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Daily Newsletter, Thursday, 10/11/2001

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The Option Investor Newsletter                Thursday 10-11-2001
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)
************************************************************
       10-11-2001           High     Low     Volume Advance/Decline
DJIA     9410.45 +169.59  9432.04  9242.63  1.66 bln   1982/1128
NASDAQ   1701.47 + 75.21  1701.48  1649.55  2.47 bln   2448/1194
S&P 100   563.39 +  8.63   564.78   554.76   Totals    4430/2322
S&P 500  1097.43 + 16.44  1099.16  1080.99
RUS 2000  431.04 +  9.38   433.10   421.66
DJ TRANS 2314.80 + 86.19  2318.11  2228.65
VIX        32.64 -  0.82    33.18    31.70
VXN        61.65 -  4.54    66.36    61.11
TRIN         .63
Put/Call Ratio       .62
*************************************************************

Bulls Bomb Bears Into Submission!

Bears went to bed Wednesday night scratching their heads about
the unexplained rally. They woke up Thursday to rumors that Osama
Bin Laden and the Taliban leaders had been captured or killed in
very heavy bombing raids overnight. The bear's worst nightmare had
appeared to come to pass. The markets gapped up on very heavy short
covering before the rumors were denied. The Nasdaq closed up a
whopping +75 points and at the exact high of the day. Many bears
simply called it quits and decided to not fight the tape. Rumors
also abounded that several hedge funds had tried to short the rally
over the last two days and got caught flat footed with huge short
positions and were scrambling to cover all day.





The "rally for no reason" was gaining speed at the close as some
tech stocks were actually suggesting that business was getting better.
Stocks that had been beaten flat like Brocade (nasdaq:BRCD) and
Silicon Storage Tech (nasdaq:SSTI) saw huge gains after positive
comments. BRCD CEO, Greg Reyes, said he would be surprised if
the company did not meet estimates for the 4Q. Not especially a
bullish comment but good enough for a +20% jump in the stock price.
SSTI said on Wednesday that they would beat estimates and CSFB
increased the forecast from four cents to eleven cents for 2001.
Almost a +200% jump! SSTI gained over +30% on the news.

Redback (nasdaq:RBAK) soared +50% after it said that their orders
for the fourth quarter would increase over the third quarter. They
also need to sell less to make a profit after their recent
restructuring. Their proforma results beat analyst's estimates.

Chip equipment stocks roared out of their mid-week slump and the
SOX.X posted almost an +11% gain. NVLS, TER, AMAT, KLAC, TXN,
KLIC and others posted huge gains even after the sector was
downgraded by JP Morgan on Wednesday. Even Intel gained ground
and padded the $5 gain over the last two weeks.

Earnings reports after the close on Thursday gave bears an even
worse case of indigestion. Juniper (nasdaq:JNPR) jumped to $21.80
in after hours trading after closing Wednesday at $15. They beat
estimates by three cents and said their business had not been
impacted by the WTC attack. Actually they felt business had
increased due to the increased effort to provide backup networks.
The +40% gain and positive comments will power networkers on
Friday as well. Sonus Networks, a maker of communication equipment,
posted a loss of -.06 cents as expected but posted much higher
sales that increased almost +160% over last year.

Network Associates, (Nasdaq:NETA), beat analyst's estimates with
help from three different computer viruses in the last quarter.
Sales were well above expectations at $209 million and they are
predicting earnings of 7-10 cents in the fourth quarter. DCLK
also beat estimates slightly on revenue of $92 million and promised
to show a profit again in 2002 after a very bad quarter. They
actually raised guidance for 4Q.

In addition to positive earnings reports the economic picture
was also a surprise. The new jobless claims were reported at
468,000 which was significantly less than expected and -67,000
lower than the prior week. While this excited traders on the
surface the drop was caused by a statistical quirk from a
seasonal adjustment and not an improvement in the actual labor
market. There are some analysts that expect a jump of as much
as +200,000 in the next couple weeks as announced layoffs take
effect. Chain store sales fell sharply as consumers stayed home
and watched news reports on TV. Discount stores and drug stores
were the only standouts with apparel and footwear stores losing
the most sales. The year over year gain of only +0.8% was
sharply down from the August gain of +3.6%. The holiday is fast
approaching and the current stimulus being discussed in Washington
includes more rebates in some form for lower income consumers.

