The Option Investor Newsletter Tuesday 09-30-2003 Copyright 2003, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Trouble in Paradise Futures Markets: Currency matters Index Trader Wrap: Sunstroke Market Sentiment: Confidence Concerns Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 09-30-2003 High Low Volume Advance/Decline DJIA 9275.06 -105.20 9378.10 9230.47 1.78 bln 1402/1528 NASDAQ 1786.94 - 37.60 1812.81 1783.46 1.87 bln 1087/1735 S&P 100 498.56 - 6.46 505.02 496.57 Totals 2489/3263 S&P 500 995.97 - 10.61 1006.58 990.36 W5000 9649.68 - 93.30 9742.98 9595.20 RUS 2000 487.68 - 5.03 492.71 483.56 DJ TRANS 2673.86 - 36.40 2709.55 2671.03 VIX 22.72 + 1.05 23.26 22.03 VXN 32.83 + 2.17 32.83 31.17 Total Volume 3,979M Total UpVol 2,999M Total DnVol 933M 52wk Highs 130 52wk Lows 14 TRIN 1.90 NAZTRIN 2.73 PUT/CALL 1.06 ************************************************************ Trouble in Paradise Those analysts predicting a +6.0% GDP for the 3Q received a serious shock this morning when several economic reports came in much lower than expected. There is a rising concern that the economic recovery tripped in late August and slid face first into September. The markets tried to rally off the lows as the bad news bulls showed up in volume but they ended up giving back yesterday's gains to close down substantially. Dow Chart Nasdaq Chart S&P Chart The morning opened negatively with the Chain Store Sales down -0.4% and the third straight week in the negative column. Most retailers were generally below plan for the week. Last week analysts said the drop was due to the hurricane. This week they said it was more likely a drop due to weakening financial conditions and not the hurricane. Some analysts said spending last week was actually helped by hurricane repairs and the numbers still came in weak. The Bank of Tokyo lowered estimates once again for September to +3.5%, down from earlier estimates of +5% and +5% growth in August. Wal-Mart, who has repeatedly said sales were running ahead of plan, guided analysts to a lower range for earnings. Analyst's estimates were for 47 cents and Wal-Mart guided them to 45-47 cents OR a quick calculation shows us a median of 46 cents and a penny less than the street. Jobs are still falling as you will see below and consumers are beginning to hoard money again now that the tax rebate checks are gone. The NY-NAPM report was flat at 222.2, up only a fraction from the August 221.70. There were some positive internals with the current conditions component rising to 51.1 and the first time over 50 this year. The rest of the internals were mixed and analysts had hoped for a generally better showing but they were still happy to see the improvement in some key indicators. Not so positive was the Chicago PMI, which fell to 51.2 from 58.9 in August. This was very negative and the lowest reading since April and only marginally over the 50 boundary for expanding conditions. New orders fell to 53.2 from 60.5 and employment fell to 45.3 from 51.2. The employment drop is the most critical component as it indicates management is not expecting rising demand in the near future. Last month was the first time in three years that employment rose over 50 and it could not hold the gains. This would indicate the early quarter bounce in the economy could have been failing as the quarter closed. Also shocking analysts was the drop in Consumer Confidence to 76.8 from 81.7 and well under the consensus of 82.0. The bulk of the decline came in the expectations component which fell to 88.4 from 94.9. This is a large drop and represents a material shift in sentiment. Consumers planning to buy a home fell to 2.9 from 4.1, a car 5.4 from 6.6 and a major appliance to 26.7 from 32.5. This decline in purchasing trends is substantial with the home buying component at its lows for the year. The auto number and appliance numbers are at three year lows and the auto manufacturers were making announcements after the close to support this outlook. Overall the headline number was the lowest level since March. This was not a good report in any context. Ford announced after the close that they would be cutting -12,000 jobs citing increased competition and falling sales. Daimler Chrysler also announced they were planning to layoff "thousands" in the near future. Numbers due out tomorrow are expected to show auto sales falling to an annualized 16.8 million units. Ford said it was also going to cut -3,000 contractors. Sales concessions were said to have run as much as 20% of the list price in September as dealers were told to push the inventory out the door and get ready for the new models. High dollar cars were rumored to have been offered at 30% discounts to unload the inventory. It does not appear the consumer is coming to our rescue again. One sun rose in the east this morning and another crashed into oblivion. SUNW warned that current quarter earnings would be less than expected and that it was going to take a $1 billion charge. SUNW said it reflects a "particularly difficult quarter for the company due in part to intense market and competitive dynamics." Analysts were expecting a -2 cent loss for the quarter and SUNW said it was now expecting a -7 to -10 cent loss. SUNW lost nearly -15% on volume of 163 million shares to lead the Nasdaq to a -37 point loss. ETS, a network equipment manufacturer, warned that they would miss earnings and blamed it on the hurricane. While I would be skeptical that a hurricane in the last two weeks of the quarter would cause a miss, that was the excuse. The sector took it on the chin on the one bad apple principle. The SUNW warning of a dismal quarter did not help the overall tech sentiment and ETS just added to the gloom. Also not helping sentiment was an announcement from the SEC that they were investigating FNM/FRE for possible evidence of fraud. There are several agencies currently targeting those firms not only for evidence of wrong doing but also for evidence of liquidity. The OFHEO (oversight committee) said FRE had sufficient liquidity as of June-30th. Glad to hear that a quarter later. The committee said they had $29 billion in capital compared to the $4.7 billion required. How that capital was impacted by the bond implosion is yet to be disclosed. The major indexes closed the quarter in positive territory stretching the consecutive strings of positive quarters to .. two. Yes, two, back-to-back positive quarters. So what? It was the first time in three years that this has happened. Break out