The Option Investor Newsletter Wednesday 02-25-2004 Copyright 2004, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. In Section One: Wrap: Oversold Bounce? Futures Wrap: Dollar Reverses Tuesday's Decline Index Trader Wrap: See Note Traders Corner: Building A Better Mousetrap Posted online for subscribers at http://www.OptionInvestor.com ******************************************************************* MARKET WRAP (view in courier font for table alignment) ******************************************************************* 02-25-2004 High Low Volume Advance/Decline DJIA 10601.62 + 35.25 10615.56 10560.07 1.67 bln 1841/ 996 NASDAQ 2022.98 + 17.54 2024.20 2007.73 1.68 bln 1968/1091 S&P 100 565.86 + 2.17 566.74 563.64 Totals 3809/2087 S&P 500 1143.67 + 4.58 1145.24 1138.71 RUS 2000 579.04 + 7.17 579.09 571.56 DJ TRANS 2868.96 + 9.65 2873.27 2849.52 VIX 14.93 - 0.97 16.05 14.93 VXO 14.99 - 0.83 15.98 14.89 VXN 23.55 - 1.13 24.80 23.52 Total Volume 3,718M Total UpVol 2,648M Total DnVol 1,024M 52wk Highs 267 52wk Lows 21 TRIN 0.78 PUT/CALL 0.77 ******************************************************************* Oversold Bounce? by James Brown What felt like a rather slow day on Wall Street actually turned into a rather bullish session. Stocks ignored disappointing home sales data and rising oil and gas prices to focus on positive comments from Fed chairman Alan Greenspan. Tech stocks actually lead the bounce with chip and networking stocks posting strong gains. Overall the major indices turned things around to end the recent losing streak. Market internals were very bullish with advancing stocks sweeping past declining issues 18 to 10 on the NYSE and 20 to 11 on the NASDAQ. Up volume was better than 2-to-1 over down volume on both exchanges but total volume was light for the session. If you're feeling pessimistic this may look like an oversold bounce after five days of consecutive losses but the rebound today was very widespread. The only sector to turn lower was the XAU gold & silver index, which lost 1% and only due to the strength in the U.S. dollar. Gold futures dropped $8.70 to $396.10 an ounce after the greenback rose against the euro and the yen. The Dow Jones Industrial average traded in a relatively tight 50- point range but remained above support and managed to close over the 10,600 level. This bodes well for tomorrow and its short- term oscillators are suggesting a continuation of the bounce. The rebound in the NASDAQ is probably more important. It was crucial that the tech-heavy NASDAQ hold support at the 2000 level and today's move should send it back toward overhead resistance at its 50-dma. Chart of the DJIA: Chart of the NASDAQ Composite: Also noteworthy was the rebound in the Russell 2000 (RUT) and the Semiconductor index (SOX). The RUT broke support at its 50-dma on Monday but never saw any follow through during Tuesday's session. Today's bounce puts it back over the 50-dma and the index has put in a new higher low compared to the earlier February drop. The SOX also made an impressive turnaround with today's 1.82% gain putting it back above its 100-dma and the 500 mark. Boosting the SOX was news from the Gartner research group who said that global semiconductor sales should rise 22.6% in 2004, the largest improvement since 2000. What I find interesting is that in Gartner's press release they call their 2004 forecast "deliberately conservative". Chart of the Russell 2000: Chart of the Semiconductor Index: The economic data this morning turned out to be disappointing. Economists were looking for a dip in existing homes sales to 6.27 million units, down from the previous month's 6.47 million annual adjusted rate. What we got was a 5.2% drop to 6.04 million units. It may have been this news that influenced early morning weakness in the homebuilders even though these were existing home sales and not new ones. Tomorrow could be important for the homebuilding sector as the new homes sales numbers are released. The media was also buzzing about the strong gains in oil and gas prices today. Crude oil rose $1.10 to $35.68 and gas prices rose 3.45 cents to $1.0589 per gallon to hit their highest levels in almost a year. Driving the news was a report from the Energy Department that unleaded gasoline inventories had dropped 1.6 million barrels last week to 203.4 million barrels, which is below year-ago levels. As mentioned in yesterday's wrap the high price of oil is a major influence on multiple sectors in our economy and the markets ability to ignore this rise has been extraordinary. Concerns over OPEC suggesting another production cut at their April meeting has some analysts speculating that we'll see drastically increased prices at the pump this summer. The rise in oil is the major factor in the oil service sector's three-month rally. Hogging the spotlight again was Alan Greenspan's third appearance this week. This time Alan was speaking before the House Budget Committee and shared his views on the U.S. economic outlook. Greenspan stated that the Bush tax cuts had sparked the current economic expansion and the Fed's accommodative stance (a.k.a. the lowest interest rates in 40 years) had allowed the U.S. to move from a "period of sub-par growth to one of more vigorous expansion". He did issue strong caution on the rising deficit and said Congress needs to address it while both congress and the President need to curb spending. Of course the real hot topic today was Greenspan's comments on Social Security and his proposals to "fix" Social Security by adjusting policy for inflation and longer life expectancies. More importantly for us short-term were his comments that, "The most recent indicators suggest that the economy is off to a strong start in 2004 and prospects for sustaining the expansion in the period ahead are good." A few market pundits went on to speculate that Greenspan's comments may re-ignite the rally in tech stocks. Currently the U.S. economy is expected to grow by 4.6% through 2004, well above the 3.1% seen in 2003. Many believe that tech stocks have already priced in this rate of growth. However, if the market interprets Greenspan's comments today to mean that the economy can grow even faster then there may be more room for stocks to run again. Given the rebound today I believe tomorrow should be bullish assuming there aren't any huge negative surprises in the handful of economic reports. Before the opening bell we'll get the weekly initial jobless claims, the durable goods orders for January. After the open we'll see the Help-wanted index and the new home sales figures. Plus, the markets will get to hear from Ben Bernanke, one of the Federal Reserve governors, as he speaks in Washington tomorrow. Traders can also keep an eye on retail stocks. Announcing before the opening bell is American Eagle Outfitters (AEOS), The Limited (LTD) and Liz Claiborne (LIZ). Announcing later on Thursday will be Kohl's (KSS) and the Gap (GPS). ************ FUTURES WRAP ************ Dollar Reverses Tuesday's Decline Jonathan Levinson The US Dollar Index bounced from its broken descending resistance line, reversing yesterday's decline. Precious metals declined despite strength in the CRB, while treasuries and equities rose. 