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Daily Newsletter, Thursday, 11/08/2001

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The Option Investor Newsletter                Thursday 11-08-2001
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)
************************************************************
       11-8-2001            High     Low    Volume Advance/Decline
DJIA     9587.52 + 33.15  9721.75  9558.39  1.5 bln   1681/1421
NASDAQ   1827.77 -  9.75  1888.39  1816.56  2.2 bln   1824/1789
S&P 100   576.62 +  2.98   584.49   573.64   Totals   3505/3210
S&P 500  1118.54 +  2.74  1135.75  1115.42
RUS 2000  439.06 -  1.74   446.11   438.49
DJ TRANS 2320.98 + 13.48  2335.20  2304.04
VIX        29.91 -  0.56    30.39    28.20
VXN        58.75 +  1.55    59.57    55.27
TRIN        1.09
Put/Call Ratio       .73
*************************************************************

Buying Opportunity Ahead?

If you listen to stock TV you could be really worried about the
next few weeks. Analysts abound that are building not a wall of
worry but a mountain of worry for investors to climb. Are they
right or wrong? Rumor has it that Barton Biggs from Morgan Stanley
went so far as to attend a siance to attempt to find out future
market direction. Anybody got money with Morgan Stanley?





All over or just all over the charts? With the demise of the new
bull market the topic of conversation on trading desks everywhere
do you get the feeling that you missed something important? I
do! What happened to investing for the future? What happened to
the 2Q recovery? For those of you that are poised to move to the
sidelines in despair I dedicate this commentary.

To begin the day the new jobless claims came in significantly less
than expected at only 450,000. A surprise to analysts that expected
another 500,000 week. The four week moving average also fell but
the continuing claims, those out of work for more than a week, rose
by +34,000 indicating that new jobs were still hard to find. This was
the lowest level in six weeks for new claims while the continuing
claims was at the highest level in 18 years. Still the positive
surprise in the declining number of layoffs could be yet another
ray of sunshine from our economic future.

The good news continued with the October Chain Store Sales which
at +2.3% more than doubled the September number and showed that
consumers were returning to the shopping malls as we near the
crucial holiday season. Discounters and wholesale stores continue
to lead the league as the more pricey stores were feeling the
impact of layoff pressures. More people are shopping Wal-Mart,
Kmart, Sams and CostCo than Saks and Ann Taylor? Imagine that!
Wal-Mart almost single handedly held up the retail sales numbers
with a +6.7% same store sales while specialty apparel stores fell
-7.8%. The Gap and Abercrombie & Fitch posted some of the weakest
numbers for the month.

The good news was bolstered at the open by a 50 point rate cut by
the European Central Bank and the Bank of England. The dual cut
on top of the better than expected economic news surprised the
markets and a +170 point Dow romp was underway. A reality check
as the day progressed prompted the generals who had driven the
markets up to wonder what happened to the support troops.

The selling started when the minutes of the October Fed meeting
were released and it was shown that the October 50 point cut was a
unanimous decision. The Fed felt the economy was already in recession
but also felt that the current stimulative policy as well as economic
packages being discussed would return the economy to its maximum
potential rate of growth by late 2002. The recovering consumer
confidence was crippled by the attack causing concern by the Fed
over the delay in that pending recovery. They said that business
investment in equipment and software was deteriorating rapidly
during the summer over concern about future sales and earnings.
A bright point was inventory liquidation, which was seen as
progressing in an aggressive manner. What killed the markets
was the outlook by the Fed that we may not have seen the bottom
and the tech correction could continue in the near term. Remember
this was from the October 2nd meeting.

The news from the minutes portrayed a Fed that was still very
worried about our economic future in the near term but confident
that the economy would rebound strongly in 2002. They appeared
ready to cut rates again in Dec/Jan and the Fed funds rate could
actually hit the discount rate of 1.5% by late January. Traders
were faced with possibly weaker conditions than they expected
and the markets sold off on profit taking while the news was
digested.

