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Daily Newsletter, Monday, 02/23/2004

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The Option Investor Newsletter                  Monday  02-23-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Stocks Fall for Fourth Day
Futures Wrap: Fresh signals
Index Trader Wrap:
Ask the Analyst: The public float and Volume at Price


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     02-23-2004            High     Low     Volume Advance/Decline
DJIA    10609.62 -  9.41 10644.96 10560.44 1.73 bln   1037/1808
NASDAQ   2007.52 - 30.41  2045.10  1999.59 1.92 bln    869/2229
S&P 100   564.58 -  0.29   566.16   562.06   Totals   1906/4037
S&P 500  1140.99 -  3.12  1146.69  1136.98
RUS 2000  570.20 -  9.69   581.86   570.20
DJ TRANS 2854.86 - 37.32  2893.76  2848.49
VIX        16.29 +  0.25    16.78    16.25
VXO        15.93 -  0.32    16.79    15.75
VXN        24.38 +  0.26    25.37    24.36
Total Volume 4,094M
Total UpVol    965M
Total DnVol  3,057M
52wk Highs     257
52wk Lows       23
TRIN          1.21
PUT/CALL      0.62
*******************************************************************

Stocks Fall for Fourth Day
by James Brown

The last week of February began with a decline as the NASDAQ
erased its 2004 gains and stocks fell for their fourth straight
session.  The tech-heavy NASDAQ traded to 1999.59 in the last
hour of trading before bouncing back above the 2000 level.
Today's close marks a 6.7% correction from the NASDAQ's 2004
highs at 2153 and from the lack of bounce at the 2000 level we
may see more declines in the near future.  The selling in the
tech sector was lead by a 2.74% decline in the semiconductor
sector, which produced a new intraday low for 2004.

The Dow Jones Industrials also struggled through most of the
session as two components, United Technologies (UTX) and Boeing
(BA), traded lower over news that the Pentagon might be canceling
the Comanche helicopter program.  The Dow Transports index also
slipped lower, continuing last week's decline.  Normally one
might expect defensive stocks like the drug sector to rally
higher as investors shift money into "safe haven" plays but the
DRG drug index fell again for the sixth loss in seven days.

Overseas stock exchanges were mixed as the dollar slipped from
three-week highs against the euro and three-month highs against
the Japanese yen.  The Japanese NIKKEI index added 148 points to
close at 10,868 while the Chinese Hang Seng lost 103 to close at
13,765.  English stocks ended with modest gains as the FTSE 100
closed up 9 points to 4524.  German stocks edged lower with a
4.6-point decline on the DAX to 4068.  In commodities crude oil
ticked higher 9 cents to $34.35 while gold bounced $1.30 to close
at $399.30 an ounce, its second session in a row under the $400
mark.

Here at home market internals were very negative. Declining
stocks surged past advancers 9 to 5 on the NYSE and 22 to 8 on
the NASDAQ.  Down volume overwhelmed up volume by more than 2 to
1 on the NYSE and nearly 5 to 1 on the NASDAQ.  Overall volume
settled at 1.73 billion on the NYSE and 1.92 billion on the
NASDAQ.

Technical oscillators are all negative on the Dow Industrials but
the venerable index managed to close above the 10,600 level again
with only minor losses.  If the selling continues tomorrow the
Industrials should find support at 10,500 with its rising 50-dma
to support it.

Daily chart of the Dow Jones Industrials:



Intraday Chart of the Dow Jones Industrials:



The NASDAQ Composite is in worse shape.  Market analysts have
been calling for a 5% to 10% correction in the major averages for
months now and many expect the NASDAQ to suffer the worst of the
selling because it out performed so well last year.  As I
mentioned earlier the NASDAQ is down 6.7% from its 2004 highs and
today's decline firmly broke technical support at the simple 50-
dma.  Art Cashin, a floor trader at the NYSE and a popular guest
commentator for CNBC, mentioned that the breakdown under the 50-
dma may be seen by many investors as a sign that the rally is
over and it's time to take some money off the table before any
more of their profits evaporate.  The temptation to sell now and
book all of 2003's profits will be a strong one.  However, there
are plenty of investors who have been waiting for a pull back to
re-enter the markets and the psychological 2000 level might look
like an entry point.

