The Option Investor Newsletter Sunday 03-03-2002 Copyright 2001, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 3-01 WE 2-22 WE 2-15 WE 2-8 DOW 10368.86 +400.71 9968.15 + 65.11 9903.04 +158.80 -163.02 Nasdaq 1802.74 + 78.20 1724.54 - 80.66 1805.20 - 13.68 - 92.36 S&P-100 576.16 + 22.12 554.04 - 5.61 559.65 + 2.37 - 12.07 S&P-500 1131.78 + 41.94 1089.84 - 14.34 1104.18 + 7.96 - 25.98 W5000 10560.01 +380.72 10179.29 -136.19 10315.48 + 66.16 -240.85 RUT 478.34 + 13.27 465.07 - 4.18 469.25 + 2.58 - 13.37 TRAN 2897.13 +171.48 2725.65 + 41.42 2684.23 + 24.29 - 99.39 VIX 22.13 - 2.76 24.89 + .80 24.09 - 1.38 + 2.60 VXN 41.94 - 6.63 48.57 + 3.58 44.99 - 4.29 + 6.20 TRIN 0.74 1.33 1.89 .64 TICK +1029 +1044 -128 +957 Put/Call .94 .90 .73 ****************************************************************** Oracle Tries To Pull A Fast One! by Jim Brown Bullishness was breaking out all over with resistance evaporating like morning fog. One minute you can't see fifty feet and suddenly the sun breaks through and a beautiful day appears. That is what happened in the markets on Friday. All the bearish and cautious comments that were clouding investor's decisions were blown away by the mornings economic reports. Euphoria reined supreme and after three days of afternoon sell offs the bears got a Friday surprise. Stocks rallied strongly into the close producing even more short covering. Traders woke up to a combination of positive surprises on Friday. Economically, the ISM index rocketed to 54.7, well over the estimates of 50.8 and showed a huge increase in manufacturing for February. This was the first time the number reflected an expansion in the manufacturing sector in the last eighteen months. This was the highest level since April-2000. The news that manufacturing was expanding after 18 months of decline was bolstered by a huge jump in new orders to 62.8 from 55.3 in January. Even order backlog jumped to 53.0 from 44.5 in January. Every indicator of the index rose except the critical inventory component which fell again to 39.5 from 40.5. This of course is also bullish since it shows a drop in inventory even after a jump in production. The new orders rose to the highest level since 1994 suggesting that the ramp up of production has begun. The ECRI Weekly Leading Index edged upward again spurred by robust growth in new mortgages and the increasing money supply. The index is predicting a good chance of recovery over the next three to six months. The Monthly Mass Layoffs also declined in January compared to the prior two months but still remains at an elevated level. There were 2146 mass layoffs in January including 263,821 workers. Despite the continued rise in unemployment Personal Income rose by a larger than expected +0.4% in January. However the gains did not come in salaries. It was in insurance payments and unemployment insurance benefits. This means most households did not see any gain and could have contributed to the drop in consumer sentiment. The final Consumer Sentiment numbers for February were announced at 90.7 compared to 93 in January. The current conditions component rose slightly but the expectations component fell sharply to 87.2 from 91.3. This means consumers are expecting less from a future rebound and are again becoming worried about their jobs. This index could also have been impacted by large numbers of workers coming to the end of their 26 weeks of unemployment without a job as well as the falling Nasdaq. Historically, consumer confidence has tracked the rise and fall of the Nasdaq since tech employment and retirement contributions have been tied to tech stock prices. The nearly -20% drop in the Nasdaq from the 2098 high in January to the 1696 low in February depressed investor hopes and expectations. This was reflected in the drop in the consumer confidence index. This was the first drop in five months. Adding to the positive economic news was a surprising announcement from Novellus that the December quarter was their bottom and they were raising guidance for 1Q 2002. They even went so far as to predict a return to profitability in Q2. They raised their guidance for 1Q by a penny but a return to profits by Q2 would beat analyst's estimates of a four cent loss by a mile. Robertson Stevens upgraded the stock to a buy after the company said bookings were increasing from DRAM makers. The CEO said bookings could rise +36% from the 4Q levels. It is not a broad based recovery yet but it is becoming broad based, Hill said. They said DRAM prices were rising and dormant DRAM buyers were coming back to life. NVLS jumped nearly +$6 to close at $48.51 and powered the entire chip sector. The SOX was within 10 points of a three-month low on Thursday but rallied to add over +56 points on Friday's news. Gains in other chips included KLAC +6.31, CCMP +5.50, VSEA +4.94, NVDA +4.93, MXIM +4.92, SLAB +4.88, AMAT +4.51, BRCM +4.41, DPMI +4.25, LLTC +4.14, XLNX +3.70, IDTI +3.33. You can see by the huge gains that many and I repeat MANY traders were short chip stocks and the NVLS news caught them off guard. As you can from the charts on KLAC and VSEA above this was not normal buying. VSEA did not trade over four times its daily volume because investors suddenly decided that chips were where it was at. They bought these stocks because they were short chips based on the negative comments from CEOs and analysts over the last several months. If the chip sector is in the middle of a recovery it has not rubbed off on the telecom sector. Sprint went the way of the other telecoms and announced a -$400 million drop in cap-ex spending for 2002. There is just no life in the telecom/networking sector and even the blowout market day only succeeded in adding .73 to the Cisco stock price which closed at $15. The software sector voted to join the rally with gains by everybody but Oracle and after the bell the reason was clear. After a bullish day with soaring markets ORCL tried to slip in after the bell with an earnings warning. Oracle shares dropped over -$1.25 to $14.79 after warning that they would miss estimates and that software sales and income growth would be flat. Oracle blamed slow sales in Asia as the main culprit. They had already lowered the bar for the quarter but the results proved even weaker than expected. Analysts expected comparisons for this quarter to be easy considering the bounce out of the September lows. Merrill Lynch warned on Friday morning that there was "pretty severe discounting" and an absence of large deals in the U.S. and Europe. Several analysts polled by Reuters said Oracle would also need to lower guidance for the next quarter when they release earnings on March 14th. The current estimate is for .17 to .18 cents which analysts now say is very unrealistic. Merck became the first major blue chip to drop Arthur Anderson as their auditor after a 30 year history. They chose to go with Price Waterhouse Coopers instead. This was the first domino to fall and doubtless there will be many more. Check out the article by Buzz Lynn last week for the complete list of all the AA major accounts. AA also agreed to pay $217 million for their part in the collapse of a non-profit fund raising company. It was the second-largest payout by a big five, soon to be big four, firm. Ernst & Young paid $335 million in 1999 for concerns related to Cendant. That number is also likely to fall from the record books as rumors now place the Enron settlement number being discussed at between $750 million and $1 billion. +400 points! That is the gain by the Dow for the week. Considering the other major indexes were teetering on the edge of support last Friday it is a remarkable achievement. The close at 10368 clearly broke resistance at 10300 from the first week in January and will have many traders questioning direction over the weekend. The leading consumer and cyclical stocks HON, BA, UTX, PG, JNJ, MMM, MO, MRK, KO, EK and even SBC were joined by MSFT, INTC and IBM for a major gain. Every component of the Dow closed the day positive with IBM rebounding for a +$4.90 gain and a close back over $100. The Dow close was the highest since August-27th last year and the biggest one day point gain since September-1st. The Nasdaq, which has been a laggard and a serious weight on the Dow rallied over strong resistance at 1790 and closed over 1800 for the first time in two weeks. Considering the steady down trend for the Nasdaq since Jan-9th this was a strong performance. Much of the gains were driven by the chip stocks which I outlined above. It is amazing how the markets can go from nearing new lows to nearing new highs in just a matter of several trading sessions. While we should be pleased with the show of strength we need to also be aware that what goes up quickly can fall even more quickly. While I am not predicting a Nasdaq sell off the gains by the chip stocks were nothing short of amazing when you consider that the picture only changed for one stock, not the whole sector. Cooler minds may prevail soon and even considering the positive economic data we should never chase gains made quickly. The Nasdaq still has to break even stronger resistance at 1875 in order to confirm a change in the trend. We should remain cautiously optimistic on tech stocks until that occurs. The S&P performed even better than the Nasdaq in my opinion. It broke resistance at 1125 with convincing strength and appears ready to conquer the next level at 1135-1140. Once that is accomplished the double bottom reversal will be complete and a new up trend firmly in place. That trend will be challenged at 1175 but that could be several weeks away. I am impressed. Doubtless thousands of other analysts are also looking at charts this weekend and actually beginning to believe that a new bull market is about to be born. Positive economic reports, raised guidance, upgrades to GDP estimates and a gradual dulling of the senses to the Enron accounting crisis all added to the explosion we saw on Friday. The range bound down trending markets suddenly appeared to have new life and floor traders were seen smiling and dialing with great enthusiasm. The market internals were strong with advances beating declines by 2:1 on decent volume. Decent volume, not great. Only 1.8 billion on the Nasdaq on a +71 point day. The NYSE managed over 1.4 billion as listed stocks saw the greatest interest. It was a great party while it lasted. The janitors have long since finished sweeping away the debris from the days trading and the profits and losses have already been booked by computers. The hangovers from the post trading happy hour are gone and everyone is facing a new week. That new week will be met by another round of shorting by bears that can't accept that the economy may be powering stock prices. It will also be met by fund managers that are sitting on a pile of cash while watching a +400 point gain last week. Questions will be flying. Are cyclicals overextended yet? Will techs have the historical April slump and should I buy now or wait? Are the credit worries over yet and if not why are BAC and WFC about to break out? There is no clear-cut answer and that is what makes a market. Indecision and reaction, fear and greed, profits and bonuses. A fund manager is faced with committing money to a runaway market which could fail again at any moment or wait on the sidelines for the next crash that may never come. One path creates a winner and the other another previous job listing on his resume. My bet is that most fund managers would rather take the bet and get into the market now. They will assume the risk that the next pull back will stop at a higher level and not below where we closed today. I believe that the real risk is not being in the market if the economic numbers are to be believed. Real investors are probably deciding this weekend that they may not get another chance at this level. It is decision time. Some will vote to buy, others will vote to wait. You have heard the old adage. Burn me once, shame on the market. Burn me twice shame on me. Most investors of the last two years have been burned so many times they could qualify as smoke eaters for the coming forest fire season. Still, I think most of these crispy critters are seeing that ray of light through the smoke and are about ready to take one more chance at investing. Will this happen next week? Did the next multiyear bull market begin last week? It is entirely possible and while most of our readers were not around to see the start of the last one in the early 90s, they are conscious, educated and ready to rock on this one. Let's hope that Friday was not the mother of all bear traps. Let's hope that the Oracle warning is seen as company specific. Let's hope that the Dow resistance at 10450-10600 evaporates as easily as 10300. Let's hope that the next round of profit taking is just another buying opportunity and not the market breakdown we were worried about last week. Let's buckle our seat belts and let the new bull market begin! Was that overly bullish? If I am dreaming, please don't wake me up! Monday will come soon enough and reality always has a sobering effect. Enter Very Passively, Exit Aggressively! Jim Brown Editor@OptionInvestor.com Have you tried the Market Monitor yet? http://www.OptionInvestor.com/itrader/marketbuzz/ ******************** INDEX TRADER SUMMARY ******************** Fridays Are Poppin'! Austin Passamonte Next time I have company in from out of town I'll be sure to let you know. It never fails we see the big market moves on days when I'm wrenched from the screens long before I wish to be. The early gap-up this morning was somewhat expected as intraday charts we drew up in Swing Trade Gameplan Thursday night showed clear bullish price patterns and nearing oversold zones for the oscillators. Personally I'd have loved to see an opening drop bounce and head higher, which would have been the buy signal to die for. The gap-up open still left a nice 20-index point range in the S&P to trade, but I watched most of it just keep walking higher without really stepping in for a big play. But that's my tale of woe, which has nothing to do with you. hopefully you got long or at least out of shorts in a timely fashion. Whether we continuation or counter to Friday's action on Monday remains to be seen, but most Fridays except for the past expiration have resulted in big upmoves by the close. We'll keep this pattern in mind for next week, too. (Hourly Chart: QQQ) A continuation chart from last night's Swing Trade Gameplan. Note the bullish wedge (pink) which broke on a very slight gap-higher open? It also placed price action above resistance near 34.25 and left room to run. I for one never expected another 1.5 points higher from there, but markets have a way of surprising us. The SOX was en fuego and fueled most of this move. Now we have near-term overbought oscillators and price action up against resistance in this channel. A pullback on Monday may be the next high-odds upside play. (Hourly Chart: OEX) Same for the leading indexes (OEX here by proxy) but not topped out yet. A touch at 580 could see pullback for next thrust higher if indeed this rally is real. (Weekly/Daily Charts: SOX) If Friday's rally is real, techs will be led by the SOX. It had quite an adventurous day as hot money streamed into the favored momentum sector via buying, shorts covering or both. In any event this one looks poised to move higher and nothing in the way except air & opportunity next week. (Daily Charts: VIX & Dow) Oh that vexing VIX! Readers continue to write an expound on how low volatility levels are. I wholeheartedly agree, but hasten to add we've seen this indexe stay below 19.00 for an entire month back in year 2000. That being said, we do note that the last four breaks of 22.00 level resulted in the Dow shedding several hundred index points in short order. S&Ps and NDX followed suit, of course. Summation Macroview of this week was bullish. The Dow began below 10,000 and closed about +375 index points higher in the end. Along the way there was gut-wrenching whipsaw volatility that wiped out many call and put plays along the way, sometimes both in one day. The three doji sessions between Mon & Fri large up days are more than stops on option plays can sometimes handle but perhaps we can enjoy more methodical, trending markets in the coming week(s) ahead. For everyone's sake I pray for deliberate, trending markets but in the end we do get what the markets give us and no more. I'd also like to see a sustained rally for weeks on end, but with a VIX reading back to recent lows we know that isn't likely. At VIX 28 - 32 I'd be looking for longs like crazy, but at 22 - 18 I know what experience has proven to me: play the upside moves right now with trepidation and care! Best Trading Wishes, austinp@OptionInvestor.com ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************** Editor's Plays ************** Play both ways! While the broader markets may be exploding the biotech stocks are still under pressure. HGSI appears headed to $10 which would be a multi-year low. Since HGSI was only able to post a four cent gain on a blowout day last Friday I can only surmise that there is still stock for sale. I would set a buy stop at $19.75 and buy the April $17.50 put. If the stock does continue to $10 it would be a home run. Set your stop loss at $21.25 once the play is entered. ******************* Combination play Naked puts with insurance SRCL has been wedging up to $65 for two weeks. During this period the biotech index has been struggling with leading biotech stocks losing ground. Those stocks are now oversold and should benefit from the next sector rotation. The way I would play this is to sell a naked put on SRCL. The May-$80 for $14.60 offers the maximum reward. For every dollar that SRCL closes over $66 at expiration returns $1 of profit from the naked put. For those that fear a possible exercise or a breakdown of the stock below $65 I would buy the March $65 put for $1.65. This protects me from any serious loss should SRCL collapse. It also lowers my possible gain on the play by $1.65 but the risk/reward is still very favorable. The obvious question is what happens on expiration Friday in March when the $65 put expires. That becomes decision day. Assume SRCL is at $70 or over. Ignore the $65 put and let it expire worthless. Set a stop loss on the naked put at $67.00 and let the play continue. The reason for $67 is that you should recover the $1.65 lost on the long put by stopping out the naked put at a higher stock price than where you sold it. Follow the stock price up with a higher stop loss as the play progresses. Assume SRCL is at $60. Close both put positions for a small loss probably around $1.65. The $80 put should be around $20 and the $65 put around $5. Assume SRCL is still at $65. The $65 put expires worthless and the $80 put is still around $15. You can close both for a minimal loss and find another play or you can leave the short side open and buy an April $65 put and risk another $1.65 or so. Personally, I look at the $65 put as insurance against disaster for the first three weeks. If the play is not moving in my direction by then I want to cancel the trade and find something else to do. There is no reason to be in any trade if it is not moving in your direction. Idle money is wasted money and the law of averages is working against you. Any trade that does not go in your favor eventually goes against you. It may not always be true but it is more often than not. Any trader that has nursed a position that has barely moved for several days or weeks knows that eventually they will wake up to bad news and the play will be busted. Always exit any play that does not go in your direction before the insurance runs out! ******************** Good Luck Jim **************** MARKET SENTIMENT **************** Sharpening Our Horns By Eric Utley Sentiment shifted to decidedly bullish last Friday after that stellar NAPM number. Or, the ISM Index. Whatever you want to call it, the number was stellar and helped our bullish stance along in the one- two-, and three-letter names. Yes, we missed the massive rally in the technology sector. Such are the rallies unique to a bear market. And, yes, the Nasdaq remains in a bear market as dictated by this weekend's bullish percent readings. Interestingly, the Nasdaq-100 Bullish Percent ($BPNDX) remained unchanged in Friday's session. Its inability to add to the bullish percent reading may reveal inherent weakness in the Nasdaq-100 (NDX.X) names. We will maintain our bearish outlook on the Nasdaq-100 until we get a reversal in the bullish percent data. That's not to say tech stocks can't be traded to the upside. It does suggest, however, that higher probability bullish trades lie in the NYSE names, more specifically the deep cyclical and transportation sectors. To further along the rally in the aforementioned sectors, I think we need to see some more selling in the Treasury market. That would generate the necessary liquidity to propel stocks higher and strengthen the bullish sentiment on the economy and market. The benchmark 10-year Yield (TNX.X) is a good indicator to watch early next week as it closed near an important resistance area last Friday. A breakout in the TNX.X above the 50.00, followed by a print at 50.50, would have me filing my horns and ready to charge ahead in stocks. