The Option Investor Newsletter Tuesday 09-23-2003 Copyright 2003, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Back to the Future Futures Markets: Correction Index Trader Wrap: Dollar firming sees leisurely advance Market Sentiment: More of the same Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 09-23-2003 High Low Volume Advance/Decline DJIA 9576.04 + 40.60 9583.48 9511.41 1.60 bln 2002/1189 NASDAQ 1901.72 + 27.10 1901.73 1875.15 1.86 bln 2069/1201 S&P 100 516.12 + 2.81 516.61 512.19 Totals 4071/2390 S&P 500 1029.03 + 6.21 1030.12 1021.54 W5000 9993.48 + 65.70 10000.16 9923.72 RUS 2000 519.36 + 5.71 519.49 513.65 DJ TRANS 2800.38 + 21.20 2804.13 2779.70 VIX 19.47 - 0.18 19.97 19.31 VXN 26.98 - 0.96 28.04 26.90 Total Volume 3,735M Total UpVol 2,702M Total DnVol 956M 52wk Highs 606 52wk Lows 15 TRIN 0.90 NAZTRIN 0.43 PUT/CALL 0.85 ************************************************************ Back to the Future The markets closed almost exactly where we closed last Tuesday. After an entire week of thrills and chills we are right back where we were last week. Literally the Dow missed it by 7 points, S&P by .29 of a point. The Nasdaq was the star performer with a +15 point gain. The gains were less than the losses yesterday so despite the green close we are still down for the week. Relief bounce or dip buy is still undetermined. The Nikkei was closed today and as the source of our Monday weakness all eyes will be on the Japanese index tonight. Dow Chart Nasdaq Chart The only economic report today was the Weekly Chain Store Sales which fell -1.8%. Analysts attributed the loss of sales to the hurricane, the monthly paycheck cycle and falling numbers of tax rebate checks. Last week they were claiming the underlying strength in retail sales was due to the hurricane and buying of building materials. They also said it was natural for a slump after a period of small growth. While I agree with all of these things isn't it amazing how the excuses come pouring out whenever there is an estimate miss? Wal-Mart held up the sector today with comments that sales were tracking at the high end of estimates. The real economic report today was an earnings warning from Verizon. The company said its 2003 earnings would fall short of prior estimates due to weak demand for services and rising labor contract costs. Verizon is the largest phone company and the weak demand could be signs the recovery is not gaining speed. They are seeing increased demand for wireless services as many customers switch to cell phone only and cancel existing land lines. It expects to add 4.5 million subscribers in 2003. Can you hear me now? Good for Verizon if you can and that commercial has new users flocking to the cell phone business. Unfortunately they have to constantly update their cell infrastructure while their expensive land lines are going dormant. It is a good news, bad news joke that will eventually benefit shareholders once the trend stabilizes. Still the other phone companies were weak today on fears that what is happening to the big guy will probably impact the smaller fish as well. Paychex reported a +6% rise in earnings due to a +24% spike in payroll services. While several high profile analysts were quick to say this was an indicator of a jump in hiring I beg to differ. I find it hard to believe that there was a 24% jump in employment this quarter. The economic numbers just do not show it. I believe their increase was due to a continued drop in jobs as small businesses cut out the clerical accounting help in favor of using a cheaper payroll service instead. It is just another in a long line of cost cutting measures to keep the doors open. I am sure a lot of it was due to their beefed up marketing campaign as well but that still supports the corporate cost cutting scenario. Dell may be about ready to take a page out of the Gateway play book. A Reuters report said Dell may be laying the groundwork to enter the flat screen TV market place, digital music players and handheld computers. Dell would love to get into the high dollar flat screen TV market like Gateway and then take on the big boys at their own game. Dell is the master at turning the manufacturing process into a pure commodity driven model with just in time shipping of components assuring the lowest price on a daily basis. They maintain a constant stream of price quotations from suppliers and because of Dell's volume the suppliers will cut their own profits to the bone to get the deal. Once Dell gets into the flat panel TV business the prices should start dropping quickly. The price war could be drastic. Dell was up on the news and nearing a 52-week high at $35. Would the last one out at Gateway please turn off the lights. The Nikkei was closed today and the US markets had to find their own way with no guidance from Japan. Regardless of the minor market gains today the dollar/yen fight is not over and it will come back to bite us. The Yen hit a three-year high to the dollar on Tuesday and comments from Japan would indicate it could go higher. The problem is the imbalance of trade and the US debt. If we buy a Japanese car the car company gives the US dollars to the Bank of Japan in exchange for Yen to pay their employees and suppliers. Normally a bank would then sell the dollars on the open market and buy back yen to replace the ones given to the car company. This cheapens the dollar and raises the value of the Yen and balances the currencies. However, to avoid this the BOJ has been buying US bonds with the dollars which effectively takes them out of the market and provides the US with a willing lender to support our deficit. This keeps interest rates down and the US functioning normally. It does not hurt Japan whose Yen is pegged to the dollar to keep those dollars from reentering the market. The current problem comes from a strong rumor that the Asian countries are becoming increasingly wary of the US debt as the deficit rises. The Democrats announced today that the Iraq action could cost $400 billion or more and drive the deficit to even higher levels. Several analysts have said they expect a $1 trillion deficit in 2004. With a trade war heating up and potentially high tariffs being discussed for Asian goods the worry is that Japan could stop buying US bonds. Since 46% of our bonds are purchased by overseas countries with Japan being a major portion of that number, any drop in purchases could drive up interest rates. Considering Japan is one of the largest US bond holders at over $500 billion according to some estimates they could make the dollar/yen problem even worse if they sold bonds and then sold the dollars in the marketplace. China would love to jump on the wagon as they have been buying something like $120 billion a year of US debt. Together they have a big club over the US economy. If they wanted to resort