prevail but there is still more pain ahead. Senators
pounded on him from every angle and he was forced to change his
testimony from last week to protect himself from their charges.
He had said they saw the slowdown 6-9 months ago and one senator
asked why they waited three months to start cutting rates. Alan
asked to modify his testimony to six months from 6-9 months because
he did not "do the math in calendar terms" before making the comment.
I wonder what else he didn't do the math on? Still it appears the
Fed is ready to continue cutting until signs of a recovery appear
and as yet there are no signs. He is trapped now in a 25 point
mode because a 50 point cut in August would signal that they were
scared and maybe they had underestimated the severity of the
problem. They could still cut 25 points inter-meeting but many
analysts doubt it will happen.

Market technicals are approaching very bearish levels. The Nasdaq
hit a low of 1939 on Tuesday which was only five points above the
July 11th low. Many analysts have said 1935 was the line in the sand
and a close below that would setup a retest of the 1638 low from
April. A close below 1935 would be the third lower low since the
mid-May highs. The only positive news to hang out hat on is the
PeopleSoft earnings and higher guidance. A small glimmer of light
in the blackness. Still the futures are up slightly in after hours.

The Dow has completely broken down and is in danger of breaking
the 10120 low from July 11th as well. We closed only +35 points
above the low for the day and without any new news the only hope
traders have is an oversold bounce.

Even after yesterdays losses I was still encouraged about the minimal
losses on the Nasdaq until the drop accelerated after lunch. I was
still grasping at straws that the normal July sell off I wrote about
a week ago would not happen but it looks like it is right on schedule.




The positive futures are the result of hope by traders that PSFT
will provide a psychological boost as well as short covering by
the bears in fear that a bounce might actually happen. For whatever
reason the markets are extremely oversold and the 1935 Nasdaq level
is likely to provide a bounce due to program buying and bottom
fishing. The odds of a bounce holding at this point are slim. There
are no buyers and no reason to be a buyer. Even though earnings are
actually coming in better than the same quarter last year the guidance
is coming in worse. It is all about the guidance. Once companies
start saying positive things you will not be able to hold the market
back but until then traders are simply waiting. The interest rate
cuts will have an impact but we are not close yet. Consumer
sentiment has got to be falling with layoffs increasing and the
retail sector could be in for a serious problem. If sales of big
ticket items like computers, TV equipment and electronics fall any
more after the huge price cuts we have seen recently, then stores
may start canceling holiday orders due to leftovers. That
would only create yet another problem for this economic cycle.

In short, we are extremely oversold but I would not bet on the
staying power of any bounce. The dog days of summer are here to
stay and the low volume is liberally spiced with short sellers.
As one commentator said today, "there were 10 sell orders for every
buy order." The down volume is not that drastic, people are not
bailing out of stocks at any price, but this is July and there are
just no buyers. 1935 on the Nasdaq and 10120 on the Dow could
provide bounces due to program buying. Should those levels fail
all bets are off!

Enter passively, exit aggressively!

Jim Brown
Editor

	
*************************ADVERTISEMENT*********************
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index instead?

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

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

Tercio Del Muerte
By Jeffrey Canavan

When a matador realizes a bull is weak and unable to charge much
longer, he will reach for his killing sword to administer the
death stroke.  The baby bull that was born on Wall Street two
weeks ago isn't quite dead, but sellers are getting ready to
administer the death stroke.

During last week's earnings onslaught, enough buyers could be
found to, not necessarily push the markets higher, but at least
keep stocks afloat.  This week those buyers look to be on
vacation.  The way the rest of this week plays out should tell us
if buyers are merely taking a break, or have said no mas.

One ray of hope for bullish traders was the Nasdaq-100 Tracking
Stock being able mount a small rally and close above $40.  It's a
small victory, but the triple Qs are also 30 cent higher in after
hours after some positive earnings from PeopleSoft.  Whether
those gains can hold through the night, and past the first hour
of trading tomorrow, will be the early test.  With call volume of
119,837 and put volume of only 34,025 for the QQQs on Tuesday,
perhaps traders are a bit too optimistic.  But perhaps OEX
traders are a bit too pessimistic. A put/call ratio of 1.62
suggests that sellers have gotten a little too rambunctious.

