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Daily Newsletter, Tuesday, 04/08/2003

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The Option Investor Newsletter                 Tuesday 04-08-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: I Surrender
Futures Markets: Stasis
Index Trader Wrap: (See Note)
Market Sentiment: Between Rounds
Weekly Fund Screen: Latin America Funds


Updated on the site tonight:
Swing Trader Game Plan: Coffee Break


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      04-08-2003           High     Low     Volume Advance/Decline
DJIA     8298.92 -  1.50  8342.83  8260.48 1.44 bln   1417/1774
NASDAQ   1382.94 -  6.60  1392.52  1376.60 1.26 bln   1405/1772
S&P 100   447.15 -  0.10   449.62   445.04   Totals   2822/3546
S&P 500   878.29 -  1.64   883.11   874.68
W5000    8313.74 - 22.80  8355.84  8283.76
RUS 2000  374.66 -  1.91   376.57   373.67
DJ TRANS 2200.99 - 30.50  2231.66  2193.70
VIX        29.59 -  2.14    30.96    29.33
VXN        40.92 -  0.52    42.27    40.46
Total Volume 2,896M
Total UpVol    941M
Total DnVol  1,915M
52wk Highs  153
52wk Lows   103
TRIN       1.42
PUT/CALL   0.80
************************************************************

I Surrender

Call off the war, I give up! I am tired of being a hostage to
whatever the next rumor might be. I feel like a POW being given
a daily choice between 30 lashes or electric shock torture.
Trying to decide how the ramifications and market reactions
to the hourly rumors is driving me crazy. (I know it is not a
long drive but it could at least be fun.) We are no longer
second guessing but third, fourth and fifth guessing what the
market is expecting and what it is reacting too.

Dow Chart - Daily



Nasdaq Chart - Daily




The market ignored several economic reports and focused
instead on watching the same war news repeated over and over.
The Wholesale Trade report showed sales slowed in February
to 1/3 of the January levels. At +0.5% the number was touted
as growing at a faster rate than expected in the press with
only +0.3% being the estimates but they ignored the number
was significantly less than the +1.4% in January. Also
ignored was the fact that higher petroleum prices accounted
for all of the gains instead of increased sales. Wholesale
Inventories rose +0.3% as sales slowed. The inventory to
sales ratio of 1.22 is only .01 point above the record low.

The Richmond Fed Survey fell to -4 from zero last month and
+18 in January. Shipments fell to -4 and the first negative
number of the year. New Orders at -10 and Order Backlog at
-16 remained negative but improved slightly over February.
The employment index remained negative for the tenth month.
This report considered conditions both before and after the
war began. There was nothing positive in this report other
that the six month expectations component which rose on
hopes the war will be over by then.

Chain Store sales also continued their slide by -0.5% after
dropping -1.4% last week. This is reported to be the CNN
effect where consumers stayed home to watch war coverage on
TV instead of stalking the malls for bargains. Sales for
most reporting retailers were below plan. Sales of big ticket
items are falling and the Fed said on Monday that borrowing
for big ticket items fell to ten year lows. Unemployment
and economic uncertainty is slowing spending and especially
spending on credit. Non-revolving credit fell -$3.9 billion
in February as consumers paid off debts to lower overhead.
Now we know where all those mutual fund outflows went.

Traders were faced with conflicting urges today. On one
hand Saddam and his sons were rumored to be killed in a
bombing strike last night and traders ran up the futures
overnight in anticipation of a quick end to the war. The
hope of a post war rally is still strong and a Saddam exit
would be expected to hasten that event. On the other hand
there were serious earnings warnings from tech companies
and continuing economic weakness. Decisions, decisions!
The confusion reined all day with the markets closing flat
after trading in a very narrow range. Investors simply do
not know which direction to turn.

They are faced with problems in North Korea, the SARS
epidemic which is still growing, fears the war could drag
on and a flood of negative earnings guidance. The only hope
appeared to be a Saddam exit as the final implosion of
the Iraqi defense. Late in the afternoon the BBC began
reporting that Saddam was alive and we had missed him
again. This was only a couple hours after a rumor blew
through the markets that Al-Jazzera was reporting he was
dead. Confused? The markets were definitely glazed over.

By days end strong resistance of 8330 on the Dow over the
last three weeks asserted itself again and the Dow was
barely able to hold on to 8300 at the close. Without
direction the Dow is likely to trade in the 8200-8330
range tomorrow unless we get a confirmation of Saddam's
health. Dead we could bounce, alive we could drop again.
The Nasdaq appears stuck between 1365 and 1400 but was
weaker than the Dow due to the constant parade of tech
warnings. Several more software companies warned today
and the multiple chip warnings from yesterday produced
a drag on the sector. The Gartner Research Group published
a report that said chip equipment sales dropped -30.4%
in 2002. They offered no estimates for 2003 but it is
commonly assumed that IT spending will be flat to +1%
for all of 2003. That would suggest another famine in
the chip equipment sector.

Many investors are pinning their hopes on a rate cut
by the Fed before the May 6th meeting but the chances
of a rate cut are dwindling. Currently the Fed fund
futures are only showing a 45% chance of a 25 point
cut by May-6th. This is down from last week. Traders
are assuming the Fed thinks the war will be over soon
and the economy will bounce without a rate cut. As long
as the potential post war rally is glimmering in our
future it appears everything is at a standstill.

One challenge I had with the market action on Tuesday
was the lack of action. The futures ran up overnight after
seeing a 60 foot crater where Saddam was eating a late
lunch with his inner circle. By morning they had sold
off again without confirmation he was dead. There was no
Saddam video and no appearance of any Iraqi leaders except
for the information minister saying there were no Americans
anywhere close. Same story, business as usual but no
instant denial of Saddam's death unlike before. Intelligence
sources said they found him after he did the walkabout
video last week which pinpointed the likely area where
he was hiding out. Tips provided the lunch location and
12 min later there was a hole in the ground. If he is
not dead do you think he is stupid enough to stick his
head out of his bunker again? Either way investors feel
the war is about over and the potential for a death
announcement is very good at any time. So, why didn't
the market go up?