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 blasted higher today, putting in a higher low and higher high to close back at last Friday's highs, holding at 87.25 after spikes above 87.30. The move reaffirmed the daily cycle upphase that kicked off last week and suggests a test of Bollinger resistance in the 88.20 area. We'll recall the persistence of 88-90 support on the way down, and this is now the level being considered from below. The broken descending trendline has been confirmed and is now first support. Despite the dollar strength, the CRB advanced, led by heating oil, crude, sugar and cocoa futures. Crude oil closed at 35.70, breaking powerfully higher earlier in the day. For the day, the CRB gained .66 to close at 269.17. Daily chart of April gold The one binary trade that continues like clockwork is in gold, with the April contract dropping to a low of 393.40 (Friday's low) and closing at 396.60, down 7.90 or 1.95%. Just as the strength in the US Dollar Index confirmed the new daily cycle upphase, so did today's decline confirm the downphase on April gold. Support continues to 392, followed by 388 and 376. HUI and XAU got clocked as well but recovered in the final minutes of trading, closing lower by 1.19% at 221.67 and 1.08% at 98.39 respectively. Daily chart of the ten year note yield Ten year note yields (TNX) dropped 1.4 bps to close at 4.015%, a 35% move for the day. This strength in bonds occurred despite a 2B net drain from the Fed and the strong rise in the US Dollar Index, and is most likely attributable to Greenspan's comments and short term speculation that a rate hike is furthest from the Fed's collective mind. The decline in the TNX tested the rising support line for the second consecutive session. A break below 4% targets key 3.92% from which powerful bounces have resulted since that test at the beginning of October. Is it a descending triangle or a triple bottom? That will be the question if current rising trendline support fails. Daily NQ candles The NQ printed narrow range day, but at least it was positive, the first such session in five, closing higher by 9 at 1472.5, a 61% gain. The bounce appears "technical", a sideways print along daily Bollinger support. The daily cycle downphase didn't twitch, as the slightly higher high and lower high did nothing to disturb the well-established daily downtrend. The low at 1458 coincided with lower Bollinger band support, below which the rising trendline just above 1440 is in play. I've been wondering for several sessions about the fate of our binary dollar trade for equities, and today saw equities rise, albeit slightly, in the face of a large upward move in the US Dollar. I won't bother guessing at reasons for the intermarket divergence from its primary trend for the past year, and for trading purposes I suggest simply tuning it out on an intraday basis. Watch the individual charts, and simply wait for the next trend to emerge. Currently, equities appear weaker and the dollar stronger, but they're not trading in lockstep the way they did even a week ago. 30 minute 20 day chart of the NQ The 30 minute NQ shows a narrowing grind higher that could be a bearish rising wedge, a bullish rising triangle, or even a sloppy reverse head and shoulders bottom. The 30 minute cycle oscillators indicate a halting trending move higher, and the price action today revealed almost perfect confusion as to whether the price would break to the upside or the down. A move below 1465 or above 1477 resistance should break the current deadlock, but with support at 1460 and resistance at 1482, there's little incentive for traders to chase moves, which most likely accounts for the excruciating range that developed in the afternoon. On a cycle basis, the daily cycle downphase should cap the 30 minute upphase that bought us today's advance, and that 30 minute upphase has so far been weak. I'd expect a failure at lower resistance, perhaps 1477 or 1482, on the basis of the current cycle setup. Daily ES candles ES rose 4.75 or .42% to close at 1143.25, bouncing from a higher low of 1137 and failing at 1145. This positive session was a breath of fresh air and broke the losing streak at the primary regression channel upper trendline. As with the NQ, the move didn't register on the daily cycle oscillators which remain committed to their ongoing downphase. That downphase kicked off from lower oscillator highs, and the resulting bearish divergence usually precipitates a steep selloff. I don't believe we've seen that occur yet on the ES, but until the rising channel breaks, the general price trend will remain bullish and not bearish. 20 day 30 minute chart of the ES We remarked on the light volume today, and the fact that such occurred during the 30 minute cycle upphase is none too encouraging to the upside. However, narrowing formations are usually characterized by declining volume, and so this isn't necessary bearish. The 30 minute upphase held through the entire session, and, launching as it did from a premature end to the preceding downphase from a higher oscillator high, portended a strong price bounce. That, and the bullish descending wedge breakout suggested much more upside than we saw today. The bounce looks more like a rising wedge here than on the NQ, and, to add to the confusion, the overall pattern of the past two and half weeks is beginning to look like a rough head and shoulders top, with today printing a right shoulder, neckline a 1135 fibonacci support. As with the NQ, my reflex would be to watch for either a trendline break to the downside confirmed with a move below 1141, or a break of upside resistance above 1146. The same problem applies, however: there's support at 1138, followed by 1133-6, and resistance at 1149, followed 1151-3. On a cycle basis, the current 30 minute upphase should fail beneath the ongoing daily cycle downphase. 