The greater concern to me is the lack of bounce from the test of
2000.  If there are a lot of traders waiting to buy the dip here
where are they?  A 7-point rebound in the last hour is not what I
would call enthusiastic.  Looking at the daily chart below you'll
see two supporting trendlines.  One is broken with today's
decline and the other is not.  Also noteworthy is the broken
simple 50-dma (pink line) on the NASDAQ's chart.  The same
technical breakdown through the 50-dma showed up in the GHA
hardware index, the GSO software index, the NWX networking index
and the INX Internet index.

Daily chart of the NASDAQ:



Weighing heavily on the NASDAQ was strong selling in the
semiconductor sector (SOX).  Earlier in February the SOX broke
through the bottom of its long-term rising channel but found
support at its 100-dma and bounced.  Today the SOX has broken
support at the 500 level and its 100-dma, which could be very bad
news for tech traders since many believe that the semiconductors
tend to lead the NASDAQ higher or lower.

Driving today's declines in the SOX was Intel, also a Dow
component.  Intel fell 3.33% and broke major support at $29.50
after reporting that an IRS audit of their 1999 and 2000 returns
might find it liable to the government for another $600 million,
plus interest, in back taxes.  The tax adjustments are focused on
Intel's export sales and the IRS has not issued any formal
rulings yet but if Intel is found liable they plan to appeal.
Investors might be worried that the IRS may find more back taxes
are owed as they currently conduct an audit of Intel's 2001 and
2002 returns.  Compounding concerns in the semiconductor group
was a downgrade for Intel rival AMD.  UBS lowered their price
target on AMD to $17 and cut its earnings estimates over concerns
from stiffer competition.  Plus, a Goldman Sachs analyst issued
some negative comments for Applied Micro Circuits Corp (AMCC)
stating their belief that AMCC won't be profitable again until
June 2005.

Daily chart of the Semiconductor Index (SOX):




Some of today's larger headlines were made by QUALCOMM (QCOM) and
Lowe's (LOW).  QCOM raised its Q2 earnings guidance this morning
and shares gapped higher above resistance at $60.00.  QCOM is the
second largest producer of chips for mobile phones and it raised
its Q2 EPS guidance from 38-41 cents to 48-50 cents.  Including
the estimated 1-cent loss for its investment division QCOM
expects to report 47-49 cents a share on revenues of $1.19-1.21
billion.  Compared to the 13 cents it earned for last year's Q2
that's a pretty big improvement.  QCOM's CEO Dr. Jacobs was
quoted as saying, "in fiscal year 2002 we shipped 65 million MSM
phone chips.  Comparatively, in the first two fiscal quarters of
2004 we expect to ship approximately 63-64 million MSM chips."
Jacobs said QCOM was seeing, "Record demand for our chipsets and
strong growth in virtually all CDMA markets..."  QCOM ended the
session with a 5.1% gain at $62.43.

Investor reaction wasn't so cheery for LOW's.  The second largest
home improvement chain in the country issued Q4 earnings that
were a penny better than analysts estimates on sales that rose
20% for the quarter to $7.25 billion.  Lowes even raised their Q2
estimates but their stock fell 2.9% by the close to $56.67.
Troubling investors was a sales shortfall compared to analyst
estimates of $7.28 billion for the quarter and a drop in same-
store sales.  Last quarter Lowes had same-store sales of +12%.
This quarter they dropped to a +7.3% gain, which is not bad but
under estimates of +7.5% and below "whisper" numbers in the high
single digits to low double digits.  Tomorrow before the opening
bell we'll hear from larger rival Home Depot (HD), a Dow
component.  Current estimates are for HD to turn in 39 cents a
share.  If HD can hit analyst estimates and issue higher guidance
it may be a positive influence on the Dow tomorrow.

More Dow components to watch tomorrow are UTX and BA.  As
mentioned earlier they traded lower today on the expectation that
the Pentagon would cancel the $38 billion Comanche helicopter
program.  After Monday's closing bell the Pentagon confirmed that
news and said the remaining $14.6 billion for the Comanche
project would be shifted to other aircraft projects.  Some of
that money is said to be headed toward UTX's Black Hawk
helicopter program.  Now there is still a chance that lawmakers,
especially those with constituents likely to be affected by this
move, will fight this cancellation.  However, the real question
for us is how will investors react tomorrow now that the news has
been verified.

