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Daily Newsletter, Thursday, 02/07/2002

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The Option Investor Newsletter                Thursday 02-07-2002
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)
************************************************************
       2-7-2002            High     Low     Volume Advance/Decline
DJIA     9625.44 - 27.95  9743.05  9624.12  1.4 bln   1403/1681
NASDAQ   1782.10 - 30.61  1824.07  1781.73  2.0 bln   1384/2124
S&P 100   548.69 -  1.51   555.82   547.24   Totals   2787/3805
S&P 500  1080.17 -  3.34  1094.03  1078.44
RUS 2000  458.40 -  4.01   463.14   458.09
DJ TRANS 2604.60 - 17.38  2633.08  2604.60
VIX        27.33 -  0.87    28.53    26.52
VXN        50.90 +  1.84    51.11    49.14
TRIN         .68
Put/Call Ratio       .85
*************************************************************

Techs Drag Markets Into Cellar

Cisco's earnings failed to inspire confidence in a coming 
recovery tech stocks took yet another dive. Even a bounce by
TYC and WCOM failed to bring investors back into the game. At
2:PM an attempt to rally failed and selling picked up speed.
Hardest hit were chip stocks with GNSS losing -9.40, NVLS
-3.79, AMAT -2.83, KLAC -4.45 and BRCM -3.08. If chips are
going to lead the Nasdaq then where are we going?



 



 



 

Cisco announced earnings on Wednesday and while they were better
than expected the all important guidance left a lot to be desired.
Cisco said they saw the next quarter to be flat to "low single 
digit" growth and they declined to speculate on future quarters
given the difficult economic outlook. Chambers said on the 
conference call that he would like to be more confident of 
economic growth resuming in the next several quarters but "in
our opinion, no one is really sure." This lack of positive guidance
slammed the networking sector and almost anything related to the
tech sector on Thursday. Reassuring comments from WorldCom did
little to put a floor under telecoms. WCOM said in a conference
call that "bankruptcy or credit default is not a concern." They
did however miss estimates and warn for 2002.

GNSS helped crash the chip sector when Pacific Growth initiated
coverage with a "neutral" rating. They said that GNSS has "nearly
maxed out its potential." They said competitive threats combined
with average selling price reductions would drive revenues lower
on an organic basis. They also felt the Sage acquisition should
hide the declining revenues for the next two quarters but after
that the fundamentals would break down. GNSS fell from $55 on
Wednesday to $44.10 at the close on Thursday.

The Retail sector did a crash and burn after a gap and crap open on
stronger than expected same store sales from some of the group's
leaders. Reporting higher sales were WMT, JCP, KSS, SKS and MAY.
Target also raised its estimates for the current quarter. Stores
that lost sales included GPS, FD and Sears. Chain Store sales
rocketed +5.2% in January up from 2.2% growth in December. This
was the biggest jump in sales growth since April 2000 when sales
grew +7.9%. Analysts said consumers responded well to the special
sales designed to part consumers from their money during a recession
but while inventory was sold, profits could be hard to find. The 
entire sector gapped open on the news but almost everyone closed 
with a loss for the day. Buy the rumor, sell the news.

The economic data may have told us more then Cisco. The meager
calendar today was highlighted by the Jobless claims which fell
from 391K to 376K and marked the fifth week below 400K. The
continuing claims and the four week moving average also fell.
This shows that the layoff picture may be easing even in the face
of new job cuts announced this week. Labor markets are expected
to be weak for sometime but every minor gain should be accepted
graciously. 
 
With the Enron cloud hanging over the marketplace and testimony
blaring from the news/stock TV channels there are just not very
many good reasons to rush out and buy stocks. Investors are 
worried that any stock could be next with rumors flying about
almost everyone. Even GE, which should be bulletproof, has been
in the rumor mill constantly. ELN announced after the close that
the SEC was investigating them for possible deceptive accounting
practices. Hardly a day goes by without someone becoming a new target.
Until this confidence crisis passes it will be hard to mount a
strong rally.

On the positive side there appears to be a capitulation event in
our future. Numerous analysts have said that the accounting 
problem would need to see stocks move to a new level which 
discounts any future revelations. With the total market cap
somewhere in the $12 trillion range and already over a trillion
dollars lower than it was when the crisis started we have seen a
10% drop. Many are now saying the discount is about done and all
we need is a capitulation event to cause institutions to come back
into the market. For the Dow that could mean another dip below
last weeks low of 9529. Hopefully that low will slow the descent
since the next meaningful support is 9050. The Nasdaq, which has
been substantially weaker than the Dow, does not have support
until the 1650-1700 range. The S&P has spent two days clinging 
to current support at 1080 with the next level at 1060. A
capitulation event could take the form of the deep V drop on Jan
29th/30th where the S&P dropped -54 points in two days. It
is just unknown where that drop would stop since we are already
below the lows from that January dip. 

The markets are not oversold on a trading basis. The VIX is moving
sideways at 27 and the TRIN is very anemic at .67. The put/call ratio
at .85 is only slightly bullish. There is definitely room for
more selling before expecting a rebound. While the Dow has tried
to rally the tech sector continues to drag it back down every day.
Several Nasdaq bigcaps are setting new relative lows. SUNW 9.22,
MSFT 59.79, finally broke $60, QCOM 39.11, broke support at $40, 
DELL 26.20. The other bigcap techs, INTC and ORCL are not far 
behind. The giant chip sector crash today could be an omen of the
coming capitulation. The strongest sectors are the last to sell
off and with increasing chip orders (according to some reports)
this sector had been gaining ground. Their crash on Thursday could
be the start of the re-valuation that institutions have been looking
for. Still we are just grasping at straws here since there is nothing
concrete on which to base these assumptions. It is pure speculation 
but it has happened in the past. Chips lead the way up, get crushed 
last and then lead again. 

Unfortunately speculation can be expensive if you guess wrong. 
Instead of speculating on possible outcomes I would recommend
trading what the market gives us. These would be my suggested
scenarios. Should the markets rally from here I would want the
Dow to be over 9775 and rising on strong volume but only if the
Nasdaq was rising as well. Finding a bullish breakout level on 
the Nasdaq is much more difficult. The downward trend is just too
pronounced. Ideally I would like to see the Nasdaq over 1960 but
that is almost +200 points from the Thursday close. The interim
level would be around 1875 but that is nearly +100 points above
our close. The problem here is the steepness of the decline. Any
attempt to buy techs closer to our current level could set us up
for another failed rally and a new loss. 