Well that's just great, we have mixed data.  Can any other
sentiment indicators help clear up the picture?  The VIX
continues to move higher, but is well short of oversold levels.
Advisory sentiment continues to climb, but that's a contrarian
indicator.  A bullish percent status of bear confirmed still
offers the best description - high risk if long.

CNBC was out in the office today, so we were subjected to MSNBC.
Other than a fascinating story about a big python climbing into
some ladies car in Florida, there was a story about a bear trying
to get seeds out of a bird feeder.  He couldn't quite reach the
food, so he just kept knocking the bird feeder around until it
fell over and he could easily get the food.  Bears have the Wall
Street birdfeeder teetering, but haven't knocked it over yet.

===

Market Volatility
VIX   27.63
VXN   57.62

===

          Put/Call Ratio  Call Volume   Put Volume
Total           .75        700,804       523,180
Equity Only     .63        643,076       407,364
OEX            1.62         13,233        21,488
QQQ             .28        119,837        34,025

===

Bullish Percent Data

*The Dow has moved to bull alert status

           Current   Change   Status
NYSE          36       -      Bear Confirmed
NASDAQ-100    26       -      Bear Confirmed
DOW           36       -      Bull Alert
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  1.09

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       963           2108
NASDAQ    1157           2445

        New Highs      New Lows
NYSE       50             51
NASDAQ     63            134

===

Advisory Sentiment

Bullish  Bearish  Correction   Net   Change
  52.5%     23.2%    24.3%    29.3%   +3.3%

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: 07/17/01
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. COT data
can be found at www.cftc.gov.

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
Institutions have lightened up on their net bearish for the second
straight week, and the S&P 500 remains above 1,200.  Coincidence?
The commercial sentiment is still bearish, but improving.

Commercials   Long      Short      Net     % Of OI
7/03/01      316,543   395,410   (78,867)   (11.08%)
7/10/01      309,374   385,178   (75,804)   (10.91%)
7/17/01      336,836   403,561   (66,725)   ( 9.01%)

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
7/03/01      133,098     54,865   78,233     41.62%
7/10/01      135,587     59,889   75,698     38.72%
7/17/01      122,525     50,211   72,314     41.86%

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

NASDAQ-100
About face!  After slowly reducing their net bearish position for
seven straight weeks, institutions abruptly switched gears.  Keep
in mind this data is from 6/17/01, before the start of earnings
week.  Perhaps some institutions sold some futures contracts to
limit their risk.  This change could be a one or two week
anomaly.

Commercials   Long      Short      Net     % of OI
7/03/01       26,544     34,880   ( 8,336)  (13.57%)
7/10/01       26,688     34,640   ( 7,952)  (12.97%)
7/17/01       26,721     37,225   (10,504)  (16.43%)

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
7/03/01       10,443     7,063    3,380      19.31%
7/10/01        9,073     7,486    1,587       9.58%
7/17/01       11,680     8,183    3,497      17.61% 	

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 got slightly more bullish on the Dow for the second
week in a row.  This is the only index with a commercial net
bullish position, and the Dow was the only index to finish the
week higher than it started.

Commercials   Long      Short      Net     % of OI
7/03/01       12,761    14,623   (1,862)    (6.8%)
7/10/01       13,743    12,999      744      2.8%
7/17/01       14,145    12,963    1,182      4.4%

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
7/03/01        4,708     5,715    (1,007)   ( 9.66%)
7/10/01        5,048     7,835    (2,787)   (21.63%)
7/17/01        5,255     9,144    (3,889)   (27.01%)

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


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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:
*****

FDRY $19.35 +0.10 (+0.56) The weakness in the Nasdaq Monday
didn't allow for our short-lived play to close above the $20
level.  Unfortunately, FDRY reports earnings after the bell
Wednesday - unfortunate because this play appears to have
potential.  Step back vis-a-vis the daily chart - FDRY has
traded rather well relative to the Nasdaq.  We'll possibly
revisit this play after earnings.  In the meantime, look for
strength above $20 to exit any open positions.

KOPN $12.60 -1.04 (-1.19) After busting out above the $12.50
level last week, KOPN is finally beginning to succumb to the
bearish pressures in the Semiconductor sector.  The $13 level
failed as support and KOPN actually fell below our $12 stop
briefly this afternoon before staging a weak recovery.  With
the intraday violation of our stop and earnings set to be
released after the close on Thursday, we'll take our exit
tonight.  Use any strength ahead of earnings as an opportunity
to gain a more profitable exit from the play.