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10369 Moving Averages: (Simple) 10-dma: 10026 50-dma: 9944 200-dma: 10034 S&P 500 ($SPX) 52-week High: 1383 52-week Low : 945 Current : 1132 Moving Averages: (Simple) 10-dma: 1101 50-dma: 1127 200-dma: 1153 Nasdaq-100 ($NDX) 52-week High: 2771 52-week Low : 1089 Current : 1435 Moving Averages: (Simple) 10-dma: 1392 50-dma: 1530 200-dma: 1575 Semiconductor ($SOX) The SOX exploded to the upside last week. The index finished the day 56 points higher, or 11.04 percent. The bullishness in the group was spurred by Novellus Systems' (NASDAQ:NVLS) comments. The chip equipment maker reported that it was seeing signs of a turnaround in the semiconductor business. The company raised its financial targets for the current quarter and in doing so sparked a broader rally. In addition to Novellus' guidance, Thomas Weisel raised its earnings estimates and price target for shares of Micron (NYSE:MU). The analyst said that the maker of DRAM products was shipping new product at an increasing rate. Standouts in the sector included Novellus, National Semiconductor (NYSE:NSM), Integrated Device Tech (NASDAQ:IDTI), Micron, Cree Research (NASDAQ:CREE), and Advanced Micro Devices (NYSE:AMD). 52-week High: 711 52-week Low : 344 Current : 567 Moving Averages: (Simple) 10-dma: 533 50-dma: 543 200-dma: 546 Biotechnology ($BTK) The biotech sector was the only group that I track that finished in negative territory last Friday. Its 0.43 percent drop earned the BTK.X the worst performing sector spot. Invitrogen (NASDAQ:IVGN) said in a conference call last Thursday that it was seeing less demand than last year. The warning resulted in a host of analyst reductions and a discount in the stock price. Shares of Invitrogen finished 25.24 percent lower. Additionally, Protein Design Labs (NASDAQ:PDLI) said that it expected revenues to decline by about 12 percent during this year due. The company also said that it did not expect to turn a profit this year. Shares of Protein Design finished 5.86 percent lower. The negative news from Invitrogen and Protein Design Labs overshadowed other positive developments in the broader biotech group. Andrx (NASDAQ:ADRX) rose 25.29 percent on favorable news, while ImClone (NASDAQ:IMCL) tacked on 21.59 percent. 52-week High: 676 52-week Low : 382 Current : 477 Moving Averages: (Simple) 10-dma: 487 50-dma: 528 200-dma: 542 ----------------------------------------------------------------- Market Volatility Whoa, Nelly! Implied volatility plunged last Friday on the strength in stocks. The VIX fell to 22, dropping nearly 4.5 percent in Friday's session. No doubt that the bears are watching for the VIX to dip below the magical 20 level. In the Nasdaq-100 world, the VXN fell to and closed at an all-time low at 41.94. I keep going back to the fact that the VXN is relatively young and in its year of existence experienced historical levels of volatility, so I don't know how much credence to give the current all-time low levels. Nevertheless, I do believe that its 9.20 percent plunge last Friday revealed a market without fear. CBOE Market Volatility Index (VIX) - 22.09 -1.04 Nasdaq-100 Volatility Index (VXN) - 41.94 -4.25 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.66 687,880 453,569 Equity Only 0.53 567,126 302,387 OEX 1.22 21,467 26,255 QQQ 1.07 52,998 56,961 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 55 + 0 Bull Alert NASDAQ-100 34 + 0 Bear Confirmed DOW 63 + 0 Bull Confirmed S&P 500 63 + 0 Bull Confirmed S&P 100 66 - 1 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 0.94 10-Day Arms Index 1.26 21-Day Arms Index 1.24 55-Day Arms Index 1.24 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 2223 926 NASDAQ 2305 1229 New Highs New Lows NYSE 192 27 NASDAQ 129 61 Volume (in millions) NYSE 1,446 NASDAQ 1,871 ----------------------------------------------------------------- Commitments Of Traders Report: 02/26/02 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 S&P commercials were wrong in the most recent reporting period. The group increased its net position through February 26. They may have scrambled to cover in last Friday's session, helping the market higher. Small traders got it right by adding almost 10,000 contracts to their net bullish position. Interestingly, just the opposite occurred in the Dow as you'll read below. Commercials Long Short Net % Of OI 02/12/02 355,276 412,868 (57,592) (7.5%) 02/19/02 355,905 416,664 (60,759) (7.9%) 02/26/02 366,258 432,258 (66,000) (8.3%) 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 02/12/02 126,730 59,902 66,828 35.8% 02/19/02 130,856 63,311 67,545 34.8% 02/26/02 139,183 62,087 77,096 38.3% Most bearish reading of the year: 36,513 - 5/01/01 Most bullish reading of the year: 91,122 - 3/06/01 NASDAQ-100 Nasdaq commercials grew increasingly neutral in the most recent report period by shedding a few more shorts than longs. Small traders added a mere 6 contracts to their net bullish position. Pretty quiet in Nasdaq land, but that could've changed in last Friday's session. Commercials Long Short Net % of OI 02/12/02 32,712 34,841 (2,129) (3.2%) 02/19/02 33,871 35,690 (1,819) (2.6%) 02/26/02 33,589 34,091 (502) (0.7%) 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 02/12/02 9,009 7,415 1,594 9.7% 02/19/02 9,966 8,073 1,893 10.5% 02/26/02 9,517 11,416 1,899 9.1% 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 traders grew more bullish in the most recent reporting period. Although the group added a number of short positions, its additions of longs more than compensated for an increase in the net bullish position. Small traders were wrong by adding to their net short position. Commercials Long Short Net % of OI 02/12/02 26,811 16,488 10,323 23.8% 02/19/02 29,606 17,953 11,653 24.5% 02/26/02 33,322 21,110 12,212 22.4% 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 02/12/02 4,562 10,038 (5,476) (37.5%) 02/19/02 4,654 10,431 (5,777) (38.3%) 02/26/02 6,333 12,547 (6,214) (32.9%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ************************Advertisement************************* BARRON'S SAYS OPTIONSXPRESS HAS "a lot of bang for the buck" * IRA Accounts Available * 8 different FREE options pricing, strategy, and charting tools * Real-Time Buying Power, Account Balances or Cancels * EASY screens for spreads, collars, covered calls or butterflies! Go to http://www.optionsxpress.com/marketing.asp?source=oinvestor013 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ************************************************************** *************** ASK THE ANALYST *************** The Other Grammy's By Eric Utley The recording industry held its annual showcase last week. A few awards didn't make it on the telecast. My go-to rock & rollers, U2, bagged four awards. And the O' Brother, Where Art Thou folks took home a few, too. The movie that accompanied the award-winning soundtrack is one of my favorites. A post-depression era interpretation of Homer's The Odyssey: brilliant! Here are a few awards you might not have seen announced on TV: Group or Duo of the Week Semiconductors, featuring Micron (NYSE:MU) and Novellus (NASDAQ:NVLS) Group or Duo of the Weak Genesis (NASDAQ:GNSS) and Invitrogen (NASDAQ:IVGN) Best Pop Performance ImClone (NASDAQ:IMCL) Best Alternative Performance Telecom Best Metal Performance Phelps Dodge (NYSE:PD) Please send your questions and suggestions to: Contact Support ---------------------------- Conexant (NASDAQ:CNXT) With a breakup into three companies in about 6 months do you think that the 10/11 level would be a good entry point? - Thanks, Frank Thanks for the question, Frank. I was bullish on Conexant in a big way last fall when the company said that it was experiencing an increase in orders for its wireless components, while its PC business had stabilized. Well, that increase in wireless orders and stabilization of its PC business lasted all of a few months as conditions have since worsened. I don't understand the bullish argument ahead of the company spinning off its chip businesses; I don't get it. Instead of one company operating in several weak industries, you'll end up with three companies in three weak industries. Without an improvement in business conditions, buying on the break-up thesis is a mistake. If you must speculate and try to pick a bottom ahead of the break-up, I'd wait for more downside risk to be removed. I'd watch for the stock to trade down to the $8 area, where it should spend some time forming a base. Such a development could at the very least reveal that the company's various business lines have stabilized. As of this weekend, they have not. ---------------------------- H&R Block (NYSE:HRB) I am writing to you as a novice "chartist." I had made some money on buying calls on H&R Block back in October when it made what I think was a triple bottom. In looking at the chart now I am unsure if it is topping out or getting ready for the next leg higher? Any input would be appreciated. - Best regards, Mike Thanks for the question, Mike, we were all novices once. H&R Block is kicking butt. The company flew past expectations when it reported last week and reaffirmed its upbeat outlook for the remainder of the tax season. Its results for the most recent quarter were padded by a double-digit increase in revenues from its mortgage business. With as strong as the housing business remains, HRB's mortgage business should continue so shine. The company is strong and so is the stock. It has the earnings momentum to justify the two-year rally and the price momentum to take the stock higher. But is the stock toppy? Excellent question. My answer is yes. The rally into last week's earnings report has left some downside risk to contend with. Don't confuse downside risk, however, with a loss of bullish conviction. I think the stock goes higher this year. I think it trades $60 before the year is over. But how it gets to $60 I don't know. I would guess through a series of pullbacks followed by a consolidation. My best offering: At $43, HRB is a gift. ---------------------------- Fuel Cell Stocks I've been watching some fuel cell stocks for awhile now, specifically Plug Power (PLUG) and Ballard Power (BLDP). It seems to me they could be marvelous performers once we shift more in that direction for energy. Even an OPEC decrease could cause these stocks to move quickly. Plug Power has some kind of joint venture with a division of GE (GE Power Systems). One big contract awarded to GE could make Plug go into the stratosphere. My feeling is that these are more news driven than fundamentals driven at the present time. Do you see any price objectives, bullish or bearish, you could share? Also, any thoughts on near and longer term prospects based on the company fundamentals? - Thanks, Rob Thanks for the question, Rob. I consider the fuel cell stocks driven by speculation. I have some solid contacts in the energy business who believe that the fuel cell technology is a long way off from commercial adoption. The economies aren't there yet to support the business so they tell me. I'll admit that I don't know much about the business, but I do know how to read financial statements. Plug Power (NASDAQ:PLUG) Plug Power recently reported fiscal year-end and fourth- quarter results. The company recorded sales of $5.7 million for its last year. Its revenues were down by 32 percent from 2000's figures. The company did defer a large amount of sales from its contract with Long Island Power Authority. Including the deferral, revenues would have totaled $11.2 million last year. That's still a very small sum. Giving Plug the benefit and using its deferred revenues, I reached a price to sales of about 40 times. Clearly, the company is a speculative endeavor. Read this line from the most recent 10-Q: "There can be no assurance that [Plug Power] will manufacture or sell fuel cell systems successfully or achieve or sustain product revenues or profitability." Buying Plug is a speculative bet. Nothing more. Why take the associated risk that comes with a stock like Plug when there are so many easier areas of the market to make money from the long side? The way I see it, you have about $8 and change of risk in Plug through Friday. Finally, Plug is a heavily shorted stock and for good reason. I see no nervousness on the part of shorts to cover even though the stock has traded sideways for about six months and the economy is picking up steam. Current bearish price objective is $6. ---------------------------- DISCLAIMER: This column is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The Ask the Analyst picks are not to be considered a recommendation of any stock or option but an information resource to aid the investor in making an informed decision regarding trading in options. It is possible at this or some subsequent date, the editor and staff of The Option Investor Newsletter may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable, but is not guaranteed as to its accuracy. ************* COMING EVENTS ************* ----------------------------------------------------------------- Major Earnings This Week... ----------------------------------------------------------------- Symbol Company Date Comment EPS Est BLDP Ballard Power Systems Mon, Mar 4 -----N/A----- -0.30 ABV Companhia Bebidas Ame Mon, Mar 4 -----N/A----- 0.38 HBC HSBC Holdings plc Mon, Mar 4 -----N/A----- N/A JWa John Wiley & Sons Mon, Mar 4 Before the Bell N/A PSO Pearson plc Mon, Mar 4 -----N/A----- N/A BJ BJ's Wholesale Club Tue, Mar 5 Before the Bell 0.77 CHS Chico`s FAS Tue, Mar 5 Before the Bell 0.20 COST Costco Wholesale Corp Tue, Mar 5 -----N/A----- 0.41 CRHCY CRH plc ADR Tue, Mar 5 -----N/A----- N/A FMS Fresenius Medical Care Tue, Mar 5 -----N/A----- 0.22 KSS Kohl`s Tue, Mar 5 After the Bell 0.66 SPLS Staples Tue, Mar 5 -----N/A----- 0.26 TLS Telstra Tue, Mar 5 After the Bell N/A UNEWY United Business Media Tue, Mar 5 Before the Bell N/A V Vivendi Tue, Mar 5 -----N/A----- N/A AEOS American Egl Outfit Wed, Mar 6 Before the Bell 0.58 ANN AnnTaylor Stores Wed, Mar 6 After the Bell 0.33 ENT Equant NV Wed, Mar 6 After the Bell N/A GLH Gallaher Group PLC Wed, Mar 6 -----N/A----- 1.31 MIK Michaels Stores Wed, Mar 6 After the Bell 0.95 PAA Plains Am Pipeline Wed, Mar 6 Before the Bell 0.36 RA Reckson Ass Realty Wed, Mar 6 After the Bell 0.64 AEG AEGON N.V. Thu, Mar 7 -----N/A----- 0.42 DYS Dist y Serv D&S SA. Thu, Mar 7 -----N/A----- 0.18 ICCI Insight Communications Thu, Mar 7 -----N/A----- -0.41 MDZ MDS Thu, Mar 7 -----N/A----- N/A NSM National Semiconductor Thu, Mar 7 -----N/A----- -0.27 NXL New Pln Excl Rlty Trst Thu, Mar 7 Before the Bell 0.43 REXMY Rexam PLC ADR Thu, Mar 7 -----N/A----- N/A AHO Royal Ahold N.V. Thu, Mar 7 -----N/A----- 0.53 SKS Saks Thu, Mar 7 After the Bell 0.50 SCO Scor ADS Thu, Mar 7 -----N/A----- N/A VDM Van Der Moolen Thu, Mar 7 Before the Bell N/A KKD Krispy Kreme Doughnut Fri, Mar 8 Before the Bell 0.13 LVMHY LVMH Met-Hen Luis Vttn Fri, Mar 8 -----N/A----- N/A ================================================================= Upcoming Stock Splits This Week & Next... Symbol Company Name Ratio Payable Executable NJR New Jersey Resources 3:2 03/01 03/04 RMCF Rcky Mtn Chocolate Factry 4:3 03/04 03/05 TRR TRC Companies 3:2 03/05 03/06 GILD Gilead Sciences 2:1 03/07 03/08 WERN Werner Enterprises 4:3 03/14 03/15 GNWR Genesee & Wyoming 3:2 03/14 03/15 WLP WellPoint Health Network 2:1 03/14 03/15 SMD Singing Machine 3:2 03/15 03/18 ================================================================= Economic Reports The week ahead of us still has a number of economic reports but none as market moving as last week's. Economists will be interested in the Factory Orders and the Fed's Beige book on Weds. plus the Unemployment number and the Avg. workweek and hourly earnings on Friday. ================================================================= -For- Monday, 03/04/02 Auto Sales Feb Forecast: n/a Previous: 5.3M Truck Sales Feb Forecast: n/a Previous: 7.1M Tuesday, 03/05/02 ISM Services (DM) Feb Forecast: 51.0 Previous: 49.6 Wednesday, 03/06/02 Factory Orders(DM) Jan Forecast: 1.0% Previous: 1.7% Fed’s Beige Book Thursday, 03/07/02 Initial Claims (BB) 03/02 Forecast: 380K Previous: 378K Productivity-Rev. (BB) Q4 Forecast: 4.2% Previous: 3.5% Consumer Credit (AB) Jan Forecast: $3.2B Previous: -$5.1B Friday, 03/08/02 Nonfarm Payrolls (BB) Feb Forecast: N/A Previous: -89K Unemployment Rate (BB) Feb Forecast: 5.8% Previous: 5.6% Average Workweek (BB) Feb Forecast: 34.1 Previous: 34.0 Hourly Earnings (BB) Feb Forecast: 0.3% Previous: 0.0% Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** 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 Sunday 03-03-2002 Sunday 2 of 5 ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********************** INDEX TRADER GAMEPLANS ********************** IS Swing Trade Model: Saturday 3/02/2002 Bullish Wedges Confirmed! News & Notes: ------------ Wedges drawn in Thursday Gameplan were not lying, even though I was suspect of the gap-higher open. Intraday traders who attempted upside plays fared quite well indeed but those who didn't exit by the close face extended market uncertainty thru the weekend. Featured Markets: ---------------- [60/30-Min Chart: OEX] We have added a potentially new channel (green) indexes may follow next week. Watch for a pullback to support area where upper green meets blue and if chart signals are oversold at that time, call plays should be in order! [60/30-Min Chart: SPX] The same is true for SPX: 1118 area on a dip should be good for calls. [60/30-Min Chart: QQQ] Qs look more extended than S&Ps, so we might expect the first pullback to begin in this index. Summation: --------- Intraday traders may fare well with put plays soon, but the trend for this week was up and that must be respected going forward until otherwise changed from that. Call plays from support are highly possible in the next session or two but obviously impossible to gauge at this time. Traders looking to play calls in current extended markets and/or puts upon descent must keep hair trigger fingers for now. 