the bubbly! It was a squeaker for the S&P which started the quarter at 975 and at one point this morning appeared it could challenge that level today. It was not to be and somebody bought the dip and held the indexes up to push them into the record books and create good press for mom and pop investor. I say somebody because the Feds were in the market today. The Fed intervened on behalf of the Bank of Japan to stabilize the rising Yen. The BOJ said they had spent 4.457 trillion yen in the last six weeks to keep the yen from climbing against the dollar. ($40 billion dollars) This was the first intervention by the BOJ since the G7 meeting in Dubai called for more flexible exchange rates and discouraging intervention. With the dollar diving today on the bad economic news the BOJ was forced to act to keep the Yen at 110 to the dollar and the current line in the sand. Ten Year Yields Once the economic news hit the fan bonds soared with the Ten Year yields dropping a full 140 basis points. While this is a positive for the bond market and the housing market it could be a negative for the stock market. Cracks are beginning to appear in the economic recovery picture and it appears there could be a concerted effort to sell stocks and buy bonds in process. The markets may have finished the quarter with a gain but they finished the day with a loss and at the low for the month. There was a definite attempt to buy the dip intraday but it failed as darkness approached. Some claimed that the intraday buying was last ditch end of quarter window dressing from funds that wanted to show stocks on the books but not willing to buy at higher risk levels over the last couple weeks. While that could be true it paints a bleak picture for the coming week. For those that were trying to hold on until September closed the pressure is off. The first day of October is known for losses as the window undressing begins. Ironically the following two days are typically up. The Dow closed under 9300, the S&P under 1000 and the Nasdaq well under 1800 again. The Dow and SPX are well under their 50 DMA and the Nasdaq is pressing it at 1779. The drops are beginning to worry traders as they are occurring on stronger volume with today's move on over 4.1 billion shares. The down volume was 3:1 over up volume. The VXO (old VIX) hit 24.98 today and is showing an increasing level of fear in the market. The new VIX hit a high for the month at 23.26 despite its lower volatility. Even more amazing was the TRIN which closed at 1.90 and the Nasdaq TRIN at 2.73. These are very oversold indicators but odds are good they will get more oversold before the week is out. On Wednesday we are facing the ISM report and the consensus is for a headline number that is flat with last months 54.7. If it holds there the carnage may be spared. That was the highest reading since the 55.2 in December-2002 and the same reading in June-2002. March through June-2003 were under 50 and showing contraction with July at 51.8, a squeaker back above the line and then the large spike to 54.7 in August. There are quite a few analysts that expect the ISM to drop several points below consensus but any number over 51 should keep the bears at bay. As long as traders can grasp at the "over 50" economic expansion hope we should not see any fresh new economic selling. We also get construction spending and layoffs tomorrow. The worry for the week is that the nonfarm payrolls on Friday will break 100K in job losses. The current estimate is -25K but the whisper number is growing. This puts the bears on the defensive. With negative expectations for the ISM and Jobs it sets up a potential relief bounce if the numbers are not as bad as the whisper numbers. This means bears are probably not as likely to short heavily into the announcements. The risk of disaster is more on their heads than the bulls. The bulls already know this is a bad season and the recent reports and earnings warnings have them in bunker mode. The wild card tomorrow is the window undressing, if any, and then the wait for Friday. If you are long the 100 DMA on the S&P is at 988 and the 25% retracement level at 977. Both of those levels should provide some support but we are in October. This month is known for some monster drops but it is also known as the "bear killer" month. Investors know to buy the October dip and ride it into January and hopefully that will happen again this year. For tomorrow, ISM is the morning focal point then we are on our own until we see if the institutions are undressing or not. The ISM could help make up their minds. If the number drops in the 50 range it could convince many investors that the recovery is in danger and profits in hand now allows for selective buying later. Enter Very Passively, Exit Very Aggressively! Jim Brown Editor *************** FUTURES MARKETS *************** Currency matters Jonathan Levinson Talk of currency intervention moved the markets today, rescuing the US Dollar Index above 92. Precious metals and commodities advanced notwithstanding, equities sunk, and bonds rallied. 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 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 Once again, the chart says it all. An attempted bounce overnight was sold heavily, while that this morning took hold and helped the US Dollar Index bounce from support at its summer lows. The news story as covered by Yahoo Finance from Reuters read as follows: “NEW YORK (Reuters) - Japan's Ministry of Finance sold yen for dollars on the foreign exchange markets on Tuesday, a ministry official said, acting through the U.S. Federal Reserve in a move that jolted the dollar sharply higher. [...] Below 110 yen, the BoJ (would have) got very nervous. The BoJ's action allows it to re-peg the dollar between 111-115. But it would be very hard to put it back up to 115 yen," said Philip Capone, senior trader at Fortis Bank in New York.” Gold and silver advanced, as did the CRB, which added 1.22 to 243.65, led by heating and crude oil, FCOJ and wheat futures. Equities dropped and treasuries advanced. Notwithstanding central bank manipulation, it appears that the dismal consumer confidence data had a significant effect on the US markets as investors behaved predictably and clutched for bonds while dumping equities. Nevertheless, the decline in equities was stemmed around the same time as the slide in the dollar, and began an advance that lasted through most of the day. Despite that advance, equities remained in negative territory