The earnings reports after the close today are sure to produce
a bounce at the open as long as President Bush does not say
something in his national press conference tonight that spoils
the mood. The FBI issued an "imminent warning of impending
attacks" tonight and the futures appeared to ignore it. As I
mentioned on Tuesday night, the apparent success of the air
war coupled with vivid pictures of bomb craters and no new
terrorist attacks at home, would lull the average investor
back into a spending mood. Spend they did! The Nasdaq has soared
+130 points from that brush with support and the Dow has gained
+360 points in two days. On Tuesday the Dow bounced twice off 9000
and the close today at 9406 seems light years from those levels.

The obvious question, is this a bear trap rally or the real thing?
I started the article with the term "unexplained rally" but is
it really? Numerous tech companies have reported better than
expected earnings and raised guidance for the future. Like
something from the twilight zone the tech world has rallied on
the news just when the obituary writers were sharpening their
pencils for the death of tech. Juniper beat earnings and raised
quidance. Chips stocks shook off multiple downgrades and rallied
to levels not seen since the attack. The heartbeat of tech, chips,
and the lifeblood of communications, networking, have exploded
and investors are buying them with reckless abandon. Or should
I say shorts are covering frantically? Volume was good today
and advancers beat decliners 2:1. That can't be all bad.

The VIX has fallen back to pre-attack levels and by anybody's
measurement the markets are overbought for the short term. I
would strongly advise anybody not to open any new call positions
on Friday morning. Any bounce at the open will be a knee jerk
reaction to the after hours earning announcements and more
short covering by those who felt Juniper would miss earnings
and whine about the disaster. Once that is over there is a
significant chance that there will be profit taking ahead of
the weekend. With more attacks possible and uncertainty about
the targets, no institutional investor wants to wake up on
Monday morning to a repeat of the September 17th drop. If you
went long last week at 9050/1550 as I suggested then you should
be very profitable. I would suggest setting stops on those
positions after the open and then hope for perfectly boring day.

Definitely, enter passively, exit aggressively!

Jim Brown
Editor


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

Around The Corner
By Eric Utley

I could smell it Tuesday.  And I hope readers caught a whiff
of it, too.  I set forth the notion Tuesday that the market
was ready to make a big move in one direction or another based
upon several factors.

Through Tuesday's session, "inside days" were ubiquitous
across the market.  The following chart of General Electric
(NYSE:GE) was used to display its two consecutive "inside days."
Recall that an "inside day" is defined quite simply as a day
in which a given stock/market's range is less than the previous
day's range.  It's simply a way to detect a forthcoming move by
way of consolidation.



Fast forward to Thursday's close, and GE's chart looks a little
different.  The stock broke above its string of sequentially
lower highs in Wednesday's session, ultimately leading to its
gap higher Thursday morning, which was good for another $1.  In
this case, GE could've been bought in a reactionary fashion
once it broke out above its series of lower highs Wednesday
and then sold for a profit sometime Thursday.



Before I go on, let me just say that I'm not trying to toot my
own horn here.  I'm secure enough with myself that I don't need
to do that.  I'm just trying to teach readers how to make money,
thus my reason for reviewing the GE set-up from Tuesday.

Anyway, another factor I alluded to Tuesday was the pivot point
set-up of the Bullish Percent indicator, specifically the Dow
Jones Industrial Average ($BPINDU) and Nasdaq-100 ($BPNDX)
charts.  I'd been addressing this indicator for the past week,
and going into Thursday's session, it was again set-up for
giving a Bull Confirmed buy signal.

The INDU and NDX gave that Bull Confirmed signal Thursday as
indicated by the two charts below.  The Bull Confirmed buy
signal is generated when the current column of 'Xs' takes
out the most recent previous column of 'Xs.'