PUTS:
*****

AES $35.00 -0.05 (-0.72) Although it hasn't been an exciting
play, it has certainly been a consistent performer, continuing
its descent down the charts.  Although the stock hasn't yet
reversed its decline, it is looking like it is close, having
found support at $35 the past 2 days.  Earnings are approaching
on Thursday, so we'll take our gains and bid AES a fond
farewell.


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The Option Investor Newsletter                  Tuesday 07-24-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
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*************************ADVERTISEMENT*********************
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index instead?

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

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


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

IBM $104.51 -1.34 (-1.19) IBM needs the broader market to advance.
Bullish traders looking to enter new positions should keep an eye
on both the S&P 500 (SPX.X) and the Nasdaq (COMPX).  At the very
least, the two market indexes need to stabilize in order for IBM
to advance.  It's market - sector - stock.  And without the
cooperation of the broader market, IBM won't work higher, no
matter its relative strength.  With all that said, any forthcoming
rebound in the SPX and NDX should be led by IBM.  Traders can
look for an advance above the 10-dma around $106.15 for a quick
trade up to the range between $107 to $108.  Conversely, those
who prefer to enter on pullbacks can look for entries near IBM's
aggressive ascending support line, which currently lies around
the $104 level.  Below that, another possible support level to
gravitate towards is $103.

MOT $17.40 -0.65 (-1.10) MOT's momentum came to a screeching
halt early Monday morning, when the Nasdaq began to rollover.
Unfortunately, the weakness in the broader tech sector has
resulted in a light volume decline in shares of MOT.  Although
on light volume, the recent weakness in shares has us on high
alert for further downside.  What's more, the stock closed
below its 10-dma for the first time since announcing earnings,
which in itself is another warning sign.  Therefore, bullish
traders with open positions should be looking to manage risk
acutely, possibly raising stops.  Insofar as initiating new
positions, it may be prudent to wait for MOT to stabilize and
advance back above at least $18.50 before considering new
call plays.

BEAS $21.18 +0.47 (-1.83) Proving once again that relative
strength is the name of the game, BEAS spent Tuesday hanging
onto its intraday gains, stubbornly refusing to head south with
the major market averages and the Software index (GSO.X).  BEAS
managed to distance itself from the critical $20 level, while
the GSO index fell even closer to its pivotal $180 support
level.  Volume is still meandering around the daily average,
and current levels could turn out to be an attractive entry
point IF the enfeebled NASDAQ can gather its strength and rally
from its deeply oversold condition.  With BEAS' superior
relative strength, it should move nicely in concert with any
broad technology rally.  Our first target for taking profits is
$26, followed by $30 for those with a longer time horizon.  We
have plenty of time until earnings, as BEAS doesn't report until
mid-August.  Take entries as they are offered near support, but
keep stops in place at $20.

DO $30.00 -1.05 (-0.50) Almost as if on cue, DO investors took
some profits off the table on Tuesday, allowing us to find
attractive entries into the play as the stock found support near
$30.  While volume was above the ADV today, it was encouraging
to see the profit taking occur on the lowest volume seen since
the bottoming process began a couple weeks ago.  With the
looming possibility that OPEC could once again be in a
production-cutting mood, we could be on the cusp of the next
big rally for the Oil Service companies.  DO found solid support
at $27 last week, and then launched higher from the $28 level
(also the level of our stop).  Use intraday dips above this
level to initiate new positions in anticipation of a run through
resistance at $32.  The $34 level might present a prudent level
to take some profits as there is significant resistance there.


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

MYGN $38.51 -2.62 (-5.19) Patience is a virtue, and can be a
very rewarding one, too.  After waiting a week for the breakdown,
MYGN finally decline below the $40 level Tuesday.  All signs
point to further downside in this stock, noting the breakdown in
the Biotech Sector Index (BTK.X) below the 500 level.  Perhaps
the only cautionary facet of this play is the fact that
stochastics are buried in oversold territory on the daily chart.
But stochastics are an oscillator, and MYGN is definitely trending.
The breakdown Tuesday should've allowed for new entries into the
play and bearish traders with open positions can start thinking
about exit points.  After all, MGYN is down about $10 since we
initiated bearish coverage.  Depending upon time frames and risk
tolerances, those with open positions can use any further weakness
Wednesday morning to lock in gains.  Those who entered the play
Tuesday on the breakdown might set an exit target down around the
$35 level, with the understanding that MYGN most likely won't
trade directly down to that level.  But stranger things have
happened in this market.  We're moving stops down to $43.

