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Daily Newsletter, Tuesday, 10/16/2001

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The Option Investor Newsletter                 Tuesday 10-16-2001
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)
************************************************************
       10-16-2001           High     Low     Volume Advance/Decline
DJIA     9384.23 + 36.61  9411.14  9298.70  1.2 bln   1965/1139
NASDAQ   1722.07 + 25.76  1722.85  1690.54  1.8 bln   2169/1434
S&P 100   564.14 +  3.71   566.83   558.74   Totals   4134/2573
S&P 500  1097.54 +  7.56  1101.66  1087.13
RUS 2000  434.53 +  4.44   434.54   430.09
DJ TRANS 2297.72 + 34.46  2302.68  2262.94
VIX        35.04 -  2.32    37.91    34.95
VXN        64.01 -  2.23    67.52    63.98
TRIN        0.90
Put/Call Ratio       .70
*************************************************************

Good News And Better News

Another day closer to getting out of October alive and the
earnings news just keeps getting better. IBM and Intel led
the charge after the close and one was a winner and one a
loser, almost. After the announcements the futures took a
dip on the prospect of a flat 4Q but once the guidance and
explanations started appearing in the press the after hours
trading exploded.





Cutting to the chase, Intel met analysts estimates of ten cents
and split the revenue numbers at $6.5 billion. Just meeting
the estimates was a relief for investors but after looking
under the hood the numbers were not pretty. Intel was very
creative in their accounting to "make" their numbers and
according to one commentator they threw in the kitchen sink
as well. After one time items it appeared they actually were
closer to three cents instead of ten. In after hours trading
they soared to $26.20 on the news that they met estimates then
fell to 24.34 after the real news was known. They did rally
again to 25.50 after IBM said they expected IT spending to
increase. While Intel was not the hero of the day at least
they did not stink up the place.

Enter the hero, IBM! IBM said their profitable outsourcing
business pipeline was "as strong as they had ever seen it"
according to their CFO. PC sales had fallen but software and
services were soaring. IBM beat estimates by a penny at .90
cents and said they were seeing a bottom in chip sales and
expected a +10% increase in IT spending next year. Thank you
IBM! The positive outlook floated all boats after the close
and should be a positive influence on the markets on Wednesday.
Many analysts had expected them to guide lower to the tune of
-10 to -15 cents for the next quarter and there are bound to
be some shorts running for cover at the open.

The storage sector got help from Veritas after the close when
they beat estimates by a penny. A not overly optimistic CEO
said he still thought VRTS had "a shot" at meeting guidance
for +25% to +35% revenue growth. On the conference call he
did hold the party line at +22% growth estimates. Still growth
is growth and VRTS soared nearly +$3 to $32 in after hours
trading. EMLX, QLGC and EMC joined the party with hefty gains.

The markets sold off again after the open on news that there
were more anthrax cases in the U.S. and news that twelve
employees of the London Bourse were being tested for it as
well. The new case of a seven month old baby whose mother
works at ABC was causing problems since they cannot find out
how it came in contact with the bacteria. There was also
traces of anthrax found at two post offices and an entire
wing in the Hart building was closed. Still if you checked
the averages at the close they were still positive! Amazing!

After trading on both sides of positive all day long the
final jolt that boosted the markets was news that
Citigroup had authorized a $5 billion stock buyback. The
size of the buyback and the timing of the announcement,
(2:45PM), prompted buying to cover before the close.
There were significant "buy on close" orders on many
issues after the sentiment boost provided by Citigroup.
On a smaller scale RMBS also announced a five million
share buyback ($60 million) as well. RMBS beat estimates
today but in reality their glory days could be over. Intel
is rapidly designing them out of the PC market and attempting
to capture the higher speed, higher profit memory interface
business. Rambus said they expected 1Q revenues to drop up
to 15% but still expected to be profitable.

The economic reports showed industrial production fell -1%
in September and has now shown a contraction for the last
twelve months. This is the lowest level of capacity utilization
since 1983 and the worst period of production since WWII.
The next few months will continue to be negative as the
impact from the attack works through the economy.

