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Daily Newsletter, Sunday, 03/07/2004

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The Option Investor Newsletter                   Sunday 03-07-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Bad News Bulls Are Back
Futures Market: See Note
Index Trader Wrap: WON'T GO UP, WON'T GO DOWN
Editor's Plays: Time to Split
Market Sentiment: Another tough week
Ask the Analyst: Sector bell curve revisited
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       WE 03-05        WE 02-27        WE 02-20        WE 02-13
DOW    10595.55 + 11.63 10583.9 - 35.11 10619.0 -  8.82 + 34.82
Nasdaq  2047.63 + 17.81 2029.82 -  8.11 2037.93 - 15.63 - 10.45
S&P-100  568.45 +  3.91  564.54 -  0.33  564.87 -  1.05 -  0.14
S&P-500 1156.86 + 11.91 1144.95 +  0.84 1144.11 -  1.70 +  3.05
W5000  11314.42 +141.50 11172.9 + 29.34 11143.6 - 30.42 + 44.60
SOX      504.25 +  1.99  502.26 -  7.99  510.25 -  0.80 -  8.30
RUT      599.54 + 13.98  585.56 +  5.67  579.89 -  5.25 +  1.07
TRAN    2893.07 -  9.12 2902.19 + 10.01 2892.18 - 24.38 + 22.20
VIX       14.48 -  0.09   14.57 -  1.47   16.04 +  0.46 -  0.41
VXO       14.80 +  0.04   14.76 -  1.49   16.25 +  0.62 -  0.35
VXN       22.08 -  0.79   22.87 -  1.25   24.12 -  0.02 -  0.49
TRIN       1.40            1.26            1.29            1.19
Put/Call   0.79            0.73            0.86            0.76
******************************************************************

Bad News Bulls Are Back
by Jim Brown

Jobs were drastically lower than expected. Markets gaped
down at the open and bonds soared on the weak economic news.
Suddenly the bad news bulls stampeded into the picture and
not only pulled the markets back from the brink but pushed
them to new highs in many cases. Bad news equals strong
markets or so it appears.

Dow Chart - Daily


Nasdaq Chart - Daily



The bad news came in the form of the February Employment
Report and a huge miss in the headline number. Only 21,000
jobs were created in February when official estimates were
for +125,000 and whisper numbers exceeded +250,000 in several
instances. Not only was the headline number bad but the
numbers for the prior two months were revised down as well.
January dropped from +112,000 to +97,000 and December fell
from +16,000 to only +8,000. This was not good news for
those looking for signs of a rapidly expanding economy.

It was good news for the bond market where bonds soared to
eight month highs as fear of a coming rate hike evaporated.
Yields on the ten-year note fell to 3.83% and well off the
4.10% highs for the week. That may not seem like much on
the surface but in bond terms it is huge. It was the biggest
one day change in rates since last July. In one fell swoop
the Fed fund futures erased the chance of a quarter point
increase in August where it had been indicated and moved
it all the way to March 2005. Obviously this can change
should the recovery suddenly catch fire but as of today
there are no rates hikes expected this year.

Ten-year Yield Chart - Daily



With the Fed on hold and interest rates falling to eight
month lows the business environment suddenly improved
significantly. Fears of rising rates from a stronger
dollar and the panic Greenspan created this week were
suddenly forgotten. No strong dollar here or in the near
future. All outward signs show the recovery still in
progress but moving at a snails pace. This means the
deficit will continue to grow from lack of tax receipts
from surging earnings but earnings gains are still on
track.

The lack of job creation is actually good for earnings.
It means productivity will continue to increase and costs
will continue to be low. U.S. employees are expensive
with up to 40% of their cost going to benefits. Using
existing employees until they are forced to hire due to
rising demand will keep earnings strong and companies
healthy.

The problem we are left with is the unemployed consumer
and those that fear they could become unemployed. Workers
in those categories hoard money not spend it. Every dollar
takes on a higher value when future income is in doubt.
What we are likely to see is further drops in consumer
confidence and sentiment numbers. Those numbers will be
even further depressed because of the political rhetoric
which intensified immediately after the jobs announcement.
The candidates wasted no time in blasting Bush about the
lack of new jobs, the rising deficit and weakness in the
economy. This will continue to be fed to the masses and
confidence in the current and future economic conditions
will decline.

Overlooked in the greater scheme of things was the six
consecutive months of positive job creation. Not a record
pace but compared to the -300K to -450K per month of job
losses in late 2001 this is a huge improvement. We have
been steadily improving albeit at a slow pace since the
9/11 disaster. Also, when evaluating the current economy
you always have to compare conditions now to those pre
9/11. Economic conditions, business and travel patterns
all changed drastically on that day and it had nothing
to do with the administration. We have worked our way
out of that black hole and America businesses are
stronger for it.

Business is improving. Many companies are posting record
profits again once they restructured to the new reality.
Lessons were also learned from the bursting of the Internet
bubble and the collapse of the Y2K buying cycle. There
are a lot of things to be positive about and many traders
saw through the jobs fog on Friday morning and went on
a shopping spree. Business conditions had suddenly
improved with the removal of the rate hike cloud that
had tanked stocks earlier in the week. Stocks were on
sale and smart investors recognizing a bull market
opportunity loaded up. Interest rate sensitive stocks
like banks and homebuilders soared with many hitting
new highs. Consumer stocks like Maytag, TJX and HSY
also rose on the prospect of continued low rates.

Bull market? Absolutely! I have been telling you for
weeks that the Russell and the Wilshire, the broadest
market indicators, were still in rally mode despite
the Dow's lagging performance. We saw the proof again
today. The Russell broke prior resistance at 600 and
traded to a high of 603.16 and a level not seen since
March of 2000. That was only .65 below the March-10th,
2000 closing price of 603.81. This is a new four-year
high and a very strong performance in the face of the
jobs news. The Wilshire traded up to 11370 and a new
post 9/11 high. It closed at 11314 also a post 9/11
closing high. The Wilshire-5000 ended up gaining +141
points for the week despite several external events
like the Greenspan speech.

In fact, all the major indexes were up for the week
except for the transportation index which lost -9
points on the rising price of oil. Considering all
the negative events I think this was a bullish week
mainly due to the new high closes on the Russell and
the Wilshire.

The Dow struggled all week, actually for the last two
weeks and remains locked into a narrow range. The spike
to 10650 today was very short lived although it put up
a valiant attempt to move higher again in the afternoon.
In the end like a swimmer sinking beneath the waves the
Dow slid back below 10600 once again. This is very tough
resistance for the Dow and it has been the price magnet
for two weeks. The Dow did get some good news as the
50dma finally rose to a level where it met the horizontal
support at 10550. The morning dip hit that 50dma for the
first time since November 24th. Now the real decision
process will begin. The Dow MUST hold that 50dma and
based on the recent highs it will continue to rise to
something in the 10600 range. It must hold this average!
This has been support since March 2003 and traders have
come to rely on it. It is not an electric fence and it
can be penetrated. On three of the last four tests it
traded across the average for up to five days before
breaking free and streaking to new highs. It never
traded below it for the entire day. Eventually this avg
will fail. I have been projecting an April failure since
November. We are now at the crossroads for this market.
If the average fails now we could easily see a drop to
the 100dma currently at 10219. We have seen the Dow
trade sideways since Jan-2nd and the time has run out.
It must move higher next week or risk a serious technical
drop.

The Nasdaq closed down for the day due to a sell program
at the close but it was still a bullish day. How can I
say that with a -7 loss? Remember Thursday, the Nasdaq
sprinted ahead of the other indexes in front of the
Intel news and closed at nearly a two week high at 2054.
The index had been trending up since its most recent low
on Feb-24th and had soared to 2064 on the day of the
Greenspan speech before getting killed on the interest
rate worries. Those worries dropped it back to 2020 and
it recovered to trade most of Friday over 2050 resistance
again until the closing sell program. Look at a short term
chart and you will see the bullish uptrend. The closing
program knocked nearly -10 points off the gains but was
not material to overall market sentiment. Much of the
weakness the Nasdaq struggled to overcome was due to
another drop in the SOX prompted by the weak Intel
guidance. Everybody forgot about Intel in the Jobs hoopla.
Hopefully TQNT and TXN on Monday will erase that memory.
The challenge for the Nasdaq is the 50dma, which is at
2060 and above the current price not below it. If you
have seen my Nasdaq chart over the last week you have
seen the triple threat resistance at 2060 and it is not
going away. We traded over it on Friday on the opening
bounce but it quickly reasserted itself. Like the Dow and
the critical 50dma support test the Nasdaq is currently
at a pivotal resistance area. It MUST break this 2060
resistance next week or risk a retest of 2000.

The most positive market event on Friday was the new
highs on the Russell and Wilshire. The Dow is languishing
but it is only 30 stocks. The Wilshire is the top 5000.
If you were going to pick one for the health of the
overall market I would pick the Wilshire. I know the Dow
is the most recognized and most quoted index but it is
not reflecting a correct picture of market strength. The
Russell closed only -2 points from a new closing high.
The Wilshire did close at a new high. These indexes are
only a heartbeat away from breakout mode and represent
a truer picture of the market.

Wilshire-5000 Chart - Weekly


Wilshire 5000 Chart - Daily



The calendar is working in our favor with no material
economic reports next week. There are plenty of reports
but none that are earth shaking. The PPI for February,
previously scheduled for next Friday, has been cancelled
just like the PPI for January. There are no new dates
for either report. The mid quarter update process is
continuing and chip makers TQNT and TXN will give us
their guidance on Monday after the close. There are also
more than a dozen tech conferences next week that will
stimulate tech interest. We are only three weeks away
from quarter end and funds will use the next couple of
weeks to dress up their portfolios for the quarterly
statements. We are only five weeks away from the start
of the Q1 earnings reporting cycle beginning the week
of April-12th. Next week is the week before March option
expiration and should have a bullish bias. This is the
time where any April earnings run should begin. The
keyword was "should". We all know there is no starting
bell and no hard and fast rule that says we will even
have an earnings run. BUT, if it is going to happen it
should start soon.

Despite the apparent neutral finish for the Friday on
the major indexes, Dow +7, Nasdaq -7, the internals were
strongly positive. We had the highest volume of the last
two weeks and advancers beat decliners 4410 to 2882. All
on bad (good) economic news. Were it not for the insane
Martha Stewart activity that took over the NYSE Friday
afternoon we could have seen a stronger finish. Trading
activity in all but MSO came to a total stop once the
verdict news hit the airwaves. Hopefully the broadcasters
will wear themselves out before Monday and we can go on
with business as usual.

I could be all wet about my current market view and it
certainly would not be the first time. Bears keep finding
more excuses to short the market and to their dismay bulls
keep buying the dips. So far the bulls have been winning
with a whopping 813 new highs on Friday as proof. Until
these conditions change I am going to keep buying the
dips and suggest you do the same. Just remember the two
key points for next week. The Nasdaq MUST break 2060 and
hold it and the Dow MUST NOT break the 50dma at 10550 by
any large amount. As long as those conditions are met the
bulls are still in control.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


**************
FUTURES MARKET
**************

Futures wrap is not emailed due to the excessive number of charts.
It may be read on the website at this address.
http://www.OptionInvestor.com/indexes/futureswrap.asp


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

WON'T GO UP, WON'T GO DOWN
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
When the market can't make much further headway but also bounces
back after "bad" news, it's usually a sign that it wants to go up
but maybe needs to mark time for awhile. Of course we also have
to speak about two different markets here: The Nasdaq has already
retraced in February a fibonacci 62 percent of its Dec-Jan
advance.  The Nasdaq Composite (COMPX) fell right to its 2000 key
technical support in Feb. then rebounded, which may be it for the
Composite - the most I see is back to 1900, then up again.

The S&P 500 (SPX) is having more of a sideways correction - a
"time" correction. The next significant move looks to be up. If
they can't take em down, eventually they should have another run
as the trend remains up.  I am holding some index calls in the
Nasdaq 100 (NDX) and will buy QQQ on dips under 36 - the risk to
reward ratio from here looks better to me in tech.

FRIDAY'S TRADING ACTIVITY –
Friday was a roller coaster day and more choppy intraday than the
week before. The Market was down early based on the weaker than
expected jobs report. Nevertheless, the S&P 500 (SPX) closed up 2
points to end at 1156 - this after being down as much as 6 points
- and, up as much as 8. The Dow (INDU) ended higher by 7 points
to 10,595.

The Nasdaq Composite (COMPX) finished down 7 at 2047, but had
been higher the day before bucking the trend of the S&P. The key
Nasdaq influence was weakness in bellwether Intel (INTC), off
almost 2.5 percent on a lowered Q1 sales forecast.

The Dow eked out a gain on the week of 0.1%, while the Nasdaq was
up 0.8% - noteworthy as the Index has reversed six weeks of
declines.

The Labor Department reported on Friday that its estimate of
nonfarm payrolls was that jobs increased by only 21,000 in
February, versus an expectation of 130,000.  The unemployment
rate was unchanged at 5.6%.

While new job creation as risen for six months, the monthly
average is around 60,000 and is only half of what is needed
merely to stay abreast of population growth - to accommodate
newly minted graduates looking for that first big job. The
Administration had put out an estimate in early-Feb that job
growth would grow by 3% in 2004, or about 300,000 a month.

"Wait until you see the effects of our tax cuts" is a battle cry
that is wearing thin. No doubt this all is making the
Administration nervous.  It's not likely that we will see ads
touting job creation anytime soon.

In fact, the Democratic nominee John Kerry was quick to seize on
the issue and say that President Bush as "under-delivered".
Treasury Secretary John Snow was just as adamant to state that
the "The President's tax cuts are working".  To add insult to
injury, January's payroll report was revised lower by 15,000 (to
just under 100,000) and December's gain was cut from 16,000 to
8,000.

However, what is not so great for equities was fuel for the bond
market as the 10-year T-note ran up well over a full point (+1
12/32), cutting its yield to 3.8%, the lowest since last summer.
Bond market participants took the report as an indication that
the Fed would be constrained from raising rates for some time to
come.

A bit of breakdown might be of interest here: manufacturing lost
3,000 jobs, making it 43 months of decline - however this was the
lowest (loss) in 3 years.  The service sector added 46,000 jobs,
temporary help services were up by 32,000.  Construction jobs
fell by 24,000, likely due to severe winter weather.  The average
workweek held steady at 33.8 hours.  Those working are not
getting fat however - average hourly wages are up only 1.6% in
the past 12 months, the slowest growth in 8 years.

Intel (INTC), as mentioned, lowered its quarterly sales forecast
due to ample inventory on hand by its Asian customers.  The
company now reports expected sales of a range of 8 to 8.2 billion
dollars versus a range of 7.9 to 8.5 billion.  INTC is of course
a major tech influence and also in the Dow 30.   However other
Dow stocks took up the slack.

McDonald's (MCD) ran up nearly 4% and a new high after reporting
a jump in same-store sales.  Guess those Big Macs are still big
and with very big with Akins diet fans - and bigger waistlines
are all around.

JP Morgan Chase (JPM) also hit a new 52-week high and the
financial sector is getting fat also. Low interest rates are not
impacting what they charge on credit cards and the like, but it
sure increases their profit margins or the spreads between what
it costs them to borrow and what they can squeeze out of
customers.

The chip sector (SOX) was weak on the Intel news, as was Computer
tech (XCI) and computer services (GSV). Gold, banking, oil
services (also natural gas), and computer hardware were among
sectors that gained.

Oh and last but not least, but my least favorite story, Martha
Stewart was the focus of a lot of media attention and trading in
her company was halted.  Interestingly, but I suppose tragically
for her, the charges were not insider trading at all, conspiracy,
obstruction of justice and lying to the feds - so, the moral of
the story is if you get caught with your hands in the cookie jar
fess up - you wanted the cookie, but maybe it wasn't the best
idea.

MY INDEX OUTLOOKS –

S&P 100 Index (OEX) – Daily chart:

The S&P of course is still stuck in the trading range defined on
its daily chart below.  There needs to be an advance above 572-
573 on a closing basis to create a breakout.  If so, I figure
upside potential to be to 590.

The first level of support can be assumed to be at 561-562, at
the prior downswing low and in the 558 area, where the OEX
bottomed in late-January/early-February. Support in the former
area is also implied by the 50-day average.




I suggested last week that I would hold puts unless there is a
close above 572 as an exit or stop point. Given my "bottom line"
assessment of the way the market is holding up here, I would let
my stop take me out. I am not assuming necessarily that there
will be a breakout and new up leg. We could still be at the top
end of a trading range here - further market action is needed to
determine.

