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Daily Newsletter, Tuesday, 08/14/2001

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The Option Investor Newsletter                  Tuesday 08-14-2001
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)
******************************************************************
       8-14-2001          High      Low     Volume Advance/Decline
DJIA    10411.34 -  3.74 10478.81 10386.92  .96 bln   1900/1203	
NASDAQ   1964.68 - 17.72  1998.59  1961.53 1.21 bln   1791/1839
S&P 100   606.98 -  3.47   614.59   605.58   Totals   3691/3042
S&P 500  1186.62 -  4.56  1198.79  1184.26
RUS 2000  479.95 +  2.59   482.61   477.60
DJ TRANS 2859.16 + 23.75  2866.84  2835.46
VIX        23.01 -   .23    23.30    22.84
Put/Call Ratio      0.74
******************************************************************

AOL Investors Hang Up!

For a slow day in August there was an avalanche of news that
confused investors and stopped a rally cold. After moving up
to a high of 10478 and +63 points the Dow pulled back to
support at 10400 again. The Nasdaq bounced off resistance at
2000 and closed near the lows of the day in front of earnings
from AMAT, BEAS, NVDA, NTAP and CKFR.







Internet giant AOL was clobbered by several reports that it
would cut up to -1000 more jobs on a continued drop in advertising
revenue. The Washington Post started the rumor with Morgan Stanley
and Lehman Brothers adding their two cents as well. Lehman analyst
Holly Becker cut revenue and cash flow estimates and Morgan Stanley
followed suit. AOL dropped -3.34 to close at 39.70 after they failed
to squash the rumor. The drop impacted the advertising related
stocks including YHOO and DCLK but failed to push AMZN or EBAY
into the negative column. It did set a negative tone for the
markets.

Adding to that negative sentiment was a warning from Wal-Mart which
announced flat earnings and lowered expectations for the future.
WMT dropped to a low of $51.13 at the open but gained ground on
the better than expected retail sales. Wal-Mart tends to gain
market share in tough times and despite the warning they ended
up gaining fractionally for the day. Retailer Home Depot also
announced earnings and beat the street by two cents. Sales rose
+16% and they affirmed estimates of $.33 for this quarter.

Another drag on the Dow was MSFT which fell -1.14 after rumors
surfaced that a glitch in Intel hardware could delay the release
of the Xbox video game player. Microsoft said the device would
ship on schedule with up to 1.5 million units delivered by year
end. The key here is when will they actually ship, on schedule
or ramp up later in the year after the bugs get worked out. NVDA
also traded down -2.34 on worries that they would see delays in
delivery of the finished product. After the close NVDA beat
estimates by two cents and announced a 2:1 stock split.

AMD lost a significant client today as well as over -$1.00 to
$15.50. IBM announced that it has stopped selling desktop PCs
in the United States with AMD processors and may also drop those
chips from computers sold in Asia. They said consumers simply
prefer Intel and they were dropping the second choice as a
cost cutting measure.

You would expect banks to be trading up with expectations that
the Fed would cut rates again next Tuesday but after Citicorp
said it would cut another 3500 jobs over the next twelve months
there was a shortage of bank investors. Many fear the Fed is
so far behind the curve that banks will be hit by a flood of
bad loans and bankruptcies before times get better. Big banks
did get some relief today after the central bank in Japan
announced it was going to pump new money (as in print more)
into the economy. Since interest rates are basically zero in
Japan their options are limited to pump up their country. The
Nikkei hit a 17 year low on Monday and without some major
stimulus there are tougher times ahead. Some analysts estimate
that banks in Japan are hiding $350 billion in bad debts which
they will not write off. Japan is the second largest economy
in the world and faces serious challenges that the prime
minister has failed to address. More than once the U.S.
markets have tanked on Japan's problems.

