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Daily Newsletter, Thursday, 01/31/2002

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The Option Investor Newsletter                Thursday 01-31-2002
Copyright 2001, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       1-31-2002           High     Low     Volume Advance/Decline
DJIA     9920.00 +157.14  9922.49  9763.20  1.5 bln   2093/ 998
NASDAQ   1934.03 + 20.59  1935.17  1906.90  1.7 bln   2117/1461
S&P 100   573.49 +  9.11   573.49   564.38   Totals   4210/2459
S&P 500  1130.20 + 16.63  1130.21  1113.30
RUS 2000  483.10 +  3.38   483.10   478.51
DJ TRANS 2797.83 + 35.72  2797.83  2756.32
VIX        22.91 -  1.96    25.27    22.77
VXN        42.82 -  1.85    45.34    42.46
TRIN        0.75
Put/Call Ratio       .67
*************************************************************

Bear Trap Rally or Spring Preview?

After a slow start the markets gained steam as the day progressed
but was it investor optimism or more short covering? Thursday was
the last day of the month and there was a strong move to dress up
portfolios to prevent further cash drain on funds. Many of the big
gains were in blue chips and big caps but few tech stocks took part.
The deep V drop and rebound on Wednesday provided an excellent
opportunity to cover shorts which many did. Those who were hoping 
for another leg down were disappointed with Thursday's action and
could have been convinced to cover before averages moved even higher.
Resistance has not disappeared however and could show itself again 
on Friday.



 



 



 

The day began with a worse than expected jobless claims report and
a jump of +30,000 claims to 390,000. Bulls tried to spin the news 
by calling it the fourth week under 400,000 but next week will 
tell the tale. The current level of claims is consistent with the
level from last January before the recession began. Continuing
claims rose again and the number from the prior week was revised
upward as well. 

The Employment Cost Index showed costs continuing to rise as the
costs of benefits grew. This growth is slowing and should equal
3.3% by year-end compared with 3.7% at the end of 2001. Rising
benefit costs could impact employers ability to add employees as
the recovery progresses. Still there is no inflation evident in
the wage numbers.

While labor costs are rising Personal Income was also soaring. The
December number came in twice what analysts expected at +0.4%. This
shows that the labor markets are stabilizing with that being the 
largest increase since Feb-2001 at +0.6%. However personal consumption
fell by -0.2% as durable goods suffered in the fourth quarter. The
increased defense spending and increased government employment as
a result of the September attacks should continue to power the
personal income numbers. Even the manufacturing sector saw a
bottoming in December as consumers continued to spend while 
businesses kept their wallets closed. Another indicator that the
labor markets are firming was the first improvement in twelve months 
in the Help Wanted Index to 46. Advertising volume is increasing 
slightly but could take a year to become healthy again warned 
analysts.

The Chicago PMI report showed an improvement but was still in
contraction stages at 45.1. Anything below 50 represents a 
contraction. The index hit a low of 38 last July and has been
staggering in the low 40s since. The slight increase from 41.5
in December could be a sign that the recession is really ending.
Many analysts expressed doubt that the +0.2 GDP number from
Wednesday was a clear sign that the recession was over. There
are far too many indicators that forecast no rebound until the
2H of 2002. This means the 1Q GDP could be negative again and
that has worried investors. Greenspan has alluded to another
dip in our future as well. The Fed kept its "bias toward easing"
position in this weeks meeting even though the current 1.75% rate
is the lowest in 40 years. They kept the bias to ease because of
the risk of a financial crisis rising out of the Enron accounting
problems. Should investors sit on their wallets until the worries
are flushed out of the system the markets could continue downward
and force the Fed to act again.

Friday will highlight the January Jobs Report, which is expected
to show another loss of -60,000 jobs. The University of Michigan
Consumer Confidence report for January will be released again
as well. Continuing confidence will be key to any future recovery
and market rally.

In stock news Procter & Gamble soared +3.37 after posting a +9%
gain in net income and the first sales increase in more than a
year. They have cut jobs and restructured to better reflect the
current business environment and global recession. Investors 
rewarded their results with a huge bout of short covering as
the shorts were betting on an earnings miss.

AOL was the third most active stock on the NYSE after posting 
earnings of only $.12. Several analysts expressed concern over 
the weak performance and Holly Becker from Lehman said she saw
no reason to buy the stock at this time. AOL closed down -.09
at $26.30 and showed no indications of a bounce in the future.

Intel gave the semiconductor sector a boost after Merrill Lynch
upgraded them to a "strong buy." The firm said investors are
underestimating the potential of its new processor line. INTC
stock jumped +1.18 and came to rest exactly on resistance at
$35. Chip equipment makers like AMAT, KLAC, NVLS all rose and
extended their bounce from the Jan-22nd lows.

Oracle tried to lift the software sector when the CFO said there
were signs that the industries fortunes would reverse by spring.
Prudential raised its rating to a "buy" from "hold" and the 
stock bounced to close exactly on resistance at $17.25. 

Juniper fell to a four month low of $15.31 as rumors surfaced
about insider selling and increasing market share by Cisco. 
CSCO rallied on the news but closed only .20 cents below resistance
at $20. Lucent, Corning and Cienna also finished lower for the day.
The sector cannot get a break with MCLD filing for bankruptcy
with a plan to erase $3 billion in debt. MCLD was the
fourth largest company in the U.S. telecom sector. Over the
last four years over $90 billion has been spent building out
fiber-optic networks in the U.S. which now has over 39 million
miles of glass fiber. HOWEVER, because of the tremendous drop
in cost for transmitting voice and data over those networks
only 5% of that 39 million miles is active. The rest is dormant
and lacking the switches and amplifiers to actually transmit
information. Can you say a decade of glut ahead? No wonder the
telecom companies are filing bankruptcy after spending billons
for networks that are currently just lifeless buried cables.

The defense sector was the leader today after two days of
rousing calls for increased defense spending along the lines 
of $48 billion. These companies have got to be working 24 hrs
a day trying to come up with new high tech weapons and 
justifications for those weapons to present to the Defense Dept.
NOC, LMT, GD, RTN and ATK were all up strongly with RTN up +20% 
in the last six days. GD has gained +$15 since mid January. We
keep looking for an entry point but these stocks are riding
the rockets they produce. 

If you are a believer in the January barometer then we are in
trouble. In the last 51 years the indicator has been correct 
84% of the time with 42 years following the January lead. The
Dow finished down -1.2%, S&P -1.9% and the Nasdaq an even -1%
for January. That would seem to indicate that we only have 
a 16% chance of finishing 2002 higher than we are today. 
Personally I think the events of last September probably threw 
a kink in the indicator and the chances of a recovery from the 
4Q lows will cause us to fall into that 14% error category. It 
just may not start next week!