OEX – Hourly:

On the hourly chart its apparent that OEX is locked in a tight
range between 572-573.  The intersection of the hourly up
trendline is at 566. Is the market coiling for a move through
upper resistance?  Stay tuned.  The trend is remains up until and
unless there lower downswing lows are seen on sell offs.




Most significant technical support comes in at 558. If 566 was
penetrated, I would exit any puts and look at calls at that
point, especially if the two stochastic model pairs on the hourly
chart, both get to their lower extremes.

Dow Industrials (INDU) Daily:

Charles Dow called this kind of sideways pattern a "line"
formation - also called a "rectangle" these days, a pattern that
is usually assumed to be a price consolidation pattern.

Most often, consolidations after such a good-sized run up will
resolve themselves by another up leg at some point. It was
noteworthy that the 50-day moving average was not broken given
the weakness seen Friday.

Key resistance has to be assumed at the prior highs just above
the 10,700 area. If this upper resistance area is penetrated,
upside potential could be to the 11000 area.




Support in the 10400-10435 area is the lower end of the
rectangle. A decisive downside penetration below 10400 gives me a
downside objective to around 10200 to 10100.

The other thing about rectangular formations is that the longer
they go on, the stronger and longer is the next price swing, up
or down.  Stay tuned.

Dow Index - Hourly (DJX):

When we look at the hourly chart, there is more of downtrend
apparent unless there is move to above 106.5 basis the Dow Index
or DJX.  There is a downtrend channel that can be drawn also that
projects a lower end of it to around 104.60.

However, the trend that exists is still that lows are climbing,
or crawling?, up an up trendline still, a pattern which is not
broken unless there is an hourly close below 105.50.




Summing up, DJX needs to get, and stay, above 106.50-107 to
suggest a renewed upswing.  Below 105.50, the up trend is
faltering and I would look for 104.60 as potential lower support.
A tough market to trade as the trend stays muddy!

Nasdaq Composite (COMP) Index  – Daily & Hourly:

The Composite has not managed yet to break out technically and
the same pattern of lower rally highs is still the pattern.

A close over 2060 would suggest the trend might get back into
gear on the upside.  2100 would then loom as the next key upside
resistance.  Key support is at 1990-2015. A close below 2000
would suggest downside potential to around 1900, but that is the
lowest projection I have currently.




A pretty mixed picture still.  Where are those jobs?  The next
key economic influence will likely be Thursday's retail sales
report in the week ahead.

Nasdaq Composite (COMP) Index  – Daily:

We did see the Composite climb back above the center moving
average and maybe the last touch to the lower envelope line will
proved to have been a high potential buy point for Nasdaq index
calls such as in the Nas 100 (NDX) options. Another close above
2050 in the Composite would convince me better.




2150 is my maximum upside potential if a rally does get going.  I
can't see fundamentally what is going to keep a rally like this
going with IT spending so sluggish in the U.S. Another rally on
expectation only could happen, but my best guess is that the
market continues to trade in a relatively narrow range - and the
trend stays more sideways than not.

NOTE: Use of the Moving Average Envelope Indicator was discussed
in my Trader's Corner article -
http://www.OptionInvestor.com/traderscorner/tc_022604_2.asp

Nasdaq 100 tracking Stock (QQQ)– Daily:

QQQ has not managed to get back above the lower boundary of its
uptrend channel and this prior support line is still acting as
resistance.  As long as this continues, the possibility of
another downswing exists for sure.  A close over 37.50-38 would
put prices back into its uptrend channel and would be bullish
technically.




I could say the same as last week - with the Q's under 37,
downside potential is to 35-35.50.

Nasdaq 100 tracking Stock (AMEX:QQQ)– Hourly:

The hourly chart below presents what could be a bearish
downtrend channel if QQQ can't get above the upper boundary line
around 37. The lower end of this hypothetical channel intersects
currently in the 35 area.  A move to below 36.25 would suggest
downside potential to the lower end of the channel, at 35-34.75.




If short QQQ stock I suggest bumping buy liquidating stops down
to 37.30 from 37.70.  I would exit shorts and take profits on a
move to the 35.25 as I figure good buying interest at 35 and the
Q's might not get there.

Good Trading Success!


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**************
Editor's Plays
**************

Time to Split

The plan from last week was working so well. The puts on
DNA profiled last week at $108 were working great. By the
afternoon on Wednesday DNA had traded down to $104 and
several readers had emailed me with congratulations. A
couple had already exited shorts with a profit. That was
before lightning struck.

About 12:15 on Wednesday Forbes posted an article on its
website suggesting Genentech had another cancer product
in the pipeline that could be announced as early as April.
Boom! Traders who had jumped on the prior weeks spike with
shorts were suddenly getting squeezed by the extremely low
float and the price exploded back to $109. Ok, new entry
point and April is still weeks away. We only need -$5.

When it rains it pours. After the close on Wednesday DNA
announces a 2:1 stock split. Boom! The stock sprints back
to $110 and near a new high. Friday several articles
about promising new drugs from various companies boosts
the entire sector and traders bought drugs on the dip.
DNA closed at a new 4-year high.

Traders using the stop loss plan I outlined in the play
description of 50% on the $2.40 option should have lost
about $1.25 depending on when you entered/exited. Due
to decreasing volatility and the slow rate of drop the
first of the week the March-$105 put never exceeded $2.70
and only those that shorted the stock made any real money.

The second caution was to exit at $110 if reached again
and the option was trading at $1.40 at that time. Either
way it was a $1.00-$1.25 loss.

This play was unfortunate but nobody can ever predict the
future 100%. Nobody knew Forbes was going to post a bullish
article on cancer drugs. Nobody knew they were going to
announce a stock split.

Needless to say I got a lot of hate mail from readers who
lost money on the trade. I had mixed emotions about airing
dirty laundry here but I decided it was best for the sake
of other traders.

I can only pick trades based on the information at hand.
I explicitly outline all the factors I think are relevant
including the risk factors. I have no crystal ball and
there will always be unexpected events. Some in our favor
and some against us.

Trading involves risk and every reader has to evaluate
the risk of each play and decide if they agree with the
position. When the reader clicks the mouse button to
initiate the position they are committing to that risk
personally and they are taking responsibility for
whatever happens. It is YOUR money and YOU are
responsible.

I try to find opportunities that offer the best risk
reward ratios at the time they are profiled. If all the
trades I profiled all produced profits the subscription
price for the newsletter would be $1000 per month and
you would be glad to pay it. As long as humans are
involved in the process there will always be unexpected
events and there will be periodic losses as well as gains.

I am sorry the play did not work. Do you think I enjoy
doing all the research, preparation and analysis just so
I can have several thousand people curse me if it goes
wrong? I always seem to get lots of hate mail on busted
plays but very few emails on those that are profitable.

Lastly, any play I recommend or any of the plays in the
newsletter for that matter contain risk. The risk in
the DNA play was $1.25. If you can't afford to risk $125
per contract then don't play. Nobody is forcing you to
enter the trade. One reader said he lost thousands of
dollars in the trade. I assume he must have bought a
lot of contracts or failed to use stop losses. Either
way it was his choice to risk thousands of dollars not
mine. I sure would not have done it and I have a pretty
high risk profile.

If I offended somebody with this commentary I apologize.
I simply felt I needed to remind everyone that YOU are
the final decision maker. When I am playing craps in
Vegas and I lose a bet I don't get mad at the shooter.
I placed the bet, not him.

"Jim – I took a small DNA short at your suggestion early
last week at 109 and made a nice profit covering in the
105's.  Thanks for the play.  Tried for the "twice is
nice" play and reloaded on Thursday short 109.  Split
news came out and I felt the pain.  Again feel it may
be overdone at 113.  Risk is probably very high, but
I'm still short 110.50 average (-2.65).   Will see how
Monday goes and maybe bite the bullet.

Thanks again - Jeff, Honolulu"


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

I am not going to provide a detailed play profile today
but a couple of random thoughts for you to choose from.

With the insane activity around Martha Stewart there
may be an opportunity in MSO. The stock was intensely
traded on Friday and ended around $11.00.

The sentencing is scheduled for June 17th. As a convicted
felon the analysts are expecting all the advertising for
her products to be pulled from many of the magazines and
TV spots. There will be a continued media frenzy for some
time and her post trial statement that she will fight the
verdict and she was unjustly convicted could go against
her when the sentence is passed. ABC was reporting Friday
night that count one had a minimum sentence of three
years under Federal sentencing guidelines. This has not
been picked up by the other networks yet. (if it is true)

With MSO at $11.00 the June $7.50 put is $.55 cents and
it may be less once the volatility eases on Monday. MSO
has traded as low as $5.25 before she was convicted.

25% of the float is currently short and you can bet
there will be a dog pile on Monday with others getting
into the act.

This might be worth a lottery play. Just realize June
17th is the day before option expiration. This is a
100% risk trade. Do not invest any more money than
you can afford to lose.

MSO Chart - Weekly





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

QQQ Lottery play


The QQQ closed at 36.63 on Friday. The 100dma is 36.13.
If we are to believe the strength in the Russell and
the breadth of the Wilshire then the QQQ should move up
from here. With very strong support only 50 cents below
the risk should be minimal.

The odds of an April earnings runs for Tech stocks is
very good. The odds of a post April crash are even better
as the campaign mud slinging increases.

I would look at buying a May-$38 call, currently 95 cents
and sell it on May 1st. Once the first two weeks of
earnings is over the "sell in May and go away" crowd
will appear, especially in an election year.

Risk on this should be about 50 cents, less if you wait
for an entry closer to the 100dma.

QQQ Chart - Daily




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

Another tough week
- J. Brown

Wow!  We just finished another eventful week.  While the markets
didn't move much in front of Intel's mid-quarter update on
Thursday and the disappointing non-farm payrolls report on Friday
the Dow and the NASDAQ's minor gains did manage to break a six-
week long losing streak.  Last Monday's rally on a decent ISM
report with an encouraging employment component quickly withered.
Intel's mid-quarter update was disappointing and lead the tech
sector lower on Friday.  Jobs failed to appear for yet another
month with just 21,000 added in February, more than 100,000 short
from most estimates.

Given the events above I'd say investor sentiment should be
tired, frustrated and ready to give up.  Yet that's not the case.
The markets rallied on the jobs report because it guarantees that
the Fed is on hold.  With the current low interest rate
environment and corporations still not hiring that means they're
getting more work done with their current staff, based on the
incredible productivity gains, and that goes straight to their
bottom line to boost earnings.  At least that's the train of
thought and big investors seem more excited to see low interest
rates than job gains.

On top of it all investor psychology might be positively affected
by the string of events for high-profile CEO's.  Earlier this
week Michael Eisner was stripped of his position as Disney
Chairman while maintaining his CEO title in reaction to the
unprecedented vote of no confidence by shareholders.  On Thursday
Bernie Ebbers, the former head of telecom titan WorldCom, was
indicted on fraud charges for his role in one of the world's
largest corporate bankruptcies.  On Friday Martha Stewart, former
head of Martha Stewart Omni Living, was convicted on all counts
of conspiracy, false statements and obstruction of justice which
will probably send her to jail.  To see all of these headlines in
one week could have a positive influence on the collective
investor mindset demonstrating the power of the little guy (with
the Disney vote) and that justice is being served to corporate
management who felt they were above the law.

Meanwhile the economy does seem to be heating up.  Commodities
are soaring even though the Fed continues to suggest that
inflation is not an issue at the moment.  The rising cost of oil
with crude breaking above the $37 a barrel is a major issue that
needs to be addressed or its going to affect both businesses and
consumers.  They're already talking about gasoline prices
potentially hitting $3.00 a gallon this summer.  The XAL airlines
index has been coiling into a tighter and tighter range
suggesting a breakout is on the way and given the rising oil
prices I would gamble that the breakout is likely to be lower if
we don't see a correction in crude prices soon.

Scanning the various sector indices I'm seeing a lot of positive
developments.  The broadest measure of the market, the Wilshire
5000 total market index, just hit a fresh 2 1/2 year high on
Friday.  Plus the Russell 2000 small cap index is attempting to
breakout above resistance in the 600 level and its technicals
look positive.  We also see both the KBW and the S&P banking
indices hitting new all-time highs.  Following the banks are the
broker-dealers, which are ready to mount another attempt to break
through resistance at 750 to hit more all-time highs.

The BTK biotech index has put together a small string of gains to
hit new two-year highs.  While the DRG drug index may have just
produced a short-term bottom.  The drug sector looks like
tempting ground for bullish traders to find candidates that
aren't so overbought.

Naturally the energy sectors are rising with oil so high.  The
OIX oil index has put together a string of four winning weeks.
The UTY utility index is at a new one-year high and the XNG
natural gas index is approaching new three-year highs.

With the economy heating up we see the RLX retail index breaking
out to new all-time highs and rising 7 out of the last 8 weeks.
Wal-Mart's strong performance this year has been a major factor
and the company just announced strong same-store sales above
their usual mantra of 3%-5% growth.

The Homebuilders have been the real standout winners with a huge
surge in the last two weeks to new all-time highs.  Honestly,
while I'm very bullish on the group they look short-term
overbought and due for a pull back.  Be careful chasing stocks in
this sector.

Also noteworthy are the IUX insurance index and the HMO
healthcare index, which are at or near new highs.

Through my research this weekend I viewed several hundred charts
and overall the picture looks pretty encouraging.  Unfortunately,
we've just seen the bullish percent data on the Dow Industrials
turn into a bull correction and the NASDAQ-100 turn into a "bear
confirmed" status.  Be careful.  With the volatility indices this
low we'll never know when the market's going to turn.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  7416
Current     : 10595

Moving Averages:
(Simple)

 10-dma: 10598
 50-dma: 10551
200-dma:  9719



S&P 500 ($SPX)

52-week High: 1158
52-week Low :  788
Current     : 1156

Moving Averages:
(Simple)

 10-dma: 1148
 50-dma: 1135
200-dma: 1045



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low :  946
Current     : 1472

Moving Averages:
(Simple)

 10-dma: 1472
 50-dma: 1495
200-dma: 1365



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

Volatility indices (VIX and VXO) traded toward their multi-year
lows early in the session but edged higher by the close.  All
three remain at extremely low levels with no change to the trend
in sight.  It's surprising that given the build up ahead of the
jobs report this morning that there wasn't a stronger reaction
here.

CBOE Market Volatility Index (VIX) = 14.48 +0.08
CBOE Mkt Volatility old VIX  (VXO) = 14.80 +0.09
Nasdaq Volatility Index (VXN)      = 22.08 -0.42

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.79        696,919       549,202
Equity Only    0.61        556,020       338,207
OEX            1.54         31,537        48,069
QQQ            3.46         22,578        78,185


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

Bullish Percent Data

           Current   Change   Status
NYSE          75.8    + 0     Bull Confirmed
NASDAQ-100    60.0    + 0     Bear Confirmed
Dow Indust.   83.3    - 3     Bull Correction
S&P 500       85.6    + 0     Bull Confirmed
S&P 100       86.0    - 1     Bull Confirmed


Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


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

 5-dma: 1.05
10-dma: 1.09
21-dma: 1.04
55-dma: 0.99


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1849      1523
Decliners     986      1542

New Highs     309       149
New Lows        6         2

Up Volume   1011M      806M
Down Vol.    652M     1104M

Total Vol.  1678M     2025M
M = millions


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

Commitments Of Traders Report: 03/02/04

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500

In spite of a decrease in long positions by Commercial traders
they still remain relatively neutral on the large S&P contracts.
Small traders remain steadfastly bullish.

Commercials   Long      Short      Net     % Of OI
02/10/04      412,217   414,044    (1,827)   (0.2%)
02/17/04      416,148   415,278       870     0.0%
02/24/04      417,490   416,502       988     0.0%
03/02/04      411,932   418,936    (7,004)   (0.1%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03

Small Traders Long      Short      Net     % of OI
02/10/04      143,496    80,362    63,134    28.2%
02/17/04      141,533    84,227    57,306    25.3%
02/24/04      141,559    85,171    56,388    24.9%
03/02/04      148,383    84,135    64,248    27.6%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Commercials did put some money to use this last week and we
see an increase in long positions but they remain net bearish.
In contrast small traders reduced their longs and upped their
shorts but remain net bullish.