Tomorrow will also bring another consumer confidence report, this
one for February.  Economists are expecting a rise to 102.0 after
last month's reading at 92.0.  Last but not least is another
scheduled appearance for Alan Greenspan before the Senate banking
committee in Washington.  While not expected to issue any
comments on monetary policy his appearance alone could cause the
markets to drift sideways on the off chance that he may say
something negative.


************
FUTURES WRAP
************

Fresh signals
Jonathan Levinson

The Naz tested 2K as the US Dollar Index declined.  Led by the
NQ, equity futures fell, the CRB rose, precious metals went
sideways as the miners declined, and treasuries advanced.

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.


Chart of the US Dollar Index


The US Dollar Index peaked overnight at 87.60 and spent Monday
declining, bouncing from the 86.75 level as of this writing.  The
move retraced part of Friday's large gains, with a higher low and
higher high extending the daily cycle upphase that kicked off
last week.  Most foreign currencies were positive against the
USD, yet silver traded in negative territory all day, gold was
weak with the miners negative, and equities declined.  This
violation of the binary dollar trade relationship lining up with
strength in treasuries tells us that some new relationship is at
work.  The CRB added 1.11 to close at 265.24, led by wheat,
soybean and lean hog futures.


Daily chart of April gold


If you squint hard, you'll see a small, greenish piece of lint on
your screen.  Don't wipe it away, because that's the 3.8 point
range that resulted in a small green candle in the middle of
Friday's large red one.  April gold printed a higher session low
of 397 and a lower high at 400.80, and spent the day trading a
narrow range in positive territory to close at 399.60, +1.20.
Daily cycle sell signals printed and confirmed Friday's weakness,
curling over from lower highs.  Resistance is at 402, 408 and
412-14, with support below at 395, 392, 387 and 377.  HUI and XAU
were both lower, closing -2.16% at 217.49 and -.92% at 96.65
respectively.


Daily chart of the ten year note yield


Ten year note yields (TNX) took a dive, retracing most of
Friday's advance and shedding 4.8 basis points to close at 4.05%,
a 1.17% decline for the day.  The move hurt recent treasury bears
but violated neither the recent uptrend nor the daily cycle
reversal we’ve been watching.  Bollinger support has risen to
price confluence of 4%, and the higher daily cycle oscillator low
confirms that we have most likely seen the bottom of the current
move for the TNX.  A break below 4% would change that, but it
shouldn't occur based on what I see in the daily chart.  A break
of 4.12% resistance is the next step of bond bears / yield bulls,
followed by resistance at 4.19%.


Daily NQ candles


The NQ went negative for the year today, but recovered off its
spike low below 1460 support, closing -16.50 at 1467, a 1.25%
loss.  The weak daily cycle upphase aborted and reversed to a
fresh downphase from significantly lower price and oscillator
highs, and the rising daily support line at 1482 was broken on a
closing basis.  The session low came at Bollinger support of
1454, below which is primary regression channel support of 1440-
44.  With the daily cycle downphase in progress, we should see a
series of lower 30 minute cycle highs and lows on the chart
below, and given the extremely weak daily cycle upphase just
ended, the daily cycle downphase could well be a doozy.

I have been discussing the violated rising trendline at 1482 as a
potential hunchback head and shoulders neckline. If so, there's
roughly 80 points of downside implied by today's closing break.
We'll keep it in mind, but for the moment, support at 1454, 1440-
44, and 1425-30 are the levels to watch.


30 minute 20 day chart of the NQ


The NQ was easily the weakest of its peers, and the 30 minute
chart tells the whole story.  However, even here on the weakest
index, we see a small bullish Macd divergence, possibly
predicting a bullish falling wedge breakout to come.  I've come
to mistrust chart patterns because of the endless pattern
failures during the past year, and the 1480-82 is set up as
trendline resistance as well as heavy price confluence.  Below
that level, it's the bears' chart, while above it the 1492 level
comes next.  The 30 minute cycle upphase kicked off as of the
close, and on this basis we can expect strength at tomorrow's
open.  However, the 150-tick short cycle oscillators reached
overbought territory bringing the NQ to this level, which creates
a good chance of a sideways up/ consolidation phase.