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 Mar Calls: 37 (QQQ-CK) Mar Calls: 102 (DJV-CX) Long: BREAK ABOVE none Long: BREAK ABOVE none Stop: Break Below Stop: Break Below Mar Puts: 34 (QQQ-OH) Mar Puts: 100 (DJV-OV) Long: BREAK BELOW none Long: BREAK BELOW none Stop: Break Above Stop: Break above ===== OEX SPX Mar Calls: 570 (OEB-CN) Mar Calls: 1125 (SPT-CE) Long: BREAK ABOVE none Long: BREAK ABOVE none Stop: Break Below Stop: Break Below Mar Puts: 550 (OEB-OJ) Mar Puts: 1075 (SPQ-OO) Long: BREAK BELOW none Long: BREAK BELOW none Stop: Break Above Stop: Break Above Open Plays: ---------- IS Position Trade Model: Saturday 3/02/2002 Friday's Squeeze = Monday's ?? News & Notes: ------------ Indexes started higher in the morning and stuck to it thru the day. Short-term extended and nearing key resistance, don't be surprised for a dip straight ahead early this week! Featured Plays: -------------- None Summation: --------- We cannot in good faith suggest any index or sector option plays that will hold for several days or weeks for high-odds success right now. 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: ---------- None Sector Share Trade Model: Friday 3/01/2002 Big Friday News & Notes: ------------ Indexes rallied big today, we'll see how Monday shapes up for follow-thru! Featured Plays: -------------- None Summation: --------- Current open plays have stops trailed closer, and no new entries to track are listed tonight. 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: ---------------- None Open Long Plays: --------------- IIH BHH Long: 4.75 Long: 3.50 Stop: 4.50 Stop: 3.50 HHH XLE IYV Long: 28.00 Long: 26.75 Long: 11.40 Stop: 29.00 Stop: 26.50 Stop: 11.50 BDH WMH MKH Long: 12.75 Long: 45.60 Long: 57.60 Stop: 12.25 Stop: 45.00 Stop: 57.60 OEF SPY FFF Long: 56.65 Long: 111.60 Long: 80.15 Stop: 57.00 Stop: 112.60 Stop: 80.00 IYZ IYW IYC Long: 26.60 Long: 48.10 Long: 55.60 Stop: 26.00 Stop: 48.00 Stop: 56.00 IYG IVE IVW Long: 87.00 Long: 53.10 Long: 58.10 Stop: 88.00 Stop: 54.00 Stop: 58.20 MDY XLF XLK Long: 92.70 Long: 25.25 Long: 21.40 Stop: 94.00 Stop: 25.00 Stop: 21.00 *********************************************************** DAILY RESULTS *********************************************************** Please view this in COURIER 10 font for alignment ************************************************* CALLS Mon Tue Wed Thu Week SII 64.79 2.01 0.19 -0.60 1.30 3.04 Still strong TDW 39.47 1.32 0.22 -0.40 0.44 2.07 Another break? UTX 74.20 0.35 1.75 1.15 0.00 4.50 Leading INDU HON 39.79 1.54 -0.34 1.04 0.97 4.40 Monster week BA 47.84 0.18 0.21 0.75 0.06 3.08 Flying high MMM 120.32 1.45 -1.15 -0.30 -1.07 1.32 Rebound Friday ETN 82.34 1.69 0.70 -0.81 -0.25 2.93 New, cyclical ACS 50.19 0.11 0.81 1.20 1.29 4.69 New, breakout PUTS GS 83.47 2.96 -0.56 -0.51 0.05 4.47 Dropped QLGC 43.06 1.86 0.08 -3.69 -1.85 2.21 Dropped MXIM 50.68 1.71 -1.42 -1.43 -2.07 1.65 Dropped ISSX 25.20 -0.22 0.94 -1.50 -2.26 -1.55 Entry point NVDA 51.01 3.91 1.17 -1.85 -2.14 6.02 Resistance ALTR 20.76 1.72 -0.78 -1.82 -0.92 0.89 Weak vs. SOX CLS 32.52 1.41 -0.05 1.71 -2.81 -0.12 New, down Fri ENZN 42.78 -0.14 1.20 1.24 -2.39 -1.12 New, breakdown LPNT 32.96 -1.11 -2.47 0.89 -0.98 -3.55 New, weakening ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* ACS – Affiliated Computer Services, Inc. $50.19 (+4.69 last week) See details in play list Put Play of the Day: ******************** LPNT – LifePoint Hospitals $32.96 (-3.55 last week) See details in play list ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ^^^^^ None PUTS ^^^^ GS $83.47 (+4.47) Looking like it was going to roll over again right up until the final hour of trading, GS finally got with the spirit of things and launched through the $82.50 resistance level to close almost $1 above that level. Volume surged strongly into the close, signaling that there might actually be some life to the rebound. We had some favorable moves from GS over the past couple weeks, but with the stock violating our stop, it is clear that the bearish party is over for now. There is no question that GS is a drop this weekend. MXIM $50.68 (+1.65) Chip stocks were definitely in favor on Friday, following the positive economic news showing the recession is over and the positive comments made by MU. That dual effect launched the Semiconductor index (SOX.X) to an 11% gain and just about every chip stock posted strong gains. That included our new put play, MXIM, which wasn't far behind the sector, posting a 10.75% gain of its own. Blasting through our $49.25 stop brings our play to an abrupt close, as Thursday's breakdown has now been erased from investors' collective memory. Use any weakness on Monday to find a better exit from any open plays. QLGC $43.06 (+2.21) After breaking down to new recent lows on Thursday, shares of QLGC gapped higher on Friday and pushed higher throughout the day, ending with a nearly 16% daily gain. Clearly there was some short-covering in there, but the bottom line is that our $41 stop was obliterated in the afternoon push to close at the highs, and it is time to move to the sideline on our bearish play. After such a huge rally on Friday, there could be some weakness early next week. Take advantage of that weakness to exit any remaining plays at a better price. *********** DEFINITIONS *********** SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** 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 Sunday 03-03-2002 Sunday 3 of 5 ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************** NEW CALL PLAYS ************** ETN - Eaton Corp. $82.34 (+2.93 last week) Eaton Corporation, incorporated in 1916, is a global diversified industrial manufacturer. Eaton is in the business of fluid power systems, electrical power quality and controls, automotive air management and fuel economy, and intelligent truck components for fuel economy and safety. The Company segments its business as Automotive, Fluid Power, Industrial and Commercial, Controls, and Truck. Cyclical stocks remain one of the highest probability bullish bets in the market. Not only that, but they carry the least amount of downside risk. Last week's trading further reinforced that notion as the Dow Jones Industrial Average ($INDU), heavy with cyclical components, finished at a six month high. The basic materials, equipment, and automotive sectors continued on their respective climbs higher. Fortunately, our new call play in ETN has operations in each of these sectors. The stock received a boost from Merrill Lynch analysts last week, when they upgraded their investment rating on the stock from neutral to a buy rating. Analysts cited the company's improved outlook and strides to increase its profit margins in several business lines. Merrill raised its earnings per share estimates for next to $5.70, from $5.23. That was a significant boost in earnings estimates which gave the stock a significant boost last week. The stock climbed to a 22 month high last week and has more upside ahead of it. There exists mild historical resistance between the $84 and $86 levels, but from there it's a clear shot to the $100 mark. We don't expect the stock to move straight up to $100, but it is a target for the longer term traders among our readers. In a strong market, as measured by the Dow and S&P 500, short-term traders can look for a high volume advance past the $83 level. Trading activity has remained relatively higher in recent weeks and should continue to do so if ETN works higher from here. Those in search of a pullback in this strong cyclical stock can look for a light volume retreat down to the $79.50 to $80 range. The 10-dma sits below at the lower end of that range. We're placing our stop at the $78 level to give this stock room to operate higher. A bounce above $78 would also serve as a favorable entry point. ***March contracts expire in two weeks*** BUY CALL MAR-80 ETN-CP OI= 39 at $3.10 SL=1.25 BUY CALL MAR-85 ETN-CQ OI= 0 at $0.50 SL=0.00 High Risk!! BUY CALL APR-80*ETN-DP OI=2261 at $4.30 SL=2.75 BUY CALL APR-85 ETM-DQ OI= 12 at $1.60 SL=0.75 Average Daily Volume = 375 K ACS – Affiliated Computer Services, Inc. $50.19 (+4.69 last week) ACS is a global Fortune 1000 company that delivers comprehensive business process outsourcing and information technology outsourcing solutions, as well as system integration services, to both commercial and federal government clients. The usual pattern for a stock after its splits is to languish for awhile, recovering from the run that went before. Not so in this case. Without so much as a hesitation, shares of ACS followed up on the 2-1 split a week ago Friday by staging an impressive rally, all in the face of a market that couldn't decide what it wanted to do. After dipping to the $44 level to confirm support, the bulls drove the stock solidly higher all last week and volume really picked up the last two days of the week, running more than triple the ADV. Resistance levels were falling quickly too, with the $48 level removed on Thursday and $49 on Friday, as the stock continued its impressive momentum run. While a consolidation dip would provide for the best entries, there is nothing to say that the stock can't just keep right on running until it runs into the next level of resistance. Right now, mild resistance is waiting at $51 with a firmer level of congestion up at $52. Of course, it will become more difficult for the bulls the closer ACS gets to its mid January highs near $55. Pick the entry strategy that works for you, either buying a breakout over the $50.25 level, or wait for a dip and bounce from either of the recently cleared support (old resistance) levels, first at $49, and then $48. We're initiating the play with our stop set at $47.50. *** March contracts expire in 2 weeks *** BUY CALL MAR-50*ACS-CJ OI=1374 at $1.75 SL=0.75 BUY CALL MAR-52 ACS-CT OI= 470 at $0.65 SL=0.25 BUY CALL APR-50 ACS-DJ OI=1020 at $3.20 SL=1.50 BUY CALL APR-52 ACS-DT OI= 568 at $2.00 SL=1.00 BUY CALL APR-55 ACS-DK OI=1900 at $1.20 SL=0.50 Average Daily Volume = 776 K ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ****************** CURRENT CALL PLAYS ****************** SII - Smith Int'l $64.79 (+3.04 last week) Smith International, Inc. is a worldwide supplier of products and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets. The Company provides a comprehensive line of technologically advanced products and engineering services, including drilling and completion fluid systems, solids-control equipment, waste management services, three-cone and diamond drill bits, fishing services, drilling tools, underreamers, casing exit and multilateral systems, packers and liner hangers. The Oil Service Sector Index (OSX.X) tacked on another 3.13% in last week's trading. The sector remains strong even after its recent three week rally. The group could be benefiting from renewed optimism over the economy. Increase in economic activity, as the ISM Index revealed late last week, will increase the demand for energy. And that demand will obviously trickle down to the exploration and production companies in the oil service arena. For its part, the OSX.X completed a very short term consolidation during the latter half of last week's trading. A breakout above the 95 level in the OSX.X could have that index advancing up to the 98 to 99 range, which would lift our SII play higher. SII traced a similar short-term consolidation last week, although SII is trading slightly better than its index. If the aforementioned move is completed in the OSX.X, then we'd look for SII to climb up to the $68 area, where traders can look to take profits. Given the short-term consolidation in the sector late last week, traders can use a breakout in the OSX.X in conjunction with an advance in SII past $65.50 to enter new positions. A pullback to the $63 area could offer entries on weakness in the sector. We're raising our coverage stop to $62. Traders with open positions might use a tighter stop to protect profits. ***March contracts expire in two weeks*** BUY CALL MAR-60 SII-CL OI= 421 at $5.60 SL=3.50 BUY CALL MAR-65*SII-CM OI= 336 at $2.15 SL=1.00 BUY CALL APR-60 SII-DL OI=3783 at $7.50 SL=5.75 BUY CALL APR-65 SII-DM OI= 734 at $4.40 SL=3.00 Average Daily Volume = 1.14 mln TDW - Tidewater $39.47 (+2.07 last week) Tidewater, Inc. provides services and equipment to the offshore energy industry through the operation of the world's largest fleet of offshore marine service vessels. The Company is one of the world's largest provider of offshore supply vessels and marine support services serving the energy industry. TDW added 5.53% last week, far out pacing the gains in its sector, the Oil Service Sector Index (OSX.X). The OSX.X tacked on 3.1% in last week's trading. TDW's relative strength is impressive as it should help to minimize the downside on any sector weakness as well as help the stock higher on any continued strength in its group. In fact, TDW traced a new relative high in last Friday's session at the $39.97 level, just short of the $40 mark. An advance past the $40 level next week would have TDW above all of its meaningful intermediate-term resistance and could portend more upside in the short-term. The sector still could be due for a pullback, but much of that will depend on the broader market. Traders looking for a breakout above $40 in TDW should pay close attention to the OSX.X as well as the Dow Jones and S&P 500. Only pursue a breakout entry in an advancing sector and market environment. In terms of a pullback, dip buyers might look for weakness down around the $38 area as an entry opportunity. We're raising our coverage stop to $37.50. ***March contracts expire in two weeks*** BUY CALL MAR-35 TDW-CG OI=9159 at $4.80 SL=2.75 BUY CALL MAR-40 TDW-DG OI= 692 at $1.10 SL=0.50 BUY CALL APR-40*TDW-DH OI=1842 at $2.15 SL=1.25 BUY CALL JUL-40 TDW-GH OI=1002 at $3.50 SL=2.25 Average Daily Volume = 730 K UTX - United Technologies $74.20 (+4.50 last week) United Technologies Corporation, through its operating segments, manufactures, installs and services elevators and escalators; manufactures commercial and residential heating, ventilating and air conditioning systems; produces commercial, general aviation and military aircraft engines, and military and commercial helicopters; and supplies transport helicopters. UTX continued to perform well in last Friday's trading, led higher by the strong rally in the Dow Jones Industrial Average ($INDU). Since breaking from its base at the $70 level earlier in last week's trading, UTX advanced as high as the $74.95 mark in Thursday's session before pulling back on routine profit taking. The stock could be due for additional consolidation as there exists some congestion immediately overhead current levels. The first level of resistance we're monitoring is the $75 mark, followed by $76, then $77. An advance past that congestion could have UTX trading back up to the mid $80s in the short to intermediate terms. Whether or not UTX makes that high in the next few weeks is dependent on the price action in the INDU. UTX needs the blue chip index to continue higher, so it's important to monitor the sentiment in the INDU when gaming new entries in UTX. Continued strength in the INDU early next week and an advance in UTX above $75 could be used as an entry opportunity. Those who prefer entering new call plays on a pullback can look for weakness in the INDU to pressure the stock back down to support. In the very short term, the $72 level could serve as a bounce point, where traders can look to target shoot new entry points. An extended pullback in the INDU could have UTX all the way back down to the $70 mark, where traders can look to aggressively enter new call plays. The 10-dma at the $70.83 level could prevent any fall down to the $70 level. ***March contracts expire in two weeks*** BUY CALL MAR-70 UTX-CN OI=2004 at $4.70 SL=3.00 BUY CALL MAR-75*UTX-CO OI=1888 at $1.30 SL=0.75 BUY CALL APR-75 UTX-DO OI= 707 at $2.95 SL=1.75 BUY CALL MAY-75 UTX-EO OI=4585 at $3.90 SL=2.75 Average Daily Volume = 2.21 mln HON - Honeywell $39.79 (+4.40 last week) Honeywell International Inc. is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services, control technologies for buildings, homes and industry, automotive products, power generation systems, specialty chemicals, fibers, plastics and electronic and advanced materials. The economic release last Friday really got HON moving to the upside again. The ISM Index rose by a much higher than expected amount during February. The consensus estimates going into the release Friday morning were calling for a rise to 49.9, while the actual reading came in at 54.7%. The reading indicated expansion in the manufacturing sector, which inspired the bulls in the Dow Jones Industrial Average ($INDU). That inspiration in turn spread to shares of Honeywell which was the fourth best performing component of the index with its 4.30% gain in Friday's session. The stock traded up past its intermediate resistance levels but may encounter resistance at the $40 level going into next week's session. Of course if the INDU continues on its rampage higher then HON should have no problem clearing the $40 level. The thing to watch for is weakness in the INDU. If the index pulls back, then the $40 level is the logical place for bulls to take some short-term profits. Options traders holding open positions should consider tightening stops in order to protect profits gained last week. As for new entries, a breakout above $40 and continued strength in the INDU could be used as an entry point into strength. While a pullback down into the $36 to $36.50 range would offer dip buyers an entry into new plays on weakness in the INDU. We're maintaining our stop at the $34 level. ***March contracts expire in two weeks*** BUY CALL MAR-35 HON-CG OI=8162 at $5.20 SL=3.75 BUY CALL MAR-37*HON-CU OI=3600 at $2.80 SL=1.75 BUY CALL MAR-40 HON-CH OI=2795 at $1.00 SL=0.50 BUY CALL APR-40 HON-DH OI=2841 at $1.95 SL=1.00 Average Daily Volume = 3.65 mln MMM - 3M $120.32 (+1.32 last week) Minnesota Mining & Manufacturing (3M), an integrated enterprise, is engaged in the research, manufacturing and marketing of products related to its technology in coating and bonding for coated abrasives. Characterized by substantial inter-company cooperation, 3M's business has developed upon the research and technology of its original product, coating and bonding. 