Commercials   Long      Short      Net     % Of OI
02/10/04      297,601   356,630    (59,029)  ( 9.0%)
02/17/04      296,313   371,703    (75,390)  (11.3%)
02/24/04      320,425   387,255    (66,830)  ( 9.4%)
03/02/04      344,805   395,112    (50,307)  ( 6.8%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
02/10/04     110,480     58,428    52,052    30.8%
02/17/04     144,014     64,391    79,623    38.2%
02/24/04     129,894     63,524    66,370    34.3%
03/02/04     119,382     67,453    51,929    27.8%

Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

Not much change here in Commercial traders' positions.
and the same can be said for the small traders.

Commercials   Long      Short      Net     % of OI
02/10/04       44,406     40,439     3,967    4.7%
02/17/04       46,104     40,385     5,719    6.6%
02/24/04       47,266     40,452     6,814    7.8%
03/02/04       49,959     41,059     8,900    9.8%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
02/10/04        9,906    13,018    (3,112)  (13.6%)
02/17/04        9,630    12,338    (2,708)  (12.3%)
02/24/04       12,388     7,310     5,078    25.8%
03/02/04       11,605     7,128     4,477    23.9%

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

DOW JONES INDUSTRIAL

Commercial traders remain asleep in the Dow futures with
almost zero change and small traders are following suit.

Commercials   Long      Short      Net     % of OI
02/10/04       21,764    11,974    9,790      29.0%
02/17/04       24,451    12,907   11,544      30.9%
02/24/04       27,176    13,918   13,258      32.3%
03/02/04       27,594    14,166   13,428      32.2%

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

Small Traders  Long      Short     Net     % of OI
02/10/04        6,267    14,220   (7,953)   (38.8%)
02/17/04        6,768    15,623   (8,855)   (39.5%)
02/24/04        6,509    14,919   (8,410)   (39.2%)
03/02/04        6,898    15,874   (8,976)   (39.4%)

Most bearish reading of the year: (10,136) - 12/16/03
Most bullish reading of the year:   8,523  -  8/26/03

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


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

Sector bell curve revisited

It has been quite some time since we looked at the various sector
bullish percent charts, and I've had some questions in recent
weeks regarding the status of various sectors.  As such, I
thought this weekend would be a good time to take a look at
what's taking place in the various sectors, but also try and
tackle a trader's question regarding precious metals stocks,
where the sector recently reversed up to "bear correction" from
"bear confirmed" after having been "bull confirmed" at a much
more overbought level of 92% in December and January of.

Here is a comparison that spans three-weeks of trade.

Sector Bullish % Bell Curve - 02/13/04 & 03/15/04 Comparison



For those that have either visited Dorsey/Wright and Associates'
web site, or subscriber to their point and figure service, you've
undoubtedly become familiar with their various sector bullish %
database.  I'm showing just two points in time, roughly 3-weeks
apart, where we've seen some sectors begin to shift left, or down
the scale, and various stocks within sectors have generated some
point and figure sell signals, while at the same time, we are
seeing sectors shift right, or up the scale as though money
coming out of one sector, rotates to others.

Today's question has the trader noticing that the Precious Metals
sector has started to show some signs of recovery in the bullish
percent (BPPREC), where after reaching a rather high level of 92%
bullish, and falling to a low reading of 56% and "bear confirmed"
status, it has started to work its way back to the right and now
reads "bear correction" status.

A "gold bug" looking to play this sector from the bullish side
would most likely have the mindset at this point that they would
be looking for a "bounce" right now, and not necessarily taking
on large positions as they look to leg back into the sector, but
be ready to exit any new positions should recent lows, or an
additional sell signal be found in the stock they are looking to
trade, or invest in.

Trading ANY stock from the bullish side in a "bear phase" sector
should be done so with caution, and DISCIPLINED stops should be
used.

Let's take a look at Newmont Mining (NYSE:NEM) $43.95, which has
fallen from a January 5, 2004 high of $50.20 (-12.45% from its
high) where traders and investors might be best able to associate
the sector's bullish % reading of 92% in January, with the taking
of profits, when sector bulls had a rather high level of risk,
where now, we have the mindset that some of that bullish risk has
been taken out of the sector, where some sign of internal repair
is being found.

Newmont Mining (NEM) - $1 box



Newmont Mining (NEM) $43.95 is a stock I consider to be a sector
bellwether for precious metals, and this stock tends to be a
leader in an advance, and when the sector begins to weaken, is
often the "last" stock to show weakness.  I've marked a point
back in April of last year, when the precious metals sector
bullish % was "bear confirmed" and had just started to reverse up
to "bear correction."  The RED 5 on the chart would be early May.
It would have been a very nice trade for a bull in NEM to trade
the "bear correction" reversal from the sector bullish %, when
NEM was trading around the $26.00 level, where at stop could have
been placed at $24.00, or lower at $22.

We can clearly see that NEM later traded $31.00, and triggered a
triple-top buy signal in early June RED 6.  I then point to
August (RED 8) when the sector bullish % then reached "bull
confirmed" status.

As such, a "gold bug" looking for renewed bullishness could use
past history to set up a trade in NEM, with understanding that a
trailing stop at $40.00 should be used, on any bullish positions.
A gold bug's tail begins to glow, should NEM show a trade at $46,
which would negate the current bearish vertical count of $31.00,
and have a new bullish vertical count building, with an initial
longer-term bullish target of $55 being established.

Maytag Corp. (NYSE:MYG) - $0.50 & $1 box



I received an upside alert in quite a few stocks and indices
today, and upon review found one of them to be Maytag (NYSE:MYG)
when the stock traded $30.00 and now looks to be breaking out of
a nice 7-month base of consolidation.  I wanted the stock to
"prove itself" with a trade at $30, to try and avoid a bull trap,
which point and figure chartists would be alert that a triple-top
buy signal that only went one box above (at $29) might be a trap,
when the associated sector bullish % was at a high level of
bullish risk.  Armed with a bullish vertical count of $44.00, MYG
shares look compelling and quite bullish coming out of a 7-month
base as if the stock is starting to get a second leg of bullish
favor, and demand (X) eats away at supply (O).

Jeff Bailey


*************
COMING EVENTS
*************

Symbol  Co               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

CMGI   CMGI                  Mon, Mar 08  After the Bell       N/A
KIND   Kindred Healthcare IncMon, Mar 08  After the Bell       N/A
LYG    Lloyds TSB Group      Mon, Mar 08  Before the Bell      N/A
LQU    Quilmes Industrial    Mon, Mar 08  After the Bell      0.62
SSL    Sasol Ltd ADR         Mon, Mar 08  Before the Bell      N/A
SGY    Stone Energy          Mon, Mar 08  After the Bell      0.93
VE     Veolia Environnement  Mon, Mar 08  -----N/A-----        N/A


------------------------- TUESDAY ------------------------------

ABS    Albertson's           Tue, Mar 09  Before the Bell     0.20
ANN    AnnTaylor Stores      Tue, Mar 09  After the Bell      0.65
CHC    CharterMac            Tue, Mar 09  Before the Bell     0.45
HUG    Hughes Supply         Tue, Mar 09  After the Bell      0.33
TEO    Telecom Argentina     Tue, Mar 09  After the Bell       N/A
IPG    Interpublic Grp Co    Tue, Mar 09  Before the Bell     0.12
KR     The Kroger Co.        Tue, Mar 09  Before the Bell     0.22


------------------------ WEDNESDAY -----------------------------

CMS    CMS Energy Corp.      Wed, Mar 10  Before the Bell     0.24
CMVT   Comverse Technology   Wed, Mar 10  After the Bell      0.01
DT     Deutsche Telekom      Wed, Mar 10  Before the Bell      N/A
EON    E.ON AG               Wed, Mar 10  Before the Bell      N/A
IDCC   InterDigital Comm CorpWed, Mar 10  Before the Bell     0.07
KKD    Krispy Kreme Doughnut Wed, Mar 10  Before the Bell     0.26
MATK   Martek Biosci Corp    Wed, Mar 10  After the Bell      0.12
MIM    MI DEVS INC           Wed, Mar 10  Before the Bell      N/A
ZQK    Quiksilver            Wed, Mar 10  After the Bell      0.15
TLB    Talbots               Wed, Mar 10  -----N/A-----       0.40
TECD   Tech Data Corporation Wed, Mar 10  -----N/A-----       0.54


------------------------- THUSDAY -----------------------------

TRMD   A/S Dmpskbsslskbt TormThu, Mar 11  -----N/A-----       0.90
ARO    Aeropostale, Inc.     Thu, Mar 11  After the Bell      0.69
AIZ    Assurant, Inc.        Thu, Mar 11  Before the Bell      N/A
BGP    Borders Group Inc.    Thu, Mar 11  After the Bell      1.51
CLE    Claire's Stores, Inc. Thu, Mar 11  06:00 am ET         0.57
CM     Coles Myer            Thu, Mar 11  -----N/A-----        N/A
CNO    CONSECO INC           Thu, Mar 11  Before the Bell     0.50
DEG    Delhaize Group        Thu, Mar 11  -----N/A-----        N/A
DKS    Dick's Sporting Goods Thu, Mar 11  Before the Bell     0.99
DISH   EchoStar Comm Corp.   Thu, Mar 11  Before the Bell     0.10
EP     El Paso Corp.         Thu, Mar 11  Before the Bell    -0.05
FCEa   Forest City Ent Inc.  Thu, Mar 11  -----N/A-----        N/A
FRED   Fred's                Thu, Mar 11  Before the Bell     0.34
NSM    National SemiconductorThu, Mar 11  -----N/A-----       0.41
ORCL   Oracle                Thu, Mar 11  After the Bell      0.12
PETC   PETCO ANIMAL SUPPLIES Thu, Mar 11  After the Bell      0.44
SHPGY  Shire Pharm Group     Thu, Mar 11  07:00 am ET         0.49
URBN   Urban Outfitters      Thu, Mar 11  11:00 am ET         0.42


------------------------- FRIDAY -------------------------------

ABER   Aber Diamond Corp     Fri, Mar 12  -----N/A-----       0.24
AEG    AEGON N.V.            Fri, Mar 12  -----N/A-----        N/A
VNO    Vornado Realty Trust  Fri, Mar 12  -----N/A-----       1.08


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Co Name              Ratio    Payable     Executable

CLFC    Center Financial Corp     2:1      Mar   5th   Mar   8th
WGO     Winnebago                 2:1      Mar   5th   Mar   8th
SSNC    SS&C Technologies, Inc    3:2      Mar   5th   Mar   8th
VAPH    Vaso Active Pharma, Inc   3:1      Mar   5th   Mar   8th
PII     Polaris Industries Inc    2:1      Mar   8th   Mar   9th
LWAY    Lifeway Foods, Inc        2:1      Mar   8th   Mar   9th
MPX     Marine Products Corp      3:2      Mar  10th   Mar  11th
FIC     Fair Isaac Corp           3:2      Mar  10th   Mar  11th
EXC     Exelon Corp               2:1      Mar  10th   Mar  11th
HWFG    Harrington West Finl Grp  6:5      Mar  11th   Mar  12th
CTX     Centex Corporation        2:1      Mar  12th   Mar  15th
BRL     Barr Pharmaceuticals      3:2      Mar  15th   Mar  16th
ATVI    Activision, Inc           3:2      Mar  15th   Mar  16th
CEC     CEC Entertainment Inc     3:2      Mar  15th   Mar  16th
CLZR    Candela Corp              2:1      Mar  16th   Mar  17th
DCOM    Dime                      3:2      Mar  16th   Mar  17th
GWR     Genesee & Wyoming Inc     3:2      Mar  18th   Mar  19th
XTO     XTO Energy Inc            5:4      Mar  18th   Mar  19th
HBHC    Hancock                   2:1      Mar  18th   Mar  19th
DCI     Donaldson Company, Inc    2:1      Mar  19th   Mar  22nd


--------------------------
Economic Reports This Week
--------------------------

The economic reports are weighted toward the end of the week
with the biggest economic news coming from the Import/Export
numbers, Retail sales, PPI and the preliminary
Michigan Sentiment numbers all this week.


==============================================================
                       -For-

----------------
Monday, 03/08/04
----------------
TQNT & TXN mid-quarter updates
Kansas City Fed Manufacturing Index


-----------------
Tuesday, 03/09/04
-----------------
Chain Store Sales
Redbook Retail Sales
Richmond Fed Manufacturing Index


-------------------
Wednesday, 03/10/04
-------------------
Trade Balance (BB)         Jan  Forecast: -$41.6B  Previous:  -$42.5B
Wholesale Inventories (DM) Jan  Forecast:    0.4%  Previous:     0.5%
Crude Oil & Gasoline Inventory numbers

------------------
Thursday, 03/11/04
------------------
Initial Claims (BB)      03/06  Forecast:     N/A  Previous:     345K
Export Prices ex-ag. (BB)  Feb  Forecast:     N/A  Previous:     0.6%
Import Prices ex-oil (BB)  Feb  Forecast:     N/A  Previous:     0.7%
Retail Sales (BB)          Feb  Forecast:    0.5%  Previous:    -0.3%
Retail Sales ex-auto (BB)  Feb  Forecast:    0.5%  Previous:     0.9%
Treasury Budget (DM)       Feb  Forecast:-$100.0B  Previous:  -$96.7B
Greenspan speaks on Education in Washington DC
Natural Gas Inventories
Money Supply numbers

----------------
Friday, 03/12/04
----------------
Business Inventories (BB)  Jan  Forecast:    0.3%  Previous:     0.3%
Current Account (BB)        Q4  Forecast: $136.2B  Previous: -$135.0B
PPI (BB)                   Feb  Forecast:     N/A  Previous:      N/A
Core PPI (BB)              Feb  Forecast:     N/A  Previous:      N/A
Mich Sentiment-Prel. (DM)  Mar  Forecast:    95.2  Previous:     94.4
Greenspan speaks at Boston College


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

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


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The Option Investor Newsletter                   Sunday 03-07-2004
Sunday                                                      2 of 5


In Section Two:

Watch List: Medical, Techs and Drugs...
Dropped Calls: DHI, RJR, RYL
Dropped Puts: None


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

Medical, Techs and Drugs...
___________________________________________________________________

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.
___________________________________________________________________


Zimmer Holdings - ZMH - close: 79.08 change: +1.50

WHAT TO WATCH:  We think ZMH looks pretty bullish here.  The
recent bounce from its test of support at $75.00 and its rising
40-dma looks pretty good.  Its MACD is about to produce a new
bullish buy signal.  Traders can use a trigger over $80.00.  We'd
target a quick move to $85 even though the stock can probably run
higher.

Chart=


---

Sina Corp - SINA - close: 45.47 change: +0.67

WHAT TO WATCH:  SINA is one of the Chinese Internets that were so
hot last year.  Shares peaked just under $50.00 in January 2004
but fortunately for shareholders the profit taking stalled at the
$40 level.  Now SINA is climbing its rising 50-dma and its
technicals look positive.  SINA's P&F chart looks tempting as
well and points to a $53 price target, although that is likely to
rise.  Short-term traders can probably target a move to
resistance at $50.00.

Chart=


---

MicroStrategy - MSTR - close: 64.17 change: +0.67

WHAT TO WATCH:  MSTR has been out performing many of its peers in
the software sector and its technical picture is turning bullish
again.  Traders might want to watch it for a breakout over
resistance at $65.00-65.50 and target a quick move to $70.00.

Chart=


---

Johnson Controls Inc - JCI - close: 59.72 change: +1.50

WHAT TO WATCH:  The breakout over its simple 50-dma on Friday was
pretty impressive, especially considering the better than average
volume.  We also note the MACD has produced a fresh buy signal
from being oversold.  JCI has a habit of bouncing from its 21-
week moving average.  Okay, a "habit" may be too strong of a word
but this is the second time and last time JCI experience a very
strong follow through.  Look for a move over $60.00 and watch out
for resistance at $62.00.  Our early target would be $65.00.

Chart=


---

Barr Pharmaceuticals - BRL - close: 78.46 change: +0.96

WHAT TO WATCH:  Previously known as Barr Labs, BRL has found
support at the $75.00 region and its simple 50-dma.  Its MACD is
about to signal a new buy signal but the stock does have short-
term resistance at 80.50.  We think BRL might be a play if the
bullish reversal in the DRG drug index continues to play out.
Aggressive players can speculate on positions here with a stop
under $75.00.  More conservative players should probably wait for
a move over $80.50.  Early target would be $85.00.

Chart=



-----------------------------------
RADAR SCREEN - more stocks to watch
-----------------------------------

AGN $89.41 +0.52 - The bounce from previous resistance at $88.00
looks very tempting but AGN still looks a little overbought here.
Momentum traders might watch for a move over $90.00.

NAV $48.72 +0.59 - NAV is another stock that has consolidated the
last several weeks and looks ready for another run higher.  We'd
look for a breakout over its 50-dma and the $50.00 level before
initiating positions.  Initial target would be $55.00.

