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Daily Newsletter, Thursday, 11/15/2001

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The Option Investor Newsletter                Thursday 11-15-2001
Copyright 2001, All rights reserved.                       1 of 2
Redistribution in any form strictly prohibited.

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charts and graphs, click here:
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Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       11-15-2001           High     Low    Volume Advance/Decline
DJIA     9872.39 + 48.78  9903.04  9808.25  1.4 bln   1492/1644
NASDAQ   1900.57 -  2.62  1922.12  1882.84  2.0 bln   1721/1917
S&P 100   590.44 +  1.28   592.36   585.86   Totals   3213/3561
S&P 500  1142.24 +  1.03  1146.46  1135.06
RUS 2000  449.39 -  3.43   453.04   449.39
DJ TRANS 2454.00 + 61.03  2458.48  2389.71
VIX        27.78 -  0.82    29.10    27.45
VXN        57.45 +  1.07    59.84    56.64
TRIN        0.95
Put/Call Ratio       .71
*************************************************************

Weakness Right On Schedule

Each of the last two days the Nasdaq slammed to a dead stop just
below 1925 resistance at 1922. The Dow struggled to another gain
but is looking tired and ready to roll over at 9900. After a great
week and a +465 point rebound off Monday's lows we should not
complain if the Dow needs a day or two to rest. That rest is likely
to be soon and traders everywhere should expect it.





We are definitely not complaining about a break even day for the
Nasdaq after cautious comments by AMAT on Wednesday night. AMAT
said that the recovery in the chip sector had been postponed due
to lack of confidence by their customers to make commitments
going forward. AMAT missed estimates by a penny and they projected
weaker revenues ahead. This depressed many of the semi stocks and
slowed the Nasdaq to a crawl.

The HWP earnings cheered the street but not enough to power techs
to another strong gain. Much of the drag was traders waiting to
see what damage Dell might do with their earnings after the close
today. They beat the street by a penny but that was the extent of
the good news. They said server sales fell -18% and felt that the
corporate market would remain week. The CFO said a mid-2002 PC
recovery was still "possible" but the tone was not positive. Dell
said they were going to maintain an aggressive pricing strategy
which could squeeze earnings by all the box makers. Not a cheerful
outlook but Dell was trading flat in after hours on their growing
market share. They did lower guidance on the conference call and
while analysts still like Dell they are cautious on the lack of
substantial gains going forward.

Echoing the slower recovery comments from Dell was Agilent which said
they would cut 4,000 jobs, twice what they previously announced, and
noted that orders were falling for semiconductors. CEO Ned Barnholt
said "the recovery will be delayed and more gradual than we expected."
It will not take many more of these comments to take the wind out
of the market's sails.

The economic picture improved again but only slightly with a drop
in the new unemployment claims by -8,000 to 444,000 for last week.
This was a small victory since continuing claims, those still out
of work from prior weeks, rose to an eighteen year high of 3,826,000.
This is the highest unemployment since February 1983. The jobless
claims could continue to cause a drag on the markets due to their
impact on consumer confidence. The market is factoring in a recovery
over the next couple quarter but rising unemployment is not showing
it to be happening. Citigroup announced another -7,800 job cuts and
American Express also said they would cut more than the previously
announced -6,100 jobs. The inventory correction cycle suffered a
setback with a -0.5% drop in business inventories in September. The
inventory to sales ratio rose to 1.45 showing that the correction
had slowed and even lost ground.

Oil stocks fell as a group again after OPEC said they were not going
to cut production unless non-OPEC countries did also. Mexico and
Norway indicated that they might go along but Russia, who needs
money by the tanker full, was reluctant to follow suit. OPEC said
that if they could not get a agreement on production cuts they
would be willing to let oil fall to as low as $10 a bbl to force an
agreement. The prospect of $10 oil hammered oil stocks of all types.
Oil that cheap prevents new drilling and exploration as not profitable
and would have a prolonged impact on the sector. Eventually OPEC
will win but until then travelers will benefit from the lowest gas
prices in over two years. Oil dropped almost $2 on the news to close
at $18.06 per barrel.