GILD $49.98 -2.92 (-4.05) Excellent execution!  Over the last two
days, GILD epitomized the success of shorting stocks/buying puts
near resistance.  The stock rolled over Monday, closing below its
10-dma and followed through in a big way Tuesday.  Its dip down
to the $50 level may have allowed for bearish, short-term traders
to exit the play.  For those biotech bears among our readers who
held positions through Tuesday's close, any weakness early
Wednesday may serve for a quick exit.  But don't get too greedy.
And keep in mind that GILD announces earnings Thursday.  So a
short covering/earnings run rally is certainly possible.  Our
stop has been moved down to $50 to prevent such a scenario from
eroding into gains.  We'll be dropping coverage Wednesday, ahead
of the company's earnings Thursday.

NVDA $72.39 +4.59 (-2.50) NVDA started the week off with a
sharp decline below our action point at $72.50.  That should've
allowed for momentum trader types to enter new positions.
However, the stock did stage a market-bucking rebound Tuesday.
Not surprisingly, NVDA ran into resistance right around $72.50
on the way back up.  Its relative strength is obviously
disconcerting for those on the short side, but NVDA has
displayed this erratic type of trading for the past two months.
Our stop was lowered on Monday to the $73 level, so any
follow-through into Wednesday's session could result in a
drop of the play.  Bearish traders should keep a close eye on
how NVDA trades around $72.50 early Wednesday.  Any failure
at that level could allow for further entry points.

DIGL $19.66 -0.29 (-2.64) DIGL settled below the pivotal $20
level Tuesday, which may very well portend further downside
in the stock.  The reversal on the daily chart adds credence
to that thought.  With about $2.50 in gains since picking up
bearish coverage on DIGL, bearish traders with open positions
might start looking to book gains in positions.  Any weakness
below Tuesday's lows should serve as exit opportunities in
the coming days.  Conversely, an advance back above $20 may
serve as a mental stop for those with gains in this play.  For
those still on the sidelines, continued weakness in the Nasdaq
would allow for entries to be taken below Tuesday's intraday
low.  We're moving stops down to $22.

VRSN $44.36 +1.46 (+1.41) VRSN continued to bounce from its
61.8 percent retracement level - the stock has found support
at that level for the past four trading sessions.  That level
is around $42.25.  Its relative strength Tuesday may be the
beginning of an earnings run.  Verisign is scheduled to
report Thursday, so we'll be dropping coverage on the play
Wednesday evening.  Before then, traders with open positions
should be careful going into Wednesday's session in light of
VRSN's strength Tuesday.  Tight stops might be a good idea.

CIMA $55.25 -1.37 (-5.95) Besieged by sellers on Monday, CIMA
fell sharply, shattering the $60 support level and coming to
rest on Tuesday at the upper edge of the $53-55 support level.
This breakdown allows us to move our stop down to the $60 level,
as this prior support should now act as resistance.  Our Point
and Figure chart is still predicting a $43 price target, so we
can use any weak intraday rallies as attractive entry points.
Target rollovers first at $57 and then $59, as these are the
sites of intraday resistance from the past 2 days.  If you'd
like to see more weakness before taking the plunge, then wait
for CIMA to fall through the $53 level before taking a position.
Watch for renewed weakness in the Pharmaceutical index (DRG.X)
as confirmation that our play still has legs, as we buckle up
to ride the stock lower into the company's earnings announcement
on August 2nd.

PDII $65.24 +0.44 (-3.15) Compared to the excitement of last
Friday's morning selloff, trading in PDII has been downright
sedate this week.  That doesn't mean there haven't been any
profitable trades though.  Monday saw the stock roll over from
the $67.50 level and today the bulls couldn't even crest $67
before giving into the bears and letting the stock fall almost
to $63.  Volume is once again anemic, and with price recovering
back over the $65 level, we could be looking at an attempt at
recovery.  We're lowering our stop to $67 in case of a bullish
move, although a rally that fails to move through this level
before rolling over could present an attractive, if aggressive
entry.  Conversely, a drop under the $62.50 level could also
pave the way to profits allowing new entries.  There should be
some mild support near $60, followed by stronger support near
$55, making for possible levels at which to take profits.

