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Daily Newsletter, Thursday, 11/01/2001

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The Option Investor Newsletter                Thursday 11-01-2001
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)
************************************************************
       11-1-2001            High     Low    Volume Advance/Decline
DJIA     9263.90 +188.76  9284.45  9014.46  1.3 bln   2223/ 880
NASDAQ   1746.30 + 56.10  1746.65  1683.99  1.7 bln   2060/1477
S&P 100   558.24 + 13.81   559.15   542.09   Totals   4283/2357
S&P 500  1084.10 + 24.32  1085.61  1054.31
RUS 2000  434.88 +  6.71   434.88   424.84
DJ TRANS 2232.98 + 37.14  2242.96  2179.83
VIX        34.18 -  1.19    36.97    33.83
VXN        61.18 -  1.17    63.13    60.92
TRIN        0.88
Put/Call Ratio       .64
*************************************************************

Just Like We Scripted It!

Despite some of the worst economic news in a decade the markets
rallied off support as investors bought the dip. Surprised? I
wasn’t since it was exactly like I suggested on Tuesday. Well,
almost exactly! I was expecting the Dow to at least touch 9000
before institutions came off the sidelines with cash but I will
take the 9014 low on Thursday as "close enough" and chalk it up
to eager traders trying to beat their competitors to the punch.





The +249 point bounce from support at the 9000 level was very
encouraging considering the magnitude of the dreary economic
news. Let's recap the weeks news. The GDP surprised analysts
with only a -0.4% drop which was the worst in a decade but much
better than most analysts predicted. On Tuesday the Consumer
Confidence number fell to 85.5 and its lowest reading since 1994.
On Wednesday the PMI numbers fell again to 46.2% in October,
up from the years low but still contracting. Today the NAPM
fell to 39.8 which was much worse than the 44.5 analysts
expected. This was the lowest level since 1991 and indicates
that the slight recovery that may have started in September
was stopped cold on 9/11. The jobless claims fell slightly to
499,000 but continuing claims rose again indicating that no
jobs are available for newly unemployed. Personal Income was
flat but spending dropped -1.8%, the biggest drop in 14 years.

By all measures of conventional wisdom you would think the market
should be testing 7000 instead of 9000. Of course informed investors
know the answer, the bad news has already been priced in and the
economy is not as bad off as commentators would have us believe.
Any real investor has heard the gloom and doom for a year now
and the post attack drop was the exclamation point at the end
of that bear market. Markets crash in advance of a recession and
rally out of them. The Sept-21st low took all the remaining weak
investors out of the market and the retest of 9000 today was the
signal for institutions to get back into stocks.

There was also a glimmer of light at the end of the tech tunnel
as several companies made positive statements about their orders.
In the pitch black cellar we have been living in, any light was
a ray of hope to investors. SUNW said they had $6 billion in cash,
no debt and that orders were tracking higher this quarter than last.
Even though the comments were surrounded by the obligatory "visibility
unclear" statements that was pretty bullish talk. Intel also held
an analyst meeting to announce the P4 to be the best selling brand
and a 3-GHZ model in the future along with dozens of new initiatives.
They spoke at another tech conference this week and made it clear
the war is on and they intend to win it on all fronts. They cut prices
another -29% as they aggressively attempt to reclaim AMD market share.
Competition has always fired up investors and the race to the recovery
is on.

The chip sector rose on the Intel comments as well as news that
KLAC affirmed their guidance. The SOX has rebounded from the two
day sell off on Monday/Tuesday right back to within 12 points of
the resistance I spoke about on Sunday at 490-500. This time the
chip stocks look stronger and ready to rumble so it will be
interesting to see if a breakout is in our future.

A rally in software stocks was led by good news in the Microsoft
case. There appears to be a deal in the works that could amount to
only a serious slap on the wrist for Microsoft and the stock was up
+3.69 on the news. As a Dow and Nasdaq component MSFT was instrumental
in the majority of the gains on both indexes. Gains beget gains and
while a nearly $4 jump in MSFT may be the major percentage of the
indexes gains it helped fuel investor excitement and drag other
stocks along for the ride as well. Friday was the deadline for a
settlement in the case and that was obviously a major factor in
the announcement. After the close it was announced that the Justice
Dept had requested a delay which could cause some volatility on Friday.