I would rather suggest that we anticipate a bounce in the Nasdaq
1700 range and attempt to bottom fish from that level. A real 
capitulation could put us in that range any day now. Without 
that event we could be just throwing good money after bad.
The market hates techs today which builds a strong case for that 
coming rebound. Cash is building up on the sidelines from a week
of selling pressure. It is not coming in from the retail sector
per TrimTabs.com which said only $1.5 billion flowed into funds
over the last week ended on Wednesday. My bottom line recommendation
is to stay flat/short until we get that capitulation sell off. 
Should we rise from here I would close Nasdaq puts at 1835 but 
not go long calls until at least 1875 or higher. Selling the 
rallies has been very profitable lately and should continue to
be so until the trend changes. Should we dip near 1700 I would
look to buy the bounce as a trading play only. Fridays are not
normally market bottoms but can produce bullish swings. Shorts
who do not want to hold over the weekend will cover if the trend
flattens and investors hoping for a Monday bounce will go long 
at the close. Neither of these normally begin a lasting trend but
provide the opportunity for a quick scalp or two. I view tomorrow 
as a throw away day unless we get the deep selling. Until then
everything else is just noise. 

Enter very passively, exit aggressively!

Jim Brown
Editor

Have you tried the Market Monitor yet?

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


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

Still Working
Austin Passamonte

"Sell All Rallies" remains the super-simple battle cry. A bit of 
added intraday volatility has made the past few sessions tougher 
than most this year, but we see no reason to change our tune yet 
tonight.

First, a brief lesson on how today treated us and then we'll peek 
at Friday & beyond from there.

(30-Min Chart: SPX)


 

The major indexes with slight exception of QQQ have been rolling 
very methodically in a descending channel for the past few weeks. 
This week has seen price action trapped between the lower zone of 
the channel, a decidedly bearish development.

At last night's close we did our best to game valid entry points 
in today's market action, always an adventure in itself. At the 
time we saw stochastic values still pointing straight down but 
near oversold extreme. Clear wedge formations (pink) had formed 
when price action coiled right between channel lines. Based on 
that and longer term charts still bearish, we wagered the downside 
would prevail.

I wrote a nice letter to the markets in pre-market action via 
Market Monitor requesting a failed pop & drop. Before that could 
happen, price action dipped below the wedge in fake-out fashion 
and quickly scrambled back in. Once it broke to the upside on top 
of that wedge, it was time to tighten stops on open put plays and 
regroup.

The real put-play entry today arrived near 2:00pm when price 
action failed at a lower high for the second time below mid-
channel line (black) while all 60/30/10/5 minute chart stochastic 
values turned bearish from there. This was noted in Market Monitor 
as well at 2:07pm EST. Another classic "read & react" entry to the 
market that is tough to diagnose ahead of time. Price action could 
have done a million different things to try and scenario, but once 
all the stars align it becomes crystal clear on a moment's notice.

Current Market Conditions
We share that hindsight replay for a reason: expect lots more of 
it. I sure would love to see methodical market behavior where the 
trend continues from bell to bell and easy money accrues. We are 
at a point right now where charts signals are beginning to mix and 
that spells mixed market action as well.

(Weekly/Daily Charts: SOX)


 

A good buddy asked me about the SOX index yesterday. I replied in 
Market Monitor that it looked like 520 was next and 500 level 
after that. Didn't realize how fast we'd see it, but you know how 
volatile these crazy chips are!

Leader of the tech is still in full-bear mode right now. Expect 
the 500 level soon, quite possibly before the next closing bell 
rings.

(Weekly/Daily Chart: BIX)


 

Leader of the old economy is looking pretty similar. Financial 
sector has been hit pretty hard lately and got whacked again today 
as it closed well off session highs. Daily stochastic values are 
trying to turn bullish but I for one wouldn't even consider going 
long these stocks until weekly chart signals turn bullish as well. 
That would preferably be from oversold extreme at lower index 
prices than we currently see in this chart if it happens.

Summation
Index & sector charts are all bearish, but look to be mixing 
things up a bit. A few weeks ago we kept saying that no real 
market direction would be found while weekly charts were bearish 
and daily charts bullish. Indeed the markets chopped sideways 
until both aligned and then we saw the beautiful trend develop.

Those predictions are recorded in this website for posterity, and 
the charts don't lie. Things remain weak in the long-term and this 
trend still has room to roll.

Sell All Rallies With Gusto,
austinp@OptionInvestor.com


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

Jittery
By Eric Utley

I'm not a frequent viewer of television programs.  I especially
dislike network television.  In my opinion, TV to the mind is like
empty calories to the body: a waste.  But I have to admit that the
Enron hearings caught my attention Thursday.  Aside from the
entertainment value, the hearings are serving as a close
examination of contemporary capitalism, specifically American
capitalism.

The American stock market has been perceived as the highest and
mightiest form of capitalism by the rest of the world.  Because
of that, American stocks have garnered a premium relative to
stocks in other countries.  Who wants to deal with the
geopolitical risks associated with Indonesia, for instance?  Well,
global investors are now weighing the perceived risks associated
with American stocks because of Enron.  The premium that U.S.
stocks have traded with for decades is now compressing because
of the uncertainty, the lack of visibility, non-transparency, and
flat out lies from Enron.

When ex-Enron CEO, Jeff Skilling, appeared before the House
panel this afternoon it triggered a broad sell-off in stocks.  I
think the mere sight of that guy scared investors across the
globe.  

I'm starting to see the potential for bottoms in stocks and
select sectors.  The Biotech Sector (BTK.X), for example, is
at a long-term technical bottom as I noted in the Market
Monitor Thursday.  Additionally, the Bullish Percent of the
Nasdaq-100 ($BPNDX) dropped to 30 in Thursday's session.  That's
getting pretty low in terms of downside risk, but as we saw in
late September, the $BPNDX can go to zero.

While I see a few technical signs of a short-term to
intermediate-term bottom in select areas of the market, the
one thing I cannot intelligently qualify is the market's
psychology, and I'm not afraid to admit that much.  Psychology
is more powerful than technicals and fundamentals in the
short-term.  