to financial terrorism or react to any new tariffs they could dump bonds/dollars and our interest rates would rocket to new highs and stop our recovery in its tracks. While they are not likely to do that because they A) have no other place to invest the money and b) depend on our dollars to finance their retail trade. They could exercise the threat of it to gain concessions from us. In order to do this they might tighten the purse strings just enough to get our attention. That is what traders are worried about. The US debt market is already heavy with the massive debt offerings (corporate and government) and any reduction of buying from Asia could be enough to offset the delicate balance. Stay tuned. The market recovery today was branded as new money coming into the market to buy the dip. It was also speculated that it was end of quarter window dressing by funds. Whatever the reason the Dow retraced almost exactly 50% of its Monday loss which would have been 9576. It closed at 9571. The Nasdaq was much stronger and came within five points of retracing 100% of the drop. Internets, chips and biotechs all rose with Internet stocks surpassing the Friday levels. Other sectors that were strong included hotels, gaming and airline stocks. AMZN rose to nearly $51 on no real news and dragged YHOO along with it. Adding to the upbeat markets was a rise in the hotel and gaming stocks with FS, HOT, MAR, HLT hitting new 52-week highs. The only really negative sector was defense after there were some negative comments about the procurement process having run its course. LMT and GD were two of the biggest losers. The bottom line for me was an apparently successful day for the markets. They shook off the panic drop from yesterday and moved back on the attack again. After an initial bounce at the open the indexes sold off and tested yesterday's lows but the test was brief. We did not rocket off the bottom but the trend was positive and gained speed on short covering when the Dow broke the 9550 level to the upside. The bounce was short lived as heavy sell volume appeared just before the close but the bulls still managed a respectable showing. Wednesday has no material economic reports with Mortgage Applications the only number to be released. That should show an increase with the drop in rates. The key will be the Nikkei tonight. Tonight is the first time it has traded since the -400 point drop on Sunday night. If it rebounds off the bottom then we could expect our markets to open up in relief that the potential bond bomb has been diffused. If funds are really marking up their portfolios for the end of the quarter statements then we are likely to go back to the recent highs tomorrow. With a heavy slate of economics on Thursday they will probably want to get in early and hope for short covering to push them higher before any bad news. The last two days of the week may not see any buying as the major earnings warnings come to a close. That would be the prime time to confess before the real earnings begin in October. For a potentially bad period in the markets this week started off bad but recovered well. The volume was light but the internals were strong with up volume three times down volume. For tomorrow Dow 9600 will be resistance as well as Nasdaq 1905. The S&P has resistance at 1032 and again at 1040. The rebound is confounding the bears and the bulls alike. Even the most adamant bulls feel like we should see a multiday bout of profit taking to insure a better base for later but the market is refusing to drop. Dip buying is alive and well and shorts are paying dearly for their conviction. AMZN rose nearly +3 on volume of 20 million shares. It is in the top ten stocks with the most short interest and those shorts are getting squeezed. I have been telling people this week not to get married to any short positions just because this week is marked with big red Xs on the calendar. What you believe about market direction is not important if the market is going against you. Capital preservation is important. The Dow and the Nasdaq are continuing to build monster bearish wedges but showing no signs of breaking down. Based on the charts above we could easily test 9700/1925 on the next uptick. The charts are painting a very tantalizing scenario for shorts and luring them back into the market on every downtick only to be surprised over and over again. With this being the 3rd year of a presidential term and the administration doing everything possible to juice the economy I firmly believe we are going to see a continued bullish tone to the market. I just expected a normal October dip from mutual fund portfolio rebalancing first. But then, it is not October yet and I can still rationalize the end of quarter markup scenario as the reason for the bounce. I just keep wondering what reason I am going rationalize next week. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor *************** FUTURES MARKETS *************** Correction Jonathan Levinson The markets corrected part of yesterday’s moves, with gold declining, treasuries and equities advancing, as the US Dollar Index continued to struggle below resistance. Daily Pivots (generated with a pivot algorithm and unverified): Note regarding pivot matrix: The support, pivot and resistance levels above are derived from the high, low and closing price levels by a simple mathematical formula. They are not intended to be predictive of market turning points or to serve as targets, but rather represent the range retracement levels as generated by the pivot algorithm. Do not think of them them as market "calls" or predictions. Like any technically-derived indicator or price level, the pivot matrix values should be regarded as decision points at which to evaluate current market conditions. Visit us in the Futures Monitor for our realtime views of the various markets covered here. 15 minute chart of the US Dollar Index The US Dollar Index spent the day struggling with the 94 resistance level after an initial selloff on Europe’s open last night. The low of the move around 4AM coincided with a high in December gold at 389.90, and the bounce from the 93.50 level brought gold down. The CRB spent the day in positive territory, closing above 240.32 +.32, led by cocoa futures, up 6.65%, live cattle and cotton futures. Daily chart of December gold December gold spent the day in negative territory, giving up its overnight gains despite a positive move in the gold miners and closing lower by 2.30 at 386. The move did not alter the picture from yesterday, with the daily chart oscillators trying to turn up on to buy signals and the price respecting the upper resistance on the bear wedge we’ve been tracking. Support is now just above 380, with today’s low of 384.40. The HUI added .09 at 208.03, XAU +.78 at 97.41. Daily chart of the ten year note yield