Option Investor

Daily Newsletter, Sunday, 04/28/2002

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The Option Investor Newsletter                   Sunday 04-28-2002
Copyright 2001, All rights reserved.                        1 of 5
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MARKET WRAP  (view in courier font for table alignment)
        WE 4-26          WE 4-19          WE 4-12           WE 4-5
DOW     9910.72 -346.39 10257.11 + 66.29 10190.82 - 80.82  -132.30 
Nasdaq  1663.89 -132.94  1796.83 + 40.64  1756.19 - 13.84  - 75.32 
S&P-100  532.37 - 27.42   559.79 +  6.05   553.74 - 10.28  - 13.85 
S&P-500 1076.32 - 48.85  1125.17 + 14.16  1111.01 - 11.72  - 24.66 
W5000  10208.26 -426.79 10635.05 +129.08 10505.97 - 45.46  -224.31 
RUT      501.50 - 15.90   517.40 +  1.94   515.46 + 17.70  -  8.70 
TRAN    2722.63 - 74.24  2796.87 - 78.16  2875.03 + 96.62  -139.55 
VIX       24.64 +  4.34    20.30 -  1.79    22.09 +   .96  +  1.81 
VXN       42.24 +  2.89    39.35 -  3.46    42.81 +  1.96  +  4.57 
TRIN       1.82             1.18             1.03             1.67  
TICK       +367             -492             +460             +341     
Put/Call    .87              .79              .99              .78   
Got That Sinking Feeling?  
by Jim Brown

Don't say I didn't warn you. We are only eleven days into the 
historical spring crash period and all the major indexes have
done just that, crashed! Positive economic reports and lingering
earnings announcements could not entice traders back into the 
market. Fears of a double economic dip are rising despite the 
GDP news and even Bush got into the act by warning that the 
current bounce may not continue. Trend lines, moving averages 
and technical support levels all failed on Friday when a short 
covering rally failed to appear at the close.




So much news, so little space. The GDP numbers led the economic
hit parade on Friday with a huge 5.8% growth rate for the first
quarter. What recession? This was the fastest rate of growth
since 4Q-1999 but the fly in the ointment was inventory liquidation.
Everyone has been pointing to the rapid draw down of inventory
and the spurt of orders related to replenishing those levels. 
Those orders spiked the 1Q GDP but they are not expected to 
continue. Also, those inventory levels suddenly spiked upward
which would indicate the rate of sales had slowed. Traders were
hit with a double whammy. The super strong GDP could pressure 
the FED to raise rates preemptively and much sooner than expected.
Secondly, the slowing consumption numbers caused concern that 
the economy could quickly dip back into recession during the
summer. Granted, both of those scenarios would not happen at
the same time but either one would have a negative impact to 
the markets.

Consumers continued to drive the GDP numbers with retail purchases
and new home buying. Businesses continued to cut spending but
the pace of the decline is slowing. Defense was the strongest 
sector with a +19.6% increase. There is a catch 22 here which
should be obvious to everyone. If businesses are continuing to
cut spending, layoff workers and delay expansion plans then 
unemployment will continue to rise and raises will be hard to
come by. This will put the consumers on a budget before summer
is over and without the consumer to provide support the house
of cards will collapse. Consumer sentiment numbers, which fell
from 95.7 in March to 93 in April may already be the leading
indicator for this problem. The expectation component fell to
89.1 but could have been influenced by the stock market. New
home sales have now fallen for two months in a row which could
also indicate a slowing of consumer demand.

The markets continued to be pressured by more weak earnings
and accounting problems. AOL posted a record loss of $54 billion
although it was funny money not cash. Still traders are bombarded
with these huge headline numbers on a daily basis. Stalwarts like
General Mills, GE and Merrill Lynch are being killed on negative
news. Adding to those headliners are the me too companies like
Tyco, JDSU, VRSN, Dynegy, which were crushed by news, warnings
and SEC investigations. Apologies by company executives don't
cut it when the legal enforcement agencies come calling. The 
apology was only the first step as the Merrill Lynch CEO found 
out on Friday. That just laid the groundwork for civil lawsuits
and a possible $2 billion fine/reimbursement for recommending
stocks to the public that they were trashing internally. Dynegy
was hit with another -4.81 loss on accounting concerns. Does 
this brain damage ever end?

Debt ratings are dropping faster than hail in Kansas with TYC, 
DYN, GIS and MER getting the call on Friday. This is just the 
tip of the iceberg and as Moodys, Fitch and S&P catch up on 
their backlog it will clearly result in another downgrade wave.
Companies with huge debt are seeing their shares drop with every
passing day. After the Enron, Global Crossing, Tyco and ADLAC 
problems, stocks with high debt are being seen as possible targets
of wrong doing. With the debt game more closely resembling a
shell game nobody wants to be the last one holding stock in a
heavily leveraged company. 

What is a trader to do? Focus on the trend and don't fight the
tape. I got several emails today asking if XYZ stock was a good
buy as these depressed levels. First, I cannot give individuals
specific stock advise because I am not a broker. Second, I don't
know your time horizon. If you want to hold GE for the next 10-20
years then $31.50 may be a good price. If you only want to hold
it for two weeks then $31.50 may not be a good price. Why everybody
wants to buy stocks on the way down is beyond me. Just because
GE looks cheap at $31.50 does not mean it can't get cheaper.
Remember CSCO at $45, $30, $25, $20, $15? It looked cheap at every 
price point but Friday's close at $13.93 was a new six month low.
Is it cheap enough yet? Who knows, it depends on your time horizon.
Two months, you can bet it will be lower. 20 years, you can almost
guarantee it will be higher. Remember Lucent at $13? AOL at $27?
Let's try not to catch the proverbial falling knife and simply
follow the trend instead.

I went through the prior paragraph to set the stage for our
discussion of the markets this weekend. You might cover the eyes
of any small children reading this with you. It is not a pretty
picture and while there is no mention of blood and guts there 
is still plenty of red ink. The Dow closed at 9910, a level not
seen since Feb-22nd and well below the critical 10,000 benchmark.
It even closed below its 200 DMA of 9956. There is no joy in
Mudville tonight. The problem only compounds as we move into the
broader markets. The Nasdaq has broken through anything resembling
a moving average long ago but the last ditch support levels have
finally collapsed as well. Once below 1700 the index picked up
speed and appears earthbound at meteoric speed. There is support
at 1650 but without some good news soon that level will be 
road kill as well. The S&P-500 resembles the Nasdaq in its rate of
descent. Support at 1100 is history, support at 1080 is toast
and the index is clinging by its fingernails to Feb lows at 1075. 
Should 1075 fail we could only be a day away from October support
levels at 1050. Do we dare imagine a triple digit S&P? 

I got a good laugh all week as TV commentators kept revising their
"critical support levels." Every day a critical support level 
was given for whatever index was being discussed. As each day
passed those "critical" levels were broken along with their 
premise. Each day there was no mention of the prior days critical
level as though by not mentioning it the viewers would forget
that it was different. These TV experts, who are supposed to 
report the news not make it, seem fixated at trying to pick the
bottom. I know the feeling well since the majority of email we
get does not ask "how far are we going to drop" but "when should
I buy." The answer would be the same but the context of the 
questions prove that most investors are just that, investors, 
and not traders. Those TV commentators are selling to the vast
majority of their audience, buyers not sellers. When the market
feeds them day after day of losses the temptation is too great
to try and be a hero by calling the bottom with a forecasted 
"support" level. 

Fortunately OIN readers appear to be learning that money can
be made both ways. I just wish I could convince you to ONLY
buy calls when the market is going up and puts when it is going
down. There is that contingent that still believes a recommended
call can be play any day just because it is recommended. But that
is another lesson. Those who have been playing puts over the last
week have done very well. We currently have more than an $8 gain
in MXIM, $4 in MU, $6 in NVDA and $3 each in EBAY and ADI. Also,
remember the VRSN put from last week at $25? We dropped it before
earnings to avoid a surprise but it closed Friday under $10. I
am not posting this to claim perfect results since everyone knows
we have been stopped out of several lately. I only post this to
emphasize that profits can be made both ways. Why? Because I
think the downside chances are still better than upside as we
go forward. You do not have to sit on the sidelines because the
market is down.

With that prelude let's get into the forecast. Up, down, flat
and all of the above. Seriously! While Friday's close was very
bearish there is a good chance there is a bounce in our future.
The VIX rocketed to over 24 and very close to the levels seen
just before the February bounce. Still a far cry from the 40
level seen in last April's sell off but still it is moving in
the right direction. The put/call ratio rose to .87 and closer
to a bullish reading. These represent fear coming back into 
the market and a necessary component to any future rally. The
TRIN or Arms Index closed at 1.99 indicating a very oversold
condition. Those indicators taken along with indexes nearing
"critical support levels" (grin) are a recipe for a bounce.

The Nasdaq should find support in the 1645-1650 area, which is
only 15 points or so away. The S&P could find buyers in the 1060
level only 16 points away. The Dow should get a transfusion 
around 9750-9850. The Dow could also see a lift on Monday from an
article in Barrons this weekend. They are profiling Boeing as
lean, mean and oversold. A $2 takeoff by Boeing won't help
however if Microsoft continues to accelerate to the downside.
Speaking of downside another Dow component, Intel, is only 36
cents away from breaking the to a new six month low. This happened
even after Intel made bullish statements last week. Apparently
investors were not impressed with their continued cautious outlook.
On a side note, the SOX closed below its 200 DMA and under support
despite a large increase in the book-to-bill numbers this week.
If semiconductors can't find support on good news then........
Traders will be watching the 500 level for a tradable bounce but
will short a break under that level aggressively.


While the oversold conditions may be pointing to a bounce soon
it may not have legs and could only be a bear trap rally. I
would look at any bounce as a new opportunity to buy puts cheap
and not the beginning of a new bull market. My entry points
for going long are so far out of range that they are not relative
to this discussion. It is far too early to revise them downward
since a short covering rally could occur very quickly and then
die just as quickly. My entry points for going short were 
10000/1725/1100 all of which have been penetrated substantially.
This means you should already be short stocks or long puts. I
would use those same levels as exit points. Should an oversold
bounce occur then exit those shorts at 10000/1725/1100 OR BEFORE!
Keep those seatbelts fastened and trade in the direction of the

Enter Very Passively, Exit Aggressively!

Jim Brown

Editors Note: We are having a spring cleaning sale at OIN.
We have rounded up the last remaining videos sets of the last 
seminar consisting of 10 four hour VHS cassettes and 
workbooks. I think we have eleven of them. 

Also we have a couple dozen of the year end special CD/Workbooks
available. Watch the website this week for our special offers. 
Act fast because there are no more. When they are gone they are 

Click Here for the Video Tape offer:

Click Here for the CD/Investor Guide offer:


by Leigh Stevens


Friday, sellers continued to vent their fear and loathing of 
stocks by continued sales of the week's casualties on missed 
earnings and revenue targets.  The market has developed a full-
blown bearish bias, as supposed "good" news, that of confirmation 
of strong Q1 growth reflected in the GDP number releaseD Friday, 
becomes yet another excuse to take the market down. 

Underlying the fundamental picture is the continued shocks and 
disappointments on the earnings front, of which conglomerate Tyco 
(TYC), net stock VeriSign (VRSN) and energy company Williams 
(WMB) are the latest examples -- Dynergy fell on the "loathing" 
aspect as it's subject to an SEC investigation on its accounting 
practices. Earnings both in the recent past and for expectations 
ahead, is what is really influencing the market day to day – 
"give me better earnings NOW!" could be rallying cry of the 

I hate to have to keep revising downward my stock index downside 
objectives or targets and the expected low side of what I still 
assess will be a broad trading range for the market. But, I'm 
forced back to the drawing board. It was bothering me that I 
could possibly have a downside expectation for the  DOW to test 
its February low in the 9600 area, while the S&P 500, benchmark 
for the fund mangers, was already almost THERE. 

The low in SPX on Friday was already at 1076, versus a Feb. 
bottom at 1074. If the Dow were to go down either another 380 
points to either its intraday low (9530) or another 290 points to 
its prior Feb. closing low point (9620), the S&P would have to go 
down much more than around current levels.  So a careful read 
with me of the longer-term weekly chart pictures below will maybe 
set a new realistic downside for the S&P.  It may be a little 
harder to come up with objectives on the Nasdaq, but we can 
always key off from the S&P for our major downside target.  

We can be complacent, fat and happy bears on the longer-term 
picture, but what about the short-term -- is there rally 
potential close at hand that will give us that new opportunity to 
pick new put plays?  Yes, I would expect one and one that may 
carry a bit higher than the anemic ones seen recently.  One that 
would be worth playing for those that figure there are always two 
sides to every story or at least two trades. This expectation or 
prediction is simply based on the odds that when you get oversold 
enough AND reach short-term objectives, profit taking sets in and 
the short-sellers and bargain hunters all try to get through the 
same revolving door at once creating what might be called a 
(short) squeeze.  

Moreover, you have to account for the fund lemmings -- as we are 
right at (well, just under) the 200-day moving average of the 
Dow, that holy grail of the institutional set -- if a rally 
starts, fund managers are compelled to put some money to work. As 
they don't try to "time" the market for the most part -- never 
have, never will -- they have to think that 10,000 Dow is "THE" 
low and even a minor reversal to the upside can turn into a minor 
stampede. Important benchmark levels, like DOW 10K when 
successfully "defended" for a time, sets up more bearish 
sentiment later, when the market does reach a climax low -- when 
fear & loathing of stocks gets so extreme you are thinking that 
you had better buy that rental home to make any money on 

And what is missing still from a "typical" major bottom is more 
upset, less complacency and more fevered options players buying 
puts like there was no bottom. By the way, put to call volume 
ratios are hardly indicating that kind of bearish extreme.  When 
markets get overdone on the upside, what follows, at the end of 
it typically, is to get overdone on the downside.  

S&P 500 (SPX) Weekly/Daily/Hourly Charts: 


To equal in the S&P, what I think will be a possible bottom in 
the Dow in the 9600 area, downward momentum here, the 1050 area 
is closer to the mark -- note the weekly MACD momentum indicator 
(left, bottom), which is far from an oversold low. A move to 
somewhere between a 50% retracement (1059) and one that gives 
back 62% (1031) of the last major upswing, gives us a target 
zone. 300 Dow points would translate to about 30 points lower in 
the S&P, or to somewhere south of 1050, say 1046. 

Meanwhile, on the daily chart, the retreat finally to the lower 
envelope line or trading band, which marks the extend of 
"typical" S&P volatility, suggests we may be overdone on the 
downside here -- at least expect the RATE of decline to slow down 
for a while.    


The most solid price and pattern suggestion for a short-term (2 
to a few days) rebound here is that, basis the hourly chart in 
the S&P 500, the index is almost at the lower boundary of its 
downtrend channel.  This suggests we are nearing a possible 
upside deflection point, in the 1070 area, plus or minus a few 
points. I suggest, traders look to play a rally that may set up 
by the Monday close, or Tuesday early. Resistance and selling 
interest could be heavy on any return to the 1100 area, a key 
support knifed through on the way down.  Next resistance appears 
at 1112, all the way back up to the top end of the channel.  

S&P 100 (OEX) Weekly/Daily/Hourly Charts: 


With the greater relative weakness in the S&P 100, perhaps a more 
realistic downside target for OEX is back closer to the fall lows 
in the 500 area and below. Actually, the low in the week that OEX 
bottomed was 480.  Maybe THAT would get the volatility index 
(VIX) well above the low-20s!. Note the same deal with the 
trading bands.  Nothing magically about that blue line, but this 
simple method has picked many extremes, at least temporary ones, 
for many years.  

The other thing to note on all the charts is that the oscillators 
on all time frames from daily to short and longer-term on the 
hourly, are lined up on oversold readings.  Yes, the weekly MACD 
suggests keeping our focus on the longer-term bearish downside 
momentum, but we are talking a rebound not a major trend 


Hourly work with the channel lines suggests a short-term buying 
opportunity may be close at hand as OEX approaches the lower 
boundary of the downtrend channel, which comes in around 528-530 
currently. Resistance comes in at 545, then 552. 

Dow Industrials ($INDU & $DJX.X) Weekly/Daily/Hourly Charts: 


I think the Dow looks quite vulnerable to a substantial further 
move lower. All those money mangers noting the out performance of 
the big cap stocks by the small to mid cap companies are going to 
be trying to squeeze through that door and sell big and buy 
little. Those little people want to be big people anyway. 9525 
looks like an intraday target, 9625 a weekly closing objective -- 
even a move to 9525 would not even complete a 50% retracement, 
which is a pretty normal give back in a stock or an average.   

98.6 in DJX looks like a near-term downside objective, based on 
the normal distance from its 21-day moving average, at least when 
oversold, without some kind of rebound attempt.  Maybe back up to 
the 21-day average at 102.2, which is often a deflection point 
and resistance.   


98 appears again as the low end of the hourly downtrend channel, 
and "fulfills" the minimum downside objective implied by the bear 
flag pattern. A buy in this area for a trade, would offer some 
potential.  101.70 is the first resistance apparent from the 
hourly price pattern -- a prior important low, now likely to be a 
resistance point. 101-102 is the top of the downtrend channel 
that has a good recent record of capping any ambitious rallies. 

Nasdaq Composite ($COMPX) Weekly/Daily/Hourly Charts:


South is the direction suggested by falling momentum.  As with 
many of the other indexes, the weekly MACD never crossed above 
the "zero" line, which is showing that the rally off the Feb. 
bottom was never that strong. We have already retraced 62% of the 
prior big up move -- if the COMP were to retrace all that move, 
we're looking at potential for a huge further drop. However, 
based on a similar objective as the S&P however, another 4% drop 
puts the Composite to the 1600 area, which is my target.  

Watch the Composite on any further dip below 1650, such as to 
around 1647. Not to try and catch a falling "knife", but if 
stability develops, this may be a buy point.  Again, we could get 
a good-sized rally going when we get oversold in all time frames 
from hourly to daily.  


Refining a possible downside objective and potential support, off 
the hourly chart, it looks like 1645 in the COMP.  

Nasdaq 100 ($NDX.X) Weekly/Daily/Hourly Charts: 


Based on the weekly downside momentum, expect a further 
substantial drop in the Nas 100.  My downside objective is to the 
1200 area currently based on the big chart weekly picture.  

However, near-term, I think we're due for a bounce and probably a 
playable bounce for agile sprinters. 1250 may develop as support, 
but judging by the downside acceleration at week's end and the 
close near the low of the day and week, a look at the hourly 
chart is in order as it would seem unlikely we are just going to 
stabilize near the weekly close.  Fear and loathing runs deep 
particularly in the former darlings of tech.  Amazing how love 
can turn to deep dislike once the warts are seen.    


Yes, the hourly chart downtrend channel line is not reached until 
around 1240 in the Naz.  A bit lower here and watch for a sign of 
a reversal.  It may come quickly.  These short-covering type 
rallies don't give you long to get in at the lows.  The more 
oversold, the more they tend to turn on a dime, at least for a 

Resistance first comes in at the former lows at the dashed level 
line -- it's not noted on the chart, but the level is 1325 
approximately.  The anticipated higher resistance is well above 
this, at the top of the uptrend channel, around 1358.  

Nasdaq 100 Trust Stock (QQQ) Weekly/Daily/Hourly Charts: 


Ah the Q's, most active most often.  They had some range on 
Friday, if I can trust my data feed -- I did check 3 sources and 
they all had a (short-squeeze stampede?) high on Friday at 34.0.  
27 is the ultimate longer range objective if we retreat back to 
the weekly low.  

Meanwhile, buy dips under 31, if we are to believe the lower 
envelope band indicates an area where the Q's might be at an 
extreme for a while.  And, if we are to believe that the low end 
of the hourly channel as shown below, may be an area of upside 
deflection.  Stay tuned. 


Index Trade Recommendations -


Long/Call Positions:

Bought XXX Calls at 
Trade Objective: 

Short/Put Positions: 

Bought XXX Puts at   
Stop or risk parameters: 
Trade Objective: 


This indicator is one that I've found to be among the more 
reliable of the general market indicators useful in helping 
identify key secondary and sometimes primary, market bottoms and 
market tops. Reversals tend to occur when extreme points are 
reached on a 10-day basis, with examples in recent weeks seen 
below for the NYSE and the Nasdaq markets, respectively.  