Investors are now perceiving greater risks associated with
the U.S. market, which is where the psychology comes into
play.  How long will the fears last?  What will come of the
Enron investigation?  How will accounting practices change when
the inevitable government-forced laws are enacted?  I don't have
the answers, and neither does the market right now, which is
why it remains on the defensive and so should you!

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

Market Averages


DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     :  9625

Moving Averages:
(Simple)

 10-dma:  9757
 50-dma:  9916
200-dma: 10092



S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1080

Moving Averages:
(Simple)

 10-dma: 1108
 50-dma: 1137
200-dma: 1164



Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1414

Moving Averages:
(Simple)

 10-dma: 1506
 50-dma: 1594
200-dma: 1609



Gold and Silver ($XAU)

Big surprise, the XAU was again the day's best performing
industry group.  The XAU gained 3.87 percent in Thursday's
session after staging a big pullback in Wednesday's trading.

Component leaders included Placer Domce (NYSE:PDG) up by a
whopping 7.90 percent, Meridian Gold (NYSE:MDG) higher by
6.59 percent, and Anglogold (NYSE:AU) better by 4.97 percent.

In this trader's opinion the group is extended in the
short-term.  Risk is greater to the downside than upside.
However, I'll see you on the pullback.

52-week High: 68
52-week Low : 46
Current     : 68

Moving Averages:
(Simple)

 10-dma: 62
 50-dma: 56
200-dma: 56


Semiconductor ($SOX)

The semiconductor group was the worst performing sector in
Thursday's trading.  The SOX shed 4.96 percent.  Perhaps more
interesting than Thursday's decline is the head-and-shoulders
top that has been traced in the index.  The pattern portends
extended downside in chip issues.

Leading components to the downside included Novellus
(NASDAQ:NVLS) lower by 9.27 percent, Micron (NYSE:MU) down
by 7.71 percent, and Xilinx (NASDAQ:XLNX) down by 7.64
percent.

52-week High: 724
52-week Low : 344
Current     : 516 

Moving Averages:
(Simple)

 10-dma: 543
 50-dma: 546
200-dma: 554

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

Market Volatility

The VIX closed for the second consecutive session above its
200-dma.  What does that tell us?  In my opinion, fear has
increased to above normal levels.  Normal is defined by the
medium, which I define as the 200-dma.  However, the VIX fell
back in Thursday's session for a fractional loss despite the
late-day sell-off in the broader market.

Conversely, the VXN is going parabolic as fear increases in
the Nasdaq-100 market.  The index has gapped higher in the last
three sessions, finishing above 50 Thursday.  Its 200-dma sits
overhead at 56.

CBOE Market Volatility Index (VIX) - 27.68 -0.52
Nasdaq-100 Volatility Index  (VXN) - 50.90 +1.84

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.85        626,321       530,055
Equity Only    0.78        509,265       395,135
OEX            0.77         21,330        16,127
QQQ            1.56         50,253        78,488
 
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          50      + 0     Bull Alert
NASDAQ-100    30      - 2     Bear Confirmed
DOW           53      + 0     Bull Correction
S&P 500       54      + 0     Bull Correction
S&P 100       54      - 1     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  1.60
10-Day Arms Index  1.45
21-Day Arms Index  1.39
55-Day Arms Index  1.23

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      1403           1681
NASDAQ    1384           2124

        New Highs      New Lows
NYSE       78             74
NASDAQ     54             90

        Volume (in millions)
NYSE     1,434
NASDAQ   1,971

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

Commitments Of Traders Report: 01/29/02

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 interests added to their net bearish position by more
than 5,000 contracts last week.  % of OI increased by 0.6 percent
in the same period.  Meanwhile, small traders picked up a few
longs and dropped a few shorts for a net increase of more than
5,000 contracts to the group's bullish position.

Commercials   Long      Short      Net     % Of OI 
01/15/02      340,005   397,024   (57,019)   (7.7%)
01/22/02      342,841   394,041   (51,200)   (6.9%)
01/29/02      345,583   401,923   (56,340)   (7.5%)

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
01/15/02      129,987     64,311   65,676     33.8%
01/22/02      125,451     65,423   60,028     31.4%
01/29/02      128,826     63,127   65,699     34.2%

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

Commercial interests' net bearish position dropped last week,
but the % of OI short increased to 11.7 percent.  Small
traders reduced their net bullish position by about 1,500
contracts.

Commercials   Long      Short      Net     % of OI 
01/15/02       32,068     34,859    (2,791)  (4.2%)
01/22/02       30,671     34,103    (3,432)  (5.3%)
01/29/02       31,577     33,651    (2,074)  (3.2%)

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
01/15/02       10,230     9,782       448      2.2%
01/22/02       11,885     8,787     3,098     15.0% 
01/29/02        9,709     8,293     1,416      7.9%

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 interests' net position remained flat in the prior
week, with an increase in both long and short positions.  Small
traders mirrored the commercial's last week.

Commercials   Long      Short      Net     % of OI
01/15/02       15,866     9,175    6,691     26.7%
01/22/02       18,152    11,013    7,139     24.5% 
01/29/02       19,956    12,171    7,785     24.2%

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
01/15/02        4,979     8,747    (3,768)   (27.5%)
01/22/02        5,424     8,969    (3,545)   (24.6%) 
01/29/02        5,872     9,709    (3,837)   (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 2/07/2002
False Start

News & Notes:
------------
From last night's summation: "There is no black & white rule to 
give in here, but I'd say greater than –2.00 SPX index points or 
–1.00 OEX index point below listed triggers would be excessive 
slippage. Better to short a failed pop instead of gapped drop 
right now during volatile times the past two sessions and possibly 
more."

Unfortunately, our initial entry triggers were ticked right off 
the open before markets steamed higher to take out trailed stops. 
From there we saw a classic put play setup later on, but it has 
been Swing Trade policy not to attempt the same play twice in one 
session. That exists to keep traders using live brokers or pre-
staged orders from getting whipsawed in repeated fashion.


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


 

As depicted in tonight's Index Wrap, price action broke below the 
wedges on an initial false move, raced higher and kissed off 
resistance lines once again. From there stochastic values turned 
bearish and price action fell along with them.