Further pressure on tech stocks was a statement from AMD that
said revenues in the 4Q were expected to be flat or up only
slightly. They said unit sales were approaching record levels but
pricing pressure was very strong and could impact profitability
going forward. Analysts did not expect them to be profitable in
2002 but AMD said that IF inventory excesses worked out and IF
the economic recovery commences and IF average selling prices of
memory chips stabilized and IF they could cut expenses by -40%
in the 4Q they could make 2002 a profitable year. Anybody want
to take that bet? AMD dropped over -$2 from the $14.67 high of
the day.

Another factor for the sell off was a deadlock in the debt
restructuring talks in Argentina. Everything appears to now be
on hold until next week and a default is expected if the delay
continues. While this is generally already priced into the U.S.
markets it is still an attention getter that worries traders
who remember Russia, Brazil and other past currency problems.

So what is an investor to do? Fight the Fed and ten aggressive
rate cuts with more to come? Everyone knows that the economy
is in the tank so no new news here. Almost every economic tidbit
points to a 2Q recovery and if that is true then now is the time
to buy stocks. This does not mean that there is not another
buying opportunity in our future. I said on Tuesday that profit
taking could be in our immediate future and recommended buying
any dip to 9500. The next day saw a drop to 9522 which was
immediately bought by investors. The Dow closed today at 9587
after breaking over 9700 intra-day. It would be nice to think
that the six day rally on the Dow and the eight day rally on
the Nasdaq could be topped with a one day intra-day -140 point
drop from the highs to allow profit taking to occur. Don't hold
your breath.

As the TV commentators have driven into investor consciousness
all day the semiconductor index was up +56% from its lows at
the high of the day. If ever there was an advertisement for
profit taking this was it. Still leaders like AMAT might have
lost ground but it only pulled back to immediate support from
two days ago. NVDA which had been up for seven days dropped
a miniscule -.88 to return to Tuesday's lows. BRCM dropped a
whopping -$4 from the highs of the day but still finished
positive and well above support from Tuesday. What is the point?

The point is the markets did pull back from their highs on
profit taking but only to recent support even in the sector
with the most profit. There is still an underlying strength
that has not been touched. Volume soared to 1.5B and 2.2B
respectively and advancers beat decliners at the close. Friday’s
economic reports should be market positive and there is still
a lot of money on the sidelines ready to buy any dip. Put in
perspective the Dow pulled back -140 points from its intra-day
high but is still up almost +600 points since the Nov-1st lows.
Not a bad performance in my book. Support is light at 9550 with
much stronger support at 9400. How ready are traders to sell
winners? IBM hit a new high of $115.56 today and a +$27.51 gain
since the Sept lows. It pulled back from that high to close just
under $114 for a FOUR cent loss. That is pretty bullish in my
opinion.

Will there be profit taking in our future? Absolutely! That
is why they made stop loss orders. Will it be Friday? It is
possible but in my opinion the only way to spell "profit taking"
from this point forward is "b-u-y-i-n-g o-p-p-o-r-t-u-n-i-t-y".
All aboard! The train is leaving and any bumps you feel over
the next couple weeks will be bear carcasses under our wheels.

Take profits on weakness and buy the dips!

Jim Brown
Editor


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

Disconcert
By Eric Utley

There's always reason to worry.  Maybe that's why many money
managers are bald or uneasy?  Who's a money manager you might
ask?  Well, are you trading your own account?  Sir, please pass
the Rogaine.  Ma'am, pass the Pepto.

Shorts are worried about the market's reluctance to go lower.
The bears may also be worried about the current Bullish
Percent readings, specifically in the Dow ($BPINDU), Nasdaq-100
($BPNDX)  and S&P 100 ($BPOEX) -- the three averages are in bull
confirmed mode.  To remind readers new to point & figure
charting, bull confirmed mode is the most bullish of market
conditions.  Maybe the market's reluctance to go lower and the
bull confirmed mode of the aforementioned averages are linked.
Maybe that's why the shorts have been so jumpy lately?

The bulls are worried about the averages' short-term overbought
conditions.  And the resistance zones in each.  The three major
averages, the Dow, NDX, and S&P 500 (SPX.X), retraced 50 percent
of their respective declines from the May highs with Thursday's
early weakness.  The three following charts better depict the
retracement and the overbought nature as measured by Daily
Stochastics.