Treasuries opened in negative territory but, perhaps assisted by a generous 8.75B in overnight repurchase agreements from the Fed (intervention money), bonds reversed, finishing the day at their highs. The TNX dropped .27 bps to close at 4.214%, but it wasn’t enough to do more than ease some of the short term overbought pressure on the yield after yesterday’s gap up. The wedge breakout is still in play, preliminarily confirmed by the daily chart oscillators. It continues to appear that we are watching the beginning of a reversal in the recent treasury rally. Daily NQ candles The NQ had a good day, reversing the better part of yesterday’s decline and confirming trendline support. For the day, NQ added 23.50 or 1.72% to close at 1389. The daily chart oscillators remain in downphases, but until the rising trendline fails, the risk of a new upphase breaking out is significant. I’ve highlighted the bearish stochastic divergence from last week more as an exercise than anything else, as it appears to have played out with yesterday’s drop. 30 minute 20 day chart of the NQ The NQ continued its climb off yesterday afternoon’s lows as expected, doing its best to fulfill the 30 minute chart oscillator upphase but appearing to fail early in the afternoon. The oscillator printed a sell signal which was subsequently partially “undrawn”, as oscillators are sometimes wont to do, and the uptrend resumed until it ran into resistance at the close. The cycle picture appears unchanged from yesterday. The week’s highs have not been approached, let alone tested, and the 30 minute chart upphase should run into trouble when it reaches the boundaries set by the nascent daily chart downphase. This might have occurred before the close, or it might occur tomorrow. But so long as Monday’s opening highs remain intact, I’ll believe that we’re watching a broad top forming for the NQ and its peers, as the daily chart oscillator continues to roll over. Resistance is currently 1392 within what appears to be a small bear wedge, with support at 1380. A break below this level projects to 1360, which could be sufficient to kick off the broader downphase on the longer term cycles. Daily ES candles The picture is the same on the ES, with the shorter cycles nearing the point at which they'll join the daily chart oscillator in overbought territory, from which point short entries will have the greatest chance of succeeding. The ES retraced less of Monday's drop than the NQ, once again lagging the more speculative and overpriced NQ. This has been the case throughout the rally, which has looked like a bearish indicator to my eyes, but others may differ. Volume roughly matched yesterday's volume, which looks like a sign of distribution on this bounce. For the time being, the 30 minute chart upphase is intact, with support below at 1016, 1020 and 1025. 20 day 30 minute chart of the ES Note from the 2 day 150-tick ES chart how the short cycle downphases bottomed with higher price lows throughout today's trading. This is the result of the ongoing upphase on the 30 minute chart oscillators above. Bulls can buy short cycle bottoms so long as the 30 minute chart upphase is intact, and bears will begin to sell short cycle tops once that longer cycle downphase commences. Given the downphase commencing on the longer daily chart oscillator (and on the weekly, not shown), bears should begin to have the advantage. Bear wedge resistance on the 30 minute chart comes at 1030, support at 1025. 150-tick chart of the ES Daily YM candles Nothing to add on the YM. 20 day 30 minute chart of the YM Tomorrow will hopefully show whether today's corrections were indeed counter to the trend of higher gold, lower treasuries and lower equities, or whether the picture is about to shift again. Keep an eye on your stops, and join us in the Futures Monitor as we report on and trade the action in realtime. ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ******************** INDEX TRADER SUMMARY ******************** Dollar firming sees leisurely advance The major indices recouped the bulk of yesterday's losses as the U.S. Dollar Index (dx00y) 94.12 +0.28% firmed against major foreign currencies after this weekend's G7 meeting. After one of the biggest declines in a year on Monday, the dollar was little changed against major currencies. The greenback was flat at 112.22 yen after sinking to 110.04 overnight, while the euro dropped 0.2% to $1.1445, with some overseas analysts optimistic that a weaker dollar might have the European Central Bank (ECB) lowering interest rates. Stocks recovered from a mid-morning dip into negative territory as President Bush addressed the United Nations in a preliminary attempt to gain financial support for its rebuilding efforts in Iraq. As President Bush was laying the groundwork for eventual UN financial support for rebuilding Iraq, a broad downgrade in defense-related stocks by Smith Barney after a poll showing a drop in public support for increased defense spending has the sector in the final innings of government spending, which the firm feels could peak as early as 2005. The broad downgrade had the PHLX Defense Index ($DFX.X) 172.77 -1.6% leading today's sector loser list, and bucking a broader bullish session for the bulk of sectors we follow. The North American Telecom Index (XTC.X) 526.75 -1.03% was the only other sector to find a loss of 1% or more after baby bell Verizon (NYSE:VZ) $33.13 -4.55% lowered its full-year 2003 earnings forecast due to pressures on its domestic telecom business stemming from regulatory constraints and the economy, weak demand for business voice and consumer landline phone services. The CBOE Internet Index (INX.X) 164.18 +2.45% nudged out the Disk Drive Index (DDX.X) 136.81 +2.4% for today's sector winner with online retailer Amazon.com (NASDAQ:AMZN) $50.44 +6.26% surging above the $50.00 level for the first time since June of 2000. The Internet HOLDRs (AMEX:HHH) $44.93 +3.05% closed at a 52-week high on volume of 852,000 shares, after trading upwards of 979,000 shares in yesterday's session. I take note of these volume patterns as it relates to NASDAQ market site statistics showing average daily volume from August 15 to September 15 running at 211,390 shares, where short interest has been growing with a notably high 12.57 days to cover. The bullish vertical count on the HHH from its point and figure chart was developed in November and has not yet negated its bullish vertical count of $50.50. Online auctioneer eBay (NASDAQ:EBAY) $55.36 +2.31% rebounded from both a 21-day SMA and 50-day SMA at $54 and may be a stock that attracts Internet bulls with a bullish vertical count of $123.00, which would only be negated with a trade at $50.00. The stock has been consolidating between $50 and $58 since mid-July and may now have started to digest its impressive move from October's