The rally from the last two days was encouraging BUT it only 
brought us back to current resistance levels that had previously
caused problems. The S&P has a strong top at 1140, only 11 points
away and which is not likely to be broken on Friday. The top on 
the Nasdaq is just above 1950 and only 17 points away. The Dow
actually closed at 9920 and +20 points ABOVE strong resistance
but is now in a congested area that may limit future gains. 

In the comments above I noted that INTC, CSCO and ORCL closed
right at resistance. Not mentioned were MSFT, DELL, SUNW and
QCOM, which are also showing no signs of help. There is not a
lot of life in the tech sector. Any gains in this market will
need to be very broad based and not depend on the Nasdaq big
caps for help. The Dow components were very strong with only
three closing negative, DIS, EK and KO. This two-day winning
streak could see profit taking on Friday. I would expect the
Nasdaq, which traded negative most of the morning, to be even
weaker if the Dow rolls over from here. 

The VIX soared from a low of 21.69 on Monday to a high of 29.92
on Wednesday only to collapse back to 22.91 today. Historically, 
22 has been a sell signal brought on by overbought complacency. The 
Nasdaq VXN closed at an all time low of 42.82 today. Granted the 
VXN has not been around long, Jan-2001, but an all time low should
be a cause for concern, especially when techs don't look that
hot. Remember, we had a buying binge brought on by portfolio
window dressing and a couple positive economic reports. This
was not a tide of sentiment change. According to TrimTabs.com 
there was a -$500 million outflow of cash from funds in the week
ended yesterday compared to outflows of $2.6 billion the prior
week. Funds are bleeding cash and are not likely to make big bets
until more economic news is known. That news will be in the form
of the Jobs Report on Friday. A positive surprise could work in
our favor if there are net jobs created instead of lost. Either
way, we are at resistance and moving up from here could be a
struggle. 

Enter very passively, exit aggressively!

Jim Brown
Editor

Have you tried the Market Monitor yet?

http://www.OptionInvestor.com/itrader/marketbuzz/


********************
INDEX TRADER SUMMARY
********************

Bulls & Bears Better Buckle Up!
Austin Passamonte

Full bull ahead? The SPX is up +49 index points off its session 
low Wednesday, a greater span than the entire range it traded 
within for several weeks not long ago. The VIX reflects that as 
well, but more on both in a bit.

When the S&P 500 gains +16.64 points in a session while the Nasdaq 
100 posts +11.41, we need to take a closer look inside technology.

(Daily Charts: SOX and NWX)


 

Chips should have had a monster day on the INTC upgrade, but 
managed a paltry +4.00 point advance. Maybe networking index is 
riding CSCO higher instead? Nope... that one's flat for the day. 
Both of these sectors have totally bearish price strength and show 
no clear signs of upside strength right now.

(Daily Charts: GSTI and DDX)


 

Maybe all those Gig-plus chips INTC is pumping are flowing into 
new boxes via Dell or others? They'd be tagged along with dram and 
software production now wouldn't they? None of that is seen here 
in the GSTI Software or DDX Disc-Drive sectors. Both are weak to 
bearish and no signs of strength tonight either.

(Daily Charts: SPX and VIX)


 

But forget the stodgy old technology sectors; they are destined to 
lag the big indexes for a long time to come. By example the Dow 
(not pictured) is up +400 index points in two sessions from its 
recent low. That single-handedly powered the SPX higher by +49 
points marked by a spike in the VIX to brush its 30.00 level of 
bullish reversal warning. However, the VIX has gone from below 22 
to 30 and back down to sub-23. This wild ride is not the harbinger 
of a trend in either direction. It reminds me of spring 2000 and 
spring 2001 when massive whipsaw volatility reigned. 

Markets bulls should hope it remains above 22, preferably close to 
the 30 level. Bears are watching for a fall below 22 and hopefully 
sub-20 for the next high-odds downside play.

Watch the 1140 area for SPX. It will be a critical pivot point and 
price action will face firm rejection there. Whether or not 
subsequent tests break above or turn back lower remain to be seen.

Summation
Not a great environment for buy & hold index or sector option 
trading. We have no problem churning out high percentage of small 
gains fast in Sector Share model. Theta decay on flat weeks and 
whipsaw V-reversals intraday when markets finally move give the 
part-time option trader fits. New 4-1 margin rules for day trading 
and low share prices offer great leverage playing the underlying 
shares, but that's a game best left for veterans as well.

We've all seen a narrow-based rally in two sessions that left 
technology out of the party. If tech would chip in, the S&Ps would 
have posted 50% better gains than they did. If tech doesn't catch 
fire, it's time for the bears to kindle the coals and expect more 
roast beef adorning their spit before long.

Best Trading Wishes,
austinp@OptionInvestor.com


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

Everlasting Complacency
By Eric Utley

The market just can't seem to shake its good feeling.  Higher
stock prices spread the cheer faster than grandpa's moonshine.
For better or worse, stocks sharply rose in Thursday's session
while the VIX sharply fell.  Only Wednesday did the VIX trade
up to the 30 level before reversing to 22.91 in Thursday's
session.  I was wrong about the VIX rising three times faster
than it falls, at least in the last two days.

Bulls will argue that the VIX's spike up to the 30 level in
Wednesday's session marked a short-term capitulation in
stocks.  The volume that crossed the tape Wednesday lends to
the notion of capitulation.

Bears, however, will argue that the extreme level of
market complacency brings opportunities in the forms of
shorting stocks and buying puts.  Bears generally don't like
crowds, especially when the crowd is buying stocks.

With the major averages, specifically the $SPX and $NDX,
approaching meaningful short-term resistance levels and
the VIX continuing to reveal complacency, I believe that
the risk is currently weighted to the downside.  If I'm wrong,
I'll know that much quickly by the $SPX advancing past 1140
and the $NDX advancing past 1600.

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

Market Averages


DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     :  9920

Moving Averages:
(Simple)

 10-dma:  9787
 50-dma:  9938
200-dma: 10105



S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1130

Moving Averages:
(Simple)

 10-dma: 1126
 50-dma: 1143
200-dma: 1166



Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1550

Moving Averages:
(Simple)

 10-dma: 1550
 50-dma: 1606
200-dma: 1615



Defense Sector ($DFI)

The $DFI was the best performing sector in Thursday's session
with its 3.72 percent gain.  The group continues to benefit
from political happenings.  Last week, President Bush said he
would ask Congress for more defense spending.  Thursday,
Defense Secretary Rumsfield spoke of the need for additional
defense build-out.

In addition to the potential for increased government spending,
defense contractors are reporting fabulous earnings.  L-3
Communications (NYSE:LLL) was the latest to report a solid
quarter.  The defense group is where the earnings are.  Bulls
want to be where there is earnings power.