After the close today Applied Materials announced earnings that
beat the street by two cents and on flat revenue. They also
said they expect an upturn in the first half but next quarter
could still be flat. BEAS also met estimates but rose in after
hours even after warning about revenues for the rest of the year.
They said they would still make their earnings estimates due
to higher gross margins and strong cost cutting. NTAP met
estimates of a penny but revenue was about $15 million short.
They said they would cut 200 employees in the first layoff in
NTAP history. They said future quarters would be flat based on
their visibility that while the economy has not turned up it
has bottomed. They are seeing extreme pricing pressure in
larger accounts by EMC but committed to beat them at their
own game. Looks like a war they will both lose.

Ford continued to fall to another 52-week low after UBS Warburg
cut them to a "sell" and said they may cut the dividend to pay
for the Firestone problem. Ford closed at $22.98. ENE dropped
almost -$3 to $39.80 after CEO Jeffery Skilling resigned. While
he had been CEO for only six months he had been at Enron for
over ten years. If you are a CenturyTel (CTL) shareholder you
are in for a pleasant surprise on Wednesday. AllTel made a cash
bid of $43 for the company after being turned down by the board
of CenturyTel. This was a 40% premium over the closing price.

Our economy is still being held up by the retail consumer but
only barely. The Retail Sales headline number was flat at zero
but still ahead of the expected -0.2% loss. Causing the biggest
drop in the numbers was a huge drop in gasoline prices and auto
sales. Without those two items the number would have posted a
+0.6% gain. With job losses still a factor, TYCO announced a cut
of 11,300 jobs today, consumers are being pressured to spend less.
With tax checks now being spent by the millions the August numbers
should however show an increase.

The economic news for Wednesday will be headlined by the
Industrial Production numbers. Estimates are for them to be
down slightly to -0.3% but still better than last months
-0.7% numbers. Short of a bad miss this is not a market mover
and all eyes will be on the CPI on Thursday instead. With the
Fed meeting only four trading days away the speculation will
increase on the size of the next rate cut but most traders
think it is already priced in anyway.

The Dow is almost perfectly flat for the week with only a -4
point drop total for the last two trading days. The price
magnet appears to be 10400 and with a -67 point drop off the
high of the day things did not look promising. The Nasdaq
has gained a net +8 points for the week and the lower high
trend was still in progress. That was before the days after
the bell earnings. BEAS, AMAT and NVDA gave the Nasdaq futures
a very slight bounce but the S&P futures were flat. It is too
close to call with both indexes selling off from the days highs
but finishing basically flat. The axiom, "don't short a dull
market" would definitely apply to this weeks trading. There
is no real reason to buy but nobody is really selling either.
Investors would be cautioned to wait patiently for positive signs
that a new trend is forming before venturing into the market.
That trend probably will not appear until after the Fed meeting
next Tuesday where only a 25 point cut could give investors
an upset stomach. The economy may have bottomed but we cannot
be that sure about the markets.

Enter passively, exit aggressively!

Jim Brown
Editor

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index instead?

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market updates, plays, education and daily commentaries by
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****************
MARKET SENTIMENT
****************

You are Getting Very Sleepy
By Jeffrey Canavan

Reportedly volume at the NYSE was 962 million, but it felt more
like 9.62.  It was hypnotic staring at my trading screen watching
the Dow go up 5, down 2, then up 6.  At times I was convinced
that my computer had frozen, but then minutes later something
would actually change on my screen.

The day had some promise when July retail sales came in better
than expected, and Home Depot posted a 10% increase in earnings,
but the Wal-Mart had to come out and negate all that by lowering
their guidance for the remainder of the year.  Traders then
decided to make like a turtle, and hide in their shells.  Perhaps
if we drop down to a 60-minute chart we can find some movement.

Dow Jones Industrial 60-Minute Chart



The most obvious reason for the Dows inability to move higher is
the two-month downtrend holding back any advances.  The next
reason could be that the Dow is unable to penetrate the neckline
of a head and shoulders bottom that is also a 61.8% retracement
of the August decline. Even if this is a head and shoulders
bottom, the upside target is only 250 points higher.  With the
Dow failing to follow through these past two days, it now becomes
a 50/50 proposition whether the index rises to test resistance at
10,600, or falls to test support at 10,200.  A close above 10,450
would be a promising short-term sign, and close below 10,354
would be less promising.