If the war is about over and there is going to be a post
war rally then why did the market languish? Was it because
of the earnings? Was it because Saddam might be still be
alive despite the 60 foot crater where the restaurant
used to be? As the US keeps pointing out Saddam is already
irrelevant. I think the more reasonable analysis is that
the rally has already occurred. I know the bulls will
disagree but we have had two days of monster gains totaling
+500 points in the last week. This was after the +1100
point rally in March. The rally this week failed exactly
at the same level as the March rally. The rally in March
was due to traders jumping the gun on the reenactment of
the 1991 post war rally. Traders and the world expected a
two-week war and everybody tried to beat others to the
punch by entering positions early. The two rallies in the
last week were on positive war news and expectations for
that news to produce a quick end. But the potential Saddam
exit today did not produce a rally. This should be confusing
to anyone still expecting a post war bounce.

Instead of trying to decide if the war was responsible for
today lets look at it technically. Just pure chart analysis.
We got almost exactly a -50% retracement of the March gains
with the drop that ended on March 31st with a low at 7929.
That is -600 points from the high of 8520. The close for that
day at 7988 was a -534 drop from the high and a -48% retracement.
This was as close to perfect as it gets. Over the next five
days the market retested 8520 again and failed. The close
today was -220 points below that retest high. Granted we
may not be done yet and the lack of any significant selling
today could be seen as bullish. The strong gains from Monday
which sold off before the close would normally have been seen
as VERY bearish. Instead the markets held their ground on
Tuesday. This could be a bullish consolidation. Technically
there could be several reasons why we did not break out on
Monday.

First the Dow ran head first into the 200 EMA average for the
fourth time since Nov-27th. All attempts to break this resistance
have failed. Secondly this was a perfect double top retest of
the March 21st high at 8520. For a retest to be considered
relative it has to be more than two weeks away from the first
attempt. This was the eleventh trading day after the first high.
This second test also failed at the down trend line from the
Dec-2nd high. These could all be coincidences but I think we
were simply too extended from the March lows to break this
strong resistance. The war bounce is an external event. It
is not stock or market related. Therefore it is built more on
sentiment than fundamentals or technicals. That makes is more
susceptible to strong technical resistance. Support for the Dow
is 8200 and positive stock news could help us hold that narrow
range between 8200-8330. Below 8200 there is a pretty large
area with next real support in the 7975 area.

Dow Chart - 60 min




Where are we going now? If anyone knew for certain they could
sell that information for enough to buy a palace in Iraq. The
war excitement may be fading but the technical resistance has
not. I do not want to bore anyone with more war facts but most
war analysts think the war could continue for a minimum of 4-6
weeks even if Saddam is found dead. Our sensitivity to it will
be slowly ground down until we are numb. Since we are already
able to go anywhere we want in Baghdad there are not a lot of
high profile news events in our future other than any Saddam
death. That means there will be even more commercials on the
news channels and more repeats of canned footage to provide
color for the lack of news. With earnings beginning to flow
on Thursday it is possible the markets attention will be
focused back on stocks and less on the war. The bottom line
is a tough market to trade and one with stronger overhead
resistance than support. This could continue to be a market
driven more by news events than stock events.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


***************
FUTURES MARKETS
***************

Stasis
By Vlada Raicevic

Daily Settlement Numbers 4:15pm ET

> DOW
Last: 8298.92
Net: -1.49
High: 8342.83
Low:  8260.48

> YM 03M
Last: 8283
Net: +29
High: 8359
Low:  8233

> S&P 500
Last: 878.29
Net: -1.64
High: 883.11
Low:  874.68

> ES 03M
Last: 878.50
Net: +1.50
High: 880
Low:  873.50

> Nas 100
Last: 1046.30
Net: -6.98
High: 1056.03
Low:  1041.47

> NQ 03M
Last: 1051
Net:  0
High: 1068.50
Low:  1043.50

DAILY PIVOTS

> YM 03M
R2: 8415
R1: 8346
Pivot: 8290
S1: 8220
S2: 8163

> ES 03M
R2: 894
R1: 886
Pivot: 880
S1: 871
S2: 865

> NQ 03M
R2: 1078
R1: 1063
Pivot: 1053
S1: 1038
S2: 1028

Yesterday we had a reversal candle on the daily charts.  Today we
have a doji, implying indecision.  I should pull out Nison's book
on candlestick charting to see what it means to have these candles
next to each other, but my eyes are too bleary from watching the
market chop around in yet another small, rangebound day.  We have
the pending news that our military may have bombed Saddam into
teeny tiny pieces, but while this news has yet to be verified, it
was very surprising that the markets could not generate any kind
of positive momentum.  Perhaps the markets are a little tired,
having spent so much energy getting to these lofty levels, or
perhaps they're tired because we've already killed Saddam several
times.  However, we've killed Bin Laden nearly a dozen times
already, and each report of his death still causes a nice multi-
hour spike in the futures.  Let's face it, the markets are
extremely moody these days, and just like a co-worker who buys you
lunch one day, and then looks like they're going to stab you in
the hand with a pencil the next day, it is best to try and step
back, and keep one's distance from such moody, irrational
creatures (co-workers and markets alike).

Since today's daily chart is not very different to yesterday's
daily chart, there is little new to add.  Instead, I have drawn up
a slightly different daily chart with different indicators, to see
if we can gain any additional information from another
perspective.  When one chart gives you no answers, I always try
another chart.  What else can I do?

The first pane shows two stochastic studies (11,7,1) and (9,7,1)
together.  These are stochastic studies which are derived using
exponential rather than simple calculations.  The faster line is
definitely reacting to the recent rise, and has just peeked above
the slower line.  This looks bullish but notice how the slower
line has not even started to roll up yet.  Anytime that this has
happened in the past, the two indicators converged and went flat.
So no new information here.

We tried to close above the trendline, but failed completely, this
is bearish.  The 9ema is currently above the 17ema, and is not in
danger of crossing to the downside since both the moving averages
are pointing up, and they are not converging, this shows that the
bullish case is still alive and well.

The second stochastic study is (13,7,1), and is also an
exponential stochastic.  It is in a decline but is well above the
trendline and centerline.  RSI(13) pointing down, but is above its
21 period moving average, which is also in a nice uptrend.
Macd(7,11,3) is a fairly fast setting, but can give insight into
recent price action.  Here it shows that the most recent move up
is much weaker than the last move up, or the move down that
followed.  It has also printed a fairly large, negative divergence
with price.