for the duration. There’s no need to rant or rave about the Working Group on Capital Markets, the Plunge Protection Team, or anyone else. The bounces in the dollar and the S&P futures came at support levels and regardless of one’s beliefs in the merits of technical analysis, the buyers were attentive to their chart levels. Whoever waited until 30 minutes after the terrible economic data was released to begin buying futures sharply was looking at a chart that showed the same support at 988 that many of us have been seeing since the summer’s trading range in that area. The move launched from the second visit to the 988 ES level, an intraday double bottom. Be it intervention or dip buying, the effect is the same, and the charts help us to be attentive at price levels at which the market is vulnerable to such moves. Daily chart of December gold I heard talk today totaling the value of the BoJ’s currency interventions for the month of September $40B US dollars, and $122B for 2003 to date. These are difficult sums to comprehend. The rally in gold seems small relative to what one might expect, but the trend is clear nonetheless. Dec gold added to yesterday’s gains, printing an intraday high at 389.50, unwilling to try for the so-far difficult 390 level. Still, a higher high and higher low from yesterday, always within the bearish formations on the daily chart. The oscillators are sliding sideways, awaiting the next directional move. It’s encouraging to have seen gold and silver finish positive against the declines in equities today. As of this writing, December gold was up 3.10 at 386.30. Daily chart of the ten year note yield Treasuries found the bids one would have expected on the poor economic data, assisted by yet another repo from the Fed, this one adding 3B to the considerable amount of money invested by its open market operations desk. The ten year note yield (TNX) dropped 14 basis points to close at 3.937% in a trending move. The oscillators are now becoming pinned in oversold territory, and the wedge failure looks very bearish for the TNX/bullish for treasuries. Daily NQ candles The NQ printed a bearish engulfing candle over yesterday’s bullish engulfing candle, displaying anything but consensus over the current price level. The daily oscillator downphase continues, with round number support at 1300 taking on more significance that we might otherwise expect. A new low for the move was printed before the 10:30AM buying spree at 1303, but the NQ closed at 1305, within spitting distance. Other than lower Bollinger band support, the failure to hold 1320 looks very bad for the bulls. 30 minute 20 day chart of the NQ The 30 minute chart holds out more hope for a bounce, as the decline continues to trace out a bull flag, and, more significantly, there’s a clear bullish divergence printing on the oscillators. Both the Macd and stochastics show a pattern of higher highs since last Thursday, compared with lower price lows. Despite my feeling entirely bearish on the NQ, ES and YM, these divergences have proven themselves useful this year. With the upper descending trendline looming close overhead at 1315 NQ, we should have our answer shortly. A sustained break below 1300 would set a new oscillator low below the rising trendline and invalidate the divergence. Daily ES candles The ES closed at 994.50 following a sharp bounce off 987.75 following the 10AM data. Unlike the NQ, it never came close to that low on the afternoon dip, and while the daily candle is not bullish, the long candle tail is far less discouraging than the bearish engulfing on the NQ. Critical support remains at 988, resistance first at 1001, followed by 1008. The downphase on this daily timeframe continues within the broader context of our bear wedge breakout projecting to a possible 957 downside target. 20 day 30 minute chart of the ES We have the same bullish divergence on the 30 minute ES, and the break above 1000 this afternoon had many wondering if a breakout wasn’t occurring. It failed, and the afternoon dip risks truncating the current oscillator upphase. As with the NQ, we need to see a breakdown before the upper descending trendline fails, in this case at 997 ES. Here’s how it looked on the 150- tick intraday chart: 150-tick chart of the ES Note that the short cycle oscillators are bottomy and suggest a bounce. However, a trending move lower would reverse the longer 30 minute chart oscillators above, and jeopardize the 988 low currently printed. Daily YM candles Same story on the YM. 20 day 30 minute chart of the YM For tomorrow, the prescription is the same. As no trade is better than a bad one, tight stops and a flexible outlook remain key. So far, we’re seeing a pattern of lower price lows and lower price highs in accordance with the ongoing daily chart downphases. The countertrend bounces on the 30 minute charts have failed at the upper trendlines, but the lows have been triggering a pattern of higher oscillator bottoms, suggesting growing strength from lower levels. With end of month window dressing coming to an end, the remainder Of the week could hold surprises in either direction, and there remains the continuing wildcard of currency intervention. See you at the bell! ************************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 ******************** Sunstroke The major indices finished in the red after Sun Microsystems (NASDAQ:SUNW) $3.31 -14.2% said the company would take a $1.05 billion charge and would post a sizeable loss after reviewing the amounts of deferred tax payments it carried on its books, would be of little future use, as the company struggled to post taxable profits as its corporate customers remained cautious on spending. Sun said it re-evaluated the assets under the accounting rule known as, "Statement of Financial Accounting Standards No. 109." While much of SUNW's expectations for a larger earnings per share loss is company specific, the company's announcement, which cited concerns that indicated an industry shift away from its traditional UNIX-based servers also weighed on Vertitas Software (NASDAQ:VRTS) $31.52 -2.89%, BEA Systems (NASDAQ:BEAS) $12.04 -1.39% and BMC Software (NYSE:BMC) $13.93 -1.13%. Merrill Lynch lowered its fiscal 2004 revenue estimate for Sun by $100 million to $11.2 billion and its bottom-line forecast to a 4 cent-a-share loss from an earlier breakeven projection. Meanwhile, Sanford Bernstein's Toni Sacconaghi said that in the face of lower sales, Sun would need to cut about 7,000 