Another headline that rallied investor confidence was the auto sales
news. Ford saw a +34% in October sales, GM +31% and Chrysler +5%.
These sales were off the charts and could propel last month into
the record books as the biggest month ever. These sales were due to
the zero percent financing and major advertising efforts to force
buyers off the couch and into showrooms in the wake of the attack.
While the efforts were wildly successful they could actually cause
trouble in the coming months. Those who were interested in a new
car or even on the fence were rushed into the sales cycle and the
remaining available buyers are drying up. With layoffs increasing
and unemployment rising it is likely that the next two months will
see money spent on reduced holiday shopping instead of new cars.
By harvesting these buyers early the future crop is likely to be
scarce. Also, free financing amounts to an additional $2500 cost
on every car and profit margins are likely to shrink substantially.
While the headline news was good for the markets today it was a one
time event and should not provide any long lasting momentum.

All eyes are now on the Employment Report on Friday. By all
accounts it will be the worst report in a decade with a loss of
-325,000 jobs and a jump in unemployment to 5.2%. In the two weeks
following the attack there were over 1000 mass layoffs announced
and this was in addition to the already swelling unemployment
rolls. While the news is expected to be grim the whisper numbers
are much worse, -500,000 jobs and 5.5% unemployment. With everyone
expecting gloom and doom again we have yet another opportunity for
a good news event and market reaction. The bad news is priced in
already and short of a million job loss or 6% unemployment the
markets should not react negatively. Should is the key word!

The economy is in the tank but the fix is in! The Fed is meeting
again next week and there is about a 60% chance that they will
cut yet another 50 basis points based on the dreary news this week.
There are stimulus programs in the wings and the government is
going to be spending billions fighting the war on the home front
and reshaping the way we live. The economy is setup to recover
from here, not fall further. Institutional investors know this
and the markets should reflect this in November.

Friday should be interesting. Reported terrorist threats against
bridges in California have now been called "not credible" and
similar to bogus threats in several other states. Even when thought
credible the futures failed to react negatively. Investors are
becoming calloused to the constant bombardment of negative news
and the lack of any follow up attack. While I personally think
that without an attack we could see the markets move higher we
need to trade what we see not what we believe. I see bears on
CNBC constantly that think the S&P will see 700-800 and the
Nasdaq 1200. They are entitled to their opinion and can certainly
spend their money how they want. Actually I hope they all short
every rally between here and Dow-15,000. That just supplies another
round of short covering panic when investors ignore bad news.

How much more bad news can we get? SUNW is not going to be declaring
bankruptcy. Microsoft is not going to self-destruct regardless of
how long the Justice Dept delays the case. IBM is not going to
cancel their share buybacks. They could even be considered a split
candidate. (remember, stock splits?) INTC, DELL, ORCL, JNPR, CSCO,
SUNW and QCOM are not going to be making any new lows anytime soon.
The economy is about as bad as it can get and with the Fed funds
rate projected at 2% by early 2002 it will be hard pressed to not
rally. Investors are much more astute than the average couch potato.
They recognize this as the time to buy. Terrorists are running out
of targets due to increased security, awareness and a shortage of
gang members not already arrested as a result of the 9/11 sweep.
Short of a major new attack by terrorists, investors will likely
be happily pursuing their fall investment plans beginning next week.
Friday is a toss up but shorts are definitely scared and bulls
are ready to rumble. What if the Employment Report is better
than expected? Can you say "curbs in"?

Enter passively, exit aggressively!

Jim Brown
Editor


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

Bullish Percent
By Eric Utley

The Nasdaq-100 Bullish Percent ($BPNDX) went bear confirmed
Wednesday and lost another stock Thursday.  Bear confirmed is
a market condition that is conducive to shorting stocks and is
diametrically opposed to bull confirmed.  Obviously Thursday
was not a day conducive to shorting stocks in the Nasdaq-100.

For those unfamiliar with the Bullish Percent indicator, it's
quite a simple methodology and generally highly reliable.
Bullish Percent simply reveals the number of stocks on buy
signals on their point & figure charts in any given group, such
as the Nasdaq-100, Dow Jones ($INDU), and S&P 500 (SPX.X).  For
example, 53 of the Nasdaq-100 components are currently on buy
signals, thus the Bullish Percent reading of 53.