triple-top buy signal at $31.00 (post split) where the stock's PnF chart didn't see a 3-box reversal until the stock recently achieved a 52-week high of $58.93 on July 24. eBay is still off its all-time high of $63.75 (post split). The Airline Index (XAL.X) 63.62 +2.15% was also among today's sector gainers, helped in part by component JetBlue Airways (NASDAQ:JBLU) $60.44 +4.27% jumping to a new 52-week high on heavy volume of 9.5 million shares. I thought the volume suspicious considering average daily volume at just over 862,000 shares and noted this evening that the stock was added to the S&P MidCap 400 Index today, replacing Hispanic Broadcasting, which was acquired by Univision (NSYE:UVN) $35.20 +0.77%. It should also be noted that JetBlue (JBLUE) was sued by the Transportation Security Administration for sharing confidential customer information with a government contractor that is testing federal passenger profiling software. Pivot Analysis Matrix - A wall of green support correlations presents itself tomorrow at the WEEKLY S1 levels, with the OEX, NDX, QQQ and BIX.X the indices in our matrix that managed to hold a close above their WEEKLY Pivots, so I've marked the QQQ WEEKLY Pivot and DAILY Pivot as an area that we might look for early support to hold on a mixed open. In today's market monitor, I profiled a bullish DAY TRADER trade in the QQQ at $34.12, target $34.49, which was a bit aggressive, but I want to note here how $34.29 (the WEEKLY Pivot) was a constant level of resistance up until today's bond market close. The only reason I profiled a bullish DAY TRADER trade in the QQQ was the Dollar Index (dx00y) 94.18 +0.35% was showing a firming dollar trade, and seemed to find a somewhat relieved market. I can't say that I feel the dollar's decline or turmoil is over with just today's trade and will note that the QQQ has now filled its gap lower from Monday morning to Friday's close with today's trade and there's still work to be done for bulls to get a continuing rebound building higher, with support looking firm at the WEEKLY S1s. NASDAQ-100 Tracking Stock (AMEX:QQQ) - 5-minute intervals QQQ $34.29 got a lot of attention today, and while our day trader's 5-minute interval retracement technique also marked the $34.29 level as an intra-day resistance level, I'm thinking it was the WEEKLY Pivot that created the bulk of today's resistance. All the QQQ did today was fill its Monday gap lower, where a short-term trader may have looked for an area void of near-term supply get filled back to the upside. With the NDX/QQQ the only major indices to have closed above their WEEKLY pivots in today's trade, today's intra-day observations of $24.29 resistance is where traders (INDU/SPX/OEX) might look for some early index support. Enough intra-day observations, lets step back and look at the daily interval chart, which has the QQQ back above our cloned downward trend and WEEKLY pivot. NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Interval I sense the QQQ is going to have to be the "leading" index for bullishness to pull the INDU/SPX/OEX above their WEEKLY Pivots, and it may well be the Internet as a sector that drives the QQQ to correlative resistance at $35.15-$35.17. Support begins to look firm at $33.73 as today's gains come as oscillators advise caution, but may provide a swing-trade bull more confident bullish entry back near $34.00, with WEEKLY S1 support at $33.73. Just as a little dollar stability may have pressed some shorts to cover today, a little dollar weakness could see a QQQ pullback to the $34.00 level yet again. Today's trade saw a net gain of 1 stock to a new point and figure buy signal and has the narrower NASDAQ-100 Bullish % ($BPNDX) edging up 1% to 81% and still "bear correction" status. A reading of 82% would have this index back in "bull confirmed" status. Millennium Pharmaceuticals (NASDAQ:MLNM) $16.50 +2.67% is a stock in the NDX that I see giving a new point and figure buy signal and boy its is a doozy! Today's trade at $16.50 is a "bearish signal reversed" and a popular pattern to look for a short squeeze. The pattern is described as needing a MINIMUM of 7 columns of alternating X's (demand) and O's (supply) where a pattern of lower highs and lower lows is reversed to the upside, where the eventual buy signal can trigger buying as distribution that had been taking place now finds the stock void of sellers. S&P 100 Index (OEX.X) Chart - Daily Interval The OEX looks to find support at its WEEKLY S1 of 512 and MACD still holding above its Signal. The shorter-term 21-day SMA still provides shorter-term momentum and bulls will be targeting 525 with support at 512. Some bears may have taken yesterday's dollar weakness as an opportunity to cover some positions, while further bullishness above the WEEKLY pivot should lend itself to further covering by bears. Today's trade saw the narrower S&P 100 Bullish % ($BPOEX) see a net loss of 1 stock to a point and figure sell signal with the bullish % slipping to 86%. Still "bull confirmed" status at 86%, and would take a reversing lower reading of 82% to achieve "bull correction" status. S&P 500 Index (SPX.X) Chart - Daily Interval Both the OEX and SPX percentage gains mirrored those found in the S&P Banks Index (BIX.X) 308.18 +0.46%, KBW Bank Index (BKX.X) 897.93 +0.69%, Broker/Dealer Index (XBD.X) 623.52 +0.59% and S&P Insurance Index (IUX.X) 274.23 +0.49%. A slight decline in the 10-year YIELD ($TNX.X), which slipped lower by 2.7 basis points to 4.214% didn't hurt. Bulls would like more of the same (with some dollar strength) to get a move going above the WEEKLY Pivot tomorrow. Today's trade saw the broader S&P 500 Bullish % ($BPSPX) see a net loss of 2 stocks to point and figure sell signals as the bullish % slipped 0.4% to 82.2%. Still "bull confirmed" status and would take a reversing lower reading of 76% to reverse into "bull correction" status. Dow Industrials (INDU) Chart - Daily Intervals Four of the 5 most heavily price weighted Dow components found gains today, with and offset weakness in the bells like T -2.27% and SBC -3.76%, which traded lower with non-component Verizon (V). Dow very similar to SPX as it relates to WEEKLY Pivot as near- term resistance, but a rising 21-day SMA, WEEKLY S1 and base of our regression channel provide some formidable near-term support at the 9,490 level. Today's trade saw no net change in the very narrow Dow Industrials Bullish % ($BPINDU) and status remains "bull confirmed" at 83.33%. Jeff Bailey ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** **************** MARKET SENTIMENT **************** More of the same - J. Brown Investor sentiment continues to be strongly bullish as the markets shrugged off another day of dollar fears. Leading the headlines was President Bush's address to the United Nations asking for unity to rebuild Iraq. The markets failed to react one way or the other to his speech. The biggest clue to investor's mindset could be the internals. The advance decline numbers were positive once again with 18 winners for every 10 losers on the NYSE and 19 advancers per 11 losers on the NASDAQ. Up volume was more than double down volume on the Big Board and almost four times down volume on the NASDAQ. As one trader commented today, we have a lack of willing sellers. Until investors decide to unload shares and lock in some profits the general trend should be a drift higher. The resiliency in the tech sectors has probably driven hair-pulling bears to baldness. We're still hearing comments about a return to a bubble mentality as the Internets like AMZN and YHOO etch new highs. Tomorrow is pretty quiet on the economic front and we'll be left to the current prevailing winds, which still point higher. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9686 52-week Low : 7197 Current : 9576 Moving Averages: (Simple) 10-dma: 9532 50-dma: 9329 200-dma: 8676 S&P 500 ($SPX) 52-week High: 1040 52-week Low : 768 Current : 1029 Moving Averages: (Simple) 10-dma: 1024 50-dma: 1000 200-dma: 929 Nasdaq-100 ($NDX) 52-week High: 1406 52-week Low : 795 Current : 1388 Moving Averages: (Simple) 10-dma: 1388 50-dma: 1302 200-dma: 1139 ----------------------------------------------------------------- Little change in the volatility or fear indices as investors continue to show "no fear". CBOE Market Volatility Index (VIX) = 19.49 -0.16 Nasdaq Volatility Index (VXN) = 26.98 -0.96 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.86 556,650 476,000 Equity Only 0.74 478,215 352,383 OEX 1.29 10,498 13,529 QQQ 2.74 27,007 74,023 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.1 + 0 Bull Confirmed NASDAQ-100 81.0 + 1 Bear Correction Dow Indust. 83.3 + 0 Bull Confirmed S&P 500 82.2 + 0 Bull Confirmed S&P 100 86.0 - 1 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.08 10-Day Arms Index 1.14 21-Day Arms Index 1.05 55-Day Arms Index 1.02 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 -NYSE- -NASDAQ- Advancers 1809 1959 Decliners 1016 1153 New Highs 141 257 New Lows 10 2 Up Volume 1057M 1443M Down Vol. 525M 373M Total Vol. 1591M 1852M M = millions ----------------------------------------------------------------- ! The COT Website has NOT updated their data since 09/09/03. Commitments Of Traders Report: 09/09/03 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 No change in sentiment for the commercial traders here. Meanwhile small traders forked out a little more cash to increase both their long and short positions. Commercials Long Short Net % Of OI 08/19/03 404,665 455,381 (50,716) (5.9%) 08/26/03 410,378 472,987 (62,609) (7.1%) 09/02/03 417,973 482,392 (64,419) (7.2%) 09/09/03 418,958 486,209 (67,251) (7.4%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 18,486 - 6/17/03 Small Traders Long Short Net % of OI 08/19/03 162,034 87,064 74,970 30.1% 08/26/03 170,424 76,967 93,457 37.8% 09/02/03 169,030 75,748 93,282 38.1% 09/09/03 176,401 81,444 94,957 36.8% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 Commercial traders in the e-minis continue to pump up their long positions. The last numbers show the most bullish posture in quote sometime. Meanwhile the small trader has rotated a little bit of money from short back to long. Commercials Long Short Net % Of OI 08/19/03 296,971 235,779 61,192 11.5% 08/26/03 338,766 234,841 103,925 18.1% 09/02/03 347,724 224,011 123,713 21.6% 09/09/03 370,909 237,610 133,299 21.9% Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 08/19/03 90,428 125,980 (35,552) (16.4%) 08/26/03 52,131 120,853 (68,722) (39.3%) 09/02/03 56,709 134,094 (77,385) (40.6%) 09/09/03 59,692 130,270 (70,578) (37.1%) Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders are increasing their bets on the NDX but they're still beating more heavily on a move lower. Small Traders are also active with larger net positions but they're still beating on the bulls. Commercials Long Short Net % of OI 08/19/03 32,107 53,665 (21,558) (25.1%) 08/26/03 33,991 55,849 (21,858) (24.3%) 09/02/03 37,002 55,379 (18,377) (19.9%) 09/09/03 44,677 62,369 (17,692) (16.5%) Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 9,068 - 06/11/02 Small Traders Long Short Net % of OI 08/19/03 25,607 10,134 15,473 43.3% 08/26/03 26,108 8,864 17,244 49.3% 09/02/03 23,168 10,561 12,607 37.4% 09/09/03 28,788 13,370 15,418 36.6% 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 No change in investor sentiment for the professional traders here. There is little change for the small trader but they have bumped up their long positions a tad. Commercials Long Short Net % of OI 08/19/03 21,088 18,984 2,104 5.3% 08/26/03 24,586 10,386 14,200 40.6% 09/02/03 25,462 10,447 15,015 41.8% 09/09/03 25,807 10,756 15,051 41.2% 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 08/19/03 15,717 9,143 6,574 26.4% 08/26/03 14,115 5,592 8,523 43.2% 09/02/03 6,629 13,402 (6,773) (33.8%) 09/09/03 7,429 13,796 (6,367) (30.0%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is $49.95. The quarterly price is $129.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Tuesday 09-23-2003 Copyright 2003, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: UTX Dropped Puts: None Call Play Updates: AMGN, AMZN, AXP, APOL, AU, ERTS, LEA, LUV, MERQ, SLB New Calls Plays: IBM Put Play Updates: KKD, GILD New Put Plays: CCMP **************** 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: ***** United Technologies - UTX - cls: 79.26 chg: +0.83 stop: 77.20 Times up! We're going to call it quits on UTX. The stock has been consolidating sideways between $77 and $80.50 for a month. That's not necessarily bad and if you have the patience feel free to keep the play open. The fundamental picture should be positive for UTX but traders may do better waiting for a breakout above $80.50 before putting their money to work here. The company does have some defense spending exposure so we're surprised the stock was up after the Smith Barney comments today. It will be our luck that we'll close UTX today and see it rally strongly by the end of the week. Picked on August 29 at $80.05 Change since picked: -0.79 Earnings Date 07/17/03 (confirmed) Average Daily Volume: 2.1 million Chart = PUTS: ***** None ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ******************** PLAY UPDATES - CALLS ******************** Amgen, Inc. - AMGN - close: 68.58 change: +0.12 stop: 67.50 Is this just a continuation of the pattern for which AMGN has been known over the past year, where the stock trolls along near support and then vaults higher? Since peeling lower on the heels of the Wachovia downgrade last week, the stock has been trading in a fairly narrow range, hugging the $68.50 level, which is very near the 50-dma ($68.30). We can also see AMGN