Daily ES candles


ES lost 3.25 to close at 1140.50, a minor .28% drop compared with
the 1.11% lost by the NQ.  It was nevertheless sufficient to give
us sell signals on the daily oscillators, and the rising
trendline at 1144 was cracked on a closing basis.  The regression
channel support at 1136 held for the low of the day, and that
level has support down to 1130.  Nevertheless, as on the NQ the
ES ground out its sell signals from lower oscillators highs,
indicating a weakening of the longer weekly cycles.  The NQ may
well be leading the way here, but looking at the ES it will be
difficult to get too excited on a bearish basis until the
endlessly resilient 1115-18 is actually broken.  Despite today's
weakness, it still appears to be a long way below.


20 day 30 minute chart of the ES


The bullish divergence noted on the NQ is more pronounced on the
ES, with both the Macd and stochastic oscillators crossing upward
from higher lows.  1144 is the first level for bulls to reach,
followed by 1149 and 1153.  What looks and feels impulsive on the
NQ is merely a correction on the ES in this shorter timeframe,
and it's going to take a lower 30 minute cycle high to confirm
what the daily cycle downphases are trying to tell us.

As mentioned earlier, equities were weak despite a pullback in
the dollar and strength in treasuries.  Stocks and bonds have
tended to trade together and inversely to the USD Index.  Today's
anomaly may be the result of op-ex repositioning and settlement,
and so we look to tomorrow to hopefully clarify the picture.  If
equities continue to diverge from their binary dollar
relationship, it could be indicative of liquidity problems
causing a sector rotation.


150-tick ES


The short cycle oscillators are overbought here, but within a
rising 30 minute Keltner channel (orange bands).  While the short
cycle oscillators trend easily, I'm expecting some chop and flop
within the current price range as the 30 minute cycle establishes
its bottom.  A break below 1136 would change that, causing a
whipsaw in the 30 minute cycle.


Daily YM candles


YM fell 17 points or .16% to close at 10606.  It was the
strongest of its peers, again, and the 30 minute chart sports the
clearest bullish divergences.


20 day 30 minute chart of the YM



Equities didn't collapse today, although it felt as if they might
this morning.  The decoupling of equities from the binary dollar
trade could be an ominous sign of impending liquidity problems,
or it could just be a hangover from op-ex Friday.  That latter
factor should be all but completely tomorrow, and we'll be free
to evaluate whether our intermarket relationships are indeed
evolving or merely being delayed.  While our daily oscillators
and trendlines indicate new trends underway, it's worth looking
at the broad price trends on these charts.  A sell signal does
not a reversal make, and the broader price trends are still in
place.  I'm not telling you to miss the move, but don't permit
yourself to become smug about the new "turn" in the market
either.  If this year has taught bulls and bears anything, it's
that smugness is the best signal to fade.  See you tomorrow.


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

Technology remains weak, with NASDAQ flat for year

The very broad NASDAQ Composite (COMPX) 2,007.52 -1.48% managed
to hold above the 2,000.00 by today's close, but the high
volatility or "beta trade" has yet to gain favor as the NASDAQ
Composite now holds a very fractional 4-point gain for the year.

Market Snapshot / Internals - 02/23/04 Close



Brief gains at the open for the smaller-caps and Russell-2000
Index ($RUT.X) 570.20 -1.67% along with the tech-heavy NASDAQ-100
Tracking Stocks (AMEX:QQQ) $36.45 -1.11% as well as the
Semiconductor Index (SOX.X) 495.81 -2.74% were quickly erased in
the first 30-minutes of trade, where weakness there helped pull
the other major indices lower for most of today's session.  A
brief spat of buying toward today's close helped mitigate today's
losses, with the large-cap S&P 100 Index (OEX.X) 564.58 -0.05%
and Dow Industrials (INDU) 10,609.62 -0.09% finishing with
fractional losses.

Pivot Matrix -



In Friday's evening's Market Monitor, I thought we might see a
relief bounce for the major indices after the passing of February
option expiration, and a couple of points at the open wasn't what
I had in mind.  I was looking for some type of relief bounce back
near the WEEKLY R1s where institutions might look to right some
at the money calls early this week.  While that didn't unfold in
today's session, it would still be a point where we might look
for a relief bounce.