150-tick ES The short cycle oscillators were rolling over as of the close, suggesting a retest of the 30 minute Keltner channel's support at 1140.75. Daily YM candles YM rose 34 to close at 10600, a .32% move. The YM was again the weakest of its peers, with GE, WMT and MSFT all finishing comfortably in the red. The blue chip weakness could be a function of the Fed's repo drain today, but that's just a guess. The cycle setup is identical to that of the ES. Resistance is at 10620, support at 10560. 20 day 30 minute chart of the YM As with the ES, the YM is also sporting a possible head and shoulders top, with today's print forming the right shoulder, neckline either at 10530 or 10555. The cycle setup suggests a failure either here or slightly above, with that failure point defining the limit of the daily cycle downphase. The ambiguity on the 30 minute charts added a great deal to the rangebound confusion of this afternoon's trading. The daily cycle downphase within which it occurred suggests that the uncertainty should resolve itself to the downside, but the level from which that occurs is the question. Provided that it's a lower high on the 30 minute chart, the daily cycle will remain intact and we'll look for lower 30 minute lows to follow. With a number of economic reports due tomorrow, including initial claims and the help-wanted index, as well as durable orders and new home sales, the current narrowing range should break. An upside break should be a good opportunity for new shorts, whereas a downward break will be trickier to play as we wait for a possible last gasp in the 30 minute cycle upphase. Either way will be exciting- a vast improvement over this afternoon's long dry spell. ******************** INDEX TRADER SUMMARY ******************** Check the Site Later Tonight For Jeff's Index Trader Article http://members.OptionInvestor.com/itrader/marketwrap/iw_022504_1.asp ************************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 ************************************************************** ************** TRADERS CORNER ************** Building A Better Mousetrap by Mark Phillips mphillips@OptionInvestor.com Last week I broached the topic of developing an automated trading system, highlighting some of the challenges inherent to such an undertaking. Few of us can resist the siren's song of building or discovering a trading system that just spits out one winning trade after another. Afterall, with program trading taking up a larger and larger percentage of the total volume on the major exchanges, it is clear that many funds (both hedge and mutual) are relegating their trading decisions to programs that reside in the computer. I'm no different in that regard and with my technical background, it should come as no surprise that I've dabbled in that arena from time to time. Actually that isn't an accurate statement -- I've spent a lot of time in pursuit of that lofty goal. While I wouldn't say that I've found the Holy Grail just yet, I certainly have learned a lot in the process. One of the most important lessons I've learned has to do with human nature. First off, it's very difficult for us to trust a system that we haven't built ourselves, where we know every nuance of its behavior. Secondly, as the eternal tinkerers that many of us are (especially us engineers), it is truly challenging to resist the urge to keep tweaking any given system in hopes of fine tuning it just a bit more to improve its performance. There's nothing wrong with that desire, but there's a fine line between letting the improving a system and getting in the way of its performance. It is this dynamic that drives many of us to seek a viable automated trading system, as we know that our human frailties get in the way of rigidly applying any set of trading rules that we might choose as the basis for the trades we take. If only we can take ourselves out of the loop and let the computer make the decisions based on the inputs and algorithm's we have provided, perhaps we can avoid the trap of analysis paralysis that so often compromises our trading performance. Clearly it is essential that we have a high degree of confidence in our system before we will be able to trust the signal that it generates, especially following a string of losses. It should go without saying (that's why I'm going to say it anyways) that before we can even consider embarking on this adventure, we need a clearly defined and written business plan that defines the basic parameters of our trading activity. That plan should encompass the strategies we'll employ such as what vehicles we will trade (stocks, bonds, commodities, options, futures, etc.), what direction we'll trade (long, short, neutral) and most importantly, what is our money management plan (i.e. how will we control risk and reward). For the sake of our discussion here, let's say that we've opted to trade a basket of 10 stocks that meet a list of criteria that are contained in our business plan. Additionally, let's also define the holding time for our trades to be from 2 days to 2 weeks. That defines our strategy as that of swing trading individual equities. Let's define our initial basket of stocks here as CSCO, DGX, AMZN, IBM, TEVA, AGN, IGT, DHI, APA and ADI. There's nothing magical about any of these stocks. What we've done is grab a cross section of the market, representing a variety of sectors and trading patterns. This is the first batch of stocks that we'll use to test our developing trading system and in the design and evaluation process we'll inevitably find that some of these stocks don't belong in the list and need to be replaced by others. Also, even after we've defined our final list of trading stocks and have a finalized trading system, we'll find that we occasionally will need to remove non-performing stocks and replace them with others that are more conducive to trading through our system. We want to build a system that is robust enough to not start spitting out a string of losing trades when a given stock ceases to move in a favorable manner. But if we know from past testing that our system generates 1-2 trades per month for each of our selected stocks and that one of our stocks hasn't generated a trade for 3 months, it would be prudent to remove that stock from future consideration, don't you think? By definition, any automated trading system will be entirely technical in nature, since it is very difficult (if not impossible) to define concrete trading rules on such subjective things as breaking news and economic data. Everything in our system will boil down to price action in our chosen stocks along with a combination of moving averages, oscillators and whatever other