The last indicator is the Blau Candlestick Oscillator, and is
based on triple-smoothed calculations of price movement.  William
Blau, a mathematician/trader developed several such indicators,
and although they tend to lag price a little bit, it is good to
use with something like the faster Macd.  This indicator is
pointing up bullish, but is above the recent highs it has reached
in previous moves up.  While this may indicate a potential top,
one cannot assume that until this indicator rolls over.

ES Daily Chart:




The NQ daily chart is not bullish at all.  Although the first
stochastic indicator is similar to that of the ES, the similarity
ends there.  The 9ema is rolling over and is about to cross the
17ema.  Note that in the recent selloff that price closed below
the 17ema Low (thin red line), indicating strong selling, before
moving back up with the 4/2 gap.  The second exponential
stochastic has broken below the trendline and is about to cross
the centerline, and the RSI(13) is back below its moving average
after barely making it above for a brief moment.  Macd printed a
tiny little blip above the centerline before falling back, and
even the slower moving Blau oscillator has rolled over and is now
below the last low.

NQ Daily Chart:




So, it looks like we didn't get that much additional information
after all.  The same conclusions as yesterday:  NQs are much
weaker, and are near breaking down on the daily chart.  The ES has
some indicators showing bullish, and others showing bearish, and
so is definitely neutral, requiring some price movement before
making its intentions clear.  As we approach options expiry week,
we should see a definite pickup in volatility, which will
hopefully allow us to see something more than a question mark on
the ES charts.


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

Check the Site Later Tonight For Jeff’s Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_040803_1.asp


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

Between Rounds
by Steven Price

The broader markets gave a couple of head fakes early on today,
as traders digested the importance of reports that Saddam Hussein
may have been killed in a Monday night bombing. The overnight
rally on the news quickly dissipated on the market's open and it
appeared that we would see a continuation of Monday afternoon's
sell-off.  However, an Al-Jazeera report that Saddam was dead
gave the market a boost that stopped the drop and sent the market
sideways.

The Dow pulled back on Monday's sell-off to a pivotal level -
8300.  That level has been significant ever since last summer, as
closes below it have led the market much lower.  Pullbacks that
ended above it have also led to eventual big rallies. The August
2002 rally that eventually topped out at 9077 came after a bounce
from that level, as did the November rally to 8800, the November-
December rally to 9034 (after a mid-November drop) and the
January rally to 8869. September actually saw a rally from a
close of 8283, so the theory is not foolproof.  However, it has
been consistent enough to draw traders' attention. Today's close
just below - at 8298 - is bearish according to this theory.

The other economic factors that have traded consistently with the
equities (with or against) also gave mixed signals.  Oil futures,
which have traded inversely to the equities like clockwork, spent
the day on both sides of unchanged but finished slightly higher
(bearish for stocks). Gold spent the day mostly higher (bearish
for stocks). The U.S. Dollar index was slightly off (bearish for
stocks).  Bonds saw some buying, pushing yields lower (bearish
for stocks).

However, in spite of more bearish indicators than bullish, none
of these indicators moved strongly enough to give clear signals
for stocks.  The ten-year yield, which rolled over hard from its
200-dma on Monday and gave the first sign of equity weakness, had
the most decisive move on Tuesday. It fell back below the 50%
retracement of its Oct-Dec range and appears headed toward its
50-dma at 3.86%, which coincides with the next retracement down
at 61.8%. That would reflect more buying of bonds and selling of
stocks.

Monday's rally finally reversed the NYSE bullish percent higher.
It now joins the OEX, SPX, Dow, NDX and COMP in rising columns of
"X."  They all added additional bullish boxes on the Monday.
However, the afternoon sell-off looked anything but bullish,
giving what appeared to be a reversal signal on the daily
candlestick charts.  Traders are now left with conflicting
signals from those two arenas.

It is not a mystery as to why we are seeing such strange
divergences.  We are trading in an environment that is taking its
cues from military success, or lack of it. When I say lack of it,
I mean the pace at which the war is proceeding.  It is apparent
that the U.S. is going to eventually win and if Saddam is dead,
then it will likely happen quickly.  However, the recent equity
rally has come in the face of sinking economic data and leaves us
to ponder whether we have already seen our war rally. If so, then
we will be left to digest what so far has been more earnings
warnings than upside surprises and contraction in both the
manufacturing and non-manufacturing sectors. However, if those
rising bullish percents are as reliable as they have been in the
recent past, then we may yet have another leg up.

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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8299

Moving Averages:
(Simple)

 10-dma: 8204
 50-dma: 7992
200-dma: 8360



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  878

Moving Averages:
(Simple)

 10-dma:  870
 50-dma:  847
200-dma:  884



Nasdaq-100 ($NDX)

52-week High: 1573
52-week Low :  795
Current     : 1046

Moving Averages:
(Simple)

 10-dma: 1049
 50-dma: 1012
200-dma:  990



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

The Semiconductor Index (SOX):  The SOX took the techs lower
after a warning from RFMD.  The company gave revenue guidance
that came in slightly above estimates, but also predicted a loss
of -$0.05-0.07 per share.  Analysts expected the company to break
even. The SOX dropped almost 4% and fell back through its 200-dma
at 307, finishing the day at 303.  The next support level here
should be the 50-dma (now at 294), which held up on the last dip
at the end of March.

52-week High: 393
52-week Low : 214
Current:      303

Moving Averages:
(Simple)

 21-dma: 313
 50-dma: 294
 200-dma: 307

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

Market Volatility

The VIX broke 30% on a closing basis for the first time since the
end of January. This can be seen as bullish for equities; however
the last tests of that level actually took the volatility
indicator between 29% and 30% in December, just before market
pullbacks.  The extension lower to a previous area of support
could signal a pullback in equities again.  However, a move below
29% would be significant and would signal a continuation of the
recent rally - at least until the VIX reaches 26%.

CBOE Market Volatility Index (VIX) = 29.59 -2.14
Nasdaq-100 Volatility Index  (VXN) = 40.92 -0.52

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.76        452,172       361,367
Equity Only    0.69        316,090       217,273
OEX            0.98         18,237        17,852
QQQ            0.27         38,314        10,154


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

Bullish Percent Data

           Current   Change   Status
NYSE          43.6    + 2     Bull Confirmed
NASDAQ-100    57.0    + 4     Bull Alert
Dow Indust.   43.3    + 3     Bull Alert
S&P 500       48.0    + 3     Bull Confirmed
S&P 100       47.0    + 0     Bull 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  1.01
10-Day Arms Index  1.28
21-Day Arms Index  1.21
55-Day Arms Index  1.38


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 they do, they can signal significant market turning
points.