jobs to get its revenue-to-employee numbers back in line with figures from the boom years of 1998 and 1999. While multiple brokerage downgrades followed, the news did seem to be very stock specific, and not necessarily an industry wide move. Some analysts cautioned investors to not throw the baby out with the bathwater. SG Cowen analyst Richard Chu called Sun's move a "conservative treatment" even though the company is not completely certain it can return to regular profitability anytime soon. "This is the proper thing to do," Chu said. "You write down items that are not predicated on a return to profitability. These are non-cash items, so I think the investment community will largely overlook Sun's move." As shares of Sun Microsystems set below their flat longer-term 200-day simple moving average of $3.83, the land of the rising sun, Japan, announced that its Finance Ministry sold yen and bought dollars, which was conducted through the New York Federal Reserve, in an attempt to reverse the latest decline in the dollar against the yen. The sales of yen helped the dollar jump over Y1 (1 yen) higher after weak US consumer confidence data had driven down long-term interest rates and pushed the US currency to a three-year low of Y110.12. Japan's tactic of interacting with the New York Federal Reserve marked a change in strategy, where in the past, the Bank of Japan had been selling covert waves of yen to try and maintain a weaker yen to help its economy recover and have its exports attractive to consumers in the U.S. The cooperation between the New York Federal Reserve and Japan gave currency traders mixed signals on the U.S.'s recent talk of a strong dollar policy, and the recent G7 meeting where the 7 major industrialized countries had apparently agreed to let more natural market dynamics establish currency values. At the end of the day, Japan's Finance Ministry showed it had sold 4.4574 trillion yen, a monthly record, in the currency market in September after refraining from intervening in August. Currency analysts believe virtually all the intervention was carried out before September 20, when the G7 issued its statement calling for flexibility in exchange rates. "After the G7 statement, the Bank of Japan has essentially been forced by the market to accept a lower trading range," said Tony Norfield, head of foreign exchange strategy at ABN Amro. However, today's soft U.S. economic data from the Conference Board's September Consumer Confidence Index and lower than forecasted day's September Chicago PMI also raised the risk that the rapid acceleration in the US economy over the summer would lose steam, and perhaps threaten a global economic recovery, which a weaker dollar might only threaten further. The combined news of Japan's intervention and weaker economic data found Treasury bonds seeing strong buying in today's session as past interventions by Japan to sell yen and buy dollars has found those dollars buying Treasuries, while the weaker economic data brought some defensive buying from investors on thought a slow to moderate rate of economic growth has Treasuries being a safer investment asset class. The shorter-dated 5-year YIELD ($FVX.X) fell 15.2 basis points to 2.823%, the benchmark 10-year YIELD ($TNX.X) dropped 14 basis points to 3.937% and the longest- dated 30-year YIELD ($TYX.X) declined 12.1 basis points to 4.884%. With consumer confidence suffering a bit of a setback in September, it might be a logical jump to conclusion that the retailers might be a sector for traders to monitor, as a way to get a read on what the MARKET is thinking about today's economic data, specifically consumer confidence and future spending plans. Over time, I've noticed that both the S&P Retail Index ($RLX.X) 334.39 -1.06% and the Retail HOLDRS (AMEX:RTH) $84.87 -1.3% tend to mimic each other's technicals. Both trade options, but the retail HOLDRS also allow the individual investor to buy or sell short the underlying security. S&P Retail Index (RLX.X) Chart - Daily Intervals I've overlaid a retracement bracket on the RTH, using conventional technique of attaching at a low and recent high. A normal pullback for a stock would be to $80.50 and we find the RTH having broken below an aggressive bullish trend, which may have come into play as resistance when the RTH achieved its most recent high on September 3. Make note of September 3. When the RTH was setting a new 52-week high, this was right when the SPX and OEX broke out of their summer bases. S&P 500 Index Chart - Daily Intervals As the retailers were achieving a relative high, the SPX was just breaking out of its summer base. Now the retailers look to be leading lower, based on their conventional retracement, where today we see the SPX still holding above its 19.1% retracement. While I wouldn't disregard the 992 level on this retracement, it didn't seem to be a meaningful level this summer, other than serving as somewhat of a waterline that the SPX traded either side of. The conventional retracement doesn't help explain what was going on at 961 this summer, when the SPX found support on pullback two separate times. It is at least informative to compare both the RTH and the SPX with conventional retracement and similar trends to see how the two might be impacted by each other, with the retailers being a sector that would be impacted, both positive and negative, with rising consumer confidence or weakening consumer confidence. For a "blast from the past" and perhaps an explanation of why the SPX found support at 961 in early August, check out our old Index Trader Wrap from August 6 titled "I'm counting on you for strength." http://members.OptionInvestor.com/Itrader/marketwrap/iw_080603_1.ASP The RTH looks as if it is vulnerable to a lower trade, and perhaps the MARKET sniffed out the Conference Board's Consumer Confidence setback in September, which was released today, earlier this month. What will October's consumer confidence reading be? Watch the RTH! S&P 500 Index (SPX.X) - Daily Intervals Here's a chart of the SPX with new October MONTHLY pivot retracement in place. We now see a more formidable level of resistance appear at the 1,008 level and when the WEEKLY pivot of 1,009.74 was there by itself. This has me more cautious on larger bullish positions and a greater measure for rebound strength in the SPX above 1,010. While the extension of our "old" downward trend came into play as support at this morning's lows, that's what stands between today's close and WEEKLY S1. Bears can't