52-week High: 582
52-week Low : 497
Current     : 582

Moving Averages:
(Simple)

 10-dma: 543
 50-dma: 528
200-dma: N/A


Disk Drive Sector ($DDX)

The $DDX was the worst performing sector in Thursday's session.
The index finished 1.58 percent lower.  Read Rite (NASDAQ:RDRT),
a component of the $DDX, guided for a weaker outlook for its
second-quarter.  Shares of Read Rite finished more than 14
percent lower in Thursday's session.

The $DDX had been one of the stronger sectors in the market up
until the last few weeks.  It's weakness in light of the strength
in the Box Makers ($BMX) was contradictory.

52-week High: 67
52-week Low : 46
Current     : 60

Moving Averages:
(Simple)

 10-dma: 59
 50-dma: 55
200-dma: 56


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

Market Volatility

What a reversal!  In the last two days, the VIX traded from just
under 30 to 22.77 in Thursday's session.  An amazing reversal in
the market's sentiment.

Meanwhile, the VXN staged a similar reversal.  It traced a new
all-time low in Thursday's session at 42.46.

CBOE Market Volatility Index (VIX) - 22.91 -1.96
Nasdaq-100 Volatility Index  (VXN) - 42.95 -1.72

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.67        588,859       394,928
Equity Only    0.55        501,492       277,628
OEX            0.92         18,865        17,276
QQQ            1.37         18,157        24,878
 
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          52      + 0     Bull Alert
NASDAQ-100    38      + 0     Bear Confirmed
DOW           57      + 0     Bull Correction
S&P 500       57      + 1     Bull Correction
S&P 100       57      + 0     Bull Correction

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  1.30
10-Day Arms Index  1.17
21-Day Arms Index  1.32
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.

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

Market Internals

        Advancers     Decliners
NYSE      2093            998
NASDAQ    2117           1461

        New Highs      New Lows
NYSE      158             21
NASDAQ    133             27

        Volume (in millions)
NYSE     1,531
NASDAQ   1,750

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

Commitments Of Traders Report: 01/22/02

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 added to their longs and subtracted from their
shorts for a decline of about 6,000 contracts in their net bearish
position.  Meanwhile, small traders grew less bullish by reducing
their net position by more than 9,000 contracts.

Commercials   Long      Short      Net     % Of OI 
01/08/02      333,742   398,286   (64,544)   (8.8%)
01/15/02      340,005   397,024   (57,019)   (7.7%)
01/22/02      342,841   394,041   (51,200)   (6.9%)

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
01/08/02      130,335     60,780   69,555     36.4%
01/15/02      129,987     64,311   65,676     33.8%
01/22/02      125,451     65,423   60,028     31.4%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01
 
NASDAQ-100

The commercial interests' net bearish position modestly grew in
the last week.  The group shed more longs than shorts.  Small
traders grew more bullish by adding to their longs and reducing
their short position.

Commercials   Long      Short      Net     % of OI 
01/08/02       30,786     38,913    (8,127) (11.7%)
01/15/02       32,068     34,859    (2,791) ( 4.2%)
01/22/02       30,671     34,103    (3,432) ( 5.3%)

Most bearish reading of the year: (15,521) -  3/13/01
Most bullish reading of the year:   7,774  - 12/21/01

Small Traders  Long     Short      Net     % of OI
01/08/02       10,073     6,404     3,669     22.3%
01/15/02       10,230     9,782       448      2.2%
01/22/02       11,885     8,787     3,098     15.0% 

Most bearish reading of the year:  (9,877) - 12/21/01
Most bullish reading of the year:   8,460  -  3/13/01

DOW JONES INDUSTRIAL

Commercial increased both long and short positions last week.
The result was a net increase in the group's bullish position.
Small traders reduced their net bearish position by about 200
contracts.

Commercials   Long      Short      Net     % of OI
01/08/02       15,921     7,981    7,940     33.2%
01/15/02       15,866     9,175    6,691     26.7%
01/22/02       18,152    11,013    7,139     24.5% 

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
01/08/02        4,380     9,188    (4,808)   (35.4%)
01/15/02        4,979     8,747    (3,768)   (27.5%)
01/22/02        5,424     8,969    (3,545)   (24.6%) 

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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***********************
INDEX TRADER GAME PLANS
***********************

IS Swing Trade Model: Thursday 1/31/2002
Straight Up From The Open


News & Notes:
------------
From Wednesday's Summation: "Individual traders who want to play 
can buy calls at the open tomorrow IF the markets don't gap-up 
open. Also, if the open is below today's close (which I doubt will 
happen) traders can also go long IF price action breaks back above 
Wednesday highs."

That approach worked for those who tried it. I waited for a market 
drop all session that never came. When price action was at the 
brink of decision near 3:00pm, buyers stepped in to drive the Dow 
higher. Tech sectors suffered, or the upside would have soared 
much more than the modest daily range they traded. 


Featured Markets:
----------------
[60/30-Min Chart: OEX]


 

The OEX is now at resistance right under the top of its recent 
descending channel. A break above and drop back under or simple 
rejection off the line is a fair put play entry with stochastic 
values all pinned in overbought.


[60/30-Min Chart: SPX]


 

Same with the SPX, of course. Watch the line of resistance (blue) 
for pivot points right here.


[60/30-Min Chart: QQQ]


 

It appears the QQQ is attempting a bullish ascending triangle here 
as it too faces resistance in the channel. An upside break with 
power will drive all indexes higher, while downside failure on 
continued weakness will drag the S&Ps along with it.


Summation:
---------
Once again we advance put-play triggers in harmony with true swing 
trade parameters. Individuals who played calls against today's 
overbought intraday charts did well as we expected it could be. 
However, the trend remains down, setup charts are at a bearish 
pivotal point and tonight's decision can measure risk/reward to 
the downside but not up. Watch price action as it behaves around 
the lines drawn here, and especially any quick pop to SPX 1140 
area for swift rejection there as depicted in tonight's Index 
Wrap.


Trade Management:
----------------
Option traders may choose listed In-The-Money (ITM) or Out-The-
Money (OTM) contracts by personal preference. They are selected 
based on volume, open interest and "Delta" values in that order. 
Our preference is usually OTM contracts except for the last few 
days of expiration when ATM or ITM contracts are preferred.

Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. Sell targets are points to exit based on 
index levels or %gain on option contract price as noted.

*No entry targets listed mean the models are idle at that time.