When you know that a very large net difference is going to be 
coming "off" from 10-days ago (e.g., +1500 0r -1900), we can 
sometimes anticipate that the indicator is likely to soon be 
dropping below, or rising above, the oversold or overbought line, 
respectively.  An explanation of the construction of this 
indicator is below as a kind of footnote - you can read it if you 
don't know the construction method and want to or disregard it, 
if known already. 

Given one large plus net A-D number that will be taken out of the 
10-day average over the next two trading sessions, we're likely 
near an oversold reading. This coupled with other signs of a 
bottom, especially involving bullish price and volume patterns,  
supports the possibility or a probability for at least a short-
term rebound in the coming week. 

Advances minus declines - 10-day moving average: 


Advances minus declines - 10-day moving average:


Explanation of construction and use - 

The plot of the 10-day moving average of the daily net difference 
between advancing and declining stocks can be seen as a type of 
oscillator, or a type of overbought/oversold indicator.  To 
construct, we simple take each daily difference between stocks 
advancing and stocks declining, resulting in either a positive or 
negative number. A simple 10-day moving average of the daily net 
A-D tends to fluctuate in a fairly predictable range, with the 
extremes of that range tending to hit certain reoccurring levels.  
From these extreme points, market reversals often follow, often 
with a lag. 

We can consider the lower extremes to mark an  "oversold" 
condition in the market and the upper extreme points to signify 
an "overbought" situation in the market.  The NYSE and the Nasdaq 
markets tend to see movements in tandem, but they can diverge, 
which is why I do not take a sum of the two figures, but plot 
them separately.  

The graph of 10-day moving average is all that is shown in the 
charts above -- the daily net difference is not. However, the 
moving average is constructed from the last 10-days daily 
figures.  The last point of the moving average line, a measured 
on the vertical price scale, might show a 10-day moving average 
of say -300.  This means that a sum of all advances minus 
declines for 10 days resulted in an average of -300. 

Each day, the net difference from 11 days ago is dropped and 
today's net difference is added, followed by division by 10, 
resulting in today's moving average. Because the average changes 
or "moves" every day, it's a moving average.)

Leigh Stevens
Chief Market Strategist 


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Editor's Plays

I Love It When A Plan Comes Together
(George Pepard - The A Team)

The telecom puts from last week are all on track for profits
despite a bounce midweek. While SBC and BLS are taking their
own sweet time the Qualcomm play dropped like a rock.

The July $35 put for $3.00 closed at $5.60 on Friday with QCOM
still heading south at a high rate of speed.

Qualcomm - put
(last week)


This week


For traders still wanting to enter this play I would look for 
an oversold bounce next week and pickup the July $25 put which
is currently $1.30.


Celera Genomics Put

Three weeks ago


This week 


The CRA play has run its course and I would not enter it now.
I would wait for a rebound to the $20 level and look for another
break down. 

If you would like to try this again on a different stock then
REGN is a likely target.


The stock has bounced off $20 support for two years with lower highs
the last three times. If it breaks $20 and you can see it closed
three cents below on Friday then next support is in the $12-$15 range.
It could go to $10. 

I would play the August $17.50 put at $1.90. Plenty of time and
very little risk. This is a stock that could be played on any
bounce as well since the bounces always seen to fail. Should it
bounce off $20 here again then short the bounce and wait. 

Cima Labs


Cima Labs is another candidate for the same type of play. It broke
support at $20 on Friday and with confirmation on Monday could
fall to the low teens or even the $10 range. This two year chart
shows lack of investor interest and when the stock breaks $20
mutual funds start unloading.

I would use the September $17.50 put currently at $2.30


Remember, these are all high risk plays and should only be made
with 100% risk capital.

Good Luck

Jim Brown


Ugly Week
By Eric Utley

The week was a poor one.  But not bad enough to signal any kind
of meaningful bottom on capitulation.  While volume was active in
Friday's session, it wasn't near the panic selling levels that
accompany a washout.  Nope, the masses still believe in technology
even after Friday's failure, and that doesn't bode well for those
stocks this summer.

The sector scorecard from Friday was decidedly slanted with a
negative technology bias.  Big drops were seen in the
Semiconductors (SOX.X), which were off by better than 4 percent.
Though the Opticals (FOP.X) were the worst performing group of
stocks in Friday's session, the drop in the SOX.X was the
most detriment as it related to sentiment, and technicals.
The amazing bid in the Gold and Silver Index (XAU.X) only
confirmed the changing tide of sentiment.

The CBOE Market Volatility Index (VIX.X) is starting to show
signs of increased fear.  The VIX has traded through the more
important levels that we've been focusing on for the last
several weeks.  Now, I'm turning my focus to looking for a
capitulation in fear in an attempt to spot a bottom.  I think
that we're a ways away from that event, but it's something to
keep in mind as we work through this.  The next level to monitor
in the progression of fear is the VIX's 200-dma.

It was a volatile week in the bullish percent data.  The
Nasdaq-100 went back and forth, ending in bear confirmed mode
at the 31 percent level.  That indicator is getting down there,
where downside risk is lessened.  It can always go lower as
we saw last fall when it hit 0, so keep that in mind.  But the
lower it falls, the less risk in the NDX to the downside.
Also, four of the five markets we cover bullish percent data for
are now in a bear market of varying strength.  Only the NYSE
market, which is arguably the most important of them all,
remains in a bull market position.

However, once again, the ARMS Index is back into extreme
territory, the short term indicator anyway.  I would dare
guess that the market is due for another short covering rally
to work off its oversold nature, but that rally will probably
be another gift as an entry point for the bears.  While it's
ugly, as traders, we need to take 'em where we can make 'em.


Market Averages


52-week High: 11350
52-week Low :  8062
Current     :  9911

Moving Averages:

 10-dma: 10128
 50-dma: 10276
200-dma:  9933

S&P 500 ($SPX)

52-week High: 1316
52-week Low :  945
Current     : 1076

Moving Averages:

 10-dma: 1107
 50-dma: 1128
200-dma: 1130

Nasdaq-100 ($NDX)

52-week High: 2071
52-week Low : 1089
Current     : 1251

Moving Averages:

 10-dma: 1348
 50-dma: 1420
200-dma: 1495

Gold and Silver ($XAU)

The XAU once again found its defensive bid in Friday's
session, once again it earned the day's best performing
sector spot.  It gained a whopping 4.81 percent for the
day, finishing at a new yearly high.

Sector leaders included Gold Fields (NASDAQ:GOLD), Anglogold
(NYSE:AU), Harmony Gold (NASDAQ:HGMCY), Meridian (NYSE:MDG),
and American Eagle Mines (NYSE:AEM).

52-week High: 78
52-week Low : 49
Current     : 78

Moving Averages:

 10-dma: 73
 50-dma: 68
200-dma: 59

Optical ($FOP)

The FOP was the worst performing sector in Friday's session,
losing 5.06 percent on the day.

Leading to the downside included shares of Vitesse (NASDAQ:VTSS),
Sierra (NASDAQ:PMCS), Nortel (NYSE:NT), Applied Micro

52-week High: 139
52-week Low :  74
Current     :  74

Moving Averages:

 10-dma: 83
 50-dma: 88
200-dma: N/A


Market Volatility

One thing that the VIX can be used for is spotting capitulation.
When everyone's running for the exits, that's usually the
bottom for stocks.  The VIX isn't near capitulatory levels just
yet.  I'll be watching for a move above the 200-dma first,
then for a print somewhere in the mid 30s.

The VXN is still lagging the VIX.  We need to see some more
upside in the VXN before we get too excited about a potential
bottom in the NDX. 

CBOE Market Volatility Index (VIX) - 24.56 +1.51
Nasdaq-100 Volatility Index  (VXN) - 41.99 +1.81


          Put/Call Ratio  Call Volume   Put Volume
Total          0.87        461,710       403,024
Equity Only    0.79        389,247       306,902
OEX            0.92         15,858        14,556
QQQ            1.50         35,271        52,808

Bullish Percent Data

           Current   Change   Status
NYSE          64      + 0     Bull Confirmed
NASDAQ-100    31      - 2     Bear Confirmed
DOW           53      + 0     Bear Alert
S&P 500       64      - 1     Bear Alert
S&P 100       59      - 1     Bear Alert

Bullish percent measures the number of stocks in an index 
currently trading on a buy signal on their point and figure 
chart.  Readings above 70 are considered overbought, and readings 
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


 5-Day Arms Index  1.53
10-Day Arms Index  1.24
21-Day Arms Index  1.39
55-Day Arms Index  1.20

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 


Market Internals

        Advancers     Decliners
NYSE      1243           1871
NASDAQ    1207           2332

        New Highs      New Lows
NYSE      147             60
NASDAQ    138            123

        Volume (in millions)
NYSE     1,376
NASDAQ   1,705


Commitments Of Traders Report: 04/23/02

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being 
financial institutions. Commercials are historically on the 
correct side of future trend changes while small specs tend 
to be wrong.  

S&P 500

Commercial traders continued to ease off of their recent relative
high in bearishness.  The group added a few more longs than shorts
last week for a slight drop in their net bearish positition.
Small traders went in the opposite direction by dropping a small
number of longs and adding a few shorts for a reduction in the
group's near yearly high bullish position.

Commercials   Long      Short      Net     % Of OI 
04/09/02      320,101   411,075   (90,974)  (12.4%)
04/16/02      322,578   411,245   (88,667)  (12.1%)
04/23/02      327,373   414,991   (87,618)  (11.8%)

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
04/09/02      151,237     47,678  103,559     52.1%
04/16/02      150,529     50,424  100,105     49.8%
04/23/02      149,324     52,469   96,855     48.0%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 107,702 - 3/26/02

Nasdaq commercials reduced their net bearish position again
last week.  The grouop maintained its long position for the
most part, but brought in a number of shorts.  Small traders
grew a little less bullish by reducing their long position
for a decline of about 800 contracts in the net bullish

Commercials   Long      Short      Net     % of OI 
04/09/02       28,985     35,221    (6,236)   (9.7%)
04/16/02       32,024     35,723    (3,699)   (5.5%)
04/23/02       32,046     34,125    (2,079)   (3.1%)

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
04/09/02       11,640     8,353     3,287     16.4%
04/16/02       12,458    10,572     1,878      8.2% 
04/23/02       11,393    10,365     1,028      4.7%

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


Dow commercials dropped a significant number of longs during the
most recent reporting period.  The group's net bullish position
was substantiall reduced.  Meanwhile, small traders sneaked in a
net bullish position by 28 contracts.

Commercials   Long      Short      Net     % of OI
04/09/02       19,393    13,445    5,948     16.7%
04/16/02       19,080    14,267    4,813     14.4% 
04/23/02       16,890    15,151    1,739      5.4%

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
04/09/02        5,459     9,340    (3,881)   (26.2%)
04/16/02        5,644     9,448    (3,804)   (25.2%) 
04/23/02        8,354     8,326        28      0.2%

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01


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Lady Luck
By Eric Utley

I haven't decided if it's better to be lucky or good.  That goes
for life in general, and the market.  As it pertains to the
latter, I guess it really doesn't matter so long as I'm making
money, which is exactly what I did in the Gold and Silver Index
(XAU.X) over the last five days.  I suppose that the timing of
my piece last week involved a little luck, the glowing (no pun
intended) profile of the precious stuff.

I received some positive feedback, and discovered that several
readers were on the right side of the more than 7 percent pop
in the XAU.X last week.  Congratulations if you were one of
those "lucky" bulls like myself.

Sticking with stocks in the strongest sectors of the market is
the only way to be bullish right now.  We've seen trends that
formed early in the year continue through even last week in such
sectors as the XAU.X, plus the super strong Health Care Index
(HMO.X).  The saying "the trend is your friend" rings more true
this year than ever!

In sticking with that theme, and because I received some good
feedback from last week's piece, I thought I'd take a look at
a sector on the other end of the market spectrum this week.

The point and figure charts that appear in this column were
created using www.StockCharts.com.

Please send your questions and suggestions to:

Contact Support 


Telecom & Networking

Some market watchers have begun to call for a bottom in the
telecom sector.  The same participants are suggesting that there
are some values in the beaten down telecom space, using a
contrarian thesis.  I actually agree, to some extent, that there
are some longer term values in the space.  But they may become
even more discounted in the months to come.

The North American Telecom Index (XTC.X) is working with a
vertical count of 360 currently, that's a full 200 points lower
from where it closed last Friday.  What's more, the XTC.X is
five columns deep into a narrowing consolidation.  That's right,
it's trading in a triangle on its point and figure chart.  The
triangle is typically a consolidation that portends a large
directional move.  Using the prevalent trend in the XTC.X, my
speculation is that the trend is lower.  It will take a print
below 545.00 to complete a bearish triangle in the XTC.X, which
would portend much lower prices!

XTC - Triangle


There are several fundamental problems with the telecom
business.  First, revenues from core operations, such as long
distance, are dropping due to increased competition from small
start ups.  Granted, a lot of those niche players have gone
away, but there are still plenty of smaller, private firms
hanging around to present problems to the bigger players.  Just
ask WorldCom (NASDAQ:WCOM) about problems.  The other issue is
the lack of profits coming from newer services, such as Internet.
The same problem of competition arises, while the costs of
updating and maintaining networks are drowning liquidity.  As a
result of the poor business conditions, the carriers have been
forced to cut spending on new equipment even more this year.
Enter the networkers.

One of the hardest hit segments of the networking space has
been the optical group.  The reason these companies are doing
so poorly is because they're nearly 100 percent dependent on
telecom spending.  Where other networkers such as Cisco
Systems (NASDAQ:CSCO) and even a company like F5 Networks
(NASDAQ:FFIV) have business outside of telecom in what is
known as enterprise.

The pure telecom dependent plays have been hardest hit,
reinforced by last Friday's whacking in the Optical Sector
Index (FOP.X), which set a new all time low.  The index
hasn't been around very long, so labeling its breakdown a
new all time low should be taken into account.  Looking at
the stocks in the group trading at multi year lows does
however bring it into context.

FOP - Lower Lows


The trend has obviously been lower in the opticals since the
index debuted last fall.  It will continue to follow the XTC
in whichever direction it trades.  Therefore, the XTC can be
used as a leading indicator for a trading in the FOP
components.  With the XTC poised to break from a bearish
triangle, there may be a lot more room to the downside in
some of these already beaten up optical plays.

The problem is that many of these stocks are already so
low priced that using options for a trade is out of the
question.  So shorting the stocks outright may be the better
way to play.  And while shorting a $5 stock may not sound
appealing at first, consider if you capture a $1 move in that
stock.  Now you might warm up to the idea with such a big
percentage potential with minimal capital outlay.  After all,
time is money when it comes to capital.

Here are some of the stocks to focus on in the optical
group for more potential downside:

Vitesse       (NASDAQ:VTSS)
Applied Micro (NASDAQ:AMCC)
Newport       (NASDAQ:NEWP)
Juniper       (NASDAQ:JNPR)
Tellab        (NASDAQ:TLAB)

Who knows, you may even be able to take some of these
stocks to zero.  Williams Communication, a former member
of the FOP, recently went into bankruptcy...


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.


Major Earnings This Week...
Symbol  Company               Date           Comment      EPS Est

ABN    ABN Amro Holdings      Mon, Apr 29  Before the Bell    N/A
ACDO   Accredo Health         Mon, Apr 29  Before the Bell   0.30
AFC    Allmerica Financial    Mon, Apr 29  -----N/A-----     0.77
AFG    American Financial Grp Mon, Apr 29  Before the Bell   0.51
STD    Bnc Sntndr Cntrl Hisp  Mon, Apr 29  -----N/A-----      N/A
BSB    Banco Santander-Chile  Mon, Apr 29  -----N/A-----     0.34
BAY    Bayer AG               Mon, Apr 29  -----N/A-----      N/A
BEC    Beckman Coulter        Mon, Apr 29  Before the Bell   0.43
CCJ    Cameco                 Mon, Apr 29  After the Bell     N/A
CZ     Celanese AG            Mon, Apr 29  Before the Bell   0.01
CHTR   Charter Communications Mon, Apr 29  Before the Bell  -0.74
CHK    Chesapeake Energy      Mon, Apr 29  After the Bell    0.07
CTV    CommScope              Mon, Apr 29  After the Bell   -0.02
CSGS   CSG Systems Intl       Mon, Apr 29  -----N/A-----     0.38
ENT    Equant NV              Mon, Apr 29  After the Bell   -0.36
EOP    Equity Office Prop     Mon, Apr 29  Before the Bell   0.84
FRT    Fed Relty Invstmt Trst Mon, Apr 29  -----N/A-----     0.66
FHCC   First Health Group     Mon, Apr 29  Before the Bell   0.29
GSPN   GlobespanVirata, Inc.  Mon, Apr 29  After the Bell   -0.02
HGMCY  Harmony Gold Mining    Mon, Apr 29  Before the Bell   0.28
HUM    Humana                 Mon, Apr 29  Before the Bell   0.28
JP     Jefferson-Pilot        Mon, Apr 29  After the Bell    0.82
KG     King Pharmaceuticals   Mon, Apr 29  Before the Bell   0.28
MVSN   Macrovision            Mon, Apr 29  After the Bell    0.16
MFC    Manulife Financial     Mon, Apr 29  After the Bell    0.42
MCY    Mercury General        Mon, Apr 29  -----N/A-----     0.48
NHY    Norsk Hydro            Mon, Apr 29  Before the Bell    N/A
NUS    Nu Skin                Mon, Apr 29  Before the Bell   0.15
OGE    OGE Energy             Mon, Apr 29  Before the Bell  -0.10
REI    Reliant Energy         Mon, Apr 29  -----N/A-----     0.47
RRI    Reliant Resources      Mon, Apr 29  Before the Bell   0.23
RCII   Rent-A-Center          Mon, Apr 29  After the Bell    1.02
RSG    Republic Services      Mon, Apr 29  After the Bell    0.30
RHA    Rhodia ADS             Mon, Apr 29  Before the Bell    N/A
ROH    Rohm and Haas          Mon, Apr 29  Before the Bell   0.38
TEVA   Teva Pharmaceutical    Mon, Apr 29  -----N/A-----     0.55
YUM    Tricon Glbl Restrnts   Mon, Apr 29  After the Bell    0.77
TSN    Tyson Foods            Mon, Apr 29  Before the Bell   0.18
UMC    United Microelec Corp  Mon, Apr 29  Before the Bell   0.00
BER    W.R. Berkley           Mon, Apr 29  -----N/A-----     0.79
WRI    Weingarten Realty      Mon, Apr 29  After the Bell    0.78
XL     XL Capital             Mon, Apr 29  After the Bell    1.53