However, the Semiconductor Index (SOX.X) 495.81 -2.74% is back
near its lows of the year, and has tested its ascending neckline
of the potential head/shoulder top patter, where Thursday's trade
did see a rather sharp reversal from the right shoulder level of
535, where sellers looked eager to sell the pattern.

Semiconductor Index (SOX.X) Chart - Daily Intervals



After trading the 535 level early Thursday morning after Applied
Materials (AMAT) $21.21 -2.48% reported better-than-expected
earnings and guided higher for the coming quarter, the SOX.X has
shown little sign of strength and has moved quickly back to its
early February lows.  Every technician in the market sees the
pattern, but will sector bulls defend the ascending neckline, or
will bears flinch and lock in quick, but handsome gains after the
recent decline?

Sector internals are weak with today's action seeing a net loss
of 2.78% to Dorsey/Wright and Associates' Semiconductor Bullish %
(BPSEMI) which currently reads "bear confirmed" at 64.39%.  In
December of last year, this sector bullish percent fell to 54%
before reversing back higher to 82%, from which it has now
reversed back lower again.

Traders and investors could make a sector bullish % tie with the
December SOX low of 468 to current levels of bullishness to
understand the implications of a SOX break below the 487 level,
or WEEKLY S2.

NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Intervals



While we track the SOX.X in our pivot matrix, its not just
semiconductors that have been dragging down the QQQ.  I do make
note that today's trade in Intel (NASDAQ:INTC) has it breaking
below its 12/10/03 relative lows, which at that time had the QQQ
much lower than current trade at approximately $34.65.
Meanwhile, chip-equipment giant Applied Materials (NASDAQ:AMAT)
$21.21 -2.48%, which Intel is AMAT's biggest customer holds above
its January 29th recent relative low of $20.78, where the QQQ
would be trading below its January 29th intra-day low of $36.66.
While some of today's weakness in INTC was largely attributed to
news that the IRS may be auditing the company's past tax filings,
broader technology has been weak.

S&P 100 Index Chart - Daily Intervals



I was somewhat surprised when an upside alert I had set at
General Electric (NYSE:GE) $33.11 was triggered today, which had
the largest cap-weighted component in the OEX moving to a two-
week high.  The top 10 weighted components saw a mixed trade and
the OEX's losses were fractional due to GE's impressive gain.

Bearish trade action tomorrow for the OEX and SPX would be if we
saw a trade at DAILY R1's reverse back below their Daily Pivots,
where some downside momentum similar to what we've seen in the
NDX/QQQ could build.

S&P 500 Index (SPX.X) Chart - Daily Intervals



The S&P Banks Index (BIX.X), KBW Bank Index (BKX.X) and S&P
Insurance Index (IUX.X) 328.54 (unch) showed relative strength
today and continue to trade strong, while the Securities/Broker
Dealer Index (XBD.X) 715.53 -1.37% give back gains after new
highs last week.  Financials aren't the worry among SPX bulls,
its technology weakness that weighs on the SPX to greater degree.

Dow Industrials (INDU) Chart - Daily Intervals



The INDU recouped just about 1/2 of its earlier session losses,
where the Pentagon's canceling of a multi-billion dollar contract
with Boeing (NYSE:BA) $43.62 -1.62% and United Technologies
(NYSE:UTX) $93.80 -2.91% had one of the Dows most heavily price-
weighted components (UTX) taking a rather large hit.

Mid-point of our regression wasn't tested during the mid-January
pullback, and should be deemed a worth upward trending support
trend, which currently intersects the INDU's WEEKLY S1.

Jeff Bailey


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***************
ASK THE ANALYST
***************

The public float and Volume at Price

I was wondering if you could shed some light on a stock's float,
and if there are any trading techniques you might know of for
using this supply indicator with technical analysis?

A quick bit of background for those that might not know what the
"float" is, the float, often times called the public float, is
the total number of shares publicly owned and available for
trading in a stock.  The public float is calculated by
subtracting restricted shares from outstanding shares.