INDU - Daily



NDX - Daily



SPX - Daily



It's no coincidence that the averages stopped where they did
Thursday morning.  The 50 percent retracement level is a big
one.  That's not to say that the averages can't or won't
push through on this leg higher.  However, overbought averages
near resistance give bulls cause for concern.

What worries me you might wonder?

A recent study conducted by The Single Male Fly Fisherman
Association found that men between the ages of 23 and 34 that
fished more than they dated were 75% less likely to marry.  They
instead grow set in their ways and increasingly selfish with
their time.  Opting for the pursuit of wild trout instead of
women.

I fit the demographic.  Now that is disconcerting.

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

Market Volatility

VIX   29.91
VXN   58.75

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.69        818,358       568,740
Equity Only    0.61        719,698       442,825
OEX            1.53         13,821        21,110
QQQ            0.86         73,424        63,390

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

Bullish Percent Data

           Current   Change   Status
NYSE          32      + 1     Bull Alert
NASDAQ-100    70      + 6     Bull Confirmed
DOW           57      + 3     Bull Confirmed
S&P 500       52      + 2     Bull Alert
S&P 100       50      + 2     Bull Confirmed

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  0.97
10-Day Arms Index  1.23
21-Day Arms Index  1.12
55-Day Arms Index  1.16

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      1681           1421
NASDAQ    1824           1789

        New Highs      New Lows
NYSE      109             26
NASDAQ     62             43

        Volume (in millions)
NYSE     1,494
NASDAQ   2,265

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

Commitments Of Traders Report: 10/30/01

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 traders, for the most part, maintained their most
bullish posture of the year last week.  % of OI was virtually
unchanged.  Open interest among small traders was a little more
volatile last week, but didn't reveal any conviction either way.

Commercials   Long      Short      Net     % Of OI
10/16/01      378,866   415,289   (36,423)   (4.5%)
10/23/01      377,177   413,658   (36,481)   (4.6%)
10/30/01      377,468   413,729   (36,261)   (4.6%)

Most bearish reading of the year: (111,956) -   3/6/01
Most bullish reading of the year: ( 36,481) - 10/16/01

Small Traders Long      Short      Net     % of OI
10/16/01      124,568     73,779   50,789     25.4%
10/23/01      127,016     71,212   55,804     28.2%
10/30/01      123,546     71,225   52,321     26.9%

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

NASDAQ-100

Commercial traders significantly added to short positions last
week by more than 3,000 contracts net.  Small traders went the
other way, adding to longs and shedding a few shorts.

Commercials   Long      Short      Net     % of OI
10/16/01       27,398     40,397   (12,999)  (19.2%)
10/23/01       29,920     40,358   (10,438)  (14.9%)
10/30/01       32,055     45,574   (13,519)  (17.4%)

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
10/16/01       12,901     6,893    6,008      30.5%
10/23/01       11,567     6,934    4,633      25.0%
10/30/01       12,725     6,475    6,250      32.5%

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 interests grew slightly less bullish last week as
measured by the drop in % of OI.  It's worth noting that that
trend has been in place for the past few weeks.  Small traders,
meanwhile, went back to more of a bearish stance from the week
ago period, albeit a modest change.

Commercials   Long      Short      Net     % of OI
10/16/01       25,402    10,267   15,135     42.5%
10/23/01       25,568    11,832   13,736     36.7%
10/30/01       25,872    12,556   13,316     34.7%

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
10/16/01        4,514    12,104    (7,590)   (45.7%)
10/23/01        4,902    11,900    (6,998)   (41.6%)
10/30/01        4,261    11,220    (6,959)   (45.0%)

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:
*****

ZION $49.17 -0.57 (+1.13) The BKX.X finished higher Thursday,
but was unable to prop up ZION.  The stock traded lower
throughout the day and closed near its low.  We don't like
the divergence and are dropping the play because of it.  A
bounce from current levels is possible, but we're choosing to
play it safe and stepping aside.