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

Market Internals

        Advancers     Decliners
NYSE       1214           1599
NASDAQ     1338           1686

        New Highs      New Lows
NYSE        49               29
NASDAQ      61               37

        Volume (in millions)
NYSE       1,434
NASDAQ     1,275


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

Commitments Of Traders Report: 04/01/02

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

Commercials stayed long for second most bullish reading of the
year, just one period after shifting from net short to net long.
Small traders reduced their overall net long position by
increasing their shorts.

Commercials   Long      Short      Net     % Of OI
03/11/03      440,688   485,938   (45,250)   (4.9%)
03/18/03      483,224   490,582   ( 7,358)   (0.1%)
03/25/03      424,781   415,258     9,523     1.1%
04/01/03      417,637   409,332     8,305     1.0%

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year:    9,523  -  3/25/03

Small Traders Long      Short      Net     % of OI
03/11/03      169,450   102,631    66,819     24.6%
03/18/03      184,907   153,400    31,507      9.3%
03/25/03      143,402   123,178    20,224      7.6%
04/01/03      143,580   126,594    16,986      6.3%

Most bearish reading of the year:  20,224 - 3/25/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500 *NEW SECTION DUE TO READER REQUESTS*

This is our first report of this data.  Commercials currently
maintain a net short position, while small traders  are net long.

Commercials   Long      Short      Net     % Of OI
04/01/03     98,460    321,335   (222,875)  (53.1%)


Most bearish reading of the year:  (222,875)  - 04/01/03
Most bullish reading of the year:  (222,875)  - 04/01/03

Small Traders Long      Short      Net     % of OI
04/01/03        2,296     1,146     1,150    33.4%


Most bearish reading of the year:   1,150   - 04/01/03
Most bullish reading of the year:   1,150   - 04/01/03

NASDAQ-100

Commercials reduced long positions by just under 10%, while small
traders left long positions nearly unchanged, but reduced shorts
by about a third.

Commercials   Long      Short      Net     % of OI
03/11/03       43,641     56,020   (12,379) (12.4%)
03/18/03       58,877     64,302   ( 5,425) ( 4.4%)
03/25/03       44,403     36,436     7,967    9.9%
04/01/03       40,493     36,893     3,600    4.7%

Most bearish reading of the year: (15,521) -  3/13/02
Most bullish reading of the year:   9,068  - 06/11/02


Small Traders  Long     Short      Net     % of OI
03/11/03       27,196     9,674    17,522    47.5%
03/18/03       37,097    26,951    10,146    15.8%
03/25/03       10,313    20,080   ( 9,767)  (32.1%)
04/01/03        9,771    13,306   ( 3,535)  (15.3%)

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercials increased short positions slightly, while leaving the
long side alone. Small traders left both sides of the equation
unchanged.

Commercials   Long      Short      Net     % of OI
03/11/03       21,726    14,370    7,356      20.4%
03/18/03       26,880    18,853    8,027      17.6%
03/25/03       19,752    10,212    9,540      31.8%
04/01/03       19,068    12,672    6,396      20.2%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
03/11/03        5,549     7,727    (2,178)   (16.4%)
03/18/03        6,589     8,343    (1,754)   (11.7%)
03/25/03        5,076     7,721    (2,645)   (20.7%)
04/03/01        5,142     7,459    (2,317)   (18.4%)

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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******************
WEEKLY FUND SCREEN
******************

Latin America Funds

This week we explore a select group of international stock funds
that seek long-term capital growth by investing primarily in the
securities of Latin American issuers.  According to Bollinger's
FundsTrader website (www.fundstrader.com), this series of funds
has had "above average" performance and offers "high" potential
return now.  This site applies Bollinger Bands to mutual funds.
Bollinger Bands provide relative definitions of high/low price,
and can help investors/traders compare price action the website
states (www.bollingerbands.com).

Screening/Evaluation Process

FundsTrader lists 11 mutual funds in this category and we'll use
them as our starting point.  These 11 Latin American stock funds
are shown below ordered by their Bollinger FundsTrader potential
ranking (1.00 lowest/best).

 FundsTrader Potential Rankings: Latin America Funds
 1.00  Scudder Latin America S (SLAFX)
 1.00  Van Kampen Latin American C (MSLCX)
 1.00  Fidelity Latin America (FLATX)
 1.00  T. Rowe Price Latin America (PRLAX)
 1.00  Merrill Lynch Latin America B (MBLTX)
 1.00  Morgan Stanley Inst. Latin American A (MILAX)
 1.00  Templeton Latin America Adv (TLAAX)
 1.00  Excelsior Latin America (UMEAX)
 1.51  Templeton Latin America A (TELAX)
 1.54  Merrill Lynch Latin America A (MALTX)
 1.61  Van Kampen Latin American A (MSLAX)

Note that the Excelsior Latin America Fund (UMEAX) didn't come up
in Morningstar's system.  That's because the fund recently merged
with its sibling, the Excelsior Emerging Markets Fund.  So, it is
no longer viable.  Van Kampen and Templeton's Latin America funds
appear twice on the list, reflecting two different share classes,
so we are really talking about eight different mutual funds here.

Of the eight available Latin American stock funds, only one has a
Morningstar highest "5-star" rating for risk-adjusted performance
relative to their category peer group.  That is the Scudder Latin
America Fund (SLAFX).   Note, however, that the fund's "S" shares
(shown herein) are closed to new investors.  Younger, load shares
are available for purchase, but whether they will generate 5-star
performance ratings is debatable considering the new cost and fee
structure.

Both T. Rowe Price Latin America Fund (PRLAX) and Templeton Latin
America Fund (TELAX) receive 4-star overall ratings per the funds
tracker.  Note that the Advisor Class shares (TLAAX) of Templeton
Latin America Fund require $5,000,000 to open an account.  Morgan
Stanley's fund requires $500,000 to invest initially, so they are
both eliminated from further consideration.  T. Rowe Price's fund
is an affordable investment option, and is rated 4 stars based on
its ability to generate above average to high returns relative to
category peers over the long-term.  In T. Rowe Price's case, fund
risk has also been above average relative to peers because it has
a growth style of investing.  Templeton's fund (A shares), on the
other hand, is value-driven so its relative risk tends to be less
than average relative to other Latin America funds.  It might not
earn as high a rate of return as the T. Rowe Price fund over time
but it has generated average to above average returns, with lower
volatility.