be too bearish here, with the SPX managing to hold the bullish trend (green trend) on a closing basis. Tomorrow's more national ISM Index for September is forecasted at 55.0, and will be a comparison, to today's more regional Chicago PMI. Today's trade saw a net loss of 3 stocks to point and figure sell signals in the broader S&P 500 Bullish % ($BPSPX). Still "bull confirmed" at 76.80%, but getting closer to the 76% reading, which would be a reversal back lower to "bull correction" status. As a benchmark, in early August, the bullish % pulled back to 74% before the recent reversal back higher. As such, we might eyeball a break below the MONTHLY S2 of 959, should the S&P 500 Bullish % ($BPSPX) fall to 72% and achieve a "bear confirmed" status. Dow Industrials (INDU) Chart - Daily Interval This morning's economic data gave little chance that the Dow could show some leadership and not unlike the SPX, has MONTHLY Pivot now serving as a level of near-term resistance. I hesitate to think a trader should be overly bearish at current levels, as I do think there is higher likelihood for a bounce back to 9,500, or the opportunity to look for better bearish entry when Stochastics turn higher and are "overbought." I will say that I was surprised that today's Consumer Confidence and Chicago PMI data were as far off of Augusts' levels as they were. I'm not sure I was surprised that economists were as far off as they were however. I'm not taking a shot at economists, but we've noted that in weekly employment data they have explained their error. I don't recall reading many explanations from economists regarding today's economic data forecasting models, and there may be some adjusting going on today. Not only in some economic forecasting models, but stock portfolios as well. I have not had the time to look at the 30 Dow components point and figure charts, but a bullish % watcher e-mailed me today that the Dow Industrials Bullish % ($BPINDU) did not lose 1 stock to a point and figure sell signal yesterday, and that the net loss of 1 stock I reported from www.stockcharts.com was the result of 3M's (NYSE:MMM) $69.07 -1.7% 2:1 stock split. I do see where www.stockcharts.com is showing the bullish % back at 80% today and still "bull confirmed." I will take some time later tonight to confirm this for myself. Not that I don't believe our subscriber, but just want to make sure. NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Intervals The QQQ saw steady and still rather heavy volume traded today and hints to me that the QQQ is not yet "sold out" on the current pullback. In early August, under similar technical setup, the QQQ saw just over 111 million shares trade, then volume decline over the next four periods. Volume still pretty heavy on a comparison basis and has QQQ vulnerable to $31.88 and WEEKLY R1. Today's trade saw a net loss of 3 stocks to point and figure sell signals as the NASDAQ-100 Bullish % ($BPNDX) fell 3% to 75%. Still "bear correction" status and would take a reading of 74% to reverse back lower to "bear confirmed" status. This internal weakening has me looking at $33.80 as more formidable resistance. 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 **************** Confidence Concerns - J. Brown The September Consumer Confidence numbers were much worse than expected and the report immediately spooked jumpy investors into another round of selling. Economists had been looking for a dip to 80.7 in September, down from 81.7 in August. What we got was a drop to 76.8 in September. Compounding the consumer confidence issue was the chain-store-sales index, which fell for its third week in a row. More than 2/3rd's of the U.S. economy is powered by the consumer and low consumer confidence does not translate into sales. Adding fuel to the fire was last night's earnings warning from Sun Microsystems (SUNW). Investors did not react kindly to the news and SUNW was joined by two more tech companies Enterasys Networks (ETS) and Regeneration Technologies (RTIX) with their own earnings warnings. Market internals were bearish as investors fled from equities into the perceived safety of bonds and gold. The yield on the 10-year note fell to 3.94 percent as bonds surged. Gold rallied most of the session and many are speculating that the weak dollar environment could drive gold to the $400 level by year's end and possibly the $450 level by the end of 2004. We don't have much longer before the Q3 earnings season begins but until then the markets will be driven by the parade of economic reports and the new focus on currency fluctuations between the dollar/yen/euro. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9686 52-week Low : 7197 Current : 9275 Moving Averages: (Simple) 10-dma: 9471 50-dma: 9351 200-dma: 8695 S&P 500 ($SPX) 52-week High: 1040 52-week Low : 768 Current : 995 Moving Averages: (Simple) 10-dma: 1016 50-dma: 1002 200-dma: 931 Nasdaq-100 ($NDX) 52-week High: 1406 52-week Low : 795 Current : 1303 Moving Averages: (Simple) 10-dma: 1355 50-dma: 1308 200-dma: 1146 ----------------------------------------------------------------- As expected the drop is the broader markets is driving a move higher for the fear indices. CBOE Market Volatility Index (VIX) = 22.72 +1.05 Nasdaq Volatility Index (VXN) = 32.83 +2.17 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.06 496,585 527,325 Equity Only 0.95 362,216 344,880 OEX 0.71 34,990 24,713 QQQ 3.24 30,416 98,565 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 71.3 - 1 Bull Confirmed NASDAQ-100 75.0 - 4 Bear Correction Dow Indust. 