[60/30-Min Chart: SPX]


 

The SPX was a valid entry near 2:00pm right around the 1091 area 
and subsequently fell to rest at 1080 from there.


[60/30-Min Chart: QQQ]


 

The QQQ is even weaker than S&Ps today as it fell completely out 
of the channel altogether. Watch that red line area on your charts 
ahead for another pop and failure there at new resistance.


Summation:
---------
Traders wonder a myriad of things that could have been done 
differently today. First let's start with one scenario: if the 
markets simply triggered entries at the open and plunged from 
there, all would be well. So the problem lies with intraday 
volatility on that sucker's rally. The best way to combat that is 
for tight stops, exit with small loss and look for next entry 
point to arrive. That happened as depicted in Index Wrap and noted 
at 2:07pm EST in Market Monitor.

Widening or pulling stops is a bad idea... certain path to account
destruction. It may have worked today to prevent modest loss that 
ultimately turned to gain. But try that over the long term and too 
many times the market will never "come back" and massive to total 
loss is the result.

Preplanned trades carry a measure of error that real-time 
decisions do not. The best approach to today's suggested entry is 
a quick kill and patience for the next door to open. If that door 
was missed, take the next one to come along after that, as entry 
points are dime a dozen. Capital defense is not.

We have no high-odds entry setups tonight. Expect Friday to be 
another choppy session and quite likely to slide into its close. 
Keep an eye out for further failed rallies intraday but do not 
hold long calls or puts over the weekend for swing trades. Time 
decay erases several index points distance while we're away!


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:  36 (QQQ-NJ)            Feb Puts: 96 (DJV-NR) 
Long: BREAK BELOW none            Long: BREAK BELOW none
Stop: Break Above none            Stop: Break Above 


=====


         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: 540 (OEB-NH)            Feb Puts: 1075 (SPQ-NO)
Long: BREAK BELOW none            Long: BREAK BELOW none
Stop: Break Above                 Stop: Break Above 



Open Plays:
----------
Feb Puts: 37 (QQQ-NK)             Feb Puts: 97 (DJV-NS) 
Long: BREAK BELOW 37.00           Long: BREAK BELOW 97.50
Stop: Break Above 36.00           Stop: Break Above 96.50 [hit]

Feb Puts:  36 (QQQ-NJ)            Feb Puts: 96 (DJV-NR) 
Long: BREAK BELOW 36.00           Long: BREAK BELOW 96.50
Stop: Break Above 37.00           Stop: Break Above 97.25

Feb Puts: 540 (OEB-NH)            Feb Puts: 1075 (SPQ-NO)
Long: BREAK BELOW 549.00          Long: BREAK BELOW 1083.00
Stop: Break Above 552.50          Stop: Break Above 1090.00


IS Position Trade Model: Thursday 2/07/2002
Further To Fall

News & Notes:
------------
Are tracking new open plays for the major indexes right from 
today's early action. A subsequent pop & drop places them right 
back to entry value near the close.


Featured Plays:
--------------
As depicted in Swing Trade Gameplan


Summation:
---------
We will track current plays right into expiration or favorable 
execution from here, whichever comes first. More potential entries 
may likely be added in the weekend edition as well.


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 means the model is idle at this time.


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


Open Plays:
----------
Feb Puts: 36 (QQQ-NJ)          Feb Puts: 96 (DJV-NR) 
Long: BREAK BELOW 36.00        Long: BREAK BELOW 96.50
Entry: 1.10                    Entry: 1.30
Stop: 100% risk-loss capital   Stop: 100% risk-loss capital

Feb Puts: 540 (OEB-NH)         Feb Puts: 1075 (SPQ-NO)
Long: BREAK BELOW 549.00       Long: BREAK BELOW 1083.00
Entry: 5.40                    Entry: 14.00
Stop: 100% risk-loss capital   Stop: 100% risk-loss capital


Sector Share Trade Model: Thursday 2/07/2002
Up & Down Again


News & Notes:
------------
We closed a few previous shorts for modest gains when tight stops 
were hit early this session on a sucker's rally. Others remain 
open with various degrees of safe distance to entry.


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


Summation:
---------
No new plays targeted tonight, as we hold tight for now and see 
what Friday's action has to offer. More action is expected via the 
weekend edition for sure.


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:
----------------
None


Open Short Plays:
----------------
HHH Internet HOLDR
Short: BREAK BELOW 34.00 
Stop:  Break Above 29.00 [hit]
Result: +5.00 [+14.71%]

SWH Software HOLDR
Short: BREAK BELOW 45.50 
Stop:  Break Above 41.50 *

IYV U.S. Internet
Short: BREAK BELOW 13.75 
Stop:  Break Above 12.00 [hit]
Result: +1.75 [+12.72%]

02/06
XLV U.S. Cyclical/Transport
Short: BREAK BELOW 28.50 
Stop:  Break Above 27.50

SMH Semi-Conductor HOLDR
Short: BREAK BELOW 43.50 
Stop:  Break Above 42.50

UTH Utilities HOLDR
Short: BREAK BELOW 84.50 
Stop:  Break Above 85.50

RTH Retail HOLDR
Short: BREAK BELOW 96.40 
Stop:  Break Above 97.00

RKH Regional Banks HOLDR
Short: BREAK BELOW 106.90 
Stop:  Break Above 108.00

IDU Dow Jones U.S. Utilities
Short: BREAK BELOW 60.00 
Stop:  Break Above 62.50

IYF Dow Jones U.S. Financials
Short: BREAK BELOW 74.50 
Stop:  Break Above 77.50

IYR Dow Jones U.S. Real Estate
Short: BREAK BELOW 80.00 
Stop:  Break Above 82.50

IJJ Mid-Cap 400 BARRA SPDRs
Short: BREAK BELOW 88.20 
Stop:  Break Above 89.00

MDY Mid-Cap SPDRs
Short: BREAK BELOW 90.00 
Stop:  Break Above 89.00


Open Long Plays:
---------------
IYH Dow Jones U.S. Healthcare
Long: BREAK ABOVE 60.90 
Stop: Break below 59.00 [hit]
Result: -1.90 [-03.22%]

XLP Consumer Staples
Long: BREAK ABOVE 25.30 
Stop: Break below 24.75 *


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The Option Investor Newsletter                 Thursday 02-07-2002
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:
*****

TGH $77.23 +0.23 (+3.62) With the recent run that Health Care
stocks have seen, it is with some sadness that we bring our TGH
play to a close.  Today's action took the stock within spitting
distance of the $78 level, providing an ideal exit for traders
that have been playing the stock to the upside.  Unfortunately,
TGH reports earnings tomorrow before the close, so we are
dropping the play tonight.  Given the recent pattern of
impressive earnings in the sector, the stock could get another
pop on the numbers tomorrow, but with substantial gains in the
play we aren't willing to take that risk.  Harvest profits and
move on to the next play.