holding just above both the long-term ascending trendline and the 20-dma ($67.77). The Biotechnology index (BTK.X) is holding up fairly well, just below resistance at the $500 level and if the BTK can break out, then AMGN will likely power through the $70 level once again. Aggressive traders should be able to establish favorable positions on additional rebounds from the vicinity of $68, keeping a tight leash on those positions with a stop at $67.50. Traders looking for some confirmation before playing will want to see a move above $70.15, which is above last Thursday's intraday high. Picked on September 16th at $69.81 Change since picked: -1.23 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 7.94 mln Chart = --- Amazon.com - AMZN - close: 50.44 change: +2.97 stop: 46.50*new* Now that's actually a more powerful move than we were expecting, but AMZN clearly proved that it has plenty of willing buyers on Tuesday. After just a bit of consolidation from Thursday's strongly bullish move, AMZN shares exploded upwards this morning, logging a 6.25% gain on huge volume of 20 million shares. That pushed the stock right to the top of its ascending channel and the bulls are showing no signs of letting up. In fact, with AMZN closing at its best level since June of 2000, this Internet leader may just be getting warmed up for the Holiday shopping season ahead. We want to give AMZN room to run higher, while at the same time minimizing our risk in the play, so we're raising our stop to $46.50, just under the 20-dma ($46.69). A pullback into the $47.50-48.50 area can be used for new entries, while aggressive momentum traders can enter on further strength above $51. Look for next resistance near $54-55, at which point we would strongly advise harvesting some gains. Picked on September 18th at $47.89 Change since picked: +2.55 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 8.44 mln Chart = --- American Express - AXP - close: 47.01 chg: +0.39 stop: 44.49 The market wide rally was mostly lost on shares of AXP as the stock continues to consolidate its recent gains above the $46 level. Of course the rise in the banking indices was not very strong and AXP out performed them both. The sideways consolidation above $46 is healthy and it provides an entry point for new bullish positions before the next leg higher. We think that next leg could start soon. AXP's management put out press release on Monday stating that while Visa/MC will appeal the court ruling last week, AXP believes the legal arguments are over and AXP will pursue new banking relationships with the credit card issuers previously unavailable to them. Picked on September 18 at $47.08 Change since picked: - 0.07 Earnings Date 10/27/03 (unconfirmed) Average Daily Volume: 3.9 million Chart = --- Apollo Group - APOL - close: 67.34 chg: -1.06 stop: 64.00 Shares of APOL are consolidating recent gains but in a very orderly fashion and bullish traders can use the slight pull back as an opportunity to pick their entry point. The daily candlesticks look somewhat like a bullish flag formation and any bounce off the $66 or $67 level looks good to us. On the other hand momentum traders might want to wait for a move above the $69-70 levels. News has been quiet on APOL but education stocks are still getting positive press. No change to our stop loss. Picked on September 16 at $68.45 Change since picked: - 1.11 Earnings Date 10/07/03 (confirmed) Average Daily Volume: 1.9 million Chart = --- Anglogold Ltd. - AU - close: 41.39 change: +0.73 stop: 39.00*new* Many have tried to call the top in the rise of gold and the gold shares, but it hasn't arrived just yet. Never underestimate the power of a secular bull market (in gold stocks), especially when it is being fueled by central banks around the world bound and determined to devalue their own currencies. The Gold and Silver index (XAU.X) celebrated again on Tuesday, launching to a new closing high above $97, and that seemed to lift shares of AU back through the $41 level. In contrast to Monday's price action though, this time the stock held its gains and closed right at the intraday high in a convincing bullish outside day formation. AU looks to be headed higher and traders that took advantage of that latest dip in the $38-39 area are sitting on a nicely profitable play. Look to add new positions on a breakout to new highs or on a pullback and rebound from above the 10-dma ($39.63). Remember, our upside target is $44, the site of the PnF vertical count. We're raising our stop to $39.00 tonight, which will be below the 20-dma (currently $38.97) by tomorrow morning. Picked on September 2nd at $39.51 Change since picked: +1.88 Earnings Date 10/30/03 (unconfirmed) Average Daily Volume = 862 K Chart = --- Electronic Arts - ERTS - close: 96.10 chg: +1.90 stop: 93.00*new* Up, up and away! The gravity-defying performance by ERTS continues. The last three sessions have shown ERTS resist any profit taking and trade sideways between $93-95. Today's bullish action in the markets was like a green light for the ERTS train and it charged ahead with another 2 percent gain. We're both astounded and encouraged but readers must know that we're in dangerous territory. The stock is extremely overbought and new positions are not to be considered lightly. As a matter of fact, we would not suggest them unless you're an experienced day trader who can jump in and out pretty quickly. Meanwhile the rest of us who might be holding on to some gains need to plan on our exit strategy. Current levels are still a good place to take some money off the table. However, if you're hanging on for the ride to $100, consider this. The $100 level is a major psychological number and there could be plenty of traders who have lined up their own exits at $99.90, 99.75, 99.50 to try and beat the crowd who might be planning to sell at $100. That's why we're suggesting that traders think about exiting in the $98.50-99.00 range. Or let it ride and just keep cinching up your stop loss. We're going to adjust our stop to $93.00, while the true channel traders should probably bump theirs to $90, under the 30-dma (which seems too low to us and a place to consider making new entries). In the last couple of days the ERTS press engine has been busy. ERTS announced plans to develop a "Battle for Middle- Earth" game with the Lord of the Rings. They launched the first expansion pack for their popular Sims game. They released the Tiger Woods PGA TOUR 2004 game as well as the Sims Double Deluxe and the NHL 2004 game. Sounds like plenty of options for Christmas. Picked on August 28 at $89.06 Change since picked: +7.04 Earnings Date 07/23/03 (confirmed) Average Daily Volume: 3.3 million Chart = --- Lear Corp - LEA - close: 54.71 change: +0.75 stop: 53.25*new* We're growing just a little bit concerned with the LEA call play. The stock dipped