NVDA $49.75 -0.88 (+2.58) We've had a nice run in shares of NVDA
over the past couple weeks.  After rebounding from the 20-dma
near $40, it ran as high as $52.58 yesterday before the profit
takers appeared.  As we mentioned on Tuesday, NVDA announced
earnings after the close tonight, bringing our play to a
successful close.  For those of you that held over the
announcement, the after-hours trading has NVDA trading higher.
Use any morning strength to lock in those profits and move on to
the next winning play.


PUTS:
*****

DYN $36.50 +3.50 (+3.05) DYN has been all over the map in
the past two sessions with the revelation of its talks with
Enron.  The news is increasing risk in the play, plus the stock
closed on our stop at $36.50 today.  Look for any weakness
early Friday morning to cut losses and exit positions.

MDT $41.47 +1.57 (+1.01) The rebound in shares of MDT that began
on Tuesday transformed into a serious rally at the opening bell
this morning, and it didn't take long before our $41 stop was
just a spec in the rear-view mirror.  While the stock pulled
back a bit in the afternoon, it wasn't nearly enough to motivate
us to keep it on the put list, especially given the strong
buying volume during most of the day.  All positions should have
been closed on the early morning ramp.  Use any opening weakness
tomorrow to exit any remaining open positions.


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The Option Investor Newsletter                 Thursday 11-08-2001
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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* FREE REAL-TIME quotes and custom option chains
* $1.50 Per Contract (10+ contracts) or $14.95 Minimum. No Hidden Fees.
* ZERO minimum deposit required to open an account
Visit: http://www.optionsxpress.com/marketing.asp?source=optinv1

Note: Options involve risk. Risk disclosure:
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********************
PLAY UPDATES - CALLS
********************

SPW $106.14 -0.81 (+2.49) SPW hit its 200-dma Thursday.  Actually,
it hit $108.10, while the 200-dma currently sits at $108.01.
Close enough.  Traders who entered down around $100 could've
used the move up to $108 as an exit point as we previously
planned.  For those who didn't exit near the 200-dma Thursday,
consider raising stops to protect profits because it looks like
SPW may further pullback.  A consolidation of recent gains is
normal and healthy, so we're not uneasy with weakness from
current levels.  A pullback to the $104 area would be routine and
allow traders to target new entries into this strong stock.  The
$104 level is the platform of SPW's recent breakout as well as
the current site of its ascending trend line.  Look for a pullback
and subsequent bounce from $104; such entries can be managed with
a tight stop.

SUNW $13.27 +0.68 (+1.83) We've captured about 22% in the
underlying since initiating coverage on this play.  Don't be
afraid to book some gains if you entered SUNW early.  The stock
remains one of the stronger big cap tech stocks, noting its out
performance Thursday.  But discipline should dictate at least
booking partial gains on positions after the recent run.  At the
very least, considering tightening stops.  SUNW hit $14 early
Thursday, but pulled back down to the $13 level near the close.
Further weakness is probable if the Nasdaq-100 (NDX.X) continues
to slide.  If the market drags SUNW lower, start thinking entries
first at $12.50 and second around $12.  Both levels have the
potential to provide support and allow SUNW to bounce, but the
stock still needs the NDX to work measurably higher.  Don't try
to fight the NDX if its declining.  Wait for an advancing market
and look for SUNW to bounce.  Stops have been raised to $11.50,
but those with open positions at lower prices should consider
a tighter stop.

SIAL $39.12 -2.05 (-0.29) What a dilemma!  The CEX.X traded
slightly lower today, but for the most part held tough.  Meanwhile,
SIAL shed 5%.  But, the stock stopped on its aggressive ascending
support line, anchored by the relative low at $36.25.  That support
line currently sits at $39.  If the stock's going to bounce from
its trend line again, it had better do it soon.  New entries can
be taken at current levels, but only with tight stops as any
further weakness Friday would give us cause to drop the play.  If
the stock's pattern of rebounding from the support line holds, it
could go on to a new relative high around $42, which is why we
still like the play.  Traders who enter calls early Friday will
be able to quickly discern whether or not SIAL is going to bounce
because the stock is right on its trend line.  In other words,
all bets are off if SIAL dips further Friday morning.