So what now? Traders should be very careful about opening new
positions on Friday. I warned readers earlier in the week that the
Nasdaq would likely suffer profit taking at 1925 and that appears
to be coming to pass. The Dow is having trouble at 9900 and even
though Thursday was a decent +48 point gain the rate of gains is
slowing. The rebound off the Nov-1st low at 9014 and the 9409 low
from Monday has produced some serious profits for investors. Many
of them are hearing the "slowing recovery" comments this week and
will be anxious to take those profits off the table soon.

Economic reports on Friday are a toss up. CPI, Capacity Utilization
and Industrial Production. This could easily influence investors
to throw money at the markets or cash out depending on the results.
Economy slowing or recovering, tomorrow could give us a clue.

The possibility of a down day on Friday is good. Traders need to
tighten up stops and be prepared to move to the sidelines. There
is growing uncertainty about the recent gains and the news from
Afghanistan is about over. With the Taliban banished to the hills
and caves the intensity of the "good" news will slow. This surprise
rout is now already priced into the market and we will be back to
trading on fundamentals again. Look for a "gap and trap" should
we open higher and raise your stops on any big gains at the open.
The more likely scenario is a down open and a weak day. I do not
expect a major sell off but more of a consolidation at a slightly
lower level before another attack on the highs. The S&P has support
at 1130 and the Dow looks better than any of the major indexes and
could hold above the 9750 level. The Nasdaq could easily pull back
to just above 1860. None of these levels represent a major change
in the bullish sentiment but a consolidation level on profit taking.

I would be hard pressed to buy any dips on Friday. I would like to
wait until Monday and see what the markets give us. Thanksgiving
week is normally bullish but we have already had a strong November.
I think caution is the key word on Friday and traders should tighten
stops and plan to sit the weekend out if those stops are triggered.

Take profits on weakness and wait patiently!

Jim Brown
Editor@OptionInvestor.com


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

Econ 101: Trough
By Eric Utley

The Dow pushed higher from its most recent breakout point
at 9700.  The S&P advanced fractionally higher.  But the
Nasdaq-100 stalled at its resistance at 1600.  The Nasdaq-100's
inability to follow the lead of the two other major market
averages may hint towards a pullback in tech.  Although that
much remains to be seen.

The three (Dow, S&P, NDX) are in bull confirmed -- the most
bullish of market conditions.  That alone may lend a bid to
the market.  Plus, the defensive nature of the market is
working away.  The fear gauges in the CBOE Market Volatility
Index (VIX.X) and the Nasdaq-100 Market Volatility Index (VXN.X)
are trending decidedly lower.  The VIX.X traced a new relative
low Thursday at 27.45.  The fear gauges are not the only
market indicator revealing investor optimism.  The defense
contractors sold off sharply this week.  At this point, the
market is discounting a Taliban defeat in the near future.

The bond market action was wild Thursday.  Thankfully Jeff
Bailey documented the day in debt.  Investors fled treasuries
Thursday evidenced by the sharp rise in yields across the curve.
Part of that money may have shifted to corporate debt, such as
the large offering from AT&T (NYSE:T).  But some of that money
may be marked for stocks for two reasons: The war on terrorism
is going well and the U.S. economy appears to be rebounding.
The two lower the risk associated with stocks.

Wild price swings were noted in the energy market.  The Oil
Service Index (OSX.X) shed 18 percent in the last two days!  I
can't think of a better time for the price of energy to
plummet.  Once economic activity picks up, the price of energy
will comeback to compensate for increased demand.  But the low
cost of energy is a good thing right now for businesses and
consumers alike.  Take a look at the recent run in Chemicals
(CEX.X), Papers (FPP.X), and Transports ($TRAN).

The market looks forward six to nine months.  Maybe that's
why the Qualcomms (NASDAQ:QCOM) and Amats (NASDAQ:AMAT) aren't
getting knocked out for their lousy guidance.  Could it be that
the bad news is finally priced in?  Could it be the bottom of
the cycle?  Could it be a new bull market?  Sure smells like it.