Fidelity's fund is rated just one star per Morningstar, while Van
Kampen's fund has only a 2-star overall rating.  It's no surprise
then to find that both funds recently received new managers.  So,
they are both eliminated from further consideration.  It came as
no surprise also that the two Morningstar 4-star rated funds had
the longest, most stable manager tenures.  Benedict Thomas has 7
years experience on T. Rowe Price Latin America Fund, while Mark
Beveridge has 6 years with the Templeton Latin America Fund.

In addition to their style differences, T. Rowe Price's fund has
no load charges and a low (for the group) expense ratio of 1.49%.
The Templeton Latin America Fund's Class A shares charge a front
load of 5.75% and have a much higher expense ratio of 2.35%, per
Morningstar.  So on the basis of cost/expense alone, the T. Rowe
Price offering is more affordable.  Latin America funds may have
greater potential return than other international fund types but
they may are also subject to greater risks and costs.  So, those
funds that can keep their costs down, have a leg up in our view.

Our Favorite Funds

Considering its long manager tenure, affordable cost and expense
structure, above average relative performance, and the company's
reputation in international investing, we think your best bet for
the long-term may be the 4-star rated T. Rowe Price Latin America
Fund (PRLAX).  It seeks long-term appreciation through investment
primarily in common stocks of companies domiciled or with primary
operations in Latin America.

As the T. Rowe Price website (www.troweprice.com) indicates, the
fund's share price ("NAV") will fluctuate with changes in market,
political, economic, and currency conditions.  It goes on to say
that Latin American countries, in general, have "less developed"
economies than developed regions of the world such as Europe and
Japan and may continue to be subject to unpredictable political
and economic conditions.  A number of countries in Latin America
have legacies of political instability, hyperinflation, and FX
currency devaluation's versus the dollar (which adversely affect
returns to U.S. investors).

So, Latin America funds have plenty of risk factors to consider.
Theoretically, higher risks lead to greater rewards in the long
term.  Accordingly, the T. Rowe Price Latin America Fund may be
appropriate for people seeking "enhanced potential appreciation"
over time and greater diversification for their equity portfolio
who can accept the risks associated with investing in stocks, as
well as the special risks that accompany international investing,
T. Rowe Price says.




You can see from the chart above that the fund is swinging upward
in value in recent weeks; hence, its high rankings in Bollinger's
FundsTrader system.  But, the fund also sports a strong long-term
track record.  Below is a summary of fund returns and rankings in
the Latin America fund category using data from Morningstar as of
April 7, 2003.

 5-Year Average Annual Total Return:
 -5.1%  T. Rowe Price Latin America Fund (PRLAX) 1st Percentile
 -6.6%  MSCI EAFE Index
 -7.3%  Latin America Fund Average

You can see that T. Rowe Price's fund outperformed both the MSCI
EAFE index of developed foreign markets and the category average
per Morningstar by wide margins over the trailing 5-year period.
Despite its more aggressive growth style, the fund has been able
to generate fairly consistent performance results for investors.
Since 1998, T. Rowe Price has ranked in or near the first decile
of the Latin America fund category in every annual period except
for 1999 when its +59.4% annual total return was only good enough
to rank in the category's 55th percentile.

In the years 2000, 2001 and 2002, the fund did an exceptional job
relative to category peers of preserving capital.  Considering it
maintains a growth bias, the feat seems even more rewarding.  The
end result is a fairly deserved Morningstar 4-star overall rating
for relative "risk-adjusted" performance.

Conclusion

Too bad the Scudder Latin America Fund S shares are closed to new
investors.  That would have been another possibility for "direct"
investors.  Individuals that work with a financial representative
may still want to ask about the Scudder Latin America Fund, Class
A (or other share class).  The S shares have a solid track record
but the younger, load shares may not perform as well due to their
potentially higher costs of ownership.

While having a growth style of investment can potentially result
in greater volatility versus value-driven funds, T. Rowe Price's
Latin America strategy has minimized losses through the downturn
better than most other Latin America funds.  It's also shown the
ability to put up annual returns of nearly 60% as it did in 2002.
It remains one of the better options in the Latin America equity
investment class.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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SWING TRADER GAME PLANS
***********************

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The Option Investor Newsletter                  Tuesday 04-08-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: BVF
Dropped Puts: None
Daily Results
Call Play Updates: BLL, IGT, MMM, WFMI, UNH
New Calls Plays: BBBY
Put Play Updates: CDWC, LLL, NOC, ROOM, WHR
New Put Plays: None


****************
PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

Biovail Corporation - BVF - close: 40.77 change: -0.44 stop:
40.50

After last week's gap breakout over the $41 level, the
bulls seemed to lose their nerve and our BVF play just
stalled out near the $42 level.  Yesterday's drop
filled that gap, but instead of generating a bounce,
the stock just continued down, hitting an intraday low
of $40.55 this morning before a really weak bounce.
The fact that BVF couldn't get any decent buying
interest today calls into question whether the bullish
move is over.  Looking for potential support, it looks
like another test of the 20-dma ($40.11) will be
necessary before buyers show up.  Rather than  take
that risk, we're closing the play for a small gain
tonight.  Use a rebound above $41 as an opportunity
for a better exit from the play.

Picked on March 14th at $39.06
Change since picked:       +1.71
Earnings Date         04/29/03 (confirmed)
Average Daily Volume = 1.10 mln


PUTS:
*****

None


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

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

CALLS              Mon    Tue    Wed   Thu  Week

BBBY     37.18   -0.55   0.73  New, Six-top buy signal
BLL      57.14   -1.04  -0.02  Consolidation
BVF      40.77   -1.59  -0.44  Drop, Failed $41
IGT      82.42   -3.14   0.11  Following 21-dma
MEDI     33.18   -1.17   0.31  21-dma entry
MMM     133.48   -2.39   0.92  Bounce from $132
UNH      93.70   -0.60   1.27  Re-test of $94
WFMI     56.59   -1.30   0.39  Bull flag?