So here we are, in Bull Confirmed mode in the INDU and NDX.
So what does that mean?  Well, historically, when a given
market's bullish percent goes into Bull Confirmed mode, then
traders adopting a bullish bias have typically done well.
I would be even more bullish if the NYSE Composite ($BPNYSE)
and S&P 500 ($BPSPX) bullish percent readings were in Bull
Confirmed mode, but they're not.  But since the INDU and NDX
are in Bull Confirmed mode, I think that adopting a bullish
short-term bias in INDU and NDX names makes sense.  That
doesn't mean that traders can go out and buy anything Dow-
and/or tech-related and make money.  What it does mean,
however, is that risk over the short-term is weighted to the
upside in the INDU and NDX.  In other words, I'm bullish on
the INDU and NDX over the short-term.

Finally, did anyone notice the massive amount of puts trading
in the QQQs (AMEX:QQQ) Thursday?  The last time the put/call
ratio in the QQQs traded north of 1.0 was on September 27.
The NDX gained about 24 points on September 28...

Jumpin' Juniper (NASDAQ:JNPR), I wonder what the buyers of
those puts will be doing Friday?

(Point & Figure Charts created using www.StockCharts.com.)

-----------------------------------------------------------------

Market Volatility

VIX   32.64
VXN   61.65

-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume
Total          0.62      1,102,480       679,626
Equity Only    0.52        924,305       482,305
OEX            1.07         17,408        19,567
QQQ            1.27         84,652       107,615

-----------------------------------------------------------------

Bullish Percent Data


           Current   Change   Status
NYSE          27      + 2     Bull Alert
NASDAQ-100    57      +12     Bull Confirmed
DOW           40      + 3     Bull Confirmed
S&P 500       44      + 6     Bull Alert
S&P 100       39      + 8     Bull Alert

Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  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  0.91
10-Day Arms Index  0.91
21-Day Arms Index  0.96
55-Day Arms Index  1.23

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      1982           1128
NASDAQ    2448           1194

        New Highs      New Lows
NYSE       77             26
NASDAQ     58             58

        Volume (in millions)
NYSE     1,666
NASDAQ   2,475

-----------------------------------------------------------------

Commitments Of Traders Report: 10/02/01

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

Commercials   Long      Short      Net     % Of OI
09/18/01      406,387   471,823   (65,436)   (7.45%)
09/25/01      357,873   407,036   (49,163)   (6.43%)
10/02/01      365,200   408,567   (43,367)   (5.56%)

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
09/18/01      172,988    100,531   72,457     26.49%0
09/25/01      122,613     71,721   50,892     26.19%
10/02/01      124,249     73,882   50,367     25.38%

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

NASDAQ-100

Commercials   Long      Short      Net     % of OI
09/18/01       35,497     45,731   (10,234)  (12.60%)
09/25/01       26,761     36,812   (10,051)  (15.81%)
10/02/01       26,703     37,669   (10,966)  (17.02%)

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
09/18/01       22,876    21,702    1,174       2.63%
09/25/01       10,699     6,580    4,119      23.84%
10/02/01       10,918     6,804    4,114      23.16%

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   Long      Short      Net     % of OI
09/18/01       28,425    15,077   13,348     30.7%
09/25/01       20,013     7,806   12,207     43.9%
10/02/01       22,755    10,124   12,631     38.3%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 13,348  - 9/18/01

Small Traders  Long      Short     Net     % of OI
09/18/01        7,335    15,044    (7,709)   (34.45%)
09/25/01        4,530    12,621    (8,091)   (47.18%)
10/02/01        4,731    11,868    (7,137)   (43.00%)

Most bearish reading of the year:  (8,091) - 9/25/01*
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:
*****

No Dropped Calls for Thursday.


PUTS:
*****

CHKP $31.00 +4.02 (+4.19) The shorts threw in the towel
Thursday in CHKP as evidenced by the stock's nearly 15% rally.
In light of CHKP's big ramp higher, we're obviously dropping
coverage.  Hopefully those with open positions prior to
Thursday's action had the appropriate risk management measures
in place.  If not, look for any profit taking early Friday to
exit plays.