Nasdaq Composite 60-Minute Chart



It's a similar story for the Nasdaq.  After completing a small
head and shoulders bottom, the Nasdaq failed to retrace more than
38.2% of its August losses.  Also helping to turn back the index
was the 50-period moving average, and psychological 2000 level.
In the short-term, the Nasdaq needs to hold above 1960, and
closing above 2,000 would be even better.

With Applied Materials, BEA Systems, and Nvidia posting better
than expected earnings after the bell, the Nasdaq has a chance to
move higher tomorrow.  Whether the Nasdaq can hold any gains
before investors start to worry about what Dell says on Thursday
will be the test.

===

Market Volatility

VIX   23.01
VXN   48.44

===

          Put/Call Ratio  Call Volume   Put Volume
Total           .74        520,181       383,809
Equity Only     .66        436,455       287,898
OEX            1.01         20,540        20,690
QQQ             .56         45,406        25,541

===

Bullish Percent Data
The Nasdaq-100 has reversed into bear confirmed status.

           Current   Change   Status
NYSE          34       -      Bear Confirmed
NASDAQ-100    42      -8      Bear Confirmed
DOW           36       -      Bull Alert
S&P 500       54       -      Bull Confirmed

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

===

 5-Day Arms Index  1.19
10-Day Arms Index  1.19
21-Day Arms Index  1.14
55-Day Arms Index  1.10

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      1899           1206
NASDAQ    1789           1841

        New Highs      New Lows
NYSE      175             28
NASDAQ     95             82

        Volume
NYSE      962
NASDAQ   1228

===

Advisory Sentiment

Bullish  Bearish  Correction   Net   Change
  46.0%    27.0%     27.0%    19.0%   +0.4%

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: 08/07/01
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
The net bearish position of commercial traders increased slightly,
but that was the result of more long positions being dumped than
short positions, and not a significant amount of new shorts being
added.  The % of Open Interest for small traders is at bullish
levels similar to February and March.

Commercials   Long      Short      Net     % Of OI
7/24/01      317,241   392,146   (74,905)   (10.56%)
7/31/01      335,532   409,352   (73,820)   ( 9.91%)
8/07/01      331,881   406,210   (74,329)   (10.07%)


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
7/24/01      141,372     61,665   79,717     39.26%
7/31/01      129,648     54,552   75,096     40.77%
8/07/01      128,454     53,191   75,263     41.43%

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

NASDAQ-100
Commercial traders added a few long positions and dropped a few
shorts, but the most encouraging sign is the fact that small
traders are starting to give up hope.

Commercials   Long      Short      Net     % of OI
7/24/01       27,396     39,198   (11,802)  (17.72%)
7/31/01       28,009     39,613   (11,604)  (17.16%)
8/07/01       28,867     38,956   (10,089)  (14.88%)

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
7/24/01       12,170     7,744    4,426      22.23%
7/31/01       11,216     8,938    2,278      11.30%
8/07/01        9,715     8,098    1,617       9.08%

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
Commercials continue to get slightly more bullish, small traders
continue to get more bearish.

Commercials   Long      Short      Net     % of OI
7/24/01       16,080    12,812    3,268     11.3%
7/31/01       17,748    13,669    4,079     13.0%
8/07/01       18,644    13,733    4,911     15.2%

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
7/24/01        5,599     9,526    (3,927)   (25.96%)
7/31/01        5,049     9,079    (4,030)   (28.52%)
8/07/01        4,841     9,909    (5,068)   (34.36%)

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:
*****

SUNW $15.89 -0.48 (-0.32) The market's weakness weighed heavily
on SUNW early this week.  So heavily that the sun set on our
stop at $16 Tuesday.  As such, we're dropping coverage on the
play this evening.  There's a chance that SUNW pops higher
Wednesday morning off of the NTAP report after the bell, which
would allow for an exit point.