The status of a group of stocks' Bullish Percent should
generally dictate a trader's bias in that group.  The six
different conditions of Bullish Percent are succinctly
described below under Bullish Percent Data.

As seen under that heading, the Dow Jones Bullish Percent
($BPINDU) is currently bull confirmed - the most bullish of
markets - while the Nasdaq-100 is bear confirmed - the most
bearish of markets.  How can it be that the two are currently
diametrically opposed?  (I really like that phrase.)

Unfortunately, I don't have the answer and admit that the
conflicting signals are a source of great frustration.  I'd be
a lot more bullish on the market after Thursday's romp if it
weren't for the big caution flag in the Nasdaq-100 Bullish
Percent.  The indicator has made me a lot of money, so I'm not
abandoning it now.

The biggest difference between great traders and those who I
like to refer to as "The Others," is that the former bunch
fully quantify risks prior to any market operation.  I'm working
on becoming a great trader, so I'm deeply concerned with risk
management, which is why I bring up the bear confirmed status of
the Nasdaq-100.

I'm certainly not advocating shorting stocks in the Nasdaq-100.
We're trying two more components tonight as call plays.  And,
while the Bullish Percent data in any group of stocks should be
given credence, in my opinion, it shouldn't be solely deferred to.
It's a tool among many.  But, for the sake risk management, I
think the current status of the Nasdaq-100 Bullish Percent should
be included in the equation.  On my part, the next best thing to
making you money is saving you money.

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

Market Volatility

VIX   34.18
VXN   61.18

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.64        573,807       368,190
Equity Only    0.48        497,008       240,008
OEX            0.81         15,685        12,732
QQQ            0.69         46,679        32,286

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

Bullish Percent Data

           Current   Change   Status
NYSE          28      + 0     Bull Alert
NASDAQ-100    53      - 1     Bear Confirmed
DOW           50      + 0     Bull Confirmed
S&P 500       43      + 0     Bull Alert
S&P 100       42      + 0     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  1.49
10-Day Arms Index  1.22
21-Day Arms Index  1.15
55-Day Arms Index  1.18

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      2223            880
NASDAQ    2060           1477

        New Highs      New Lows
NYSE       71             71
NASDAQ     51             54

        Volume (in millions)
NYSE     1,307
NASDAQ   1,758

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

Commitments Of Traders Report: 10/23/01

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

Commercial interests remained relatively flat week-over-week.
In the 10/16 reporting period, commercial interests reached
their most bullish reading of the year by collectively holding
a net short position of 36,423.  That net position barely
changed last week, but small traders grew more aggressive.
Small traders increased long positions while covering short
positions last week, in all, increasing their collective net
long position by more than 5,000 contracts.

Commercials   Long      Short      Net     % Of OI
10/12/01      369,049   407,804   (38,755)   (4.9%)
10/16/01      378,866   415,289   (36,423)   (4.5%)
10/23/01      377,177   413,658   (36,481)   (4.6%)

Most bearish reading of the year: (111,956) -   3/6/01
Most bullish reading of the year: ( 36,423) - 10/16/01

Small Traders Long      Short      Net     % of OI
10/12/01      122,292     74,539   47,753     24.0%
10/16/01      124,568     73,779   50,789     25.4%
10/23/01      127,016     71,212   55,804     28.2%

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 interests, for the most part, left short positions
alone last week, while adding to long positions.  The drop in
% of OI short reveals the bullish positioning last week.
Meanwhile, small traders' net long position dropped by more
than 1,000 contracts.

Commercials   Long      Short      Net     % of OI
10/12/01       24,662     38,020   (13,358)  (21.4%)
10/16/01       27,398     40,397   (12,999)  (19.2%)
10/23/01       29,920     40,358   (10,438)  (14.9%)

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
10/12/01       11,948     7,012    3,936      20.6%
10/16/01       12,901     6,893    6,008      30.5%
10/23/01       11,567     6,934    4,633      25.0%

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

Commercial traders grew a little less bullish last week as
measured by the nearly 6 percent drop in % of OI long.  Small
traders, on the other hand, went the other direction.  While
still decidedly bearish, small traders did bring in some short
positions last week and added to longs.