New Play Targets:
----------------
         QQQ                          DJX
Feb Calls: 38 (QQQ-BL)            Feb Calls: 98 (DJV-BT)  
Long: BREAK ABOVE none            Long: BREAK ABOVE none
Stop: Break Below                 Stop: Break Below 
                                

Feb Puts:  37 (QQQ-NK)            Feb Puts: 98 (DJV-NT) 
Long: BREAK BELOW 38.00           Long: BREAK BELOW  99.00 
Stop: Break Above 39.00           Stop: Break Above 100.00 


=====


         OEX                         SPX
Feb Calls: 570 (OEB-BN)           Feb Calls: 1125 (SPT-BE)
Long: BREAK ABOVE none            Long: BREAK ABOVE none
Stop: Break Below                 Stop: Break Below 


Feb Puts: 560 (OEB-NL)            Feb Puts: 1100 (SPQ-NO)
Long: BREAK BELOW 572.00          Long: BREAK BELOW 1129.00
Stop: Break Above 576.00          Stop: Break Above 1135.00



Open Plays:
----------
None


IS Position Trade Model: Thursday 1/31/2002
Higher Again


News & Notes:
------------
Markets enjoyed end-of-month markup in the old economy today and 
tech hopes to follow suit on Friday. Best guess is we are headed 
back within a near-term range for now. Buy & hold option trading 
is not a viable risk/reward game right now, unless full-time 
market attention allows one to enter & exit at precise moments in 
time.


Featured Plays:
--------------
None


Summation:
---------
No buy & hold option plays at this time.


Trade Management:
----------------
Option traders may choose listed In-The-Money (ITM) or Out-The-
Money (OTM) contracts by personal preference. They are selected 
based on volume, open interest and "Delta" values in that order. 
Position Trade model usually tracks OTM contracts with several 
weeks of time premium left until expiration for buy & hold plays.

Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. 

*No entry targets listed mean the models are idle at that time.


New Play Targets:
----------------
None


Open Plays:
----------
XLI
Feb Puts: 28 (XLI-NB)
Long: 1.00
Stop: 2.50 [hit]
Result: +150% on contract cost


Sector Share Trade Model: Thursday 1/31/2002
Month-End Dressing?

News & Notes:
------------
All the action was found in the Dow today as long-term charts for 
tech appear week. We had a number of short shares tracked hit 
their trailed stops and only the RTH retail HOLDR triggered on 
Wednesday suffered a loss.

Picking off small gains using shares has been easy and would be 
even more so if monitored intraday. However, our intent is to 
catch a directional move for solid gains if possible. The only one 
that's emerged eluded us in the Wireless HOLDR from a couple weeks 
ago until now. We await the next to appear!


Featured Plays:
--------------
(Weekly/Daily Chart: BBH)


 

And that could ensue with the biotechs. This sector has both 
weekly and daily chart stochastic values buried in oversold with 
bullish reversal off long-time support near 114+ on Wednesday. A 
break above 120 gets us long with first challenge above near 125 
area.

Similar situation with the drug index HOLDR (not pictured). These 
are both solid long plays with much better upside potential than 
downside risk right now.

(Weekly/Daily Chart: SWH)


 

On the short side of life, software and other technology issues 
remain weak. This daily chart (right) is the classic example of 
price weakness struggling below resistance. We'll track the SWH 
and other shares short if price action breaks down from here.


Summation:
---------
Mixed markets right now that will probably remain trapped between 
SPX 1085 and 1140 levels for now. All sectors and indexes can be 
expected to bounce around a bit, so we'll try to buy support and 
sell resistance if/when opportunity permits.


Trade Management:
----------------
Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. Sell targets are points to exit based on 
index levels or %gain on share price as noted.

No entry targets listed mean the model is idle at that time.

* Asterisk means stop-loss level changed since prior posting


New Play Targets:
----------------
LONG
BBH Biotech HOLDR
Long: BREAK ABOVE  120.00 
Stop: Break below  114.00 

PPH Pharmaceutical HOLDR
Long: BREAK ABOVE 97.00 
Stop: Break below 93.00 

IYH Dow Jones U.S. Healthcare
Long: BREAK ABOVE 60.90 
Stop: Break below 57.50 

XLP Consumer Staples
Long: BREAK ABOVE 25.30 
Stop: Break below 23.50 


SHORT
SWH Software HOLDR
Short: BREAK BELOW 45.50 
Stop:  Break Above 47.00 

IYH U.S. Technology 
Short: BREAK BELOW 60.50 
Stop:  Break Above 62.50 

IYV U.S. Internet
Short: BREAK BELOW 13.75 
Stop:  Break Above 15.00 


Open Short Plays:
----------
HHH Internet HOLDR
Short: BREAK BELOW 34.00 
Stop:  Break Above 32.00 

01/25
IYF Dow Jones U.S. Financial
Short: BREAK BELOW 80.00
Stop:  Break Above 78.00 [hit]
Results: +2.00

IYR Dow Jones Real Estate
Short: BREAK BELOW 79.75
Stop:  Break Above 80.00 

01/28
IYG Dow Jones Financial
Short: BREAK BELOW 91.50
Stop:  Break Above 88.00 [hit 89.05]
Results: +2.45

RKH Regional Bank HOLDR
Short: BREAK BELOW 115.00
Stop:  Break Above 110.00 [hit]
Result: +5.00 gain

1/29
XLF Financial SPDR
Short: BREAK BELOW 26.00
Stop:  Break Above 26.00 [hit]
Results: Par

FFF Fortune 500
Short: BREAK BELOW 80.00
Stop:  Break Above 80.00 [hit]
Results: Par

1/30
RTH Retail HOLDR
Short: BREAK BELOW 94.50 
Stop:  Break Above 97.00 [hit 97.25]
Results: -2.75


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The Option Investor Newsletter                 Thursday 01-31-2002
Copyright 2001, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.



****************
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:
*****

MMM $111.00 +1.13 (+0.23) The President didn't deliver any
guidance concerning asbestos litigation during this speech.
Despite the lack of guidance, MMM bounced back in yesterday's
and today's sessions in concert with the strength in the Dow.
With the lack of political catalyst in the short-term,
however, MMM's upside may be capped by the 200-dma.  Look to
exit open positions near the $112 area.

PVN $3.75 -0.21 (-0.59) After the initial pop higher a couple
weeks ago, PVN just hasn't been able to get out of its own way,
continuing to drift lower and teasing us with what looked like
possible entry points.  Thursday's decline (driven by the
announcement that earnings would be delayed) was the last straw
as the stock fell below our stop at the close, so we're pulling
the plug tonight.


PUTS:
*****

MRCY $36.36 +0.85 (-2.84) MRCY traded higher in the last two
sessions thanks to broad tech sector strength.  The stock
still looks poised to break below its bearish wedge.  But
in the meantime, we are choosing to error on the side of
caution, not to mention that our stop at $36 was triggered.
Look for any weakness in tomorrow's session to cut losses.