INFY $81.53 -3.73 - We mentioned INFY in the MarketMonitor on
Friday.  The roll over under resistance at $86.00 looks pretty
bearish and a breakdown at support of $80.00 looks imminent.
However, traders should keep an eye on INFY's point-and-figure
chart where the stock is currently struggling with support.  We
would target the 200-dma near $70.00.


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**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

D.R.Horton - DHI - close: 35.18 chg: +0.91 stop: 32.00

Homebuilder and mortgage lenders soared on Friday after the
disappointing jobs report sent bonds higher, yields lower and
mortgage rates back toward the 2003 lows.  Shares of DHI helped
lead the DJUSHB home construction index to a new all-time high
and the stock (DHI) surpassed our planned exit point of $34.75 to
hit $35.75.  We're going to take the money and run even though
DHI's intraday chart still looks strong.  Its weekly and daily
charts are looking very overbought and we'd prefer to sit back
and wait for new entries on a appropriate pull back.

Picked on February 08 at $30.00
Change since picked:     + 5.18
Earnings Date          01/21/04 (confirmed)
Average Daily Volume:       2.4 million
Chart =


---

RJ Reynolds Tobacco - RJR - cls: 61.08 chg: -0.50 stop: 59.00

We're going to pull the plug on RJR.  We don't like the recent
weakness and RJR is under performing its larger rival MO.  Even
though the drop on Friday held support near $61.00 volume was
pretty strong at more than twice the average.  In RJR's 10K the
company reported an increase in its legal expenses by $8 million,
which may have unsettled some investors.  While we still feel
that a bounce from $60.00 will probably work for bullish
positions there are more attractive opportunities available.

Picked on February 20 at $60.51
Change since picked:     + 0.57
Earnings Date          01/27/04 (confirmed)
Average Daily Volume:       699 thousand
Chart =


---

Ryland Group - RYL - close: 92.60 chg: +2.00 stop: 84.99

Our call play in RYL has performed perfectly.  The stock has
exceeded our short-term target of $90.00 and surpassed our
official exit point of $92.00 with Friday's rally to $93.17.  If
you read the DHI play update homebuilders and mortgage lenders
soared on the jobs report because it put the Fed on hold, sent
interest rates and mortgage rates lower.  We're still bullish on
RYL but we're going to exit here and look for another entry
point.

Picked on February 24 at $83.96
Change since picked:     + 8.64
Earnings Date          01/21/04 (confirmed)
Average Daily Volume:       746 thousand
Chart =



PUTS
^^^^

None


***********
DEFINITIONS
***********

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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**********

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The Option Investor Newsletter                   Sunday 03-07-2004
Sunday                                                      3 of 5


In Section Three:

Current Calls: AET, AHC, ATH, CDWC, CFC, GS, MHK, QCOM, RNR, SLB,
    UNH
New Calls: EBAY
Current Put Plays: CHIR, CTSH, MMM
New Puts: None


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******************
CURRENT CALL PLAYS
******************

Aetna Inc. - AET - close: 81.58 change: +0.32 stop: 77.50

Company Description:
Aetna is one of the nation's leading providers of health care,
dental, pharmacy, group life, disability and long-term care
benefits, serving approximately 13.0 million medical members,
10.9 million dental members, 7.4 million pharmacy members and
12.3 million group insurance customers, as of December 31, 2003.
The company has expansive nationwide networks of more than
600,000 health care services providers, including over 362,000
primary care and specialist physicians and 3,626 hospitals.
(source: company press release)

Why We Like It:
We still like the strength in the IUX insurance index and shares
of AET continue to be a leader in the group.  As a matter of fact
AET has been marching to the beat of its own drummer lately and
that tune spells out a slow drift higher, despite the recent
market volatility.  We didn't hear or see anything noteworthy
coming from AET's appearance at the Lehman Brothers healthcare
conference this last week but there is another chance for AET to
issue stock-moving news at the upcoming SG Cowen conference on
March 10th.

AET's P&F chart still looks super strong and points to an $89
price target.  However, our first target is the $85 region.  If
the opportunity presents itself dips to $80.00 can be entry
points for new positions.

Suggested Options:
Short-term traders can use the March or April calls.  We like the
April 80's.

! Alert - only two weeks left for March options!

BUY CALL MAR 75 AET-CO OI=3599 at $6.90 SL=4.40
BUY CALL MAR 80 AET-CP OI=2229 at $2.55 SL=1.20
BUY CALL MAR 85 AET-CQ OI= 199 at $0.35 SL= --
BUY CALL APR 80*AET-DP OI= 613 at $3.90 SL=1.85
BUY CALL APR 85 AET-DQ OI=3539 at $1.45 SL=0.75

Annotated Chart:



Picked on February 29 at $80.79
Change since picked:     + 0.79
Earnings Date          02/12/04 (confirmed)
Average Daily Volume:       1.2 million
Chart =


---

Amerada Hess Corp. - AHC - cls: 66.98 chng: +1.89 stop:
64.00*new*

Company Description:
Amerada Hess Corporation explores for, produces, purchases,
transports and sells crude oil and natural gas.  These
exploration and production activities take place in the United
States, United Kingdom, Norway, Denmark, Equatorial Guinea,
Gabon, Indonesia, Thailand, Azerbaijan, Algeria, Malaysia,
Colombia and other countries.  The company also manufactures,
purchases, transports, trades and markets refined petroleum and
other energy products.  It owns 50% of a refinery joint venture
in the United States Virgin Islands, as well as another refining
facility, terminals and retail gasoline stations located on the
east coast of the United States.

Why we like it:
Flexing its muscles again on Friday, AHC ignored the broad market
weakness and surged sharply higher, tagging the $67 level and
holding it into the close.  Once again, strength in the price of
crude oil seems to be the dominant factor, as the front month
contract broke out to new highs yet again.  AHC's consolidation
for much of last week strongly resembled the consolidation in
crude oil, confirming once again that the stock should continue
to trade in sympathy with the price of black gold.  With the
stock up well over 10% from our picked place and resistance
looming near $68, obviously we're not interested in new momentum
positions on further strength.  But aggressive traders may be
able to fine a solid entry on a dip and rebound now above the 10-
dma ($64.33), but with solid gains under our belt, we're more
interested in harvesting gains from the play near the top of this
move, not in trying to find new entries.  Note that we've raised
our stop to $64 this weekend, which is just under the 10-dma.
Conservative traders should use an initial move near $68 to
harvest gains, while those aggressive traders can still target
the $72-73 area.

Suggested Options:
Shorter Term: The March $65 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the April $70
Call, while traders looking for more immediate movement will want
to use the April $65 strike.  Our preferred option is the April
$65 strike, which is in the money and should provide sufficient
time for the play to move in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-65 AHC-CM OI= 439 at $2.40 SL=1.25
BUY CALL APR-65*AHC-DM OI= 336 at $3.30 SL=1.75
BUY CALL APR-70 AHC-DN OI=  55 at $0.95 SL=0.50

Annotated Chart of AHC:



Picked on February 10th at   $59.53
Change since picked:          +7.45
Earnings Date               1/28/04 (confirmed)
Average Daily Volume =        938 K
Chart =


---

Anthem, Inc. - ATH - close: 89.81 change: +1.50 stop: 85.70*new*

Company Description:
Anthem is a health benefits company serving over 7 million
members, primarily in Indiana, Kentucky, Ohio, Connecticut, New
Hampshire, Colorado and Nevada.  The company owns the exclusive
right to market its products and services using the Blue Cross
Blue Shield (BCBS) names in these states under license agreements
with the Blue Cross Blue Shield Association.  ATH's product
portfolio includes a diversified mix of managed care products,
including health maintenance organizations (HMOs), preferred
provider organizations (PPOs) and point-of-service (POS) plans,
as well as traditional indemnity products.  The company's managed
care plans and products are designed to encourage providers and
members to select cost-effective healthcare by utilizing the full
range of its medical management services.

Why we like it:
It sure is nice to see ATH vindicating itself after so many
failed breakout attempts near the $85 level.  Clearly this one is
for real, as the stock continues driving higher, hitting an
intraday high of $92.15 in early trade before falling back to end
the week just a fraction under the $90 level.  That was our first
target at $90 and given the stock's strength, we're betting on
further strength from here.  That certainly seems to be the
picture we're getting from the HMO index, which once again broke
to new all-time highs on Friday near $924.  We'll continue to
ride this rocketship higher as long as it lasts and based on
Friday's move, it looks like our initial target of $90 was far
too conservative.  After the strong move of the past two days, it
is only prudent to tighten our stop significantly and we're
raising ours to $85.70, which is just under Wednesday's intraday
low.  Aggressive traders can look for a dip to and rebound from
the 10-dma ($86.56) as the only likely entry point.  Make sure to
monitor the HMO index for signs of weakness, as that may provide
a clue that the sector is starting to lose strength.

Suggested Options:
Shorter Term: The March $90 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.

Longer Term: Aggressive longer-term traders can use the April $95
Call, while more conservative traders will want to use the April
$90 strike.  Our preferred option is the April $90 strike, which
is at the money and should provide sufficient time for the play
to move further in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-85 ATH-CQ OI=6372 at $5.30 SL=3.25
BUY CALL MAR-90 ATH-CR OI=1601 at $1.55 SL=0.75
BUY CALL APR-90*ATH-DR OI= 571 at $2.95 SL=1.50
BUY CALL APR-95 ATH-DS OI= 320 at $1.10 SL=0.50

Annotated Chart of ATH:



Picked on February 26th at   $85.37
Change since picked:          +4.44
Earnings Date               4/28/04 (unconfirmed)
Average Daily Volume =     1.43 mln
Chart =


---

CDW Corp. - CDWC - close: 71.63 change: +0.00 stop: 66.00

Company Description:
CDW Corporation is a direct marketer of multi-brand computers and
related technology products and services in the United States.
The company offers multi-brand computers and related technology
products, including hardware and peripherals, software,
networking and communication products and accessories, for use
with microcomputers based on a variety of operating platforms,
including Microsoft, Apple, Linux, Novel, Oracle and others.
CDWC offers more than 80,000 products that include a range of
product types from manufacturers including Cisco, Hewlett-
Packard, IBM, Intel, Microsoft, Sony and Toshiba.  With this
selection of products, the company can provide its customers with
fully integrated, multi-branded technology solutions and the
convenience of one-stop shopping.

Why we like it:
It was really a snoozer of a week for CDWC after blasting higher
on Monday to post a new 3-year high over the $74 level.  After
such a strong move, some profit taking is to be expected, and the
shallow decline in the middle of the week was just what we were
looking for ahead of today's dip and rebound from the 10-dma
($70.68).  As we noted earlier in the week, the best entries into
the play would come on a retest of support in the $70-71 area and
it certainly seems like we may have seen that today with the
rebound off the 10-dma.  With oscillators still looking mildly
bearish, buying the dips is the only prudent course of action, as
CDWC would have to break out over the $74.50 level to signal a
breakout entry.  Stick with the plan and maintain a wide stop
down at $66 until we see how much strength is in the next bullish
move.

Suggested Options:
Shorter Term: The March $70 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the April $75
Call, while the more conservative approach will be to use the
April $70 strike.  Our preferred option is the April $70 strike,
which is in the money and should provide sufficient time for the
play to move in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-70 DWQ-CN OI=780 at $2.80 SL=1.40
BUY CALL MAR-75 DWQ-CO OI=773 at $0.60 SL=0.30
BUY CALL APR-70*DWQ-DN OI=789 at $4.10 SL=2.50
BUY CALL APR-75 DWQ-DO OI=291 at $1.70 SL=0.75

Annotated Chart of CDWC:



Picked on March 2nd at       $72.43
Change since picked:          -0.80
Earnings Date               1/21/04 (confirmed)
Average Daily Volume =     1.27 mln
Chart =


---

Countrywide Financial - CFC - cls: 96.55 chg: +3.91 stop: 90.00*new*

Company Description:
Founded in 1969, Countrywide Financial Corporation is a member of
the S&P 500, Forbes 500 and Fortune 500. Through its family of
companies, Countrywide provides mortgage banking and diversified
financial services in domestic and international markets.
(source: company press release)

Why We Like It:
Mortgage lenders like CFC were soaring on Friday after the
abysmal jobs report.  The lack of jobs put the Fed on hold for
what many investors feel is the rest of the year.  With a lack of
any interest rate hikes in our near future the bond markets
spiked higher sending the yield on 10-year note to its biggest
one-day loss since October 2001.  With bond yields dropping so
were mortgage rates and investors were quick to capitalize on the
expectation that homebuilders and lenders will do big business
with the up coming spring-summer home buying season.

The pop to $96.55 puts us half way to our target at $100.00 for
CFC.  The big move is giving us room to raise our stop loss to
$90.00 but more conservative traders might be able to get away
with a tighter stop in the $91-92 region.  It's tough to gauge
new entries with Friday's pop but bulls may want to consider a
pull back to $93.50-94.00 as an entry point.

Suggested Options:
Short-term traders can choose from March and April calls.  Our
favorites are the April 90's.  Be careful.  There are some odd
option symbols floating around due to CFC's recent stock split.
Be sure you check the correct symbols with your broker.

! Alert - only two weeks left for March options!

BUY CALL MAR 90 CFC-CR OI= 6052 at $7.10 SL=4.85
BUY CALL MAR 95 CFC-CS OI=13569 at $3.20 SL=1.65
BUY CALL APR 90*CFC-DR OI=  595 at $8.70 SL=5.25
BUY CALL APR 95 CFC-DS OI=  689 at $5.50 SL=3.25

Annotated Chart:




Picked on February 24 at $91.63
Change since picked:     + 4.92
Earnings Date          01/27/04 (confirmed)
Average Daily Volume:       2.3 million
Chart =


---

Goldman Sachs - GS - close: 109.05 chg: +0.53 stop: 104.00

Company Description:
Goldman Sachs is a leading global investment banking, securities
and investment management firm that provides a wide range of
services worldwide to a substantial and diversified client base
that includes corporations, financial institutions, governments
and high net worth individuals. Founded in 1869, it is one of the
oldest and largest investment banking firms. The firm is
headquartered in New York and maintains offices in London,
Frankfurt, Tokyo, Hong Kong and other major financial centers
around the world.(source: company press release)

Why We Like It: (Thursday's original write up)
Wow!  Can you believe it?  It seems like earnings season just
ended and now we're already looking forward to the next batch of
earnings from the broker-dealers.  Granted they do announce
earlier than the rest of the market but that doesn't mean we
can't ride them for a good old-fashioned earnings run.  GS is
expected to announce in about two weeks but to be honest we can't
confirm that date just yet.  In the mean time we have a sector
that is near all-time highs and looks ready to mount another
attempt at a breakout over the 750 level.  GS should lead the way
with today's breakout over short-term resistance at $108.00.

We do not plan to hold over earnings so if a two-week time period
is too brief for you be sure to know your limitations and sit
out.  We're going to suggest longs on today's move over $108.00
with stops at $104.00 - that's where GS bounced about a week ago.
The P&F chart suggests a price target of $120.00, which doesn't
seem too unreasonable but we'll re-evaluate as GS approaches the
$115 range.

Weekend Update:
Right on track!  Our recently added GS call continued to move
higher after Thursday's breakout above the $108 level.  Boosting
the stock was a comment from Prudential who reiterated their
"over weight" outlook and $115 price target.  Meanwhile GS
confirmed that they would announce earnings on the morning of
March 23rd, which gives us even more time for an earnings run.


Suggested Options:
Aggressive traders can speculate on March options.  Even though
we're not holding over the March 18th earnings date (estimated)
we're going to suggest the April 105 calls.

! Alert - only two weeks left for March options!

BUY CALL MAR 105 GS-CA OI=11839 at $5.00 SL=2.75
BUY CALL MAR 110 GS-CB OI= 5815 at $1.60 SL=0.80
BUY CALL APR 105*GS-DA OI= 8133 at $6.20 SL=3.50
BUY CALL APR 110 GS-DB OI= 8508 at $3.10 SL=1.65

Annotated Chart:



Picked on March 04 at $108.52
Change since picked:   + 0.53
Earnings Date        03/23/04 (confirmed)
Average Daily Volume:     3.2 million
Chart =


---

Mohawk Industries - MHK - cls: 85.27 chng: +0.74 stop: 79.50

Company Description:
Mohawk Industries and its subsidiaries, are producers of
floorcovering products for residential and commercial
applications in the United States.  The company is the second
largest carpet and rug manufacturer, and a manufacturer, marketer
and distributor of ceramic tile and natural stone.  Through its
carpet and rug business, MHK designs, manufactures and markets
carpet and rugs in a broad range of colors, textures and patterns
and is a producer of woven and tufted broadloom carpet and rugs,
principally for residential applications.