Commercials   Long      Short      Net     % of OI
10/12/01       24,873    10,194   14,679     41.7%
10/16/01       25,402    10,267   15,135     42.5%
10/23/01       25,568    11,832   13,736     36.7%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
10/12/01        3,517    12,294    (8,777)   (55.5%)
10/16/01        4,514    12,104    (7,590)   (45.7%)
10/23/01        4,902    11,900    (6,998)   (41.6%)

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:
*****

SNPS $48.44 +1.44 (-0.96) SNPS has been all over the map in the
last two days.  We're frustrated with the stock's inability to
move and stay above the $50 level, especially after the
strength in the software sector today.  We're dropping the
play this evening ahead of any potential rollover.  Traders
with open positions can look to any strength above $48.70
tomorrow to exit plays.


PUTS:
*****

STJ $72.01 +1.01 (+0.51) STJ has put back-to-back days in
of solid price action. The stock gave us some nice downside
action up through Tuesday, but its recent strength suggests
a rebound.  We're stepping aside from the play, and
traders with open positions can look for any weakness early
Friday to exit plays.


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Anything else is too slow!

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The Option Investor Newsletter                 Thursday 11-01-2001
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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* $1.50 Per Contract (10+ contracts) or $14.95 Minimum. No Hidden Fees.
* 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
********************

CSCO $17.66 +0.74 (+0.37) Two days left for a run.  Cisco reports
after the bell Monday.  The stock closed strongly today and is
close to breaking out of its recently established trading range.
Another day of strength in tech and CSCO should be able to take
out its relative highs just above current levels.  A breakout
above $18 could carry CSCO a $1 higher ahead of its report next
week.  Look for that move Friday if the Nasdaq continues
marching higher.  For confirmation, turn to the Networking Sector
Index (NWX.X).  The NWX.X traded up to the 280 level in the past
two days.  Watch for a strong advance above that level in
conjunction with a CSCO breakout above $18.

ZION $48.51 +0.59 (-0.04) ZION is right there.  The stock
closed near the upper-end of its recent trading range today,
and any follow through tomorrow should lead to a breakout in
this banking play.  Breakout traders can look for a move past
the relative highs at $48.75.  When trading a breakout, make
sure to confirm that the market and sector are supporting
higher prices.  Look for strength in the Bank Sector Index
(BKX.X) and watch it as it approaches 800, which could be a
resistance level.  If the Dow and S&P continue higher, ZION
will have a much better chance of breaking out.  With support
in place at $47.25, traders can use any future pullback to
that area as an entry point.  Just make sure to use a tight
stop when entering call plays on weakness.

SPW $101.95 +2.35 (-2.13) SPW's rebound over the past two days
has been very encouraging.  The stock charged back above the
century mark Thursday and finished the day solidly higher.  The
move back above $100 could've allowed for an entry into today's
strength.  For those who entered on the break above $100, look
for an advance from current levels back to relative highs around
$104.50, where some gains could be taken off the table.  Same
goes for those who entered on the recent dip.  For new entry
points, a break above $102.50 Friday could allow for a new
play on SPW.  However, before entering on strength above current
levels, make sure to confirm direction in the Dow and S&P.  SPW
seems to be tracking the two averages pretty closely.  Future
pullbacks down to the $100 mark could offer entries on weakness.

BRCM $37.33 +2.92 (+0.28) After just barely dodging a move to
the drop list on Tuesday, BRCM has been flexing its bullish
muscles again on the back of continued impressive strength in
the Semiconductor sector (SOX.X).  Halting its profit-taking
decline right at the ascending trendline on Tuesday, the stock
used the 10-dma ($34.18) as support yesterday and launched
higher on Thursday, gaining 8.5% by the closing bell.  The SOX
was the strongest sector today, gaining 6.7%, and it is clear
that BRCM is still showing good relative strength.  If you
missed taking an entry over the past couple days, look for
another dip near the 10-dma to provide entry.  Otherwise, wait
for BRCM to clear the $39 level before taking a position.  Make
sure buying volume remains strong and watch the action on the
SOX as well for confirmation that the bullish trend still has
legs.  Move stops up to $34.