back below the $55 level on Monday but managed to bounce from the $54 mark Tuesday. The bounce is encouraging today but shares remain below $55 despite the market's rally. We probably shouldn't be too concerned. Volume has been slowly receding on the consolidation sideways and the rising simple 50- dma allows us to inch up our stop loss to $53.25, which really reduces our risk. There has been no new headlines to report. Traders might want to consider new positions over the $55 mark (or over $56 if that makes you feel better). Picked on September 16 at $54.05 Change since picked: + 0.66 Earnings Date 10/17/03 (confirmed) Average Daily Volume: 694 thousand Chart = --- Southwest Airlines - LUV - close: 18.20 change: +0.03 stop: 17.75 A quick look at the daily chart of the Airline index (XAL.X) and it certainly appears as though some bears may have gotten trapped by yesterday's decline and today's sharp rebound. By the closing bell, the XAL had recouped all of Monday's losses and it looks poised for another breakout attempt above the $64-65 area. Our LUV play has behaved pretty much to script over the past week, consolidating its recent breakout by coming back to confirm new support near the $18 level and it also looks ready to continue its ascent. The past two days have seen pretty convincing rebounds from the site of the 20-dma ($17.92) and another rebound from above this level looks like a decent entry point into the play. More conservative traders might want to wait for that rebound to extend above the $18.50 level, which marks the top of yesterday's gap down, before playing. Remember, our initial target is for a move up to $20 resistance, and we will likely need to see the XAL break out in order to see LUV achieve our initial target. Maintain stops at $17.75. Picked on September 11th at $18.36 Change since picked: -0.16 Earnings Date 10/20/03 (unconfirmed) Average Daily Volume = 2.56 mln Chart = --- Mercury Interactive - MERQ - cls: 50.14 chng: +0.94 stop: 47.65 While it isn't conclusive yet, it certainly looks like some bears may have gotten trapped by yesterday's selloff and subsequent rebound today. Nothing about MERQ's chart setup has changed, as the pattern of higher lows and higher highs remains intact. In fact, the pullback and rebound from the $49 area looks quite healthy, as it confirms new support at the site of the recent breakout. Adding conviction to the rebound was the fact that volume on Tuesday's rebound came in slightly stronger than the selling volume of the prior two days. Successive dips that find support in the $48.50-49.00 still look attractive for opening new positions, although momentum traders will likely want to wait for a rally through the $52.25 level before initiating new positions. Maintain stops at $47.65 for now, which is just below both the 20- dma ($47.83) and the intraday low from last Monday. Picked on September 14th at $48.16 Change since picked: +1.98 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume = 3.06 mln Chart = --- Schlumberger Ltd. - SLB - close: 50.70 change: -0.37 stop: 47.50 Just as we expected when we initiated coverage of SLB over the weekend, the stock appears to be coming back to test support at its broken resistance level ($49.75-50.00). That level of resistance has been in place for several months now and it would be unreasonable to think the bulls would just blast right through without at least a single pullback to test that old resistance as new support. Another way of looking at it is that the $50.00 level (actually $49.98) is the 50% retracement of the rebound from the bottom of the bullish wedge on 9/18 and the top at $52.10 on Monday. Either way you look at it, a rebound from the vicinity of $50 looks like a high odds entry point ahead of a resumption of the rally that should take SLB up to our $56 target. It should now be safe to inch our stop up to $48, which is still below the bottom of that bullish wedge. Picked on September 21st at $50.99 Change since picked: -0.29 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 3.12 mln Chart = ************** NEW CALL PLAYS ************** Intl Business Machines -IBM- cls: 91.34 chg: -0.05 stop: 87.90 Company Description: Big Blue is being heralded as the world's largest technology company. Considering their massive hardware and software business across the globe it's not surprising. However, IBM's services and consulting business is growing by leaps and bounds and is a major source of revenues. Why We Like It: Why do we like it? That's easy. Just about everyone on Wall Street has raised their outlook or offered positive comments on IBM's business from its software to consulting to its chip divisions. If there is any rebound in IT spending then IBM should get a part of it. Plus, the stock has broken into its gap between $90 and $97. The pull back to the $91 area is an entry point for IBM's next leg up to "fill the gap". The $90 level should be strong support since it was such tough resistance to break. Very conservative traders could put their stop loss just under $90, but we're going to give Big Blue a little more room with a stop at $87.90. Any bounce above $90 looks like an entry point to us. The company has three weeks before they're expected to report their Q3 earnings and we might get an old fashioned earnings run. Suggested Options: We're going to suggest the October and November 90 and 95 strikes as our favorites but longer-term traders could look to the January's. BUY CALL OCT 90 IBM-JR OI=53608 at $3.40 SL=1.75 BUY CALL OCT 95 IBM-JS OI=37252 at $1.20 SL=0.60 BUY CALL OCT 100 IBM-JT OI=24671 at $0.35 SL -- riskier! BUY CALL NOV 90 IBM-KR OI= 199 at $4.50 SL=2.25 BUY CALL NOV 95 IBM-KS OI= 1526 at $2.10 SL=1.05 BUY CALL NOV 100 IBM-KT OI= 460 at $0.85 SL= -- risky Annotated chart: Picked on September 23 at $91.34 Change since picked: + 0.00 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume: 6.7 million Chart = ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* PLAY UPDATES - PUTS ******************* Krispy Kreme - KKD - cls: 39.47 chg: -0.17 stop: 42.71 *new* We're running out of stale doughnut jokes but fortunately the stock keeps crumbling lower despite the market's attempt to stay positive. Shares finally broke the $40 level on Monday but the candlestick almost looked like a potential "hammer" and suggested a possible reversal. The stock surged higher early this morning back above the $40 level but couldn't hold it, which is good news for the bears. The thought of capitalizing on such a "sweet" deal could be attracting even more bears now that the stock has spent two days under support (at $40). There was some news about the company buying 73% of the "rights" to sell Krispy Kreme doughnuts in Michigan from one of their franchisees but we doubt that had much affect on investor sentiment for the stock. Traders who had