NTIQ $30.00 -1.25 (-0.47) This week's volatile trade has given
day traders some playable moves in NTIQ as it has oscillated
between resistance at $32 and support near $28.  The highs over
the past 3 weeks have been getting lower, with the descending
trendline now resting right at $32, the level of our stop.  But the
intraday lows are getting gradually higher this week, with the
ascending trendline now resting at $29.  This wedge will likely
break in the next couple days, but the stock is acting like it
doesn't want to go down any further.  With today's close right
in the middle of the recent range, we'll take this opportunity to
exit the play, rather than wait for it to go against us.


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

Please view this in COURIER 10 font for alignment
*************************************************
CALLS              Mon    Tue    Wed    Thr

PVN       3.75   -0.02  -0.30  -0.06  -0.21  Dropped, report delay
TGH      73.53   -0.81  -0.23   0.83   0.24  Right place for bulls
MMM     111.00   -0.69  -1.89   1.22   1.13  Dropped, 200-dma cap
DPMI     50.00    0.62  -1.35   1.66   0.34  Right there at $50.00
RATL     23.42   -0.02   0.25   0.01  -0.74  On alert for downside
UPS      57.48    0.07  -0.70   0.53   0.55  New, trucking higher
NOK      23.45    0.33  -0.76   0.51   0.27  New, phone gorilla
ASYT     16.76    0.62  -0.50   0.78   0.17  New, chip breakout


PUTS

ADRX     58.74   -3.26   1.26   0.35  -0.78  Can't break the 10-dma
IVGN     53.86   -2.91  -0.17  -0.31  -0.64  Still trending lower
NTIQ     30.00    1.03  -1.22   0.97  -1.25  Dropped, sideways
GNSS     60.47    4.08  -2.24  -0.31   2.77  Right at entry point
CCMP     66.13    0.26  -2.65   2.64   2.48  Low risk entry point
MRCY     36.36    1.12  -0.18   1.10   0.85  Dropped, stopped out
CIMA     26.10   -1.12  -0.03   0.24  -0.84  Can't catch a bid
GS       86.98    0.55  -3.37   1.52   0.98  Tracking the SPX.X
AT       55.48   -0.25  -1.63  -0.24   1.10  Wireless covering
AGN      66.75   -1.43  -1.75   0.34  -1.40  New, dilutive develop
VRSN     30.86   -1.43  -1.15  -0.33  -0.90  New, guided lower


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

DPMI $50.00 +0.34 (+1.29) Right at resistance.  DPMI has
performed pretty well for us this week, giving us a nice dip and
bounce on Wednesday, providing ample opportunity to initiate
new positions prior to the rally we've seen over the past day
and a half.  Despite TXN's dramatic cut to cap-ex spending for
the year, the Semiconductor index (SOX.X) continues to work back
towards recent resistance.  The Merrill Lynch upgrade on INTC
this morning following yesterday's upgrade on the whole sector
by Thomas Weisel is keeping the bulls interested.  The stock is
resting right at recent resistance at $50, with the next obstacle
being the early January highs near $52.50.  Target a renewed
bounce from the $48 level (convergence of both the 10-dma and
20-dma) or a breakout over $50.50.  More conservative players
will want to wait for DPMI to clear $52.50 before playing.

RATL $23.48 -0.68 (-0.44) Still outperforming the overall
Software sector (GSO.X), shares of RATL have been showing their
weaker side over the past couple days.  Today the stock dipped
to just below the $23 level (closing the gap from last week) and
the stock caught a small bounce off the lows.  It looks like
there was some decent institutional volume on Thursday, as RATL
traded more than 10 times its ADV.  Even factoring out the nearly
9 million shares that traded in the last 30 minutes (likely
mutual fund window dressing), that looked like some serious
interest on the buy side.  Now that the stock has filled its gap,
the bulls should be free to push it higher, using current support
as a springboard.  While the recent weakness is somewhat
disconcerting, it is providing us with an apparently attractive
risk reward scenario.  With our stop set at $22, we can risk $1
to the downside, while a breakout over $25 will have us targeting
resistance near $30 for harvesting some profits.  

TGH $73.53 +0.24 (+0.03) Like the Energizer Bunny, TGH keeps
going and going.  Yesterday's big dip, gave us another great
entry point as the stock fell and bounced from near the $71
level.  That bounce continued into Thursday's session, with the
stock briefly trading as high as $74.75 before profit takers
once again appeared.  Despite the late-day weakness, it was
encouraging to see TGH find support near $73.50.  The big
question is whether this one has any more gas in the tank.  We
think so and expect it to continue working higher into the
company's earnings report on February 8th.  The Health Care
index (HMO.X) is drawing ever closer to that $480 resistance
level, and once it plows through, TGH should gain the needed
momentum to challenge its all-time highs near $80.  Another
bounce near $72 would make for a good entry for the next leg
higher.  Otherwise, wait for TGH to plow through the $75
resistance level on strong volume before playing.  Keep stops
set at $71.


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

UPS - United Parcel Service $57.48 +0.55 (+0.45 this week)

United Parcel Service Inc. (UPS) is an express carrier, package
delivery company and a global provider of specialized
transportation and logistics services. Over the course of more
than 90 years, the Company has expanded from a small regional
parcel delivery service into a global company. UPS delivers
packages each business day for 1.8 million shipping customers
to six million consignees. The Company's primary business is
the time-definite delivery of packages and documents throughout
the United States and in over 200 other countries and territories.

Transportation stocks continued to trade well through Thursday's
session.  For the day, the Dow Jones Transports ($TRAN) finished
1.29 percent higher.  The $TRAN is setting up for a big
breakout above its long-standing bearish resistance line.  That
resistance currently rests overhead at the 2800 level.  Look for
it to be broken in Friday's session.  One stock that should
continue higher along with the $TRAN is UPS.  Although the stock
is currently not a component of the $TRAN, UPS tracks the index
very closely for obvious reasons.  Also, UPS' biggest competitor
in FDX is a component of the $TRAN.  UPS recently reported a
solid fourth-quarter number.  The company said that continued
international growth in its overseas markets as well as strong
holiday shipping traffic contributed to a gain in fourth-quarter
revenues.  The company's fiscal performance last year was solid
given the difficult economic environment.  UPS managed to
control costs, which should parlay into strong earnings growth
once the economy rebounds.  Judging by the recent price action
in the $TRAN, the economy looks to be doing just that.  Traders
can look for UPS to emerge from its two month base if the $TRAN
breaks out above its immediate resistance.  Look for volume to
increase in UPS as it approaches the $58 level.  A pullback down
into its base around the $56.50 area would offer an entry on
weakness.  Our stop is initially in place at $55.50.