Why we like it:
Bond yields plunged on Friday in response to the pathetic
Employment Report and that certainly bodes well for the Housing
sector.  Apparently there's consensus on the topic as well, as
investors handed the Dow Jones Home Construction index ($DJUSHB)
another 3% gain and a fresh all-time high.  MHK is benefiting
from that trend as well and Friday's price action pushed the
stock to a new all-time high of its own above $85.  Volume was
strong too, and this breakout looks like it could have some room
to run.  We're still close enough to the breakout that momentum
entries look favorable above Friday's $85.79 high.  Traders
looking for a pullback to confirm old resistance as new support
can target a dip back to the $83-84 area, with the lower end of
that range now reinforced by the 10-dma ($83.05).  MHK really
shouldn't be able to pull back below the 20-dma ($82.03) if this
rally has legs, but we're going to maintain our stop down at
$79.50 until we see a bit more upside.

Suggested Options:
Shorter Term: The March $85 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.

Longer Term: Aggressive longer-term traders can use the April $90
Call, while the more conservative approach will be to use the
April $85 strike.  Our preferred option is the April $85 strike,
which is at the money and should provide sufficient time for the
play to move in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-85 MHK-CQ OI=215 at $1.80 SL=0.90
BUY CALL APR-85*MHK-DQ OI= 46 at $3.20 SL=1.50
BUY CALL APR-90 MHK-DR OI= 32 at $1.15 SL=0.60

Annotated Chart of MHK:



Picked on March 4th at       $84.53
Change since picked:          +0.74
Earnings Date               2/05/04 (confirmed)
Average Daily Volume =        337 K
Chart =


---

Qualcomm, Inc. - QCOM - cls: 63.88 chng: +1.31 stop: 61.25*new*

Company Description:
Based on its proprietary CDMA technology, QCOM is engaged in
developing and delivering digital wireless communications
services.  The company's business areas include integrated CDMA
chipsets and system software and technology licensing.  QCOM owns
patents that are essential to all of the CDMA wireless
telecommunications standards that have been adopted or proposed
for adoption by the worldwide standards-setting bodies.
Currently, QCOM has licensed its CDMA patent portfolio to more
than 80 telecommunications equipment manufacturers around the
world.

Why we like it:
Playing right along with our script, QCOM pulled back almost
exactly to the 10-dma ($62.15) last week before staging an
impressive rebound on Friday.  We can thank Deutsche Securities
for Friday's bullish move, as the firm upgraded QCOM from Hold to
Buy before the open.  While the stock did manage to post a fresh
intraday high, a bit of late-day profit taking dropped the stock
to just below the $64 resistance level at the close.  With
bullish price action confirmed by the strong volume picture, QCOM
seems destined to break out and more than likely reach our $67-68
bullish price target.  As suggested here last week, the pullback
to the 10-dma was the preferable continuation entry and kudos to
those that took it.  Aggressive traders can make a quick play on
a breakout over Friday's high, targeting $67-68, but that is not
our preferred strategy.  Let's raise our stop slightly to $61.25,
which is just under last week's low.

Suggested Options:
Shorter Term: The March $65 Call will offer short-term traders
the best return on an immediate move, as it is just slightly out
of the money.

Longer Term: Aggressive longer-term traders can use the April $70
Call, while the more conservative approach will be to use the
April $65 strike.  Our preferred option is the April $65 strike,
as it should provide sufficient time for the play to move in our
favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-60 AAO-CL OI=11307 at $4.30 SL=2.75
BUY CALL MAR-65 AAO-CM OI=14098 at $1.00 SL=0.50
BUY CALL APR-65*AAO-DM OI=12892 at $2.10 SL=1.00
BUY CALL APR-70 AAO-DN OI= 3260 at $0.70 SL=0.35

Annotated Chart of QCOM:



Picked on February 17th at   $59.55
Change since picked:          +4.33
Earnings Date               1/21/04 (confirmed)
Average Daily Volume =     8.83 mln
Chart =


---

Renaissancere Ltd - RNR - close: 54.63 chg: -0.03 stop: 52.00

Company Description:
RenaissanceRe Holdings Ltd. is a global provider of reinsurance
and insurance. The Company's business primarily consists of four
business units: (1) Catastrophe Reinsurance; (2) Specialty
Reinsurance; (3) Individual Risk business, which includes primary
insurance and quota share reinsurance, and (4) Renaissance
Underwriting Managers, which manages the Company's Property
Catastrophe Joint Ventures, its Business Development Joint
Ventures, and its Structured Reinsurance Products.
(source: company press release)

Why We Like It:
Our relative strength insurance play in RNR has been performing
very well.  This last week really confirmed the breakout above
resistance at $52.00 in late February.  RNR has come very close
(2 cents) to our original profit target of $55-56.  On Thursday
we set an official exit price of $55.95 and if the IUX insurance
index can burst past its recent highs we stand a good chance of
getting there.

Readers should take note that the stock does look short-term
overbought and while it is overdue for a small correction the
strength in the sector may support the stock price. Despite our
enthusiasm we are not suggesting new positions with RNR so close
to our target.  More aggressive traders might want to keep an eye
on it for a pull back to its simple 10-dma (near $53) and look
for a bounce.

Suggested Options:
RNR is pretty close to our planned exit point so we're not
suggesting new entries at this time.

! Alert - only two weeks left for March options!

Annotated chart:



Picked on February 15 at $50.83
Change since picked:     + 3.80
Earnings Date          02/03/04 (confirmed)
Average Daily Volume:       238 thousand
Chart =


---

Schlumberger Ltd - SLB - close: 64.99 change: -0.38 stop: 62.75

Company Description:
Schlumberger Limited is an oilfield services company that
supplies technology, project management and information solutions
that aim to optimize performance for customers working in the
international oil and gas industry.  The company is comprised of
two primary business units.  Schlumberger Oilfield Services
supplies a wide range of products and services that support core
industrial operational processes.  WesternGeco, jointly owned
with Baker Hughes, is a large seismic company that provides
advanced acquisition and data processing surveys.

Why we like it:
With crude oil continuing to surge to new highs last week, SLB is
notable due to its price weakness on Friday.  But rather than
real weakness, this looks like more consolidation before the
expected breakout to new highs.  That is the pattern the stock
has been following for the past several weeks - push to a new
high, consolidate above the 10-dma ($64.99) and then break out
again.  Ending right on the 10-dma on Friday keeps that pattern
intact, with backup support provided by the 20-dma at $64.12.
After hitting a new multi-year high of $66.50 on Monday, SLB
spent the week consolidating and it looks like one or two more
days of sideways action should produce the next breakout to new
highs.  This current action is the best opportunity for entering
the play on dips as low as the $64 support level, the site of old
resistance and the location of its most recent breakout.
Maintain stops at $62.75.

Suggested Options:
Shorter Term: The March $65 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.

Longer Term: Aggressive longer-term traders can use the April $70
Call, while the more conservative approach will be to use the
April $65 strike.  Our preferred option is the April $65 strike,
which is at the money and should provide sufficient time for the
play to move in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-65 SLB-CM OI=4745 at $1.35 SL=0.60
BUY CALL APR-65*SLB-DM OI=1394 at $2.20 SL=1.00
BUY CALL APR-70 SLB-DN OI= 805 at $0.55 SL=0.25

Annotated Chart of SLB:



Picked on February 24th at   $64.47
Change since picked:          +0.52
Earnings Date               1/23/04 (confirmed)
Average Daily Volume =     3.58 mln
Chart =


---

UnitedHealth Group - UNH - cls: 63.17 chng: +0.67 stop:
60.50*new*

Company Description:
UnitedHealth Group Inc. provides health and well-being products
serving more than 48 million Americans.  The company's revenues
are derived from premium revenues on risk-based products, fees
from management, administrative and consulting services and
investment and other income.  UNH conducts its business primarily
through operating divisions in four business segments: Uniprise;
Health Care Services, which includes UnitedHealthcare, Ovations
and AmeriChoice businesses; Specialized Care Services, and
Ingenix.

Why we like it:
Giving a hint of what was to come, UNH edged slightly above the
$62 resistance level on Thursday and then confirmed that
bullishness on Friday with a solid breakout above $63.  As noted
here on more than one occasion, UNH won't be a fast moving play,
but with the ascending channel working in its favor, it should be
a consistent performer.  Last week's slow motion rebound off the
bottom of its rising channel near $61 provided a great entry
point into the play, and Friday's breakout over $62.50 gave the
momentum set an opportunity to play.  Look for a break over the
top of the rising channel ($63.90) to confirm strength and lay
the groundwork for a move to the top of the channel at $66 in the
near term.  Because of the way UNH has been trading the past few
months, we would recommend harvesting gains on a touch of the
upper channel boundary and looking for re-entry on the next
pullback.  Raise stops to $60.50, which is under the bottom of
the channel, and both the 20-dma ($61.01) and the 30-dma
($60.66).

Suggested Options:
Shorter Term: The March $60 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the April $65
Call, while the more conservative approach will be to use the
April $60 strike.  Our preferred option is the April $60 strike,
which is in the money and should provide sufficient time for the
play to move in our favor.

! Alert - March options expire in 2 weeks!

BUY CALL MAR-60 UHB-CL OI=3576 at $3.50 SL=1.75
BUY CALL APR-60*UHB-DL OI= 300 at $4.20 SL=2.50
BUY CALL APR-65 UHB-DM OI= 738 at $1.25 SL=0.60

Annotated Chart of UNH:



Picked on February 24th at   $61.92
Change since picked:          +1.25
Earnings Date               1/22/04 (confirmed)
Average Daily Volume =     2.57 mln
Chart =



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

eBay Inc - EBAY - close: 69.31 chg: +1.44 stop: 66.50

Company Description:
eBay is The World's Online Marketplace.. Founded in 1995, eBay
created a powerful platform for the sale of goods and services by
a passionate community of individuals and businesses. On any
given day, there are millions of items across thousands of
categories for sale on eBay. eBay enables trade on a local,
national and international basis with customized sites in markets
around the world. Through an array of services, such as its
payment solution provider PayPal, eBay is enabling global e-
commerce for an ever growing online community.
(source: company press release)

Why We Like It:
Odds are you're familiar with EBAY and odds are growing that you
or someone you know is one of their 95 million registered users.
EBAY continues to broaden its product line and business models
and investors have rewarded it as the premier Internet darling to
survive the post-90's bubble.  Even Standard & Poor's stock
analysts give EBAY 5 stars (their form of a "buy") and suggest
that EBAY's intrinsic value should be closer to $83 per share.

EBAY topped out just under resistance at $70.00 just as the
NASDAQ Composite peaked near 2150.  Now that the NASDAQ appears
to be finishing its consolidation so does EBAY with a strong
bounce from its simple 50-dma toward the $70.00 level.  We're
going to use a TRIGGER at $70.05 to open the play for us.  That
way we can comfortably wait and watch for the breakout just in
case EBAY decides to tighten the wedge-like pattern under $70.

If we are triggered at $70.05 we'll start the play with a stop
loss at $66.50, just under the 50-dma.  We're going to target a
move to $77.50.

Suggested Options:
Short-term traders should probably choose from the April or July
strikes but July seems a ways off yet.  We're going to select the
April 70's although the April 65's look pretty tempting too!

BUY CALL APR 65.00 XBA-DM OI=17408 at $5.60 SL=3.25
BUY CALL APR 67.50 XBA-DU OI= 7557 at $4.00 SL=2.20
BUY CALL APR 70.00 XBA-DN OI=11269 at $2.60 SL=1.30
BUY CALL APR 72.50 XBA-DV OI= 4995 at $1.55 SL=0.75

Annotated Chart:




Picked on March 07 at $ xx.xx <-- see trigger
Change since picked:   + 0.00
Earnings Date        04/20/04 (unconfirmed)
Average Daily Volume:     7.0 million
Chart =



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Chiron Corp - CHIR - close: 49.35 chg: +0.33 stop: 50.51

Company Description:
Chiron Corporation, headquartered in Emeryville, California, is a
global pharmaceutical company that leverages a diverse business
model to develop and commercialize high-value products that make
a difference in people's lives. The company has a strategic focus
on cancer and infectious disease. Chiron applies its advanced
understanding of the biology of cancer and infectious disease to
develop products from its platforms in proteins, small molecules
and vaccines. The company commercializes its products through
three business units: BioPharmaceuticals, Vaccines and Blood
Testing. (source: company press release)

Why We Like It:
CHIR gave us a scare on Friday with its early morning rally to
$50.34.  That put it above resistance at $50.00 and within 17
cents of our stop loss.  Fortunately, shares rolled over under
21-dma (and its 200-dma).  The bad news is the pop higher makes
CHIR technicals looks bullish.  Technicals aside we're encouraged
that it produced another failed rally and closed under the $50
mark, especially with the BTK biotech index still hitting new
two-year highs on a regular basis.

Readers should still remain cautious opening bearish positions in
this environment.  A move under the recent low near $48.50 would
be a good mental trigger to initiate positions.

Suggested Options:
Short-term traders can choose from the March or April strikes
but we're going to select the April 50 puts as our favorite.

! Alert - only two weeks left for March options!

BUY PUT MAR 50.00 CIQ-OJ OI=5596 at $1.50 SL=0.75
BUY PUT MAR 47.50 CIQ-OT OI=1236 at $0.50 SL= --
BUY PUT APR 50.00*CIQ-PJ OI=2511 at $2.40 SL=1.20
BUY PUT APR 47.50 CIQ-PT OI=2475 at $1.20 SL=0.60
BUY PUT APR 45.00 CIQ-PI OI= 265 at $0.55 SL= --

Annotated Chart:



Picked on February 24 at $49.11
Change since picked:     + 0.24
Earnings Date          01/28/04 (confirmed)
Average Daily Volume:       1.7 million
Chart =


---

Cognizant Tech. - CTSH - cls: 46.36 chng: +0.59 stop: 47.50*new*

Company Description:
Cognizant Technology Solutions Corporation delivers full
lifecycle  solutions to complex software development and
maintenance problems that companies face as they transition to e-
business.  These information technology (IT) services are
delivered through the use of a seamless on-site and offshore
consulting project team.  The company's solutions include
application development and integration, application management
and re-engineering services.  Among CTSH's prominent clients are
ACNielsen Corporation, ADP, Inc., Brinker Int'l, Computer
Sciences, The Dun & Bradstreet Corporation, First Data
Corporation and Nielsen Media Research.

Why we like it:
While still adhering to its dominant downtrend, CTSH is sending
some disturbing signals.  Everything was looking rosy though the
early action on Friday, as the stock fell to a fresh low for the
move at $44.38.  But the bulls got active after the initial
market-related selloff, driving price nearly $2 higher from that
intraday low by the close.  We've seen this sort of bounce
before, and each time it resulted in another rollover from the
10-dma ($46.98).  If that pattern holds true, then we ought to
see another rollover from the $47 area, with former support
acting as new resistance.  We're still looking for an eventual
decline to the $41 area, so there's plenty of room for new
entries on that rollover to work.  That is if price action works
in our favor.  Should CTSH break from its bearish trend, we'll
know for sure when it breaks above the 10-dma on a closing basis.
So let's get a bit more aggressive with our stop, lowering it to
$47.50, which is also just over the 100-dma ($47.48).

Suggested Options:
Aggressive short-term traders can use the March 45 Put, while
those with a more conservative approach will want to use the
March 50 put.  Aggressive traders looking for more insulation
against time decay will want to utilize the April strike.  Our
preferred option is the April 45 strike, as it provides more time
until expiration.

! Alert - March options expire in 2 weeks!

BUY PUT MAR-50 UPU-OJ OI= 352 at $4.30 SL=2.75
BUY PUT MAR-45 UPU-OI OI=1699 at $1.10 SL=0.50
BUY PUT APR-45*UPU-PI OI=1016 at $2.50 SL=1.25

Annotated Chart of CTSH:




Picked on February 19th at    $47.49
Change since picked:           -1.13
Earnings Date                2/10/04 (confirmed)
Average Daily Volume =      1.31 mln
Chart =


---

3M Company - MMM - close: 78.66 change: -0.23 stop: 80.75

Company Description:
Commonly known as the maker of the ubiquitous, adhesive-backed
Post-It Notes, MMM is also a leading manufacturer of a variety of
industrial, consumer, and medical products.  Reflective sheeting
on highway signs, respirators, spill-control sorbents, and
Thinsulate brand insulations are just some of the company's
industrial products.  MMM also makes microbiology products,
making it easier for food processors to test for the
microbiological quality of food.