Knowing what the public float is for a stock can be helpful to
both a stock trader and stock investor as the public float can
give insight into how profitable, or at a loss, bullish investors
might be in a stock as it relates to the public float, where in
very simplistic terms, the public float is considered the amount
of SUPPLY of stock available for the public (you and I along with
institutions) to be trading.

Some stocks can trade their public float over the course of days,
while larger cap stocks may take weeks, months or years for
trading volume to have the float traded.

Some trading software packages offer a tool for measuring price
range where the public float is owned.  While I use QCharts and
know of their tool for defining the range, other software
packages may also offer such a tool.

For those that may be using QCharts, this tool can be found under
"Studies" and the "Float Turnover Channel" tool.

Here's a chart of Cisco Systems (NASDAQ:CSCO) where I've used the
"Float Turnover Channel" tool to show that on January 15, 2004,
when Cisco Systems (CSCO) was trading a new 52-week high, there
were very few traders or investors that were not profitable in
the stock, as CSCO was trading at the upper-end of its public
float channel.

Cisco Systems (CSCO) Chart - Daily Intervals (01/15/04)



The gray shaded area would represent the total price range on
average, that Cisco's public float was owned.  I've placed a
retracement bracket at the high and low end of the public float
range, which it would be incorrect to assume that the average
price that the public owns the stock is $22.47, or 50% of the
range, but for those traders that trade levels, the retracement
bracket does dissect the total range of trade.

It would be my opinion, that the Fibonacci retracement bracket
used above did have some technical significance at the $19.35
(80.9% retracement) and $21.28 (61.8% retracement) levels, but
began to lose some of its technical significance at higher price.
Still, a pattern of bullishness was seen as each time CSCO's
stock achieved a higher retracement level, the stock either found
support at the next level lower, or never tested a lower level.

Let's scroll forward to present time, so we can get an idea of
the current public float range.  Let's also follow those
retracement levels above and see how CSCO's stock has been
trading.

Cisco Systems (CSCO) Chart - Daily Intervals (02/20/04)



On January 16, 2004, shares of CSCO jumped higher and then traded
a new high on Monday, January 20, 2004.  While the upper-end of
the public float range expanded, there hasn't been enough volume,
or shares traded to have the lower-end of the public float range
moving higher at this point.  Note the recent gap lower in CSCO's
shares and heavy daily volume of 190.7 million shares between
$25.00 and $24.01.

One technical analysis tool that can be helpful when trying to
count cards in relation to understanding the public float is
looking at Volume at Price.  Volume at price gives the
trader/investor an observation of where there was great degree of
INTEREST and DISAGREEMENT between bulls and bears, where
support/resistance levels might also be found.

Cisco Systems (CSCO) Chart - (02/20/04) Volume at Price



In red bars at along the left vertical axis, I've turned on the
Volume at Price study, where I've marked some of the price/volume
inflection points.  The recent break below the $24.05 level
certainly gives the technical perspective that CSCO bulls aren't
as bullish as they used to be, and more of the public float is
currently underwater, and resistance should be building at
$24.82, or the 38.2% retracement.

The volume at price study shows that last fall (September-
October) there was great interest and disagreement surrounding
the $20.77 level.

The current retracement bracket, which is attached to the current
public float range has done a better job, or made more sense in
defining levels of resistance than support, where a
trader/investor would be more bearish the stock below $24.82,
with a downside target of support at $22.00.

As we can see from Cisco's chart, it would show that CSCO has
turned over its public float in about 6-months time.

There are some stocks that turn over their public float in much
shorter time.  These stock are often-times HIGHLY VOLATILE and
may show VERY HIGH levels of short interest.

TASER International (TASR) Chart - Daily Intervals



TASER International's public float range changes almost daily, if
not every week.  QCharts users can turn on their "Float Turnover
Channel" and move their chart back to the left, then begin moving
your chart forward in time.  You can really get the observation
of how shorts have been squeezed when the stock moves above the
upper-end of its float turnover channel.  Bears might be starting
to get the stock under control if they can keep it below the
current upper-end of $61.23.

TASER Intl. (TASR) - 60-minute Intervals



The recent 3:1 stock split brought TASR's stock price down to a
more "affordable" price level for traders that might not
otherwise have traded a $120-priced stock.  As you can see, the
60-minute interval chart looks as volatile as a DAILY bar chart
interval of volatile stocks.