PDLI $52.80 -2.17 (-4.08) Taking another beating already this
week, the Biotechnology index (BTK.X) fell through the
important $500 level on Tuesday, closing at its lowest level
since April 16th.  Of course our PDLI play felt the pain as
well, gapping below the $55 level.  Although the bulls tried
valiantly to recover throughout the day, they couldn't make any
headway at filling the gap.  The best they could manage was
battling the bears to a standstill just below $53.  PDLI and
the BTK index are so deeply oversold now that a bounce can't be
too far off.  That bounce should provide fresh entry points,
allowing us entries as the stock rolls over from any level below
our new $56 stop.  As deeply oversold as the stock is, we want
to be careful about buying further weakness.  Selling the failed
rallies presents a better risk to reward ratio as we ride the
stock towards its August 2nd earnings release.

SGR $29.65 -2.05 (-3.20) If it's true that there's no rest for
the wicked, then SGR investors must have been very wicked.
Maybe this is payback for all the profits the company has
accrued through the recent power crunch.  After crashing through
the $35 support level last week, the stock picked up steam,
falling all the way to $28 before enough buyers emerged to prop
up the stock at the close.  It wasn't enough to get SGR back
over the $30 level, and that handed the stock its lowest close
since late September last year.  The late day bounce came on
some pretty decent volume, but it could be giving us that
oversold bounce we mentioned over the weekend.  Look for the
upward pressure to subside, causing a price rollover below the
$32 resistance level, also the level of our stop.

SRNA $20.37 +0.30 (-0.48) Are Software stocks ever going to
stop falling?  Of course.  The big question is when.  The late
day bounce today is unlikely to have any staying power as
earnings season continues to bloody the sector.  Even though
SRNA has now managed a late-day recovery above the $20 support/
resistance level the past 2 days, it hasn't come with
the conviction of volume.  So we want to continue riding the
downtrend as long as it lasts, but don't want to give back our
hard-won gains.  Tighten stops to the $22 level and target
intraday rallies below this level for new entries.
Alternatively, new positions can be considered as the stock
falls through intraday support at $19.50, preferably on
increasing volume.  And of course, we want to keep an eye on
the Software index (GSO.X).  It is resting just above the
critical $180 level.  A violation of this level will likely
lead SRNA lower as well.


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NEW CALL PLAYS
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CSCO - Cisco Systems $18.38 +0.11 (+0.39 this week)

Cisco Systems and its subsidiaries are engaged in networking for
the Internet.  Cisco hardware, software and service offerings are
used to created Internet solutions so that individuals, companies
and countries have seamless access to information, regardless of
differences in time and space.

Shares of Cisco have been trading relatively well versus the
broader Nasdaq.  And have been trouncing the Networking Index
(NWX.X).  While the NWX has been flirting with its relative lows,
shares of Cisco have been moving sideways.  In short, the stock
is catching a bid.  That may stem from the company's upcoming
earnings report on August 7.  Or, from the fact that Cisco is
reportedly seeing an up-tick in its enterprise business.  Either
way, the stock has been trading well and may pop higher in the
short-term should the selling pressure in the broader Nasdaq
subside.  The Nasdaq is again approaching oversold conditions
and any short covering/relief rally in the short-term should
free-up CSCO to trade higher.  Keeping in mind, however, that
this could be a very short-term play.  That's because CSCO has
had a terribly difficult time getting above the $20 level.
Therefore, any trade initiated at current levels should be
exited as the stock approaches the $20 level, assuming it goes
in our favor.  Should CSCO breakout above $20, we'll then
reassess its position.  In the meantime, bullish traders can
enter positions around current levels early Wednesday or on
an advance above $19.  While many will scoff at the thought
of playing an option for a $1 move in the underlying, others
might recognize that the cost of carry and implied
volatility variables are extremely low in Cisco's options
currently.  Because of those two variables, a $1 move in the
underlying can produce a substantial return on a higher delta
call option.  Stops are in place just below the 10-dma at
$17.50.