3M announced last Friday morning that sold $400 million in three year notes. We suspect that the weakness we observed in the MMM in the three days prior to Friday was related to the debt offering. We're pointing fingers, but it could be that part of the selling against the trend of the market could've been related to the announcement Friday morning. After the announcement, MMM proceeded to trade higher through the day, making that rebound from above the $117 level earlier in the session very smart if readers took plays. With the Dow Jones Average looking strong going into next week's trading, MMM could continue marching higher after its pullback last week. The level to watch for momentum traders going into next week is at $121. MMM ever so slightly rolled over from that level in last Friday's session, which could mean that a breakout above could have the stock retesting the $122 relative highs in a hurry. In an advancing Dow, look for MMM to breakout above that $121 level. From there, we'll be looking for the retest of the stock's all-time high up around the $127 mark. In terms of pullbacks, we still like the idea of targeting entries on bounces above the $117 up to the $118 range. ***March contracts expire in two weeks*** BUY CALL MAR-115 MMM-CC OI=2800 at $6.60 SL=4.75 BUY CALL MAR-120*MMM-CD OI=3176 at $2.95 SL=1.50 BUY CALL MAR-125 MMM-CE OI=1656 at $0.85 SL=0.25 BUY CALL APR-120 MMM-DD OI=3094 at $5.60 SL=3.25 Average Daily Volume = 1.97 mln BA – Boeing $47.84 (+3.08 last week) One of the world's major aerospace firms, BA operates in three principal segments: commercial airplanes, military aircraft and missiles, and space and communications. Commercial airplanes operations involves the development, production and marketing of commercial jet aircraft, principally to the commercial airline industry. The Military Aircraft and Missiles division is involved in the research, development, production, modification and support of military aircraft, including transport and attack aircraft. The Space and Communications segment is involved in the research, development, production, modification and support of space systems, rocket engines and battle management systems. Transport stocks are flying high and led the way for the DJIA to post its best session since late September on Friday. The DJ Transports ($TRAN) blasted through their long-standing resistance at $2840, shortly after pushing through the descending trendline that had capped every rally since the highs posted in the middle of 1999. With the Airline index (XAL.X) setting a new post-9/11 high too, it should come as no surprise that BA is continuing to shoot to new highs, obliterating the resistance that could have materialized at the 200-dma. The stock spent all day trading above that level on Friday though, and appears intent on challenging the first resistance level in the near future. Speaking of resistance, the 50% retracement of the May-September decline lies just overhead at $49, followed by the psychologically significant $50 level. Serious resistance doesn't start to materialize until about $52.50, so it looks like this momentum play has room to run. While a breakout above Friday's highs can certainly be used for fresh entries, with the stock up for each of the past 7 days, it may be time for a bit of consolidation. A rebound from intraday support near $46 (near the 200-dma) would be ideal. Move stops up to $45.50 (just below the top of Wednesday's gap) this weekend. *** March contracts expire in 2 weeks *** BUY CALL MAR-47 BA-CW OI=1562 at $1.35 SL=0.75 BUY CALL APR-47*BA-DW OI=1519 at $2.35 SL=1.25 BUY CALL APR-50 BA-DJ OI=2062 at $1.30 SL=0.75 BUY CALL MAY-50 BA-EJ OI=4871 at $1.70 SL=0.75 Average Daily Volume = 3.61 mln ************* NEW PUT PLAYS ************* CLS – Celestica, Inc. $32.52 (-0.12 last week) Celestica is a provider of electronics manufacturing services (EMS) to original equipment manufacturers worldwide. The company provides a wide variety of products and services to its customers, including manufacture, assembly and test of complex printed circuit assemblies. The company's broad range of EMS services includes design, procurement, product assurance, assembly, full supply chain management, worldwide distribution and after sales support. CLS complements its EMS services by providing memory and power products to its customers. You are now entering the pending breakdown zone. Breakdowns have definitely been the most profitable plays in this market, and we've got another play that is right on the cusp of doing just that. Contract manufacturers are dependent on strength in the manufacturing sector, particularly for electronics products focused on the Telecom industry. On Thursday, ABN Amro lowered estimates for the entire contract manufacturing group, saying that the recovery in the Telecom industry is progressing more slowly than expected. That drove shares of CLS down to the $32.50 level, and the weakness continued on Friday with the stock trading below $32 intraday before finally rebounding right to the $32.50 level at the close. Looking at the PnF chart, you can see how critical the current support level is to any bullish hopes, as trading at $31 will create another double-bottom breakdown and a fresh signal. The most recent sell signal yields a price target of $19, which is actually below the September low of $20.69. While we can use a failed intraday rally to gain a better entry point into the play (assuming the breakdown will happen), the best way to play looks to be waiting for CLS to trade the $31 level, giving the actual PnF sell signal. If you want to fade any near-term rebound in entering the play look for any rally to fail below the $34.50 level. In order to give the stock some room to move before breaking down, we are initiating the play with a liberal stop at $36.25. *** March contracts expire in 2 weeks *** BUY PUT MAR-35*CLS-OG OI=4877 at $3.50 SL=1.75 BUY PUT MAR-30 CLS-OF OI=2697 at $1.10 SL=0.50 BUY PUT APR-30 CLS-PF OI= 566 at $2.50 SL=1.25 Average Daily Volume = 2.41 mln ENZN – Enzon, Inc. $42.77 (-1.22 last week) Enzon is a biopharmaceutical company that develops and commercializes enhanced therapeutics for life-threatening diseases through the application of its two proprietary platform technologies: polyethylene glycol (PEG) and single-chain antibodies. The company applies PEG technology to improve the delivery, safety and efficacy of proteins and small molecules with known therapeutic efficacy. ENZN applies its single-chain antibody technology to discover and produce antibody-like molecules that offer many of the therapeutic benefits of monoclonal antibodies while addressing some of their limitations. Stocks are breaking down so fast we can hardly keep up with them all. That's right, the broad markets staged their best rally day since late September, but there are still plenty of laggards to play to the downside. One of the weakest sectors of the market over the past two days has been the Biotechs, and the BTK index once again dipped precariously close to the early February lows on Friday before managing to recover most of its losses with the help of the broad market strength. But the BTK is once again underperforming (relative weakness) the broader NASDAQ, and the NASDAQ remains weak relative to the broad market. Enter ENZN, a Biotech that has dramatically under-performed even the lowly BTK over the past month and is right now on the cusp of another big breakdown. We've been seeing this pattern develop in other weak Biotech stocks lately, most recently IVGN, which blew up to the tune of a 25% loss on Friday following a 9% loss on Thursday. That doesn't mean that ENZN will do the same thing, but the chart looks eerily similar to that prior to IVGN's breakdown. ENZN is tenuously holding onto support near $41.50 and should that level break, it may find some last ditch defense near the $40 level, which provided some support in March/April of last year. Target new entries either on a failed rebound at $44 or even $45.50, or wait for a breakdown below the $41.50 level. Our stop is initially in place at $46.50. *** March contracts expire in 2 weeks *** BUY PUT MAR-45*QYZ-OI OI= 610 at $3.60 SL=1.75 BUY PUT MAR-40 QYZ-OH OI=1649 at $1.15 SL=0.50 BUY PUT APR-40 QYZ-PH OI= 347 at $2.90 SL=1.50 Average Daily Volume = 1.24 mln LPNT – LifePoint Hospitals $32.96 (-3.55 last week) LifePoint Hospitals operates 21 acute care hospitals in growing non-urban communities in Alabama, Florida, Kansas, Kentucky, Tennessee, Utah and Wyoming. The hospitals usually provide commonly available medical and surgical services, as well as diagnostic, emergency and outpatient services. The company also makes available a variety of management services to its facilities including information systems, leasing contracts, accounting, financial and clinical systems, as well as internal auditing and resource management. The Health Care sector (HMO.X) has been leading the broad markets higher for months, but in the past few weeks, it has been losing its position of relative strength as money rotates into other, more economically sensitive stocks. Peaking in early February, the HMO index has been gradually drifting earthward for the past few weeks and then fell sharply on Wednesday and Thursday. The dramatic broad market rally dragged the HMO out of its slump for a positive day, but it still greatly under-performed the broad market, with the relative strength chart taking a dramatic turn for the worse. We successfully played LPNT to the upside earlier this year, when the HMO index was still on the rise. Now that the tables have been turned, we can see that it is starting to significantly Underperform the HMO. Weak stock in a weak sector. That's the perfect recipe for puts, don't you think? After falling back below the 200-dma, LPNT has plunged through all of its moving averages in short succession, and the only think holding it up at this point is the tenuous support between $32-33. The recent decline has given the stock its first PnF sell signal since it began recovering in early November, and the current column of O's gives us a tentative price target of $25. A failed rally from current levels would likely provide the best entry, and we would look for a rollover near failed support at $34.50, also the site of the 50-dma. Barring that, look to initiate new positions as the stock falls below the $32 intraday support level, preferably on increasing volume. In order to give the play some room to work, we're initiating it with a liberal stop at $36, just above the 20-dma ($35.86). *** March contracts expire in 2 weeks *** BUY PUT MAR-35*PUN-OG OI=27 at $2.85 SL=1.50 BUY PUT MAR-30 PUN-OF OI= 0 at $0.40 SL=0.00 BUY PUT APR-30 PUN-PF OI= 0 at $1.00 SL=0.50 Average Daily Volume = 486 K ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** 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 Sunday 03-03-2002 Sunday 4 of 5 ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***************** CURRENT PUT PLAYS ***************** ALTR - Altera $20.76 (+0.89 last week) Altera Corporation designs, manufactures and markets programmable logic devices (PLDs) and associated development tools. PLDs are semiconductor integrated circuits that customers can program using its proprietary software, which operate on personal computers and engineering workstations. The Semiconductor Sector Index (SOX.X) erupted last Friday with a 11.01% gain. The SOX.X was powered higher by bullish analysts actions and positive news from within the group. Novellus (NASDAQ:NVLS), a chip equipment maker, said that it sees signs of recovery in the chip industry and raised its revenue targets for the current quarter. The positive guidance was well received by Wall Street as several firms rushed to upgrade the stock. Separately Thomas Weisel raised its earnings estimates and price target on shares of the DRAM memory maker Micron Technology (NYSE:MU). The renewed bullish sentiment lifted ALTR from its recent sell-off, but it was interesting to watch ALTR under perform its sector. ALTR finished 8.86% higher, well below the benchmark performance as indicated by the SOX.X. If the sellers return to the chip sector next week, ALTR should be high on the list for its relative weakness. What's more, the stock approached significant overhead resistance last Friday. The 10-dma, which has served as resistance on the way down recently, currently sits overhead at the $20.97 level. ALTR failed to reach that level last Friday, but if it does early next week, a rollover from there would serve as a solid entry point into new put positions. Entries taken at the $21 area can managed with tight stop. Our coverage stop can be used, which is currently at the $21.50 level, to manage potential upside risk on entries at the 10-dma. To the downside, we'll target the recent relative lows down around $19 on entries taken from rollovers at the 10-dma. Just make sure to keep a close eye on the SOX.X when attempting to target shoot an entry on a rollover next week. We need to see some weakness in the SOX.X if ALTR is going to trade lower from here. ***March contracts expire in two weeks*** BUY PUT MAR-22*LTQ-OS OI=1603 at $2.25 SL=1.00 BUY PUT MAR-20 LTQ-OD OI=4420 at $0.90 SL=0.25 Average Daily Volume = 6.86 mln ISSX – Internet Security Systems $25.20 (-1.55 last week) Internet Security Systems is a global provider of security management solutions for protecting e-business. The company's Adaptive Security Management approach to information security protects distributed computing environments from attacks, misuse and security policy violations, while ensuring the confidentiality, privacy, integrity and availability of proprietary information. ISSX delivers an end-to-end security management solution through its SAFEsuite security management platform coupled with around-the-clock remote security monitoring through the company's managed security services offerings. Following the descending triple-bottom breakdown in shares of ISSX on Thursday, we were hoping for a rebound in the stock to give us a better entry point to the downside, and Friday's broad market rally looks like it gave us just what we were looking for. The stock has been under heavy selling pressure for all of the month of February, losing 37% of its value, and that decline was punctuated by the breakdown below the long-standing $25 support level. Taking a closer look at the PnF chart, we can see that the initial sell signal that was generated last month gave the stock a bearish target of $14, and that is well below its current price near $25. Adding to the pivotal status of the current level is the 50% retracement of the September through January rally, which rests right at $25. Big breakdowns have been common lately and the bearish patterns on the PnF charts have been very reliable at catching a lot of them. Use the current broad market-induced rebound to initiate new positions near the $25-26 area, anticipating the eventual breakdown in price. If momentum trading is your preference, then you'll want to see ISSX drop below the $22 level (Thursday's intraday low) before taking a position. Our stop remains in place at $26.50. *** March contracts expire in 2 weeks *** BUY PUT MAR-25*ISU-OE OI=4680 at $2.65 SL=1.25 BUY PUT MAR-22 ISU-OX OI= 229 at $1.50 SL=0.75 BUY PUT APR-22 ISU-PX OI= 60 at $2.80 SL=1.50 Average Daily Volume = 2.75 mln NVDA – NVIDIA Corporation $55.94 (+6.02 last week) NVIDIA Corporation designs, develops and markets 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop personal computer user. Used in a wide variety of application including games, the Internet and industrial design, the company's products were the first to incorporate a 128-bit multi-texturing graphics architecture. This design approach delivers to users a highly immersive, interactive 3D experience with compelling visual quality and stunning effects at real-time frame rates. NVDA sells its products to major PC manufacturers such as Compaq, Dell, Gateway, Hewlett-Packard and IBM. Entry point, or end of the line? Clearly we haven't had an opportunity for an entry in our NVDA play, as we added it on Thursday and Friday saw Semiconductor stocks rallying sharply on the combined stimulation of positive economic numbers and sharply revised upward guidance from MU. That sent the Semiconductor index (SOX.X) on a more than 11% journey to the upside, bringing it right to the long-term descending trendline, and just a bit below heavy resistance near $580. Either this rebound will fail like all the others or there is some significant upside to come. Based on the fact that NVDA is on the put list, we think it is the former. Once the enthusiasm of Friday's rally fades, we're looking for NVDA to roll over and challenge the lows from last week enroute to taking out the $50 support level. The current downside target from the PnF chart is currently $35, but if NVDA trades $57 next week, that target will be negated by the fresh buy signal. If you're going to play, make sure to play with caution. NVDA is only 6 cents below our stop and it could take that out if the SOX continues to rally next week. A rollover from current levels would make for a great entry if our premise for the play is correct, but if our stop is taken out on Monday, we'll be moving the play to the drop list. More conservative traders will want to wait for NVDA to fall back below intraday support at $53.75 before taking a position. We'll be honoring our stop at $56; make sure you do too. *** March contracts expire in 2 weeks *** BUY PUT MAR-55*RVU-OK OI= 6169 at $2.75 SL=3.75 BUY PUT MAR-50 RVU-OJ OI=10964 at $1.25 SL=1.50 BUY PUT APR-50 RVU-PJ OI= 1495 at $3.90 SL=2.50 Average Daily Volume = 9.99 mln ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***** LEAPS ***** Upgrades and Downgrades and Rumors, Oh My! By Mark Phillips Contact Support The week that was. And what a wild and wooly week it was. Highlights for me included the upgrade/downgrade war over EBAY between Holly Becker and Mary Meeker, the GNSS acquisition of Sage that suddenly became dilutive rather than accretive to earnings, and of course we can't leave out the rumors that the U.S. already had ground troops in Iraq. Any of these factors on their own don't really mean much, but taken together with a slew of conflicting economic reports and Greenspan testifying before Congress, and you have the makings for a volatile week in the sandbox we call the stock market. The DJIA failed on three separate days to power through overhead resistance and each time was turned back in a weakening afternoon session. But on the fourth day, the sun shone through and the major indices managed to keep their lofty gains as we headed into the closing bell. Lighting