technical indicators we find are effective in producing those winning trades. It sounds like a daunting task, doesn't it? In reality, it is! If it wasn't, then everyone would have created their own automated trading systems and would be sitting on the beach sipping Mai Tai's while their computer churned away day after day, growing their accounts. But it is that very desire that motivates many of us in this pursuit. So where do we start? We've defined our timeframe, strategies and trading vehicle. Now 'all' that's left is to start programming the computer with our list of trading rules, running backtests and weeding out the wheat (viable trading rules) from the chaff (those rules that don't work) as we work our way towards the goal of a set of rules/algorithms that produce an acceptable win/loss and profit ratio. That brings up another issue though. How will we know when we've reached our goal? When is the trading system sufficiently well defined that we can turn it loose to actually generate trade signals? Needless to say, we must define those criteria before proceeding with the design. Here are the basic parameters I believe are necessary in order to say we have viable system. 1. The system must perform well both historically (at least for the past 12 months) and that performance must then translate into comparable performance going forward. That means that we must achieve acceptable performance over the back-testing period and then it must perform at roughly the same level when we start feeding it live data and taking the trade signals (on paper) in real time. This test insures that we haven't "curve fit" our system to work only with historical data to the detriment of future performance. We're making sure that we have a robust system. 2. Secondly, we need a system that provides a smooth equity curve. If we are to have faith in the system once we start following its trade signals with real money, we need to know what the worst case draw-down is. If the system historically never causes an equity decline in our account of more than 3%, while at the same time growing by 8-10% on a monthly basis, I would call that a very workable system. Another way to define this is if we plotted the historical account balance over the back-testing period, we should see a rising trend of higher lows and higher highs. In other words, we want to see a bullish trend. There's one other thing that is essential in this endeavor and that is a program that is capable of processing the data, being programmed with our set of trading rules and doing the actual back-testing, finally spitting out detailed results so that we can evaluate the performance and make the necessary changes for the next iteration. There are a number of programs on the market that provide this ability, but Trade Station is the industry leader. Among the other platforms that have sufficient flexibility for this pursuit, I've also utilized Metastock and eSignal. I don't want to get bogged down in the details of which program to use or how to use it, but for those of you that are interested in pursuing this project on your own, any of those products should do the job quite well. I told you when we started this discussion that there was a lot involved and that it would take some time to cover everything. Unfortunately, I've once again used up my space for the day and must wrap this up until next week. I think we've covered all the necessary groundwork for the process ahead and next week we can start tinkering with the specifics of what works and what doesn't and then set you loose, building your own mouse traps. See you next week! Mark ************************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 ************************************************************** ******************* 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. 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The Option Investor Newsletter Wednesday 02-25-2004 Copyright 2004, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. In Section Two: Stop Loss Updates: PD Dropped Calls: EBAY Dropped Puts: None Spreads, Combinations & Premium-Selling Plays: It's Definitely Time For A Bounce! Watch List: More Three-lettered stocks to watch ************************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 ************************************************************** ***************** STOP-LOSS UPDATES ***************** PD - call raise stop from 78.00 to 79.00 ************* DROPPED CALLS ************* eBay, Inc. - EBAY - close: 67.20 change: +0.01 stop: 66.50 The play that never was. EBAY failed to reach its entry trigger above $70 before reversing course and taking out near-term support near $67 this morning. The stock did manage a feeble rebound to close back over that level, but with our $66.50 stop tripped in the early going, we have no choice but to drop it. The stock is still holding near its recent highs, and we'll keep our eyes peeled for another opportunity to attempt playing the upside in the near future. Picked on February 22nd at $69.26 Change since picked: -2.06 Earnings Date 4/21/04 (confirmed) Average Daily Volume = 6.89 mln ************************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 ************************************************************** ************ DROPPED PUTS ************ None ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ********************************************* SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS ********************************************* It's Definitely Time For A Bounce! By Ray Cummins Stocks rebounded Wednesday as wary investors were lured back into the market by bullish comments from Federal Reserve Chairman Alan Greenspan. The Dow Jones Industrial Average finished up 35 points at 10,601 with the best performance coming from Eastman Kodak (NYSE:EK). The NASDAQ Composite added 17 points to close at 2,022 with chip, networking and computer hardware stocks posting some of the best gains. The S&P 500 index climbed 4 points to 1,143 as biotech, electronic manufacturing services, broker/dealer, retail apparel, utility, industrial, and healthcare issues moved higher. On the technology exchange as well as in the broader markets, advancers roughly doubled decliners. Total volume was 1.35 billion on the NYSE and 1.7 billion on the NASDAQ. In the treasury market, the 10-year note was up 4/32 with its yield falling to 4.01%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 02/24/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The following summary is a reasonable account of the positions