AMAT $38.40 -0.94 (+0.43) Semiconductor stocks have been leading
the latest Technology rally, so it was only natural to expect
some profit taking in the group.  Up sharply since the September
lows, shares of AMAT have found solid resistance near $41 the
past 2 days and we saw selling pressure intensify in the
afternoon, dragging our play back to the $38 support level near
the close.  We could consider new positions on a bounce from the
$38 support level, but it looks like there could be a bit more
froth that needs to be taken out before initiating new positions.
The 20-dma (currently $35.43) has been acting as support for the
past 3 weeks, and we would expect it to continue to do so.
Target new positions on a bounce either at the 10-dma ($36.98)
or from the $36 support level, which is also the level of our
stop.  Don't forget to watch for renewed strength in Chip
Equipment stocks and keep November 14th on your calendar.  That
is the day AMAT reports earnings, and we'll want to exit any
open positions before that.

BAC $63.10 +0.35 (+2.23) It is hard to have a meaningful broad
market rally without the participation of Financial stocks, so
the rally over the past 6 weeks has been encouraging with the
Banking sector (BKX.X) advancing from $700 to as high as $845
on Thursday.  BAC has definitely been a winner in the sector
too, as it has moved more than $13 off its September lows.
Confirming the strength of the move, our play handily cleared
the $61 resistance level earlier this week and has been
steadily marching higher.  At least until the profit taking
appeared this afternoon.  While BAC dropped a bit from its daily
highs, this was to be expected as a consequence of the stock's
first test of the $64 resistance level since the September
attacks.  Use the dip as an opportunity to initiate new
positions, so long as BAC can hold above the $61 level, also the
site of our stop.  While a dip to $61 would be the preferred
entry point, we may find that eager bulls appear to prop the
stock up near the $62 intraday support level, and that would
also make for an attractive entry point, so long as the bounce
comes on solid volume.

BRCM $41.40 +0.65 (+3.55) Well, we knew that profit taking was
due sometime soon, and we got it this afternoon.  The bulls
rallied BRCM again in the morning, with the stock rising all the
way to the $44.50 level, but that was all she wrote.  Afternoon
weakness erased nearly all the day's gains, as the 200-dma
($42.78) held as resistance for now.  While there seemed to be a
bit of support near $41 this afternoon, we'll be looking for a
dip back to firmer support (just above $40) before buying this
dip.  Target new positions on a dip and bounce from above the
$40 level or possibly the ascending trendline (now at $37.75),
also the site of the 10-dma.  We'll need to see renewed strength
in the Semiconductor index (SOX.X) to confirm that the bulls are
still interested in driving chip stocks higher.  Keep stops in
place at $36.

IBM $113.81 -0.04 (+4.31) After leading the broad market in its
break out over major resistance, shares of IBM needed to
consolidate a bit.  Tuesday's monster rally through the $111
resistance level moved the stock back into the $111-120 trading
range from earlier in the year, but the bulls have been having a
hard time pushing the price higher.  Resistance is holding at
the $115.50 level, and we'll need to see another surge in buying
volume to clear that level.  It would be nice to see a bit more
of a pullback, possibly to the $111 level with the supportive
10-dma currently resting at $110.77.  That would give us an
attractive entry point as the stock bounces and confirms prior
resistance as new support.  We're leaving our stop in place at
$109, as our expectation is that IBM will lead the broad markets
higher.  An alternative entry point would be to initiate new
positions as the stock powers through the $116 level on strong
volume.

MSFT $64.42 +0.17 (+3.02) Resistance at the $66 level is proving
to be a tough nut to crack in the post-settlement world.  MSFT
rallied into the announcement that the DOJ anti-trust lawsuit
had been resolved and now bullish investors are trying to decide
if the stock deserves to be driven even higher.  Volume has
remained strong over the past two days as the stock has
consolidated its recent gains.  Support should be firm near
$62.50 (also the site of the 200-dma) and a dip to that level
could provide for attractive entries for the next leg higher.
This is also the site of the six-week ascending trendline,
reinforcing the validity of that support level.  MSFT should
continue to be one of the stronger performers if the broad
markets can push above recent resistance, so we could also
consider new positions as the stock rallies through the $66
level.  Keep stops in place at $61.