Why we like it:
Giving new meaning to directionless and boring, MMM really didn't
go anywhere last week, trading in a very narrow range between $78
and $79.50.  Whether this is consolidation before a move up or
down, it is hard to say, but the oscillators are beginning to
show a bearish short-cycle reversal and that suggests a
breakdown.  The action points remain the same while we wait for
clarity.  Rollover entries below $80 look favorable, while
momentum traders need to wait for the drop under $77, which will
give us that long-awaited PnF Sell signal.  If MMM is going to
break down like we expect, then it shouldn't be able to move
above the short-term descending trendline ($79.75).  So let's
tighten our stop to $80.75, just over the 2/24 intraday high.

Suggested Options:
Aggressive short-term traders can use the March 80 Put, while
those with a more conservative approach will want to use the
April 80 put.  Our preferred option is the April 80 strike, as it
is currently in the money.  Aggressive traders looking for more
insulation against time decay will want to use the April strike.

! Alert - March options expire in 2 weeks!

BUY PUT MAR-80*MMM-OP OI=4392 at $1.85 SL=0.90
BUY PUT APR-80 MMM-PP OI=5200 at $2.70 SL=1.25
BUY PUT APR-75 MMM-PO OI=3460 at $0.75 SL=0.35

Annotated Chart of MMM:




Picked on February 15th at    $79.68
Change since picked:           -1.02
Earnings Date                1/20/04 (confirmed)
Average Daily Volume =      2.76 mln
Chart =



*************
NEW PUT PLAYS
*************

None


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The Option Investor Newsletter                   Sunday 03-07-2004
Sunday                                                      4 of 5


In Section Four:

Leaps: Interest In The Dollar
Traders Corner: I Like Mine “Horizontal” – How About You?


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*****
LEAPS
*****

Interest In The Dollar
By Mark Phillips
mphillips@OptionInvestor.com

That title could just as easily have been "Interest Rates And The
Dollar" as those two issues are at the very heart of what is
driving virtually every market with which we concern ourselves.
Recently the dollar has rebounded on thoughts that the U.S.
economy is heating up and that the Federal Reserve will need to
start raising short-term interest rates sooner, rather than later.
But the continued insistence that the Fed will remain patient
until there is strong growth in employment seems to be telling us
a different story.  Especially in light of Friday's employment
report, which showed dismal job growth of only 21,000 new jobs
last month.

Who are these brain donors that are coming up with estimates ahead
of the report every month in the 200-300K range?  A blind dog can
do better than that and I certainly can't see where the upside is
in such ridiculous predictions  unless they are hoping for their
quick 15 minutes of fame if the Fed finally makes good on their
promises that December's "missing" jobs are still going to show
up.  New Flash!  They are showing up -- just not in the U.S.

The employment news seemed to have been what everyone was waiting
for last week and when the news hit, the reaction was immediate.
The dollar sold off as foreign currencies were bought, the thought
being that with our interest rates expected to be low for the
foreseeable future, other currencies still look much more
attractive.  At the same time, bonds were bought furiously,
driving yields to lows not seen since July.  The 10-year yield
actually touched 3.8% and the 30-year yield hit 4.7%.  In both
cases, this was a breakdown from bearish triangles that have been
forming for the past several months and it appears the long end of
the yield curve is heading south again.

Equities sold off on the news, but as we have come to suspect of
late, the dip was aggressively bought, with all the major indices
ending close enough to unchanged for both the day and week as to
call it insignificant.  Since January 5th, the DOW has risen 51
points, the SPX hasn't move at all since January 26th and the
NASDAQ ended at 2047 on Friday, right where it ended the session
on January 5th.  Of the three, the SPX looks the most bullish and
the NASDAQ looks the most bearish.  But the point is that we are
stuck in the middle of a sideways continuation coil with little
incentive to drive the pile either higher or lower.

For the remainder of the year, we can expect the strength of the
dollar and the expectation for interest rates to be at the core of
what drives equities either higher or lower.  Stocks are priced
for the perfection of rates staying low into 2005 and any
perturbation of that belief will have significant effects on the
intraday action, if not the overall trend.

Everyone knows that inflation is rampant at the raw goods level, a
topic we've discussed frequently here.  It's the dirty little
secret that everyone knows about, but never talks about because we
want it to stay low so prices can continue upwards.  I had an
interesting conversation with a good friend (non trader) last
week.  She was asking what is going on with gas prices being high
and I relayed to her our conversation from last week that gas
prices are NOT high...it's just that the value of the dollar is
quite low.  When I explained the dynamics of the situation, it was
quite interesting to see the light bulb go on, as she instantly
understood the longer-term ramifications.

Regardless of whether government reports show it, inflation does
exist and it is consistently whittling away our purchasing power.
At the same time, all tangible goods (even equities, although they
ceased being a tangible good long ago) are rising.  Not in actual
value, but in relation to the ever deteriorating dollar.  You see
there are two types of inflation to deal with.  The first and most
common is demand-driven inflation, where the cost of goods is
driven higher due to demand outstripping supply.  This is the type
of overheating that the Fed has traditionally addressed by
tightening the money supply.  The other type of inflation is
monetary inflation, which is caused by excessive money growth.  In
this second variety, the price of everything rises, not because of
strong demand, but because the value of the money used to purchase
things is falling.  The key difference is that in the first case,
prices rise because the products being purchased are deemed to
actually have greater value.  In the latter case, there is no
increase in value -- it only seems that way, as it takes more
money to buy the same things.  The important point for us to
realize, is that in either case, we're confronted by an
environment where our dollars buy less and less, while at the same
time, our income fails (miserably) to keep pace with inflation.

As long as our government refuses to exercise the self-control of
even a crack addict when it comes to spending money, we can expect
to see the dollar continue to weaken, money creation to continue
at historical levels and monetary inflation continue to increase.
Speaking of inflation, 2 weeks ago we looked at the inflationary
signs that are creeping into the CPI report and wondered where in
the world is the PPI report.  Well, guess what?  The PPI is still
missing in action!  Every week we get a fresh lie, er, I mean
estimate, about when the report will actually come out and each
week it fails to materialize.  The credibility of the BLS has now
declined to the subatomic scale if they can't manage to get the
report issued, now 3 weeks beyond its normal release.  If we can't
believe the estimates on the release dates, how are we supposed to
have any faith in the actual numbers contained therein?

Last week I received an email from my brother that contained a
very interesting quote that I think is worth sharing.  It is from
Alexander Tyler in 1787, who at the time was a Scottish history
professor at The University of Edinburgh.  "A democracy is always
temporary in nature; it simply cannot exist as a permanent form of
government.  A democracy will continue to exist up until the time
that voters discover that they can vote themselves generous gifts
from the public treasury.  From that moment on, the majority
always votes for the candidates who promise the most benefits from
the public treasury, with the result that every democracy will
finally collapse due to loose fiscal policy."

Regardless of which side of the political aisle you sit on, I hope
you can see that this is at the core, both of our current
political process, as well as the current economic morass in which
we find ourselves.  Many readers would prefer that I leave my
political commentary out of our weekly discussions, but I am
reticent to do so simply because our political landscape is
inextricably linked with the reality that we see unfolding in the
markets on a daily and weekly basis.

Bringing the focus back around to the markets, I see no reason to
expect any of the major trends to change in the next week or
three.  That means bullish trends in foreign currencies, all
commodities, bond prices and real estate prices and a sustained
bearish trend in the dollar.  This inter-market relationship will
eventually come to an end and the manner in which it unravels will
be quite interesting indeed. But in the near-term, the winning
strategy will continue to be to play the prevailing trends until
they end.

In the equity world, that means buying the dips in bullish trends
as long as important support levels are not broken.  It is
virtually impossible to gain any real clues from the action in the
major indices or from any of the primary bullish percent readings,
as everything there looks bullish, but stale -- just like it has
for the past several months.  Staleness of trend has obviously had
no bearish on the longevity of that trend, now has it?  As I've
stated several times, we aren't likely to see a material change in
the equity landscape until the VIX finds some life and gets back
over 20.  With two forays under the 14 level in the past 2 weeks,
I don't see a change on that front anytime soon.

With that, let's go take a look at our current list of plays and
see what excitement cropped up last week.

Portfolio:

SMH - For all the volatility and gyrations in price, the SMH
hasn't really gone anywhere for the past 2 weeks.  For that
matter, it's still within 50-cents of where we initiated the play
back at the end of December.  The bearish divergence that
developed on the weekly Stochastics hasn't materialized into any
significant price weakness.  Despite a lack of strength, there's
also a notable lack of selling pressure, with the bulls staunchly
defending support near $500 on the SOX.  Rather than delivering a
downside break, it is entirely possible that the SMH will simply
work off its overbought condition by trading sideways for a bit
longer.  That said, the trend does seem to be weakening
significantly, with SMH now finding resistance below its 50-dma.
We're still looking for a break under $40 to provide some
confirmation of pending weakness down towards the mid-$30s, but
with the 200-dma now rising over the $37 level, we may simply run
the clock out in sideways fashion.  We'll stick with the play for
now, but conservative traders wary of an upside break may just
want to exit the play on another bounce from the $40 level and re-
deploy that cash into another play that looks more promising.

NEM - Pundits were all in a lather over the past week in an
attempt to be the first to proclaim the end of the bear market in
the dollar.  Here's a newsflash for those misguided souls -- the
end of the decline in the dollar is still a long ways off.  That
reality was driven home over the past two days, with the DX00Y
resuming its downtrend (reversing from the 100-dma) and gold
stocks putting in a nice bounce, with the XAU index gaining nearly
3%, just on Friday.  This leaves in place the potential for a H&S
bottom on the XAU, with a sloping neckline that crosses at the
$107 level.  A break above that point will give us a near-term
measuring objective of $121, well above the $113 highs from early
January.  NEM has a similar pattern in place (although not quite
as clean) following last week's rebound from $41.  A breakout over
$47 will confirm the pattern and give us a bullish price objective
of $53.50.  I still like new entries in the $40-42 area (although
with the weekly Stochastics now turning up from just above
oversold, that ship may have sailed) and for late comers, a
breakout over the 50-dma looks attractive as well.

HD - Well, how doe you like that?  HD is finally finding some
buying interest and broke above its range of the past few months
last week, testing the $37.50 resistance level and coming to rest
right at the upper channel line.  That doesn't look good for our
play and the continued rise in the weekly Stochastics looks
bullish too.  This is precisely where the use of our insurance
options will do wonders in keeping us emotionally balanced on our
plays in the near-term.  The LEAPS may be losing value, but they
will do so more slowly than the protective position is gaining
value.  HD is benefiting from the continued strength in the
Housing sector, which is being caused by the expectation of
continued low interest rates and maybe another wave of refinancing
activity.  Fundamentally, HD still looks like a good short, but
technically the jury is still out.  The next important resistance
measure to watch is the 200-week moving average at $39.50.

MLNM - Well, so far it looks like we did the right thing by
raising our entry point on MLNM, as the stock found support near
$17.50 and put in a solid rally last week, getting back over the
$19 level at the close on Friday.  A breakout over $20 will
confirm the bullishness in the stock and most likely have the
weekly Stochastics turning a short-cycle bullish reversal.  Should
we see another dip near $18 prior to that breakout, it will
provide another viable entry point along the path to a rally into
the mid-$20s later on this year.  We'll maintain a wide stop for
now, but once over $20, it should be safe to trail that stop to
$16, which will be below the 200-dma at that time.

CHK - Cheating a bit on the entry point on CHK was certainly the
right course of action, as the stock is responding favorably to
the renewed rise in Natural Gas prices, and last week's breakout
over $13 certainly looks constructive.  The weekly Stochastics are
turning a bullish reversal right now and it is reasonable to
expect a breakout to new highs in the weeks ahead.  It seems
unlikely that we'll see the February lows retested, so let's raise
our stop to $11, which is solidly below the 200-dma.

Watch List:

SNDK - Over the past few weeks, SNDK has been trying to put in a
bottom and the rally off the recent lows near $24 certainly looks
convincing so far.  Price is currently stalled near the site of
the 50-dma and 200-dma and it is reasonable to expect one more
pullback before a real rally can get underway.  But price action
is looking constructive and I like the fact that weekly
Stochastics are trying to turn bullish from within oversold.
Let's take the play off hold and use an entry target at $25-26.
If filled, we'll use an initial stop at $21.50, just under the 62%
retracement of last year's rally from $8 to $43.  The initial
target for the play will be for a retest of the January highs near
$36, and as we near that level, we can evaluate whether a rally to
challenge the 2003 highs is reasonable.

LUV - Was that the end of the decline?  LUV certainly appears to
be putting in an impressive upside move over the past few days,
rising right to the top of the descending channel of the past
couple months.  But with price sill well below the 50-dma, I'm in
no hurry to chase the stock higher.  That said, the weekly
Stochastics are really trying to turn up from oversold after being
buried there for the past few months and this could be a bottom
forming.  So let's be a little more reasonable with our entry
target and raise it to $14 this weekend.  Initial stops will be
set at $11, with near-term protection provided by the protective
put.

TYC - As promised last week, TYC makes the transition to the Watch
List this weekend, as the stock continues to make steady upward
progress in its year-long rising channel.

Radar Screen:

WMB - Natural Gas prices are once again moving strongly higher and
that bullish price action caused a premature reversal in shares of
WMB over the past 2 weeks and it now looks as though the foray
under the 200-dma ($9.09) may have been the entry point to target.
One thing is certain -- the price increase over the past couple
days certainly looks convincing, as it is coming on strongly
increasing volume.  Weekly Stochastics are attempting a short-
cycle bullish reversal as well and combined with the higher low in
price, we could have bullish divergence setting up.  That is in
direct opposition to the bearish divergence we noted a few weeks
ago and that leaves us in a position of indecision.  I still
really like the Natural Gas sector and WMB specifically, but I'd
prefer to see greater clarity before turning this one into a Watch
List play.

APA - It looks like this train may have left the station without
us, as APA held support at its 100-dma and then vaulted
substantially higher, actually eclipsing its all-time highs on
Tuesday.  With the stock holding just below resistance and weekly
Stochastics posting a short-cycle bullish reversal, it looks like
we missed our chance.  I like the bullish trend in APA, but the
stock is too extended here for us to consider it a viable play.
Let's keep our eye on it and look for another pullback near the
100dma as the most likely setup to consider it a viable long-term
play.

GM - The more I look at the descending multi-year channel on GM,
the more I like it in terms of setting up a great long-term
bearish play.  But at the same time, I see the potential for a
breakout from that pattern, and that keeps me cautious for now.
Note that the weekly Stochastics have fallen near oversold, while
at the same time, price is holding near the top of that channel
($50).  If price fails to drop significantly lower before the
oscillator turns back up, we'll have bullish divergence on our
hands and that will obviously force me to rethink my position.
For now, let's just keep our eye on the stock and postpone making
any decisions.

Closing Thoughts:
"Steady as she goes" remains our action plan.  Buy the dips when
offered and hold for higher levels throughout much of the year as
the dollar continues to deteriorate against foreign currencies.
With the diminished expectations for an increase in interest rates
this year, we could very well see this trend continue right into
2005.  U.S. stocks will continue to appreciate relative to the
dollar and that will work quite nicely for investors that can
enter into steady trends.  Let's hope that's us!

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
SNDK   12/21/03   $25-26       JAN-2005 $ 27  XWS-AY
                            CC JAN-2005 $ 25  XWS-AE
                               JAN-2006 $ 27  YSD-AY
                            CC JAN-2006 $ 25  YSD-AE
                            PP JUL-2004 $ 22  SWQ-SX
LUV    02/29/04   $14          JAN-2005 $ 15  ZUV-AC
                            CC JAN-2005 $ 12  ZUV-AV
                               JAN-2006 $ 15  WUV-AC
                            CC JAN-2006 $ 12  WUV-AV
                            PP JUN-2004 $ 12  LUV-RV
TYC    03/07/04   $26-27       JAN-2005 $ 30  ZPA-AF
                            CC JAN-2005 $ 25  ZPA-AE
                               JAN-2006 $ 30  WPA-AF
                            CC JAN-2006 $ 25  WPA-AE
                            PP JUL-2004 $ 25  TYC-SE


PUTS:
None


New Portfolio Plays

None


New Watchlist Plays

TYC - Tyco International $29.96  **Call Play**

It was a rough road for TYC bulls throughout 2002, but after
building a solid bottom just above the $10 level, the stock has
shaken off the effects of controversy from its ex-CEO and has been
rising in a slow and steady manner for the past year.  Price
action has been rising in a steady upward channel and based on the
consistency of that price action and a very bullish PnF chart, it
looks like that trend could continue throughout much of this year.
After rebounding from the middle of its rising channel at the end
of February, the stock has once again moved up to test the top of
the channel, currently at $30.  This trend has the feel of the
strong bullish trend we saw in SBUX before riding that stock
significantly higher in recent months and with the PnF chart
giving a bullish price target of $63, there's definitely plenty of
upside potential to work with.  The way the stock has been
oscillating between the boundaries of the rising channel tells us
that we don't have to chase it higher, but just wait for a
pullback to the lower boundary of that pattern to take our entry.
Reinforcing support at the bottom of the channel (just below $26)
is the 100-dma ($25.27) and it would be very surprising to see
that average broken.