ATG    AGL Resources          Tue, Apr 30  -----N/A-----     0.87
AW     Allied Waste Industry  Tue, Apr 30  After the Bell    0.18
ACAS   American Cap Strtges   Tue, Apr 30  -----N/A-----     0.60
AWK    American Water Works   Tue, Apr 30  -----N/A-----      N/A
AU     Anglogold Limited      Tue, Apr 30  Before the Bell   0.34
AOC    AON Corporation        Tue, Apr 30  -----N/A-----     0.47
AOT    Apogent                Tue, Apr 30  Before the Bell   0.33
AVB    Avalonbay Communities  Tue, Apr 30  After the Bell    0.99
BF     BASF                   Tue, Apr 30  -----N/A-----      N/A
BOW    Bowater                Tue, Apr 30  Before the Bell  -0.83
BP     BP Amoco               Tue, Apr 30  Before the Bell   0.43
BTI    British Am Tobacco     Tue, Apr 30  -----N/A-----      N/A
CMX    Caremark Rx            Tue, Apr 30  -----N/A-----     0.23
CB     Chubb                  Tue, Apr 30  Before the Bell   1.07
CNL    CLECO                  Tue, Apr 30  -----N/A-----     0.26
CEFT   Concord EFS            Tue, Apr 30  Before the Bell   0.16
CIV    Conectiv Incorporated  Tue, Apr 30  Before the Bell    N/A
CAM    Cooper Cameron         Tue, Apr 30  Before the Bell   0.34
CVH    Coventry Health Care   Tue, Apr 30  -----N/A-----     0.38
CXR    Cox Radio              Tue, Apr 30  Before the Bell   0.06
CK     Crompton Corporation   Tue, Apr 30  -----N/A-----     0.05
DCX    DaimlerChrysler        Tue, Apr 30  -----N/A-----     0.28
DYN    Dynegy                 Tue, Apr 30  Before the Bell   0.40
EOC    Empr Nac de Elect      Tue, Apr 30  -----N/A-----     0.13
ENI    Enersis SA ADS         Tue, Apr 30  -----N/A-----     0.01
EPD    Enterprise Products    Tue, Apr 30  Before the Bell   0.24
EOG    EOG Resources          Tue, Apr 30  -----N/A-----    -0.03
EL     Estee Lauder           Tue, Apr 30  Before the Bell   0.19
FLR    Fluor                  Tue, Apr 30  After the Bell    0.42
FTE    France Telecom         Tue, Apr 30  -----N/A-----      N/A
FMS    Fresenius Medical Care Tue, Apr 30  -----N/A-----     0.28
FDP    Fresh Del Monte        Tue, Apr 30  Before the Bell   0.92
FUJIY  Fuji Photo Film        Tue, Apr 30  -----N/A-----      N/A
GEMP   Gemplus International  Tue, Apr 30  -----N/A-----    -0.08
GILD   Gilead Sciences        Tue, Apr 30  After the Bell   -0.06
JNY    Jones Apparel          Tue, Apr 30  Before the Bell   0.65
KTC    Korea Telecom          Tue, Apr 30  -----N/A-----      N/A
KCIN   KPMG Consulting        Tue, Apr 30  After the Bell    0.15
LAF    Lafarge North America  Tue, Apr 30  After the Bell   -0.79
LR     Lafarge S.A.           Tue, Apr 30  -----N/A-----      N/A
MEE    Massey Energy Company  Tue, Apr 30  After the Bell    0.03
MXIM   Maxim Integrated Prod  Tue, Apr 30  After the Bell    0.19
MDR    McDermott Intl         Tue, Apr 30  Before the Bell   0.00
MCK    McKesson Corporation   Tue, Apr 30  Before the Bell   0.45
MX     Metso Corporation      Tue, Apr 30  Before the Bell    N/A
NFS    Nationwide Fin Srvics  Tue, Apr 30  After the Bell    0.82
NMR    Nomura Holdings, Inc.  Tue, Apr 30  Before the Bell    N/A
NVO    Novo-Nordisk           Tue, Apr 30  -----N/A-----      N/A
OMC    Omnicom Group          Tue, Apr 30  Before the Bell   0.68
PCAR   Paccar                 Tue, Apr 30  Before the Bell   0.56
PB     Pan American Beverages Tue, Apr 30  Before the Bell   0.22
PDX    Pediatrix Medical Grp  Tue, Apr 30  Before the Bell   0.53
PFGC   Performance Food       Tue, Apr 30  -----N/A-----     0.24
PER    Perot Systems          Tue, Apr 30  Before the Bell   0.17
PMI    PMI Group              Tue, Apr 30  Before the Bell   1.85
POL    PolyOne                Tue, Apr 30  After the Bell   -0.03
PT     Portugal Telecom SGPS  Tue, Apr 30  -----N/A-----      N/A
PCP    Precision Castparts    Tue, Apr 30  Before the Bell   0.71
PG     Procter & Gamble Comp  Tue, Apr 30  -----N/A-----     0.83
QSFT   Quest Software         Tue, Apr 30  After the Bell    0.03
Q      Qwest Communications   Tue, Apr 30  Before the Bell  -0.04
RCI    Renal Care Group       Tue, Apr 30  After the Bell    0.42
RYG    Royal Group Tech       Tue, Apr 30  Before the Bell   0.20
SDA    Sadia S.A.             Tue, Apr 30  -----N/A-----      N/A
SSFT   ScanSoft               Tue, Apr 30  Before the Bell   0.02
SEPR   Sepracor               Tue, Apr 30  Before the Bell  -1.19
SBSA   Span Broadcasting Sys  Tue, Apr 30  Before the Bell  -0.04
RIG    Transocean Sedco Forex Tue, Apr 30  Before the Bell   0.16
VLO    Valero Energy          Tue, Apr 30  Before the Bell  -0.09
VSH    Vishay Intertechnology Tue, Apr 30  Before the Bell  -0.02
WPL    W.P. Stewart & Co      Tue, Apr 30  Before the Bell   0.41
WSH    Willis Grp Hldngs Lmtd Tue, Apr 30  Before the Bell   0.42
WEC    Wisconsin Energy       Tue, Apr 30  Before the Bell   0.65

ACE    ACE Limited            Wed, May 01  -----N/A-----     0.82
AXL    Am Axle & Manu Hldngs  Wed, May 01  -----N/A-----     0.73
APU    AmeriGas Partners      Wed, May 01  -----N/A-----     1.55
AIV    Apartment Ivstmt & Man Wed, May 01  -----N/A-----     1.30
ILA    Aquila, Inc            Wed, May 01  Before the Bell   0.32
ABX    Barrick Gold           Wed, May 01  -----N/A-----     0.12
BHP    BHP Billiton Ltd       Wed, May 01  -----N/A-----     0.14
CRL    Charles River Lab      Wed, May 01  After the Bell    0.27
CPG    Chelsea Property Group Wed, May 01  After the Bell    1.19
CRUS   Cirrus Logic           Wed, May 01  After the Bell   -0.12
CMS    CMS Energy             Wed, May 01  -----N/A-----     0.63
CMCSK  Comcast                Wed, May 01  -----N/A-----     0.10
CNC    Conseco                Wed, May 01  Before the Bell   0.14
CUZ    Cousins Properties     Wed, May 01  After the Bell    0.53
DTC    Domtar                 Wed, May 01  -----N/A-----     0.02
EDMC   Education Management   Wed, May 01  Before the Bell   0.37
EPN    El Paso Energy Partner Wed, May 01  -----N/A-----     0.15
EC     Engelhard              Wed, May 01  Before the Bell   0.37
EQR    Eqity Resi Prprts Trst Wed, May 01  During the Market 0.62
FCH    FelCor Lodging Trust   Wed, May 01  After the Bell    0.44
FSH    Fisher Scientific Intl Wed, May 01  After the Bell    0.32
GGP    Gen Growth Properties  Wed, May 01  After the Bell    1.12
GG     Goldcorp               Wed, May 01  After the Bell    0.15
HIW    Highwoods Properties   Wed, May 01  After the Bell    0.92
HMT    Host Marriott REIT     Wed, May 01  -----N/A-----     0.19
IRM    Iron Mountain          Wed, May 01  Before the Bell   0.15
KMT    Kennametal             Wed, May 01  -----N/A-----     0.53
LANC   Lancaster              Wed, May 01  -----N/A-----     0.52
MDP    Meredith               Wed, May 01  Before the Bell   0.37
NWL    Newell Rubbermaid      Wed, May 01  Before the Bell   0.22
OCAS   Ohio Casualty          Wed, May 01  -----N/A-----     0.20
OKE    Oneok                  Wed, May 01  After the Bell    0.57
OHP    Oxford Health Plans    Wed, May 01  Before the Bell   0.74
PCG    PG&E                   Wed, May 01  -----N/A-----     0.59
PCLN   Priceline.com          Wed, May 01  After the Bell    0.02
PLD    ProLogis Trust         Wed, May 01  After the Bell    0.57
STR    Questar                Wed, May 01  -----N/A-----     0.63
RA     Reckson Assoc Realty   Wed, May 01  After the Bell    0.60
RSE    Rouse                  Wed, May 01  -----N/A-----     0.78
DNY    RR Donnelley & Sons    Wed, May 01  -----N/A-----     0.16
SPI    Scottish Power         Wed, May 01  -----N/A-----      N/A
SHPGY  Shire Pharm Grp        Wed, May 01  -----N/A-----     0.30
STTS   ST Assmbly Test Srvces Wed, May 01  -----N/A-----    -0.28
SRCL   Stericycle             Wed, May 01  After the Bell    0.44
TU     TELUS Communications   Wed, May 01  Before the Bell    N/A
WEN    Wendy`s International  Wed, May 01  -----N/A-----     0.39
WGL    WGL Holdings Inc       Wed, May 01  After the Bell    1.13

AGU    Agrium                 Thu, May 02  After the Bell   -0.22
ACL    Alcon Labs, INC        Thu, May 02  -----N/A-----     0.30
AYE    Allegheny Energy       Thu, May 02  After the Bell    0.81
AC     Alliance Capitl Mngmnt Thu, May 02  -----N/A-----     0.65
APCC   Am Power Conversion    Thu, May 02  After the Bell    0.12
AMKR   Amkor Technology       Thu, May 02  After the Bell   -0.59
AVE    Aventis                Thu, May 02  -----N/A-----      N/A
BUH    Buhrmann NV            Thu, May 02  -----N/A-----      N/A
CVC    Cablevision Systems    Thu, May 02  Before the Bell  -1.45
CPN    Calpine                Thu, May 02  Before the Bell   0.10
CPT    Camden Property Trust  Thu, May 02  After the Bell    0.90
CLU    Canada Life Financial  Thu, May 02  During the Market  N/A
CSB    CIBA SPCALTY CHEM HLDG Thu, May 02  Before the Bell    N/A
CI     CIGNA                  Thu, May 02  -----N/A-----     1.88
CLX    Clorox                 Thu, May 02  Before the Bell   0.43
DDR    Develop Divers Relty   Thu, May 02  -----N/A-----     0.61
DVN    Devon Energy           Thu, May 02  Before the Bell   0.22
DISH   EchoStar Communication Thu, May 02  Before the Bell   0.05
EP     El Paso Corp.          Thu, May 02  Before the Bell   0.88
ELN    Elan                   Thu, May 02  Before the Bell   0.30
EMR    Emerson Electric       Thu, May 02  After the Bell    0.65
EPC    Epcos                  Thu, May 02  Before the Bell    N/A
GOLD   Gold Fields Limited    Thu, May 02  -----N/A-----     0.05
GRP    Grant Prideco          Thu, May 02  Before the Bell   0.07
HCR    HCR Manor Care         Thu, May 02  Before the Bell   0.32
HNT    Health Net, Inc.       Thu, May 02  Before the Bell   0.46
HRC    Healthsouth            Thu, May 02  -----N/A-----     0.27
HTV    Hearst-Argyle TV       Thu, May 02  Before the Bell   0.11
ICI    Imperial Chemical      Thu, May 02  -----N/A-----      N/A
ITY    Imperial Tobacco       Thu, May 02  -----N/A-----      N/A
JHF    John Hancock Fnl Serv  Thu, May 02  After the Bell    0.70
NXY    Nexen                  Thu, May 02  -----N/A-----     0.12
NXTP   Nextel Partners        Thu, May 02  -----N/A-----    -0.33
OCR    Omnicare               Thu, May 02  Before the Bell   0.33
PNP    Pan Pacific Retail     Thu, May 02  Before the Bell   0.71
PY     Pechiney               Thu, May 02  -----N/A-----     0.21
PRGN   Peregrine Systems      Thu, May 02  After the Bell   -0.06
PDS    Precision Drllng Corp  Thu, May 02  Before the Bell   0.68
RMG    Rainbow Media Group    Thu, May 02  Before the Bell   0.10
RMD    ResMed                 Thu, May 02  After the Bell    0.29
SC     Shll Transport Trading Thu, May 02  -----N/A-----     0.49
SBGI   Sinclair Broadcast Grp Thu, May 02  After the Bell   -0.08
SKYW   SkyWest                Thu, May 02  Before the Bell   0.28
SII    Smith International    Thu, May 02  Before the Bell   0.62
TLD    TDC                    Thu, May 02  Before the Bell    N/A
IPG    The Interpublic Group  Thu, May 02  After the Bell    0.18
TKTX   Transkaryotic          Thu, May 02  After the Bell   -0.54
UVV    Universal              Thu, May 02  After the Bell    1.03
VNO    Vornado Realty Trust   Thu, May 02  -----N/A-----     0.99

CRE    CarrAmerica Realty     Fri, May 03  Before the Bell   0.85
ENB    Enbridge               Fri, May 03  -----N/A-----      N/A
IC     ICICI LTD              Fri, May 03  Before the Bell    N/A
ROIA   Radio One              Fri, May 03  -----N/A-----    -0.05

Upcoming Stock Splits This Week & Next...

Symbol  Company Name              Ratio    Payable     Executable

PRHC    Province Healthcare       3:2      04/29       04/30
CUB     Cubic Corp                3:1      04/29       04/30
OPTN    Option Care               5:4      04/30       05/01
PFCB    P.F. Changs               2:1      04/30       05/01
DRI     Darden Restaurants        3:2      05/01       05/02
ABM     ABM Industries            2:1      05/03       05/06
TJX     TJX Companies             2:1      05/08       05/09
MCHP    Microchip Technology      3:2      05/08       05/09
PNG     Penn-America Group        3:2      05/08       05/09
WSM     Williams Sonoma           2:1      05/08       05/09
CATY    Cathay Bancorp            2:1      05/09       05/10
WTSLA   The Wet Seal Inc          3:2      05/09       05/10
LH      Laboratory Corp           2:1      05/09       05/10
FAST    Fastenal                  2:1      05/10       05/13
IFNY    INFINITY Inc              2:1      05/10       05/13
BBY     Best Buy                  3:2      05/10       05/13

Economic Reports

Wall Street is beginning to wrap up earnings season but it's still
a very full week of announcements.  Earnings news and views will
maintain the spotlight while economists and analysts will be
watching a week full of reports with economic data coming out
every day this week.  Click inside for a calendar.


Monday, 04/29/02
Personal Income (BB)     Mar  Forecast:   0.5%  Previous:    0.6%
Personal Spending (BB)   Mar  Forecast:   0.4%  Previous:    0.6%

Tuesday, 04/30/02
Chicago PMI (DM)         Apr  Forecast:   55.0  Previous:    55.7
Consumer Confidence (DM) Apr  Forecast:  108.0  Previous:   110.2

Wednesday, 05/01/02
Auto Sales (BB)          Apr  Forecast:   6.0M  Previous:    6.0M
Truck Sales (BB)         Apr  Forecast:   7.3M  Previous:    7.3M
ISM Index (DM)           Apr  Forecast:   54.6  Previous:    55.6
Construction Spending(DM)Mar  Forecast:  -0.1%  Previous:    1.1%

Thursday, 05/02/02
Initial Claims (BB)    04/27  Forecast:    N/A  Previous:    421K
Factory Orders (DM)      Mar  Forecast:   0.7%  Previous:    0.3%

Friday, 05/03/02
Nonfarm Payrolls (BB)    Apr  Forecast:    60K  Previous:     58K
Unemployment Rate (BB)   Apr  Forecast:   5.8%  Previous:    5.7%
Hourly Earnings (BB)     Apr  Forecast:   0.3%  Previous:    0.3%
Average Workweek (BB)    Apr  Forecast:   34.3  Previous:    34.2
ISM Services (DM)        Apr  Forecast:   57.5  Previous:    57.3

DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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I wrote an exhaustive Index Trader Wrap for this week and have 
now some key formats and "templates" set up for that section.  
For this section, I'm reminded of the Dell commercial currently 
playing over and over and over on cable channels, where the guy 
says "you go in for this and all they got is that -- it makes 
your head swim!"  

I am still swimming upstream in this Sector Wrap section trying 
to arrive at a format for how I bring the most value to you the 
reader as to highlighting some trading ideas involving sectors.  
Any ideas and feedback are welcome.  No one is sending me a ton 
of mails about this section.  Maybe because we don't always have 
good ways to play the sectors that are moving, either up or down, 
as far as option plays.  

One of my dissatisfactions is that I bought into too many sectors 
that looked like they were going to rebound a bit, as the market 
approached its Feb./early March lows.  But, these have not 
followed though too much to the upside.  Our iShares short play 
in Retail, a sector which got overdone to the upside, is doing 
ok.  Wish I had more shorts in my quiver.  

Even slow moving sectors plodding higher like Utilities, fell 
apart this week on the bad news coming out of Dynergy -- in fact, 
the UTH HOLDR (trust) stock was holding some of DYN and suffered 
more than say the Dow Utility Average, which was nevertheless 
correcting big time.  The disk drive makers, as reflected by the 
Disk Drive Index ($DDX.X) has been stronger than most other tech 
groups -- the GDP report tells us why, as Corporate upgrading of 
PCs has been strong in an otherwise lackluster IT spending.

Some of the strongest sectors are not sectors at all, but what we 
can call grading by size -- as the business media talking heads 
are telling us endlessly, all you got to do is be in small and 
mid cap stocks -- be a small size bull and your pockets will be 
full.  They, at the same time, are NOT telling us how we are all 
going to be able to be mostly invested in small and mid 
capitalization stocks and not blow THEIR valuations through the 
roof. When they get overly rich in terms of price/earnings, where 
are we going to go.  By the way, when I took a look at the 
Russell 2000 (RUT) and S&P 600 small cap iShares they looked a 
bit toppy to me.  These charts are below:

Russell Ishares (weekly chart)

S&P small cap Ishares (weekly chart)


As the downside potential of many of the beaten up tech sectors 
may not be all that great relative to put plays on individual 
stocks within that sector, especially as the momentum slows down
 and the premiums are a bit rich, how about the sizzling sector 
that have been going up like there was no tomorrow?  In fact, 
some of them are going up precisely cause there may be no SAFE 
tomorrow -- especially oil services and gold stocks.  

I got some e-mails asking me for names of the stocks in some of 
the sectors that have mighty MO (MOmentum) here.  Let me review 
and over the next couple of days in this section see what I could 
suggest in the what I will call the HOT SECTORS.    

Healthcare Payors Index ($HMO.X) has got STRONG upside MO here 
and projects higher - Point & Figure and other technical 
measures, such as looking at the top end of the broad weekly 
uptrend channel that HMO is in, suggests potential up to the 750 
area.  A list of the stocks is below the weekly chart.  

HMO.X (weekly chart)   

The stocks in the Healthcare Payer's Index ($HOM.X) -- figures on 
net gains were from Friday's close. The names and symbols of the  
stocks making up the index are for those wanting to take a look 
at the fundamental and technical picture for the individual 
companies in HMO.  

HMO.X component performance (image)

Health Provider Index ($RXH.X) - I anticipate some resistance 
coming in around the 384 area, at the previously broken up 
trendline on the weekly chart -- sometimes a return and "touch" 
to this trendline, acts as the "kiss of death" - time will tell.  
Stay tuned.  Meanwhile, if RXH can get through this area regain 
its uptrend, I get one projection, made on a technical basis, to 
around 430.  I have not come up with the list of these stocks 
yet, so will look to provide this later on.   

RXH.X (weekly chart)

Gold and Silver Index ($XAU.X)- had a strong week, with a close 
at 77.5 - one way to project potential is to look for a possible 
move up to the top end its weekly uptrend channel, up in the 100 
area, which would be a double from its 2001 low. If I turn 
bullish on gold, after making a bear case for it, before bullion 
prices broke out to new highs last week, is probably the kiss of 
death for the glittering stuff. 

XAU.X (weekly chart)

Until the end of last week, I hadn't liked the XAU technical 
pattern, due to what looked liked a bearish rising wedge, that I 
was seeing on the XAU daily chart. However, a strong surge 
Friday, negated that pattern with the decisive upside penetration 
of the upper trendline.  Meanwhile the stocks that make up the 
XAU are posted below.

XAU.X (daily chart)

This "snapshot" was taken Friday  

(gold stock performance)

Oil Services Index ($OSX.X) -- at 107.8 - has some resistance 
nearby at 112, but with a next upside target to 116; then  
major resistance comes in at 135, extending to around 143-145. 

OSX.X (weekly chart)


(OSX.X components performance image)


>> DRG, the Pharmaceutical sector index ($DRG.X), (4/22). 
Rebounding from low end of a probable trading range and oversold.  
Moreover, investor attention may focus on DRB due to strength in 
other healthcare areas.
DRG sector is playable by the purchase of the May 60 Merck (MRK 
EL) calls, a prominent stock in this sector, especially on a 
pullback in the stock to the 54 area -- getting close - 4/26 
close: 54.47. 