Commerce One gave itself nearly a 50% haircut today saying
it will cut -2800 employees on Sept 30th or -46% of its
workforce. There was also a rumor that SAP could be making
a bid for the company but SAP denied it. There may have
been conversations and when they failed CMRC had to cut
costs without a savior in sight.

Not all earnings were rosy with KMB losing -4.48 after
warning that 3Q earnings would be a nickel light. RTRSY
(Reuters) said it would not hit estimates due to the
results of the attack and lost -5.02. Downey Financial,
DSL, lost -4.99 after income fell. Broadwing, BRW, lost
-3.83 after lowering its guidance. Forest Labs dropped
-5.61 even though it beat estimates by two cents.
Semiconductors were hampered by Cognex (CGNX) which sees
a loss instead of a profit due to lower capital expenditure
spending by manufacturers.

Two days and counting! Futures are up strongly in after
hours and would indicate a positive open on Wednesday.
The odds are good that without any new terrorist attacks
or new outbreaks of anthrax that the Dow could make
a break above resistance at 9425. If shorts start
feeling the heat it is entirely possible we could see
a return to pre-attack levels near 9600. Before you start
thinking I am smoking something funny I would still caution
you about the normal October surprise. Remember from my
Sunday article the historical time frame for any October
sell off is a five day period beginning on Thursday of
this week. If you are currently long this market and
many of you are, please set some stops under those
positions on Thursday morning. If we get lucky and the
October drop never materializes then you remain in the
market. If however it does occur you will get out
with a nice profit and be ready to buy the dip again.
Those entry points of 9050 and 1550 are looking better
every day! I hope you took advantage of them!

Definitely, enter passively, exit aggressively!

Jim Brown
Editor


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

Tuesday Fashion Report
By Eric Utley

Plenty on the plate for Tuesday.  Let's dig in.

The ladies from HBO's Sex In The City stopped by the office this
morning to remind me that buying the dips was "totally cool."
The only problem is that they didn't tell me how long this
particular fad would last.

Ms. Bradshaw was of the opinion that the trend would last for
a few more days before "something better" comes along.  I
asked her if that "something" rhymed with pig, but she didn't
find that very funny.

Charlotte, who was dressed in blue, said a certain tech
bellwether was going to say some good things after the bell
Tuesday and that there were plenty of traders on the wrong
side of that particular situation.

Miranda was here cynical self.  Apparently she had shorted
Juniper (NASDAQ:JNPR) Monday, expecting the stock to fill its
gap below $20.  Little did she know that a rumor would surface
Tuesday afternoon that Cisco's (NASDAQ:CSCO) quarter was
tracking quite well.  I called Miranda after the bell to ask if
she covered her Jumpin' Juniper during that R-A-M-P into the
close.

"Hell no," replied Miranda when asked if she covered, "It'll
come in tomorrow...I hope."

Samantha didn't have much to say about the tape, but she did
say that she was fond of my sexy hairdo.

Crowds Are Bad

I'm not quite agoraphobic, but I do admit that I don't like
crowds of people, specifically traders.

A few weeks back, the bulls were free to roam in wide open
spaces.  But that pasture is getting a bit more crowded.  I've
noticed that daily put/call ratios are dropping across the
averages; one of those ratios plummeted Tuesday...

While the recent drop in put/call ratios is preliminary, I
recognize that no rally lasts forever.  That's especially
the case when the majority is bullish.  Because, in the market,
the majority is a bad demographic.  Thank goodness that, in the
market, demographics are extremely dynamic.