BUY CALL AUG-17.5*CYQ-HW OI=61127 at $2.00 SL=1.00
BUY CALL AUG-20.0 CYQ-HD OI=88999 at $0.80 SL=0.25
BUY CALL OCT-17.5 CYQ-JW OI=22643 at $3.00 SL=1.50
BUY CALL OCT-20.0 CYQ-JD OI=34191 at $1.80 SL=1.00

Average Daily Volume = 67.0 mln



AHAA - Alpha Industries $36.00 +2.41 (+1.20 last week)

Alpha Industries designs, manufactures and markets proprietary
radio frequency, microwave frequency and millimeter wave
frequency integrated circuits and discrete semiconductors for
wireless voice and data and broadband communications. The
primary applications for the company's products include
wireless handsets, wireless infrastructure and broadband
communications equipment. AHAA also produces integrated
circuits, discrete components, electrical ceramics and ferrites
used in wireless base station equipment, cable television, cable
modems and other broadband applications, wireless local loop,
wireless personal digital assistants and wireless local area
networks.

A steady stream of cautiously positive news has us eyeing the
Wireless sector for call plays again.  With possible upturns
for Wireless bellwethers QCOM and NOK, companies that provide
components to these companies stand to benefit.  Apparently,
that fact has not gone unnoticed by the analyst community, as
AHAA received an upgrade to Strong Buy from CIBC World Markets
on July 19th.  This came one day after the company posted a loss
for the first quarter, but predicted a return to profits in Q3.
Someone apparently had advance warning that the news was going
to get better, as AHAA began a ragged rally from the $21 level
back in mid-June and has now added nearly 75% to its share
price.  It is a difficult chart to trade with all the gaps, but
there is a definite trend emerging and that trend is up.  It
looks like a momentum run in progress, especially with buying
volume more than doubling the ADV today when the rest of the
Technology sector was under selling pressure.  After the most
recent gap up, support has been building near $34, giving us an
attractive level at which to set our entry target on an intraday
pullback.  Set stops just below at $33.  Since it looks like a
momentum run, perhaps the best entry strategy will be to target
fresh entries as the stock clears its recent highs near $37 on
continued heavy volume.

BUY CALL AUG-35*GAQ-HG OI=368 at $4.00 SL=2.50
BUY CALL AUG-40 GAQ-HH OI=380 at $1.90 SL=1.00
BUY CALL AUG-45 GAQ-HI OI=224 at $0.80 SL=0.00
BUY CALL SEP-40 GAQ-IH OI= 37 at $3.60 SL=1.75

Average Daily Volume = 1.09 mln



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

No New Puts for Tuesday


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

BEAS - BEA Systems $21.18 +0.47 (-1.83 this week)

BEA Systems, Inc is a provider of e-commerce infrastructure
software that helps companies of all sizes build e-commerce
systems. For the 3 months ended 4/30/01, revenues rose 67% to
$257.2M. Net income totaled $20.6M vs. a loss of $12.4M. Revenues
reflect the continued adoption of software solutions, the addition
of new customer accounts and increased product & service
offerings.  Earnings reflect the absence of a $2.2M acquisition
charge.

Most Recent Write-Up

Proving once again that relative strength is the name of the game,
BEAS spent Tuesday hanging onto its intraday gains, stubbornly
refusing to head south with the major market averages and the
Software index (GSO.X).  BEAS managed to distance itself from the
critical $20 level, while the GSO index fell even closer to its
pivotal 180 support level.  Volume is still meandering around the
daily average, and current levels could turn out to be an
attractive entry point IF the enfeebled NASDAQ can gather its
strength and rally from its deeply oversold condition.  With BEAS'
superior relative strength, it should move nicely in concert with
any broad technology rally.  Our first target for taking profits
is $26, followed by $30 for those with a longer time horizon.  We
have plenty of time until earnings, as BEAS doesn't report until
mid-August.  Take entries as they are offered near support, but
keep stops in place at $20.

Comments

The prospects of a short-term double-bottom in BEAS may be
increasing.  That is, if Tuesday's relative strength is any
indication of short-term price action.  Bullish traders can
look for any rebound in the Nasdaq and GSO.X for a green
light to enter BEAS call positions.  A nice short-term trade
might be provided up to its 10-dma around $23.20 if the
broader markets rebound.

BUY CALL AUG-20*BUC-HD OI= 557 at $3.40 SL=1.75
BUY CALL AUG-25 BUC-HE OI=6848 at $2.20 SL=1.25
BUY CALL SEP-20 BUC-ID OI= 255 at $4.40 SL=2.75
BUY CALL SEP-25 BUC-IE OI=1189 at $2.50 SL=1.25

Average Daily Volume = 12.5 mln



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