>> Internet Sector index ($INX.X) - 4/17 Sector Trader 
suggestion: OPTION play: JNPR (Juniper Networks) May 15 Calls 
(JUX EC).JNPR objective is to $18, based on the stock having 
potential to retrace half of the Dec - Feb. downswing.

The May 12.5's (JUX EV) Calls were later recommended.  

>> Telecom ($XTC.X) index - 4/15 suggestion:
OPTION play: Sector stock, Level 3 Communications (LVLT)-
1)June 5 Call (HGY FA) suggested at .60 and under
2)LVLT outright purchase, with stock under $5, also suggested. 
Objective on LVLT stock is to 5.5/6 based on upside potential 
based on the stock continuing to advance within its current 
uptrend channel.

>> Semiconductor Index ($SOX.X) - 4/15 Sector Trader suggestion:
May 650 call play at 2.35 on 4/23 close.

Break below the early-April lows at 548-548, suggests new down leg. 

WATCH: On any rebound this week -- look at puts in SOX-member 
stocks like Micron (MU), KLA Tencor (KLAC), Teradyne (TER), 
Applied Materials (AMAT) or Intel (INTC). 

>> Cyclical sector ($CYC.X) - 4/15 suggestion:
1.) iShares Cyclical Trust (IYC)  - 4/16 open: 56.95
Objective: new high above 63.00
2.) OPTION play: CYC Sector stock, - Alcoa (AA) 
May 40 calls (AA EH) - 4/16 open: .60  

WATCH: Any CYC break of technical support at 556-559

Sector stock play suggested -- Alcoa (AA) May 40 calls -- is a 
hold only, as stock broke technical support. Calls aren't worth 
selling, but the stock pattern turned bearish, with key support 
in the $33 area.

>> Airline sector ($XAL.X) - 4/15 Sector Trader suggestion:
OPTION PLAY: XAL sector stock Southwest Airlines (LUV) 
Sept. 20 (LUV ID) call suggested at 1.25 or less.  
OBJECTIVE: $22 based on a rebound back toward the high end of the 
current uptrend channel.

LUV has been holding technical support, but just. Retreat in the 
stock to BELOW 17.25, on a closing basis, would cause me to exit. 

>> Utilities Index - Holders trust shares (AMEX: UTH) 
Long at 95.25 
Stop: 91.00


>> RTH (AMEX: Retail sector trust stock)
SHORT at 99.00 
LOWER stop to 100 

NOTE: RISK to REWARD guidelines -  
Determining an objective is important, even if it is a moving 
target, as this is the reward potential.   Determining reward 
potential is critical to establishing whether a stop that makes 
“sense” (e.g., a sell stop that was placed under a key support 
level) would, if triggered, result in a dollar loss that is in 
proportion to profit potential; e.g., 1/3 of it.  (On occasion, 
when the purchase price of call or put is equal to 1/3 or less of 
the estimated reward potential, there may not be a specific exit 
suggestion, as the cost of the option is equal to the amount that 
is being risked.)   

Leigh Stevens
Chief Market Strategist


CALLS              Mon    Tue    Wed    Thu   Week

AZO      78.50    0.16   0.40   0.74   2.87   3.92  All time highs
TKTX     41.07    0.97  -0.45   0.11  -0.34   0.19  Holding up
PNRA     66.06    0.26   1.61  -0.86  -0.59  -0.94  Dropped, stop
ACDO     60.01   -0.49  -0.32  -1.10   1.68  -2.67  Pulling back
SLB      56.81   -0.98   0.43  -0.05   1.20   2.49  New, ready
DGX      91.05   -3.30  -0.35   2.80   0.75   1.70  New, healthy
SII      71.29   -0.73   1.49  -0.88   2.46   3.64  New, OSX.X!
THC      74.48   -1.00  -0.25   0.09   0.92   0.40  Ready to break


MU       26.00    1.40  -1.51  -2.09   0.25  -3.50  Going to $25?
MXIM     48.19   -0.77  -1.54  -2.58  -0.17  -5.73  Picked top!!
EBAY     49.70   -0.71  -1.25  -1.15   0.15  -4.69  Broken!!!
NVDA     30.70    0.19  -1.50  -3.12   1.26  -6.54  Sub $20???
ADI      36.24   -0.45  -1.36  -1.56  -0.58  -4.81  Weak chips
PLCM     19.01   -1.59  -1.58   0.56  -0.34  -3.13  Inst'l sales
CVC      23.70   -1.90   0.02   0.41  -1.48  -4.01  New, worsened
LRCX     25.16   -0.25  -0.57  -0.88   0.02  -2.91  New, chip shot
SEBL     22.59   -1.30  -0.63  -1.42   0.52  -4.52  New, softening
VRTS     26.22   -0.39  -1.72  -1.66   0.46  -4.40  Trending lower


Trade online with trailing stops at OptionsXpress
Trailing stops based on the option price or the stock price.

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Note: Options involve risk. Risk disclosure:


Call Play of the Day:

DGX - Quest Diagnostics $91.05 (+1.70 last week)

See details in play list

Put Play of the Day:

LRCX - Lam Research $25.16 (-2.91 last week)

See details in play list


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.


ACDO $60.00 (-2.78) A little bit of profit taking came into the
Health Care sector on Friday and that was no great surprise after
the run they've been on lately.  But it was rather disconcerting
to see ACDO give up more than 4% on the day (vs. a mere 0.3% for
the HMO index), and the selling volume increased into the closing
bell as the stock settled at its low of the day.  That's right,
investors took their profits and ran ahead of the weekend and
more importantly ACDO's earnings report on Monday before the
opening bell.  With the poor price action and earnings on the
calendar, ACDO leaves our playlist this weekend.

PNRA $66.06 (-0.94) The defensive buyers who have been using
PNRA as a parking place for short term capital lost some ground
last week.  The stock is looking a little toppy, given its
failure to trace a new relative high.  We fear a breakdown in
next week’s trading, plus the triggered stop gives us more than
enough reason to drop coverage this weekend.  Use any short term
bounce next week to cut losses.




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.

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.


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Contact Support

The Option Investor Newsletter                   Sunday 04-28-2002
Sunday                                                      3 of 5

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DGX – Quest Diagnostics $91.05 (+1.70 last week)

Quest Diagnostics was the result of a 1996 Corning spinoff,
and currently holds the title of the world's #1 clinical
laboratory.  DGX performs more than 100 million routine tests
annually, including cholesterol, HIV, pregnancy, alcohol, and
pap smear tests.  Operating laboratories throughout the US and
in Brazil, Mexico, and the UK, DGX also performs esoteric
testing (complex, low-volume tests) and clinical trials.  The
company serves doctors, hospitals, HMOs, and other labs as well
as corporations, government agencies, and prisons.

Whoever said that bulls can't make money in a bearish market, has
likely never applied sector analysis or relative strength
analysis to their investing research.  There is no doubt that the
Health Care sector (HMO.X) is the strongest of any portion of the
broad market right now, and as Technology and other economically
sensitive stocks continue to fall, money is finding its way to
this defensive sector.  While not a component of the HMO index,
shares of DGX are benefiting from the sector's strength as well
as a solid earnings report just over a week ago, where the company
beat Wall Street estimates by more than 10% ($0.67 vs. the $0.60
consensus).  Given that earnings were released with the stock
trading near all-time highs, it is no surprise that a bit of
profit taking ensued.  But DGX found support right at the $85
level and began surging higher again, breaking out to a new high
on Friday and clearing the runway for more positive action ahead.
The breakout over the $91 level initiated a fresh double-top
breakout on the Pnf chart, and now the bullish target is set at
$106.  Rally ho!  An intraday pullback into the $89-90 area would
make for a solid entry into the play, although a bounce from $88
would be even better.  Should the pullback fail to appear, then
we'll look to open new positions as DGX rallies through the $92
level to new highs.  Given the stock's rather volatile action,
we're initiating the play with a rather wide stop down at $87.

BUY CALL MAY-90*THC-ER OI=3069 at $3.00 SL=1.50
BUY CALL MAY-95 THC-ES OI= 324 at $0.75 SL=0.25
BUY CALL JUN-90 THC-FR OI=  97 at $4.70 SL=2.75
BUY CALL JUN-95 THC-FS OI=1311 at $2.20 SL=1.00

Average Daily Volume = 703 K

SLB - Schlumberger $56.81 (+2.49 last week)

Schlumberger Ltd. operates two businesses: Oilfield Services and
SchlumbergerSema. Oilfield Services is a provider of exploration
and production services, solutions and technology to the
international petroleum industry. ShlumbergerSema is an Internet
technology services company that provides information technology
solutions to the telecommunications, utility, finance, transport
and public sectors, and is also a supplier of smart card

Oil service shares continue rising.  The group, as measured by
the Oil Service Sector Index (OSX.X), is one of the best
performing of the year.  While the broader markets, especially
the technology segments continue to struggle, bulls are
finding just what they need from the energy service space.  One
stock that continues to trade very well in the oil patch is
SLB, one of the bigger oil service firms.  The company recently
reported a lackluster earnings report, but its outlook is
certainly on the rise, just like its shares.  The move in SLB
has been preceded by the breakout in the OSX above its quite
meaningful resistance last week.  The OSX.X appears to be
heading for blue skies, with gentle sailing higher into the
foreseeable future.  That should bring the buyers back into the
big quality names such as SLB, who has recently completed a
short term consolidation.  A quick glance at the daily chart
with a 50-day moving average included will reveal a good
breakout point to watch for next week at the $57.20 mark.  Just
make sure to confirm direction in the OSX.X before entering
into strength.  If there’s one thing we need in this market, it’s
confirmation!  Stops at $54.75.

BUY CALL MAY-55*SLB-EK OI=15992 at $3.20 SL=1.75
BUY CALL MAY-60 SLB-EL OI=14369 at $0.85 SL=0.50
BUY CALL JUN-55 SLB-FK OI=  156 at $4.20 SL=2.25
BUY CALL JUN-60 SLB-FL OI=  569 at $1.85 SL=0.75

Average Daily Volume = 3.14 mln

SII - Smith $71.29 (+3.64 last week)

Smith International, Inc. is a worldwide supplier of premium
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 unfortunate events taking place in the Middle East have
caused a sellers strike in the oil space.  What’s more, the
prospects for an economic recovery have caused real buyers to
move into the forefront of the energy sector.  The lack of
supply, from both short sellers and long liquidators, plus the
buying pressure from the real buyers has created an imbalance
in supply and demand in the Oil Service Sector (OSX.X).  We
certainly saw that idea reinforced last week with the big
breakout in the OSX.X.  Leading the charge has been shares of
Smith International, one of the strongest stocks in the group.
The stock broke above a major, major resistance level at the
$69 mark just last week.  Point and figure enthusiasts will
recognize the move as a quintuple-top breakout, a very, very
rare pattern indeed.  But it just revealed how strong the
buying pressure is in SII.  A new upward trend appears to be
just under way following the breakout above $69 last week,
which should have trend traders on the alert for higher prices
early next week.  Use further strength in the OSX.X as
confirmation for entries into SII at current levels.  Intraday
pullbacks between the $69 and $70 support zone can be used as
entries on pullbacks.  Our stop is in place at $69.

BUY CALL MAY-70*SII-EN OI= 324 at $3.90 SL=2.25
BUY CALL MAY-75 SII-EO OI=1695 at $1.50 SL=0.75
BUY CALL MAY-70 SII-FN OI=   4 at $5.70 SL=3.75
BUY CALL MAY-75 SII-FO OI=  51 at $3.30 SL=1.50

Average Daily Volume = 1.23 mln


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AZO – AutoZone, Inc. $78.50 (+3.92 last week)

AutoZone is a retailer of automotive parts and accessories,
primarily focusing on do-it-yourself customers.  Each of its
more than 2900 stores in 42 states and Mexico carries an
extensive product line for cars, vans and light trucks,
including new and re-manufactured automotive hard parts,
maintenance items and accessories.  Approximately half of its
domestic stores also have a commercial sales program, which
provides commercial credit and prompt delivery of parts and
other products to local repair garages, dealers and service

Given the growing level of investor skepticism regarding the
fabled economic recovery, it is hard to find bullish stocks
outside of the Health Care, Energy and Precious Metals markets.
That makes the resilience of AZO that more impressive,
especially with the Retail index taking it on the chin again
last week to the tune of a 3.3% loss.  At the same time, AZO
broke out again (this time above the $76 resistance level) and
traded right to the $80 resistance level Friday morning before
pulling back throughout the day to end with a fractional loss.
That pullback from $80 was a high-odds signal for harvesting
gains, as $80 was exactly the stock's high back in early December
before beginning a multi-month consolidation process.  AZO could
very well be setting up for another breakout move, although we
would expect to see a bit more consolidation before it gets
running again.  Take advantage of any intraday weakness to
initiate new positions on a rebound from support, which is now
building just above the $78 level.  We could also enter on a
rebound from the $77 level, but that is all the leeway we're
willing to give the play, given the strong run it has recently
had.  Keep stops in place at $76.50.  Momentum traders can open
new positions on a decisive break above $80, as that breakout
will likely induce a fresh round of buying, whether new buying
or short-covering.

BUY CALL MAY-75 AZO-EO OI= 923 at $4.60 SL=2.75
BUY CALL MAY-80*AZO-EP OI=1245 at $1.50 SL=0.75
BUY CALL JUN-80 AZO-FP OI=1296 at $3.30 SL=1.75
BUY CALL JUN-85 AZO-FQ OI=1112 at $1.60 SL=0.75

Average Daily Volume = 993 K

THC– Tenet Healthcare Corp. $74.48 (+0.37 last week)

THC is the second largest investor-owned healthcare services
company in the United States.  As of the end of May, 2001, the
company's subsidiaries and affiliates owned or operated 111
general hospitals with more than 27,000 licensed beds and
related healthcare facilities serving urban and rural
communities in 17 states.  The related healthcare facilities
included a small number of rehabilitation hospitals, specialty
hospitals, long-term care facilities, and numerous medical
office buildings located nearby its general hospitals and
physician practices.

Never have the words "The Trend Is Your Friend" been more
valuable than in the current market.  While economically
sensitive stocks are crumbling all around us, the Health Care
index (HMO.X) is rocketing to new highs, seemingly on a daily
basis.  Witness Thursday's blast through the $600 resistance
level, which paved the way for Friday's mild consolidation.
Shares of THC have been working their way higher in a very
predictable trend since the beginning of March.  Each time the
bulls pause to harvest some gains, it provides an opportunity
to get onboard for the next leg higher.  So long as the
ascending trendline (currently $72.75) remains unbroken, we can
take advantage of the dips to enter the play for the next move
up the chart.  So a pullback to this area looks good for new
entries, although given THC's pattern of rallying for 7-10 days
before pulling back, it appears the next high-odds entry will
come from a breakout over the $74.75 level.  Trade the breakout
if it comes, or else wait for the pullback to support to enter
the play, its as simple as that.  We want to give THC a little
leeway, so we are keeping our stop set at $71, right at the
last reaction low.

BUY CALL MAY-70 THC-EN OI=5005 at $5.00 SL=3.00
BUY CALL MAY-75*THC-EO OI=1119 at $1.50 SL=0.75
BUY CALL JUN-75 THC-FO OI= 269 at $2.60 SL=1.25
BUY CALL JUN-80 THC-FP OI= 141 at $0.75 SL=0.25

Average Daily Volume = 2.02 mln

TKTX - Transkaryotic $41.07 (+0.19 last week)

Transkaryotic Therapies, Inc. (TKT) is a biopharmaceutical company
that develops protein- and cell-based therapeutics for the treatment
of a wide range of human diseases. During 2001, the Company received
its first product marketing approvals. TKT is building a broad and
renewable product pipeline based on three proprietary development
platforms: Niche Protein products, Gene-Activated proteins and
Transkaryotic Therapy gene therapy.

TKTX continues to display amazing relative strength in the face of
broad market weakness.  The stock held up very well for all of last
week, managing a fractional gain for the week while most other four
lettered stocks were whacked for multi percentage drops.  Not only
has the broader market been terrible, but the AMEX Biotechnology
Sector Index (BTK.X) has been trading very week.  The biotech sector
broke down in a big way last week, below what had been a very
important long term support level.  The fact that TKTX didn’t follow
its sector lower bodes very well for our bullish play on this stock. 
But as we saw last week, without help from the broader market and 
its sector, TKTX will have trouble making much upside progress.
although the stock is holding up well and eked out a fractional gain
last week, that’s not going to be enough to make us any money going
forward.  For this play to succeed, we need to see some stabilization
in the broader market, as well as the biotech sector.  If those two
come together, then we should see a nice pop in TKTX during next
week’s trading.  Watch for a rebound from the $40 level during
intraday weakness as a possible entry point, or a breakout above the
$42.50 level on intraday strength.

BUY CALL MAY-40*UFT-EH OI=103 at $3.70 SL=2.25
BUY CALL MAY-45 UFT-EI OI= 35 at $1.50 SL=0.75
BUY CALL JUN-40 UFT-FH OI= 10 at $5.10 SL=3.25
BUY CALL JUN-45 UFT-FI OI=  3 at $2.95 SL=1.75

Average Daily Volume = 427 K


CVC – Cablevision Systems Corp. $23.70 (-4.01 last week)

Cablevision Systems Corporation owns and operates cable
television systems and has ownership interest in companies
that produce and distribute national and regional entertainment
and sports programming services.  Its Rainbow Media subsidiary
operates cable networks including American Movie Classics (AMC)
and Bravo.  Rainbow's majority-owned Madison Square Garden
properties include the famous sports arena, the New York Nicks
(NBA), the New York Rangers (NHL), and Radio City Entertainment
(the Music Hall and the Rockettes).  Other CVC units are
involved in electronics retailing (The Wiz), movie theaters,
and competitive telephone service.

It's the bull market in reverse, where breakdowns abound in any
stock even remotely connected to Technology.  New all-time lows
are as common today as all-time highs were in March of 2000. 
One of the latest members of this inauspicious group is CVC,
which spent most of last week trying to hold support near the
$25.75 area.  That jig was up on Thursday, as the stock fell
through there and accelerated its decline on Friday, coming to
rest at a new all-time closing low of $23.70.  CVC has been on
a sell signal since early January and is clearly under
distribution.  The PnF chart got another double-bottom breakdown
in late March and the current bearish price target is $15.  So
there is clearly room for the stock to fall, and with the pattern
lately surrounding earnings, things could remain ugly right into
the company's earnings report next Thursday.  Resistance is now
firm in the $26.00-26.50 area and with the market still in
decline, it would likely take a miracle to push CVC above that
level.  On an oversold bounce, the stock is most likely to run
out of steam either at $25 or $25.75.  A rollover near resistance
will be our best entry into the play but we aren't ruling out a
drop to fresh lows on Monday.  Should the market continue to
deteriorate, look to initiate new positions as CVC drops below
the $23.25 level (Friday's intraday low).  Stops are initially
in place at $26.50.

BUY PUT MAY-25 CVC-QE OI=2101 at $2.60 SL=1.25
BUY PUT MAY-22*CVC-QX OI= 176 at $1.20 SL=0.50
BUY PUT MAY-20 CVC-QD OI= 704 at $0.60 SL=0.25

Average Daily Volume = 1.76 mln

SEBL – Siebel Systems $22.59 (-4.52 last week)

Siebel Systems is a provider of eBusiness applications.  The
company's products enable organizations to sell to, market to,
and service their customers across multiple channels, including
the Web, call centers, resellers, retail, and dealer networks.
SEBL's eBusiness applications are available in
industry-specific versions designed for the pharmaceutical,
healthcare, telecommunications, insurance, energy, apparel,
automotive, and finance markets.  Through SEBL's applications,
companies can create a single source of customer information
that sales, service, and marketing professionals can use to
tailor product and service offerings to meet each of their
customer's unique needs.