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The Option Investor Newsletter                 Thursday 10-11-2001
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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* ZERO minimum deposit required to open an account
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Note: Options involve risk. Risk disclosure:
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**************************************************************


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

ATK $86.80 -3.17 (-2.80) ATK pulled back on further profit
taking Thursday.  The broader defense sector actually pulled
back in concert, with weakness in shares such as NOC, GD, LMT,
and LLL.  The weakness came in spite of continue military
action.  We're aware that ATK settled just below our stop at
the $87 level Thursday, but decided to maintain coverage
because we've been patiently waiting for a pullback to gain
another entry point.  And it looks like that time has arrived.
Bullish traders looking for an entry point can look for a
rebound in the aforementioned defense issues.  If the group is
moving higher, look for an entry in ATK around current levels,
but make sure to use a tight stop with any new positions
around current levels.

MO $51.02 -0.29 (+0.86) MO pulled back a bit Thursday on what
appeared to be a rotation out of defensive plays into more
aggressive growth areas such as technology.  The pullback felt
routine and MO actually climbed higher into the close.  In
fact, its dip down to the $50.50 level may have offered those
waiting for an entry point an opportunity to pull the trigger.
Future pullbacks to that area may serve as entry points.  For
those with open positions, future strength above the $52 level
should serve as a favorable exit point.  The company announces
earnings next week so we'll have another few days to trade the
stock.

ENZN $61.02 +1.47 (+4.62) ENZN pushed past the $60 level
Thursday with its gap higher off the Genentech earnings
report.  Unfortunately the gap higher probably didn't allow for
a favorable entry into new plays.  But the strength Thursday
should've allowed traders with open positions an opportunity
to book gains.  After the gap higher, ENZN spent the better
part of Thursday consolidating around the $61 level.  The stock
is very technically strong and traders looking for momentum
entries can look for a breakout above the $62 level.  Just make
certain that the BTK.X is trading strongly before entering
into strength above current levels.  The stock has some pretty
solid resistance around the $65 level so bullish traders might
turn to that level as a possible short term exit point.

IP $38.20 +1.39 (+2.10) IP has traded fabulously over the past
two days.  The stock's steady climb higher has allowed for
several entry opportunities as well as exit points.  The stock
is now back above its pre-attack levels and looking strong.
However, a little profit taking may be in order at current
levels given IP's run over the past week.  Bullish traders with
open positions at much lower levels might use IP's current
strength to book some gains.  Those looking for new positions
are probably better off waiting for a pullback.  The first
level of support to turn to for a possible entry is at $37,
below the $36 level may offer some entry opportunities.

PLCM $32.40 -0.53 (+3.53) PLCM rocketed higher Thursday
morning.  That strength may have allowed traders to book some
quick gains in the play.  Hopefully it did because PLCM pulled
back through the remainder of Thursday's trading.  The stock
acted like it was pulling back on profit taking, so we're not
too upset with its weakness today.  However, we'll monitor its
behavior closely Friday to see if there's a trend of weakness
developing.  The company reports earnings next Wednesday so
we only have a few days left to cover this play.  New entries
can be had on a pullback to the $32 level.  The stock's pattern
of higher lows has been in place for the past week, and bullish
traders will want to see that pattern hold before entering new
plays on a pullback.  If the accompanying pattern of higher
highs remains intact, PLCM should next spike up to around the
$35.50 to $36 area, which would be a good site to take profits
ahead of next Wednesday.

SEPR $4.38 +1.64 (+4.11) SEPR traded very well Thursday on the
heels of favorable earnings news from the biotech sector.
Although, you had to be quick to gain entry into the play
Thursday morning because the stock screamed higher in the first
five minutes of trading and sort of flat-lined for the rest of
the day.  The stock traded as high as the $43 early Thursday.
Between the $43 and $45 levels exists significant resistance,
including the 200-dma currently at $43.70.  As such, the stock
may spend some time consolidating around current levels before
making a run on its resistance.  Bullish traders with open
positions should consider locking in some gains if SEPR doesn't
follow-through into Friday's session.  Of course if the BTK.X
continues plowing higher, SEPR may be able to breakthrough its
immediate overhead resistance.  But a little profit taking on
the part of traders with open positions may not be a bad idea.