BUY CALL FEB-55*UPS-BK OI= 3559 at $2.75 SL=1.50 
BUY CALL MAR-55 UPS-CK OI=  964 at $2.90 SL=1.50 
BUY CALL MAR-60 UPS-CL OI= 4340 at $0.30 SL=0.00 
BUY CALL APR-60 UPS-EI OI=15330 at $0.65 SL=0.25 

Average Daily Volume = 1.26 mln
 



ASYT - Asyst Technologies $16.76 +0.17 (+0.97 this week)

Asyst Technologies, Inc. is a provider of integrated automation
systems for the semiconductor manufacturing industry. The Company
designs systems that enable semiconductor manufacturers to
increase their manufacturing productivity and protect their
investment in silicon wafers during the manufacture of integrated
circuits. The Company offers isolation systems, work-in-process
materials management, substrate-handling robotics, automated
transport and loading systems, and connectivity automation
software. The Company has incorporated the technologies from these
areas to create its Plus-Portal System for OEMs (original
equipment manufacturers).

Bulls are warming up to semiconductor issues.  That fact was made
clear Thursday morning when Merrill Lynch's influential chip
analyst, Joe Osha, upgraded shares of Intel (NASDAQ:INTC) to a
strong buy rating.  The upgrade of the world's biggest chip
manufacturer sent the Semiconductor Sector Index ($SOX) higher
by about 1 percent in Thursday's session.  The group had been
knocked down in recent sessions over valuation concerns, but
those fears have appeared to subsided in Thursday's session.
After the recent pullback in the group, some stocks appear
poised for the next leg higher.  ASYT is one such chip stock.
It pulled back after tracing a relative high up around the
$17.70 level.  The stock subsequently bounced from the $14.50
area and has been climbing since.  Continued strength in the
$SOX should allow ASYT to break out from its near-term base
and continue on to new relative highs.  Look for that strength
in the $SOX into tomorrow's session.  Momentum traders can
look for ASYT to breakout above the $17 level.  Confirm any
such move with active volume.  If ASYT can clear its short-term
resistance around the $17.50 area, it could work up to $20 in
short order.  Our coverage stop is placed at $15.50.

BUY CALL FEB-15*QQY-BC OI=845 at $2.20 SL=1.25 
BUY CALL FEB-17 QQY-BY OI=452 at $0.55 SL=0.25 
BUY CALL MAR-17 QQY-CY OI=300 at $1.30 SL=0.75 
BUY CALL MAR-20 QQY-CD OI=371 at $0.60 SL=0.25 

Average Daily Volume = 371 K
 

NOK – Nokia Corporation $23.45 +0.27 (+0.33 last week)

Nokia is a mobile phone manufacturer and a supplier of mobile,
fixed and Internet protocol (IP) networks and related services.
The company has two primary business groups, Nokia Networks and
Nokia Mobile Phones.  Nokia Networks is a supplier of mobile,
broadband, IP network infrastructure and related services.  It
also develops mobile Internet applications and solutions for
operators and Internet service providers.  Nokia Mobile Phones
is the world's leading mobile phone manufacturer, having won
the war of attrition against rivals Motorola and Ericsson.

Wireless stocks took another beating this week but it was
encouraging to see the Wireless Telecom sector (YLS.X) find
support and bounce once again near the September lows.
Despite the sector weakness relative to the broader Technology
market, shares of NOK look like a good bet.  The company
released earnings 3 cents ahead of analyst estimates last week,
but more importantly spoke of increasing their market share and
forecast global handset sales in the 420-440 million range for
2002.  While the company admitted that the next quarter will be
a bit on the weak side, the bullish longer-term forecast put
investors in a buying mood, quickly driving the stock higher
before giving way to a bit of profit taking.  Particularly
encouraging was the fact that the stock found support at a higher
level ($22) earlier this week as other stocks were being taken
apart.  Given NOK's impressive strength relative to other stocks
in the Wireless sector and its solid earnings report, it is clear
that if you have to own only one stock in the Wireless arena, NOK
is the one.  It looks like the gyrations have abated for the time
being and NOK is now back above its 200-dma ($22.98), and appears
poised to take another run at the recent highs near $27.  But
before that can occur, the bulls will have to work through a bit
of overhead congestion in the $23.50-24.50 area.  Target new
positions on a renewed bounce in the vicinity of $22.50-23.00 or
else wait for the stock to clear the $24.50 level (the bottom of
the January 7th gap.  We're setting a tight stop at $22, as a
close below that level will be a danger sign for the bulls.
Watch for increasing strength in the YLS index to help propel
NOK higher.

BUY CALL FEB-22*NAY-BX OI=12420 at $1.55 SL=0.75
BUY CALL FEB-25 NAY-BE OI=24795 at $0.40 SL=0.00
BUY CALL MAR-22 NAY-CX OI= 2409 at $2.30 SL=1.25
BUY CALL MAR-25 NAY-CE OI= 6544 at $1.15 SL=0.50
BUY CALL APR-25 NAY-DE OI=34039 at $1.60 SL=0.75

Average Daily Volume = 12.6 mln



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

ADRX $58.74 -0.78 (-1.33) ADRX reported Thursday morning that it
had received conditional approval from the FDA to market its
generic version of a cholesterol drug.  The company said that
the marketing of the drug was contingent upon certain conditions
set forth by the FDA.  The news caused an early morning gap
higher as bulls embraced the release.  But ADRX's early morning
gap proved to be yet another failed attempt of the stock to
advance past its 10-dma.  ADRX peaked above its short-term
moving average in the early going, but soon reversed to finish
the day more than 1% lower.  The Biotech Sector's (BTK.X)
fractionally negative finish added pressure.  ADRX has been
finding support between the $56.50 and $57 level in the last
several sessions.  Momentum traders can look for a breakdown
below that support level for a possible entry.  In the meantime,
continue to look for put entries near resistance such as the
10-dma.


CCMP $66.13 +2.48 (+2.73) After displaying bearish price
action earlier this week, CCMP has since rebounded on relatively
lighter volume.  The price action in the last two days has
followed the broader market as well as the Semiconductor
Sector (SOX.X).  We think that CCMP will continue to follow the
Nasdaq and SOX.X in the coming sessions, which is why it's very
important to monitor both broader gauges when gaming this play.
The stock climbed back up to its 200-dma in today's session.
Our stop up at the $67 level was never penetrated while the
stock was held back by its 200-dma.  Any signs of weakness
early tomorrow morning should offer a very favorable entry
into this put play as risk is easily managed at current levels.
Entries taken near the 200-dma can be managed with a stop
slightly above the 200-dma.  As for downside from current
levels, we'll look for CCMP to revisit its recent lows down
around the $61 area.


AT $55.48 +1.10 (-1.02) AT came within 10 cents of its 10-dma
in today's session before pulling back.  We were encouraged to
see the sellers knock the stock down after the rebound from
yesterday into today's session.  The broader telecom space
rebounded in today's session noting the fractional gains in
the Wireless Services (YLS.X) and North American Telecom
(XTC.X) indexes.  The bounce in AT in conjunction with the
bounces in the telecom indexes leads us to believe that the
stock traded higher out of sector sympathy and on short covering.
Volume was relatively lighter in today's session, which
strengthens the case for short covering.  If the sellers are
still serious, AT should not be able to close above its 10-dma.
That should allow traders low risk, potentially high rewarding
entries at current levels.  Use a tight stop above the 10-dma
to manage risk.