ADSK $36.40 -0.61 (+0.32) Things were looking good for our ADSK
play as the stock gradually advanced from Friday's lows.  That
was until the final hour on Tuesday when sellers took control,
wiping out nearly all the gains from the remainder of the week.
Our stop is still intact at $35.50, but it looks like the
momentum is gone.  With earnings coming out on Thursday, the
smart move is to cut bait now and look for a better play.


PUTS:
*****

SKX $22.35 +2.09 (+2.65) The retail numbers reported Tuesday
provided the catalyst to scare the shorts, who leaned on SKX
last week, into covering their bearish bets.  The stock closed
above our $21 stop, resulting in a segue to the drop list.
There's a possibility for a pullback in the retail sector,
which would allow for exits if SKX's ramp didn't get bearish
traders out Tuesday.  And it's also possible that its pop
Tuesday may ultimately prove to be a good intermediate-term
entry point if the consumer weakens.


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

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market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
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The Option Investor Newsletter                  Tuesday 08-14-2001
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/9610_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
********************

 BRCM $44.14 -1.23 (+1.59) BRCM traded solidly off of the Goldman
upgrade Monday, but unless traders were in the play ahead of
Monday's gap higher, gaining entry into the play may have been
difficult.  Conversely, the stock's pop up to the $46 level
Tuesday may have allowed those in at lower levels a quick exit
point.  If there's one thing we cannot stress enough, it's that
the current market environment begs nimbleness and quick timing,
especially in the tech sector.  For those unable to monitor
stocks intraday, it's probably best to stay on the sidelines and
preserve capital for "easier times" in tech.  But for those
who have the ability to actively trade BRCM, a bounce from the
$44 level Wednesday may offer a short-term entry point.  Any
additional weakness beyond that level should see BRCM revisit
the $42 level, which may also serve as an entry point.  In either
case, strict risk management is required.

MRK $70.00 +0.35 (+0.97) We're pleased with the progress in MRK
so far this week.  Albeit slow, it's progress nonetheless.  MRK
represents a perfect example of a low volatility play AWAY from
tech that is working and will continue working as long as the
dollar continues falling, barring any blow-up within the Drug
Sector (DRG.X).  Speaking of the DRG, it continues working higher
and next faces resistance at 400 - note its intraday high
Tuesday (399.92).  A breakout above 400 in the DRG should equate
to MRK advancing above the $70 level, where it stopped Tuesday.
Above $70, there's nothing but open space until the $74 level,
which is a result of MRK's gap down in late June, which was
partially due to the strong dollar...It's quite probable that
MRK will pause before filling its gap, but bullish traders can
use $74 as an intermediate price target in this play if they
choose to enter around current levels.  Conversely, for those who
entered on MRK's last dip down around the $67 level, any strength
above $70 might offer an exit point.  Discipline is not a
four-letter word, and it may dictate taking a little of the
table in this play, depending upon risk tolerance and timeframe,
and of course entry point.

QQQ $40.60 -0.50 (+0.32) To reiterate, this play is ALL about risk
versus reward.  Here's the skinny.  Despite the QQQs slipping
Tuesday, they managed to settle right on their 61.8 percent
retracement level at $40.60.  Our stop is in place at $39.30, or
about a $1.30 from current levels.  While our upside, short-term
target is between $42.75 and $45.  Finally, daily stochastics have
just recently crossed over from oversold territory.  So the signs
are lined up, and it's just a matter of execution from this point.
Traders in this play will do well to keep close tabs on the
Software Sector (GSO.X) and the Semiconductor Sector (SOX.X) - the
two are leading the QQQs around like a dog, except this dog
doesn't have fleas.  Finally, in-the-money contracts make the
most sense currently due to their higher deltas and slower
premium erosion as opposed to more reactive at-the-money contracts,
which should make managing risk a little easier.

ELNT $36.28 -0.43 (-0.34) All things considered, ELNT's still
trading relatively well and its progress appeared to be halted by
the pullback in the SOX Tuesday.  Although, we would've like to
see the stock participate a little more during Monday's advance
in chip issues.  Furthermore, bullish traders should note that
ELNT's simple 10-dma is currently at $38.43, dually noting that
its relative high around $41 two weeks ago was, at the time, at
the 200-dma.  Therefore, it might be safe to assume that if ELNT
clears its 200-dma, then the stock might get a nice pop to test
its highs around $41.  As such, bullish traders might practice
patience and wait for an advance in the SOX above the 610 level
before getting long ELNT calls.