GE $38.94 +1.03 (+1.49) Following GE's breakout Wednesday, the
stock tacked on another $1 in Thursday's session.  But if you
weren't in the play ahead of Thursday's strength you probably
weren't able to gain a real solid entry due to the gap higher.
However, GE's run up to roughly $39.50 may have allowed those
who entered on Wednesday's breakout an opportunity to book
some gains.  From current levels, the stock may do some
consolidation work, which could take it back down to the $38
level from which entries could be had.  On the other hand, GE
could continue advancing from its current levels, in which case
a breakout above the $39.50 level may offer momentum-based
entry points.  In either case, take a cue from the S&P 500
when planning an entry into new positions.

PPG $50.68 +2.38 (+3.18) It was a beautiful day for PPG
Thursday.  It's hard to complain about nearly 5% in this
perceived "slow mover."  PPG traded higher to fill its gap,
which also coincided with the current level of its 200-dma at
$51.  Not by surprise, PPG's day high was $51.  With the 200-dma
overhead and the gap filled, traders should obviously be thinking
about booking gains, especially those who entered on the stock's
dip down to its 10-dma at $45.80 on Tuesday.  With so much
resistance overhead, we'd feel better about entering new plays
on a pullback from current levels.  Support down at $48 should
provide a good base to bounce from during any future pullbacks.
The company announces earnings next Thursday, so we've only a
few days remaining in this play.

TEVA $67.60 +0.70 (+2.74) A dollar a day keeps the losses away.
Okay, that might be kind of hokey, but it sure feels like TEVA's
been climbing by about $1 a day for the past week.  The stock,
with little effort, climbed higher in Thursday's session, well
above its pre-attack gap.  We've captured about $4 in this play
since its inception, so a little profit taking on the part of
those with open positions might be a prudent idea up around
current levels.  Then again, TEVA could make its way up to the
$70 level if the AMEX Biotechnology Sector Index (BTK.X)
continues working higher.  Let your risk tolerance and strategy
determine whether or not profits should be taken.  As for new
entries, momentum-based entry points can be found on a breakout
above the $68 level if the BTK.X is advancing, but momentum
strategies at current levels offer a less favorable risk/reward
scenario.  A better risk/reward scenario can be found on a
pullback down to $67, or possibly lower around $66.


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


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

JPM $33.42 +0.03 (+0.01) JPM didn't trade well Thursday.  The
stock tacked on a miniscule 3 cents, while the Dow added
almost 2 percent.  The relative weakness of JPM hints towards
future downside if the broader markets weaken in the coming
days.  But we do only have a few days remaining for this play
as the company reports next Wednesday.  As such, plan your
trades around the short time period remaining in the play.
Also, keep a close eye on the Bank Sector Index (BKX.X) in
the coming days when gaming JPM.  Any weakness in the BKX.X
should result in JPM out performing to the downside.  If th
BKX.X and S&P 500 weaken early Friday, bearish traders might
look for entries in JPM around its current levels.  In
addition, a breakdown below $33 may offer more confirmation
in the form of weakness and another entry point possibility.

CIMA $60.80 +1.29 (+1.24) CIMA continues to measurably under
perform the AMEX Biotechnology Sector Index (BTK.X).  The stock
has done that much for the past two days, which has us thinking
that the stock has downside potential if its sector shows any
signs of weakness in the coming days.  At this point, we think
that the broader buying in the biotechnology sector is propping
CIMA up.  But as soon as that buying subsides, we think that
CIMA is due for some downside.  With that being the case,
bearish traders can look for the first signs of weakness in
the BTK.X and consider entering put plays in CIMA around current
levels.  Those looking for more confirmation might consider a
breakdown below the $60 level.


*************
NEW PUT PLAYS
*************

MBI - MBIA Inc. $47.42 -0.46 (-1.55 this week)

MBIA is engaged in providing financial guarantee insurance and
investment management and financial services to public finance
clients and financial institutions on a global basis.  Financial
guarantee insurance provides an unconditional and irrevocable
guarantee of the payment of the principal of, and interest or
other amounts owing on, insured obligations when due.