been waiting for a close under $40 now have a chance to open new positions. We're still targeting the $37-36 area near its simple 200-dma. Meanwhile we're also moving our stop down to $42.71. Picked on September 8 at $41.69 Change since picked: - 0.93 Earnings Date 08/21/03 (confirmed) Average Daily Volume: 1.0 million Chart = --- Gilead Sciences - GILD - close: 58.04 chg: +0.33 stop: 63.01*new* Monday was another tough day for GILD shareholders. The markets were weak due to concerns over the dollar and the prevailing attitude was selling to lock in profits. GILD may have fallen strongly from its highs near $70 two weeks ago but there are still PLENTY of profits still in the stock. The stock rose from $31.50 in February and smart investors will not want to let it all evaporate without taking some off the table for themselves. The decline on Monday started with a gap open to $59.40. This was below our trigger of $59.75 so our new entry price becomes $59.40. Volume was strong and the stock closed below its simple 100-dma. Today's market bounce also had shares of GILD bouncing from another fresh relative low but the bounce faded for GILD late in the afternoon as shares rolled over near $59.00. This is encouraging for the bears and we're going to lower our stop loss to $63.01. That might seem a little wide and more conservative traders could probably use a stop near $62 or even $61 as the $60 level should be new resistance. Picked on September 16 at $59.40 Change since picked: -1.36 Earnings Date 07/31/03 (confirmed) Average Daily Volume: 3.31 million Chart = ************* NEW PUT PLAYS ************* Cabot Microelect. - CCMP - close: 59.05 change: -1.19 stop: 63.25 Company Description: Cabot Microelectronics is a supplier of high performance polishing slurries used in the manufacture of advanced integrated circuit (IC) devices, within a process called chemical mechanical planarization (CMP). CMP is a polishing process used by IC device manufacturers to flatten many of the multiple layers of material that are built upon silicon wafers and necessary in the production of advanced ICs. CMP enables IC device manufacturers to produce smaller, faster and more complex IC devices with fewer defects. Why we like it: After leading the Technology market higher for several months, the Semiconductor index (SOX.X) seems to be losing its luster. Last week, the SOX failed to make a new high, struggling mightily with the $460 resistance level before finally giving in a beginning to drift lower. In light of the potential for weakness, the index has actually held up fairly well so far this week. On the other hand, shares of CCMP are clearly exhibiting some relative weakness, getting sold to the tune of a 1.97% slide on Tuesday, following Monday's 2.67% loss. This comes after Friday's bearish session that left CCMP resting below the 50-dma ($62.39) for the first time since late May. Adding to the bearish picture right now is the way volume is increasing to the downside this week, coming in well above the ADV today. When CCMP broke the $60 level yesterday, it completed a descending triple-bottom Sell signal on the PnF chart, and price is currently resting on the bullish support line ($58) for the first time since May. The vertical count currently projects down to $55 although it certainly seems reasonable that a test of the 200-dma ($50.61) could be in the cards. Clearly the stock is at a critical juncture right now, and we would expect at least one failed rally attempt before the bears successfully break the bullish support line. That makes the ideal entry on a failed rebound below resistance and the logical places to look for an entry would be on a rollover at the bottom of yesterday's gap (just below $61) or a rebound failure near the top of that gap ($61.90), reinforced by the rolling lower 10-dma ($62.49) and 50-dma ($62.39). After entry, look for an initial drop to $55, using a protective stop at $63.00. Suggested Options: Aggressive short-term traders will want to focus on the October 55 Put, as it will provide the best return for a short-term play. More conservative traders will want to look to the October 60 strike, with is currently at the money. If looking for a longer- term play, then we would favor the November 55 Put. But take note that these were just listed on Monday and open interest is still very low. BUY PUT OCT-60 UKR-VL OI=1015 at $3.60 SL=1.75 BUY PUT OCT-55 UKR-VK OI=2565 at $1.65 SL=0.75 BUY PUT OCT-55 UKR-WK OI= 30 at $3.10 SL=1.50 Annotated Chart of CCMP: Picked on August 27th at $64.45 Change since picked: +0.00 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 881 K Chart = ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Tuesday 09-23-2003 Copyright 2003, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Play of the Day: CALL - IBM ********************** PLAY OF THE DAY - CALL ********************** Intl Business Machines -IBM- cls: 91.34 chg: -0.05 stop: 87.90 Company Description: Big Blue is being heralded as the world's largest technology company. Considering their massive hardware and software business across the globe it's not surprising. However, IBM's services and consulting business is growing by leaps and bounds and is a major source of revenues. Why We Like It: Why do we like it? That's easy. Just about everyone on Wall Street has raised their outlook or offered positive comments on IBM's business from its software to consulting to its chip divisions. If there is any rebound in IT spending then IBM should get a part of it. Plus, the stock has broken into its gap between $90 and $97. The pull back to the $91 area is an entry point for IBM's next leg up to "fill the gap". The $90 level should be strong support since it was such tough resistance to break. Very conservative traders could put their stop loss just under $90, but we're going to give Big Blue a little more room with a stop at $87.90. Any bounce above $90 looks like an entry point to us. The company has three weeks before they're expected to report their Q3 earnings and we might get an old fashioned earnings run. Suggested Options: We're going to suggest the October and November 90 and 95 strikes as our favorites but longer-term traders could look to the January's. BUY CALL OCT 90 IBM-JR OI=53608 at $3.40 SL=1.75 BUY CALL OCT 95 IBM-JS OI=37252 at $1.20 SL=0.60 BUY CALL OCT 100 IBM-JT OI=24671 at $0.35 SL -- riskier! BUY CALL NOV 90 IBM-KR OI= 199 at $4.50 SL=2.25 BUY CALL NOV 95 IBM-KS OI= 1526 at $2.10 SL=1.05 BUY CALL NOV 100 IBM-KT OI= 460 at $0.85 SL= -- risky Annotated chart: Picked on September 23 at $91.34 Change since picked: + 0.00 Earnings Date 10/15/03 (unconfirmed) Average Daily Volume: 6.7 million Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.
To ensure you continue to receive email from Option Investor please add "email@example.com"
Option Investor Inc