ABT $52.29 -0.26 (+0.01) It's hard to find anything in this
rangebound market with a decent uptrend, but the Pharmaceutical
index (DRG.X) is looking pretty good as it continues to post
higher lows and weaken the resistance at $400.  ABT is taking
advantage of this sector strength, walking higher on its own
ascending trendline, currently resting at $52.  Combined with
support from the 20-dma (currently $52.06) and daily Stochastics
once again turning up without descending into oversold
territory, ABT is looking solid.  Target bounces from the $52
area for fresh entries and keep those stops in place at $51.50.
Alternatively, wait for the bulls to push through the $53 level
before taking a position.  Keep an eye on the $54 resistance
level, as this will be the next place the bears try to flex
their muscles.

IMPH $45.33 +0.73 (+0.74) After Monday's strong rally in the
Biotechnology index (BTK.X), investors seemed to take the day
off to catch their breath.  But that wasn't the case for shares
of IMPH, which continued their advance right along the short-term
ascending trendline, currently at $45.  Support materialized last
week at the 30-dma near $43.50, while the 20-dma (currently
$45.44) is creating resistance.  Target new positions on an
intraday dip to $45 or the longer-term trendline, which rests at
$43.50.  Our stop is still resting at $43 as a drop below that
level would present a violation of the current up trend.  More
cautious investors will want to wait for the bulls to push IMPH
through resistance at $46 before taking a position.

IBM $106.20 +0.34 (+1.25) Back above the 200-dma (now at
$104.59), IBM is gradually inching higher again with the
assistance of an ascending Stochastics oscillator.  The
rangebound market action has been keeping a lid on the stock's
advance, as has the weak volume.  But it looks like things are
improving as IBM has now scaled the 20-dma ($105.65) and is just
below the 30-dma ($106.24).  A renewed bounce from the $103
support level is buyable, but make sure volume is solid before
taking a position.  Resistance is looming at $107 and then $109,
the latter of which might mark a prudent location to take some
short-term profits before the bulls and bears begin the battle
over keeping the stock in the current $102-109 range or pushing
it back into the $111-118 range from May and June.

NTIQ $38.85 +1.55 (+2.45) Higher highs and higher lows make for
an attractive bullish play and that is an apt description of
NTIQ.  On the most recent dip, the stock found support at $33.50,
right at the 20-dma before resuming its uptrend.  With daily
Stochastics once again on the rise, the stock is advancing again
and volume is strong (nearly double the ADV on Tuesday).  NTIQ
is bumping into resistance at $39 but the strengthening buying
volume indicates the bulls are getting close to breaking through
this level.  A rally through this level can be used for fresh
entries.  Just keep an eye on the $$40.50 level, where the stock
will likely encounter more resistance.  Intraday dips are also
buyable, with $37, $35 and $34 offering possible entry points.
Move stops up to $34.

WAG $36.09 -0.63 (-1.23) After two days of heading lower on
solid volume, our WAG momentum play is looking a little green
around the gills.  While a little profit taking would be
expected after the stock's recent rise, the drop has come on
strong volume and has been large enough to put the uptrend at
risk.  The ascending trendline is now resting at $35, also the
site of historical support and our stop.  Look for possible
support at $36, and target new positions on any volume-backed
bounce that occurs above our stop.  Recall that we have
formidable resistance at $38, and conservative players will
want to wait for WAG to clear this level before playing.


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

CHKP $40.16 -0.77 (-0.96) CHKP's four month pattern of rolling
lower highs continues to unfold so far this week.  A rollover
near between $42.50 and $43 would mark the fifth observation at
the stock's descending trend line and may offer a solid entry
point into the play in terms of risk versus reward.  The
Software sector (GSO.X) may get a pop off of the BEAS earnings
after the bell Tuesday, but that much remains to be seen.  However,
if the GSO does bounce higher, look for CHKP to stall around
the aforementioned levels.  In terms of momentum entry points,
a near-term bottom in the stock has formed around $38.50.  The
momentum crowd can use a breakdown below that level to enter
new put positions, with a downside target of $35, but only after
confirming weakness in the COMPX and GSO!