Software stocks have been trading heavy for months now and with
the weakness in the Software index (GSO.X) on Friday, the break
below the last line of support near $133 portends a revisit of
the September lows.  Despite a solid earnings report just over a
week ago, shares of SEBL have been unable to break out of the
bearish trend that has been in place since early March.  Following
the earnings report, the stock managed to pop up to the descending
trendline (then at $28) before rolling over.  Since then it has
been a rapid decline, with SEBL suffering the fate of the GSO
index and looking like it is headed back to test its September
lows.  There are still some support levels to be dealt with (62%
retracement at $22.25, then $18-19 and finally $16), but with the
broad markets breaking down below significant support, the bears
are definitely in control.  It is interesting to note that the
double-bottom breakdown on the PnF chart from earlier this month
forecasts a bearish price target of $13, which just happens to be
the location of the September lows.  With the negative tone of the
close on Friday, we're likely to get a negative open.  Look out
for an oversold bounce, but new entries can be entertained on a
drop below the $22 level.  Alternatively, when the bounce runs
out of steam (assuming we get one), look to initiate new positions
on a rollover from intraday resistance, first at $24 and then $25.
We are initiating the play with our stop set at $25.75

BUY PUT MAY-25 SGQ-QE OI=21818 at $3.30 SL=1.75
BUY PUT MAY-22*SGQ-QX OI= 4749 at $1.75 SL=1.00
BUY PUT MAY-20 SGQ-QD OI=14703 at $0.85 SL=0.25

Average Daily Volume = 17.4 mln

LRCX - Lam Research $25.16 (-2.91 last week)

Lam Research Corporation designs, manufactures, markets and
services semiconductor processing equipment used in the
fabrication of integrated circuits. The Company's products are
currently used in the front-end of the wafer processing
manufacturing cycle: etch, CMP, and post-CMP clean.

The Semiconductor Sector Index (SOX.X) gave up a lot of ground
last week.  The index shed about 12 percent.  That move was
counter to what we have observed in the chip sector all year
long.  Namely, the trend of relative strength and out performance
to the upside.  It’s difficult to say with much accuracy whether
or not last week’s move was the beginning of a multi month trend
of weakness in the SOX, but it sure looked that way to us.  That’s
why we’re turning to yet another bearish play in the semi space
in LRCX.  But, before we go on, readers need not over leverage
bearish positions in the chip space.  We already have several
other bearish chip plays working in our favor, and if you have
positions in those plays already, you need not add another one
with LRCX.  The reason we’re adding LRCX to the put play list is
because it looks like it needs to play catch up to the downside
with its chip peers, making it a solid bearish play for readers
who missed the downside moves in our other semi shorts.  Those
who don’t yet have a chip short position can look for a breakdown
in LRCX next week below the $25 level.  Such a double bottom
breakdown should open the way to weakness down to the $22 level
over the short term.  Our stop is in place first at $27.50.

BUY PUT MAY-30 LMQ-QF OI= 766 at $5.10 SL=3.25
BUY PUT MAY-25*LMQ-QE OI=2952 at $1.55 SL=0.75

Average Daily Volume = 2.65 mln

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The Option Investor Newsletter                   Sunday 04-28-2002
Sunday                                                      4 of 5


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EBAY – eBay, Inc. $49.70 (-4.69 last week)

After developing a Web-based community in which buyers and
sellers are brought together in an efficient format, EBAY has
emerged as the dominant online auction site.  The eBay dynamic
pricing format permits sellers to list items for sale, buyers to
bid on items of interest and all eBay users to browse through
listed items.  Items listed on eBay include collectibles,
automobiles, art objects, jewelry, consumer electronics and a
host of practical and miscellaneous items.  Although based in
the United States, through its subsidiaries, EBAY also operates
trading platforms in Germany, the United Kingdom, Australia,
Japan, Canada, France, Austria, Italy and South Korea.

Just as a rising tide lifts all boats, a falling tide pulls them
all downwards.  Such is the case with EBAY, which is being sucked
lower by the exodus of investor cash from the Technology sector.
The NASDAQ appears destined to challenge its September lows and
at the current rate of descent it could happen sooner, rather
than later.  Shares of EBAY haven't been able to hold their
ground in the wake of the company's earnings report and on Friday
the stock fell below the $50 level for the first time since the
end of February.  Now resting less than $1 above the February
lows, the stock appears destined to also visit its September lows
now that the ascending trendline (now at $52) has been decisively
broken.  Adding insult to injury, the print at $50 on Friday gave
the PnF chart a fresh descending triple-bottom breakdown and the
current vertical count is now $44.  A rebound near the $51.50 or
$52.50 resistance levels would likely provide the next high-odds
entry point, although with the current market weakness, we may
have to settle for entering on a drop through the $48.75 support
level (February lows).  In either case, lower stops this weekend
to $52.75

BUY PUT MAY-50*QXB-QJ OI=5651 at $2.60 SL=1.25
BUY PUT MAY-45 QXB-QI OI=4357 at $0.95 SL=0.50

Average Daily Volume = 5.76 mln

MXIM – Maxim Integrated Products $48.19 (-6.73 last week)

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

All good things must come to an end and there are only two more
days left to ride this successful Semiconductor play.  Following
its obedient rollover from the $58 level (right at the descending
trendline), MXIM has been hit hard by the bears.  Falling through
the $50 level on Thursday and then the 200-dma on Friday, we're
left to wonder when the carnage will end.  A safe bet would be on
the $46-47 support area, but with the long-term ascending
trendline (currently $51) now broken and the Semiconductor index
(SOX.X) now below its own 200-dma, MXIM could fall even further.
The PnF chart paints an equally grim picture for the bulls, with
the recent double-bottom breakdown giving us a tentative bearish
target of $37.  Unfortunately, we won't likely get to see that
level during this play, as we'll want to have all positions
closed before the company releases earnings on Tuesday after the
closing bell.  We can still enter new positions on a failed
intraday rally near resistance, most likely near the $50 level.
With the daily Stochastics already buried deep in oversold and
the SOX approaching support near $500, the risks of an oversold
bounce are too great to contemplate new positions on a breakdown
below the $48 level.  Either fade the rally as it fails or else
use further weakness to harvest gains ahead of the company's
earnings report.  We are lowering our stop this weekend to

BUY PUT MAY-50*XIQ-QJ OI=8709 at $4.10 SL=2.50
BUY PUT MAY-45 XIQ-QI OI=7880 at $1.85 SL=1.00

Average Daily Volume = 5.70 mln

NVDA – NVIDIA Corporation $30.37 (-6.55 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.

After failing to clear resistance up at $615, the Semiconductor
index (SOX.X) has shed more than $100 (15.7%) in the past 7 days
and in the process violated the 6-month ascending trendline,
support at $555 and the 200-dma ($537).  The next level of
support lies near $500, but given the building bearish momentum,
that support could be short-lived.  Shares of NVDA were already
under pressure when the SOX rolled over, and the sector weakness
helped to ensure the rollover at NVDA's descending trendline (then
at $40).  Since then the stock has shed a fourth of its value and
is resting precariously on the $30 support level.  Should this
support fail (and it appears that it will), it will likely lead
to a retest of the September lows down near $23-24.  Adding to
NVDA's woes was the news in MSFT's earnings report that Xbox sales
are running well below plan.  Given the fact that NVDA makes the
graphics chips for the game console, this weakness is sure to have
a detrimental effect on the company's earnings in the future.
With investors apparently giving up on the concept of a rapid or
robust economic recovery, they are selling now and asking
questions later.  We'll continue to play this trend as long as it
lasts, entering new positions either on a failed rebound near
intraday resistance (now at $31.50 and then $33.25) or on a
breakdown below the $30 level.  We are lowering our stop this
weekend to $34.25.  Use the SOX as your guide for the play.  As
long as the sector continues to be weak, look for NVDA to head
lower over the near term.

BUY PUT MAY-30*RVU-QF OI=9414 at $2.75 SL=1.25
BUY PUT MAY-25 RVU-QE OI=2073 at $1.25 SL=0.50

Average Daily Volume = 11.1 mln

PLCM - Polycom, Inc. $19.01 (-4.13 last week)

Polycom manufactures and markets a full range of high quality,
media-rich communications tools and network solutions, which
enable business users to immediately realize the benefits of
video, voice and data over rapidly growing converged networks.
Although the company is primarily a video conferencing and
voice conferencing product provider, it has recently entered
the DSL access market, particularly in the area of integrated
voice appliances and broadband access devices.

How quickly investors forget about solid earnings in a bear
market.  After beating street estimates in its earnings release,
shares of PLCM have been under heavy selling pressure, with the
stock falling below the $20 level for the first time since early
September of last year.  It seems that the bloom is off this rose,
and it is back below where it started right after the terrorist
attacks.  Not only that, but it looks like the bears have their
sights set on testing and possibly breaking the $18 support level,
at least if the PnF chart has anything to say about it.  The
bearish price target is currently $17, and it would make sense
that once the $18 support level is breached, a whole new wave of
selling could come in to drive PLCM down towards the $12-13
support level.  Use any sort of failed intraday rally to initiate
new positions near the $20 or $21 levels.  Otherwise, feel free
to chase the stock lower as it breaks below the $19 level.  Just
make sure to keep an eye out for a short-covering rally.  It is
likely to be short-lived and provide us with the next opportunity
to enter new positions.  We are lowering our stop to $21.50 this

BUY PUT MAY-20*QHD-QD OI=1198 at $2.10 SL=1.00
BUY PUT MAY-17 QHD-QW OI=  89 at $1.05 SL=0.50

Average Daily Volume = 3.53 mln

VRTS – Veritas Software $26.22 (-4.40 last week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

No matter how bad things seem, they can always get worse.  At
last that's the way things seem to bullish traders in the
Storage sector.  The likes of EMLX and BRCD have been trading
heavily for months now, but that's nothing compared to the
weakness affecting shares of VRTS.  In addition to the weakness
in the Storage industry, VRTS is suffering the indignity of the
Software sector (GSO.X) getting very close to testing its
September lows.  VRTS began its most recent downward leg after
announcing earnings on April 16th.  The conference call left
investors with a less than inspired feeling about the future and
they've been selling the stock hand over fist ever since.
Beginning with the gap under the $32.50 support level in the wake
of earnings, shares of VRTS continue to drift lower and are now
resting right on significant support near $26.  Once that level
gives way, there is only the $24 support level between current
levels and a full test of the September lows.  With Friday's
breakdown in the GSO index below the $133 support level, the group
has taken a decidedly bearish turn.  We would love to get an
oversold bounce to give us a better entry point on a failed rally
in the vicinity of intraday resistance near $28 ($29 would be even
better).  But if weakness prevails, we'll settle for entering the
play as VRTS falls below the $26 level.  Keep stops at $30.50
until after the breakdown and then ratchet them down to $29.

BUY PUT MAY-30 VIV-QF OI=20062 at $4.50 SL=2.75
BUY PUT MAY-25*VIV-QE OI=13722 at $1.60 SL=0.75
BUY PUT MAY-22 VIV-QX OI=  788 at $0.75 SL=0.25

Average Daily Volume = 12.8 mln

ADI - Analog Devices $36.24 (-4.81 last week)

Analog Devices, Inc. is engaged in the design, manufacture and
marketing of high-performance analog, mixed-signal and digital
signal processing integrated circuits (ICs) used in signal
processing applications. The Company produces a wide range of
products that meet the technology needs of a broad base of
customers and markets. Markets and applications for the
Company's products include communications, computers and
computer peripherals, consumer electronics, industrial,
instrumentation, military and space systems and automotive

Our bearish play on the Semiconductor Sector Index (SOX.X),
using ADI as the vehicle to initiate the trade, worked very
well indeed last week.  The breakdown in the SOX.X below the
key 550 support level was most encouraging, and should
probably lead to a test of the psychologically significant
500 level sometime next week.  That may be the spot where the
shorts decide to cover, and where short term selling finally
grows exhausted.  It’s difficult to say with any degree of
certainty with as crazy as this market has become, so the best
we can do is defer to our levels, and manage risk accordingly.
As for ADI, it broke below its February lows, revealing that
it’s one of the weaker chip stocks in the group.  That’s a
positive for us leaning bearish.  If the SOX.X continues down
to the psychological 500 level that should pressure ADI
closer to the $35 mark, where traders should start looking
to book short term profits.  At the very least, traders who
are holding open positions should be looking to lower stops
to protect against any forthcoming short covering rally.  As
for new entries, we’ll wait for a short covering rally of
some duration to work off the short term oversold nature of
ADI before taking new positions.

BUY PUT MAY-40 ADI-QH OI=1283 at $4.50 SL=3.25
BUY PUT MAY-35*ADO-QG OI= 688 at $1.60 SL=0.75

Average Daily Volume = 2.87 mln

MU - Micron $26.00 (-3.50 last week)

Micron Technology, Inc. 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.

The mighty MU isn’t so mighty after last week’s performance.
The stock led to the downside in what was an incredibly weak
broader Semiconductor Sector (SOX.X).  The reversal of
relative strength in what had become the go to technology
sector was pretty amazing last week, and we’re certainly happy
that we were on the right side of the move with this play.
Moving forward, there are a couple of key levels to monitor in
the SOX.X going into next week’s trading.  Probably the most
important point to watch is the 500 mark, which is setting up
to be a short covering level after last week’s pummeling of the
group.  As the SOX approaches that level, traders should be
looking to tighten stops on open plays on MU.  Specific to MU,
however, the stock looks destined for the $25 level during this
most recent leg lower.  The $25 level to MU may or may not line
up with the SOX at 500.  No matter what, have a tight stop in
place to protect those profits from any upside potential risk.
We’ll be looking for rollovers from the $28 vicinity as new
entry points next week.

BUY PUT MAY-30 MU-QF OI=8506 at $4.40 SL=2.75
BUY PUT MAY-27*MU-QR OI=6150 at $2.55 SL=1.25

Average Daily Volume = 8.50 mln


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September Lows, Here We Come!
By Mark Phillips

While persistently weak all week, the markets didn't seem to
really take a turn for the worse until the Dynegy news broke
on Thursday.  In case you missed it, the company missed
earnings estimates, guided future estimates lower and was the
target of an SEC inquiry, where the firm's revenue stream from
energy trading is being called into question.  I don't think I
need to tell you that the analysts couldn't type up their
downgrades fast enough, with BofA, JP Morgan, UBS Warburg and
Salomon Smith Barney chiming in.  The horses are all gone - quick,
somebody close the barn door!  Of course, it comes as no surprise
that Goldman Sachs was out with an upgrade to Market Outperform.
By the way, tell me again what Market Outperform means and why
the self-aggrandizing carnival barkers can't do something simple.
Buy, Hold or Sell.  That's all the investing public needs, but
the self-proclaimed experts on Wall Street need to keep things
unnecessarily complex so that we don't point out that the emperor
really has no clothes.  Needless to say, we're dropping DYN this
weekend, and the details are contained below.

But while I'm on my soapbox, I feel the need to hit a couple of
important points -- well, at least they're important to me.
Long-time readers know that I have little respect for any of the
Wall Street elite that call themselves analysts.  There are some
great ones out there, but the bad apples spoil it for everyone,
us included.  Another example of what I consider to be one of the
worst firms in the business came out this morning with Goldman
Sachs issuing a technical report that the market is oversold and
they are expecting a rally, get this, TODAY!  Not only was it a
brazen call, but I think you'd agree that it was dead wrong.  Now
I make as many mistakes as the next guy, but here's the big
difference, and the reason why it makes me mad.  I freely admit
when I'm wrong.  These guys never do.  When was the last time you
heard from the Abbey Joseph Cohen's or Joe Battapaglia's of the
world saying something like this, "Sorry, but we really blew it
on our analysis of XYZ Corp.  Clearly the stock is attracting
flies and should be avoided like the plague.  We'll do better
next time."  No, instead they'll hold Strong Buy ratings on these
dog stocks all the way to zero.  That was certainly the case with
Enron on its way to irrelevancy.

I live my life on the principle of personal responsibility and I
don't feel that it should be acceptable for others in this
profession to shirk their responsibilities.  Clearly there have
been some violations of that principle in the past few years and
I for one am thrilled to see the NY Attorney General starting to
go after the worst offenders. It isn't the fact that these guys
are occasionally wrong -- we all are.  What sends my blood
pressure into orbit is the knowledge that some of these extremely
well-paid analysts think it is perfectly acceptable to tell the
public that a stock is attractive, while at the same time joking
among themselves what a dog it is.  That is fraud in my book and
it should be punished as such.  The loss of confidence that I
(and many others) have in the analyst community is well deserved
and I am looking forward to watching the process and seeing some
of these guys (and gals) in the hot seat.  Send a dozen or so of
the worst offenders to the Big House and I think you'll see the
industry clean up its act in a hurry.  Then we'll have an analyst
community in which we can once again place our trust.

Alright, enough of my ranting.  Let's get on with the show.

Saddled with a series of earnings disappointments, more accounting
concerns (DYN and TYC were the poster-children this week) and
fears of the possibility of the Arab world using oil as a weapon,
the markets really didn't have a chance.  By the time it was over
and done with, we had a long list of violated support levels as
the bear market once again extended its claws.  Semiconductors,
Biotechs, Brokers, Software were all among the big losers last
week.  And even the mighty Cyclicals are flirting with a serious
breakdown, calling into question the idea of the economic
recovery.  Even strong GDP numbers on Friday weren't enough to
inspire any significant bullish action.  Remember my skepticism
of the market's slight gains last week?  Well, we saw what the
market was really made of this week and it is plainly seen in the
updated table below.

Index        Close 4/12   Close 4/19   Close 4/26   Change
DOW          10190        10257        9910         -280
S&P 500      1111         1125         1076         - 35
Nasdaq-100   1351         1385         1250         -101

While clearly not a stellar two weeks for the bulls, the point
changes mask just how bad the carnage has been.  All of the major
indices have now broken below meaningful support.  The SPX posted
a new closing low (since late October) and barring a sharp bounce
on Monday we appear headed to 1060 post haste.  While the DJIA is
holding up the best of the bunch, it is clearly in trouble after
having broken back below the 10,000 level and the 200-dma on
Friday.  The September lows are looming large in the view-screen
for Technology investors, with the Nasdaq-100 closing at 1250,
just 100 points below the 1150 support from September.  I've been
saying for months that the September lows need to be tested and
it appears that is precisely what we are going to get.

The one encouraging thing that I saw last week was that somebody
(actually a bunch of somebody's) finally got scared!  Finally
market participants get it, that recovery is not all-but-assured
and that there is significant downside risk in the market.  The
VIX closed on Friday at 24.56, which is a far cry from where it
was just one short week ago at 20.

Let this serve as evidence for all the critics out there - A low
VIX (below 20) means only one thing.  The market is going lower.
Period.  End of story.  It may meander below 20 for weeks before
spiking on renewed fear, with the market selling off, but in the
end, the low VIX will lead to a rising VIX, which accompanies a
falling market.  I hope this puts to rest (at least for the time
being) any foolish notions that "this time a rising VIX will be
caused by a rising market".  Get over it, it isn't going to

Please understand that I'm not angry about this.  I am passionate
about the topic though as I know there are a lot of investors out
there that look at the low VIX and somehow believe that this time
it will be different.  The faces change but the song remains the
same.  Just another group of unwitting participants fall victim
to history repeating itself.  Repeat after me, "VIX is high, time
to buy.  VIX is low, time to go!"  Follow just this advice for
the rest of your investing career and I believe you'll do quite
well indeed.

Now that I've said my piece on both the brokers and the VIX,
let's take a look at our list of plays and see if there is
anything of merit there.


JNJ - I continue to be impressed with JNJ's strength relative to
the broad market.  Despite broad weakness in virtually every
sector, JNJ continues to hold support at the $62 level and appears
to be shaping up to actually move higher.  While a significant
market decline could have a detrimental effect, the current
relative strength should continue to keep the stock in its

LUV - It was a nip and tuck battle last week in the Transportation
sector, but in the end, the bulls managed to hold support near
$2660, just above the 200-dma at $2650.  The Airline index (XAL.X)
similarly held above support in the $92-94 area, although the XAL
is now below its 200-dma.  LUV is holding in there above the $18
support level, which will be key to the longevity of our play.  I
still like entries near the $18 level, although a drop and close
below $17.25 will bring it to a swift end.

EK - With comments from company management that the Q1 represented
the bottom for the company, EK has actually been holding up fairly
well.  That's a bit of a mystery to me, but I'm going to stick to
my guns on this one.  The market weakness dragged the stock down
as low as $32 on Thursday, but there were still eager buyers due
to the strength of that recent support level.  Look for a drop
through the $30 level to provide confirmation that the stock is
headed south and keep those stops in place, in case we are wrong.