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

Market Volatility

VIX   27.78
VXN   57.45

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.71        935,114       661,822
Equity Only    0.60        777,209       467,090
OEX            1.57         22,229        34,868
QQQ            1.36         61,321        83,590

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

Bullish Percent Data

           Current   Change   Status
NYSE          34      + 0     Bull Alert
NASDAQ-100    74      + 1     Bull Confirmed
DOW           60      + 0     Bull Confirmed
S&P 500       57      + 0     Bull Confirmed
S&P 100       55      - 1     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  0.87
10-Day Arms Index  0.92
21-Day Arms Index  1.12
55-Day Arms Index  1.12

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      1492           1644
NASDAQ    1721           1917

        New Highs      New Lows
NYSE      112             40
NASDAQ     76             45

        Volume (in millions)
NYSE     1,463
NASDAQ   1,996

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

Commitments Of Traders Report: 11/06/01

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 grew slightly more bearish last week.  Their
positioning wasn't pronounced.  Small traders added more
contracts.  Their collective position grew less bullish.

Commercials   Long      Short      Net     % Of OI
10/23/01      377,177   413,658   (36,481)   (4.6%)
10/30/01      377,468   413,729   (36,261)   (4.6%)
11/06/01      376,807   416,063   (39,256)   (5.0%)

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
10/23/01      127,016     71,212   55,804     28.2%
10/30/01      123,546     71,225   52,321     26.9%
11/06/01      132,106     81,208   50,898     23.9%

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 interest grew measurably less bearish last week
by adding a substantial number of new long positions.  Their
net short position dropped by 5,000 contracts.  Small traders
went the other way by shedding long positions and adding to
shorts.

Commercials   Long      Short      Net     % of OI
10/23/01       29,920     40,358   (10,438)  (14.9%)
10/30/01       32,055     45,574   (13,519)  (17.4%)
11/06/01       39,410     47,890   ( 8,480)  ( 9.7%)

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
10/23/01       11,567     6,934    4,633      25.0%
10/30/01       12,725     6,475    6,250      32.5%
11/06/01       11,406     8,143    3,263      16.7%

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 added a few longs and covered a few shorts
last week to increase their bullish position, which is about
1,000 net long contracts away from the year's most bullish
reading.  Meanwhile, small traders went the other way.  Small
traders are 65 net short contracts away from their most
bearish reading of the year.

Commercials   Long      Short      Net     % of OI
10/23/01       25,568    11,832   13,736     36.7%
10/30/01       25,872    12,556   13,316     34.7%
11/06/01       25,977    11,951   14,026     37.0%

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
10/23/01        4,902    11,900    (6,998)   (41.6%)
10/30/01        4,261    11,220    (6,959)   (45.0%)
11/06/01        3,569    12,281    (8,712)   (55.0%)

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:
*****

No Dropped Calls for Thursday.


PUTS:
*****

No Dropped Puts for Thursday.


***********************************************************
DAILY RESULTS
***********************************************************

Please view this in COURIER 10 font for alignment
*************************************************


CALLS              Mon    Tue    Wed    Thu

SPW     114.14    0.18   2.93   4.69   0.27  Still very strong
SUNW     13.49   -0.19   0.40   0.13   0.27  Trading range
PMCS     22.00    1.05   1.53   0.19  -0.29  Inside day
FFIV     21.27    1.23   1.59   1.13  -1.87  Profit taking
PDLI     36.23    0.27   3.12  -0.79   0.18  Held back by BTK.X
BRCM     44.36    0.71   1.15  -0.21  -1.02  Consolidating
IBM     114.05    0.78   1.84  -2.35  -0.30  Pullback to support
BAC      63.29   -0.03   0.44   0.04  -0.21  Resistance at $64
AOL      37.48    0.67   1.57   0.25  -0.77  Pulling back
GE       41.43   -0.98   1.13   0.32   0.55  Moving higher
QLGC     47.81    1.01   1.08  -0.79   0.51  Tightening range
MSFT     65.94    0.58   2.11  -1.87  -0.01  Near support
CMVT     23.88    0.14   2.15   1.28  -0.81  Big rally Wednesday
CHKP     40.26    2.55   3.39  -1.15  -0.49  Backing and filling