QLGC $44.28 -2.66 (+3.44) Profit-taking or reversal?  That is
the $64,000 question, and the answer is currently unclear.
After breaking out above the $44 level earlier in the week, QLGC
reversed from the $49 resistance level this afternoon, dropping
right back to the level of its breakout.  What has us concerned
about the play is the fact that the decline came on heavy volume
(50% over the ADV) and we could be seeing the end of the stock's
advance for now.  We need to see support hold near current
levels, or possibly as low as the 200-dma (now at $42.68) before
initiating new positions.  Keep stops in place at $41.50 and
target new entries on a dip and strong (read: volume) bounce from
above the support levels listed above.


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


AOL - AOL-Time Warner $36.45 +1.95 (+4.44 this week)

AOL-Time Warner is an integrated, Internet-powered media and
communications company.  The company was formed when America
Online and Time Warner merged in January, 2001.  The company's
America Online branch consists of interactive services, Web
brands, Internet technologies and electronic commerce.  The
Time Warner division contributes cable television systems,
filmed entertainment and television production.  Additionally
the joint company is involved in cable and broadcast
television networks, recorded music, music publishing and
magazine and book publishing.

Ready for another breakout play?  Shares of AOL have been
marching higher for the past week, and broke above the $34-35
resistance level on Tuesday on strong volume.  After a bit
of profit taking yesterday, the bulls were back in charge on
Thursday, driving the stock through $36 for the first time in
over 2 months.  Driving the move today was strength in the
Publishing sector.  With strong gains in shares of NYT, TRB and
DJ, AOL added that strength to its arsenal and charged through
resistance on continued heavy volume.  After rising more than
14% over the past 4 days, we would like to see a bit of profit
taking to give us a better entry point.  A dip and bounce from
the $34 level would be good, although we could get lucky with
an intraday dip near $33.  Support is stronger here and is
reinforced by the ascending trendline ($32.75), the 10-dma
($33.26) and the 20-dma ($32.69).  Look to enter when the profit
taking begins to abate and is replaced by more strong buying
near the above-mentioned support levels.  For you momentum
traders, alternative entries can be taken as AOL rallies through
the $37 level.  That will open the door for a run at the next
major resistance between $39-40.  Place stops at $32.50.

***November contracts expire next week***

BUY CALL NOV-35 AOE-KG OI=36776 at $2.00 SL=1.00
BUY CALL NOV-37 AOE-KU OI=11219 at $0.60 SL=0.00
BUY CALL DEC-35*AOE-LG OI=15073 at $3.40 SL=1.75
BUY CALL DEC-37 AOE-LU OI= 7634 at $2.00 SL=1.00
BUY CALL DEC-40 AOE-LH OI= 6572 at $1.05 SL=0.50

Average Daily Volume = 18.1 mln



GE - General Electric $40.35 +1.00 (+2.39 this week)

As one of the largest and most diversified industrial companies
in the world, GE's products include major appliances, lighting
products, industrial automation equipment, medical diagnostic
equipment, electrical distribution and control equipment and
power generation and delivery products.  Additionally, GE
provides commercial and military aircraft jet engines,
locomotives and nuclear power support services.  Through the
National Broadcasting Company (NBC), GE delivers network
television services, operates television stations and provides
cable, Internet and multimedia programming and distribution
services.