PUTS

CDWC     40.96   -1.04  -0.59  Products suffering
LLL      37.84   -0.71  -0.45  Stepping lower
NOC      83.70    0.99  -0.30  Still consolidating
ROOM     54.46   -0.99  -0.25  No bounce
WHR      51.70   -0.63   0.08  200-dma ceiling


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

Ball Corporation - BLL - close: 57.14 change: -0.02 stop: 55.50

Surging sharply higher at the open on Monday, BLL looked like it
was going for a breakout.  but the quick fade in the broad market
put those plans on hold, with the stock pulling back quickly from
above the $59 level.  That pullback didn't really find support
until the stock reached the $57 level early on Tuesday, but with
the lack of buying pressure in the market, the bulls couldn't
really make any progress on a bounce attempt.  This is an
important support level now, as it is both the site of the bottom
of last week's gap ($56.91) as well as the 10-dma ($56.89), which
provided solid support before the breakout move early last week.
A rebound from this level looks like a solid point to take new
entries into the play ahead of another attempt at breaking the
$59 level.  The one point of concern is that both Stochastics and
MACD are rolling lower and could be hinting that the bullish move
has run its course.  If looking for new entries, be sure to wait
for the bounce, avoiding the urge to catch a falling knife.  Our
stop remains at $55.50, just below what should be strong support.

Picked on March 21st at $55.87
Change since picked:       +1.27
Earnings Date         04/24/03 (confirmed)
Average Daily Volume = 449 K

---

Intl. Game Tech. - IGT - close: 82.42 change: +0.11 stop: 78.50

While it hasn't exactly gotten off to a roaring start, our IGT
play is holding its own rather well.  Monday's session started
off with a bang, as IGT gapped up above the $85 level, only to
fall back near unchanged by the close.  Buyers showed up at the
$82 level on Tuesday, but with the lack of bullishness in the
broad market, the stock just couldn't make any headway to the
upside.  Part of what is providing this support is the ascending
trendline from the March 12th lows, which currently rests at
$82.10, which just happens to be today's intraday low.  Whether
that trendline holds or not, intraday dips that find willing
buyers above the $80 level look attractive for new entries.
While a trade at $80 will generate a PnF Sell signal, we're
giving the play more room to work (down to our $78.50 stop) to
avoid being scared out of the play by a quick bear-trap dip.
Traders looking to enter on strength will want to wait for a
volume-backed move through the $84 level.

Picked on April 6th at $82.18
Gain since picked:       +0.24
Earnings Date         04/22/03 (confirmed)
Average Daily Volume = 1.24 mln

---

3M Company - MMM - close: 133.48 change: +0.92 stop: 129.75

Considering that it is the highest priced DOW stock, MMM is
holding up quite well this week.  Over the past 2 days, the stock
has successfully tested the $132 level as support, which is the
top of last Wednesday's upward gap.  Unfortunately though, MMM
couldn't hold its breakout over the $135 level on Monday, leaving
behind a higher high, while daily Stochastics rolled over from a
lower high.  That's right campers, bearish divergence.  Whether
it plays out that way or not is anyone's guess, especially with
the way this market is ignoring technical setups.  But it is a
concern we ought to be cognizant of, nonetheless.  Due to its
high price, MMM tends to be volatile, forcing us to keep our stop
rather wide at $129.75, just below the 20-dma ($130.59)  It still
seems likely that we'll see last week's gap fill down to just
below the $131 level and a dip and rebound from that level
appears to be the best possible entry setup.  Once MMM manages a
close over the $135 level, we'll consider raising our stop to
$132.

Picked on March 27th at $131.66
Change since picked:       +1.82
Earnings Date         04/21/03 (confirmed)
Average Daily Volume = 2.37 mln

---

Whole Foods Mkt - WFMI - close: 56.59 change: +0.39 stop: 54.50

It is make or break time for our WFMI play.  After being rejected
again at the $58 level on Monday, the stock fell back into its
familiar support area just above $56 and caught a weak bounce
this morning that gave way to profit taking late in the day.
Over the past week, WFMI has been drifting closer to that
ascending trendline, which has continued to rise, now resting at
$56.  If the stock is going to break higher, the bulls are going
to need to show their conviction soon.  A break below the
ascending trendline would not be a good sign, as it would
underscore the likelihood that the upward trend is ending.
Aggressive traders can still use a rebound from the $56 level to
initiate new positions, but should look for confirmation of
stronger volume than we've seen so far this week.  Traders
looking for confirmation before entering the play will still want
to see WFMI trade through the $58.25 level on expanding volume
before playing.  While we're leaving our official stop at $54.50,
more risk averse traders may want to consider raising their stop
to $55.50, which is just below the 3/31 closing low.

Picked on April 1st at $56.42
Change since picked:      +0.17
Earnings Date         05/08/03 (unconfirmed)
Average Daily Volume = 937 K

---

Unitedhealth - UNH - close: 93.70 change: +1.27 stop: 89.48

UNH has been creeping higher, even breaking through the $94
resistance level we have highlighted since entering the play.  It
took that level out on Monday's big market rally, but eventually
fell back below on the afternoon sell-off.  However, it continues
to set higher highs and higher lows and has remained within its
ascending channel ever since breaking through its 200-dma. The
resistance zone between $94 and $96 remains a challenge, but if
it can break through that resistance, $100 looks like a
possibility. The HMO sector Index (HMO.X) has also broken the
200-dma and since bounced from that level on subsequent
pullbacks. It has also been setting a series of higher highs and
higher lows, but was quiet on Tuesday. A look at the point and
figure chart shows UNH's morning pullback to $91.87 holding above
what would be 3-box reversal at $91 and the stock has avoided
that reversal on each of its pullbacks since giving the last buy
signal at $84. Our current stop is set at _89.48, however more
conservative traders can either take a gain on the entry at $90,
or raise stops to just below $91, which would be a PnF reversal
and where it has found support the past couple of days.

Picked on March 25 at $90.66
Change since picked:       +3.04
Earnings Date         04/16/03


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

Bed Bath & Beyond - BBBY close: 37.18 change: +0.73 stop: 35.00

Company Description:
Bed Bath & Beyond is an operator of stores selling predominantly
better quality domestics merchandise and home furnishings
typically found in better department stores.  As of May, 2002,
the company had stores in 44 states.  Domestics merchandise
includes bed linens and related items, bath items and kitchen
textiles.  Home Furnishings include kitchen and tabletop items,
fine tabletop and giftware, basic housewares and general home
furnishings.