Watch List:

PG - Even with the broad market in decline, shares of PG have
been holding up rather well.  Over the past week, the stock has
been riding the midline of its year-long ascending channel, but I
have a sneaking suspicion that this support will give way over
the near term.  The lower end of the channel will provide our
best support and most likely level for fresh entries going
forward.  Given the weakness in the broad market, I expect we'll
see this level tested, especially surrounding the company's
earnings report Tuesday morning.  While it is still possible
that PG will rebound from the midline support, I am going to err
on the side of caution and lower our entry target back to the
$85-86 area, the site of the lower edge of the ascending channel.

MDT - If you need proof that it is an uncertain market, MDT
certainly provides it.  Last week the stock looked like it might
be running away from us, and this week it is looking like it is
going to break strong support near $43.50.  If this support fails
to hold up, then it looks like it may fall back to retest the $42
level.  This week brings another change to the entry target, first
in the $43-44 area and then down at $42.  If initiating new
positions near current levels we want to do it on price strength,
not weakness.  We do not want to try to catch a falling knife.
Look for a rebound before playing, ideally with a close back over
the $44 level.

WMT - While it may seem puzzling that I'm keeping WMT on the Watch
List, given the recent price weakness, my motivation is basically
that the company remains the dominant leader in the discount
Retail market.  Due to the double-bottom breakdown on the PnF
chart, I'm leaving the play on Hold, pending a better idea of
where the stock will likely find support.  The current bearish
target from the PnF chart is $50, and that coincides nicely with
the bullish support line, sitting at $51.  The next big test is
the 200-dma at $55.50, but I expect that one will fall to the
bears assault over the near term.  We want to be in place to take
advantage of the price weakness when the stock does find a bottom
and right now the low $50s looks like a high-odds bet.

BRCM - Have you noticed that BRCM is actually starting to gain
some strength relative to the Semiconductor sector?  That's right,
the stock has been falling along with the SOX, but it is looking
stronger than the SOX right now.  If the SOX can actually hold
support near the $500 level, then BRCM could actually be in an
attractive level to initiate new positions.  But I don't think
the $500 level is going to hold, at least not for long. 
Daredevils could try target-shooting entries near the $30 support
level, but given the rampant Technology weakness, I will want to
see some building strength both in the market and the sector
before playing.

MSFT - What can I say other than the fact that I clearly jumped
the gun on this one.  I thought the $55 support level would hold
and shares of MSFT plunged through that level in short order this
past week.  All eyes are now on the $48-50 range, where MSFT
found support back in September.  A solid bounce from that area
looks good for fresh entries and our target has been adjusted
accordingly.  But a drop through that level will not be a good
sign and could set the stock up to challenge support near $43-44
from late 2000/early 2001.  It is interesting to note that the PnF
chart gives a bearish target of $44, so it may be worth paying
attention to that level.  We'll leave the play active, but make
sure that new entries are taken on a solid bounce, not just

As you can see, I don't have a lot of conviction for initiating
new positions right now, with the broad markets looking very
heavy.  A full retest of the September lows is simply a matter of
timing in my opinion, and it looks to me like we are on our way.
During that process, we should start to see the pockets of
strength that will lead us off those lows and we'll start adding
those to our Watch List in the weeks ahead.

I look at the current market as a mirror image of the one we
experienced in early 2000, with irrational drops in price on
solid stocks.  In early 2000, it was irrational price rises on
little more than hype.  The market is currently in the process
of hammering out a bottom and as it does so, pockets of relative
strength will emerge to show us the companies and sectors that
will lead us to the next set of relative market highs.

There are numerous missed plays to the downside that I'm kicking
myself over, not the least of which is VRSN.  More than once in
the past 6 months I have seriously considered placing the stock
on our LEAPS Put list, and as you can see by its meltdown last
week, it would have been a wildly successful play.  EBAY is
another one that although we had it in our Portfolio late last
year, we got stopped out just before the long downtrend commenced.
Missed opportunities are legion, and our job is to try and find
them before they pass us by.  Stay tuned!

Personal Note: I had some email problems last week and was unable
to receive mail on Wednesday and Thursday.  In the process of
getting back online, I think there may have been some emails that
just plain got lost.  I know this because of messages that friends
sent that never showed up.  So if you emailed me in the past
several days and I haven't responded, please resend your message,
as I probably didn't get it the first time around.  Thanks for your 

See you next week!


LEAPS Portfolio

Current Open Plays


JNJ    03/05/02  '03 $ 60  VJN-AL  $ 5.90  $ 7.10  +20.34%  $61
                 '04 $ 60  LJN-AL  $ 9.20  $10.70  +16.30%  $61
LUV    04/12/02  '03 $ 20  VUV-AD  $ 2.10  $ 1.70  -19.05%  $17.25
                 '04 $ 20  LOV-AD  $ 3.90  $ 3.30  -15.38%  $17.25

EK     04/12/02  '03 $ 30  VEK-MF  $ 2.70  $ 2.95  + 9.26%  $36
                 '04 $ 30  LEK-MF  $ 3.90  $ 4.50  +15.38%  $36

LEAPS Watchlist

Current Possibles


BRCM   10/28/01  $30           JAN-2003 $ 35  OGJ-AG
                            CC JAN-2003 $ 30  OGJ-AF
                               JAN-2004 $ 35  LGJ-AG
                            CC JAN-2004 $ 30  LGJ-AF
MDT    03/10/02  $42, $43-44   JAN-2003 $ 45  VKD-AI
                            CC JAN-2003 $ 40  VKD-AH
                               JAN-2004 $ 45  LKD-AI
                            CC JAN-2004 $ 40  LKD-AH
PG     03/31/02  $85-86        JAN-2003 $ 90  VPG-AR
                            CC JAN-2003 $ 85  VPG-AQ
                               JAN-2004 $ 90  LPR-AR
                            CC JAN-2004 $ 85  LPR-AQ
WMT    03/31/02  HOLD          JAN-2003 $ 65  VWT-AM
                            CC JAN-2003 $ 60  VWT-AL
                               JAN-2004 $ 65  LWT-AM
                            CC JAN-2004 $ 60  LWT-AL
MSFT   04/21/02  $48-50        JAN-2003 $ 55  VMF-AK
                            CC JAN-2003 $ 50  VMF-AJ
                               JAN-2004 $ 55  LMF-AK
                            CC JAN-2004 $ 50  LMF-AJ



New Portfolio Plays


New Watchlist Plays



DYN $14.90 OUCH!  Let's start this off right, with "I was wrong".
Oh so wrong.  There wasn't anything inherently wrong with the
play on a Utility stock, but I guess I should have gone with a
straight utility that hadn't had any involvement in the energy
trading business.  Right up until Wednesday night, I was looking
at the stock's chart pattern and thinking that we were going to
get a lovely entry.  After the initial rally, DYN was gradually
consolidating in a low-volume descending wedge pattern that
looked like it would break higher from the vicinity of $26-27.
But that all came to an end on Thursday following the company's
poor earnings report, numerous downgrades and talk of more
accounting irregularities attracting the SEC's attention.  The
punishment was delivered swiftly, with DYN giving up nearly half
its value in two short days.  Clearly this is not an investable
stock until conditions improve and I would avoid it like the
plague.  With a PnF price target of $0, it seems clear that the
stock is headed for single-digit status.

KBH $48.70 All right, I've given up on this one, at least for
the time being.  Clearly, I was too early to play the downside
in the Housing stocks as the group has once again broken out to
the upside.  I still view this sector of the market as being in
a "bubble", but it isn't yet ready for a bearish play.  I'm
removing KBH from the Watch List this weekend in the wake of its
recent breakout.  But I haven't completely given up on it.  It
is just going to take some more time before it is ripe.  I will
continue to monitor this sector, and KBH specifically for signs
of a more mature top and then you can look for this one to find
its way back onto the Watch List.


Lead The Herd
Austin Passamonte

In Thursday night’s Market Sentiment section Kent did a fine job 
of providing us with our topic for the weekend!

Kent noted that right when the markets were rolling over once 
again in March during another bear market failure, media pundits 
on CNBC and similar ilk were in full bull mode. That’s nothing 
new: the herd moves that way. Investors and traders have always 
bought tops and sold bottoms since the dawn of free enterprise 
system, and rest assured they always will. It is human nature to 
do so. Why? Emotional baggage.

Weekly/Daily Charts: Dow & DJX May 104 puts)


The Dow had been topping and stalling for what seemed to be 
forever but the masses were just getting comfortable with the 
idea that markets making new highs should continue higher. That’s 
an old adage left over from the great bull-run now deader than 
WCOM’s chances of still connecting phone calls two years from 
tonight. Markets making new highs are usually those just about to 
tip over these days instead.

When the VIX broke below 20 and Dow was pressing 10,660 area I 
loaded the truck with DJX May 104 puts and noted that on a daily 
basis right here in OI all the way. Dollar cost average was right 
near 2.00 per contract with two months of time premium left until 
expiration. This wasn’t any big home-run play at all but the easy 
double-plus was practically free money. We couldn’t go out and 
steal +100% gains easier than this buy & forget about it trade 
came along. Weekly and daily chart stochastic values were 
creaming at us to short with both hands and feet. VIX readings at 
19 was pure icing on the cake.

Do you think the masses took this trade and doubled their money 
in nearly risk-free fashion? Nope... not at all. The masses 
didn’t do it because they just then got around to feeling 
good about the market going higher. Notice we emphasize the word 
feeling in there: it is this emotional bond with thought that 
most traders must connect before they can act on a financial 
decision. By the time they got done watching the Dow press to new 
recent highs and decided the upside was safe, the upside was over 

Keeping this thought in mind, when do you think the masses will 
finally capitulate and get short with reckless abandon? Right 
about the time Dow and other indexes finish this dip and begin 
the next bear market failed rally. With predictable sadness we 
know for sure a washout session will arrive where all of the 
sellers exhaust themselves, whereupon indexes will mark a near-
term low and trend higher (for a little while) from there.

We’ll know this short-term bottom is in when the VIX spikes, 
media is filled with doom & gloom and most financial newsletters 
see no bottom in sight. You & I will have our trusty weekly/daily 
chart signals turning up from oversold extreme to tell us that is 
the time to get long and stay that way. No proprietary junk or 
mumbo-jumbo required: just basic tools setup like we’ve shared 
here for the last two years, with more examples below.

(Weekly/Daily Charts: DYN)

Here’s a little goodie I found on April 5th when cruising the S&P 
500 index looking for plays. DYN stood out as a pretty good short 
candidate at that time. Weekly chart was forming a loooong term 
bearish triangle and daily chart showed a trendline violation 
that day.



September 22.5 puts (DYN-UX) were so cheap at 1.85 “ask”, why not 
grab plenty of time premium and hunker down for a spell? Didn’t 
take too long. Hopefully three weeks later those flashy ads that 
haunt us on Bubblevision won’t now feature employees crying at 
their desks over plunging 401K plans. Cruel joke on my part that 
isn’t funny and I sure hope & pray the stock doesn’t fall any 
further for employee’s sake.

It took three weeks for this deliberate trade to work and work it 
did. Now the herd can have my puts at 300% above cost... I’m all 
done with them myself. 

If you didn’t want to tie up your capital for these lengths of 
time, how about those screaming short plays from last weekend? 
The SOX was listed as a short at 582+, the OIH Oil Services HOLDR 
a short from 70 and the XAL Airlines Index short at 99.88 just 
five trading sessions ago.

Since then the SOX has plunged to 514, XAL to 94.88 and OIH 
spiked to 72+ for a stopped out play. One small loss, one modest 
gain and one whopper of a gain in the SOX or SMH puts alone, not 
to mention taking time to ferret out the weakest components for 
puts on them alone. This is far from clairvoyance or magic. We 
don’t need any silly proprietary systems or nonsense like that. 
Just follow the trend, lead the herd by selling resistance and 
buying support.

Almost Time To Buy
Which leads us to our next and closing thought. Right now the 
herd is getting restless and in the midst of selling now that 
much of the damage is done. Pretty soon we will have chart 
signals buried in oversold extreme and turning bullish. We will 
have the VIX above 28 and possibly 30+. We will have CNBC 
nonsense and the lame lambs they push on screen telling us how 
there is no hope nor bottom in sight. That’s just about the time 
we need to begin scaling into distant-month calls in preparation 
for the next failed rally to begin.

Make no mistake, there isn’t going to be any miraculous recovery 
in this stock market for months and possibly years. My guess is 
we close 2002 with a Dow below 10,000 and Nasdaq below 1200 if I 
had to lay wagers tonight. Whether that happens or not is moot: 
we are traders and will see plenty of gyration in between. Short 
plays in April were golden but that won’t work every month. Stick 
with your weekly/daily charts to gauge the trend, follow it with 
strict adherence and divorce any market bias or preference you 
may have.

Many of us enjoyed massive profits in April and I cannot image 
how serious, active traders wouldn’t. We expect to do the same 
every month this year and beyond. Honor the trends, ignore the 
masses and lead the herd. Please do not be part of it!

Best Trading Wishes,
Austin Passamonte

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The Option Investor Newsletter                   Sunday 04-28-2002
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Technical Analysis Basics: Understanding Sentiment Indicators
By Mark Wnetrzak

A number of analysts have commented on the recent increase in
fear and anxiety in the stock market.  The basis for studying
sentiment gauges such as the equity-only put/call ratio is a
concept known as the "contrarian" viewpoint.
The most common methods of technical analysis use quantitative
measures that characterize price movement to determine the
future outlook for a particular instrument.  Even the popular
broad-market charting indices such as the advance/decline line
and the equity overbought/oversold ratio are based on historical
statistics.  There is however, another class of indicators that
does not rely on the mathematical analysis of specific trends or
changes in volume and accumulation patterns to produce a trading
signal.  The theory behind these measures is that investors and
analysts are particularly prone to simple psychological biases
such as "running with the crowd" and the opposing perspective or
outlook is often referred to as Contrary Opinion.  The rationale
for contrarian investing is simple: When the general public is
bullish, they invest their money in stocks, some to the point of
borrowing against portfolio collateral (margin).  When most of
the crowd's cash is already in the market, what money is left to
push stock prices higher?  On the other hand, when the majority
of investors become bearish, they have already sold most of their
stocks.  If the average investor has more cash than stock, there
is a lot of money waiting to be reinvested.

Contrarian indicators are subjective and they don't rely on any
specific signals, as opposed to most chart reading methods that
measure quantity and quality.  The underlying idea is that human
nature and the "herd" mentality affects all of us because people
feel comfortable when they share common beliefs and opinions.  In
fact, humans tend to coalesce around popular ideas even when there
is no substantial evidence to support the base theory.  We ignore
evidence that would lead to other conclusions in hopes that it
will eventually go away.  This type of behavior in the market is
exhibited in the excessive optimism that investors display just
before a significant correction occurs.  It is also seen in the
negative outlook that becomes widespread as the bottom of a bear
market approaches.  Many of these biases occur because of the way
people process information.  Investors tend to base decisions on
data that is insufficient and drawn from a sample that is far too
small.  We also tend to focus on issues that are outperforming the
market and assume the current trend will continue far beyond the
point that probability suggests is practical.  These beliefs are
reinforced when others interpret information in the same manner,
thus market confirmations and agreement often create a vicious,
self-fulfilling cycle.  Traders who understand these biases and
successfully identify the opinions of the majority can use this
knowledge to position their portfolio with the opposite outlook.

The most common contrarian indicators are the equity put/call
ratios and the bullish-bearish sentiment indices compiled by
market research services such as Investors Intelligence.  The
(equity-only) put/call ratio is computed daily by dividing the
put volume of all stock options by the call volume of all stock
options.  When option traders are bullish on the stock market,
call volume increases relative to put volume.  When traders are
bearish, put volume increases relative to call volume.  This
ratio is an excellent contrary sentiment indicator and when the
relationship between put volume and call volume becomes extreme,
a market reversal is likely.  Investors Intelligence was one of
the first services to exploit the fact that when too many people
are bullish on the market, a correction may be looming on the
horizon.  The company produces the well-known Market Sentiment
Index, which reflects the number of investment newsletters that
are bullish or bearish on stocks.  In August 1987, the bulls rose
to over 60% while the bears were only 19% and that psychological
climate prevailed even though a technical market top was forming.
Those attitudes continued until the "Black Monday" sell-off in
October; strong evidence that optimism usually doesn't accompany
the start of a new bull market.

Contrary opinion indicators are valuable tools when used properly
but one thing to be aware of is that any technique you subscribe
to should always be used to confirm other signals from different
types of analysis.  When these indicators provide well defined
signals that agree with your other gauges, be sure to listen to
the message.

Trade Wisely!

Note:  Margin not used in calculations.

Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

BSML    5.37   5.05   MAY   5.00  0.90  *$  0.53   7.4%
WGRD    5.89   5.98   MAY   5.00  1.20  *$  0.31   7.2%
NFLD    8.19   7.50   MAY   7.50  1.30   $  0.61   6.4%
PDLI   17.37  17.12   MAY  15.00  3.20  *$  0.83   5.1%
ZIXI    6.08   4.95   MAY   5.00  1.35   $  0.22   5.1%
PLUG   10.26  11.10   MAY  10.00  0.80  *$  0.54   5.0%
PWAV   14.24  12.87   MAY  12.50  2.40  *$  0.66   4.8%
QUIK    5.03   4.94   MAY   5.00  0.30   $  0.21   4.8%
AMLN   10.71   9.98   MAY  10.00  1.15   $  0.42   4.8%
CCK     8.85  11.02   MAY   7.50  1.80  *$  0.45   4.6%
EMKR    9.10   8.21   MAY   7.50  2.05  *$  0.45   4.6%
IDCC   10.99  11.01   MAY  10.00  1.45  *$  0.46   4.2%
NPRO    8.85   7.17   MAY   7.50  1.90   $  0.22   2.8%
SAPE    5.40   4.64   MAY   5.00  0.65   $ -0.11   0.0%
IMCO   15.99  13.90   MAY  15.00  1.75   $ -0.34   0.0%
ACRT   19.90  16.45   MAY  17.50  3.10   $ -0.35   0.0%
TUNE   15.21  11.37   MAY  12.50  3.40   $ -0.44   0.0%
CYGN    5.79   4.27   MAY   5.00  1.05   $ -0.47   0.0%
PRCS    5.39   3.87   MAY   5.00  0.80   $ -0.72   0.0%

*$ = Stock price is above the sold striking price.


Yes, winter is showing some signs of ending (up here in Alaska)
and the bears are on the prowl.  With the breakdown in the NASDAQ
and the S&P-500 on the edge of a cliff, sitting on the sidelines
(again) may be the most prudent move.  Many of the issues above
are correcting and are testing their support areas, as well as
our discipline.  Unless they have a crystal ball, most everyone
will see the "bottom" in the major averages only in hindsight.
In the current environment, protection of investing capital
becomes paramount.  Next week, we will show Cygnus (NASDAQ:CYGN),
Praecis Pharma (NASDAQ:PRCS), and Microtune (NASDAQ:TUNE) closed.
Investors with a longer-term outlook may consider adjusting their
positions by rolling forward as practical.  Several other issues
may need to be closed on further weakness or on violations of
technical support.  Remember, while writing covered-calls offers
downside protection for stock ownership, the strategy is not a
panacea for a protracted bearish market. 


Sequenced by Company
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

ADPT   15.13  MAY 15.00   APQ EC  0.90 351   14.23   21    7.8%
AVGN   10.56  MAY 10.00   GKU EB  1.15 69     9.41   21    9.1%
GRP    15.30  MAY 15.00   GRP EC  0.85 347   14.45   21    5.5%
MOT    15.00  MAY 15.00   MOT EC  0.60 7664  14.40   21    6.0%
MOVI   18.78  MAY 17.50   QLV EW  1.90 832   16.88   21    5.3%
PDG    12.79  MAY 12.50   PDG EV  0.65 6285  12.14   21    4.3%
TDY    17.82  MAY 17.50   TDY EW  0.90 9     16.92   21    5.0%

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

AVGN   10.56  MAY 10.00   GKU EB  1.15 69     9.41   21    9.1%
ADPT   15.13  MAY 15.00   APQ EC  0.90 351   14.23   21    7.8%
MOT    15.00  MAY 15.00   MOT EC  0.60 7664  14.40   21    6.0%
GRP    15.30  MAY 15.00   GRP EC  0.85 347   14.45   21    5.5%
MOVI   18.78  MAY 17.50   QLV EW  1.90 832   16.88   21    5.3%
TDY    17.82  MAY 17.50   TDY EW  0.90 9     16.92   21    5.0%
PDG    12.79  MAY 12.50   PDG EV  0.65 6285  12.14   21    4.3%

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).