IBM $109.89 +1.82 (-1.27) Our IBM play continues to tease us,
as the stock bounces around between the $107 support level and
resistance at $110.  The bulls have attempted to break through
this resistance both of the past 2 days, but haven't managed to
pull it off yet.  Aggressive traders could have nibbled on new
positions this morning, as the stock rebounded from the $107
level after the market absorbed its daily dose of bad news and
then headed north.  But the high odds entry we are looking for
remains the strong breakout over $110, and we haven't seen that
yet.  With the MSFT settlement likely to arrive tomorrow, that
could be our much-awaited catalyst.  So long as the market
receives the news well, we'll look for IBM to stage a breakout
and use that move for new positions.  For those that already
did some nibbling on new positions, keep your stops set at $107.

IMNX $24.61 +0.72 (-0.90) While they did manage to post a modest
gain on Thursday, Biotechnology stocks have cooled somewhat,
giving up the leadership role to shares of Software and
Semiconductor stocks.  Be that as it may, our IMNX play is once
again making progress up the chart after offering up another
entry point as it dipped right to the $23 level yesterday
morning.  Since then, the stock has been steadily marching
higher, regaining the upper side of the $24.50 level right at
the closing bell.  Additionally, the month-long ascending
trendline (currently $24) is continuing to provide support, and
we would look at bounces from this line or the $23 level as
potential entry points.  We're still waiting for the breakout
over the $26.50 intraday resistance level, and such a move
provide attractive entries as well.  For now, keep stops set at
$22.

JNJ $58.87 +0.96 (+0.20) The waiting game continues, as shares
of JNJ vacillate between $57.50-59.00.  Now that the 20-dma has
risen to $57.39, it should bolster the $57 support level and
increase the likelihood that that level will continue to provide
attractive entry points.  The DJIA moved right up to its 20-dma
today, and if the bulls can push through the 9300 level
tomorrow, we will be looking for JNJ to take advantage of the
strength and finally move through the pesky $59.50 resistance
level.  For new entries, either target a renewed bounce near the
20-dma or wait for the stock to clear resistance before playing.
For now, our $57 stop remains intact.


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

SUNW - Sun Microsystems $10.84 +0.69 (+0.44 this week)

Sun Microsystems is a worldwide provider of products, services,
and support solutions for building and maintaining network
computing environments.  Sun sells scalable computer and storage
systems, high-speed microprocessors, and a comprehensive line
of high-performance software for operating network computing
equipment.

At a Prudential Securities tech conference Wednesday, a Sun
executive told analysts that the company had seen a slight
increase in orders over the same period last quarter.  The
positive guidance pushed the stock higher yesterday, and the
broader strength in the tech sector pushed SUNW closer to a
breakout today.  The stock has some slight resistance just
above current levels at $11.  But its pattern of higher
relative lows could provide the base from which SUNW breaks
out.  The stock obviously needs the cooperation of the broader
Nasdaq to move substantially higher, but it has a good shot
working higher on its own, noting the recent pop in relative
strength.  In an advancing market, bullish traders can look
for a breakout above the $11 on heavy intraday volume and use
any such move as an entry point.  Above $11, the stock doesn't
have any major resistance until $12.  While only a $1 difference
in levels, a move of that magnitude should produce good gains
in the options.  Beyond $12, SUNW has an unfilled gap up to
$13.50.  That level will serve as our target exit point over the
next several weeks.  Market weakness could pressure SUNW back
down to the $10 level.  A bounce from that price would mark
yet another higher relative low and provide a favorable entry
point on weakness.  Our stop is initially in place at $9.50.

BUY CALL NOV-10*SUQ-KB OI=57346 at $1.20 SL=0.75
BUY CALL NOV-12 SUQ-KV OI=28988 at $0.30 SL=0.00
BUY CALL DEC-10 SUQ-LB OI=51454 at $1.75 SL=1.00
BUY CALL DEC-12 SUQ-LV OI=18225 at $0.65 SL=0.25
BUY CALL JAN-12 SUQ-AV OI=12830 at $1.05 SL=0.50

Average Daily Volume = 46.9 mln



NVDA - NVIDIA Corporation $46.52 +3.66 (+0.73 this week)

NVIDIA Corporation designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for
every type of desktop personal computer user.  Used in a wide
variety of application including games, the Internet and
industrial design, the company's products were the first to
incorporate a 128-bit multi-texturing graphics architecture.
This design approach delivers to users a highly immersive,
interactive 3D experience with compelling visual quality and
stunning effects at real-time frame rates.  NVDA sells its
products to major PC manufacturers such as Compaq, Dell,
Gateway, Hewlett-Packard and IBM.