CIMA $26.10 -0.84 (-1.75) Unless you opened new put positions
at the close yesterday, CIMA has given us very little to show
for the recent market volatility.  But patient traders will note
that the stock is continuing to drift lower, and it was
encouraging to see CIMA reverse sharply this morning right at
the $27 resistance level.  The inability of the Biotech index
(BTK.X) to gain any upward traction is keeping shares of CIMA
under pressure and it appears that it is only a matter of time
before the stock breaks below the $25 level on its way to $20
and possibly even lower.  Target new entries on a failed rally
near $27 or on a volume-backed move below $25.  Move stops down
to $28.

GNSS $60.47 +2.77 (+4.30) Is it an entry point, or the end of
the road?  Tomorrow will likely tell the tale, as GNSS is
knocking on the door of $61 resistance, also the level of our
stop.  This is the stock's third trip to this level in the past
week, and each of the prior rallies were met with a sharp
selloff.  Will we get a repeat?  Odds are that we will due to
the fact that supply is still in control.  A rollover from near
current levels looks good for new entries, while a push through
the $61 level will have us exiting the play this weekend with a
violated stop.  Traders looking for some confirmation before
playing will want to watch for GNSS to fall under near-term
support at $58 (and possibly $56) before playing.  Remember
that the important level to the downside is still the 38%
retracement at $52.50.  If our bearish play is going to really
pan out, we'll need to see this level fail and when it does it
will likely usher in a fresh wave of selling.  

GS $86.98 +0.98 (-0.32) With brokerage stocks getting whacked
in a big way earlier this week, GS gave us a great start to the
play.  Falling as low as $81.60 yesterday before the reversal
began, gave nimble day traders some early profits.  Since then
the stock has been working higher and came to rest right at the
converged 10-dma and 200-dma near $87.  While the stock could
roll over from here, we'd prefer to initiate new positions a bit
higher, near $88 resistance to give us a better risk-reward
ratio.  The rebound over the past couple days is largely due to
the rebound in the Broker/Dealer index (XBD.X), but it has
resistance looming just above current levels, near $503.  Look
for a rollover in the XBD to confirm our bearish stance in GS
before initiating new positions.

IVGN $53.86 -0.64 (-4.03) A little bit at a time, IVGN bears are
clawing their way through the $52-55 support zone that was put in
place in March and April of last year.  The continued weakness in
the Biotechnology sector (BTK.X) is helping to keep IVGN in sell
mode, where every rally attempt is met by willing sellers.  A
nearly perfect descending trendline connects the highs for the
past 6 weeks, showing that each time the stock approaches its
20-dma (currently $58.07) like it did last week, it is a
high-odds put entry.  In between those times, intraday rallies
near the 10-dma (currently $56.55) can be used to initiate new
positions.  Today was one such day, with IVGN spiking just above
$56 at the open and then heading south for the remainder of the
day.  There was some increased buying near the close, indicating
that we could see one more selling opportunity before the
weekend.  Sell the rallies so long as our $57 stop is not
violated, or else wait for the stock to fall below $52 support
before playing.


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

AGN - Allergan $66.75 -1.40 (-4.24 this week)

Allergan, Inc. is a provider of eye care and specialty
pharmaceutical products throughout the world with products in
the eye care pharmaceutical, ophthalmic surgical device,
over-the-counter contact lens care, movement disorder and
dermatological markets. The Company's worldwide consolidated
revenues are principally generated by prescription and
non-prescription pharmaceutical products in the areas of
ophthalmology and skin care, neurotoxins, intraocular lenses
and other ophthalmic surgical products and contact lens care
products.

Seemingly defensive issues, several drug stocks have
recently proved otherwise.  Bristol-Myers (NYSE:BMY),
Schering Plough (NYSE:SGP), and Merck (NYSE:MRK) have had
unique problems in the recent past which have combined to
shift sentiment to the bear camp.  Allergan's earnings
announcement last week added to the negative sentiment.  In
conjunction with releasing its quarterly numbers, Allergan
reported that it would spin off its non-pharmaceutical
business divisions.  The company said that it planned to
divest its contact lens and surgical businesses to their own
operating entity.  The move will allow each division to
focus on its specialty.  But the problem is that Allergan's
non-pharmaceutical divisions would have accounted for 30% of
this year's revenues, plus the spin off is dilutive to this
year's earnings to the tune of 12%.  Investors didn't like
the news as AGN has been selling off since the announcement.
The stock broke below key short-term support in today's
session and looks to continue lower in the near-term.
Momentum traders can look for a break below the $66.50
level in tomorrow's session.  Confirm sentiment in the Drug
Sector Index ($DRG) before entering on weakness.  To the
upside, a rollover from $69 would offer an entry after any
short covering rally.  Stops are in place at $69.25.

BUY PUT FEB-70*AGN-NN OI=1159 at $4.20 SL=2.50
BUY PUT FEB-65 AGN-NM OI= 225 at $1.40 SL=0.75

Average Daily Volume = 759 K


VRSN – VeriSign, Inc. $30.86 –0.90 (-3.81 this week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  The company also offers
the VeriSign Onsite service, which allows an organization to
leverage the company's trusted service infrastructure to develop
and deploy customized digital certificate services for use by an
organization's employees, customers and business partners.  To
date, over 300 enterprises have subscribed to the OnSite service
and VRSN has strategic relationships with industry leaders
including Cisco, Microsoft ,RSA, Security Dynamics, and VISA.

Looking for an established bearish trend to play?  Then we've
got your ticket right here.  No rest for the wicked, seems to be
the theme for shares of VRSN as the stock has had one failed
rally after another for the past 8 months.  And the slope of the
trendline connecting the highs just keeps getting steeper.
Long-term support had been holding the stock up near the $36
level since the rebound off the September lows, but the bears
have successfully chewed through that support level in the past 3
weeks, leaving it behind as just one more resistance level.  With
a less-than-inspiring earnings report last week showing a
continued deterioration in the company's income stream, VRSN
probed below the $33 level, recovered slightly and then rolled
over again.  This latest plunge left the stock resting at its
lowest level since last April, as of Thursday's close.  With the
20-dma ($34.77) acting as resistance, along with the $35 price
level, VRSN looks like it is on its way to setting new 52-week
lows sooner, rather than later.  Any rebound near the $35 level
should provide for an attractive entry point as the rally fails,
although it may be more realistic to shoot for a rollover near
the $33.50 intraday resistance level.  When the $30 support level
gives way, momentum traders can enter on the breakdown, but need
to keep an eye on the April reaction lows at $26.50.  It's
possible the stock could get a short-term bounce from that level.
After that, the stock will be in new multi-year low territory and
will be testing lows not seen since early 1999.  We're
initiating our play with a rather wide stop at $35.50.