PSFT $40.61 +0.30 (+1.77) Head fakes and bear traps are things of
frustration and discouragement.  We're referring to PSFT's dip
below the pivotal $38.25 level Monday.  Just enough to trap a few
bears before rebounding.  Fortunately, PSFT rolled over near its
one-week descending trend around the $41.50 level during Tuesday's
session.  Its rollover marked yet another lower high - the last
was at $42 - in PSFT's trend, so we'd certainly likely to see
follow-through in the form of price weakness Wednesday.  In terms
of execution, bearish traders can turn to the $40 level, or lower
again at $38.25.  Should PSFT retest $38.25 in the short-term, it
should prove to be a weaker level following its "violation" in
Monday's session.

GMST $37.31 +0.22 (+1.36) Rule #2: Don't hold over an earnings
announcement.  GMST reported numbers Monday evening, after we
picked up bearish coverage on the play over the weekend.  It was
a combination of misinformation and error, and there's no way
around that.  We sincerely apologize.  But since we're in play,
and the stock rolled over Tuesday, we thought, "Hey, entry point."
Plus, there's no sense in focusing on the past, it's the future
that we're concerned with.  And on that note, bearish traders
interested in this play should take a close look at GMST if/when
it approaches $38.50.  That level served as a veritable lid on
shares Tuesday, and may continue to do so.  And a breakdown
below $35 wouldn't be a bad thing for the bears.

AIG $80.31 -0.64 (-1.37) As the broad markets continued to
meander in their ever-tightening range, AIG finally broke below
the $81 level, keeping the Insurance index (IUX.X) under
pressure.  Sure the IUX managed a fractional gain on Tuesday,
but there is no denying that the downtrend is still in effect,
which should keep any eager bulls at bay.  AIG gapped lower at
the open on Tuesday and deteriorated right up to the closing
bell, coming to rest just fractionally above the $80 support
level.  Adding to the bearish tone was volume coming in 50%
above the ADV.  The current weakness allows us to ratchet our
stop down to $82 as we continue to ride AIG lower.  Target new
entries either on a weak intraday rally that stalls out below
our stop or on a volume-backed move below $80.

CERN $51.70 -0.51 (-0.44) After failing to crest the $56
resistance level in the middle of last week, CERN has been
weakening in the face of a directionless market.  While the
bulls tried to hold the line at the $52 support level.  That
level failed on Tuesday as the bearish pressure increased.
CERN has now broken below the 20-dma (currently $52.36) as the
daily Stochastics oscillator has continued its free-fall.  While
there is some support near $50, continued selling pressure will
likely drive the stock down to $48, just above the 200-dma
before any significant buying interest materializes.  Resistance
at $54 is looking stronger by the day, and weak bounces below
this level look attractive for new positions.  If you'd rather
wait for confirmation before putting your capital at risk, wait
for a drop below $51 before playing.


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

PG - Procter & Gamble $72.50 +0.38 (+1.80 this week)

Procter & Gamble 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.

In conjunction with its last earnings release, P&G released
the following: "Revenues reflect unfavorable currency effects."
Well, that trend is reversing.  The U.S. dollar has been
weakening recently, especially relative to the euro.  This
should positively impact P & G's revenues in the near-future,
and that much is currently being discounted into its share
price.  Not only is the dollar premise in play with P & G,
but the stock may also be benefiting from a flight to quality,
as capital flows to "easier" places of the equity market and
retreats from the "difficult" tech complex.  However, the
main driver here is the dollar.  Traders can monitor the
price action of the dollar throughout the day using QCharts
with the following symbol: DX01U.  Not by coincidence, the
dollar was lower Tuesday while PG - among other multinationals
(Read: MRK) - was higher.  In terms of entry points, bullish
traders can establish new positions at current levels if
the Dow is advancing and the dollar is declining.  Our
short-term target to the upside is $75, therefore it's probably
more prudent to play PG with in-the-money contracts - it's SEP
70's have about $1.30 of "juice."  Our stop is initially in
place at $70.50, but individual traders are better suited to
determine their own unique risk tolerance, and hence, their
own stop.