It may seem that we're late to the party and that risk is higher
due to the weekly Stochastics still holding in overbought
territory, but one thing we've learned is that this strong
uptrends can continue much further than anyone expects and that
oscillator readings are often unreliable for picking entry points.
So we'll defer to price action and play the dominant pattern in
play, that rising channel as long as it lasts.  That means we want
to look for a pullback near the bottom of the channel near $26 to
set up a solid entry point.  Even with the long time horizon of
LEAPS plays, the $63 level seems a bit too aggressive in terms of
expectations, but the weekly chart shows a very real possibility
of continued upside to at least $35, and quite possibly strong
resistance at $42.  Achieving either of those goals will represent
a handsome gain on the play, provided we can get the entry point
we're looking for.  More aggressive traders may even want to enter
at a slightly higher level near $27, which held as support on the
most recent pullback.  We'll set our official entry at $26-27,
looking to split the difference on any dip into the lower part of
the channel, entering on the first rebound from that support.
We'll use a fairly wide stop initially, placing it at $22, just
under the 200-dma.

BUY LEAP JAN-2005 $30 ZPA-AF
BUY LEAP JAN-2005 $25 ZPA-AE **Covered Call**
BUY LEAP JAN-2006 $30 WPA-AF
BUY LEAP JAN-2006 $25 WPA-AE **Covered Call**
BUY Put  JUL-2004 $25 TYC-SE **Insurance Put**


Drops

None


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I Like Mine “Horizontal” – How About You?
By Mike Parnos, Investing With Attitude

Martha Stewart is in the headlines – no big surprise.   So she’s
guilty.  No big surprise.  Apparently, what moral fiber Martha
has, comes in a box of breakfast cereal.   So she lied and she got
caught.  Who hasn’t done either or both?

Speaking of headlines . . . Good headlines are difficult to write.
These are just a few I came across:
"New Study of Obesity Seeks Larger Test Group"
"Typhoon Rips Through Cemetery; Hundreds Dead"
"Include Your Children When Baking Cookies"

Let’s hope that CPTI students pay more attention to their trades
than the editors of those headlines.  Meanwhile, let’s revisit the
Calendar Spread strategies.   They come in handy.  After you read
the article, see if you can identify how, and where, we use
Calendar Spreads in our CPTI portfolio.
___________________________________________________________

The “Horizontal” Calendar Spread
The “horizontal” calendar spread consists of the purchase of a
long-term option and the simultaneous sale of a short-term option
at different strike prices.  For our example we will use GILD – on
which we have a neutral to mildly bullish outlook.

GILD (Gilead Sciences) closed Friday at $57.33.  We will:
1.  Buy the GILD August $60 calls @ $4.90
2.  Sell the GILD April $60 calls @ $1.65
Total debit is $3.35.
Regardless of where the GILD moves, our total risk is defined at
$3.35.

How Do We Make Money?
If we’re right about the direction of GILD, it will move up
slowly.  The delta of the August $60 call is 48.  The delta of the
April $60 call is 38.  That means that for every $1.00 GILD goes
up, the value of the August call will increase $.48 and the April
call will go up only $.38.  We have a positive delta differential
of 10.  (Delta is the percentage that an option will move in
relation to a $1 move in the underlying).  Deltas are important
because they’ll tell us if, and when, to make adjustments to the
position later on.

In a perfect world (and who’s kidding who?) GILD would move up to
$59.90 by April expiration and the April $60 call would then
expire worthless.

At that point we would have two choices. A) Close out the spread
and take our profits, or; B) Sell an option out for the next
cycle.

A)  How much profit do we have?  We can approximate the numbers by
using our Greek friends – delta and theta.  (Theta is the change
of an option’s value given a one day change in time).  Gather our
fingers, take off our shoes and socks because it’s time to
calculate.  These results will be approximate – but close enough
to enable us to make an educated decision.

The delta of the August GILD $60 call is 48.  GILD is currently
trading at $57.33.  We are projecting a slow increase in stock
price to finish at $59.90.  That’s a price increase of $2.57.  If
we multiply that by 48% (delta), we get $1.23.  We then add the
$1.23 to the original August $60 call price ($4.90) and get $6.13.

We have to remember that there are still 41 days left to April
expiration.  The August call will experience time erosion – not a
lot, but enough that we should include it in our calculations.
The “theta” is .017 per day.  41 x .017 = .697.  We’ll round it
off to $.70.  We now subtract this $.70 of time erosion from the
$6.13 and we have an approximate value of the August $60 call of
$5.43 at April expiration.

It originally cost us $3.35 to put on the calendar spread.  If we
close the position by selling the August $60 call for $5.43, we
will show a profit of $2.08.  That’s pretty impressive on a $3.35
initial risk.  Taking your profit would be the prudent thing to
do.

B)  If we still have a bullish outlook on GILD, we could then sell
a $65 call for about $1.00 a go through the process again.  Our
cost basis will have been reduced to about $1.27 ($3.35 - $2.08).
GILD will have five more points of room to move up with a much
higher delta working for you.  How often will that happen?   It’s
about as likely as you marrying a girl named Trixie and living
happily ever after.

Let’s Get Back To Reality
What happens if . . .
a) What if the GILD is at $57 at April expiration? The April $60
call would expire worthless.  The August $60 call would have
increased in value and we’re now free to sell the March $60 call
and take in about another $1.25.  That would further reduce the
cost basis of the August $60 call to $2.10.  Even if we take in an
about a buck a month, we will have paid for the August call in
three months and everything above and beyond is P-R-O-F-I-T.
That’s music to our ears and more spendable green stuff our bank
accounts.

b) What if the GILD is at $51 at April expiration?  The April $60
call would obviously expire worthless, but you should have had a
predetermined stop loss and closed the position– hopefully.  If
you have no self-discipline, and you’re still hoping for a
rebound, you can sell the May $60 call for about $.25 while you
patiently wait for a bounce back up.

c) What if the GILD is at $64 at February expiration?  It’s moved
up a little too quickly.  Well, that’s one scenario you want to
head off at the pass.  Why?  Because the delta of the April $60
call will likely have surpassed the delta of the August $60 call.
That will cost you money if you don’t make an adjustment before
that plays out.  It means the April $60 call will be increasing in
value faster than the August $60 call.   That’s a no-no.

You have to monitor the deltas of both options.  You will have to
close the spread when the delta of the August $60 call is no
longer higher than the delta of the April $60 call.  You will
likely have made a very respectable profit.   If you’re still
bullish, you can put on another (new) calendar spread using higher
strikes.

The “Diagonal” Calendar Spread
A “diagonal calendar spread” is basically the same as the
“horizontal” calendar spread except the strike prices are
different.  Using the example above, a “diagonal” spread might
consist of:
Buying the August $55 call @ $7.30
Sell the April $60 call @ $1.65
Total debit of $5.65.

The main benefit is that you are basically buying more delta.  The
August $55 call has a delta of 63 vs. the 48 delta of the August
$60 call.  With a "diagonal calendar spread," it's also the months
of time you buy in the long option that gives you flexibility. You
can buy more or less time, depending on how long you think it will
take for the underlying to go in your direction.

Remember that, in both the “horizontal” or “diagonal” calendar
spreads, you have many choices. You can take profits (if they
exist) by unwinding the position at any time during the life of
the long option.  Taking profits is often a good idea.  Why risk a
nice profit on the “come.”  You don’t want to risk what you have
(profits) for something that hasn’t “come.”
______________________________________________________________

MARCH CPTI POSITIONS

Position #1 – OEX (S&P 100 Index) Iron Condor – 568.45
We sold 12 OEX March 595 calls and bought 12 OEX March 605 calls
(Bear Call Spread).  Then we sold 12 OEX March 540 puts and bought
12 OEX March 530 puts (Bull Put Spread).  The total net credit was
$1.20 ($1,440).  Maximum profit range: 540 – 595.  Maintenance:
$12,000.

Position #2 – RUT (Small Cap Index) Iron Condor – 599.54
We sold 8 RUT March 610 calls and bought 8 RUT March 620 calls
(Bear Call Spread).  Then we sold 8 RUT March 550 puts and buy 8
RUT March 540 puts (Bull Put Spread).  The total net credit was
$2.75 ($2,200).  Maximum profit range: 550 - 610.  Maintenance:
$8,000.

Position $3 – MNX (Mini-NDX Index) Iron Condor - $147.30
We sold 20 MNX March $157.50 calls and bought 20 MNX March $160
calls (Bear Call Spread).  Then we sold 20 MNX March $142.50 puts
and bought 20 MNX March $140.00 puts (Bull Put Spread).  The total
net credit was $.90 ($1,800).  Maximum profit range: $142.50 -
$157.50.  Maintenance: $5,000 less $1,800 = $3,200.

Position #4 – BBH (Biotech Index) - Siamese Condor - $150.35
We sold 10 BBH March $145 calls and sell 10 BBH March $145 puts
for a credit of about $6.95.  Then we bought 10 BBH March $160
calls and buy 10 BBH March $130 puts for a debit of about $.70.
The total net credit was $6.25 ($6,250).  Our profit (safety)
range was $138.75 to $151.25.  These were also our bailout points.
The closer BBH finishes to $145, the more money we will make.

On Friday, BBH blasted through our topside parameter.  We bought
back the March $145 call at $7.40.  We had taken in $6.25.
Result:  Loss of $1.15 ($1,150).
______________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $36.63
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts
of the 2005 QQQ $29 calls for a total debit of $14,300.   We make
money by selling near term puts and calls every month.  Here's
what we've done so far:
October: Oct. $33 puts and Oct. $34 calls – credit of $1,900.
November: Nov. $34 puts and calls – credit of $1,150.
December: Dec. $34 puts and calls – credit of $1,500.
January: Jan. $34 puts and calls – credit of $850.
February: Feb. $34 calls and $36 puts – credit of $750.
March: Mar. $34 calls and $37 puts – credit of $1,150.
Total credit: $7,300.

Note:  We haven't included the proceeds from this long term QQQ
ITM Strangle in our profit calculations.  It's a bonus!  And it's
a great cash flow generating strategy.

ZERO-PLUS Strategy.  OEX – 568.45
In my Feb. 8th column, I outlined a strategy based on an initial
investment of $100,000.  $74,000 was spent on zero coupon bonds
that will mature in seven years at a value of $100,000.  In
essence, that guarantees the principal $100,000 investment.  We
are trading the remaining $26,000 to generate a “risk free” return
on the original investment.

We bought 3 OEX Jan. 2006 540 calls at a cost of $24,300.  Then we
sold 3 OEX March 2004 585 calls for a credit of $930.  We also put
on a bull put spread, selling three OEX March 535 puts an buying
three OEX March 525 puts for a credit of $330.  Our total credit
is $1,260.  Our current cash position is $2,960 ($1,260 plus the
unused $1,700).  This one is going to drag on for seven years, so
get comfortable.  We’re going to make some money.
_____________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our educational plays or our strategies?  To find
past CPTI (Mike Parnos) articles, look under "Education" on the OI
home page and click on "Traders Corner."  They're waiting for you
24/7.
____________________________________________________________

Happy Trading!
Remember the CPTI credo: May our remote batteries and self-
discipline last forever, but mierde happens. Be prepared! In
trading, as in life, it’s not the cards we’re dealt. It’s how we
play them. Your questions and comments are always welcome.

Mike Parnos
CPTI Master Strategist and HCP
_____________________________________________________________

Couch Potato Trading Institute Disclaimer
All results reported in this section are hypothetical. While the
numbers represented here may have been achieved or beaten by our
readers, we make no representation that any individual investor
achieved these exact results. The tracking for the plays listed in
this section uses closing prices for the day the newsletter is
published and it is not meant to imply that any reader actually
received those prices or participated in these recommendations.
The portfolio represented here is hypothetical and for investment
education purposes only. It is only an illustration of what type
of gains a knowledgeable investor might receive utilizing these
strategies.


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The Option Investor Newsletter                   Sunday 03-07-2004
Sunday                                                      5 of 5


In Section Five:

Spreads/Combinations/Premium-Selling Plays: The Range-Bound Trend
    Continues...


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Spreads/Combinations/Premium-Selling Plays
******************************************

The Range-Bound Trend Continues...
By Ray Cummins

The broader equity averages ended little changed Friday with
concerns over the health of the labor market neutralizing the
effects of a positive interest-rate outlook.

The blue-chip Dow closed up 7 points at 10,595 with McDonald's
(NYSE:MCD), Coca-Cola (NYSE:KO) and Exxon-Mobil (NYSE:XOM) among
the best performers.  The technology-laden NASDAQ slid 7 points
to 2,047 amid weakness in semiconductor stocks.  The Standard &
Poor's 500 index added 2 points to 1,156 as homebuilding, gold,
restaurant, auto parts, oil & gas equipment, apparel, insurance
and tobacco shares moved higher.  Volume on the NYSE was 1.37
billion shares with advancers outpacing decliners by more than 2
to 1.  On the technology exchange, over 2 billion shares traded
with winners and losers roughly even at the close.  Treasuries
saw a huge buying effort following the unimpressive employment
report, forcing yields on the 10-year note down to 3.78%.  The
high bond prices were sustained by the Bank of Japan, which was
buying dollars to offset its early decline.  The 10-year note
closed up 1 14/32, with its yield falling to 3.84%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
UPCOMING EVENTS - CHANGES TO NEWSLETTER CONTENT
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

They say "nothing lasts forever" and that statement was never more
accurate than with regard to finance and publishing.  But, despite
the psychological comfort of a repetitious cycle, sometimes change
is a "good" thing.  I truly hope that is the case with the current
situation at the OIN, where we have decided to make some major
adjustments to the content in this portion of the newsletter.
Obviously, the primary catalyst for the changes is the readership,
whose desires were made very clear after our recent request for
"favorite" strategies.  In addition, the editors of each section
have identified areas they think need improvement or modification,
and there are also some personnel issues to contend with such as
time limitations due to "life events" among members of the staff.
With that in mind, we will no longer be offering covered-calls on
a weekly basis, but rather once-a-month, which is really the best
timeframe for our (in-the-money) approach to the strategy.  The
Spreads & Combos editor will now focus on vertical spreads and
"premium-selling" positions in both the Wednesday and Saturday
editions, however neutral-outlook debit straddles will also be
added to the bi-weekly content as market conditions permit.  The
summaries for the core strategies will slowly be combined (credit
spreads this week) thus providing more-timely observations with
regard to position exits and adjustments.  In the future, we hope
to publish "supplemental play" data to replace some of the omitted
strategies, such as calendar spreads and synthetic positions, and
further augment the current number of candidates for combination
plays.  Among the new (and recurring) additions will be monthly
credit spreads on the OEX and SPX, and some longer-term plays in
all categories.  One final adjustment will occur in April, when
the "Premium-Selling" section moves to Tuesday afternoon, thus
providing candidates for Wednesday's market session.