the bullish path were some impressive economic numbers that seem to be saying that the recession is over and the recovery is underway. That's truly encouraging, but I take note that the SPX and NASDAQ markets are pinned at resistance at the upper bounds of their recent ranges, and the DJIA has a lot of overhead resistance to plow through. Can the bulls power through? I don't know, but I can tell you that with the VIX down at 22, I'm certainly nervous about initiating new long-term bullish plays. But an action plan is an action plan and we need to follow it, right? I'm sure you all noticed the entry signals we got on Friday in 3 of our Watch List plays, IBM, BRCM and BBH, all of which posted strong rebounds from our entry targets. Particularly impressive was the fact that the BBH was able to shake off the negative news from IVGN, bounce right at the $115 support level that we have been targeting for new entries. So BBH makes it into the Portfolio tonight. I've got mixed feelings on the other two stocks that gave us entry signals today. I tend to think that much of the positive action in Technology names on Friday stemmed from a lot of short-covering. BRCM vaulted higher by nearly 15% on Friday and volume was strong. So why isn't it moving to the Portfolio this weekend? I just don't feel comfortable that the gains are going to stick on this cycle, and would prefer to grab an entry on the next dip down that confirms the $31-32 support level. Recall, that when we list plays here in the LEAPS column, we take our entries at the end of the day, listing closing prices. If you took an entry on Friday when the stock rebounded from our entry target, then protect yourself with a tight stop just below Thursday's lows. We'll keep BRCM on the Watch List this weekend and look to enter the play on the next rebound from support. But I like IBM better than BRCM due to the fact that it is a broad-based technology enterprise and is less leveraged to the troublesome Telecom industry. I really like the way the stock refused to break below the $95 support level and then blasted off with the broad market, handily clearing our secondary target level of $100. So we'll go ahead and add it into the Portfolio. Here's the problem that I run into when contemplating new Watch List plays. Technology is in the process of being drilled into the dirt -- with the NASDAQ looking to likely test (and possibly break) the September lows, as one richly valued stock after another takes a serious valuation haircut. Don't let Friday's short-covering rally fool you; the NASDAQ is still stuck in its 2-year descending channel and the bulls have a lot of work to do before this index will be considered strong again. GNSS was the poster child for that this week, but what we'd really like to know is who is next! We tried to play that game with EBAY last fall, with dismal results. We were just too early to the party, as the stock began its downward slide just a couple weeks after we were stopped out of our LEAP Put play and threw in the towel. Timing is everything and ours was definitely off. Isn't hindsight great! With the markets as volatile as they have been in recent months it seems that just when we get into what looks like a good position, the stock moves just enough to kick us out of the position and convince us we were wrong. Then it reverses abruptly, heading in favor of the direction we picked, going on to hit levels that would eventually have been quite profitable. How about AIG? We played that one to the downside from last November through mid-January, looking for the stock to break down to the $70 level or thereabouts. Well, I got just a wee bit too aggressive on the stop loss and no sooner had we closed out the play for par, then it cratered as low as $66.50. Right on the expectation, but wrong on the implementation. And since then, the stock has violated the $70 level on four different days and continues to post lower highs. My point in highlighting this is to show that playing the downside with position trades is a difficult business over a period of weeks and months. You never know if the spike in price is a recovery or just another failed rally. Set that stop too tight and you'll be taken out of the play. Set it too loose and you take on too much risk or risk giving back too much of your profits. See how tricky it can be picking downside plays in a market that is desperately trying to find its sea legs again? The other half of the problem is that stocks that look healthy to me and are moving to the upside have already made most of the move that I think they have in store. The likes of BA, HON, UTX (all OI Call plays right now) are moving nicely to the upside, but weekly and daily Stochastics are already buried in overbought territory. Amazing but true, I actually contemplated adding BA as a new LEAP play back in early November, but avoided it due to the uncertainty surrounding the Airline industry. Big mistake, as the stock has now moved up more than $14 from the point where we likely would have taken an entry. So what is going on with the rest of the Watch List? GS is finally getting booted off the list. We've been waiting for a bottom to form in the stock and the Brokerage sector, and while we might be there for now, the fundamental picture is still looking ugly. We'll cancel that one out before placing it on the Portfolio due to an unfavorable risk-reward dynamic. Out lone remaining Put candidate is getting really close to giving us an entry, but I think it just might inch a bit higher before giving us that much anticipated rollover. Wait for the weakness to materialize and then we'll be ready to pounce. I've raised the entry target to $34-35 (the next level of resistance), but if it fails and rolls over from current levels, that would make for an acceptable entry as well. No matter how many times I miss solid entry points, I know there is another one just waiting around the corner to taunt me. The latest in this perpetually-growing list is GE. After dipping and closing below $36 a few weeks back, I became convinced that a test of $32 support would be necessary before recovery could really begin. Wrong!! Rebounding back above $36 would have given us the optimum entry, but by that time I had dropped the entry target to $32 and I ignored the strength, instead waiting for the next rollover. Well it came, and bottomed above the $36 level, and it now looks like a test of resistance near $41-42 is next on GE's agenda. I'm not willing to chase it higher at this point, but I am resetting the entry target back to where it was, $36. Speaking of missed entry points, I can't believe I stood by and didn't take aggressive action when JNJ tested the $55 level a month ago. That was the high odds entry point for that play, and the stock is up sharply since that bounce, as consumer cyclicals have continued to outperform. In fact, if the rebound is for real (as the economic numbers would seem to suggest), then I expect JNJ to continue working higher in the months ahead. I'm not willing to chase it higher at this point, but would consider any dip on the daily chart that gives us a bounce near $60 (the level of the recent breakout) would set us up nicely for a run from current levels to at least $70. Despite those failures, I'm not wasting my time crying over spilt milk. Accepting and learning from those mistakes, I've got another new entry for the Watch List this weekend, this time in the Airline sector. It has been steadily recovering since the September lows, and with the breakout of the XAL index over recent resistance on Friday, I think it has room to run. We're adding LUV to the Watch List this weekend, as I expect it to continue to outperform the overall sector over the long term. And that ought to do it for this week. Lessons learned, new plays and expectations for a an economic recovery made for a busy week. Enjoy your weekend, and we'll regroup for more excitement next week. Mark Phillips mphillips@OptionInvestor.com LEAPS Portfolio Current Open Plays SYMBOL OPENED LEAPS SYMBOL ENTRY CURRENT CHANGE STOP Calls: BBH 03/03/02 '03 $120 OEE-AD $16.60 $16.60 + 0.00% $110 '04 $120 KBB-AD $26.20 $26.20 + 0.00% $110 IBM 03/03/02 '03 $110 VIB-AB $ 9.80 $ 9.80 + 0.00% $95 '04 $110 LIB-AB $17.00 $17.00 + 0.00% $95 Puts: None LEAPS Watchlist Current Possibles SYMBOL SINCE TARGET PRICE TARGETED LEAP SYMBOL CALLS: GE 08/12/01 $36 JAN-2003 $ 40 VGE-AH CC JAN-2003 $ 30 VGE-AF JAN-2004 $ 40 LGR-AH CC JAN-2004 $ 30 LGR-AF BRCM 10/28/01 $31-32 JAN-2003 $ 35 OGJ-AG CC JAN-2003 $ 30 OGJ-AF JAN-2004 $ 35 LGJ-AG CC JAN-2004 $ 30 LGJ-AF JNJ 12/09/01 $60 JAN-2003 $ 60 VJN-AL CC JAN-2003 $ 57 VYN-AY JAN-2004 $ 55 LJN-AL CC JAN-2004 $ 50 LJN-AK LUV 12/09/01 $19-20 JAN-2003 $ 20 VUV-AD CC JAN-2003 $ 15 VUV-AC JAN-2004 $ 20 LOV-AD CC JAN-2004 $ 15 LOV-AC PUTS: EK 01/27/02 $34-35, $32 JAN-2003 $ 30 VEK-MF JAN-2004 $ 30 LEK-MF New Portfolio Plays BBH - Biotech HOLDR $119.38 We've had our eye on the Biotech sector (BTK.X) for the past few weeks, as it has been looking like it is trying to put in a solid bottom after declining as low as the $450 level a few weeks back. Since then the BTK has attempted several times to break down again, but each time, it has found strong arms waiting in the $475-480 level. We're using the BBH HOLDR for this trade, and that support level has corresponded to the $115 level, our entry target. Bad news from numerous Biotechs has continued to crop up, but the BBH keeps bouncing from support. IVGN was the latest bearer of bad news on Friday, giving up more than 30% intraday. That drove the BBH down to $115.20, but it rebounded strongly, gaining ground all day and actually closing positive. While the weekly Stochastics are starting their recovery, we can see that the dailies are actually pointed down. But we're looking for this to be another short-cycle bullish reversal on Stochs, just like we had a couple weeks ago. While we take our entries in the LEAPS portfolio at the end of the day, traders that jumped into the play on the rebound from our target area are already sitting on a modest gain. This one may take a little time to actually get moving, as the March-April period is usually the toughest for Biotechs. So we're giving this one some room to move, placing our stop at $110, just below the early February lows and also the site of the year-long ascending trendline. If you missed this entry, look for any renewed dip near $114-115 to provide entry into the play. While there is some near-term resistance near $123-124, we aren't looking for a serious battle with resistance until the BBH moves up to challenge its long-term descending trendline, currently $130. BUY LEAP JAN-2003 $12.50 OEE-AD $16.60 BUY LEAP JAN-2004 $12.50 KBB-AD $26.20 IBM - International Business Machines $103.02 As I mentioned above, I am actually rather nervous about taking this position, with the VIX resting near 22. But with prospects that the economy is actually recovering, and smartly at that, I think this is one of the better plays for those that want to bet on a recovery in the Technology arena. Despite the bears' best attempts over the past two weeks, they couldn't push IBM down to even touch the $95 entry target we had listed, and that alone had me leaning towards taking a position on Friday. But then the bulls really got serious, propelling the stock up for a 5% gain on the day on robust volume, shooting solidly through our secondary target of $100. While I don't like taking a position on such a huge upward move (since our entries are all marked at the end of the day), we'll have to take what we can get. For those of you still on the sidelines, I would recommend looking for IBM to give back some of Friday's gains and confirm the $99-100 level as new-found support before taking a position. So long as the economy truly is headed north, IBM should benefit and go along for the ride, working its way back toward the January highs in the vicinity of $125. We're initiating the play with our stops set at $95, just below the recent lows and also the location of the long-term ascending trendline. BUY LEAP JAN-2003 $110 VIB-AB $ 9.80 BUY LEAP JAN-2004 $110 LUE-AV $17.00 New Watchlist Plays LUV - Southwest Airlines $20.80 **Call Play** I can't tell you the number of times I talked myself into and then out of adding LUV to the Watch List over the past several months. Even when the rest of the Airline industry looked like it might go into the trash heap, LUV continued to look strong both from a fundamental and technical standpoint. After bottoming near $12 following the September terrorist attacks, the stock began marching northward, dramatically outpacing the Airline index (XAL.X) through early November, when the XAL actually began to behave better on prospects that travel habits were starting to return to normal. So while LUV has recently given back some of its relative strength, it is still much stronger relative to the sector than it was in early September. What really clinches an Airline play for me this week is Friday's strength that pushed the XAL to its highest close since September 10th, and it looks like it is still in ascent mode. Now, I know this is a bit out of character for me, as the weekly Stochastics are nowhere near oversold territory, but once again they are turning up, posting a short-cycle reversal. That's a sign of internal strength, signaling that the group is poised for further upside. That point is reinforced by the economic reports in the past week that point towards further growth in Transportation stocks and Deep Cyclicals, as Jeff Bailey has been talking about for weeks now. So on to entry points. After recently blasting through the $20 resistance level, the stock rang right up to the next level of resistance ($21.50-22.00) and is now experiencing a bit of weakness. That weakness should work in our favor, as LUV comes back to confirm support near $20 before taking off for the next leg higher. Ideally, we'll get the daily Stochastics reversing from oversold in conjunction with a bounce from support. We're setting our entry target at $19-20, and will place our stop at $18.25. BUY LEAP JAN-2003 $20.00 VUV-AD BUY LEAP JAN-2003 $15.00 VUV-AC For Covered Call BUY LEAP JAN-2004 $20.00 LOV-AD BUY LEAP JAN-2004 $15.00 LOV-AC For Covered Call Drops GS $83.47 I'm finally throwing in the towel on GS after letting it languish on our Watch List for the past 2 months. While we've seen that there is some significant support near the $78 level and the weekly chart is trying to reverse from oversold territory, I just don't like the way the overall Broker/Dealer Sector (XBD.X) is trading. Driven by both credit concerns in the wake of the Enron meltdown and a complete lack of a revival of investment banking business, I expect to see the XBD break its current support level over the near to intermediate term. As a key component of the XBD, GS looks both technically and fundamentally weak, and I see no reason to put myself at risk in an area of the market that continues to under-perform the broad market. Even the sharp rebound on Friday does little to change my mind on this one, and I think we can find better areas of the market to focus on. ************** TRADERS CORNER ************** Readers Stuff Austin Passamonte It always happens that readership feedback on Q&A articles we share in here draw great reviews from our peers out there in the trenches. Like "Survivor IV" in the new reality series, I'll go to the well at least one more time here with a batch of recent emails this week I think we all can learn something from. Let's begin: "Dear Austin: In your experience would you say that when the 30 and 60 min stochastics separate and change direction at the same time that is a hint that that trend may be a little stronger than when the 30 min stochastics has begun to separate and change directions 1-2 hours before the 60 min stochastics begins to separate and change direction? Hope that was not confusing!" [Austin] My answer to that is emphatically yes! First of all, there are many methods of successful trading that do not include stochastic values. I happen to lean on them out of ease and familiarity after many years use. What oscillators essentially measure is the underlying strength or weakness of current price action... i.e. is the buying or selling about to reverse. The very best directional trades arrive when all various time frame charts begin reversing stochastic value directions in sequence. When weekly, daily, hourly, 30-min, 10-min and 5-min charts all have stochastic values in overbought or oversold extreme zones, pressure has built that will soon release in the opposite direction with power. When varied time frame charts have signals going different directions, it tells us the symbol is weak this hour but strong during that day but weak in a weekly measure of trend, etc. Mixed chart signals doesn't necessarily tell us a directional move can't or won't occur, but we just have no clear measure to define risk/reward. But when all time frames in charts align to extreme, that's when the very best entries occur. And by nature downside play entries setup when the masses are totally bullish and upside plays when the masses can barely stomach to go long! "Morning Austin! Thanks for your great articles over the weekend. I would comment further here, but I would rather make money. And like you wrote, let's get on with FOCUSING on technical analysis, etc., and making money! Question: Would it be correct to say that it is more significant (preferable, or necessary?) when stochastic values cross below 20 or above 80 than if they stall and turn before they get there? Today with the SPX, we had weekly turning up from before 20, daily too. I would have thought that might be a pretty clear "bullish" signal, and I am sure they COULD go up from there. But do the odds favor a continuation (down in this case) because they haven't yet reached their oversold potential? Thanks for your comments when you get a chance, (S)" [Austin] Excellent question! What you are describing is called a "short cycle" in the oscillators. In other words a move from one extreme towards the next stops part way between and reverses back again. This happens during a defined trend. If the trend is up, stochastic values remain pinned near overbought for awhile, cycle back down towards oversold only to quickly reverse and head back up again. When we see this type of behavior it is important to use other market measures as well. Is the symbol in a defined ascending channel? A powerful entry near support comes when an ascending trendline or channel bottom is touched while stochastic values reverse from pointing downward to pointing back up. Now we have confirmation that the trendline will hold rather than poke & hope! Short cycles are found mostly in trending markets and also less liquid symbols where stochastic (and other oscillator) values can get a tad erratic. "I'm having trouble finding good charts. Where can I find 10/5/1 minute charts?" (RL) [Austin] Most of us here use Qcharts service at quote.com but any professional charting service should offer these time frames as well. There are some free and/or inexpensive