As the broad market declined prior to the September attacks, GE
was finding consistent support at $40, right at the pivotal
200-week moving average.  When the stock broke below that level,
it opened the door for a significant decline.  The events of
September 11 just hastened that decline, and GE traced a low at
$28.50 on September 21st.  Since then the stock has been
battling its way higher along with the broader markets.  Well,
don't look now, but today GE vaulted above the $40 level for the
first time in over 2 months.  Today's strength is important
because the stock closed near its high of the day, despite the
fact that the broad market averages declined to close near their
daily lows.  Can you say relative strength?  That's right, GE
looks poised to head higher on its own merits, but if the broad
market can continue to work higher, the stock should lead the
bullish charge.  We wouldn't be surprised to see GE charge
higher from here, but there is a fair amount of congestion in
the $40-42.50 area.  The best case for new entries would be a
profit-taking dip to the $39 or even $38 level, followed by a
resurgence of strong buying volume.  A decline below $37 would
definitely knock GE off its bullish path, so that is where we
are setting our stop.

***November contracts expire next week***

BUY CALL NOV-37 GE-KS OI=20275 at $3.10 SL=1.50
BUY CALL NOV-40*GE-KH OI=47608 at $1.15 SL=0.50
BUY CALL DEC-37 GE-LS OI= 7634 at $3.80 SL=2.50
BUY CALL DEC-40 GE-LH OI=22311 at $2.15 SL=1.00
BUY CALL DEC-42 GE-LV OI=12466 at $1.10 SL=0.50

Average Daily Volume = 21.3 mln



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

AHC $59.15 +0.86 (+0.79) The broader energy sector (OIX.X, OSX.X)
dragged AHC higher Wednesday and again Thursday.  But the stock
rolled over at its 10-dma right around the $60 level, also the
site of our stop.  We're monitoring the play closely as further
strength in the energy sector would probably allow AHC to break
above the $60 level.  Watch the two aforementioned sector indices
closely Friday.  If they weaken, look for AHC to fall below the
$58.50 level where new put entries could be had.  However, further
upside in the stock into Friday's session would give us reason
to axe the play.

PPDI $24.94 +0.85 (-1.06) Early Thursday morning it looked as if
PPDI would breakdown below $24.  But the brief weakness below
that level proved to be head fake as the stock rebounded sharply
higher.  Still, PPDI is weak relative to the market and could
eventually break below the $24 level if the averages weaken over
the short term.  Keep a close watch on the BTK.X and the DRG.X
when gauging PPDI.  Weakness in the two in conjunction with a
high volume break below $24 could give the green light to enter
puts.  Look for resistance - potential rollover sites - to form
between $25.50 and $26.

CVTX $33.25 -3.75 (-3.21) After drifting lower for much of the
past 3 weeks, it was only natural that we'd see a bit of bargain
hunting as the stock found support at the $36.50 level.  That
buying pushed shares of CVTX up to the descending trendline
(near $40) yesterday, providing an attractive entry for new
plays.  The breakdown we were waiting for materialized this
morning, as the stock sold off on heavy volume (more than triple
the ADV).  The selling accelerated as CVTX fell under support
and we saw it trade briefly below $32 before some buyers stepped
in to halt the slide.  While it looks like there could be more
downside in store, this may be a good time to lock in some
profits, and then look for another entry point in the days
ahead.  Look for a rebound to roll over in the vicinity of the
$36 resistance level (old support) to trigger your entry into
new positions.  It looks like we could still test the $28-30
level before the play is done.  Move stops down to $39.


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

BRL - Barr Labs $66.68 -3.87 (-4.31 this week)

Barr Labs is a pharmaceutical company engaged in the development,
manufacture, and marketing of generic and proprietary prescription
pharmaceuticals.  The company was formed in October 2001 as the
result of a merger between a subsidiary of Barr Labs and Duramed
Pharmaceuticals.

How about a technical breakdown?  Specifically, a breakdown below
the 200-dma.  BRL lost its critical 200-dma Thursday at the $69.72
level.  The stock bounced from its 200-dma on three separate
occasions in the recent past.  But not Thursday.  The break was
big in terms of percentage move and was accompanied by convincing
volume.  Trading activity topped 1.6 million shares Thursday,
all of which was declining volume except for the last hour of
trading.  The steady, heavy selling of the stock intraday revealed
serious selling.  It's evident that supply overwhelmed demand.
Looking lower, BRL doesn't have any meaningful support immediately
below current levels.  The next level is located at $62 which is
more than $4 below current levels.  Traders who like to enter
put plays into weakness can look for entries early Friday.  Target
shoot a decline past Thursday's intraday low at $65.50, with a
downside target of $62 over the short-term.  It's possible that
the stock could retest its 200-dma from below.  If a bounce does
occur, look for a rollover at the 200-dma.  Our stop is in place
at $71.  Keep close tabs on the Drug Sector Index (DRG.X) when
trading BRL.  Continued weakness in the DRG.X should pressure
BRL and would confirm entries at current levels or lower.