It is hard to find a Technology stock trading near its all
time highs, but that doesn't mean they don't exist.  Not only
is the stock up more than 200% since the beginning of the year,
but it is up 100% since its early October lows near $23.
Benefiting from the recent strength in the Semiconductor sector
(SOX.X), shares of NVDA dipped sharply earlier in the week, but
found support right at the $40 level, also the site of the
20-dma (currently $41.53).  Volume has been running well above
the ADV, and with the daily Stochastics just emerging from
oversold territory, this stock has the look of one that is
likely to continue outperforming the broad Technology market.
Looking for another bullish factor?  NVDA reports earnings on
November 13th, and given its recent history of continuing to
beat analyst estimates, chances are good that the stock could
see a run into the announcement.  The stock is building a new
uptrend, creating intraday support near $44 and backed up by
firmer support near $42.  Target an intraday dip to either of
these levels, but wait for the bounce before playing.  We're
initiating the play with our stop at $41.50, just below the
supportive 20-dma.  The next major obstacle will be major
resistance at $50.  A breakout over this level could provide
another entry for momentum traders.

BUY CALL NOV-45*RVU-KI OI=6896 at $4.60 SL=2.75
BUY CALL NOV-50 RVU-KJ OI=4670 at $2.15 SL=1.00
BUY CALL DEC-47 RVU-LW OI= 851 at $5.80 SL=4.00
BUY CALL DEC-50 RVU-LJ OI=2216 at $4.70 SL=2.75
BUY CALL DEC-52 RVU-LT OI= 695 at $3.80 SL=2.25

Average Daily Volume = 7.25 mln



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

GDW $47.26 -1.34 (-1.70) GDW finally made the big break today.
The stock got knocked down along with the broader S&L sector on
concerns over the Treasury's announcement yesterday and the
impact on fixed rate mortgages.  GDW's trading was extremely
volatile Thursday morning.  Hopefully its weakness around and
below the $46 level allowed traders to book some solid gains.
The stock rebounded into the close but is still a distance away
from the $50 resistance level, where readers could've recently
entered put positions.  On any further strength Friday, readers
with open positions might consider trimming exposure and booking
some gains.  Conversely, continued weakness in Friday's session
could portend a retreat back down to the $45 area.  Those looking
for new plays might consider a rollover upon a filling of the
gap at around $48.50.  Stops have been moved down to $49.

EBAY $53.24 +0.76 (-3.76) EBAY hung around Thursday, but didn't
make much progress in either direction.  The stock's heavy
trading yesterday revealed that the sellers are still hanging
around.  The stock bumped up against its 10-dma Wednesday, but
was unable to move higher than that.  Thursday's slight bid in
the stock was most likely market-related.  If that was the case,
then we should see EBAY trade measurably lower on any weakness
in the Nasdaq.  The level we're starting to watch closely is $50.
While traders with entry points between $55 and $59 might use
any weakness down to $50 to book some gains, a breakdown below
the $50 level could lead to substantial downside in the stock.
We'd prefer a weak market (COMPX, NDX, SPX) before entering on
a breakdown.  If the stock continues to hang around current
levels, then bearish traders could look for future rollovers
near resistance first at $54, or slightly higher around the
10-dma, which currently sits at $54.50.

THQI $50.94 +1.14 (-1.38) The overwhelming theme in the THQI
play is the stock's descending channel.  Notably, its pattern
of lower relative highs and lows.  Its early in the channel,
but the pattern is unmistakable.  The stock did rebound today,
but it under performed the broader Nasdaq measures, plus volume
was extremely light.  Further strength on light volume could
carry THQI to the upper-end of its channel, which currently sits
around $52.25.  A rollover from that level would serve as a
favorable entry point.  If further strength doesn't transpire,
then a breakdown below the $50 level could be used as an entry
point, but only in a declining market.  Our short-term downside
target is located at the $47 level, so traders taking positions
around current levels should look for an exit point if THQI
approaches that level in the coming sessions.  While there
exists some support at $48.50, the $47 level is currently the
site of the lower-end of THQI's descending channel.