PUTS

BRL      65.00    0.66  -5.82   1.57   0.94  Relief rally
NOC      89.02   -1.04  -4.17  -0.88  -2.49  Selling off sharply
MXIM     54.06    1.70   2.24  -0.87  -0.18  New, extended chip


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


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The Option Investor Newsletter                 Thursday 11-15-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/8715_2.asp


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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:
http://www.optionsxpress.com/welcome_risk_index.htm
**************************************************************


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

SPW $114.14 +0.27 (+7.89) SPW sharply advanced Wednesday.  The
stock gapped higher and proceeded to advance into Thursday's
session, albeit at a much more modest rate.  The gap higher
Wednesday morning made it difficult to enter new call plays.
But the gap higher may have allowed traders with open positions
to take profits into strength.  Those still holding calls entered
between $100 and $106 may think about taking some money off the
table at current levels.  Although SPW hasn't shown signs of
weakness, it's due for profit taking.  Though it could work up
to the $115 area before encountering short-term resistance.  At
this point in the trend, entering new call plays into strength
may not be the most prudent approach; SPW is overbought.
Instead, waiting for a pullback to support is the preferred
strategy.  The stock may need to fill its gap, which would bring
it back down to $110 where we can look for an entry.  Our stop
has been raised to $108.

SUNW $13.49 +0.27 (+0.57) SUNW is holding between its trading
range.  Support at $13 continues to attract buyers while
resistance just above at $13.50 continues to contain the
stock's rally attempts.  A breakout above the $13.50
resistance zone could carry SUNW to its relative high at $14.
But the stock is likely to encounter resistance at $14.  A
broad tech-based rally would most likely carry SUNW above its
short-term resistance levels.  Traders looking to enter SUNW
calls on a breakout should confirm such a strategy with
strength in the Nasdaq as well as the Hardware Sector Index
(GHA.X).  Otherwise, entering on weakness near support at
$13 may allow for a solid entry with limited risk as tight
stops should accompany such a strategy.

PMCS $22.00 -0.29 (+2.48) PMCS traced an inside day Thursday.
Its day high was lower and its low was higher than the previous
day.  The inside day is indicative of indecision.  It can mark
either an end in the recent trend or a brief pause before the
resumption of trend.  Traders with open positions should keep a
close eye on weakness Friday for it could portend a deeper
pullback in PMCS.  Levels to monitor might include Wednesday's
low at $21 and Thursday's low at $21.35.  Tight stops would help
to protect against potential downside.  Keep in mind, however,
that a bounce from support may offer a favorable entry point
if PMCS resumes its advance.  Monitor the Semiconductor Sector
(SOX.X) along with the Networking Sector (NWX.X) for more
insight into PMCS.  If the stock advances early Friday, watch
for a breakout above the $22.50 to $23 zone.  Such a move may
portend an advance to $25 over the short-term.

FFIV $21.27 -1.87 (+2.08) FFIV measurably pulled back Thursday.
There wasn't news to spark the sell-off.  It's likely that
profit taking was to blame.  The stock traded to its relative
highs Wednesday around the $23 level.  That move may have
allowed traders to take profits.  We were looking for FFIV to
retest its relative highs, which is exactly what the stock did
Wednesday.  The pullback Thursday has us looking for FFIV to
return to a support level from which it might bounce.  Traders
might look for a bounce from the $20.50 level, which would
fill the stock's gap formed Tuesday morning.  The $20 level may
provide psychological support and a potential bounce on extended
weakness.  Below $20, the ascending trend line currently sits
between the $19 and $19.50 level.  When watching for a bounce,
monitor the Networking Sector Index (NWX.X) for insight into
FFIV.  If the NWX.X is weakening, it's best not to go against
the trend.