ADPT - Adaptec  $15.13  *** Up On A Downgrade! *** 

Adaptec (NASDAQ:ADPT) provides storage access solutions that
reliably move, manage and protect critical data and digital
content.  The company's storage solutions are found in high
performance networks, servers, workstations and desktops from
the leading manufacturers, and are sold through OEM and other
distribution channels to Internet service providers, large
enterprises, medium and small businesses and consumers.  The
company currently operates in three primary segments: Storage
Solutions, Desktop Solutions and Storage Networking.  Adaptec
reported earnings this week, in line with expectations, due to
strength in the U.S. and Asia, as well as new products.  The
company experienced a 3% sequential revenue increase as their
business conditions continued to improve.  The stock rallied
above the mid-April high even in the face of a downgrade on 
Friday.  This position offers favorable speculation on a
rebounding stock.

MAY 15.00 APQ EC LB=0.90 OI=351 CB=14.23 DE=21 TY=7.8%

AVGN - Avigen   $10.56  *** The Trend Is Your Friend ***

Avigen (NASDAQ:AVGN) is engaged in the development of gene therapy
products for the treatment of inherited and acquired diseases. 
The company is developing its proprietary adeno-associated virus 
vector technology, known as AAV vectors, to deliver DNA to 
patients that are suffering from genetic and various non-genetic
diseases.  Avigen believes the AAV vectors can be used to deliver 
genes for many inherited genetic diseases, including hemophilia 
and certain metabolic diseases such as Gaucher disease, as well
as for many acquired diseases, including Parkinson's disease, and
certain types of cardiovascular disease.  The company recently
received 3 new patents, strengthening its expansive intellectual
property portfolio in adeno-associated virus (AAV) vector tech-
nology.  This week Avigen reported favorable results in a pre-
clinical study for its adeno-associated virus (AAV) vector for
the treatment of hemophilia A, and said it expects to file an
investigational new drug (IND) application in 2003.  We simply
favor the chart with technicals that suggest the current tight
trading range near $10 will continue.

MAY 10.00 GKU EB LB=1.15 OI=69 CB=9.41 DE=21 TY=9.1%

GRP - Grant Prideco  $15.30  *** Oil Sector Hedge ***

Grant Prideco  (NYSE:GRP) manufactures and supplies oilfield drill 
pipe and other drill stem products, as well as engineered connect-
ions, and tubing and casing.  The company's drill stem products 
are used to drill oil and gas wells.  The drilling products seg-
ment manufactures and sells a full range of proprietary and API 
brand drill pipe, drill collars, heavyweight drill pipe and drill
accessories.  The engineered connections segment designs, manu-
factures and sells a complete line of engineered connections and 
associated tubular products and accessories.  Investors have been
acquiring Grant Prideco after the company reported earnings in
February showing record revenues in 2001 and a 4th-quarter net 
income of $0.17 per share.  With the price of oil increasing
and continued unrest in the middle east, investors desiring to 
add an oil driller to their portfolio may consider this position
for a low risk entry point.  The company is due to report earnings
on May 2.

MAY 15.00 GRP EC LB=0.85 OI=347 CB=14.45 DE=21 TY=5.5%

MOT - Motorola  $15.00  *** Bottom-Fishing For Blue Chips? ***

Motorola (NYSE:MOT) is a global provider of integrated communicat-
ions solutions and embedded electronic solutions.  The company's 
Intelligence Everywhere solutions include: software-enhanced wire-
less telephone and messaging, two-way radio products and systems, 
as well as networking and Internet-access products, for consumers,
network operators and commercial, government and industrial 
customers; end-to-end systems for the delivery of interactive 
digital video, voice and high-speed data solutions for broadband 
operators; embedded semiconductor solutions for customers in wire-
less communications, networking and transportation markets; inte-
grated electronic systems for automotive, telematics, industrial, 
telecommunications, computing and portable energy systems markets.
Yes, Motorola reported its 5th straight loss but managed to beat
estimates by $0.04 per share.  The "surprise" incited a $2.50
rally as the company said it is on track to reach profitability 
by the second half of 2002.  The stock has now pulled back to
technical support and this position offers a fair entry point for
those who believe Motorola is on the road to recovery.

MAY 15.00 MOT EC LB=0.60 OI=7664 CB=14.40 DE=21 TY=6.0%

MOVI - Movie Gallery  $18.78  *** Next Leg Up? ***

Movie Gallery (NASDAQ:MOVI) owns and operates a total of 1,467 
specialty stores that rent and sell videocassettes, DVDs and 
video games located in 41 states and five Canadian provinces. 
The company is the leading home video specialty retailer pri-
marily focused on rural and secondary markets.  Movie Gallery
rallied on Friday after the company announced same-store revenues
for the 1st-quarter, ended April 7, 2002, increased by 0.3% as
opposed to expectations of flat to slightly negative same-store
revenues. The company also increased its targeted range for pro
forma earnings per diluted share by almost 10 cents.  Movie 
Gallery is due to report earnings on May 10.  The bullish
technicals suggest higher prices ahead and this position offers
a reasonable entry point from which to speculate on the company's

MAY 17.50 QLV EW LB=1.90 OI=832 CB=16.88 DE=21 TY=5.3%

PDG - Placer Dome  $12.79   *** Gold Sector Hedge ***

Placer Dome (NYSE:PDG) principally is engaged in the exploration 
for, and the acquisition, development and operation of gold 
mineral properties.  The company's major mining operations are 
located in Canada, the U.S., Australia, Papua New Guinea, South 
Africa and Chile.  Exploration work is carried out in the above-
mentioned countries and elsewhere throughout the world.  Placer
Dome's principal product is gold, although significant quantities
of silver and copper also are produced.  This week, Placer Dome 
posted stronger 1st-quarter earnings on Tuesday, saying higher 
prices and lower cash costs offset a drop in gold production.  
As political tensions and economic uncertainty increased, the
price of gold has continued to stage a bull-rally.  Investors
looking to add a "gold" stock to their long-term portfolios may
consider this relatively low risk entry point.

MAY 12.50 PDG EV LB=0.65 OI=6285 CB=12.14 DE=21 TY=4.3%

TDY - Teledyne Technologies  $17.82 *** Bracing For A Rally ***

Teledyne Technologies (NYSE:TDY) is a provider of sophisticated
electronic components, instruments and communications products,
including data acquisition and communications equipment for air-
lines and business aircraft, monitoring and control instruments 
for industrial and environmental applications and components, 
and subsystems for wireless and satellite communications.  The 
company also provides systems engineering solutions and inform-
ation technology (IT) services for space, defense and industrial
applications, and manufactures general aviation and missile 
engines and components, as well as onsite gas and power gener-
ation systems.  Teledyne operates 4 business segments: Electron-
ics and Communications, Systems Engineering Solutions, Aerospace 
Engines and Components and Energy Systems.  Teledyne reported
solid 1st-quarter results this week with sales of 183.3 million
and a net income of $0.16 per diluted share.  The company expects
modest revenue growth in 2002, primarily driven by demand for 
defense electronics products.  We simply favor the bullish 
momentum as the stock looks to break above resistance on in-
creasing volume.  A favorable cost basis from which to spec-
ulate on the company's future.

MAY 17.50 TDY EW LB=0.90 OI=9 CB=16.92 DE=21 TY=5.0%



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

GIVN   13.33  MAY 12.50   QPG EV  1.50 326   11.83   21    8.2%
SMMX   20.41  MAY 20.00   OFU ED  1.45 0     18.96   21    7.9%
OVER   33.77  MAY 30.00   GUO EF  5.20 2707  28.57   21    7.2%
PHSY   28.30  MAY 25.00   HYQ EE  4.40 3714  23.90   21    6.7%
NSIT   25.16  MAY 25.00   QNT EE  1.20 196   23.96   21    6.3%
U       5.47  JUN  5.00     U FA  0.95 899    4.52   56    5.8%
ORB     5.50  JUN  5.00   ORB FA  0.95 405    4.55   56    5.4%
WBSN   27.14  MAY 25.00   DQH EE  3.00 46    24.14   21    5.2%
AFFX   25.85  MAY 22.50   FIQ EX  4.00 383   21.85   21    4.3%
MACR   22.01  MAY 20.00   MRQ EY  2.55 885   19.46   21    4.0%


Market Mentality: Time To Review The Emotional Cycle of Investing
By Ray Cummins

The recent bearish activity in stocks has brought to light the
difficulty of purchasing stocks in unfavorable market environment.
Indeed, it is hard to be optimistic when everyone seems to be
selling but history suggests that now may be good time to become
a buyer.

Successful investing requires observation, comprehension and
action.  Experienced traders learn to understand the facts and
reasons behind market-moving events, observe the trends, and
identify the early stages of a rally or decline.  But, it is not
enough to merely observe the activity and discern the movements.
You must also develop a sense of market emotion and learn to put
a range of indicators together in context, including the ability
to perceive when a trend is approaching an extreme.  Of course,
all that aptitude will be worthless if you take no useful action.
Acting upon your observations is without doubt the most difficult
skill to master, and when the market is overwhelmed by rampant
selling pressure, the task can be all the more daunting.  Unless
you are a seasoned investor, it is difficult to evaluate the
market's unusual behavior for lack of past experience.  However,
there is one condition that is easy to observe: the opinion of
the masses.  For example, when the majority of participants are
in agreement on the current outlook, there is a high probability
that a move in the opposite direction is forthcoming.  In simple
terms, stocks will rally when every seller has been accommodated.
In contrast, when everyone who wants to buy is fully invested,
there is little potential for further upside activity.  You have
probably heard the phrase, "In the stock market, the public is
right during the trends but wrong at both ends," and that saying
was never more correct than in a bearish environment.

When the market is in a bullish trend, the emotion of the moment
generally dictates the issue, causing the majority of typical
traders to enter new positions near the top, when the stock is
finishing its rally.  At that point, everybody who is bullish on
the issue already has it and there is no one left to support the
price.  The professionals are the first to exit, quietly closing
out their positions while the public is overwhelmed by glowing
earnings reports and bullish forecasts.  As the stock struggles
to hold its gains, trading volume drifts lower and the primary
groups trading the issue; the technicians, the fundamentalists
and the general public compete to determine the next trend.  When
the historical pattern exhibits the first signs of failure, the
technical traders begin to sell in earnest.  Analysts raise the
company's targets to support the inflated share value, but when
the issue no longer responds to good news, the outcome is clear.
Soon the public becomes nervous and as the correction takes shape,
closing orders increase in number.  The fundamentalist is the last
to go, generally after a full-scale downtrend is in effect.  With
this type of psychological analysis, it obvious how human nature
determines our actions in the stock market.  Hope leads to fear,
and then to panic, and the few that remain through it all (the
amateurs), eventually unload their positions for significant
losses.  In fact, you can almost see the anxiety and hysteria in
the heart-pounding selling climax of these issues over the past
few days:  Dynegy (NYSE:DYN), General Mills (NYSE:GIS), Verisign
(NASDAQ:VRSN), Tyco (NYSE:TYC), Cabot Micro (NASDAQ:CCMP), and
Cell Therapeutics (NASDAQ:CTIC).
After the market has endured a substantial decline, it's hard to
overcome the public's fear and loathing, as well as the widespread
disbelief that any recovery is forthcoming.  The general panic
propagated by dour doomsayers and the media's sensationalistic
coverage of every negative event often creates an apparently
insurmountable obstacle.  The act of buying into weakness, in
opposition of the crowd, will always feel uncomfortable and when
the time comes to make the trade, its unlikely you'll have all
the necessary information.  With that in mind, it's easy to see
why anticipating a change in the direction of the market is more
an art than a science.  In addition, those who hear your opposing
views and witness your contra-intuitive behavior will likely voice
their opinions, and they may eventually convince you to abandon
your independent line of thinking, at precisely the wrong time.
That's why it is so important to always consider the contrarian
viewpoint, even when the perspective leaves you alone in your
outlook, without confirmation from the masses.  Remember, the
stock market moves quickly from one extreme to the next and
success in the long run requires that you act as an individual
during those times when being part of the crowd simply contributes
to the current market behavior.

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.


Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

VIRL   17.81  17.50   MAY  15.00  0.50  *$  0.50  11.3%
WFR     8.60   7.75   MAY   7.50  0.30  *$  0.30   9.9%
OATS   10.63  10.92   MAY  10.00  0.45  *$  0.45   9.6%
TTWO   26.53  22.93   MAY  22.50  0.55  *$  0.55   8.4%
ADPT   14.57  15.13   MAY  12.50  0.40  *$  0.40   8.4%
IMCO   14.22  13.90   MAY  12.50  0.50  *$  0.50   8.1%
PHSY   26.01  28.30   MAY  20.00  0.40  *$  0.40   7.8%
ENER   24.24  22.83   MAY  22.50  0.75  *$  0.75   7.5%
EAGL   17.00  16.97   MAY  15.00  0.45  *$  0.45   7.4%
IDTI   32.00  26.92   MAY  25.00  0.40  *$  0.40   6.4%
RMCI   25.45  25.10   MAY  20.00  0.40  *$  0.40   6.3%
TOL    27.58  28.55   MAY  25.00  0.65  *$  0.65   6.2%
ISLE   20.50  20.19   MAY  17.50  0.30  *$  0.30   5.9%
MARY   21.50  23.45   MAY  17.50  0.40  *$  0.40   5.8%
LNCR   31.28  31.11   MAY  30.00  0.80  *$  0.80   5.8%
AEIS   36.71  33.75   MAY  30.00  0.40  *$  0.40   5.2%
CTLM   13.86  12.15   MAY  12.50  0.45   $  0.10   2.3%
SNDK   20.37  16.21   MAY  17.50  0.65   $ -0.64   0.0%
JDAS   35.29  28.70   MAY  30.00  0.45   $ -0.85   0.0%

*$ = Stock price is above the sold striking price.


The market headed south this week amid a slew of unfavorable
earnings reports, and concerns over the flagging economy and
the conflict in the middle east.  The effect on corporate share
values was far more pronounced in technology issues and the
composite index now appears headed for lows not seen since last
September.  With that sobering thought in mind, traders should
consider closing positions with anything less than outstanding
technical indications in order to preserve portfolio capital.
As noted in last week's commentary, Veeco (NASDAQ:VECO) was a
prime exit prospect and the downward trend has continued almost
unabated in recent sessions.   Sandisk (NASDAQ:SNDK) is also a
candidate for early exit and JDA Software (NASDAQ:JDAS) became
a member of that category Tuesday, despite the fact they beat
consensus earnings estimates in their quarterly report.  There
is, however, a chance the issue will rebound in the next few
sessions, now that a $250 million shelf registration has been
cancelled.  Issues on the watch-list include: Energy Conversion
Devices (NASDAQ:ENER), Take-Two (NASDAQ:TTWO), Memc Electronic
(NYSE:WFR), Integrated Device Technologies (NASDAQ:IDTI), and
Advanced Energy (NASDAQ:AEIS).

Positions Closed: Veeco Instruments (NASDAQ:VECO)


Sequenced by Company
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

AMZN   16.91  MAY 15.00   ZQN QC  0.30 5570  14.70   21    8.4%
DO     32.10  MAY 30.00    DO QF  0.40 3495  29.60   21    5.2%
EAGL   16.97  MAY 15.00   UQV QC  0.50 6     14.50   21   13.6%
GSF    35.33  MAY 32.50   GSF QZ  0.40 1281  32.10   21    5.0%
MACR   22.01  MAY 20.00   MRQ QY  0.50 216   19.50   21    9.9%
OVER   33.77  MAY 25.00   GUO QE  0.45 3572  24.55   21    9.0%
PHSY   28.30  MAY 20.00   HYQ QD  0.30 983   19.70   21    7.3%
PLNR   24.73  MAY 22.50   PNQ QX  0.45 5     22.05   21    8.0%

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

EAGL   16.97  MAY 15.00   UQV QC  0.50 6     14.50   21   13.6%
MACR   22.01  MAY 20.00   MRQ QY  0.50 216   19.50   21    9.9%
OVER   33.77  MAY 25.00   GUO QE  0.45 3572  24.55   21    9.0%
AMZN   16.91  MAY 15.00   ZQN QC  0.30 5570  14.70   21    8.4%
PLNR   24.73  MAY 22.50   PNQ QX  0.45 5     22.05   21    8.0%
PHSY   28.30  MAY 20.00   HYQ QD  0.30 983   19.70   21    7.3%
DO     32.10  MAY 30.00    DO QF  0.40 3495  29.60   21    5.2%
GSF    35.33  MAY 32.50   GSF QZ  0.40 1281  32.10   21    5.0%

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).

AMZN - Amazon.com  $16.91  *** Optimistic Outlook! ***

Amazon.com (NASDAQ:AMZN) is a Website where customers can find and
discover anything they may want to buy online.  The company lists
millions of unique items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera/photo items, software,
computer and video games, tools and hardware, lawn & patio items,
kitchen products, and wireless products.  Through its Marketplace,
Auctions and zShops services, any business or individual can sell
virtually anything to the company's 30 million customers, and with
Amazon.com Payments, sellers can accept credit card transactions.
In addition to its U.S.-based Website, the company operates four
internationally focused Websites: www.amazon.co.uk, www.amazon.de,
www.amazon.fr and www.amazon.co.jp.  The company also operates the
Internet Movie Database (www.imdb.com), a source of information on
movies and entertainment titles, and cast and crewmembers.  Shares
of Amazon.com surged last week as Wall Street applauded the online
retailer's second-straight blowout quarter.  A number of analysts
published optimistic research reports suggesting that the company
will not only survive but thrive.  Amazon appears to be in a new
bullish trend and investors can speculate on its near-term share
value with this position.

MAY 15.00 ZQN QC LB=0.30 OI=5570 CB=14.70 DE=21 TY=8.4%

DO - Diamond Offshore  $32.10  *** Hot Sector! ***

Diamond Offshore Drilling (NYSE:DO) is principally engaged in the
contract drilling of offshore oil and gas wells.  The company is
active in deep water drilling with a fleet of approximately 45
offshore rigs that consisted of 30 semi-submersibles, 14 jack-ups
and one drill-ship.  The company's large, diverse fleet enables it
to offer a broad range of services worldwide in various markets,
including the deepwater market, the harsh environment market, the
conventional semi-submersible market and the jack-up market.  The
company's first-quarter earnings per share came in a penny ahead
of Wall Street's consensus estimate despite weakness in the Gulf
of Mexico and now the issue is moving higher amid optimism for a
recovery in the second-half of the year.  Investors who wouldn't
mind having a popular oil-driller in their portfolio can establish
a low risk cost basis in the issue with this position.

MAY 30.00 DO QF LB=0.40 OI=3495 CB=29.60 DE=21 TY=5.2%

EAGL - EGL Inc.  $16.97  *** Improving Fundamentals! ***

EGL, Inc. (NASDAQ:EAGL) is a global transportation, supply
chain management and information services company dedicated to
providing flexible logistics solutions on a price competitive
basis.  The company's services include airfreight and ocean
freight forwarding, customs brokerage, pick-up and delivery
service, materials management, warehousing, trade facilitation,
procurement and integrated logistics and supply chain management
services.  The company provides value-added services in addition
to those generally provided by traditional airfreight forwarders,
ocean freight forwarders and customs brokers.  These services are
designed to provide global logistics solutions for customers in
order to streamline their supply chain, reduce their inventories,
improve their logistics information and provide them with more
efficient and effective domestic and international distribution
strategies in order to enhance their profitability.  CSFB raised
its rating on airfreight services provider EGL Inc. to a "buy"
recently due to cost-cutting efforts and improving fundamentals.
Our outlook for the issue is also bullish and investors can
establish a low risk entry point in the stock with this position.