PUTS:
*****

None


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

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

CALLS              Mon    Tue    Wed    Thr

TGH      77.23    0.78   2.60   0.01   0.23  Dropped, earnings
UPS      55.63   -0.23   0.34  -0.74  -0.53  At entry, 200-dma
ASYT     15.71   -0.63  -0.02   0.07  -0.71  Watch your stops
UNH      75.10   -1.07   1.10  -0.40   0.50  Wedging up nicely
LH       83.32    0.53   0.67  -0.41   0.82  New, watch $84

PUTS

IVGN     51.95   -3.04   2.13  -0.33  -0.96  Still trending down
GNSS     44.07   -4.80  -1.10  -0.18  -9.48  Find an exit point!
CCMP     61.96   -1.11  -2.01   0.00  -0.04  Point break-down
GS       81.11   -2.90  -1.46   0.86  -0.79  It's all about $80
AT       54.65   -0.94  -0.33  -1.46   1.70  Rollover at 10-dma
AGN      66.68   -5.41   3.33  -1.05   0.90  Unable to advance
VRSN     24.10   -2.10  -2.45  -2.52   0.17  Next round of sells
EBAY     54.96   -2.49  -1.06   0.70  -0.24  $54 support is key
TLAB     13.30   -0.96  -0.67  -0.24   0.15  Weak, very weak
THQI     40.15   -0.80  -3.02   0.63   0.09  Short covering
ADI      39.34   -0.86  -0.26  -1.01  -1.67  New, SOX.X top


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

UPS $55.63 -0.53 (-1.16) Recent rumors and media reports have
suggested that UPS was interested in buying troubled Tyco's
(NYSE:TYC) financing division, Tyco Capital.  The Wall Street
Journal reported that among other companies, UPS was looking
into buying the Tyco division.  UPS squashed those rumors
and reports Thursday morning with a press release.  Albeit
mere talk, the reports could've been the cause for recent
weakness in this play or added to the market weakness in the
stock.  Whatever the case, UPS stopped on its 200-dma in
today's trading.  Traders who were waiting for a pullback,
now is the time.  Just make sure to use an ultra tight stop
on entries at current levels.  The ability to set a tight
stop below the 200-dma is what's appealing about entries at
current levels.  The entries aren't based on probabilities
because of the market risk that remains.  However, that risk
is easy to manage with a tight stop.

ASYT $15.71 -0.71 (-1.05) There were two positives about
ASYT today: it didn't break our stop and volume was light.
Other than that, it was an ugly day for this chip play.  The
Semiconductor Sector Index (SOX.X) shed almost 5%, pressuring
ASYT lower.  If that trend continues into tomorrow's session,
we'll more than likely be stopped out on this play.  Make sure
to have the appropriate risk management measures in place for
those who have open positions currently.  In a very weak
semiconductor sector, ASYT could have downside all the way to
the $14 level where its 50-dma and 200-dma are currently
converged.  The key is the SOX.X and its direction in tomorrow's
trading.  Watch it closely.  If the SOX.X stabilizes, then
we'll start to look for entry opportunities over the weekend.

UNH $75.10 +0.50 (+0.13) Helped along by continued bullish action
in the Health Care index (HMO.X), UNH is continuing to inch
higher, closing above $75 for the first time on Thursday.  Look
at the latest breakout in the HMO index.  It rocketed through the
$480 level earlier this week and is rapidly closing in on the
$502 resistance level (the highs from a year ago).  While there
may be some profit taking near that level, as long as earnings
from Health Care stocks continue to be strong, HMO should
continue to work higher, carrying UNH along for the ride.
Speaking of earnings, watch the results out from TGH in the
morning.  If positive (as we expect), look for UNH to work
through its recent intraday highs near $75.65.  Continue to
take advantage of intraday dips to support as entry points.
Support levels to monitor are $74.40 and then $73.65.  Keep stops
set at $73.


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

LH – Laboratory Corp. of America $83.32 +0.82 (+1.61 this week)

Laboratory Corporation of America Holdings (LabCorp) is the #2
clinical laboratory service in the world, behind Quest
Diagnostics.  LH performs 2000 types of tests for more than
100,000 clients, including health care providers, pharmaceutical
firms, physicians, government agencies and employers.  With 25
major laboratories and some 1200 service sites nationwide, the
company emphasizes specialty and niche testing such as allergy
tests, HIV tests, blood analyses, and substance abuse
screenings.

You've got to look long and hard to find a sector that is
performing better than the Health Care index (HMO.X), as it has
rocketed northwards over the past month.  With positive earnings
from many of the companies in the sector and the HMO index now
approaching its all time highs near $503, this is a relatively
safe area for bulls to play.  Shares of LH have been continuing
to March higher following the long-term ascending trendline
(currently $78.65) that began last spring.  The most recent test
of that trendline came in early January, as LH bounced from
strong support near $76.50.  Since then LH has worked through
the $81.50 resistance level and looks ready to take a run at the
$85 level.  Look for continued positive action in the HMO index
to help fuel this move, using intraday dips to support, first at
$82 and then $81, as potential entry points.  Momentum traders
may be able to play this one successfully as well, targeting a
breakout over the $83.50 resistance level in the near term.  Be
careful with trading the breakout though; LH tends to have a
rather erratic intraday volume pattern, making it hard to discern
a true breakout move.  One point to watch is that LH is set to
announce earnings on February 13th after the closing bell.  So
that only gives us 4 days to play, since we'll want to have all
positions closed before the announcement.  Initial stops are in
place at $80.50.