PDLI $36.23 +0.18 (+2.51) PDLI tracked the broader biotech
sector closely Thursday.  The AMEX Biotechnology Sector Index
(BTK.X) traded fractionally higher into the close in the wake
of an analyst's positive comments on Celera (NYSE:CRA).  Both
PDLI and the BTK.X are marking time at current levels.  The
BTK.X is finding resistance between the 590 and 600 level.
Meanwhile, PDLI is having difficulty advancing past the $36.75
to $37.50 zone.  A breakout in both could offer bullish traders
an entry into PDLI call positions as the stock doesn't have
meaningful resistance until the $43 level.  But the breakout
in PDLI is likely to develop unless the BTK.X trades higher.  If
the BTK.X does weaken from current levels, look for the index
to find support first at 540, and second at 515 to 520.  An
extended pullback in the BTK.X could pressure PDLI down to $33.50,
where bullish traders can look for an entry upon a bounce.

AOL $37.48 -0.77 (+0.38) Another day of mild profit-taking saw
AOL post a fractional loss, as investors spent the day digesting
the gains of the past 2 weeks.  Yesterday's action confirmed
that there is significant resistance in the $39-40 level,
confirmed by the 38% retracement of the decline from the May
highs, which rests at $40.33.  While the bulls may be running
out of steam here, as demonstrated by the rollover in daily
Stochastics, the uptrend is still very much intact.  Continue
to target fresh entries on intraday pullbacks near the 5-dma
($37.47) or the 10-dma ($35.89), confirmed by intraday support
near $36.  Our stop is still resting at $34.50.

BAC $63.29 -0.21 (+0.24) Despite continued gains in the broad
market, Banking stocks are looking a bit tired, as shown by the
past two days' 'doji' candlesticks on the Banking index (BKX.X)
near the $850 resistance level.  The picture is very similar for
shares of BAC, which has been unable to break through the $64
resistance level.  There isn't much incentive to sell right now,
but it looks like risks are weighted to the downside.  We've got
our stop in place at $62, and any solid (read:volume) bounce
above that level, ideally between the 10-dma ($62.61) and
intraday support at $63, would make for another good entry,
especially if we can see renewed strength in the BKX.

BRCM $44.36 -1.02 (+0.63) Semiconductor stocks have seen a bit
of profit taking in the past couple days, and that should come
as no surprise after the incredible run they have seen since
their early October lows.  After moving up to almost $47 on
Tuesday, BRCM has spent the past couple days consolidating,
finding support near $44.  After such a strong run, it is
encouraging to see the lack of selling pressure (today's volume
was the lightest it has been in 3 weeks) on a down day.  The
ascending trendline has risen to $41.50, and the 10-dma ($42.53)
should continue to provide support.  Target fresh entries at
either of those levels or even intraday support near $44.  BRCM
has outperformed the broader Semiconductor sector (SOX.X) over
the past 5 weeks, and this relative strength should help the
stock to push through the $48 resistance level as the SOX
pushes through its own resistance at $540.  Keep stops in place
at $40.

CHKP $40.26 -0.49 (+4.30) It's about time shares of CHKP took a
break!  After rocketing through the $35 resistance level last
week, the stock ran as high as $43 yesterday morning (just shy
of the 38% retracement of the decline from the May highs) before
investors decided to harvest some profits.  As CHKP consolidated
Thursday, it has begun to build some intraday support near
$39.50.  We would like to see Tuesday's gap filled down to the
$38-38.50 level, as that would set the stage for the next leg
of the rally, possibly as high as the $46 level.  Look for a dip
to support, followed by strong buying to usher you into new
positions, with possible support also coming in near $36 on any
serious selling.  Keep stops in place at $35.

CMVT $23.88 -0.81 (+2.76) After shooting higher from the
ascending trendline earlier this week, CMVT was due for a bit of
profit taking and that is precisely what happened after the
stock tagged a high of $26.30 yesterday morning.  Following such
a large gap-open move, the stock needed to do undergo a bit of
consolidation.  CMVT fell as low as $23.30 on Thursday,
perfectly filling the gap left yesterday morning and setting the
stage for the next move higher.  A rebound from the $23 level
could provide for fresh entries, as would a dip to the $22
level, also the site of the 3-week ascending trendline, backed
up by the supportive 10-dma ($21.59).  Keep stops in place at
$21.