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

Market Volatility

VIX   35.04
VXN   64.01

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.70        728,846       510,388
Equity Only    0.58        630,859       366,373
OEX            1.50         17,785        26,601
QQQ            0.33         55,421        18,263

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

Bullish Percent Data


           Current   Change   Status
NYSE          27      + 0     Bull Alert
NASDAQ-100    63      + 4     Bull Confirmed
DOW           43      - 3     Bull Confirmed
S&P 500       44      + 0     Bull Alert
S&P 100       42      + 1     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  0.88
10-Day Arms Index  0.96
21-Day Arms Index  0.96
55-Day Arms Index  1.19

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      1965           1139
NASDAQ    2169           1434

        New Highs      New Lows
NYSE       60             36
NASDAQ     47             41

        Volume (in millions)
NYSE     1,214
NASDAQ   1,809

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

Commitments Of Traders Report: 10/12/01

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
09/25/01      357,873   407,036   (49,163)   (6.4%)
10/05/01      365,200   408,567   (43,367)   (5.6%)
10/12/01      369,049   407,804   (38,755)   (4.9%)

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
09/25/01      122,613     71,721   50,892     26.2%
10/05/01      124,249     73,882   50,367     25.4%
10/12/01      122,292     74,539   47,753     24.0%

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
09/25/01       26,761     36,812   (10,051)  (15.8%)
10/05/01       26,703     37,669   (10,966)  (17.0%)
10/12/01       24,662     38,020   (13,358)  (21.4%)

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
09/25/01       10,699     6,580    4,119      23.8%
10/05/01       10,918     6,804    4,114      23.2%
10/12/01       11,948     7,012    3,936      20.6%

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
09/25/01       20,013     7,806   12,207     43.9%
10/05/01       22,755    10,124   12,631     38.3%
10/12/01       24,873    10,194   14,679     41.7%

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
09/25/01        4,530    12,621    (8,091)   (47.2%)
10/05/01        4,731    11,868    (7,137)   (43.0%)
10/12/01        3,517    12,294    (8,777)   (55.5%)

Most bearish reading of the year:  (8,777) - 10/12/01*
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:
*****

PLCM $33.65 +0.66 (+0.28) PLCM popped higher today, but the
stock hasn't done a lot of upside work in recent sessions.
Traders might be waiting to hear from the company after the
bell tomorrow, which is why we're dropping coverage this
evening.  Look for any strength up to the $35 level as an exit
ahead of earnings.

PPG $49.83 +0.42 (+0.19) PPG reports Thursday morning, so we're
dropping coverage ahead of the report, leaving readers with
Wednesday's session to square up positions.  PPG has been
consolidating in recent sessions and looks ready to breakout
in one direction or another.  Of course a favorable earnings
report could carry the stock above its 200-dma at $51.  But
it's unlikely that the stock will make such a move ahead of its
numbers.  Look for any strength above $50 to exit plays tomorrow.


PUTS:
*****

No Dropped Puts for Tuesday.


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The Option Investor Newsletter                  Tuesday 10-16-2001
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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* Option Chains Linked to Order Screens, and Interactive Charting
* NBBO Guaranteed so you get Best Execution Prices
* Stock and Option Watch Lists
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Note: Options involve risk. Risk disclosure:
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**************************************************************


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

ENZN $62.93 +1.93 (+3.53) ENZN shot to the upside Tuesday, out
performing the broader biotech sector.  The stock doesn't have
much in the way of resistance immediately above its current
levels.  It could make its way up to the $65 area over the short
term if the BTK.X and Nasdaq continue advancing.  Momentum
traders might consider entries at current levels if the two
aforementioned indexes are steadily working higher Wednesday
morning.  Otherwise, a pullback down around the platform area
of $62 and subsequent bounce might provide an entry for those
who prefer entering call plays on a dip.  An extended pullback
might take ENZN back down to the $60 level, in which case a
bounce would provide another possible entry target.  We're
raising our coverage stop up to the $58.75 level, which is around
ENZN's 10-dma.