chart services on the web that some traders attempt to cut costs using, but I can tell you for sure that anyone using such short-term time frames to trade must have advanced level, full streaming real-time charts to work with. End of day traders can easily rely on low cost or even free chart services, but intraday traders MUST have professional equipment to succeed. "Hi Austin...I know you're busy, but I'm looking @ last night's SOX charts in Summary and notice how smooth your fast stochastic line is on the weekly and daily chart. I'm using the 5,3,3 setting and the fast line is all over the place...slow line is cool and lines up like yours. What am I doing wrong. What settings are the best? Thanks (LA)" [Austin] I cannot explain why the same chart settings would create different results, so you stumped me on that one. But I can tell you that 5,3,3 settings are my current choice for stochastic values. This sequence is very common in volatile markets such as illiquid futures (pork bellies, lumber, etc) because they track fast turns. Trending, deliberate markets like currency futures use a slower setting (larger numbers) to filter out market noise and not get whipped out of a long-term trend. No surprise here, but we haven't seen any trends in the equity markets last more than several weeks. Lately it's been several hours, but that's another story. In any event I favor the faster setting that is sometimes early signaling and entry and exit but that's the type of equity market conditions we have right now. "Hey Austin! Wanted to throw my 1/2 cent' worth into this one. I still work a day job but am able to watch the market - I run Qcharts on a laptop via wireless modem; have to hide it behind my table-sized engineering workstation but I can at least see it. Still have to go to meetings intermittently, never know when or where so learning the business of trading & being able to implement properly have taken quite a while. With many thanks to you, Buzz, Mark, Jim and lots of reading, internalizing and implementing self-control over risk & emotion I am now routinely successful. Not getting filthy rich but the equity curve is rising orders of magnitude faster than my salary & bonus from the day job. I cannot even attempt to play on a 1-min chart for entries, since my attention is divided - but at least the limitation is accepted. However, I can certainly hit the majority of 60/30/10/5 alignments or chart breaks (AND CLOSE). This morning I was called into an impromptu meeting @ 11; fifteen minutes earlier I had entered an OEX 560 put play on the break, picked it up @ 6.2. Within minutes the bid reached my cost so I moved the stop up to cost to prevent loss. Some folks were late to the meeting so I took 2 minutes to return & check the action - hey, waddaya know, price moved up! Moved up the stop to 10% gain to lock profits, went back to the meeting. An hour later I find out I locked in minor profits - cool, maybe next time it'll go higher. By the way, did the same thing yesterday for a 35% gainer, same play. Being able to make even minor cash on an intra-day basis, in THIS market, while working full-time day job, should speak volumes on the education you folks have provided. Keep it up! Regards, Gumby [Austin] My good buddy Gumby pretty much said it all about the individual trader adapting their lifestyle, time allotment and preference of trade method to all fit within the circle of life. I can't help but imagine this will spark some ideas for others! "Austin, Until yesterday I was buy & hold investor, After loosing lot and margin calls, today I am using your technique "trade using chart". Today I made about $900 with three trades. Thanks, got the good education, Regards [A]" [Austin] I'd love to be a buy & hold investor myself, even if it was several weeks at a time. Trust me... day or intraday trading is hard work full of angst, sweat and stress. But it does pay a monthly (or yearly) salary several days a week, on average. Key to success here is NOT giving back solid gains the next day when trade setups and entries aren't clear. Enjoy the short-term game until we can all once again relax a bit and trade LEAPS for a living in the future. "Austin, Just wanted to share with you our (me and you) record.:) I did get the bounce, closed out two more positions to bring my record to 7-0. I have one negative trade, DJX 100 PUT which I will probably close out on a dip today. (I felt like a needed some insurance should my DJX & QQQ calls fail to pay). Many, many thanks. [S]" [Austin] "S", here's a newsflash: we are in danger of a losing string ahead. That's the good news. The best news is you & I both know it and can amply prepare ourselves. No questionable entries or "fliers" unless it's with tiny amounts of capital. No holding onto a loser that might break the streak to see if it will "come back". No getting cocky and leveraging capital beyond safety. Oh... I was giving that speech to myself on this one but I imagine it may help you to! "Greetings Austin, you are quite correct about Abby and her types. Abbey Cohen recommended IBM in Barron's a few months ago at 124!! When analysts/strategists recommend a stock, they should define their parameters: intraday, swing, positional, or long...long term. These hot shots are very irresponsible. I have been learning so much from IndexSkybox to OptionInvestor. I can call my own play now still making money. I am a professor at many universities teaching Computer Science. The money I made from the market is much, much more than my salary at the university. One good trading week can equate with a three-month teaching load. Thanks to you all. Please keep up the good work. Have a great weekend. Best (V)" [Austin] Nothing, and I mean nothing replaces self-education for success. As a professional educator you realize the info given to students is not the beginning & end, it is just the beginning. My two-year tenure here with OI group has been spent trying to teach others how to teach themselves, teach them how to learn. Many of us have learned a lot together in the process. Successful traders make money and remain loyal readers. Those who insist on forcing dated tactics that only worked in 1999 and may never work again are destined to fail. Those waiting for 1999 conditions to return are destined to fail. Those who make the personal decision to learn how to trade today's market and tomorrow's market will be around a long, long time. Reward for that willingness can be one good trading week equaling three month's teaching load. Keep doing what you're doing and I'll do the same! Hope This Helps (And Entertains), austinp@OptionInvestor.com ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** 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 Sunday 03-03-2002 Sunday 5 of 5 To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/c03c_5.asp z ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************* COVERED CALLS ************* Technical Analysis 101: A Tool For Analyzing Broad Market Trends By Mark Wnetrzak One of our readers asked about using the advance-decline (A/D) line to determine the outlook for the market in light of the recent volatile conditions. The Advance-Decline (AD) line represents the cumulative total or the difference between the number of advancing stocks and declining stocks in a given market such as the New York Stock Exchange (NYSE), which a widely used measure of market breadth. There are several ways to use a statistical summary of advances and declines. Weekly figures offer a perspective for long-term investment analysis while daily numbers can be charted to indicate reversals of a short-term nature, suitable for trend-trading or scalping. The methods of A/D interpretation are basic to chart analysis and the results are accurate and easy to understand. One of the most common evaluations is based on the divergence of the A/D line and other market indices. Another successful indication involves the use of long-term moving averages of the daily data. A well-known axiom suggests that a trend in motion can be expected to continue until it reverses. Utilizing a long-term average of the A/D statistics can help identify this trend and recognize the true momentum of the market. Interpreting this type of indicator is similar to other momentum-based techniques in that the primary signal is a crossing (in either direction) of the median line. A move from one area to the other confirms a trend in that direction and the longer the period that the gauge has been either above or below the median, the more meaningful the signal when it occurs. The most significant trends are those indicated when a move has come from deep in positive or negative territory. In a bearish market, this indicator will usually achieve new lows before any of the major indices and a preemptory buy signal is identified by a sharp spike from the lowest range while it's still in negative territory. The most significant buy signals occur when the gauge has been in the lower region for extended periods and reached the furthest extreme before finally issuing a bullish signal. This unique indicator can help identify the beginning of a character change well before the future trend surfaces and when utilized on a regular basis, it can provide added insight into the strength and character of the current cycle. The ability to recognize fundamental changes in the market outlook is a requirement for successful investing. As far as acquiring the current figures for trend analysis, you will need a charting service to plot the data (unless you want to do it yourself manually), and there are a number of free products on the Internet that have that information readily available. Here is an example using the NYSE: http://stockcharts.com/webcgi/wb.exe?Gall.web+$NYAD For additional information: One of the most respected technicians in the business is Steven B. Achelis. He has some excellent data and background information on the A/D line and other broad-market indicators at: http://www.equis.com/free/taaz/advdecline.html For more information, consider these books: Technical Analysis of the Financial Markets by John J. Murphy; Technical Analysis for the Trading Professional by Constance Brown and Stan Weinstein's Secrets for Profiting in Bull & Bear Markets. We all know that the stock market moves in identifiable cycles, and to be a successful investor, you must be able to determine the current phase of activity. This allows you to formulate an accurate perception of the overall trend and manage the positions in your portfolio with the appropriate outlook. It is also very important to be familiar with the common technical indicators used to determine the overall movement of financial issues and apply this knowledge as a practical part of your trading strategy. Trade Wisely! SUMMARY OF PREVIOUS CANDIDATES ***** Note: Margin not used in calculations. Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield MACR 15.61 18.85 MAR 15.00 1.50 *$ 0.89 9.1% AVII 10.50 9.90 MAR 10.00 1.45 $ 0.85 8.2% CANI 5.93 7.20 MAR 5.00 1.20 *$ 0.27 6.4% IMCL 18.44 27.28 MAR 12.50 6.60 *$ 0.66 6.3% ATVI 26.71 29.82 MAR 25.00 2.70 *$ 0.99 6.0% UTHR 11.20 12.26 MAR 10.00 1.70 *$ 0.50 5.9% OSIS 22.82 21.10 MAR 20.00 3.80 *$ 0.98 5.8% XMSR 13.98 13.50 MAR 12.50 2.25 *$ 0.77 5.7% DCTM 20.39 18.70 MAR 17.50 3.90 *$ 1.01 5.3% WNC 10.86 11.21 MAR 10.00 1.20 *$ 0.34 5.1% GT 25.14 26.99 MAR 25.00 0.95 *$ 0.81 4.8% FFIV 22.66 21.45 MAR 20.00 3.30 *$ 0.64 4.8% FDP 17.61 17.50 MAR 17.50 0.65 $ 0.54 4.6% HAL 16.27 16.90 MAR 15.00 1.85 *$ 0.58 4.5% AVII 11.22 9.90 MAR 10.00 1.70 $ 0.38 4.5% PECS 28.55 24.71 MAR 25.00 5.00 $ 1.16 4.3% BSML 5.22 4.70 MAR 5.00 0.65 $ 0.13 3.2% CRGN 17.44 16.36 MAR 17.50 1.15 $ 0.07 0.6% VPHM 19.50 16.30 MAR 17.50 3.00 $ -0.20 0.0% *$ = Stock price is above the sold striking price. Comments: The end-of-week rally should help the covered call portfolio remain respectable but a few issues are fairly weak and will be closely watched or exited. F5 Networks (NASDAQ:FFIV) is acting fairly horrid and may test its 150-dma around $19. Will AVI BioPharma (NASDAQ:AVII) continue to rally off its 150-dma? Is the rally offering a second-chance exit for Pec Solutions (NASDAQ:PECS)? Is it time to take the small-loss exit in ViroPharma (NASDAQ:VPHM) as the stock has moved to a new low? Next week should offer some more answers as the puzzle called the "Market" slowly unfolds. Positions Closed: Packeteer (NASDAQ:PKTR), Inrange Technologies (NASDAQ:INRG) NEW CANDIDATES ********* Sequenced by Company ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield ACF 25.30 MAR 22.50 ACF CX 3.30 3654 22.00 14 4.9% IBI 20.17 MAR 20.00 IBI CD 0.75 209 19.42 14 6.5% IMCL 27.28 MAR 25.00 QCI CE 3.30 4136 23.98 14 9.2% LTXX 23.72 MAR 22.50 UXT CX 1.90 1139 21.82 14 6.8% MACR 18.85 MAR 17.50 MRQ CW 1.85 236 17.00 14 6.4% NXTP 6.05 APR 5.00 KTU DA 1.50 12 4.55 49 6.1% OI 15.10 MAR 15.00 OI CC 0.50 86 14.60 14 6.0% Sequenced by Target Yield (monthly basis) ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield IMCL 27.28 MAR 25.00 QCI CE 3.30 4136 23.98 14 9.2% LTXX 23.72 MAR 22.50 UXT CX 1.90 1139 21.82 14 6.8% IBI 20.17 MAR 20.00 IBI CD 0.75 209 19.42 14 6.5% MACR 18.85 MAR 17.50 MRQ CW 1.85 236 17.00 14 6.4% NXTP 6.05 APR 5.00 KTU DA 1.50 12 4.55 49 6.1% OI 15.10 MAR 15.00 OI CC 0.50 86 14.60 14 6.0% ACF 25.30 MAR 22.50 ACF CX 3.30 3654 22.00 14 4.9% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** ACF - AmeriCredit $25.30 *** Economy On The Mend *** AmeriCredit (NYSE:ACF) has been operating in the automobile finance business since September 1992. Through its branch net- work, AmeriCredit purchases auto finance contracts without recourse from franchised and select independent automobile dealerships and makes loans directly to consumers buying late model used and new vehicles. AmeriCredit targets consumers who are typically unable to obtain financing from traditional sources. Funding for the company's auto lending activities is obtained primarily through the sale of loans in securitization trans- actions. AmeriCredit services its automobile lending portfolio at regional centers using automated loan servicing and collection systems. AmeriCredit's typical borrowers have experienced prior credit difficulties or have limited credit histories. The long economic slowdown, combined with possibly poor borrower selection, has worried investors that ACF might experience a deterioration in credit quality. But signs of economic recovery and a recent pricing of a $1.6 billion offering of automobile receivables- backed securities may ease the near-term monetary worries. The chart depicts a 4-month base with support at $20 which makes for reasonable short-term speculation. MAR 22.50 ACF CX LB=3.30 OI=3654 CB=22.00 DE=14 TY=4.9% ***** IBI - Intimate Brands $20.17 *** Climbing Higher? *** Intimate Brands (NYSE:IBI) includes specialty retail stores and direct-response (catalog and e-commerce) businesses that offer women's intimate and other apparel, personal care products and accessories. The company consists of Victoria's Secret Stores, Victoria's Secret Beauty, Victoria's Secret Direct and Bath & Body Works. Victoria's Secret Stores is a specialty retailer of women's intimate apparel and related products. Victoria's Secret Beauty is a specialty retailer of high-quality beauty products. Bath & Body Works is a specialty retailer of personal care products. Victoria's Secret Direct is a catalog and e- commerce retailer of intimate and other women's apparel. Through its Website, www.VictoriasSecret.com, many of its products may be purchased worldwide. Intimate Brands said 4th-quarter profits climbed by almost 33% amid strong holiday sales at Victoria's Secret, but they also warned that current-quarter earnings would be flat. Analysts are speculating that IBI's forecast appears "too conservative," and they think the company's profits could be much higher, if they deliver similar margin and same-store improvements as they did during the holidays. We simply favor the strong Stage II climb that has reached a new 52-week high. MAR 20.00 IBI CD LB=0.75 OI=209 CB=19.42 DE=14 TY=6.5% ***** IMCL - ImClone Systems $27.28 *** Speculators Only! *** ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company that is developing a portfolio of targeted biologic treatments designed to address the medical needs of patients with a variety of cancers. The company focuses on three strategies for treating cancer, growth factor blockers, cancer vaccines and angiogenesis inhibitors. The company's lead product candidate, IMC-C225, is a therapeutic mono- clonal antibody that inhibits stimulation of a receptor for growth factors upon which certain solid tumors depend in order to grow. ImClone's share price recently suffered over concerns regarding one of its cancer drugs. Now there is speculation that company may be a take-over target. IMCL said that it had adopted a shareholder rights plan or "poison pill," which would distribute new shares to current stakeholders if anyone tried to acquire a greater than 15% stake in ImClone. Was this in response to billionaire financier Carl Icahn, who is looking to buy $500 million worth of shares or is it a shield against a larger threat? This week, ImClone said regulators may consider its request to bring a promising colon cancer drug to market if the biotechnology company resubmits its U.S. clinical data and includes new data from Europe. Bristol Myers Squibb (NYSE:BMY) also announced that it has dropped its threat to end its $2 billion marketing partnership with ImClone but still wants to renegotiate the terms. This position offers favorable speculation on a bullish "break-out" in the issue. MAR 25.00 QCI CE LB=3.30 OI=4136 CB=23.98 DE=14 TY=9.2% ***** LTXX - LTX Corp. $23.72 *** Bracing For A Break-out *** LTX Corporation (NASDAQ:LTXX) designs, manufactures, markets and services semiconductor test equipment. The company sells its test systems to semiconductor designers and manufacturers world- wide, such as Texas Instruments, Philips Semiconductor, National Semiconductor, Motorola, NEC, Vitesse Semiconductor, etc. These customers use semiconductor test equipment to test every semi- conductor device at two different stages during the manufacturing process. LTX reported a loss in February but did manage to meet their revenue, expense and earnings targets for the quarter. The company remained positive on the future due to strong incoming orders and early signs that their business cycle is moving in a positive direction. We favor the strong rally off the January low on increasing volume, which suggests higher prices in the future. MAR 22.50 UXT CX LB=1.90 OI=1139 CB=21.82 DE=14 TY=6.8% ***** MACR - Macromedia $18.85 *** Successful Test Of The Lows? *** Macromedia (NASDAQ:MACR) develops, markets, and supports software products, technologies, and services that enable people to define what the Web can be. The company's customers, from developers to enterprises, use Macromedia solutions to help build compelling and effective Websites and eBusiness applications. Throughout the majority of fiscal year 2001, the company operated in two segments: the