Why we like it:
Consumers may be getting more discriminating about when and where
they spend their hard earned dollars, but apparently they haven't
completely shut off their spending.  Not only are some specialty
retailers holding their own, there are a select few that are
actually prospering.  BBBY just reported its Q1 earnings last
week, and came in with its best quarter ever, both in terms of
earnings and revenues.  That sure is a marked departure from the
tales of woe we've been hearing from many of the broad line
retailers.  The company reported earnings of $0.35/share (2 cents
ahead of estimates) on its first ever quarter above the $1
billion revenue mark.

This stellar financial performance hasn't been lost on investors
either, as they are once again challenging $38, a resistance
level that has continued to come into play since it was first
challenged last April.  After a powerful rebound that began at
the $30 level on March 12th, BBBY has worked its way back to that
resistance level and it looks like the bulls will be successful
this time around.  But that isn't to say that the stock will
break out without another pullback first.  After the strong surge
to just below $38 on Monday, the daily Stochastics are flattening
out and threatening to roll over.  If that rollover does occur,
we'll have a bearish Stochastics divergence (higher price highs
and lower Stochastic highs) to deal with.  While that may sound
bearish, we're looking for any pullback to be rather shallow,
with the ascending trendline (connecting the lows from 3/12 and
4/01) at $35.25, the 20-dma ($35.38) and the bottom of the 4/03
gap ($35.48) and the 10-dma ($35.77) all teaming up to provide
strong support.  A dip and rebound from the $35.50 area may turn
out to be the best entry for aggressive traders.

However, in our attempt to keep from getting into hot water with
the potential for bearish divergence, we're setting a trigger of
$38 on our BBBY play.  The stock hasn't been able to trade that
level yet, and given the significance of that resistance level,
we're expecting a trade there to have some follow through.
Momentum traders will want to enter on the initial breakout,
while those with a more conservative approach will want to wait
for a pullback to confirm newfound support in the $37-38 area
before playing.  Because of the strength of the support detailed
above, we're starting out with a rather wide stop at $35.  One
other point of reference is the Retail index (RLX.X).  Believe it
or not, the RLX is above both its 200-dma and 50-dma and has
closed above its March 21 highs on each of the last 3 days.  A
continuation of this bullish sector action will only help to
propel BBBY higher.

Suggested Options:

Shorter Term: The April 80 Call will offer short-term traders the
best return on an immediate move, with manageable risk.  With
April expiration looming next week though, this option should
only be used by aggressive traders.

Longer Term: Traders looking to capitalize on a sustained
breakout move over the next few weeks will want to look to the
May 40 Call or even the July 40 Call.  These options are
currently out of the money, but should provide sufficient time
for the stock to move higher without time decay becoming a
dominant factor over the short run.

BUY CALL APR-37 BHQ-DU OI=1709 at $0.85 SL=0.40
BUY CALL MAY-37 BHQ-EU OI=5460 at $1.80 SL=0.75
BUY CALL MAY-40 BHQ-EH OI=2290 at $0.75 SL=0.40
BUY CALL AUG-40 BHQ-HH OI=3261 at $2.00 SL=1.00

Annotated Chart of BBBY:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-08/BBBY040803.gif



Picked on April 8th at  $37.18
Gain since picked:       +0.00
Earnings Date         07/02/03 (unconfirmed)
Average Daily Volume = 3.21 mln


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

CDW Computer - CDWC - close: 40.96 change: -0.59 stop: 43.25

This put play has continued its rollover from the failed test of
the 50-dma. It caught a bid with the early broad market rally on
Monday, but failed along with the sell-off as well.  While there
has not been company specific news, we have gotten a number of
warnings in the tech sector.  There were several downgrades and
earnings misses, with poor outlooks in the semiconductors and
handset markets. If the demand for tech products is not looking
good, then a tech retailer like CDW is likely to suffer, as well.
The stock has yet to hit our trigger for momentum traders at
$39.70, but continues to flirt with support at $40, setting lower
highs on each rebound attempt. Traders who took an alternate
entry on the failed rebound at the 50-dma are looking good right
now, but we'll consider the play officially triggered below
$39.70.  After the recent bounce to $43, a trade back down to $40
will put the stock back into a column of "O" on the PnF chart and
also represent a failed bounce from a descending trendline on
that chart.   We'll leave our closing stop at $43.25, given the
recent volatility.

Picked on April 1 at $40.00
Change since picked:       +0.96
Earnings Date         04/15/03

---

L-3 Comms - LLL - close 37.84 change: -0.45 stop: 40.00*new*

No matter how you slice it, the Defense Index (DFI.X) does not
look healthy, as investors continue to vote with their dollars the
expectation that the Iraq war will be swift and have negligible
impact on the revenue stream of the major Defense contractors.
LLL fell to just above $38 on Monday and continued that slide this
morning, hitting an intraday low of $37.23.  While the stock
managed a late-day bounce from that level (which wasn't unexpected
due to mild support at the $37 level), LLL gave us another day of
lower highs and lower lows.  Over the past few days, LLL has left
behind intraday resistance at $38.25, $38.75-39.25 and $39.75.  A
failed rebound at any of these levels can be used for new entries.
A failure at $38.75 looks like the best setup, as that is also the
site of the 7-day descending trendline.  Recall that our initial
target for LLL was $37, which is moderate support and a good level
for conservative traders to harvest gains.  With our final price
target of $35.50 so close, new entries on a breakdown below $37
don't make sense.  Note that our stop has been lowered to $40.

Picked on April 3rd at $38.84
Change since picked:      -1.00
Earnings Date         04/23/03 (unconfirmed)
Average Daily Volume = 1.59 mln

---

Northrop Grumman - NOC - close: 83.70 change: -0.30 stop: 88.55

The stock continues to consolidate in a tighter and tighter
formation. It hasn't broken down or broken out and volume has
drifted lower.  It has been testing the lower trendline of the
pennant formation we highlighted on the weekend chart and
bouncing the past couple of days with higher lows. The momentum
short play was triggered when the stock dipped through $83.24 all
the way down to $82.30 before catching a bounce.  The sector has
continued to react to war-related developments, however, did not
move much on Monday or Tuesday.  The Defense Index (DFI) is
currently forming its own pennant between the 50-dma as
resistance and the 21-dma as support. Conservative traders
looking to trade a breakdown here can watch the DFI for a move
below its 21-dma for confirmation.  NOC's 21-dma, which has begun
to turn higher, has also served as resistance on intraday rally
attempts the past two days and traders looking for a very tight
stop can look to that average (currently 84.42).