80.0 + 0 Bear Confirmed S&P 500 76.8 - 2 Bull Confirmed S&P 100 78.0 - 2 Bull Correction Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-Day Arms Index 1.66 10-Day Arms Index 1.32 21-Day Arms Index 1.19 55-Day Arms Index 1.06 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 1308 1233 Decliners 1526 1886 New Highs 72 85 New Lows 14 11 Up Volume 537M 365M Down Vol. 1212M 1484M Total Vol. 1780M 1861M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 09/23/03 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 The latest option/futures expiration appears to have reduced some outstanding positions and commercial shorts saw the biggest drop. Suddenly, professional longs are dead even with shorts. Meanwhile, small traders closed a large chunk of long positions. Commercials Long Short Net % Of OI 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%) 09/23/03 395,123 397,858 ( 2,735) (0.0%) 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 08/26/03 170,424 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% 09/23/03 139,482 87,981 51,501 22.6% 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 We have a major reversal in the works here. Commercial long positions dropped about 260K, instantly changing sentiment to bearish. Small traders had a change of heart and suddenly went excessively long, which is ironic now that the SPX just broke support. Commercials Long Short Net % Of OI 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% 09/23/03 109,417 204,026 ( 94,609) (30.2%) 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 08/26/03 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%) 09/23/03 175,750 62,558 113,192 47.5% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 The recent expiration appears to have reduced the number of outstanding positions but sentiment remains bearish for commercials and bullish for small traders. Commercials Long Short Net % of OI 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%) 09/23/03 32,648 42,565 ( 9,917) (13.2% 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 08/26/03 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% 09/23/03 17,862 9,880 7,982 28.8% 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 The same can be said for the $INDU futures with outstanding positions dropping, the sentiment remains the same with commercials feeling bullish. However, small traders are feeling a lot more neutral with a drop in short positions. Commercials Long Short Net % of OI 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% 09/23/03 15,911 9,123 6,788 27.1% 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 08/26/03 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%) 09/23/03 7,505 7,779 ( 274) ( 1.8%) 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. 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The Option Investor Newsletter Tuesday 09-30-2003 Copyright 2003, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: LEA Dropped Puts: KKD Call Play Updates: AMZN, APOL, EXC, SLB New Calls Plays: RYL Put Play Updates: CCMP, GILD, ITT, JCI 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: ***** Lear Corp - LEA - close: 52.64 change: -0.96 stop: 53.25 The market weakness has just been too much pressure for shareholders of LEA and the selling quickly pushed the stock through our stop at $53.25 this morning. We had grown pretty cautious as the stock slowly drifted lower the last few days and suggested no new bullish entries. Shares did bounce from the $52.25 level but the afternoon roll over today doesn't look good. Picked on September 16 at $54.05 Change since picked: - 1.41 Earnings Date 10/17/03 (confirmed) Average Daily Volume: 694 thousand Chart = PUTS: ***** Krispy Kreme - KKD - cls: 38.50 chg: +0.51 stop: 40.36 After some debate we've decided to close the play on KKD. The stock has stalled its descent at the $37.70 level and can't seem to break it. While today's gain could just be an oversold bounce we really don't want to see current profits evaporate. The positive move certainly didn't sit well with us given the down market. The stock could easily rebound to the $40 level and still maintain its bearish trend. We'd much rather close it now and look for a new entry on a failed rally at $40 then watch it bounce and get stopped out. We don't see any new headlines but KKD certainly got plenty of negative publicity on CNBC yesterday as they discussed the high number of insiders who were selling near the recent top. More aggressive traders will to take the heat should monitor their stop losses closely. Picked on September 8 at $41.69 Change since picked: - 3.19 Earnings Date 08/21/03 (confirmed) Average Daily Volume: 1.0 million Chart = ************************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 ******************** Amazon.com - AMZN - close: 48.43 change: -1.43 stop: 46.50 The last few days have proved quite volatile for the Internet stocks with our AMZN play looking weak on Friday, strong yesterday and weak again today. The good news is that it remains in the upper half of its channel and above what should now be strong support near $47. The bad news is that the stock ended the day at its low of the day and slightly below Friday's close. We're looking for a serious test of support over the next couple days and the outcome of that test will determine whether the play is still viable. First support comes in at the center of the channel (currently $47.90), then the 20-dma ($47.44) and then prior resistance near $47.25. A solid rebound from this zone of support can be used for new (although aggressive) entries. Traders looking to enter on strength will want to see AMZN get back above the $50 level before considering new positions. Maintain stops at $46.50 for now, as that remains just below the 30-dma. Picked on September 18th at $47.89 Change since picked: +0.54 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 8.87 mln Chart = --- Apollo Group - APOL - close: 66.03 chg: -0.81 stop: 64.50*new* Shares of APOL continue to bounce from support near the $65 mark but they can't seem to gain any momentum with the broader markets slipping backward. More aggressive traders can use the pull back to $65 as an entry point but more conservative traders may want to wait for a bit of momentum. A move over $67.00 might work. Yesterday Lehman Brothers raised their price target on the stock to $72 and suggested to clients to buy the dips. Sounds like a plan to us. We're going to raise our stop loss to $64.50 Picked on September 16 at $68.45 Change since picked: - 2.45 Earnings Date 10/07/03 (confirmed) Average Daily Volume: 1.9 million Chart = --- Exelon Corporation - EXC - close: 63.50 change: -0.20 stop: 61.00 Monday's breakout certainly got our EXC play started off on the right foot, but as mentioned in last night's play of the day writeup, more upside without some consolidation first would likely be tough to manage, with the stock closing right on the upper Bollinger band and just below the top of the rising channel. Sure enough, today's session offered some consolidation and it was pretty encouraging to see the entire range near the upper end of yesterday's range. The best setup for new positions still looks like a pullback and rebound from the center of the channel (currently $62.60), with additional support provided by the 10-dma ($62.52). EXC is not a fast-moving stock, so we should be able to wait for it to come back to us, rather than chasing it