Software segment and shockwave.com, Inc. The Software segment develops software that creates Website layout, graphics and rich media content for Internet users. shockwave.com designs, develops, and markets aggregated content to provide online entertainment on the Web. Macromedia currently operates in one primary business segment, the Software segment, as a result of the deconsolidation of shockwave.com. Macromedia is continuing its restructuring and cost containment plans as it recently announced a restructuring charge of $30 million to $40 million in its 4th-quarter ending March 31. The company will soon be shipping new products, which should help revenues, and is on the verge of a significant product upgrade cycle. Salomon Smith Barney raised it rating on the stock from "neutral" to a "buy." We noticed the apparent successful test of the September low in the short-term, and the recently emerging "head-n-shoulders" bottom in the long-term. MAR 17.50 MRQ CW LB=1.85 OI=236 CB=17.00 DE=14 TY=6.4% ***** NXTP - Nextel Partners $6.05 *** If Bill Gates Likes It... *** Nextel Partners (NASDAQ:NXTP) provides digital wireless communi- cations services in mid-sized and smaller markets throughout the US. The Nextel digital mobile network uses a single digital transmission technology called integrated digital enhanced net- work, which Motorola (NYSE:MOT) developed. The company offers a package of wireless voice and data services under the Nextel brand name targeted to business users. Services include digital mobile, or interconnect, telephone service; Nextel Direct Connect service, which allows users to contact co-workers instantly, on private one-to-one calls or on a group call; the ability to receive and send pages and short text messages, and Nextel Wireless Web service (formerly Nextel Online), which provides wireless Internet services, including Web-based applications and content to Internet-capable subscriber telephones. Nextel has suffered over the last several months on earnings warnings and overall weakness in the sector. The company did manage to double revenue as it added more U.S. subscribers than expected in the 4th-quarter and gave upbeat guidance for 2002. On Friday, it was reported that Billionaire Bill Gates quietly gained a 5.45% stake in the wireless communications operator. We simple favor the move above the February high on heavy volume and the current bullish momentum. This position offers conservative "bottom-fishers" a favorable risk-reward entry point from which to speculate on the company's future. APR 5.00 KTU DA LB=1.50 OI=12 CB=4.55 DE=49 TY=6.1% ***** OI - Owens-Illinois $15.10 *** The Trend Is Your Friend *** Owens-Illinois (NYSE:OI) is a worldwide manufacturer of packaging products. The Company manufactures glass and plastic containers, plastic closures, plastic prescription containers and multi-pack plastic carriers for beverage bottles. Owens-Illinois has two product segments: Glass Containers and Plastics Packaging. The Glass Containers unit produces containers in a wide range of sizes, shapes and colors for many markets. The Plastics Packaging segment is comprised of three business units: Plastic Containers, Closure and Specialty Products and Prescription Products. No recent news since Owens-Illinois reported a 50% increase (before unusual items) in earnings per share for the 4th-quarter of 2000. The company's outlook remains bright as lower energy costs, improved pricing in a number of product lines, higher U.S. unit volumes, and the recently acquired Canadian glass container operations should have a favorable impact on the company's performance in 2002. The bullish up-trend shows no sign of stopping and the stock has now reached a new 18-month high. MAR 15.00 OI CC LB=0.50 OI=86 CB=14.60 DE=14 TY=6.0% ***** ***************** SUPPLEMENTAL COVERED CALL CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield (monthly basis) ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield GMST 20.28 MAR 20.00 QLF CD 1.40 4064 18.88 14 12.9% AMT 5.51 MAR 5.00 AMT CA 0.75 2205 4.76 14 11.0% AMZN 15.39 MAR 15.00 ZQN CC 0.95 10139 14.44 14 8.4% MRVL 35.39 MAR 32.50 UVM CZ 4.00 776 31.39 14 7.7% U 5.40 APR 5.00 U DA 0.85 40 4.55 49 6.1% INVN 40.10 MAR 35.00 FQQ CG 5.90 459 34.20 14 5.1% NOVN 20.88 MAR 20.00 NPQ CD 1.25 146 19.63 14 4.1% TER 37.55 APR 35.00 TER DG 4.70 2001 32.85 49 4.1% ***************** NAKED PUT SECTION ***************** Success Basics: Q&A With The Naked-Puts Editor By Ray Cummins Today's questions concern the fundamental goals of this section and the selection process used to identify favorable candidates for the strategy of selling puts. Attn: Naked Puts Editor I recently became a subscriber to your newsletter and I am very interested in your low-risk approach to selling puts. I want to learn more about the way you pick the plays and how successful you have been since the market turned downward. Also, do you have any suggestions for good books or other information on the strategy and the best ways to trade these types of positions? Thanks for your time! TS Hello TS, First, thanks for your inquiry concerning the Naked-Puts section of the OIN. This section is written primarily for new traders that need simple strategies. To generate the majority of plays, we search through lists of issues with overpriced options (the OTM positions), reviewing the technical outlook of the underlying and its industry group/sector. If we feel the issue has bullish potential and there is a fair risk-reward, then it goes on a list of final candidates. After we have all the possible plays for a specific day, we simply choose those which (in our opinion) appear most favorable. In most cases, we try to achieve a 4-6% monthly return with at least 15-20% downside protection. If the options market has relatively low implied volatility, that can be a very difficult task. In addition, writing "covered" calls and selling "naked" puts are generally not favorable strategies for a bearish market but the readers want plays regardless of the overall trend. However, if we don't have confidence in what we have to offer, it won't be published, and that's the overriding measure of any play we list in the section. We also provide a selection of additional candidates to supplement your search for profitable positions. For one reason or another, they simply did not make the final list; which is usually limited to 7 or 8 candidates. Of course, the process of selecting the "published" plays is very subjective and there are always other issues that warrant consideration. That is why we include some of the stocks that just missed our final list (for various reasons), so that YOU may decide if they meet your criteria for a favorable play. Remember, our job is to provide a list of potential plays, greatly reducing your research time. Your job is to decide which positions fit your risk-reward profile and hopefully (with further scrutiny and analysis far beyond that which we can provide in the few hours between Friday market close and the Saturday publishing deadline), you will select only those that are winners. As far as ongoing position management, we try to monitor the plays in the section regularly but we do not make specific suggestions about when they should be closed or adjusted. Again, our job is to provide candidates for your more-thorough examination and also to identify positions that have a favorable risk-reward outlook. The determination to trade is solely yours. We will however, attempt to point out those occasions when a play offers a favorable "early exit" return, or when we see an issue that has reversed direction and may require closure or adjustment of the underlying position. Keep in mind that we usually have over 100 plays in four sections to track on a daily basis and we may not always notice the crucial turning point or "change in character" of a specific issue. The weekly "comments" section is not intended as a substitute for your own trading techniques nor does it replace your duty to manage the positions in your portfolio. In addition, any actions taken based on the commentary would be far too late to be effective. As far as the success ratio/average returns; this strategy, when employed correctly and managed diligently, generally yields a 4-8% monthly (annualized) profit. Regardless of how you utilize our research, we hope you will eventually benefit from some of the plays offered in this section. At the same time you must remember, they are all just candidates and should only be considered with respect to your personal risk-reward attitude and trading style. For more information: Here are my suggestions for the best books on option trading and strategies that profit from premium disparities. The rules have not changed in years and the bibles remain the same: "Options as a Strategic Investment" (McMillan), and of course, "Option Pricing and Volatility" (Natenburg), both available in the OIN bookstore. The CBOE (www.cboe.com) also has some excellent articles on basic trading techniques and combination positions in their educational section. As far trading strategies, I have written a number of narratives for the techniques used in the section and those are still listed in the web-site archives (and Options 101 etc). Of course, there are also a plethora of great articles by other OIN researchers, covering just about every imaginable option trading strategy that is commonly used by retail investors. Unfortunately, there is no way to produce a complete list of specific guidelines or step-by-step techniques on entering/exiting plays. The methods we use are much the same as those that Jim and the other traders discuss in the daily narratives and each one is based on simple, proven money-management techniques; the most important of which is "keep the losses small." The older articles in Options 101 and Broker's Corner (by Robert Ogilvie) cover the basic combination strategies and their possible outcomes (good and bad) and many of Jim's more recent trading lessons describe the use of adjustments (such as rolling into spreads) to minimize losses in conventional option positions (buy call/sell call etc). Of course, the most valuable position management information for option traders comes from the knowledge of option pricing, time erosion, volatility and probability and those subjects have been covered at length in the various educational series (now in the web-site archives). Contrary to what you might believe, there are no simple and easy answers. Option trading is not free money in any way -- lots of hard work and research -- and success generally occurs only after a series of failures. The key is to find something you do well and stick to it. Don't use complex strategies just because they are unique or intriguing. Often the best course of action is the simplest. In addition, you must understand that the newsletter is designed primarily to provide a list of candidates to assist in your search for profitable trading positions. You still have to decide what you are looking for and if any of the candidates meet your criteria for potential plays. Only you can know what type of strategies are suitable for your portfolio outlook, skill level, risk-reward tolerance and trading style. Good Luck! *** WARNING!!! *** Occasionally a company will experience catastrophic news causing a severe drop in the stock price. This may cause a devastatingly large loss which may wipe out all of your smaller gains. There is one very important rule; Don't sell naked puts on stocks that you don't want to own! It is also important that you consider using trading STOPS on naked option positions to help limit losses when the stock price drops. Many professional traders suggest closing the position when the stock price falls below the sold strike or using a buy-to-close STOP at a price that is no more than twice the original premium from the sold option. SUMMARY OF PREVIOUS CANDIDATES ***** Stock Price Last Call Strike Price Gain Potential Symbol Picked Price Month Sold Picked /Loss Mon. Yield AMZN 12.52 15.39 MAR 10.00 0.50 *$ 0.50 14.5% HAL 16.49 16.90 MAR 15.00 0.50 *$ 0.50 12.9% HAL 13.95 16.90 MAR 12.50 0.70 *$ 0.70 12.6% ASW 10.81 11.68 MAR 5.00 0.35 *$ 0.35 12.1% OSIS 22.06 21.10 MAR 17.50 0.70 *$ 0.70 11.9% PPD 26.30 24.46 MAR 20.00 0.45 *$ 0.45 11.4% PLMD 20.76 21.44 MAR 17.50 0.40 *$ 0.40 10.7% DDS 18.70 20.00 MAR 15.00 0.30 *$ 0.30 10.7% FFIV 23.15 21.45 MAR 17.50 0.45 *$ 0.45 10.0% PPD 26.11 24.46 MAR 17.50 0.45 *$ 0.45 8.9% OCLR 27.25 27.23 MAR 25.00 0.55 *$ 0.55 8.7% ACN 27.45 26.20 MAR 22.50 0.50 *$ 0.50 8.6% MANH 29.80 32.11 MAR 22.50 0.65 *$ 0.65 8.5% MDR 14.14 14.30 MAR 12.50 0.25 *$ 0.25 8.5% TER 32.70 37.55 MAR 27.50 0.60 *$ 0.60 8.0% TXN 30.29 31.50 MAR 27.50 0.85 *$ 0.85 7.3% FTI 17.64 18.95 MAR 15.00 0.30 *$ 0.30 7.2% OII 23.79 26.80 MAR 22.50 0.55 *$ 0.55 7.1% DDS 17.40 20.00 MAR 15.00 0.30 *$ 0.30 7.0% MU 34.90 36.29 MAR 27.50 0.60 *$ 0.60 6.9% PLMD 20.75 21.44 MAR 15.00 0.25 *$ 0.25 6.4% LUX 18.13 18.00 MAR 17.50 0.30 *$ 0.30 6.3% SANG 19.75 21.85 MAR 17.50 0.25 *$ 0.25 6.1% AMAT 47.20 47.98 MAR 40.00 0.60 *$ 0.60 5.5% *$ = Stock price is above the sold striking price. Comments: Friday's broad-market rally virtually guaranteed that all of our positions would remain "in the black." Now if we can only convince the "bears" that it is time to go long! Positions Closed: PMC Sierra (NASDAQ:PMCS) - Still positive though... NEW CANDIDATES ********* Sequenced by Company ***** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield AMAT 47.98 MAR 40.00 ANQ OH 0.30 6244 39.70 14 5.7% DCN 19.10 APR 15.00 DCN PC 0.55 5910 14.45 49 7.8% FST 26.24 MAR 25.00 FST OE 0.25 40 24.75 14 5.7% INVN 40.10 MAR 35.00 FQQ OG 0.85 1042 34.15 14 15.7% MU 36.29 MAR 32.50 MU OS 0.55 4341 31.95 14 10.6% PSUN 25.21 MAR 22.50 PVQ OX 0.30 145 22.20 14 8.5% SLAB 30.90 MAR 25.00 QFJ OE 0.30 101 24.70 14 9.6% TER 37.55 MAR 32.50 TER OZ 0.25 465 32.25 14 5.3% Sequenced by Target Yield (monthly basis) ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield INVN 40.10 MAR 35.00 FQQ OG 0.85 1042 34.15 14 15.7% MU 36.29 MAR 32.50 MU OS 0.55 4341 31.95 14 10.6% SLAB 30.90 MAR 25.00 QFJ OE 0.30 101 24.70 14 9.6% PSUN 25.21 MAR 22.50 PVQ OX 0.30 145 22.20 14 8.5% DCN 19.10 APR 15.00 DCN PC 0.55 5910 14.45 49 7.8% AMAT 47.98 MAR 40.00 ANQ OH 0.30 6244 39.70 14 5.7% FST 26.24 MAR 25.00 FST OE 0.25 40 24.75 14 5.7% TER 37.55 MAR 32.50 TER OZ 0.25 465 32.25 14 5.3% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** AMAT - Applied Materials $47.98 *** Hot Chip Stock! *** Applied Materials (NASDAQ:AMAT) develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry. Many of Applied's products are single-wafer systems designed with two or more process chambers attached to a base platform. The platform feeds wafers to each chamber, allowing the simultaneous processing of several wafers to enable high manufacturing productivity and precise control of the process. Their platforms support chemical and physical vapor deposition, etch and rapid thermal processing technologies. Customers for their products include semiconductor wafer manufacturers and integrated circuit (chip) manufacturers. Shares of Applied Materials rallied in early February, even after the company posted a fiscal first quarter loss of $45 million, or 6 cents a share, on revenue of $1 billion. However, the company surprised investors by announcing that new orders rose for the first time in four quarters. AMAT's CEO also noted that chip revenues have apparently reached a bottom because memory prices have risen and activity in chip factories has increased. Traders who think Friday's rally to a recent high is an indication of future upside potential can establish a low risk entry point in the issue with this play. MAR 40.00 ANQ OH LB=0.30 OI=6244 CB=39.70 DE=14 TY=5.7% ***** DCN - Dana Corporation $19.10 *** Premium Play! *** Dana (NYSE:DCN) is an independent supplier of components and systems to vehicular manufacturers and related aftermarkets. The company's operations are comprised of its Automotive Systems Group, Automotive Aftermarket Group, Heavy Truck Group, Engine Systems Group, Fluid Systems Group, and Off-Highway Systems Group. Dana also is a provider of lease financing services in selected markets through its wholly owned subsidiary, Dana Credit Corporation. The premium in Dana's options are higher than normal and there does not seem to be any fundamental explanation for the robust implied volatility. However, the issue has been very active in recent weeks and there is certainly a potential for future volatility, based on the company's earnings outlook and restructuring plan. Investors who think the worst is over for this icon of the auto industry can speculate on the future movement of its share value with the position. (NOTE: April expiration for this position.) APR 15.00 DCN PC LB=0.55 OI=5910 CB=14.45 DE=49 TY=7.8% ***** FST - Forest Oil $26.24 *** Oil Sector Bottom-Fishing! *** Forest Oil Corporation (NYSE:FST) is an independent oil and gas company engaged in the exploration, development, acquisition, production and marketing of natural gas and liquids. Forest operates from production offices located in Lafayette and Metairie, Louisiana; Denver, Colorado; Anchorage, Alaska; and Calgary, Alberta. The company runs its international business, excluding Canada, from an office located in Houston, Texas. Forest Oil is one of the smaller companies in the Alaska oil industry but their presence has increased in the wake of a ramp-up of investment in Anchorage's Cook Inlet. Indeed, the oil industry is beginning to show signs of a recovery and we favor the technical support near the cost basis in this play. Investors who are interested in a long-term portfolio position in the oil sector should consider this issue. MAR 25.00 FST OE LB=0.25 OI=40 CB=24.75 DE=14 TY=5.7% ***** INVN - InVision Tech. $40.10 *** Bombs Are Their Business! *** InVision Technologies (NASDAQ:INVN) markets advanced detection and inspection products by adapting various medical and laboratory technologies for government and commercial uses, such as security, defense and process control. InVision is the worldwide leader in explosive detection technology and has produced the first automated explosive detection systems to be certified by the FAA as meeting its stringent requirements. Shares of InVision have stabilized over the past few weeks as investors decide the real value of the leading company in explosive-detection technology. The company recently asked its shareholders to approve an increase in the number of authorized shares of common stock from 20 million to 60 million shares and the request was overwhelmingly approved. Does that mean a stock-split announcement is possible in the near-future? No one knows for sure but this relatively conservative position offers a good way to speculate on the company's future share value. MAR 35.00 FQQ OG LB=0.85 OI=1042 CB=34.15 DE=14 TY=15.7% ***** MU - Micron Technology $36.29 *** Chip Sector Leader! *** Micron Technology (NYSE:MU) and its subsidiaries are principally engaged in the design, development, manufacturing and marketing of semiconductor memory products. The