Picked on April 5 at $83.26
Change since picked:       +0.44
Earnings Date         04/29/03

---

Hotels.com - ROOM - close 54.46 change: -0.25 stop: 57.25*new*

It's hard to draw any conclusions from Tuesday's session, with
ROOM's exceedingly light volume.  The mild morning bounce faded
into the close for a 25-cent loss, but with volume only 25% of the
ADV, it is clear that it wouldn't have taken much to push the pile
around.  We're left with price action that still looks weak,
barely holding above the $54 support level and any elevation in
the level of concern about the SARS virus could produce a quick
downdraft.  Failed rallies in the $55-56 area still look good for
new entries, although more conservative traders will still want to
wait for the break below $54 on increasing volume before taking
the plunge.  With the 10-dma falling to $55.67 today and
yesterday's intraday surge capped at $57.20, it seems both prudent
and safe to lower our stop to $57.25.

Picked on March 30th at $58.58
Change since picked:       -4.12
Earnings Date         04/24/03 (unconfirmed)
Average Daily Volume = 1.23 mln

---

Whirlpool - WHR - close: 51.71 change: +0.08 stop: 52.76

Whirlpool has had a roller coaster week similar to that of the
broader markets. It broke above its 200-dma intraday on Monday,
but couldn't manage a hold above that level on the close.  It
also ran into its descending 200-ema (53.55) on that effort,
topping out at that level to the penny. The eventual failure at
that 200-dma gives us reason to give it another chance and leave
it on the short list.  With declining durable goods orders and a
shrinking manufacturing and non-manufacturing report, the economy
certainly does not seem to be getting better.  Mortgage rates
have also upticked, which may put a crimp in home sales, leading
to a drop in the demand for appliances.   The stock managed a PnF
reversal on the Monday rally, but that reversal stopped dead at
the descending bearish resistance line, which sits at $53.00.  A
reversal back down comes at $50.  Aggressive bears can enter at
current levels with a stop above the 200-ema, but we'll leave our
closing stop as is. The 50-dma and 21-dma now converge at 49.92
and 50.01, so a trip back below $50 may be more decisive since
the last bounce came from the 21-dma.  Conservative traders can
wait for a break below those averages before initiating new
entries.

Picked on March 29 at $49.58
Change since picked:       +2.12
Earnings Date         04/16/03


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The Option Investor Newsletter                  Tuesday 04-08-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - BBY


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

Bed Bath & Beyond - BBBY close: 37.18 change: +0.73 stop: 35.00

Company Description:
Bed Bath & Beyond is an operator of stores selling predominantly
better quality domestics merchandise and home furnishings
typically found in better department stores.  As of May, 2002,
the company had stores in 44 states.  Domestics merchandise
includes bed linens and related items, bath items and kitchen
textiles.  Home Furnishings include kitchen and tabletop items,
fine tabletop and giftware, basic housewares and general home
furnishings.

Why we like it:
Consumers may be getting more discriminating about when and where
they spend their hard earned dollars, but apparently they haven't
completely shut off their spending.  Not only are some specialty
retailers holding their own, there are a select few that are
actually prospering.  BBBY just reported its Q1 earnings last
week, and came in with its best quarter ever, both in terms of
earnings and revenues.  That sure is a marked departure from the
tales of woe we've been hearing from many of the broad line
retailers.  The company reported earnings of $0.35/share (2 cents
ahead of estimates) on its first ever quarter above the $1
billion revenue mark.

This stellar financial performance hasn't been lost on investors
either, as they are once again challenging $38, a resistance
level that has continued to come into play since it was first
challenged last April.  After a powerful rebound that began at
the $30 level on March 12th, BBBY has worked its way back to that
resistance level and it looks like the bulls will be successful
this time around.  But that isn't to say that the stock will
break out without another pullback first.  After the strong surge
to just below $38 on Monday, the daily Stochastics are flattening
out and threatening to roll over.  If that rollover does occur,
we'll have a bearish Stochastics divergence (higher price highs
and lower Stochastic highs) to deal with.  While that may sound
bearish, we're looking for any pullback to be rather shallow,
with the ascending trendline (connecting the lows from 3/12 and
4/01) at $35.25, the 20-dma ($35.38) and the bottom of the 4/03
gap ($35.48) and the 10-dma ($35.77) all teaming up to provide
strong support.  A dip and rebound from the $35.50 area may turn
out to be the best entry for aggressive traders.

However, in our attempt to keep from getting into hot water with
the potential for bearish divergence, we're setting a trigger of
$38 on our BBBY play.  The stock hasn't been able to trade that
level yet, and given the significance of that resistance level,
we're expecting a trade there to have some follow through.
Momentum traders will want to enter on the initial breakout,
while those with a more conservative approach will want to wait
for a pullback to confirm newfound support in the $37-38 area
before playing.  Because of the strength of the support detailed
above, we're starting out with a rather wide stop at $35.  One
other point of reference is the Retail index (RLX.X).  Believe it
or not, the RLX is above both its 200-dma and 50-dma and has
closed above its March 21 highs on each of the last 3 days.  A
continuation of this bullish sector action will only help to
propel BBBY higher.

Suggested Options:

Shorter Term: The April 80 Call will offer short-term traders the
best return on an immediate move, with manageable risk.  With
April expiration looming next week though, this option should
only be used by aggressive traders.

Longer Term: Traders looking to capitalize on a sustained
breakout move over the next few weeks will want to look to the
May 40 Call or even the July 40 Call.  These options are
currently out of the money, but should provide sufficient time
for the stock to move higher without time decay becoming a
dominant factor over the short run.

BUY CALL APR-37 BHQ-DU OI=1709 at $0.85 SL=0.40
BUY CALL MAY-37 BHQ-EU OI=5460 at $1.80 SL=0.75
BUY CALL MAY-40 BHQ-EH OI=2290 at $0.75 SL=0.40
BUY CALL AUG-40 BHQ-HH OI=3261 at $2.00 SL=1.00

Annotated Chart of BBBY:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-08/BBBY040803.gif



Picked on April 8th at  $37.18
Gain since picked:       +0.00
Earnings Date         07/02/03 (unconfirmed)
Average Daily Volume = 3.21 mln


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