higher. Support should now be strong in the $61.50- 62.00 area, as that was the site of last week's closing lows, and has the 20-dma ($61.42) rising to reinforce that support. Maintain stops at $61, just below the bottom of the channel. Picked on September 28th at $62.64 Change since picked: +0.86 Earnings Date 10/28/03 (unconfirmed) Average Daily Volume = 1.16 mln Chart = --- Schlumberger Ltd. - SLB - close: 48.40 change: -0.78 stop: 47.50 The outlook for our SLB play is not promising, as the stock cracked below its rising trendline ($48.60) at the close, something that didn't occur at all during the consolidation during August and September. We've mentioned in recent updates that the break back inside the bullish triangle pattern didn't look encouraging and this break under the bottom of the pattern looks particularly ominous. But with strong support in the $47.60-48.00 area, we're going to take a chance on another rebound from that support. Helping to reinforce that support is the 50-dma at $47.78. We are not recommending new positions at this time. The only entry strategy that makes sense is if the stock can rebound strongly and get back over the initial breakout level of $49.75. Buying this dip just looks a bit too risky until we see renewed signs of strength. Maintain stops at $47.50 as a break below that level will be a very clear sign of a busted play. Picked on September 21st at $50.99 Change since picked: -2.59 Earnings Date 10/21/03 (unconfirmed) Average Daily Volume = 3.12 mln Chart = ************** NEW CALL PLAYS ************** The Ryland Group - RYL - close: 73.11 change: -1.82 stop: 69.50 Company Description: The Ryland Group is a homebuilder and mortgage-finance company that has built more than 175,000 homes. Additionally, the Ryland Mortgage Company (RMC) has provided mortgage financing and related services for more than 155,000 homebuyers. Currently, Ryland homes are available in more than 260 communities in 21 markets across the United States. Why we like it: In case you haven't noticed, bond yields have been falling over the past couple weeks. By Tuesday's close, the yield on the 30- year bond was back under 4.9% for the first time since the middle of July. This pullback in the long-term interest rates hasn't been lost on the Housing stocks, with the Dow Jones Home Construction index ($DJUSHB) working its way steadily higher in an ascending channel from the early August lows. Today's 1.5% gain pushed the index to its best close since June 17th, and it looks like a test of the June high ($482) is coming up. RYL has been trading very much in-line with the DJUSHB in recent weeks and today's 1.56% gain helped the stock to deliver its best close since mid-July. The stock has been working higher in its own ascending channel and today it managed to close in the upper half of that channel for the first time in over a week. Another encouraging sign is the way the 20-dma ($70.94) has been providing support over the past 5 weeks. The PnF chart is clearly bullish, on a Buy signal, in a column of X and with a vertical count of $91. We're not necessarily looking for that level to be reached in the near-term, but a breakout over the June/July highs seems likely. In the past, RYL has had a tendency to make powerful and violent moves, but in the past few weeks, the gains have been more measured and in a two steps forward, one step back fashion. That means the preferable way to enter the play will be to look for a pullback to support and enter on the rebound. Another factor that argues against momentum entries right now is the way the stock was turned back today from the upper Bollinger band ($73.76) at the close. Target entries on a rebound from the 20-dma and look for a first target in the $77-78 area, near the June/July highs. That will likely produce a round of profit taking ahead of our expected breakout over the $80 level. Our stop is initially set at $69.50, just under both the bottom of the channel ($69.75) and the 30-dma ($69.59), both of which have provided consistent support in the past several weeks. Suggested Options: Shorter Term: The October 75 Call will offer short-term traders the best return on an immediate move, as it is just slightly out of the money. Longer Term: Aggressive traders looking to capitalize on an extended rally will want to look to the January 80 Call. This option is 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. More conservative long-term traders will want to use the January 75 Call. There are November strikes available as well, but note that open interest is still very light. BUY CALL OCT-70 RYL-JN OI=1261 at $4.60 SL=2.75 BUY CALL OCT-75 RYL-JO OI=1729 at $1.70 SL=0.75 BUY CALL NOV-75 RYL-KO OI= 25 at $3.50 SL=1.75 BUY CALL JAN-75 RYL-AO OI= 447 at $5.20 SL=3.25 BUY CALL JAN-80 RYL-AP OI= 409 at $3.30 SL=1.75 Annotated Chart of RYL: Picked on September 30th at $73.11 Change since picked: +0.00 Earnings Date 10/21/03 (confirmed) Average Daily Volume = 832 K 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 ******************* Cabot Microelect. - CCMP - cls: 55.63 chng: -2.40 stop: 58.25*new* If you like volatility, then you've got to love CCMP this week. We figured the stock was due for an oversold rebound after reaching support at $56 last Friday and that's exactly what happened yesterday, with the stock rebounding with the overall Semiconductor index (SOX.X) to end right at $58 resistance. CCMP quickly fell back from that level this morning, providing a fleeting rollover entry opportunity ahead of the plunge back below $56. Buyers appeared again, but that bounce stalled just over $57, providing an aggressive entry point yet again this afternoon before the final-hour plunge below $56. Closing near the day's low and at its lowest closing level since early July certainly looks bearish and with the SOX closing under $420, we're looking for CCMP to now make strides towards next support near $52.50. Another failed rebound below $58 (preferably below $57.50) looks good for continuation entries, as does a break below today's $55.50 intraday low. Just in case of a strong rebound though, we're lowering our stop to $58.25, just above yesterday's intraday high. Picked on September 23rd at $59.05 Change since picked: -3.42 Earnings Date 10/23/03 (unconfirmed) Average Daily Volume = 767 K Chart = --- Gilead Sciences - GILD - close: 56.04 chg: +0.04 stop: 60.01 Hmmm... this looks like a dangerous time for GILD traders. Yesterday's early morning weakness pushed GILD through support