*** February contracts expire next week ***

BUY CALL FEB-80 LH-BP OI=1514 at $3.90 SL=2.50
BUY CALL FEB-85 LH-BQ OI= 712 at $0.85 SL=0.00
BUY CALL MAR-80 LH-CP OI=1502 at $5.20 SL=3.25
BUY CALL MAR-85*LH-CQ OI= 159 at $2.35 SL=1.25
BUY CALL MAY-85 LH-EQ OI= 141 at $4.90 SL=3.00

Average Daily Volume = 555 K



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

AGN $66.68 +0.90 (-2.37) AGN bucked the fractional weakness in
the drugs today.  The stock traded up to its 10-dma, but
failed to make much upside progress from there.  The stock
did threaten to stop us out at the $67 level, but failed to
settle above that level, which is why we're keeping the play
alive for another day.  The inability to advance past the 10-dma
revealed that there are still sellers in this stock.  We like
that.  Use any failed rally near the 10-dma as an entry
opportunity, especially in a weak health care market.  Those
in search of more confirmation can wait for a breakdown below
Wednesday's low at $65.50. 

CCMP $61.96 -0.04 (-3.28) The chip stocks were whacked in
today's session, but CCMP held up relatively well.  We think
it's time could come tomorrow.  The stock has traded in a
descending fashion in the last five sessions and today's
session culminated with an inside day.  Plus, that inside day
came on relatively lighter volume.  Momentum traders need only
to look for a weak technology sector tomorrow and for CCMP to
decline below yesterday's low at $59.90.  Such a move should
open the way to further selling.  A breakdown could have the
stock trading down to the mid $50s in the short-term.  If
the breakdown does not come tomorrow, look for the stock to
again rollover at its 10-dma, currently at $63.30.

AT $54.65 +1.70 (-1.03) With amazing regularity, AT traded up
to its 10-dma again in today's session and rolled over from
there.  The stock, however, did rebound to the tune of 3%
thanks to the strength in the broader telecom sector, including
the North American Telecom Index (XTC.X) and the Wireless
Services Sector Index (YLS.X).  Today's strength in the sectors
and indeed AT was most likely a product of short covering after
the recent drubbing in the group.  Volume was lighter in today's
session in AT which supports the view of short covering.  The
best way to play this stock going forward is by looking for
entries near resistance.  That means watching for rollovers from
the 10-dma in a weak telecom sector.

TLAB $13.30 +0.15 (-1.72) TLAB spiked higher in the early going
of today's session but failed to make much of its strength.
The stock rolled over into the close in a big way along with the
rest of the technology sector.  Short-term support could be
forming at the $13 level, so we'll be looking for that level to
break in the coming sessions as a sign that the sellers remain
in control of this stock.  Watch the Networking Sector (NWX.X)
as it relates to TLAB.  Continued pressure in that group of
stocks could have TLAB lower in the short-term.

EBAY $54.96 -0.24 (-3.09) After tagging an intraday low near
$53.50 on Tuesday, EBAY has been consolidating its recent
decline, finding support near $54 and resistance near $56.  It
looks like that 50% retracement at $56.61 is firming up as a
resistance level and ambitious bears can consider entering new
positions on failed rally attempts near this level.  While a
better entry would come from a failed rally near the $58 level,
given the weakness in the Internet index (INX.X) and the broader
NASDAQ, it doesn't look like we'll be that fortunate.  Recall
that our stop is currently at $58.  For those that are looking
to trade a further breakdown, wait for EBAY to fall below the
62% retracement at $52.60, accompanied by the INX breaking below
the $107 support level.

GNSS $44.07 -9.48 (-15.73) Patience is rewarded!  The bulls have
been trying to prop up shares of GNSS for the past 2 weeks, but
had their sails deflated this morning by Pacific Growth
initiating coverage with a Neutral rating.  The firm says it
sees revenues declining and says that the company has "nearly
maxed out its potential".  Ouch!  That sent the stock into free
fall at the open, and despite getting some midday support from a
CE Unterberg Towbin, the stock fell more than 17% on more than
triple the average daily volume to close at the low of the day.
In one day, the stock fell through the $53 support level and is
once again resting on support, only now it is at a much lower
level.  An oversold bounce would not be out of the question, but
it will likely run out of gas before clearing intraday resistance
at $48.  Target new positions on a failed rally below this level
and tighten stops to $48.25.  If GNSS continues to slide from
current levels, momentum traders can consider new positions on a
drop below $44, but will want to watch out for support near the
$41 level (the 62%) retracement of the September-January rally.
For those that were in the play before today's dramatic slide,
strongly consider harvesting some profits near current levels
and then wait for a fresh entry point.

GS $81.11 -0.79 (-4.29) "I've fallen and I can't get up!"  The
Broker/Dealer index (XBD.X) broke down again earlier this week,
falling below its 200-dma near $479, and despite the best
attempts of the bulls can't get back over that level.  GS plunged
with the XBD, falling to test the $80 support level several times
in the past 2 days.  Even today's broad market rally attempt
couldn't get GS over the $83 level and the afternoon drop brought
the stock closer to its lows than highs of the day.  With the
intraday highs getting higher and the lows getting lower, GS is
exhibiting just the kind of unstable consolidation that should
break to the downside.  Use intraday rallies that top out in the
$83-84 area to initiate new positions in anticipation of the
stock breaking below the $80 level.  Recall that our bearish
price target is $78, and we would recommend harvesting profits
on a decline near that level.  Tighten stops to $84.25.

IVGN $51.95 -0.96 (-2.20) Despite the Biotechnology sector's
(BTK.X) valiant attempt to bounce from the $450 level this
morning, there wasn't much in the way of follow through, as the
BTK rolled over at the end of the day.  The bearish sentiment is
clearly seen in the price action of our IVGN play, as the stock
was stopped cold near the $53.50 level before heading south
throughout the afternoon.  The descending trendline that has
been pressuring the stock for the past 9 days is now resting at
$53.65, and failed rallies near this level continue to provide
attractive entry points as we await the next breakdown.  Speaking
of breakdowns, IVGN is working through the support level ($51-52)
left behind in March and April of last year.  Once that support
is gone, the stock should move quickly down to test the $45
level.  Momentum traders will want to consider new positions on
a breakdown below the recent intraday lows near $50.50.  Confirm
the breakdown by watching for increasing volume and look for the
BTK to drop below the $450 level.  Lower stops to $54.50.