BUY PUT FEB-35 QVR-NG OI=9837 at $4.70 SL=2.75
BUY PUT FEB-30*QVR-NF OI=5104 at $1.40 SL=0.75
BUY PUT FEB-25 QVR-NE OI=1079 at $0.30 SL=0.00

Average Daily Volume = 10.6 mln



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The Option Investor Newsletter                 Thursday 01-31-2002
Copyright 2001, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


*********************
PLAY OF THE DAY – PUT
*********************
AT - Alltel $55.48 +1.10 (-1.02 this week)

Alltel Corporation is a customer-focused information technology
company that provides wireline and wireless communications and
information services. The Company operates in two principal
areas, communications and information services. The Company's
communications operations consist of its wireless, wireline
(local and long-distance) and emerging businesses segments.

Most Recent Update

AT came within 10 cents of its 10-dma in today's session before
pulling back.  We were encouraged to see the sellers knock the
stock down after the rebound from yesterday into today's
session.  The broader telecom space rebounded in today's
session noting the fractional gains in the Wireless Services
(YLS.X) and North American Telecom (XTC.X) indexes.  The bounce
in AT in conjunction with the bounces in the telecom indexes
leads us to believe that the stock traded higher out of sector
sympathy and on short covering.  Volume was relatively lighter
in today's session, which strengthens the case for short
covering.  If the sellers are still serious, AT should not be
able to close above its 10-dma.  That should allow traders low
risk, potentially high rewarding entries at current levels.
Use a tight stop above the 10-dma to manage risk.

Comments

AT rebounded on lighter volume in today's session.  The shorts
may have been covering.  If the sellers are for real in this
stock, they should continue to lean on AT at its 10-dma.  Look
for low risk entries near the 10-dma in tomorrow's session and
make sure to confirm weakness in the Wireless and Telecom
sectors.

BUY PUT FEB-55*AT-NK OI=173 at $1.00 SL=0.50
BUY PUT MAR-55 AT-OK OI= 42 at $2.00 SL=1.00

Average Daily Volume = 811 K



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**************
TRADERS CORNER
**************

Milking Q-Charts, Part IV, An Owner's Manual
Buzz Lynn
buzz@OptionInvestor.com

Can you stand another edition of setting up the charts?  I hope 
so.  The responses I received so far in putting together this 
manual have been gratifying.  To the many who wrote to thank me 
for helping them put it all together in a basic usable format, 
the pleasure was all mine.  My thanks for that.

For those who already knew/know how to use Q-charts, today’s 
Options 101/Trader’s corner (not sure under which section this 
will end up) is going to ferret out some of the more obscure 
features of its use that will make the charting experience much 
more manageable and useful.

If you are just joining us, feel free to check out the previous 
articles that will help you get started and bring you up to speed.

http://www.OptionInvestor.com/traderscorner/011002_1.asp
http://www.OptionInvestor.com/traderscorner/011702_1.asp
http://www.OptionInvestor.com/traderscorner/012402_1.asp


So, what is in store today?  Glad you asked!  There is nothing so 
frustrating as looking at the charts and trying to figure out just 
exactly where support and resistance lay.  Would it not be easier 
to have some crosshairs and a corresponding level on the charts to 
match, which would tell us EXACTLY where it is?  While Q-charts 
does not have the ability to predict the charts for us, it does 
have the ability to give us the exact number that corresponds with 
the location of our cursor.  Pick the spot with our mouse, and we 
will automatically get the number in what I call the “scorecard”.  
So, off to the charts!

The first thing we want to do is get the chart open to the 
appropriate spot.  If you have multiple charts in your workspace, 
the only chart that will get "scorecard" is the active chart.  
You'll know the active chart by its blue header.  So if you want 
scorecards on multiple charts, you will have to perform the 
following on each chart.  Anyway, once we have the naked bar or 
candle chart open with all the indicators plugged in, the rest is 
simple.  

Using just a single chart, our workspace looks like the following, 
but we can put this on a single chart or on multiple charts in the 
same workspace.  Again, just be sure the chart you intend to put 
the “scorecard” on is active (blue header, not gray).



 


Notice that I keep the tool bars packed along the perimeter rather 
than stacked on top of each other.  It creates more real estate on 
the screen.  Now to get that “scorecard”.  It is actually called 
“Data Window” within Q-charts.  While we’re at it, we’ll insert 
the Cursor Tracking (“crosshairs”) and Snapshot bar.  We find that 
on the “Chart Toolbar” under “View” in the main menu.



 


Now that the Chart Toolbar is visible on the perimeter of the 
workspace, simply select “Cursor Tracking”, “Data Window”, and 
“Snapshot Bar” as shown below.



 


The crosshairs will look as follows.



 


You can adjust the color too by right-clicking anywhere on the 
chart, then selecting “Format”, and then “Colors”.  I adjust my 
cursor color to magenta (bright pink), but choose any that you 
like.  The Colors box appears as follows:



 


Now you can get the scorecard to show up by clicking on the button 
– same for the snapshot, which shows the high, low, open, and 
close.  It looks like this when finished.



 

You can drag and drop the data window anywhere on the chart you 
like.  But the default is to the upper left-hand corner of the 
chart.  The same is true for the snapshot.  Drag and drop that 
anywhere too by grabbing the left-most blue tap and dropping it 
anywhere that suits your chart-viewing habit!

Note that wherever the crosshairs appear, the exact point will be 
indicated in the Data Window/scorecard, as will the Bollinger 
bands, stochastics, and MACD, as will any other "Study" you have 
decided to use.  If a study is in use, the value will appear in 
the scorecard.  Just put your cursor on a point and check the 
corresponding number.  You can do it with support, resistance, a 
particular date, and on any particular candle, you can find out 
the values of open/high/low/close.  



 


In the above example, you can clearly see the upper and lower 
Bollinger band values, and the 20 period moving average.  You can 
also see the %K and %D values of the stochastics and the MACD 
values.  Just put the crosshairs where you want them and let the 
charts do the work!

Now you have a complete screen that looks like this.  As noted at 
the beginning of this column tonight, you can do this to all 
charts on a multiple chart screen or only the charts you select.  
The flexibility is yours!



 


Size the chart to fit, add more charts side by side for a montage, 
set up quote sheets if desired and chart to your heart’s content!

Short lesson today, but really handy for taking the effort out of 
value-guessing on any given point on the chart.  That’s it for 
now.  

Until next time, happy charting!


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