SEPR $44.71 +2.96 (+4.40) SEPR's pullback to the $40 level
Monday, which was at the time the site of its 10-dma, provided
the base from which the stock rallied above its 200-dma today.
The stock has mild resistance between the $45 to $46 area, but
above that area, there's not much in the way of congestion.  In
fact, the stock could make its way up to the $50 level if the
aforementioned resistance is cleared in the short term.  As for
execution, bullish traders who bought the dip down to $40
yesterday might look to book partial gains on any further
strength above current levels.  After all, a $5 move in the
underlying in two days is a pretty decent trade.  For new entries,
bullish momentum traders might consider a breakout above $45
early Wednesday if the Nasdaq and BTK.X are rallying.  Any
weakness down around the $42 area could provide an entry on a
pullback.  We're raising our stop up to the $41 level.

GE $38.47 -0.39 (-0.53) GE diverged from the broader market
Tuesday with yet another pullback down to its 10-dma, currently
$38.  Bullish traders looking for an entry into this play
might consider any future pullbacks down to the 10-dma with a
tight stop just below that level.  To the upside, we need to
see the stock move past the $40 level for the play to remain
alive.  Otherwise, we run the risk of time decay in premiums if
GE continues trading sideways.  A breakout above the relative
high at $39.50 could offer bullish traders an entry point, just
make sure that the Dow and S&P 500 are advancing before
entering on strength above current levels.

TEVA $68.20 +2.95 (+1.50) It's been an interesting last two days
in TEVA.  The stock looked as if it were going to rollover in
a big way Monday, but was able to bounce back above the $65
level.  Judging by the snapback rally Tuesday, it's highly
likely that some shorts got on the wrong side of the market
Monday and scrambled to cover Tuesday, carrying TEVA to a new
relative high.  Hopefully that strength Tuesday allowed traders
with open positions to book some gains in this play.  The stock
could head towards the $70 level in the next few days if the
BTK.X and Nasdaq keep on climbing, but traders should realize
that TEVA has come a long way in the last two days, so a little
profit taking might not be a bad idea.  That said, a pullback
from current levels might be the "best" way to gain new
entries in this play for those still on the sidelines.  Weakness
down to the $65.25 level may offer a favorable entry point if
TEVA bounces from there.  We're raising our stop up to the $65
level for coverage purposes.

FFIV $16.01 +0.15 (+0.26) FFIV traded quite well for the majority
of today's session, but faded near the close of trading.  In the
last 30 mins of trading, FFIV fell from the $16.50 level all the
way down to $16.  The late-day weakness was most likely profit
taking on the part of a large trader who rode the stock higher
recently.  With that supply out of the way, FFIV should continue
higher into Wednesday's session if the NWX.X continues
rallying.  Bullish traders might look for a bounce from the $16
level early tomorrow.  Additionally, a momentum-based entry
might be taken if FFIV rallies on heavy volume above its intraday
high today at $16.55.  But we want to make sure that the Nasdaq
and NWX.X are rallying too before entering a bullish trade into
strength above current levels.  Our stop on FFIV has been raised
up to the $14.00 level.

DELL $24.27 +0.69 (+0.17) DELL put in a solid day today after
bouncing from its 10-day moving average yesterday at the
$22.60 level.  Those who entered on the dip Monday can use any
strength above its closing level today to book some quick gains.
The IBM and INTC reports after the bell should both impact
DELL's trading tomorrow, so bullish traders might use any gap
higher off of that news as an exit point.  As for new entries,
the 10-dma might be a good spot to look for future pullbacks
and subsequent bounces.  Also, take note that DELL closed just
beneath its 200-dma today, that level currently sits at $24.35.
A sharp advance above that level might offer breakout-type
entry points, but an entry on a pullback from current levels
might offer a more favorable risk/reward scenario.

ABGX $29.71 +1.17 (+2.29) ABGX snuggled right up with the $30
level today, and looks ready to breakout.  But for the stock to
be able to breakout abov4 the $30 level, we need to see the
BTK.X provide the extra lift to give the move staying power.  If
that scenario presents itself tomorrow, bullish traders not yet
in this play might look for a breakout above the $30 level to
enter new call positions.  Above $30, ABGX's 200-dma is quickly
approaching current levels.  The 200-day currently sits at the
$32.98 level and might be used as a solid short term exit point
on any new plays added around current levels.  We're raising
our stop up to the $26 level, which is beneath ABGX's 10-dma at
$26.90.  Traders who like the dip thing might look for a bounce
from the 10-day on any future weakness as a possible entry
point.