SPC $48.01 +2.11 (+1.95) The Insurance Sector (IUX.X) rebounded
pretty much in-line with the broader market Thursday.  SPC was
one of the stronger stocks in the group but, with any luck,
the stock will rollover in the coming days.  SPC traded as high
as the $48 level today, which was short of the resistance area
at $48.50 that we wrote about in yesterday's profile.  Volume was
a bit higher today than yesterday, so we'll want to keep an eye
on trading activity in the coming trading days.  Ideally, we'll
see volume subside and SPC work up to the $48.50, subsequently
rolling over with weakness in the IUX.  That would set-up a good
entry point into the play.  While others might wait for a decline
below the 200-dma now at $45.80 before entering new positions.

AIG $80.35 +1.75 (-3.45) The breakdown in the Insurance sector
(IUX.X) yesterday caused AIG to breach its $80 support level for
the first time in over 3 weeks.  Despite the rebound on Thursday,
Wednesday's close below $79 opens the door for further declines
in the days ahead.  The stock is now solidly below the 200-dma
($81.36) and when combined with resistance (prior support) near
$81, will likely provide attractive entry points as the bulls
run out of steam.  Target a rollover between $81-82 for new
positions, confirmed by the IUX index heading back under the
$700 level.  Keep stops in place at $83.50 for now.

HD $38.40 +0.17 (-1.89) Pressured by the weakening economy,
especially the weakness in the Retail and Housing sectors,
shares of HD have once again reverted to a downtrend after
topping out near $43 in early October.  Since then the stock has
been finding resistance at the descending trendline (currently
at $39.25) solidified by the descending 10-dma ($39.45).  The
negative economic reports this week pushed the stock solidly
below the 20-dma ($39.94) and it looks like a further breakdown
in price is on the horizon.  Support near $37.25 held earlier in
the week, and cautious investors will want to wait for a drop
below that level before initiating new positions.
Alternatively, any failed rally below our $39.90 stop can be
used to enter the play.

MDT $40.90 +0.60 (-1.35) Health Care stocks, as measured by the
HCX index have been gradually weakening over the past couple
weeks, and this has created some downward pressure in shares of
MDT.  After declining to the $40 level on Wednesday, weary bulls
helped to prop up the stock and post a modest gain today.  With
the daily Stochastics bottomed in oversold and today's heavy
buying volume, we could be looking at the end of this play.  But
we're going to give it just a bit longer, using our $42.50 stop
as insurance.  Look for the rally attempt to fail below the $42
level if you want to enter the play, and target the $38 level as
a possible point to harvest some profits.


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

No New Puts for Thursday.


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

HD - The Home Depot $38.40 +0.17 (-1.89 this week)

A home improvement retailer, The Home Depot operates more than
1100 stores throughout the United States.  The do-it-yourself
warehouse retail stores offer building materials, home
improvement products and related furnishings.  Additionally,
the company provides lawn and garden products and an assortment
of services to both individual home-owners and independent
contractors.

Most Recent Update

HD $38.40 +0.17 (-1.89) Pressured by the weakening economy,
especially the weakness in the Retail and Housing sectors,
shares of HD have once again reverted to a downtrend after
topping out near $43 in early October.  Since then the stock has
been finding resistance at the descending trendline (currently
at $39.25) solidified by the descending 10-dma ($39.45).  The
negative economic reports this week pushed the stock solidly
below the 20-dma ($39.94) and it looks like a further breakdown
in price is on the horizon.  Support near $37.25 held earlier in
the week, and cautious investors will want to wait for a drop
below that level before initiating new positions.
Alternatively, any failed rally below our $39.90 stop can be
used to enter the play.

Comments

Some might argue that HD is at a crossroads.  The company
could benefit from an increase in housing demand, potentially
spurred by the Treasury's actions Wednesday.  While others would
argue that the consumer is weakening.  The employment report
Friday morning could reveal more about the current state of the
consumer and potentially move HD.  If the market doesn't like
what it hears from the Labor Department tomorrow morning, HD
could trade lower off the report.  Watch for early weakness in
the Retail Sector (RLX.X) and look for weakness in HD below
$37.25.

BUY PUT NOV-40*HD-WH OI=13027 at $3.10 SL=1.50
BUY PUT NOV-35 HD-WG OI= 9191 at $1.00 SL=0.50

Average Daily Volume = 7.39 mln



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