MBI rebounded from the $36 level as high as $51.85 in recent
weeks.  But the stock is poised to rollover from current levels.
MBI hasn't participated in the last two days' rallies, which
may reveal inherent weakness in the stock.  The company
announced that it wouldn't be adversely impacted by the attacks
on the WTC, so they may be other variables at play in this
stock currently.  One possible explanation for its recent
weakness is the potential for the Fed to ease off its rate
cutting ways, which could impact MBI's business.  Whatever the
reason, the stock is poised to trade lower over the short
term.  Bearish traders looking for new entry points might
consider plays at current levels if both the Insurance Sector
Index (IUX.X) and Bank Sector Index (BKX.X) are trading lower.
Weakness in the two aforementioned groups should pressure MBI,
especially any weakness in the IUX.X.  Those bearish traders
who would rather enter puts near resistance might look for
MBI to rebound and subsequently rollover near the $48.70 level.
Our stop is initially in place just above that level at $50.
To the downside, short term traders might target the $45.70
level as the first potential level of support, thus exit point.
Those with a longer time horizon might look for MBI to work
its way down towards the $43.80 area.  The company announces
earnings on November 1st so we have some time to play MBI.

***October contracts expire next week***

BUY PUT OCT-50*MBI-VJ OI=220 at $3.30 SL=2.25
BUY PUT OCT-45 MBI-VI OI= 55 at $0.95 SL=0.50

Average Daily Volume = 559 K



TGH - Trigon Healthcare $63.61 -2.13 (-2.77 this week)

Trigon Healthcare, through its subsidiaries, is a managed
healthcare company in Virginia, serving over two million
members primarily through statewide and regional provider
networks.  The company divides its business into four
segments, which include health insurance, government programs,
investments and all other.

Judging by Thursday's rally, market participants are rotating
back into aggressive growth groups such as technology.  If
that rotation continues over the short term, defensive sectors
of the market such as health care may be suspect to downside.
Indeed, the Health Care Sector Index (HCX.X) was one of the
worst performing sectors of the market Thursday with its nearly
1 percent slide.  Of course that's not a big move, but on a day
such as Thursday, any weakness is big.  The HCX.X is currently
battling with its 200-dma at 822, which may indicate further
potential for the group to pullback over the short term.
Although not a member of the sector, TGH displayed similar
weakness in Thursday's session.  In fact, the stock has been
sliding since tracing a double-top up around the $70 level about
two weeks ago.  TGH traced a new relative low Thursday, and
looks to be headed lower over the short term.  Bearish traders
looking for new positions can consider entries at current levels
if the HCX.X is weak again Friday morning.  Other defensive
sectors such as the Drug Sector (DRG.X) can be used to confirm
any further rotation out of these stocks.  If TGH does rebound
in the coming trading days, bearish traders might look for a
rollover in the $65 vicinity, or higher around $66.  Our stop
is initially in place at $66.25, which is just above the current
level of TGH's 10-dma.  For downside targets, our first level is
at $62, followed by the $60 level.

***October contracts expire next week***

BUY PUT OCT-65*TGH-VM OI= 30 at $2.60 SL=1.50
BUY PUT OCT-60 TGH-VL OI=230 at $0.55 SL=0.00

Average Daily Volume = 231 K



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

CIMA - Cima Labs $60.80 +1.29 (+1.24 this week)

Cima Labs develops and manufactures pharmaceutical products
based on its proprietary OraSolv and DuraSolv fast dissolve
technologies.

Most Recent Update

CIMA continues to measurably under perform the AMEX Biotechnology
Sector Index (BTK.X).  The stock has done that much for the past
two days, which has us thinking that the stock has downside
potential if its sector shows any signs of weakness in the coming
days.  At this point, we think that the broader buying in the
biotechnology sector is propping CIMA up.  But as soon as that
buying subsides, we think that CIMA is due for some downside.
With that being the case, bearish traders can look for the first
signs of weakness in the BTK.X and consider entering put plays in
CIMA around current levels.  Those looking for more confirmation
might consider a breakdown below the $60 level.

Comments

CIMA's reversal Thursday may portend weakness into Friday's
session.  At least the reversal on its daily chart seems to suggest
so.  The stock is trading poorly relative to the BTK and should
weaken with any pullback in the sector.  Look for a pullback in the
BTK and consider entries at current levels in CIMA.

***October contracts expire next week***

BUY PUT OCT-60*UVK-VL OI=42 at $2.25 SL=1.50
BUY PUT OCT-55 UVK-VK OI=50 at $0.75 SL=0.25

Average Daily Volume = 383 K



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