THQI $40.15 +0.09 (-3.10) That bounce didn't take long.
Tuesday's sharp plunge in shares of THQI continued at the open
on Wednesday, but it was followed almost immediately by a solid
bounce that brought the stock back up near the $40 level, where
it has been stuck since then.  The bounce from the $37 level
should have come as no surprise, as it was the site of the
September reaction lows.  But that doesn't mean the decline is
over.  Notice that there just hasn't been any concerted buying
interest (light volume on the rebound), and with the intraday
oscillators nearing overbought territory, the stock now has room
to fall again with the near-term oversold condition somewhat
relieved.  Use failed rallies to initiate new positions at
intraday resistance ($41 and then $42).  Alternative entries
can be considered on a volume-backed drop below the $39 level
(intraday support on Thursday).  Tighten stops to $42.25.

VRSN $24.10 +0.17 (-6.90) There's nothing like getting into a
play at just the right time to put a smile on your face.  VRSN
has given us quite a little ride this week, falling from north
of $30 to as low as $21.50 yesterday before finally finding some
buying interest.  Traders that entered the play earlier this
week should have definitely been harvesting some profits in
anticipation of a fresh entry point, and it looks like that is
starting to form right now, with the price starting to weaken
(along with the intraday oscillators) near the $25 level. 
Another failed bullish attempt at the $25.50 level can be used
for fresh entries.  Last night we reduced our stop to the $26.50
level because the sharp drop in the stock brought it below our
bearish price target.  VRSN could still fall further, but we
want to ensure that we keep our gains accrued so far.  Use
another drop near the $21-22 level to lock in profits as the
rebound off those lows saw strong buying volume, and that means
it could constitute a meaningful level of support.


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

ADI - Analog Devices $39.34 -1.67 (-3.80 this week)

Analog Devices, Inc. is engaged in the design, manufacture and
marketing of high-performance analog, mixed-signal and digital
signal processing (DSP) integrated circuits (ICs) used in
signal processing applications. The Company has a generic list
of approximately 2,000 products, with the highest revenue
product accounting for approximately 4% of its revenue in fiscal
2000. Analog also designs, manufactures and markets a range of
assembled products. 

The Semiconductor Sector Index (SOX.X) has formed a descending
head-and-shoulders top over the last two months.  It appears as
if that pattern is giving way to heavy selling in chip stocks.
The left shoulder of the pattern was traced in early December
near the 590 level.  The head was completed in early January
near the 600 level.  And the right shoulder was recently traced
near the 560 area.  The breakdown today could lead way to a
new very short-term trend in the chip stocks.  A component of
the SOX.X, ADI broke below triple-bottom support in today's
session.  That break came when the stock traded below the $39
level.  Volume was relatively active during the sell-off which
added credence to the breakdown.  We're looking for the selling
of the semis to continue into Friday's session and possibly
early next week.  ADI does report earnings next week, so we
won't be in this play more than a few days.  Of the chip stocks,
ADI didn't sustain as big of a move in Thursday's session, which
means it may have some catching up to do to the downside.
Momentum players can simply look for continued weakness in the
SOX.X in tomorrow's session and obtain entries in ADI around
current levels.  Watch the SOX.X as it approaches the 500 level,
which has acted as psychological support in the recent past.
A failure of that level, signaled by a trade below 495, would
lead to additional selling in chip issues.  The stop on ADI is
at $41.50.

***February contracts expire next week***

BUY PUT FEB-40*ADI-NH OI=1005 at $2.20 SL=1.00
BUY PUT MAR-40 ADI-OH OI=1526 at $3.80 SL=2.00

Average Daily Volume = 3.30 mln



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book:  

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and clicking on the link to the book on its home page.

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


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support
The Option Investor Newsletter                 Thursday 02-07-2002
Copyright 2001, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


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

CCMP - Cabot Microelectronics $61.96 -0.04 (-3.28 this week)

Cabot Microelectronics Corporation is a supplier of high
performance polishing slurries used in the manufacture of the
most advanced integrated circuit (IC) devices, within a
process called chemical mechanical planarization. The Company
supplies slurries to IC device manufacturers worldwide. Most
of the Company's CMP slurries are used to polish insulating
layers and the tungsten plugs that go through the insulating
layers and connect the multiple wiring layers of IC devices.

Most Recent Update

The chip stocks were whacked in today's session, but CCMP held
up relatively well.  We think it's time could come tomorrow.
The stock has traded in a descending fashion in the last five
sessions and today's session culminated with an inside day.
Plus, that inside day came on relatively lighter volume.
Momentum traders need only to look for a weak technology
sector tomorrow and for CCMP to decline below yesterday's low
at $59.90.  Such a move should open the way to further
selling.  A breakdown could have the stock trading down to
the mid $50s in the short-term.  If the breakdown does not
come tomorrow, look for the stock to again rollover at its
10-dma, currently at $63.30.

Comments

CCMP traced the classic inside day Thursday.  The stock could
breakdown in a big way in Friday's session if the SOX.X
continues selling off.  GNSS traced an inside day in Wednesday's
session and once it broke the $52 level...you get the picture.
We were a day early in GNSS, but feel the timing is right in
CCMP.  Simply watch for a breakdown below $59.90 and confirm
weakness in the SOX.X. 

***February contracts expire in two weeks***

BUY PUT FEB-65*UKR-NM OI=441 at $3.40 SL=2.00
BUY PUT FEB-60 UKR-NL OI=491 at $1.35 SL=0.75

Average Daily Volume = 1.17 mln



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

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

Back by popular demand – more setting up of Q-charts!  This Q-
chart thing has gone on longer than anyone first imagined, 
certainly me.  I was expecting a one-time shot at just setting up 
the indicators to watch on the charts.  If you missed it the first 
time, check it out at:

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

Thanks to overwhelming e-mail response for more, we added a part 
II and Part III, showing how to set up the charts and the quote 
sheets, respectively.

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

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

If you want to go there at a later time, you can find these in 
Trader’s Corner section of the OIN Web site menu on January 10, 
2002, January 17, 2002, January 24, 2002, and January 31, 2002.