company offers products that include dynamic random access memory, synchronous dynamic random access memory, double data rate dynamic access memory, legacy dynamic random access memory products, static random access memory products and Flash products. Dynamic random access memory (DRAM) is the Company's primary semiconductor memory product. DRAMs are high-density, low-cost-per-bit, random access memory components that store digital information and provide high-speed storage and retrieval of data and DRAMs are a widely used semiconductor memory component in computer systems. DRAM sales represented approximately 87%, 94% and 95% of the company's net sales in 2001, 2000 and 1999, respectively. Micron has been a popular position in our portfolio over the past few weeks and Friday's rally in the chip sector has brought it back to the forefront in the technology group. The current technical outlook for Micron is bullish and our position offers a great way to speculate on the future movement of the issue with relatively low risk. MAR 32.50 MU OS LB=0.55 OI=4341 CB=31.95 DE=14 TY=10.6% ***** PSUN - Pacific Sunwear $25.21 *** Earnings Speculation! *** Pacific Sunwear of California (NASDAQ:PSUN), together with its wholly owned subsidiaries, is a specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. The company operates three nationwide, primarily mall-based, chains of retail stores under the names Pacific Sunwear (PacSun), Pacific Sunwear Outlet and d.e.m.o. PacSun and the PacSun Outlet stores specialize in board-sport-inspired casual apparel, footwear and accessories catering to teenagers and young adults. d.e.m.o. specializes in hip-hop music-inspired casual apparel and related accessories catering to teenagers and young adults. The company also has a web-site through a wholly owned subsidiary that sells merchandise online, provides content and community for its target customers and provides information about the company. Pacific Sunwear is slated to announce quarterly earnings this week and based on the recent activity in the stock, investors expect the report to be positive. Traders who agree with that outlook can profit from a favorable announcement with this speculative position. MAR 22.50 PVQ OX LB=0.30 OI=145 CB=22.20 DE=14 TY=8.5% ***** SLAB - Silicon Laboratories $30.90 *** Chip Sector Rally! *** Silicon Laboratories (NASDAQ:SLAB) designs, manufactures and sells proprietary high-performance mixed-signal integrated circuits for the wireless, wireline and optical communications industries. The company initially focused its efforts on developing ICs for the personal computer modem market and is now applying its mixed-signal and communications expertise to the development of ICs for other high growth communications devices, such as wireless telephones and optical network applications. The company's mixed-signal design engineers utilize standard complementary metal oxide semiconductor (CMOS) technology to create ICs that can reduce the cost, size and system power requirements of devices that the company's customers sell to their end user customers. Shares of SLAB rallied Friday in conjunction with the bullish activity in the chip sector and the strong upside move suggests the issue may have reversed its recent downtrend. The close above the 30-dma on heavy volume is also a favorable indication and the cost basis in this position provides a great speculation opportunity for traders who like the outlook for the chip sector. MAR 25.00 QFJ OE LB=0.30 OI=101 CB=24.70 DE=14 TY=9.6% ***** TER - Teradyne $37.55 *** More Chips - Bring The Dip! *** Teradyne (NYSE:TER) is a maker of automatic test equipment and related software for the electronics and communications industries. Products include systems to test and inspect semiconductors; circuit boards; high-speed voice and data communication, and software. Teradyne is also a manufacturer of back-planes and associated connectors used in performance electronic systems. Semiconductor and chip-equipment stocks have been among the best performing technology groups during the recent market sell-off and based on Friday's rally, the group is going to lead any future recovery in the technology industry. TER appears to be one the stronger issues in the chip-equipment sector and investors who wouldn't mind owning the issue at a discounted basis can speculate on the future performance of the company's share value with this position. MAR 32.50 TER OZ LB=0.25 OI=465 CB=32.25 DE=14 TY=5.3% ***** ***************** SUPPLEMENTAL NAKED PUT CANDIDATES ***************** The following group of issues is a list of additional candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. Sequenced by Target Yield (monthly basis) ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield LTXX 23.72 MAR 22.50 UXT OX 0.70 10 21.80 14 17.0% YHOO 16.61 MAR 15.00 YHZ OC 0.30 8494 14.70 14 12.2% NPRO 11.59 APR 10.00 NYQ PB 0.70 50 9.30 49 11.6% AMZN 15.39 APR 12.50 ZQN PQ 0.60 8119 11.90 49 9.6% PENN 37.13 MAR 35.00 UQN OG 0.55 36 34.45 14 9.0% GPI 38.00 MAR 35.00 GPI OG 0.45 5 34.55 14 7.7% OCLR 27.23 MAR 25.00 QLO OE 0.30 0 24.70 14 7.3% HOT 36.47 MAR 35.00 HOT OG 0.40 128 34.60 14 6.4% NOVN 20.88 APR 17.50 NPQ PW 0.40 56 17.10 49 4.6% TMCS 26.96 APR 22.50 QMF PX 0.50 1050 22.00 49 4.5% SEE DISCLAIMER IN SECTION ONE ***************************** ************************ SPREADS/STRADDLES/COMBOS ************************ Stocks Soar Amid Optimistic Economic Reports By Ray Cummins ****************************************************************** - MARKET RECAP - ****************************************************************** Friday, March 1 The major equity averages rallied strongly today in the wake of upbeat data on manufacturing, construction and consumer spending. The Dow Industrial Average surged 262 points to 10,368, closing at a six-month high after a key index revealed that the flagging manufacturing sector grew in February for the first time since July 2000. All but three of the blue-chip components rose and the day's losers, McDonald's (NYSE:MCD), Home Depot (NYSE:HD), and Alcoa (NYSE:AA) were down less than 1%. The NASDAQ Composite Index gained an amazing 71 points to finish at 1,802 on renewed strength in the semiconductor sector. The broader market S&P 500 Index rose 25 points to 1,131. For the week, the NASDAQ rose 4.5% percent, snapping a month-long losing streak, while both the Dow and the S&P 500 gained roughly 4%. Market breadth was promising on the Big Board, where 2,221 stocks rose and 925 fell on trading volume of 1.45 billion shares. The win-loss ratio was similar on the technology exchange, where 1.87 billion shares changed hands. Bond prices plunged as investors shifted money into stocks. The 10-year Treasury slumped 7/8 point while its yield rose to 4.98% and the 30-year bond tumbled 1 1/4 point to yield 5.50%. Last week's new plays (positions/opening prices/strategy): Flir Sys. (NSDQ:FLIR) MAR40P/MAR45P $0.45 credit bull-put Tidewater (NYSE:TDW) APR40C/APR35P $0.40 debit synthetic St. Jude (NYSE:STJ) APR85C/APR75P $0.50 credit synthetic Dupont (NYSE:DD) JUL50C/APR50C $0.95 debit calendar Pactiv (NYSE:PTV) AUG20C/APR20C $0.85 debit calendar Applera (NYSE:CRA) JUN20C/JUN20P $4.65 debit straddle Monday's opening rally did little to help our new plays in Flir Systems and Tidewater as both issues offered few opportunities to initiate the bullish positions at favorable prices. In the FLIR "bull-put" spread, the credit was slightly less than our target but there was no chance for entry into a similar spread in TDW. In addition, the synthetic position in Tidewater did not trade at a credit on a simultaneous order basis, rather the best price observed was a debit of $0.40. Of course, the play was still quite profitable even at that price as the position reached a high of $1.40 credit Friday; a gain of $1.00 in less than one week. Both of our new calendar spreads were available at acceptable prices and the underlying issues are trading much as expected. The synthetic position in St. Jude Medical was the only disappointment as the stock plummeted Monday and continued to move lower during the week. The issue is now at a proverbial "key moment" and we will monitor it closely for signs of further downside activity. Portfolio Activity: The big surprise of the week was ImClone Systems as the issue almost doubled in value on renewed optimism for the company's experimental cancer treatment Erbitux. The company said its recent meeting with the Food and Drug Administration about the application for its Erbitux cancer drug was "very productive" and it now appears ImClone and its partner Bristol-Myers Squibb could win clearance to sell Erbitux without having to launch an entirely new round of patient testing. ImClone reported that it and Bristol-Myers discussed an approach to get the application back on track by providing the FDA with additional data from a European clinical trial currently being conducted by Merck KgaA. ImClone's CEO said he assured the FDA that he was committed to working towards a resolution of the current issues and that he would continue to focus his efforts on gaining approval for the product. The news was overwhelmingly positive for investors and the "short-covering" rally drove the share value from $14 to $27 in only five days. Needless to say, our bullish calendar spread achieved the target exit profit and much more, in less than two weeks. Another surprise winner was the synthetic position in Goodyear Tire and Rubber (NYSE:GT), which achieved a favorable "early-exit" profit of $1.00, well ahead of its expiration in April. The long call (APR-$30) traded as high as $2.10 during Thursday's session, offering investors a great opportunity to lock-in profits in the speculative play. The straddles section has been the best performer among the various categories in the Spreads/Combos portfolio over the past month and this week was no exception with positions in Credence Systems (NASDAQ:CMOS), Serena Software (NASDAQ:SRNA) and Qlogic (NASDAQA:QLGC) offering excellent profits. In addition, the neutral position in Waste Management (NYSE:WMI) is near the upside "break-even" point and should achieve profitability in the coming week. Last, but not least, it was nice to see our one and only "collar" back in the black. Sandisk (NASDAQ:SNDK) closed Friday's session at $17.17, slightly above the cost basis in the bullish, long-term position. Questions & comments on spreads/combos to Contact Support ****************************************************************** - NEW PLAYS - Friday's volatile upside activity has left even the most savvy traders with little insight as to the market's future direction so rather than risking our hard-earned capital in this difficult environment, we have decided to avoid any new directional plays until the near-term trend in stock prices is firmly established. For those of you who favor volatility trading, the opportunities are virtually endless and here are just a few of the many great candidates in this strategy. All of these issues meet our criteria for a favorable straddle; cheap option premiums, a history of adequate price movement and the potential for volatility in the stock or its industry. This selection process provides the foremost combination of low risk and potentially high reward but, as with any positions, they must be evaluated for portfolio suitability and reviewed with regard to your strategic approach and trading style. ****************************************************************** NRG - NRG Energy $11.88 *** Low Risk = Low Reward! *** NRG Energy (NYSE:NRG) is a global energy company engaged in the acquisition, development, ownership and operation of power eneration facilities, and the sale of energy, capacity and related products. As of 1/1/02, NRG Energy had interests in power generation facilities (including those under construction) having a total design capacity of 25,000 megawatts. Most of NRG Energy's North American projects are grouped under regional holding companies corresponding to their domestic core markets. The company has established regional offices in Pittsburgh, Pennsylvania (Northeast region), Baton Rouge, Louisiana (South Central region) and San Diego, California (West Coast region). NRG Energy's North Central region (a recently added region, as of year-end 2000) is managed from its Minneapolis headquarters. PLAY (conservative - neutral/debit straddle): BUY CALL JUN-12.50 NRG-FV OI=785 A=$0.60 BUY PUT JUN-12.50 NRG-RV OI=233 A=$1.25 INITIAL NET DEBIT TARGET=$1.70-$1.75 TARGET PROFIT=50% Note: The Delta or "hedge ratio" in the position suggests that we should buy 2 calls for every put (2:1 ratio) to maintain a neutral outlook. However, any upward movement in the issue in the coming week should allow both sides of the position to be purchased at similar prices. ****************************************************************** GNSS - Genesis Microchip $25.50 *** Where To From Here? *** Genesis Microchip Incorporated (NASDAQ:GNSS) designs, develops and markets integrated circuits that receive and process digital video and graphic images. Its integrated circuits are typically located inside a display device and process images for viewing on that display. The company also supplies reference boards and designs that incorporate its proprietary integrated circuits. Genesis is focused on developing and marketing image-processing solutions and targets the flat-panel computer monitor and other potential mass markets. PLAY (very speculative - neutral/debit straddle): BUY CALL MAR-25 QFE-CE OI=1166 A=$2.25 BUY PUT MAR-25 QFE-OE OI=841 A=$1.85 INITIAL NET DEBIT TARGET=$3.75-$4.00 TARGET PROFIT=15-25% ****************************************************************** SEIC - SEI Corporation $40.20 *** Probability Play! *** SEI Corporation's (NASDAQ:SEIC) principal subsidiaries are SEI Investments Distribution (SIDCO), SEI Investments Management Corporation (SIMC) and SEI Trust Company (SEI Trust). SIDCO is a broker-dealer registered with the Securities and Exchange Commission (SEC). SIMC is an investment advisor. SEI Trust is a trust entity chartered in the Commonwealth of Pennsylvania. SIDCO and SIMC also provide a full range of administration and distribution services to proprietary mutual funds established by banks and other financial institutions and intermediaries. The client serves as the investment advisor for the proprietary funds and the funds are sold primarily to customers of the client. SEI is organized around its four primary business lines, which are Technology Services, Asset Management, Mutual Fund Services and Investments in New Businesses. PLAY (speculative - neutral/debit straddle): BUY CALL MAR-40 QEI-CH OI=1355 A=$1.30 BUY PUT MAR-40 QEI-OH OI=991 A=$1.20 INITIAL NET DEBIT TARGET=$2.25-$2.40 TARGET PROFIT=15-25% ****************************************************************** STK - Storage Technology $19.75 *** Recently Active! *** Storage Technology Corporation (NYSE:STK) designs, develops, manufactures and markets a broad range of information storage products, and provides maintenance and consulting services. These storage products and services are designed to provide customers with a broad range of solutions for the storage and retrieval of digitized electronic data. StorageTek's solutions are designed to be easy to manage and allow universal access to data across servers, media types and storage networks. Their products are used by a broad range of customers that include large multinational companies, mid-size and small businesses and governmental agencies encompassing a range of industries, such as financial services, retail sales, telecommunications, transportation and a variety of manufacturing industries, as well as educational, scientific and medical institutions around the world. PLAY (speculative - neutral/debit straddle): BUY CALL MAR-20 STK-CD OI=606 A=$0.70 BUY PUT MAR-20 STK-OD OI=117 A=$0.95 INITIAL NET DEBIT TARGET=$1.50-$1.55 TARGET PROFIT=15-25% ****************************************************************** CREE - Cree Inc. $15.80 *** Big Mover! *** Cree, Inc. (NASDAQ:CREE) develops and manufactures a wide range of compound semiconductor materials and electronic devices made from commercialize silicon carbide and gallium nitride. Cree operates its business in two segments: the Cree segment, which consists of its SiC based products; and the UltraRF segment, which consists of radio frequency transistors and amplifiers on a silicon platform. The company's customers include Siemens AG, Sumitomo Corporation and Spectrian. PLAY (very speculative - neutral/debit straddle): BUY CALL MAR-15 CVO-CC OI=1294 A=$1.50 BUY PUT MAR-15 CVO-OC OI=1221 A=$0.75 INITIAL NET DEBIT TARGET=$2.00-$2.15 TARGET PROFIT=15-25% ****************************************************************** - CREDIT STRANGLES - ****************************************************************** CI - Cigna $94.50 *** Trading Range? *** CIGNA Corporation (NYSE:CI) is one of the largest investor-owned employee benefits organization in the United States. CIGNA is a holding company and its subsidiaries are primary providers of employee benefits offered through the workplace; healthcare products and services, group life, accident and disability insurance, retirement products and services and also investment management. CIGNA's major insurance subsidiary is Connecticut General Life Insurance Company. The company's principal business segments are Employee Health Care, Life and Disability Benefits, Employee Retirement Benefits and Investment Services and also International Life, Health and Employee Benefits. The implied volatility in options has been so low for so long that we had all but given up on looking for favorable credit strangles. However, the recent share-price activity (amid a Justice Department probe of Medicare reimbursements at one of CI's very minor subsidiaries) in the issue has generated excess premium in its options and traders who believe the range-bound trend will continue for the next few weeks can profit from that outcome with this position. PLAY (aggressive - neutral/credit strangle): SELL CALL MAR-100 CI-CT OI=189 B=$0.75 SELL PUT MAR-85 CI-OQ OI=363 B=$0.80 INITIAL NET CREDIT TARGET=$1.50-$1.70 PROFIT(approx)=10% UPSIDE B/E=$101.50 DOWNSIDE B/E=$83.50 ****************************************************************** ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************ MARKET WATCH ************ Several watch list candidates have been working in our favor. We're looking at two more additions this weekend in hopes of successful outcomes. To Read The Rest of The OptionInvestor.com Market Watch Click Here http://members.OptionInvestor.com/watchlist/030302.asp ************** MARKET POSTURE ************** Three of the major market averages plowed past resistance levels last Friday. Several sectors require close monitoring into next week's trading. To Read The Rest of The OptionInvestor.com Market Posture Click Here http://members.OptionInvestor.com/marketposture/030302.asp ********** 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
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