GE $41.43 +0.55 (+1.02) Following the rally through the $40
resistance level, shares of GE have continued to work higher
this week.  Monday's dip to the 38% retracement level provided
a solid entry point into this week's rally and on Thursday the
stock crested the 50% retracement at $41.20 for the first time
since the first week of September.  GE has been leading the DJIA
higher since the September lows and if the Industrials can push
towards the 10,000 level, GE should continue to lead the charge.
Intraday dips near $40 or even $38.50 (the site of our stop)
could provide for attractive new entries.  The stock is
currently working through significant overhead resistance, and
once GE moves through the upper end of this congestion (near
$42.50) it will open the door for a move towards the 61%
retracement at $44.

IBM $114.05 -0.30 (-0.03) Is Big Blue running out of buyers?
We've seen a fair amount of consolidation since IBM broke out
last week, and the $114 level has acted as a price magnet as the
bulls and bears vie for dominance.  Today's 'inside day'
formation indicates indecision, but the ascending trendline
(now at $114) continues to provide support.  So long as the
broad market continues to work higher, shares of IBM should
move towards solid resistance at $118-120.  We'll continue to
target new entries on intraday dips in the $113-114 area, with
support continuing to come from the 10-dma ($113.61).  Keep
stops set at $112 and watch for continued strength in the DJIA
before initiating new positions.  Another possible catalyst on
Friday is the earnings report from DELL.  If well-received, it
could provide a boost to shares of IBM.

MSFT $65.94 -0.01 (+0.73) Will a successful launch of MSFT's new
X-Box game system be enough to help the stock continue its rally?
Bullish traders are betting on it, but the selling volume over
the past couple days raises a caution flag.  After briefly
trading above $68 Wednesday morning, the profit taking commenced,
allowing the stock to drop back and fill the gap left from
Tuesday's euphoric open.  Despite the stock's overbought status,
the ascending trend is still intact and could provide deliver
another bounce to drive the stock towards the $69-70 resistance
level.  Target new entries on a dip and bounce from either the
10-dma ($64.90) or the ascending trendline at $64.40.  Our stop
remains in place at $64.  Watch the market's reaction to DELL's
earnings news due out after the close tonight.  A positive
reception could be just the catalyst bullish traders are looking
for to go on another buying spree.

QLGC $47.81 +0.51 (+1.81) Despite weakness in the NASDAQ, shares
of QLGC continue to shine.  The stock has been riding the 10-dma
(currently $45.90) higher for more than a month now.  The
ascending trendline is resting right at $46 and with resistance
building at $49, we have a nice bullish wedge starting to form.
This gives us some attractive action points on which to focus.
Either a dip and bounce from the $46 level or a breakout over
$49.25 can be used for initiating new positions.  If QLGC
manages to stage a breakout above current resistance, we could
see shares work up to the $54-55 level before profit-taking
rears its ugly head again.  We're keeping our stop in place at
$44 until we see which way the wedge breaks.


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

No New Calls for Thursday.


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

BRL $65.00 +0.94 (-2.65) BRL raised the bar Wednesday.  (Pun
intended.)  The company raised its earnings outlook for its
current quarter, which ends in December.  The news sparked a
big reversal in the stock.  Prior to the news release, BRL
traded below the $60 level.  Hopefully traders with open
positions used that weakness to book very short-term gains.  The
follow-through into Thursday's session wasn't unexpected, plus
the healthcare sector traded higher through the day.  We were
encouraged with BRL's pullback from its highs.  But, we will
be closely watching the stock into Friday's session as it's
approaching a key resistance line between $66.50 and $66.75.  If
BRL continues higher, we need to see selling around that
resistance area.  A rollover would provide an entry point into
new positions.