I received a couple of e-mail this past week regarding TASR's
price action in regards to any news on the stock this past week
as it price action was all over the place.

While the stock is quite liquid, the high level of short-
interest, active volume and small public float makes this stock
one of the most volatile and unpredictable stocks in the market
right now.

Jeff Bailey


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The Option Investor Newsletter                   Monday 02-23-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: WGO
Dropped Calls: GD
Dropped Puts: None
Watch List: Support Defended


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*****************
STOP-LOSS UPDATES
*****************

WGO - Put
Lower stop from 71.50 to 70.00


*************
DROPPED CALLS
*************

General Dynamics - GD - close: 93.52 chg: -0.91 stop: 92.00

News that the Pentagon might cancel the $38 billion Comanche
helicopter program sent ripples of concern through the defense
sector.  United Technologies (UTX) and Boeing (BA) are the two
defense contractors to be hardest hit by the news, which was
confirmed after the closing bell.  Yet today's weakness in the
group was enough to send GD below the $92.00 level and stop us
out.

Picked on February 08 at $96.88
Change since picked:     - 3.36
Earnings Date          01/21/04 (confirmed)
Average Daily Volume:       1.0 million
Chart =




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************
DROPPED PUTS
************

None


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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.

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**********
Watch List
**********

Support Defended

=================================================================
WATCH LIST
=================================================================
United Technologies - UTX - close: 93.81 change: -2.81

WHAT TO WATCH: The announcement that the Pentagon was canceling
the Comanche Helicopter program did not sit well with UTX
investors and the stock plunged nearly 3% on the day to end just
above key support near $92.50.  This support has been in place for
over 2 months and if it gives way, UTX can be expected to trade
down towards next support at $87.50 and possibly stronger support
in the $84-85 area.

Chart=


---

KLA Tencor Corporation- KLAC - close: 53.76 change: -1.43

WHAT TO WATCH: Semiconductor stocks were the leaders to the downside
again on Monday, with the SOX index closing under $500 support.  KLAC
tested its 200-dma and just barely held onto that level as support.  A
break below the $52.50 level should have the bears eyeing next support
near $47.50.  Use a trigger under $47.50 for entry and monitor the SOX
for indications of continued sector weakness.

Chart=


---

Analogy Devices Inc. - ADI - close: 48.22 change: -1.12

WHAT TO WATCH: Traders that view the current weakness in the
Semiconductor index as just another bullish entry point might want
to turn their attention to shares of ADI, which are still trading
within the ascending channel that has been in force for the past
year.  Target entries on a rebound from the bottom of the channel
near $46.75 and then look for a rebound back to test the recent
highs near $52.50.

Chart=


---

Johnson Controls - JCI - close: 56.97 change: -1.10

WHAT TO WATCH: Putting in a pretty convincing topping formation
over the past couple months, shares of JCI appear to be breaking
down, violating the 50-dma on Friday and continuing their downward
slide today.  While there's mild support near $55, it looks like
the real target is stronger support near $52.50.  Optimal entries
would come on a failed bounce below the 50-dma, while secondary
entries can be taken on continued weakness below today's intraday
low.

Chart=



===================
On the RADAR Screen
===================

COF $69.99 - Twice in the past month the bulls have bought the dip
in shares of COF, successfully defending the $69-70 support level,
but this time things may be different.  Use a trigger under $69
and target initial support at $65.

ABC $56.08 - Since the big plunge in late December, ABC has been
consolidating in a tight sideways pattern.  The $58 level has been
providing consistent resistance and now the 50-dma is falling to
reinforce that resistance.  Failed rallies near $58 look like the
ideal entry ahead of an expected breakdown below $55 support.
Target strong support in the $52.50 area.

GE $33.42 - News of management changes helped GE to buck the
weakness in the broad market on Monday and it looks like the
beginning of a strong rebound from key support is underway.
Entries near current levels look favorable, with a tights stop
placed just under the 50-dma at $32.20.  Look for a rally towards
strong resistance at $37.50, also the site of the 200-week moving
average.


*******************
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


**********
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**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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