***November contracts expire next week***

BUY PUT NOV-70*BRL-WN OI=1250 at $4.70 SL=3.50
BUY PUT DEC-65 BRL-XM OI= 115 at $4.60 SL=3.50

Average Daily Volume = 1.3 mln



CAH - Cardinal Health $61.50 -2.40 (-3.56 this week)

Cardinal Health is a provider of products and services to
healthcare providers and manufacturers, helping them improve
the efficiency and quality of their healthcare services and
products.

Capital has been flowing from the defensive sectors of the
market recently.  Fairly quickly at that.  The sector
rotation makes sense if the market expects the economy to
recover in the early or middle part of 2002.  Fund managers
will want to be in the more business cycle sensitive and
growth areas of the market instead of defensive issues such
as healthcare.  The recent price action in CAH smells of
rotation.  The stock broke to a new relative low today and
only has minor support at the $60 level.  A breakdown below
$60 could see CAH revisit its year low down around $57.  Bearish
traders looking for entries can use further weakness from
current levels to establish new positions.  However, confirm
weakness in the broader healthcare space by monitoring the
HCX.X before entering put plays on weakness.  The stock has
been volatile recently, so a sharp rebound from current levels
isn't unexpected.  In the event of a rebound, however, look
for a rollover near resistance first at the $64 level.  Our
stop is initially in place at $66.

***November contracts expire next week***

BUY PUT NOV-65*CAH-WM OI=3608 at $4.00 SL=3.00
BUY PUT DEC-60 CAH-XL OI= 326 at $2.85 SL=1.75

Average Daily Volume = 1.88 mln



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

IBM - Int'l Business Machines $113.81 -0.04 (+4.31 this week)

International Business Machines uses advanced information
technology to provide customer solutions.  The company provides
value to its customers through a variety of solutions including
technologies, systems, products, services, software and
financing.  IBM's three hardware product segments are comprised
of Technology, Personal Systems and Enterprise Systems.  Other
major operations consist of a Global Services segment, a
Software segment, a Global Financing segment and an Enterprise
Investments segment.

Most Recent Update

After leading the broad market in its break out over major
resistance, shares of IBM needed to consolidate a bit.  Tuesday's
monster rally through the $111 resistance level moved the stock
back into the $111-120 trading range from earlier in the year,
but the bulls have been having a hard time pushing the price
higher.  Resistance is holding at the $115.50 level, and we'll
need to see another surge in buying volume to clear that level.
It would be nice to see a bit more of a pullback, possibly to
the $111 level with the supportive 10-dma currently resting at
$110.77.  That would give us an attractive entry point as the
stock bounces and confirms prior resistance as new support.
We're leaving our stop in place at $109, as our expectation is
that IBM will lead the broad markets higher.  An alternative
entry point would be to initiate new positions as the stock
powers through the $116 level on strong volume.

Comments

IBM held support Thursday after the broad market sell-off.  The
stock could bounce Friday if the averages rebound.  Look for
early strength in the Dow and S&P, and watch for buyers to
step into IBM around $113.75.  A move back above the $114 level
could signal a short term rebound.

***November contracts expire next week***

BUY CALL NOV-105 IBM-KA OI=15576 at $9.30 SL=7.00
BUY CALL NOV-110 IBM-KB OI=20348 at $4.90 SL=3.75
BUY CALL NOV-115*IBM-KC OI=15187 at $1.70 SL=1.00
BUY CALL DEC-110 IBM-LB OI= 7983 at $7.60 SL=5.50
BUY CALL DEC-115 IBM-LC OI= 5590 at $4.60 SL=3.50

Average Daily Volume = 8.56 mln



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