NOC $89.02 -2.49 (-8.58) The progress of the war on terrorism
is of great benefit to the free world.  Except for defense
contractors.  The defense sector of the market continued lower
Thursday, led by bellwethers such as NOC.  The stock closed below
its 200-dma for the first time since the attacks.  NOC looks to
be headed lower, but it's growing increasingly oversold.  Its
settlement below the 200-dma was encouraging and indicates
further short-term downside.  But a relief rally is approaching.
Daily oscillators are buried in oversold territory; stocks don't
go straight down.  Traders with open positions should employ
stops to protect gains and from a snapback rally.  Though NOC
could continue lower without pause to its gap down around $82,
traders need to be cognizant of the upside risk potential.
Continue to monitor others in the group such as LLL, LMT, GD,
BA, ATK, and RTN.  Our stop has been lowered to $95, which is
the current site of NOC's 10-dma.  A snapback rally to the
10-day and subsequent rollover would offer a favorable set-up
for new entries into this play.


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

MXIM - Maxim Integrated Products $54.06 -0.88 (+2.19 this week)

MXIM designs, develops, manufactures and markets a broad range
of linear and mixed-signal integrated circuits, commonly
referred to as analog circuits.  The company also provides a
range of high-frequency design processes and capabilities that
can be used in custom design.  MXIM's objective is to develop
and market both proprietary and industry-standard analog
integrated circuits that meet the increasingly stringent
quality standards demanded by customers.

So you think the Semiconductor sector (SOX.X) is starting to
weaken and want an attractive put play?  MXIM could be just what
you're looking for.  The stock has had one heck of a run from
the September lows, rising from the $32 level to as high as
$57 yesterday morning before beginning to weaken.  MXIM hasn't
really started to weaken yet, but it is encouraging to note that
the bulls couldn't push through resistance.  Speaking of
resistance, the SOX ran into the $540 resistance level earlier
this week and looks like it may be rolling over at the
descending trendline (currently $540).  Any serious selling in
the sector could drive the SOX down to the $480 level in short
order, and that would put pressure on MXIM, likely driving the
stock down to the $46-47 support level.  It isn't a complete
breakdown, but could give us some nice short-term profits.
Aggressive traders can target fresh rollovers from the $56-57
level, but the higher-odds trade will emerge as the stock
starts breaking support levels.  First support exists at the
10-dma (currently $52.85), also the site of intraday support.
Then we can focus on the ascending trendline near $52 and then
stronger support near $50.  We are initially placing our stop
at $59, just above the highs in May and June.

BUY PUT DEC-55*XIQ-XK OI= 143 at $5.10 SL=3.00
BUY PUT DEC-50 XIQ-XJ OI= 580 at $2.80 SL=1.50
BUY PUT DEC-45 XIQ-XI OI=2047 at $1.45 SL=0.75

Average Daily Volume = 5.77 mln



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

IBM - Int'l Business Machines $114.05 -0.30 (-0.30 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

Is Big Blue running out of buyers?  We've seen a fair amount of
consolidation since IBM broke out last week, and the $114 level
has acted as a price magnet as the bulls and bears vie for
dominance.  Today's 'inside day' formation indicates indecision,
but the ascending trendline (now at $114) continues to provide
support.  So long as the broad market continues to work higher,
shares of IBM should move towards solid resistance at $118-120.
We'll continue to target new entries on intraday dips in the
$113-114 area, with support continuing to come from the 10-dma
($113.61).  Keep stops set at $112 and watch for continued
strength in the DJIA before initiating new positions.  Another
possible catalyst on Friday is the earnings report from DELL.
If well-received, it could provide a boost to shares of IBM.

Comments

IBM has been bouncing from support in the past few sessions.
The stock finished near its support at $114 Thursday.  If the
tech sector rallies Friday, an entry near support in IBM may
prove solid.  Look for a bounce early Friday with strength
into the close.

BUY CALL DEC-110 IBM-LB OI= 8732 at $7.20 SL=5.75
BUY CALL DEC-115*IBM-LC OI= 6938 at $4.30 SL=2.75
BUY CALL DEC-120 IBM-LD OI=10467 at $2.10 SL=1.25
BUY CALL JAN-115 IBM-AC OI=18529 at $6.40 SL=4.50
BUY CALL JAN-120 IBM-AD OI=36986 at $3.90 SL=2.75

Average Daily Volume = 8.79 mln



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


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