previously offered in this section. However, no representation is being made as to the actual performance of a position and in fact, there are frequently large differences between the summary results and those of our subscribers, due to the variety of ways in which each play can be opened, closed, and/or adjusted. In addition, the summary might not be completely representative of the manner in which the average trader would react to changing conditions in a position and to the options market in general. The editor of this section does not take actual positions in any published plays and the summary comments are simply a service to help new traders understand when positions might be opened and closed. In most cases, actions taken based on the commentary would be far too late to be effective, thus it is not intended as a substitute for personal trade management nor does it in any way replace your duty to diligently monitor and manage the positions in your portfolio. MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE The Maximum Yield (listed in the summary and with "naked" option selling plays) is the greatest possible profit available in the position. This amount, expressed as a percentage, is based on the initial margin requirement as determined by the Board of Governors of the Federal Reserve, the U.S. options markets and other self-regulatory organizations. Although increased margin requirements may be imposed either generally or in individual cases by various brokerage firms, our calculations use the widely accepted margin formulas from the Chicago Board Options Exchange. The "Simple Yield" is based on the cost of the underlying issue (in the event of assignment), including the premium from the sold option, thus it reflects the maximum potential loss in the trade. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NAKED PUTS Stock Strike Strike Cost Current Gain Max Simple Symbol Month Price Basis Price (Loss) Yield Yield IDCC MAR 20 19.55 25.38 0.45 6.66% 2.30% LSCP MAR 17 17.10 24.25 0.40 6.20% 2.34% PCLN MAR 22 21.70 21.20 (0.50) 0.00% 3.69% * AMLN MAR 20 19.55 21.93 0.45 6.42% 2.30% ATRX MAR 22 22.05 26.70 0.45 6.79% 2.04% BRCM MAR 37 36.95 40.00 0.55 4.29% 1.49% IDCC MAR 22 22.10 25.38 0.40 5.88% 1.81% OSTK MAR 20 19.35 26.89 0.65 10.25% 3.36% NEOL MAR 17 16.95 20.59 0.55 10.48% 3.24% RMBS MAR 30 28.90 31.66 1.10 10.64% 3.81% SMTC MAR 22 22.15 24.45 0.35 4.58% 1.58% The new position in Priceline.com (NASDAQ:PCLN) is a candidate for "early exit" for conservative traders. NAKED CALLS Stock Strike Strike Cost Current Gain Max Simple Symbol Month Price Basis Price (Loss) Yield Yield AAII MAR 25 25.40 16.66 0.40 7.47% 1.57% CMTL MAR 35 35.45 24.80 0.45 7.46% 1.27% FLML MAR 35 35.35 23.43 0.35 6.02% 0.99% MHS MAR 35 35.45 32.65 0.45 4.40% 1.27% PUT-CREDIT SPREADS Symbol Pick Last Month L/P S/P Credit C/B G/L Status GS 107.09 104.32 MAR 95 100 0.65 99.35 0.65 Open MSTR 64.78 57.76 MAR 50 55 0.55 54.45 0.55 Open MICC 22.06 21.16 MAR 18 19 0.12 18.63 0.12 Open VIP 83.25 82.20 MAR 70 75 0.65 74.35 0.65 Open Microstrategy (NASDAQ:MSTR) and Goldman Sachs (NYSE:GS) are on the "watch" list. CALL-CREDIT SPREADS Symbol Pick Last Month L/C S/C Credit C/B G/L Status MGAM 38.65 39.62 MAR 50 45 0.50 45.50 0.50 Open UTEK 26.28 24.55 MAR 35 30 0.60 30.60 0.60 Open AMZN 44.87 42.32 MAR 55 50 0.50 50.50 0.50 Open CTAS 42.77 43.25 MAR 50 45 0.60 45.60 0.60 Open Questions & comments on spreads/combos to Contact Support ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NEW POSITIONS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ This following group of plays is simply a list of candidates to supplement your search for profitable trading positions. As with any new investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies are suitable for your personal skill level, risk-reward tolerance and portfolio outlook. In addition, we recommend that you avoid any trading techniques in which you are not completely comfortable with the potential capital loss, the necessary adjustments, and the common entry-exit strategies. The positions with "*" will be included in the weekly summary. Those with "TS" (Target-Shoot) are below our minimum monthly return, but may offer a favorable entry price with a limit order, due to the daily volatility of the underlying issue. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BULLISH PLAYS - NAKED PUTS All of these issues have robust option premiums and relatively favorable technical indications. However, current news and market sentiment will have an effect on these stocks, so review each play thoroughly and make your own decision about its future outcome. WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL! The sale of uncovered puts entails considerable financial risk, far more than the initial margin or collateral required to open a position. The maximum financial obligation for the sale of a naked put is the strike price (of the underlying stock) that is sold. Although this obligation is reduced by the premium from the sale of the option, a writer of puts should have the cash or collateral equivalent of the sold strike price in reserve at all times. In addition, there is one very important rule when using this strategy: Don't sell puts on stocks that you don't want to own! Why? Because stocks occasionally experience catastrophic declines, exponentially increasing the margin maintenance and possibly causing a devastating shortfall in your portfolio. It is also important that you consider using trading stops on naked option positions to help limit losses when a stock's price falls. Many professional traders suggest closing the position when the underlying share value moves below the sold strike, or using a "buy-to-close" stop order at a price that is no more than twice the original premium received from the sold option. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ADEX - ADE Corporation $22.02 *** Chip Sector Rally! *** ADE Corporation (NASDAQ:ADEX) is engaged in the design, building, marketing and service of production metrology and inspection systems for the semiconductor wafer, semiconductor device, magnetic data storage and optics manufacturing industries. The company's products have evolved from single instruments used in offline engineering analysis to full, 100% inline, automated metrology solutions throughout the wafer, semiconductor device and hard disk drive manufacturing processes. Its systems analyze and report product quality at critical manufacturing process steps, sort wafers and disks and provide manufacturers with certification data upon which they rely to manage processes and accept incoming material. Semiconductor wafer, device and magnetic data storage manufacturers use the firm's systems to improve yield and capital productivity. ADEX - ADE Corporation $22.02 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 20 QDE OD 74 0.45 19.55 8.2% 2.3% * SELL PUT MAR 22.5 QDE OX 32 1.50 21.00 18.4% 7.1% __________________________________________________________________ ALXN - Alexion $22.91 *** Drug Speculation! *** Alexion Pharmaceuticals (NASDAQ:ALXN) develops pharmaceutical products for the treatment of heart disease, inflammation, cancer and diseases of the immune system. The company's two lead product candidates are genetically altered antibodies that target specific diseases that arise when the human immune system induces undesired 1inflammation in the human body. Alexion's product candidates are designed to block components of the human immune system that cause undesired inflammation while allowing beneficial components of the immune system to remain functional. ALXN - Alexion $22.91 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 20 XQN OD 70 0.30 19.70 6.1% 1.5% * SELL PUT MAR 22.5 XQN OX 10 1.05 21.45 14.2% 4.9% __________________________________________________________________ APPX - American Pharma Partners $36.10 *** Uptrend Resumes? *** American Pharmaceutical Partners (NASDAQ:APPX) is a specialty drug company that develops, manufactures and markets injectable pharmaceutical products, focusing on the oncology, anti-infective and critical care markets. The company is one of the largest producers of injectables, with more than 130 generic products in more than 350 dosages and formulations. APPX - American Pharma Partners $36.10 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 30 AQO OF 1220 0.30 29.70 4.6% 1.0% * SELL PUT MAR 35 AQO OG 1643 1.50 33.50 13.4% 4.5% __________________________________________________________________ ATRX - Atrix Laboratories $27.04 *** Entry Point? *** Atrix Laboratories (NASDAQ:ATRX) is a specialty pharmaceutical company focused on advanced drug delivery. With five unique patented technologies, Atrix is currently developing a diverse portfolio of proprietary products, including oncology, pain management, and dermatology products. The firm also partners with large pharmaceutical and biotechnology companies to apply its proprietary technologies to new chemical entities or to extend the patent life of existing products. ATRX - Atrix Laboratories $27.04 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 22.5 OQF OX 69 0.30 22.20 6.0% 1.4% * SELL PUT MAR 25 OQF OE 42 0.90 24.10 12.3% 3.7% __________________________________________________________________ MRVL - Marvell Technology $43.13 *** In A Trading Range? *** Marvell (NASDAQ:MRVL) designs, develops and markets integrated circuits utilizing proprietary communications mixed-signal and digital signal processing technology for communications-related markets. Marvell offers its customers a wide range of integrated circuit solutions using proprietary communications mixed-signal processing and digital signal processing technologies. Marvell's product groups include: storage products, consisting of a variety of read channel, system-on-chip and preamplifier products; and broadband communications products, consisting of a variety of transceiver products, switching products, internetworking products and wireless LAN products. MRVL - Marvell Technology $43.13 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 37.5 UVM OU 1164 0.40 37.10 4.4% 1.1% * SELL PUT MAR 40 UVM OH 4010 0.95 39.05 8.3% 2.4% __________________________________________________________________ NEOL - NeoPharm $21.10 *** Testing Recent Highs! *** NeoPharm (NASDAQ:NEOL) is a biopharmaceutical company engaged in the research, development and commercialization of drugs for the treatment of various cancers. The firm has built its drug portfolio based on its novel proprietary technology platforms, the proprietary NeoLipid liposomal drug delivery system and a tumor-targeting toxin platform. NeoPharm has several promising compounds in various stages of development. The company's lead compound is IL13-PE38, a tumor-targeting toxin being developed as a treatment for glioblastoma multiforme, a deadly form of brain cancer. NEOL - NeoPharm $21.50 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 17.5 UOE OW 219 0.20 17.30 5.2% 1.2% * SELL PUT MAR 20 UOE OD 40 0.95 19.05 15.2% 5.0% __________________________________________________________________ OSTK - Overstock.com $28.11 *** Mega-Rally Mode! *** Overstock.com (NASDAQ:OSTK) is an online "closeout" retailer offering discount, brand-name merchandise for sale primarily over the Internet. The company's merchandise offerings include bed-and-bath goods, kitchenware, watches, jewelry, electronics, sporting goods and designer accessories. Overstock offers its customers an opportunity to shop for bargains conveniently, while offering an alternative inventory liquidation distribution channel to its suppliers. The company typically offers around 5,000 non-media products and over 100,000 media products (books, CDs, DVDs, video cassettes and video games) in seven departments on its Websites, www.overstock.com, www.overstockb2b.com and www.worldstock.com. OSTK - Overstock.com $28.11 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 20 QKT OD 279 0.30 19.70 6.7% 1.5% * SELL PUT MAR 22.5 QKT OX 913 0.50 22.00 10.8% 2.3% __________________________________________________________________ SEPR - Sepracor $29.53 *** Pure Premium-Selling! *** Sepracor (NASDAQ:SEPR) is a research-based pharmaceutical company dedicated to treating and preventing human disease through the discovery, development and commercialization of pharmaceutical compounds, including product candidates directed toward serving unmet medical needs. The firm's proprietary compounds are either single-isomer or active metabolite forms of existing drugs, which Sepracor refers to as improved chemical entities, or new chemical entity compounds, which are unrelated to current products. SEPR - Sepracor $29.53 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAR 17.5 ERQ OW 959 0.25 17.25 5.4% 1.4% * SELL PUT MAR 20 ERQ OD 10996 0.55 19.45 11.3% 2.8% SELL PUT MAR 22.5 ERQ OX 5901 0.90 21.60 17.5% 4.2% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BULLISH PLAYS - CREDIT SPREADS These candidates are based on the underlying issue's technical history or trend. The probability of profit in these positions may also be higher than other plays in the same strategy, due to small disparities in option pricing however, each play should be evaluated for portfolio suitability and reviewed with regard to your strategic approach and trading style. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ GDT - Guidant $69.79 *** A New "Multi-Year" High! *** Guidant Corporation (NYSE:GDT) pioneers lifesaving technology, giving an opportunity for a better life today to millions of cardiac and vascular patients worldwide. The company, driven by a strong entrepreneurial culture of more than 11,000 employees, develops, manufactures and markets a broad array of products and services that enable less invasive care for some of life's most threatening medical conditions. GDT - Guidant $69.79 PLAY (less conservative - bullish/credit spread): BUY PUT MAR-60.00 GDT-OL OI=2127 ASK=$0.25 SELL PUT MAR-65.00 GDT-OM OI=3154 BID=$0.85 INITIAL NET-CREDIT TARGET=$0.60-$0.65 POTENTIAL PROFIT(max)=14% B/E=$64.40 __________________________________________________________________ MTH - Meritage $71.09 *** Testing "All-Time" Highs! *** Meritage (NYSE:MTH) is a designer and builder of single-family homes in the Sunbelt states of Texas, Arizona, California and Nevada. The firm operates in Texas as Legacy Homes, Monterey Homes and Hammonds Homes; in Arizona as Monterey Homes, Meritage Homes and Hancock Communities; in Northern California as Meritage Homes, and in Nevada as Perma-Bilt Homes. The company is actively selling homes in over 120 communities, with base prices ranging from $92,000 to $910,000. The company is the general contractor for projects and typically hires subcontractors to complete the construction at a fixed price. The company usually enters into agreements with subcontractors and materials suppliers after receiving competitive bids on an individual basis. MTH - Meritage $71.09 PLAY (conservative - bullish/credit spread): BUY PUT MAR-60.00 MTH-OL OI=333 ASK=$0.30 SELL PUT MAR-65.00 MTH-OM OI=84 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.45-$0.55 POTENTIAL PROFIT(max)=9% B/E=$64.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BEARISH PLAYS - NAKED CALLS Based on analysis of option pricing and the underlying stock's technical background, these positions meet our fundamental criteria for bearish "premium-selling" strategies. Each issue has robust option premiums, a well-defined resistance area and a high probability of remaining below the target strike prices. As with any recommendations, these positions should be carefully evaluated for portfolio suitability and reviewed with regard to your strategic approach and personal trading style. WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL! The sale of uncovered calls entails considerable financial risk, far more than the initial margin or collateral required to open the position. The maximum financial obligation for the sale of a naked option is the strike price (of the underlying stock) that is sold. Although this obligation is reduced by the premium from the sale of the option, a writer of options must have the cash or collateral equivalent of the sold strike price in reserve at all times. The simple fact is: stocks often experience large price swings, exponentially increasing the margin maintenance and very possibly causing a devastating shortfall in your portfolio. It is also important that you consider using trading stops on naked option positions to help limit losses when a stock price moves in a volatile manner. Many professional traders suggest closing the position when the underlying share value moves beyond the sold strike, or using a "buy-to-close" stop order at a price that is no more than twice the original premium received from the sold option. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CECO - Career Education $48.80 *** Profit-Taking Underway! *** Career Education Corporation (NASDAQ:CECO)) is the world's largest on-campus provider of private, for-profit postsecondary education and has a rapidly growing presence in online education. CEC's Colleges, Schools and Universities Group operates 51 campuses in the U.S., Canada, France, the United Kingdom and the United Arab Emirates and offers master's degree, bachelor's degree, associate degree and diploma programs in the career-oriented disciplines of visual communication & design technologies, information technology, business studies, culinary arts and health education. The Online Education Group's AIU Online Division offers master's degree, bachelor's degree and associate degree programs in information technology, business administration, visual communication and education. CECO - Career Education $48.80 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAR 55 CUY CK 1422 0.50 55.50 4.8% 0.9% * SELL CALL MAR 50 CUY CJ 1491 1.80 51.80 11.8% 3.5% __________________________________________________________________ ECLG - eCollege.com $19.08 *** E-Learning Sector Slump? *** eCollege.com (NASDAQ:ECLG) is a provider of technology, products and services that enable colleges, universities, primary and high schools, grade schools and corporations to offer online classes for distance, on-campus and hybrid learning. The firm's unique technology enables it's customers to reach students who wish to take courses at convenient times and locations via the Internet. Its customers can also use its technology to supplement on-campus courses with an online environment. In addition, the company offers services to assist in the development of online programs, including online course and campus design, development, management and hosting as well as ongoing administration, faculty and student support. ECLG - eCollege.com $19.08 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAR 22.5 EGU CX 137 0.35 22.85 10.1% 1.5% * SELL CALL MAR 20 EGU CD 243 0.90 20.90 15.6% 4.3% __________________________________________________________________ ESI - Itt Educational Services $38.50 *** Subpoenaes Served! *** ITT Educational Services (NASDAQ:ESI) is a provider of technology oriented postsecondary degree programs in the United States. The company offers associate, bachelor and master degree programs and non-degree diploma programs to more than 33,000 students. The company has 74 institutes located in 28 states and each of its institutes is authorized by the applicable education authorities of the states in which they operate and recruit, and accredited by an accrediting commission recognized by the United States DOE. The company currently offers a variety of degree programs as well as several diploma programs in various fields of study. All of its institutes offer degree or diploma programs for information technology and