at $55 down to the $53.50 area. Unfortunately, the stock fully participated in the market-wide bounce and shares were positive by Monday's close. The bounce continued into Tuesday's morning but sellers took over when the stock hit $57.19. We suggest caution and new positions are probably not recommended until GILD trades back under the $55 mark again. Very conservative traders could use today's high to guide their stop loss placement. There are no new headlines. However, Point-and-Figure chart fans will note that the recent bounce off the low is a PERFECT rebound from the bullish support line. Definitely use caution. We might consider closing the play if GILD trades back toward the $53.50 level again. Picked on September 16 at $59.40 Change since picked: -3.36 Earnings Date 07/31/03 (confirmed) Average Daily Volume: 3.31 million Chart = --- I T T Industries - ITT - cls: 59.84 chg: -0.62 stop: 62.51 We don't have a lot to report for the new put play on the list. Shares of ITT failed again at the simple 200-dma during yesterday's bounce. Today makes it the second time in as many days. Bearish entries still look attractive here. The intraday chart is almost suggesting a short-term bearish flag consolidation pattern and if that's the case then some traders may want to wait for a move back through the $59.40 mark before opening positions. Picked on September 28 at $59.64 Change since picked: +0.20 Earnings Date 07/28/03 (confirmed) Average Daily Volume: 546 thousand Chart = --- Johnson Controls - JCI - cls: 94.60 chng: -1.05 stop: 97.75*new* Traders looking for a little bit of excitement certainly weren't disappointed by JCI today, as the stock plunged sharply at the open, reaching an intraday low just above $93. That gave strong confirmation to Monday's dip below $95, which generated that PnF Sell signal we were expecting. Just as quickly as the stock fell though, it rebounded back above $95, leaving the bears more than a little confused. Broad market weakness into the close helped to push JCI back under the pivotal $95 level at the close and that looks encouraging for our play. Now that we have a solid Sell signal on the PnF chart (vertical count of $87), failed rebounds below $96 look like solid entry opportunities. Adding to our bearish conviction, JCI is now below the ascending trendline from the March lows and our initial target of $90 looks to be a good bet. Lower stops to $97.75 tonight, which is just above both the 10-dma ($97.39) and the 50-dma ($97.64). Picked on September 25th at $95.75 Change since picked: -1.15 Earnings Date 10/22/03 (confirmed) Average Daily Volume = 475 K Chart = ************* NEW PUT PLAYS ************* None ************************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 09-30-2003 Copyright 2003, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Play of the Day: CALL - RYL ********************** PLAY OF THE DAY - CALL ********************** The Ryland Group - RYL - close: 73.11 change: -1.82 stop: 69.50 Company Description: The Ryland Group is a homebuilder and mortgage-finance company that has built more than 175,000 homes. Additionally, the Ryland Mortgage Company (RMC) has provided mortgage financing and related services for more than 155,000 homebuyers. Currently, Ryland homes are available in more than 260 communities in 21 markets across the United States. Why we like it: In case you haven't noticed, bond yields have been falling over the past couple weeks. By Tuesday's close, the yield on the 30- year bond was back under 4.9% for the first time since the middle of July. This pullback in the long-term interest rates hasn't been lost on the Housing stocks, with the Dow Jones Home Construction index ($DJUSHB) working its way steadily higher in an ascending channel from the early August lows. Today's 1.5% gain pushed the index to its best close since June 17th, and it looks like a test of the June high ($482) is coming up. RYL has been trading very much in-line with the DJUSHB in recent weeks and today's 1.56% gain helped the stock to deliver its best close since mid-July. The stock has been working higher in its own ascending channel and today it managed to close in the upper half of that channel for the first time in over a week. Another encouraging sign is the way the 20-dma ($70.94) has been providing support over the past 5 weeks. The PnF chart is clearly bullish, on a Buy signal, in a column of X and with a vertical count of $91. We're not necessarily looking for that level to be reached in the near-term, but a breakout over the June/July highs seems likely. In the past, RYL has had a tendency to make powerful and violent moves, but in the past few weeks, the gains have been more measured and in a two steps forward, one step back fashion. That means the preferable way to enter the play will be to look for a pullback to support and enter on the rebound. Another factor that argues against momentum entries right now is the way the stock was turned back today from the upper Bollinger band ($73.76) at the close. Target entries on a rebound from the 20-dma and look for a first target in the $77-78 area, near the June/July highs. That will likely produce a round of profit taking ahead of our expected breakout over the $80 level. Our stop is initially set at $69.50, just under both the bottom of the channel ($69.75) and the 30-dma ($69.59), both of which have provided consistent support in the past several weeks. Suggested Options: Shorter Term: The October 75 Call will offer short-term traders the best return on an immediate move, as it is just slightly out of the money. Longer Term: Aggressive traders looking to capitalize on an extended rally will want to look to the January 80 Call. This option is 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. More conservative long-term traders will want to use the January 75 Call. There are November strikes available as well, but note that open interest is still very light. BUY CALL OCT-70 RYL-JN OI=1261 at $4.60 SL=2.75 BUY CALL OCT-75 RYL-JO OI=1729 at $1.70 SL=0.75 BUY CALL NOV-75 RYL-KO OI= 25 at $3.50 SL=1.75 BUY CALL JAN-75 RYL-AO OI= 447 at $5.20 SL=3.25 BUY CALL JAN-80 RYL-AP OI= 409 at $3.30 SL=1.75 Annotated Chart of RYL: Picked on September 30th at $73.11 Change since picked: +0.00 Earnings Date 10/21/03 (confirmed) Average Daily Volume = 832 K Chart = ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and 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
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