ORCL $14.94 +0.50 (+0.00) ORCL is hanging in there, but the stock
just can't seem to clear the $15 level, no matter how hard it
tries.  In the last four trading days, ORCL ran right up to the
$15 level but has yet to follow-through above that resistance
zone.  What that could lead to is an explosive rally above the
$15 level once the necessary catalyst emerges, or once all of the
supply at that level is taken out.  With the stock trading
sideways for the last four trading days, a strong breakout is
very possible, which could be used as an entry point into
strength.  A breakout above the $15 level could take ORCL as
high as $16.25 in short order.  While a roughly $1 move in the
underlying might not sound that enticing to a sophisticated
options trader, there are few things to consider.  First, ORCL
is a low priced stock so its premiums are lower.  Second, the
$15 level just happens to be a strike price, of which has a
delta close to 50, which makes it an extremely responsive
option.  But if trading a breakout isn't your cup of tea or
won't provide a big enough gain in this case, then a pullback
back down around the $14.25 to $14.50 area would allow traders
to get in ahead of any forthcoming breakout attempt.

AMAT $34.45 +0.81 (-0.59) AMAT took it on the chin Monday
morning following the Lehman Brothers downgrade of several
chip equipment stocks.  That downgrade knocked AMAT down to
around the $32.75 level before the stock rebounded into the
close.  Then Novellus, a cohort of AMAT's, reported a less
than favorable earnings report last night.  It would've been
reasonable to expect AMAT to trade lower again today, but
the stock didn't.  In fact, after rebounding from around its
10-dma at $32.93 early today, the stock rocketed higher into
the close.  Hopefully some of our readers used the dip down
to the 10-dma to enter some fresh call plays today.  For those
not yet in this play, a further advance from current levels
might offer an entry point for those who like trading in a
momentum fashion.  Just make sure to recognize that AMAT has
some overhead supply around $35.25 and again at $36.  We could
see the stock move up to that level if INTC's report after the
bell is well received by the market Wednesday morning.  Of
course a breakout above the $36 level could offer another entry
possibility if the SOX.X really gets moving to the upside.


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

NOK - Nokia $19.48 +0.73 (+0.51 this week)

Nokia is a mobile phone manufacturer and a supplier of mobile,
fixed and Internet protocol (IP) networks and related services,
as well as multimedia terminals.  Nokia has two business groups,
Nokia Networks and Nokia Mobile Phones, and also includes Nokia
Ventures Organization and the Nokia Research Center.

Don't count the Finnish phone giant out yet.  Nokia is making
a comeback.  The stock, that had been pummeled up through the
past month, has been making strides recently.  NOK is now
poised to breakout back above the psychologically significant
$20 level, which could potentially cause some heavy institutional
buying to come back into shares.  After breaking out above the
$17.50 level last week, NOK has spent the better part of the
last four trading sessions consolidating.  The stock may now be
ready for its next leg higher after four days of basing work.
If the stock does breakout above its current trading range, it
might not only receive some renewed institutional sponsorship,
but we're likely to witness another leg of heavy short covering,
which would help to exacerbate any push higher.  If NOK does
breakout above the $20 level, we'll target the $23 level as the
first upside target point for this play.  Beyond that level, NOK
has an unfilled gap above the $24 level, while its 200-dma is
currently located at the $25.72 level.  To the downside, NOK
has solid support at the $18.50, which may provide a solid
entry point if NOK pulls back from its current price.  Below
the $18.50 horizontal support area, NOK should find some help
near its 10-dma, which current sits right around the $18
level.  We're initially setting our stop at the $17.50 level.