BUY CALL SEP-70*PG-IN OI= 864 at $3.80 SL=2.50
BUY CALL SEP-75 PG-IO OI=3760 at $1.10 SL=0.50
BUY CALL OCT-70 PG-JN OI=8452 at $4.70 SL=2.75
BUY CALL OCT-75 PG-JO OI=7434 at $2.00 SL=1.25

Average Daily Volume = 2.82 mln



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

VRTS - Veritas Software $37.44 -1.60 (-1.22 this week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

Storage stocks can't seem to get a break lately with bearish
news continuing to hit the sector.  Industry leader EMC has
dropped to new lows, NTAP announced earnings inline with
estimates after the close tonight, and our new play VRTS is
looking weak too.  After a brief recovery following a large drop
on the heels of its own inline earnings report a month ago, VRTS
ran into impenetrable resistance at the $44 level and has been
in descent mode for the past week.  ABN Amro didn't help the
bulls' case yesterday when it lowered its rating on the stock
from Add to Hold and stated their expectation for VRTS to fall
to the $26-30 range.  Stochastics continue to decline and
reaching oversold territory today did nothing to stimulate any
buying activity.  The stock is now resting just above support
at $36 and looks like it will take out that level in the days
ahead.  Any short-term strength on the heels of the NTAP
earnings report could allow for attractive entries on a rollover
from the $40-41 resistance level, reinforced by the declining
20-dma (currently $40.35).  Accordingly, we are initially
placing our stop at $41.  Alternatively, target new positions
as VRTS drops through the $36 support level.

BUY PUT SEP-40*VIV-UH OI=2265 at $5.50 SL=3.50
BUY PUT SEP-35 VIV-UG OI=4375 at $2.95 SL=1.50

Average Daily Volume = 12.0 mln



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

NTIQ - NetIQ Corp. $38.85 +1.55 (+2.45 this week)

NetIQ Corporation develops application management software that
enables businesses to optimize the performance and availability
of their Windows NT-based systems and applications. For the 9
months ended 3/31/01, revenue totaled $108.3M, up from $27.6M.
Net loss totaled $337.1M vs. an income of $4.1M. Results reflect
continued strong demand for the Company's products, offset by
increased amortization of goodwill and intangibles.

Most Recent Write-Up

Higher highs and higher lows make for an attractive bullish play
and that is an apt description of NTIQ.  On the most recent dip,
the stock found support at $33.50, right at the 20-dma before
resuming its uptrend.  With daily Stochastics once again on the
rise, the stock is advancing again and volume is strong (nearly
double the ADV on Tuesday).  NTIQ is bumping into resistance at
$39 but the strengthening buying volume indicates the bulls are
getting close to breaking through this level.  A rally through
this level can be used for fresh entries.  Just keep an eye on
the $$40.50 level, where the stock will likely encounter more
resistance.  Intraday dips are also buyable, with $37, $35 and
$34 offering possible entry points.  Move stops up to $34.

Comments

NTIQ's relative strength was most impressive Tuesday.  We're
looking for the stock to follow-through Wednesday.  With some
inklings of favorable news in the after hours, the Nasdaq may
be set up for a short-term trading rally, which would bode well
for NTIQ.  Look for an advance above Tuesday's intraday high at
$39.05.

BUY CALL SEP-35 CQT-IG OI= 42 at $6.70 SL=4.50
BUY CALL SEP-40*CQT-IH OI=328 at $3.80 SL=2.50
BUY CALL OCT-35 CQT-JG OI=207 at $8.20 SL=5.50
BUY CALL OCT-40 CQT-JH OI= 85 at $5.80 SL=4.00

Average Daily Volume = 1.00 mln



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