MAY 15.00 UQV QC LB=0.50 OI=6 CB=14.50 DE=21 TY=13.6%

GSF - GlobalSantaFe  $35.33  *** More Drillers! ***

GlobalSantaFe (NYSE:GSF) is a holding company that conducts its
operations through Global Marine Drilling Company (GMDC), Global
Marine International Drilling Corporation (GMIDC), Challenger
Minerals Inc. (CMI), Applied Drilling Technology Inc. (ADTI) and
Global Marine Integrated Services (Europe) (GMIS), a division of
one of the company's foreign subsidiaries.  The company's three
lines of business consist of contract drilling, drilling management
services and oil and gas.  The contract drilling business provides
manned, mobile offshore drilling rigs to oil and gas operators on
a daily rate basis, which is also referred to as day-rate drilling;
drilling management services business or turnkey drilling, designs,
develops and executes specific offshore drilling programs and also
delivers a loggable hole to an agreed depth for a guaranteed price;
the oil and gas business participates in exploration and production
activities.  GlobalSantaFe is another popular issue among the "oil
drillers" and the company was recently upgraded by Merrill Lynch
and Deutsche Securities after a favorable quarterly earnings report.
The technical indications in the issue also suggest further upside
activity in the near future.

MAY 32.50 GSF QZ LB=0.40 OI=1281 CB=32.10 DE=21 TY=5.0%

MACR - Macromedia  $22.01  *** Recovery Underway! ***

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.  As a result of the
deconsolidation of shockwave.com, the company operates in one major
business segment, the Software segment.  Shares of web-publishing
software company Macromedia soared last week after the company said
it expects to return to profitability, on a pro-forma basis, in the
June quarter, and remain "in the black" for the rest of the year.
Also, revenue showed sequential growth for the first time in a year,
and the top line should grow another 10% sequentially in the June
quarter, due to a slew of new products that have been released or
are scheduled for release in the next couple of months.  Investors
can establish a conservative basis in the stock with this position.

MAY 20.00 MRQ QY LB=0.50 OI=216 CB=19.50 DE=21 TY=9.9%

OVER - Overture Services  $33.77  *** Yahoo! Contract Renewal ***

Overture Services (NASDAQ:OVER) is engaged in the provision of
pay-for-performance search services on the Internet.  Overture
operates an online marketplace that introduces consumers and
businesses that search the Internet to advertisers that provide
products, services and information.  Advertisers participating in
the company's marketplace include retail merchants, wholesale and
service businesses and manufacturers.  Overture facilitates these
introductions through its search service, which enables advertisers
to bid in an ongoing auction for priority placement in Overture's
search results after editorial approval.  The company's marketplace
offers consumers and businesses quick, easy and relevant search
results for products, services and information, while providing
advertisers with a cost-effective way to target them.  Shares of
Overture Services, formerly GoTo.Com, surged Friday on news of the
company's strong first-quarter results and a new 3-year deal with
Yahoo!  Now the issue is back in a comfortable range near $30 and
traders who think it will remain there can profit from that outcome
with this position.

MAY 25.00 GUO QE LB=0.45 OI=3572 CB=24.55 DE=21 TY=9.0%

PHSY - PacifiCare Health Systems  $28.30  *** Sector Rally! ***

PacifiCare Health Systems (NASDAQ:PHSY) is a healthcare services
company with operations in managed care products for employer
groups and Medicare beneficiaries in the U.S. and Guam, serving
approximately four million members.  The company operates health
maintenance organizations (HMOs) and offers HMO-related products
and services.  The company's commercial and Medicare programs are
designed to deliver quality healthcare and customer service to
members, cost effectively.  The company also offers a variety of
specialty HMO managed care, and HMO-related products and services
that employers can purchase to supplement their basic commercial
plans or as stand-alone products.  The company's other specialty
products include pharmacy benefit management, behavioral health
services, life/health insurance, and dental and vision services.
Insider buying has been increasing among the health insurers and
analysts say its a good sign because it means management thinks
the industry is recovering.  Shares of PHSY certainly reflect
that optimism as the company's stock price is up over 50% in the
last two weeks.  Traders can speculate on the future success of
one of the most popular companies in the Healthcare sector with
this position.

MAY 20.00 HYQ QD LB=0.30 OI=983 CB=19.70 DE=21 TY=7.3%

PLNR - Planar Systems  $24.73  *** On The Rebound! ***

Planar Systems (NASDAQ:PLNR) is a developer, manufacturer and
marketer of high-performance electronic display systems.  The
company's products include its proprietary electro-luminescent
flat-panel displays, active matrix liquid crystal displays and
passive matrix liquid crystal display products.  These products
are used in a variety of medical, industrial (process control,
instrumentation), transportation, communications and other
applications.  The company's major customers include Philips,
Marconi, Datex Ohmeda, GE Medical, DataScope, Tokheim, Sun
Microsystems, Kodak, Allen Bradley and Dell Computer Systems.
The share value of Planar Systems has been "on the rebound" since
the company reported increasing second-quarter sales and noted
that "the economic situation appears to have stabilized" in the
display industry.  The company also said that "profitability in
our custom display systems business remains strong," and "the
desktop monitor business continues to outperform targets, both
in rapid sales growth and in bottom-line results."  Indeed, the
outlook appears to be improving and traders who agree with the
bullish assessment can profit from future upside activity with
this position.

MAY 22.50 PNQ QX LB=0.45 OI=5 CB=22.05 DE=21 TY=8.0%



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

PCSA   15.38  MAY 12.50   CQO QV  0.30 90    12.20   21   12.2%
FHRX   25.10  MAY 22.50   FUF QX  0.65 5     21.85   21   11.6%
WBSN   27.14  MAY 22.50   DQH QX  0.45 64    22.05   21    9.8%
SHRP   21.98  MAY 20.00   SAU QD  0.45 82    19.55   21    9.0%
ABX    20.39  MAY 20.00   ABX QD  0.50 1162  19.50   21    8.8%
FNF    30.01  MAY 30.00   FNF QF  0.70 50    29.30   21    8.0%
PRX    25.05  MAY 22.50   PRX QX  0.35 435   22.15   21    6.5%
DFS    15.69  MAY 15.00   DFS QC  0.25 110   14.75   21    6.2%



The Market Bears Are On The Prowl!
By Ray Cummins

                         - MARKET RECAP -
Friday, April 26

The major equity averages retreated to levels not seen in months
as concerns over flagging earnings and the lack of an economic
recovery drove investors to unload stocks in almost every sector.

Technology issues led the decline with the NASDAQ Composite index
ending 49 points lower at 1,663 on weakness in Internet, telecom,
semiconductor, and networking shares.  The Dow Jones Industrial
Average also experienced precipitous losses with the blue-chip
gauge down 124 points to 9,910 amid steep declines in its hi-tech
components.  The broad market was a sea of red with biotechnology,
natural gas and retail issues among the big losers while oil and
pharmaceutical stocks saw limited buying pressure.  Volume was
average at 1.4 billion on the NYSE and 1.9 billion on the NASDAQ.
Market breadth was bearish with decliners outpacing advancers 3
to 2 on the NYSE and 2 to 1 on the technology exchange.  In the
treasury market, the 10-year note advanced 9/32 to yield 5.06%
while the 30-year government bond soared 15/32 to yield 5.59%.
On the fund flow front, Trim Tabs estimated that equity funds
had outflows of $6.1 billion during the 5 trading days ending
Wednesday, compared with inflows of $6.9 billion in the prior

Last week's new plays (positions/opening prices/strategy):

Cooper       (NYSE:CAM)   MAY45P/MAY50P  $0.60  credit  bull-put
Microchip    (NSDQ:MCHP)  MAY35P/MAY40P  $0.55  credit  bull-put
Applied Mat. (NSDQ:AMAT)  J03-30C/M30C   $2.85  debit   calendar
Amer. Exp.   (NYSE:AXP)   J03-45C/M45C   $3.20  debit   calendar
BMC Soft.    (NYSE:BMC)   MAY15C/MAY15P  $2.00  debit   straddle
Emulex       (NSDQ:EMLX)  MAY30C/MAY30P  $4.80  debit   straddle
Veritas      (NSDQ:VRTS)  MAY30C/MAY30P  $4.75  debit   straddle
Andrx        (NSDQ:ADRX)  MAY50C/MAY35P  $0.40  credit  synthetic

The volatile market activity did little to help the bullish plays
in our portfolio but the movement was a boon to our new straddle
candidates.  Both Emulex and Veritas traded near recent lows and
there is excellent potential for further downside activity in the
near future.  The Veritas straddle is currently profitable but we
will need additional declines in both issues to achieve favorable
gains.  The BMC straddle is not expected to yield a profit until
the company's quarterly earnings announcement in early May.  One
play that offered an acceptable short-term gain was the bullish
synthetic position in Andrx.  The initial credit was higher than
expected, due to the opening slump on Monday and the issue moved
higher later in the week, providing a profit of $0.65-0.75.  In
the credit-spreads category, Cooper Cameron is off to a good start
with the bullish activity in the Oil Service sector but Microchip
is testing a recent support area and will require monitoring over
the next few days.  The calendar spreads were a mixed offering
with American Express providing a good entry opportunity while
Applied Materials slid below a short-term trading-range bottom,
suggesting further downside activity.

Portfolio Activity:

There was little significant activity this week in the Spreads
portfolio however the volatility in stock prices did benefit a
few of our debit straddles.  Celera Genomics (NYSE:CRA) moved to
a new 2-year low, providing another profitable trading opportunity
in the long-term position.  The straddle has now offered a near
break-even exit on both sides of the initial strike price and
there is over a month until the options expire.  CVS Corporation 
(NYSE:CVS) and Viacom (NYSE:VIA) are also at recent lows and may
yet achieve profitability in their respective positions.  The most 
successful straddles for the month of May were Mirant (NYSE:MIR)
and Reliant Resources (NYSE:RRI) and the neutral-outlook position
in J.P. Morgan Chase (NYSE:JPM) also earned a small profit during
the recent rally.  Among the older positions, Abercrombie & Fitch
(NYSE:ANF) has retreated after achieving a 9-month high and NRG
Energy (NYSE:NRG) has traded in a small range since the play was
initiated, thus they are both candidates for early exit.  Advanta
(NASDAQ:ADVNB) is a relatively new play and has over 3 months to
become profitable.

In the remaining categories, the Pactiv (NYSE:PTV) calendar spread
has been an outstanding performer, providing a favorable profit
after two months in play and the issue closed the week exactly
at the sold strike of $20.  A similar position in Dupont (NYSE:DD)
also produced a small profit but the issue has recently moved out
of a long-term trading range and readers in the spread should
consider closing the play to preserve capital.  Unfortunately, the
"bottom-fishing" play in Edison (NASDAQ:EDSN) was curtailed by a
slew of downgrades issued a few days after it was initiated and
the spread was closed this week for a small loss as the stock fell
below technical support at $12.  In the credit-spreads group, the
bearish position in Eli Lilly (NYSE:LLY) is comfortably profitable
but the bullish play in Applied Materials (NASDAQ:AMAT) is under
close scrutiny.  In addition, traders who participated in the Oil
Service Holders Trust (AMEX:OIH) position were prompted to close
(or adjust) the bullish play by Tuesday's rally to a new high and
thankfully, they were assisted in that activity on Wednesday by a
fortuitous consolidation in oil shares.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
GSF - GlobalSantaFe  $35.33  *** Drillers Rally! ***

GlobalSantaFe (NYSE:GSF) is a holding company that conducts its
operations through Global Marine Drilling Company (GMDC), Global
Marine International Drilling Corporation (GMIDC), Challenger
Minerals Inc. (CMI), Applied Drilling Technology Inc. (ADTI) and
Global Marine Integrated Services (Europe) (GMIS), a division of
one of the company's foreign subsidiaries.  The company's three
primary lines of business consist of contract drilling, drilling
management services and oil and gas.  The contract drilling
business provides manned, mobile offshore drilling rigs to oil
and gas operators on a daily rate basis, which is also referred
to as day-rate drilling; drilling management services business or
turnkey drilling, designs, develops and executes specific offshore
drilling programs and also delivers a loggable hole to an agreed
depth for a guaranteed price; the oil/gas business participates in
exploration and production activities.

We found this position in the scan for Covered-Call and Naked-Put
candidates and based on the recent (bullish) activity in the Oil
Service group, the issue has excellent potential for future upside
movement.  In addition, GlobalSantaFe was upgraded by analysts at
Merrill Lynch and Deutsche Securities after a favorable quarterly
earnings report and the technical indications suggest the issue
will continue higher in the coming weeks.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JUN-40  GSF-FH  OI=198  A=$0.65
SELL PUT   JUN-30  GSF-RF  OI=22   B=$0.50

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $925 per contract.

BJS - B.J. Services  $37.58  *** Oilfield Services ***

BJ Services Company (NYSE:BJS) is a provider of pressure pumping
and oilfield services serving the petroleum industry worldwide.
The company's pressure pumping services consist of cementing and
stimulation services used in the completion of oil and natural
gas wells and in remedial work on existing wells, both onshore
and offshore.  The company's oilfield services include product
and equipment sales for pressure pumping services, tubular
services provided to the oil and natural gas exploration and
production industry, commissioning and inspection services,
provided to refineries, pipelines, offshore platforms and
specialty chemical services.

Analysts are optimistic about the prospects for a recovery in
the Oil Service sector as supply and demand fundamentals improve
and the price of crude stabilizes.  Investors are apparently in
agreement with that positive outlook as they have pushed BJS to
an 11-month high and traders who believe the bullish trend will
continue can profit from that outcome with this position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-32.50  BJS-QZ  OI=324  A=$0.30
SELL PUT  MAY-35.00  BJS-QG  OI=332  B=$0.55

CI - Cigna  $107.46  *** Health Insurers - Safety Sector! ***

CIGNA Corporation (NYSE:CI) and its various subsidiaries are an
investor-owned employee benefits organizations in the United
States.  Its subsidiaries are major providers of employee
benefits offered through the workplace, including health care
products and services, group life, accident and disability
insurance, retirement products and services and investment
management.  CIGNA's operating divisions include Employee Health
Care, Life and Disability Benefits, CIGNA Group Insurance,
Employee Retirement Benefits and Investment Services, and
International Life, Health and Employee Benefits.  The company's
Other Operations include the recognition of deferred gains on
the sales of CIGNA's individual life insurance and annuity
business and reinsurance business, and the results of CIGNA's
retained reinsurance business, corporate life insurance business,
settlement annuity business, and non-insurance operations.

The majority of the nation's major health insurers have reported
favorable earnings this quarter and Cigna is expected to post
profits of $1.88 a share, up from $1.76 a share last year, when
the company announces earnings in early May.  Cigna struggled
during the past year with escalating medical costs that reduced
the company's profitability but analysts say they have corrected
the problem.  Traders who agree with that outlook can speculate
on the upcoming report with this conservative position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-95   CI-QS  OI=402  A=$0.40
SELL PUT  MAY-100  CI-QT  OI=216  B=$0.95

QLGC - Qlogic  $43.86  *** Another Earnings Play! ***

QLogic Corporation (NASDAQ:QLGC) simplifies the process of
networking storage for OEMs, resellers and system integrators
with the only end-to-end infrastructure in the industry,
consisting of award-winning controller chips, host bus adapters,
network switches and management software to move data from the
storage device through the fabric to the server.  QLogic designs
and produces solutions based on all storage network technologies
including SCSI, iSCSI, InfiniBand and Fibre Channel.  QLogic is
a member of the S&P 500 Index and was recently ranked 25th on
Forbes' Best 200 Small Companies and 21st among Fortune's 100
Fastest Growing Companies.

QLogic plans to announce its fourth quarter and fiscal year-end
financial results after the close of the equity markets on May 7
and based on the recent technical indications, investors are not
expecting favorable results.  On Friday, the issue closed below
a recent support area at $45 and QLGC is now at a "key" moment
with regard to its technical outlook.  A move below the current
range would suggest further downside activity and in the unlikely
event of a recovery, the first area of resistance, near the sold
strike at $50, will provide a reasonable margin of safety (and
time) for any exit or adjustment transactions.

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-55  QLC-EK  OI=2577  A=$0.35
SELL CALL  MAY-50  QLC-EJ  OI=3605  B=$0.90

                   - STRADDLES AND STRANGLES -
CNXT - Conexant Systems  $10.14  *** Reader's Request ***

Conexant Systems (NASDAQ:CNXT) provides semiconductor system
solutions for communications applications.  Conexant Systems'
expertise in mixed-signal processing allows it to deliver
integrated systems and semiconductor products that facilitate
communications worldwide through wire-line voice and data
communications networks, cellular telephony systems and emerging
cable, satellite and fixed wireless broadband communications
networks.  Conexant operates in two primary business segments:
the Personal Networking business and Mindspeed Technologies, the
company's Internet infrastructure business.

One of our readers asked for an inexpensive straddle candidate
to use as his first attempt with the strategy.  CNXT is a low
priced stock that meets 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 position, it must
be evaluated for portfolio suitability and reviewed with regard
to your strategic approach and trading style.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  MAY-10  QXN-EB  OI=1154  A=$0.80
BUY  PUT   MAY-10  QXN-QB  OI=439   A=$0.65

- or -

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JUN-10  QXN-FB  OI=31  A=$1.15
BUY  PUT   JUN-10  QXN-RB  OI=86  A=$0.95

RIMM - Research In Motion  $18.09  *** Reader's Request! ***

Research In Motion Limited (NASDAQ:RIMM) designs, manufacturers
and markets wireless solutions for the mobile communications
market.  Through the development and integration of hardware,
software and services, RIM provides solutions for seamless
access to time-sensitive information including e-mail, messaging,
Internet and intranet-based applications.  RIM technology also
enables an array of third party developers and manufacturers in
North America and around the world to enhance their products and
services with wireless connectivity.  RIM's portfolio of products
includes the RIM Wireless Handheld product line, the BlackBerry
wireless e-mail solution, embedded radio modems and software
development tools.

Here is another low-cost candidate for very speculative straddle
traders, based on analysis of its historical option pricing and
technical background.  In addition, the issue has a history of
multiple movements through a sufficient range in the required
amount of time to justify the overall risk of the position.  As
always, review the play individually and make your own decision
about the future outcome of the position.

PLAY (very speculative - neutral/debit straddle):

BUY  CALL  MAY-17.50  RUL-EW  OI=79    A=$1.70
BUY  PUT   MAY-17.50  RUL-QW  OI=1060  A=$1.10

QQQ - Nasdaq-100 Trust Series  $31.04  *** Trade The NASDAQ! ***

The Nasdaq-100 Trust Series I is a pooled investment designed to
provide investment results that generally correspond to the price
and yield performance of the Nasdaq-100 Index.  With Nasdaq-100
Index Tracking Stock, you can buy or sell shares in the collective
performance of the Nasdaq-100 Index and the transaction gives you
ownership in the 100 stocks of the Nasdaq-100 Index.  When you
purchase Nasdaq-100 Index Tracking Stock, you're investing in the
Nasdaq-100 Trust, a unit investment trust that holds shares of the
companies in the Nasdaq-100 Index.  The Trust is designed to track
the price and yield performance of the Index, thus you can expect
your Nasdaq-100 Index Tracking Stock to move up or down in value
when the Index moves up or down.

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time.  The buyer has the rights and the seller
the obligations.  With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
industry group or on the market as a whole.  Option premiums are
at historic lows on the QQQ and traders who think the volatility
in technology stocks will continue this month in the wake of the
recent NASDAQ sell-off can attempt to profit from that activity
with this neutral-outlook position.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  MAY-31  QAV-EE  OI=5947   A=$1.20
BUY  PUT   MAY-31  QAV-QE  OI=40362  A=$1.10


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Note: Options involve risk. Risk disclosure: 


A few recent watch list plays worked real well in our favor.  
Let’s see if these two keep the winning ways going.

To Read The Rest of The OptionInvestor.com Market Watch Click Here


More movement late last week.  Will the volatility return next 
week?  Make sure to tune in your levels!

To Read The Rest of The OptionInvestor.com Market Posture Click Here


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