BUY CALL NOV-17*NOK-KW OI= 5059 at $3.00 SL=2.00
BUY CALL NOV-20 NOV-KD OI= 9862 at $1.50 SL=0.75
BUY CALL JAN-17 NOV-AW OI=18885 at $0.45 SL=0.00
BUY CALL JAN-20 NOK-AD OI=46477 at $2.50 SL=1.75

Average Daily Volume = 13.3 mln



QQQ - Nasdaq-100 Tracking Stock $34.96 +0.56 (+0.41 this week)

Representing 100 of the largest non-financial U.S. and non-U.S.
companies listed on the National Market tier of The Nasdaq
Stock Market, the Nasdaq-100 Index reflects Nasdaq's largest
companies across major industry groups, including computer
software and hardware, telecommunications, retail/wholesale and
biotechnology.

The QQQs are poised to breakout above the $35 level, which
corresponds with the Nasdaq-100 at 1400.  The tech sector has
been showing some serious signs of rebound recently, so what
better way to play any forthcoming tech rally than the QQQs?  In
all seriousness, seeing that we're in the middle of earnings
season, we thought that employing the QQQs as a trading
vehicle would help to remove some of the non-systematic risk
that is so often prevalent in the tech sector.  Speaking of
earnings season and judging by the after hours reactions, the
reports of IBM and INTC after the bell today could set the
tech sector up for a big day tomorrow.  Traders bullish on the
tech sector can look for the QQQs to breakout above the $35
level early tomorrow.  In the event of a gap above that level,
traders should use their best discretion when deciding on
whether or not to enter new call plays.  Above the $35 level,
the QQQs have some congestion around the $36 mark.  On any
future pullbacks from current levels, traders can look for the
QQQs to bounce from the current support line, which sits around
the $34 to $34.50 area now.  Also, pay attention to the price
action in the SOX.X, GSO.X, NWX.X, and BTK.X when trading the
QQQs.  Our stop is initially in place at $33.

BUY CALL NOV-33 QAV-KG OI=25690 at $3.60 SL=2.90
BUY CALL NOV-34 QAV-KH OI=19486 at $2.90 SL=2.20
BUY CALL NOV-35*QQQ-KI OI=24596 at $2.40 SL=1.90
BUY CALL JAN-36 QQQ-KJ OI= 8256 at $1.85 SL=1.25

Average Daily Volume = 65 mln



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

CIMA $60.81 +0.13 (+1.26) CIMA is doing a whole lot of nothing.
The stock is...yawn...trading sideways, right around the $60
level.  There are two ways to view CIMA's price action recently.
First, its reluctance to move higher is encouraging - it's
under performing the BTK.X.  Second, if you're holding open
positions, you're losing time value.  With the current situation,
bearish traders with open positions should look to the BTK.X
for guidance.  If the BTK.X continues advancing, then some risk
management steps may be in order.  Then again, if the BTK.X
weakens from its current levels, we could see CIMA pullback like
it did early Monday.  The stock's 200-dma currently at $61.46
has capped each of its rally attempts in the last two days, so
if the BTK.X does trade higher, and CIMA follows, a stop could
be placed just above the 200-dma to protect against any further
upside risk.

MBI $48.35 +0.31 (+0.21) MBI is being dragged higher by the
broader market.  The good news is that the stock isn't making
much progress to the upside.  And, the stock did rollover around
our resistance range at the $48.70 area today.  New put plays can
be taken around current levels, with risk managed with a tight
stop above MBI's high today at $49.08.  The stock could have
downside to $45.70 over the short term if the market rolls
over in the coming days.  Those who'd like to see more weakness
before initiating new put plays might wait for a breakdown below
the $47.50 level.