electronics, and the majority of institutes offer a degree or diploma program involving design. ESI - Itt Educational Services $38.50 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAR 50 ESI CJ 0 0.30 50.30 5.0% 0.6% * SELL CALL MAR 45 ESI CI 15 1.20 46.20 15.7% 2.6% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BEARISH PLAYS - CREDIT SPREADS All of these positions are favorable candidates for "bear-call" credit spreads, based on the current price or trading range of the underlying issue and its recent technical history or trend. The probability of profit from these positions may be higher than other plays in the same strategy, due to disparities in option pricing. However, current news and market sentiment will have an effect on these issues, so review each play individually and make your own decision about its future outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CCU - Clear Channel Comm. $43.44 *** Mediocre Outlook? *** Clear Channel Communications (NYSE:CCU) is a diversified media company with three business segments, radio broadcasting, outdoor advertising and live entertainment. The firm owns, programs or sells airtime for over 1,000 domestic radio stations as well as international radio stations and its own national radio network. In addition, the company has equity interests in various domestic and international radio broadcasting companies. The company is also an outdoor advertising company and a diversified promoter, producer and venue operator for live entertainment events, owning or operating a large number of live entertainment venues. CCU - Clear Channel Comm. $43.44 PLAY (less conservative - bearish/credit spread): BUY CALL MAR-50.00 CCU-CJ OI=2451 ASK=$0.05 SELL CALL MAR-45.00 CCU-CI OI=9802 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.60-$0.65 POTENTIAL PROFIT(max)=14% B/E=$45.60 __________________________________________________________________ ICOS - ICOS Corporation $37.53 *** Next Leg Down? *** ICOS Corporation (NASDAQ:ICOS) develops pharmaceutical products with significant commercial potential by combining its unique capabilities in molecular, cellular and structural biology, high-throughput drug screening, medicinal chemistry and gene expression profiling. The firm applies its integrated approach to erectile dysfunction and other urologic disorders, sepsis, pulmonary arterial hypertension and cardiovascular diseases, as well as inflammatory diseases. The company has established collaborations with pharmaceutical and biotechnology companies to enhance its internal development capabilities and to offset a substantial portion of the financial risk of developing its product candidates. ICOS - ICOS Corporation $37.53 PLAY (conservative - bearish/credit spread): BUY CALL MAR-45.00 IIQ-CI OI=1148 ASK=$0.15 SELL CALL MAR-40.00 IIQ-CH OI=1112 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.50-$0.60 POTENTIAL PROFIT(max)=11% B/E=$40.50 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ********** Watch List ********** More Three-lettered stocks to watch ___________________________________________________________________ How to use this watch list: Readers can use the candidates below as a springboard for their own research. Many are in the process of breaking support or resistance or in the process of starting new trends or extending old ones. With your own due diligence these could be strong potential plays. ___________________________________________________________________ Pulte Homes - PHM - close: 47.05 change: +0.59 WHAT TO WATCH: After trading negative most of the session the DJUSHB home builders index finally close in the green on Wednesday. With it was a strong bounce by PHM. We like PHM because shares broke through its descending trend of lower highs two weeks ago along with resistance at its 50-dma and the $45.00 level. Now the stock has been able to consolidate sideways between 47.50 and 45.00. Traders can choose to buy the bounce from $45.00 today or wait for the breakout over $47.50. Chart= --- Eaton Corp - ETN - close: 59.70 change: +0.69 WHAT TO WATCH: There doesn't appear to be any post-split depression for ETN yet. The stock split 2-for-1 yesterday and the stock is holding up above technical support at its 40-dma. This actually looks like a potential entry point for bulls but ETN still has resistance at the $62.00 level. Aggressive traders may want to go long now with a tight stop. The rest of us can probably wait for a breakout over $62.00. Chart= --- Caterpillar - CAT - close: 77.18 change: +0.48 WHAT TO WATCH: Shares of CAT are at an inflection point. The stock had been building what looked like a bear flag consolidation pattern. What appeared to be a breakdown from that pattern has stalled while the Dow Industrials, of which CAT is a component, is trying to bounce. If the Industrials do bounce then we can probably expect CAT to trade back toward resistance at $80.00. If not, then bears should be watching for a breakdown of CAT's new short-term trading range between $76 and $78. We would target the 200-dma near $70. Chart= --- United Technologies - UTX - close: 92.30 change: +0.47 WHAT TO WATCH: After three days of steady declines UTX bounced from the $90.00 region on Tuesday afternoon and pierced the bottom of its recent trading range. That bounce continued today but the stock began to roll over again in the afternoon. The declines began due to a Pentagon decision to eliminate the $38 billion Comanche helicopter program of which UTX and BA were the main contractors for. UTX came out later and said there would be no material effect on their earnings but still investors sold the stock. UTX's point-and-figure chart looks very bearish with a new sell signal pointing to an $84 price target. We would watch for a breakdown under the $90.00 mark. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- TROW $51.22 +0.36 - TRO W has been in a sideways trading range since mid-January with shares oscillating between $50 and $54. Aggressive traders may want to buy the most recent bounce from $50 given rising support at its 50-dma. TTC $53.80 +1.25 - Toro Co, the maker of lawncare equipment, is extending its gains after yesterday's earnings blow out. Volume has been strong and the breakout looks tempting but we'd wait for a pull back. BZH $100.05 +0.35 - Another homebuilder, BZH also bounced from its 50-dma and looks ready for another leg higher. Volume was decent at 583K for the session. Use a tight stop under today's low. ******************* 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. 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