Also, on March 19, 2001, Austin completed an excellent piece on 
setting up Time and Sales information to track large block trades.  
As I write this, the HTML department is hard at work attempting to 
re-create a fresh link, which would hopefully be available by the 
time we start trading on Monday morning of next week when it 
counts (expiration week!)

What do you know?  Through the marvel of binary code applied to 
modern technology, here's that link -- and we didn't even have to 
wait through the weekend!  Thanks Jim!

http://www.indexskybox.com/archive/fieldbriefings/031801_1.asp

So now we have charts, oscillators, quote sheets and time/sales at 
our disposal.  Isn’t that enough?  Short answer:  Not quite.

Long answer:  There are many helpful features within Q-Charts that 
can make our decision and information gathering process even 
easier for us.  

Would anyone be interested in looking at what happens after hours?  
How about those retracement lines that Jeff Bailey, Eric Utley, 
Austin Passamonte, and Mark (Rocketman) Phillips so skillfully put 
on their Market Monitor updates?  Or maybe drawing regression 
lines and retracements?  The list goes on.

Let’s start with an easy one – getting after hours data to show up 
on our candlestick charts.  From the Q-chart screen simply click 
the “All Sessions” button located next to the time interval 
selection window near the top of your screen.  If you have two, or 
more charts set up next to each other, be sure to click on the 
active chart in which you want after hours data to appear.  That 
would generally mean 60 minutes on down on the interval scale.  

The "daily" interval time scale on any given chart won’t give you 
the after hours data unless you re-create the time frame to 
reflect some amount of minutes.  For those insistent on having it 
shown on a daily chart, the truly tricky can hop this obstacle by 
plugging in "720 minutes" (or a period of 12 hours, which engulfs 
all U.S. market action) in the interval scale.  Here’s what the 
button looks like:



 


While you can’t see the whole screen with which I trade in this 
shot, you can see that the partial second chart is the active 
chart - you know that because it is blue at the top.  

This is not a button to set and forget, as it will screw up the 
oscillator readings on short time intervals at the next day’s 
market open.  I toggle it regularly before and after market hours.  
But it remains unchecked most of the time.

Now for the fun stuff!  How about lines and retracements?

Take a look first at a regression channel.  It draws a parallel 
set of lines that contain candle price action.  Go to the chart on 
to which you will draw your regression.  Then click on the 
“Regression Line” icon.  A pencil should now take the place of 
your cursor.  It will look like this:



 


With the regression icon now active, place the “pencil” anywhere 
on the time/date you want to start and left-click once – no 
holding down necessary.  Move the pencil to the time/date you want 
to finish and left-click again.  The channel automatically adjusts 
to fit the candles!  But in addition it continues infinitely in 
the direction that you leave it.  That way, you stay honest and 
won’t have lines jumping around to follow the candles.  Instead, 
the candles will have to stick to the channel if the channel is to 
hold validity.

The following is a chart I started way back in August 2000 and 
stopped on the November 13, 2000.  Notice how the channel had then 
held up even though I hadn't moved the line in months.



 


Now are you wondering about that line running down the middle of 
your chart (not shown here because I usually eliminate it) and 
your different colored (probably red) lines?  Want to change that?  
Simply place your cursor “pencil” or regular cursor on any part of 
the line you drew (Q-charts does not care on which part of the 
line, or if you have the drawing tool active) and right-click.  
Select “Preferences” and a box should pop up that looks like this:



 


With a bunch of moving averages and Bollinger band lines, the 
centerline is unnecessary in my opinion, so I simply uncheck the 
“Display” box.  Be sure to keep both the channel boxes checked, or 
you will lose a part of your channel.  Can’t have that!  To help 
me see it better, I also adjust the color and the line thickness.  
That way, I can’t possibly confuse it with something else.

You can also draw a point-to-point “Line”, “Ray”, or “Extended” 
line by going through the same process.  Here are the buttons on 
the tool bar.



 


For the point to point, ray, or extended line, select the one you 
want to draw, and click.  Place your “pencil” cursor over the 
exact spot you wish to start your line and left click.  Notice the 
line will move wherever you move the cursor.  It will not become 
permanent until you left-click again on the spot you want to end 
your line.  That’s it!  When you have completed the steps to draw 
your first line, you can draw another, or choose a different line 
to draw.  Practice by marking up the whole graph.

Want to change the preferences on any of your working lines?  
Again, just right-click directly on any line, select “Preferences" 
and pick your colors and line size in the pop-up box.

Notice how I conveniently side-stepped use of the retracement 
tool?  I’m sure I couldn't get away with that for too long, so 
here goes!
  
Let's go with this for starters, and I’ll encourage you to play 
with it a bit.  Just like the lines described above, select the 
"Retracement” icon and place it over the point from the beginning 
of a move up or down.  A yellow line will extend in any direction 
from that point until you left-click again.  Your second click 
should be at the top of the move upon completion of a rise, or the 
bottom of the move upon completion of a selloff.  The following is 
an example:



 


Notice the daily Dow (DJX.X) chart above.  Start the line from 
where you want to retrace.  The value of the index will be 
reflected along with the percentage retracement.  In this example, 
I started from the high in March 2001 and traced to its low just 
10 days later in March 2001.  Pretty simple and it works on any 
time frame over any distance of value movement.  Want your own and 
not "default" preferences here too?  Same steps. . .just right-
click on any part of the yellow line, or the retracement level 
lines, select preferences and have fun!  This is really a great 
tool!

Well that’s it for now.  Let me know what other features of Q-
charts are important to you and I’ll do my best to flush them out 
in this column.

Many thanks for all of your comments and suggestions so far.  Keep 
them coming.  I know from many e-mails received and from my 
personal experience, including ALL of our collective trading 
buddies across the country that Q-charts has its faults and throws 
temper tantrums.  Unfortunately, I don't have a hotline to Lycos, 
the parent company, nor do I have an e-mail contact to get quick 
fixes.  I wait like everyone else, as do all of Denver and remote 
staff.  In short, there are no guaranteed fixes, but there are 
some things we can try.  Like Frankenstein's Monster, occasionally 
Q-charts can be re-animated in a pinch.  Rest assured, we'll have 
a list things to try as part of the "Milking Q-Charts series.

Until next time, Happy charting!


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