TGH $63.64 -0.14 (+0.39) TGH ever so slightly pulled back today
as capital once again flowed to the more aggressive sectors of
the market such as technology.  The stock could bounce from the
$63.50 level over the next few days if the selling doesn't begin
to pick up steam.  On the other hand, if the stock does trade
higher, bearish traders should look for a rollover at the
$65 level, which would provide a solid entry point into new put
positions.  Conversely, if the stock weakens from its current
level, then it could have downside over the very short term to
the $62 level, from which it bounced last Friday.  Entries at
or slightly above current levels could use the $62 level to
the downside as a favorable exit point for a quick trade.


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

WFC - Wells Fargo $40.19 -0.58 (-0.89 this week)

Wells Fargo & Company is a diversified financial services company
providing banking, mortgage and consumer finance through stores,
the Internet and other distribution channels throughout North
America and elsewhere internationally.

Traders didn't take too kindly to WFC's earnings report.  Despite
the strength in the broader market today, WFC fell to a new
yearly low.  The divergence in shares was painfully obvious as
the stock shed more than 1% while its sector, the Bank Sector
Index (BKX.X), gained almost 2% on the day.  We're looking for
WFC to continue trading lower, especially if the broader market
and the BKX.X begin to weaken.  Traders bearish on WFC might
look for signs of weakness in the BKX.X early tomorrow and for
WFC to break below the $40 level - its intraday today.  The stock
doesn't have much in the way of support below the $40 level,
so an entry on weakness below that level might prove to be a
successful endeavor.  On the other hand, a rally from current
levels and subsequent rollover would suit our intentions.
Resistance at the $41 level might be a good rollover spot, while
the $42 level higher may serve the same purpose.  If WFC breaks
down below the $40 level in the coming days, we'll target the
$37.50 level to the downside as a possible exit point.  Our
stop is initially in place at the $43 level.

BUY PUT NOV-45*WFC-WI OI=31283 at $5.40 SL=4.00
BUY PUT NOV-40 WFC-WH OI= 6598 at $1.80 SL=1.00

Average Daily Volume = 4.23 mln



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

AMAT - Applied Materials Inc $34.45 +0.81 (-0.59 this week)

Applied Materials, the largest supplier of products and services
to the global semiconductor industry, is one of the world's
leading information infrastructure providers. Applied Materials
enables Information for Everyone(TM) by helping semiconductor
manufacturers produce more powerful, portable and affordable
chips. (source: company press release)

Most Recent Update

AMAT took it on the chin Monday morning following the Lehman
Brothers downgrade of several chip equipment stocks.  That
downgrade knocked AMAT down to around the $32.75 level before
the stock rebounded into the close.  Then Novellus, a cohort of
AMAT's, reported a less than favorable earnings report last
night.  It would've been reasonable to expect AMAT to trade
lower again today, but the stock didn't.  In fact, after
rebounding from around its 10-dma at $32.93 early today, the
stock rocketed higher into the close.  Hopefully some of our
readers used the dip down to the 10-dma to enter some fresh
call plays today.  For those not yet in this play, a further
advance from current levels might offer an entry point for
those who like trading in a momentum fashion.  Just make sure
to recognize that AMAT has some overhead supply around $35.25
and again at $36.  We could see the stock move up to that
level if INTC's report after the bell is well received by the
market Wednesday morning.  Of course a breakout above the $36
level could offer another entry possibility if the SOX.X
really gets moving to the upside.

Comments

AMAT is set to rally Wednesday, following INTC's earnings
report.  The stock could very well stage a breakout above the
$36 level if the SOX.X follows through.  Consider an early
morning entry if the broader tech sector is advancing
strongly.

BUY CALL NOV-32 ANQ-KZ OI=1759 at $4.40 SL=2.50
BUY CALL NOV-35*ANQ-KG OI=6105 at $3.00 SL=1.50
BUY CALL NOV-40 ANQ-KH OI=4546 at $1.20 SL=0.70
BUY CALL JAN-35 ANQ-AG OI=2733 at $4.80 SL=3.00
BUY CALL JAN-40 ANQ-AH OI=8476 at $2.75 SL=1.50

Average Daily Volume = 39.8M



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Stop Losses based on the option price or the stock price.
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**************************************************************


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