Your thoughts are always valued as they guide our policy decisions
and determine our subject matter.  Please don't hesitate to send
your comments and suggestions to: questions@OptionInvestor.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 03/05/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   27.26    0.45   6.66%    2.30%
LSCP     MAR    17    17.10   24.42    0.40   6.20%    2.34%
PCLN     MAR    22    21.70   24.19    0.80   7.85%    3.69% *
AMLN     MAR    20    19.55   25.38    0.45   6.42%    2.30%
ATRX     MAR    22    22.05   26.28    0.45   6.79%    2.04%
BRCM     MAR    37    36.95   41.25    0.55   4.29%    1.49%
IDCC     MAR    22    22.10   27.26    0.40   5.88%    1.81%
OSTK     MAR    20    19.35   33.19    0.65  10.25%    3.36%
NEOL     MAR    17    16.95   22.12    0.55  10.48%    3.24%
RMBS     MAR    30    28.90   31.30    1.10  10.64%    3.81%
SMTC     MAR    22    22.15   23.14    0.35   4.58%    1.58%
ADEX     MAR    20    19.55   23.31    0.45   8.22%    2.30%
ALXN     MAR    20    19.70   25.42    0.30   6.05%    1.52%
APPX     MAR    30    29.70   38.04    0.30   4.59%    1.01%
ATRX     MAR    22    22.20   26.28    0.30   6.03%    1.35%
MRVL     MAR    37    37.10   43.85    0.40   4.40%    1.08%
NEOL     MAR    17    17.30   22.12    0.20   5.25%    1.16%
OSTK     MAR    20    19.70   33.19    0.30   6.70%    1.52%
SEPR     MAR    17    17.25   48.13    0.25   5.37%    1.45%
ADEX     APR    20    19.45   23.31    0.55   5.64%    2.83%
ALXN     MAR    22    22.05   25.42    0.45  10.40%    2.04%
KMRT     MAR    30    29.65   32.51    0.35   6.19%    1.18%
NEOL     APR    15    14.55   22.12    0.45   6.79%    3.09%
OSTK     MAR    25    24.65   33.19    0.35   9.74%    1.42%
PBY      MAR    22    22.15   25.80    0.00   0.00%    0.00%
PKZ      MAR    25    24.60   29.90    0.40   8.63%    1.63%

Priceline.com (NASDAQ:PCLN) was a candidate for "early exit"
during the recent slump.  The position in Pep Boys (NYSE:PBY)
was not available due to the "gap-up" in the issue on the day
after our play was published.  Semtech (NASDAQ) is on the
early-exit "watch" list.


NAKED CALLS

Stock   Strike Strike Cost   Current   Gain    Max    Simple
Symbol  Month  Price  Basis   Price   (Loss)  Yield   Yield

AAII     MAR    25    25.40   10.15    0.40   7.47%    1.57%
CMTL     MAR    35    35.45   27.82    0.45   7.46%    1.27%
FLML     MAR    35    35.35   26.24    0.35   6.02%    0.99%
MHS      MAR    35    35.45   32.80    0.45   4.40%    1.27%
CECO     MAR    55    55.50   52.17    0.50   4.96%    0.90%
ECLG     MAR    23    22.85   20.48    0.35  10.15%    1.53%
ESI      MAR    50    50.30   34.90    0.30   4.96%    0.60%
ISSI     MAR    18    17.85   17.22    0.35  11.45%    1.96%
SEAC     APR    20    20.40   15.56    0.40   7.86%    1.96%

Integrated Silicon Solutions (NASDAQ:ISSI) is on the early-exit
"watch" list.


PUT-CREDIT SPREADS

Symbol  Pick   Last   Month L/P S/P Credit  C/B    G/L   Status

CERN    46.09  47.63   MAR  35  40   0.60  39.40   0.60   Open
DNA     98.25 113.27   MAR  85  90   0.70  89.30   0.70   Open
ESRX    70.58  75.16   MAR  60  65   0.65  64.35   0.65   Open
NBR     46.97  47.15   MAR  40  42   0.25  42.25   0.25   Open
BSX     41.94  43.53   MAR  35  37   0.25  37.25   0.25   Open
CEC     51.62  56.92   MAR  45  50   0.55  49.45   0.55   Open
ONXX    36.80  37.64   MAR  30  35   0.55  34.45   0.55   Open
OSTK    29.27  33.19   MAR  22  25   0.30  24.70   0.30   Open
RYL     85.72  92.60   MAR  75  80   0.50  79.50   0.50   Open
GS     107.09 109.05   MAR  95 100   0.65  99.35   0.65   Open
MSTR    64.78  64.17   MAR  50  55   0.55  54.45   0.55   Open
MICC    22.06  22.35   MAR  17  19   0.12  18.63   0.12   Open
VIP     83.25  90.57   MAR  70  75   0.65  74.35   0.65   Open
GDT     69.79  71.50   MAR  60  65   0.65  64.35   0.65   Open
MTH     71.09  78.35   MAR  60  65   0.70  64.30   0.70   Open
APOL    77.82  80.54   APR  65  70   0.60  69.40   0.60   Open
S       48.35  47.46   APR  42  45   0.35  44.65   0.35   Open

L/P = Long Put  S/P = Short Put  CB = Cost Basis  G/L = Gain/Loss

Synopsys (NASDAQ:SNPS) has previously been closed to limit losses.


CALL-CREDIT SPREADS

Symbol  Pick   Last   Month L/C S/C Credit  C/B    G/L   Status

CYBX    27.04  23.74   MAR  35  30   0.65  30.65   0.65   Open
SOHU    29.05  28.49   MAR  40  35   0.60  35.60   0.60   Open
KLAC    54.24  53.25   MAR  65  60   0.60  60.60   0.60   Open
IACI    31.92  32.36   MAR  37  35   0.30  35.30   0.30   Open
NVLS    33.26  31.16   MAR  40  37   0.30  37.80   0.30   Open
BBBY    40.62  41.54   MAR  45  42   0.30  42.80   0.30   Open
LLTC    40.03  39.10   MAR  45  42   0.25  42.75   0.25   Open
PIXR    65.76  66.62   MAR  75  70   0.55  70.55   0.55   Open
SFNT    37.96  38.62   MAR  45  40   0.60  40.60   0.60   Open
UTEK    26.28  24.95   MAR  35  30   0.60  30.60   0.60   Open
AMZN    44.87  44.09   MAR  55  50   0.50  50.50   0.50   Open
CTAS    42.77  42.92   MAR  50  45   0.60  45.60   0.60   Open
CCU     43.44  44.44   MAR  50  45   0.60  45.60   0.60   Open
ICOS    37.53  41.90   MAR  45  40   0.50  40.50  (1.40) Closed
DISH    35.50  34.55   APR  42  40   0.30  40.30   0.30   Open
NVLS    31.15  31.16   APR  37  35   0.35  35.35   0.35   Open

L/C = Long Call  S/C = Short Call  CB = Cost Basis  G/L = Gain/Loss

As noted earlier in the week, Icos (NASDAQ:ICOS) should have been
closed, for a smaller than published loss, when the issue moved
above the sold (call) strike at $45.  Neurocrine Bisosciences
(NASDAQ:NBIX), OSI Pharma (NASDAQ:OSIP), and Multimedia Gaming
(NASDAQ:MGAM) and have previously been closed to limit losses.


DEBIT STRADDLES

Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status

HOV     74.99  90.00   MAR    75    75     7.00   15.00   Closed
TTWO    32.03  34.07   MAR    32    32     3.20    3.00    Open
SNP     40.74  42.80   APR    40    40     5.70    5.70    Open
AMX     35.66  37.82   MAY    35    35     3.65    4.30    Open
CCMP    44.55  44.40   APR    45    45     5.90    5.75    Open

Hovnanian (NYSE:HOV) was the "play of the month," offering up to
a $8.00 gain on $7.00 invested.  Take-Two Interactive (NASDAQ:TTWO)
may yet yield a profit, and America Movil (NYSE:AMX) is off to a
good start.  Straddles in Martek Biosciences (NASDAQ:MATK), Bear
Stearns (NYSE:BSC) and Forest Labs (NYSE:FRX) have previously been
closed to preserve capital.


Editor's Note: Due to mandated changes in the newsletter content,
positions in any other strategies are no longer being tracked on
a weekly basis.  For more information on exit and/or adjustment
techniques, please send an E-mail to: questions@OptionInvestor.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AAPL - Apple Computer  $26.74  *** A Big Day! ***

Apple Computer (NASDAQ:AAPL) designs, manufactures and markets
personal computers and related personal-computing solutions for
sale primarily to education, creative, consumer and business
customers.  The company's personal-computing products include
desktop and notebook PCs, related devices and peripherals,
networking and connectivity products, as well as third-party
hardware products.  Apple's software products and computer
technologies include operating systems; professional application
software; consumer-, education- and business-oriented application
software; Internet products and technologies, and also wireless
connectivity and networking products.

AAPL - Apple Computer  $26.74

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  MAR 25    AAQ OE    1397   0.35  24.65   9.5%   1.4% *
SELL PUT  APR 22.5  AAQ PT    7360   0.25  22.25   2.8%   1.1% TS
SELL PUT  APR 25    AAQ PE    1354   0.75  24.25   5.9%   3.1%


__________________________________________________________________

AMLN - Amylin Pharmaceuticals  $25.38  *** On The Rebound! ***

Amylin Pharmaceuticals (NASDAQ:AMLN) is committed to improving
the lives of people with diabetes and other metabolic diseases
through the discovery, development and commercialization of
innovative, cost-effective medicines.  Amylin has two primary
drug candidates in late-stage development for the treatment of
diabetes; SYMLIN (pramlintide acetate) and exenatide, formerly
referred to as AC2993 (synthetic exendin-4).

AMLN - Amylin Pharmaceuticals  $25.38

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  MAR 25    AQM OE      73   0.65  24.35  15.8%   2.7%
SELL PUT  APR 20    AQM PD     457   0.25  19.75   3.6%   1.3% TS
SELL PUT  APR 22.5  AQM PX    2230   0.70  21.80   6.7%   3.2% *


__________________________________________________________________

APPX - American Pharma Partners  $38.04  *** 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  $38.04

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  MAR 35    AQO OG    3357   0.40  34.60   8.1%   1.2%
SELL PUT  APR 30    AQO PF    3589   0.40  29.60   3.8%   1.4% TS
SELL PUT  APR 33.3  AXD PV     448   0.90  32.48   6.0%   2.8% *


__________________________________________________________________

ASKJ - Ask Jeeves  $29.60  *** Rally Mode! ***

Ask Jeeves (NASDAQ:ASKJ) is a provider of Internet-wide search,
providing consumers with authoritative and fast ways to find
relevant information to their everyday searches.  Ask Jeeves
deploys its search technologies on Ask Jeeves (Ask.com and
Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com).
In addition, to its internet sites, Ask Jeeves syndicates its
monetized search technology and advertising units to a network
of affiliate partners.  The company is based in Emeryville,
California, with offices in New York, Boston, New Jersey, Los
Angeles, London and Dublin.

ASKJ - Ask Jeeves  $29.60

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  MAR 25    AUK OE    2927   0.30  24.70  10.1%   1.2% *
SELL PUT  APR 22.5  AUK PX     190   0.35  22.15   4.2%   1.6% TS
SELL PUT  APR 25    AUK PE     921   0.80  24.20   7.6%   3.3%


__________________________________________________________________

NEOL - NeoPharm  $22.12  *** Pure Premium-Selling! ***

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  $22.12

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    UOE OD      65   0.35  19.65  12.5%   1.8%
SELL PUT  APR 15    UOE PC    2710   0.35  14.65   5.6%   2.4% *
SELL PUT  APR 17.5  UOE PW     438   0.90  16.60  12.9%   5.4%


__________________________________________________________________

NKTR - Nektar Therapeutics  $23.24  *** New High! ***

Nektar Therapeutics (NASDAQ:NKTR) makes drug delivery products
based on its portfolio of technologies and expertise designed
to improve drug performance throughout the drug development
process.  The company has developed three distinct technology
platforms: Nektar Molecule Engineering, which uses advanced PEG
(polyethylene glycol)ylation and PEG-based delivery systems to
enable drug performance, Nektar Particle Engineering, which uses
the company's expertise in pulmonary particle technology and
supercritical fluids technology to design and manufacture optimal
drug particles and Nektar Delivery Solutions, which uses advanced
systems for pulmonary drug administration to improve therapeutic
outcomes.

NKTR - Nektar Therapeutics  $23.24

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  QNX OX     420   0.65  21.85  17.9%   3.0%
SELL PUT  APR 17.5  QNX PW     130   0.25  17.25   3.9%   1.4% TS
SELL PUT  APR 20    QNX PD     131   0.80  19.20   8.9%   4.2% *


__________________________________________________________________

OSTK - Overstock.com  $33.19  *** Another New High! ***

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  $33.19

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    QKT OF     963   0.80  29.20  18.6%   2.7%
SELL PUT  APR 22.5  QKT PX     297   0.35  22.15   3.8%   1.6% TS
SELL PUT  APR 25    QKT PE     356   0.70  24.30   7.3%   2.9% *



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BZH - Beazer Homes  $111.90  *** Homebuilders Rally! ***

Beazer Homes USA (NYSE:BZH) designs, builds and markets single
family homes in the following locations within the United States:
Florida, Georgia, North Carolina, South Carolina, Tennessee,
Arizona, California, Colorado, Nevada, Texas, Maryland, Virginia,
New Jersey, and Pennsylvania.  The company designs its homes to
appeal primarily to entry-level and first time move-up homebuyers.
The firm's objective is to provide its customers with homes that
incorporate quality and value while trying to maximize its return
on invested capital.  Beazer's homebuilding and sales activities
are conducted under the name of Beazer Homes except in Colorado
(Sanford Homes) and Tennessee (Phillips Builders).

BZH - Beazer Homes  $111.90

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-95.00   BZH-PS  OI=349  ASK=$0.65
SELL PUT  APR-100.00  BZH-PT  OI=611  BID=$1.20
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$99.40


__________________________________________________________________

KBH - KB Home  $78.71  *** Strong Sector! ***

KB Home (NYSE:KBH) is a homebuilder that has domestic operations
in Arizona, California, Colorado, Florida, Nevada, New Mexico and
Texas, and, through a majority owned subsidiary, international
operations in France.  KB Home builds homes that cater primarily to
first-time and first move-up homebuyers, generally in medium-sized
developments close to major metropolitan areas.  Kaufman & Broad
S.A., KB Home's majority-owned subsidiary, builds single-family
homes, high-density residential properties such as condominium
complexes and commercial projects in France.  KB Home also provides
mortgage-banking services to domestic homebuyers through its wholly
owned subsidiary, KB Home Mortgage Company.

KBH - KB Home  $78.71

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-65.00  KBH-PM  OI=1228  ASK=$0.40
SELL PUT  APR-70.00  KBH-PN  OI=555   BID=$0.90
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$69.45



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NTE - Nam Tai Electronics  $27.07  *** Next Leg Down? ***

Nam Tai Electronics (NYSE:NTE) is a electronics manufacturing and
design services provider to original equipment manufacturers of
telecommunication and consumer electronic products.  Through its
electronics manufacturing services operations, the company makes
electronic components and subassemblies, including liquid crystal
display panels, transformers, LCD modules, and radio frequency
modules.  The firm also manufactures finished products, including
cordless phones, palm-sized personal computers, personal digital
assistants, electronic dictionaries, calculators and digital camera
accessories for use with cellular phones.  In addition, the company
assists its OEM customers in the design and development of their
products and furnishes full turnkey manufacturing services.

NTE - Nam Tai Electronics  $27.07

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  MAR 30    NTE CF    3365   0.20  30.20   6.3%   0.7% TS
SELL CALL  APR 30    NTE DF     922   0.80  30.80   7.0%   2.6%


__________________________________________________________________

NTLI - NTL Incorporated  $64.05  *** Consolidation Underway? ***

NTL Incorporated (NASDAQ:NTLI) provides communications services
to residential, business and wholesale customers.  The company
offers residential telephony, cable television and Internet
access services.  NTL also provides national and international
carrier telecommunications, satellite and radio communications,
as well as digital and analog television and radio broadcast
transmission services.

NTLI - NTL Incorporated  $64.05

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  MAR 70    NUD CN    3616   0.50  70.50   6.3%   0.7% *
SELL CALL  APR 65    NUD DM    2857   3.80  68.80  10.1%   5.5%
SELL CALL  APR 70    NUD DN    3436   1.90  71.90   6.7%   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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ADBE - Adobe Systems  $36.46  *** Nothing Bullish Here! ***

Adobe Systems (NASDAQ:ADBE), the leader in network publishing,
offers a comprehensive line of software for enterprise and
creative professional customers. Its products enable customers
to create, manage and deliver visually rich, compelling and
reliable content.  Adobe Systems helped launch the desktop
publishing revolution in 1982 and is at the heart of the next
publishing revolution, network publishing.  Network publishing
is about making reliable, visually rich information available
to anyone, anywhere, on any device.  Today, Adobe offers a
comprehensive line of software for enterprise and creative
professional customers.

ADBE - Adobe Systems  $36.46

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-45.00  AEQ-DI  OI=1813  ASK=$0.15
SELL CALL  APR-40.00  AEQ-DH  OI=3803  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$40.55


__________________________________________________________________

VSEA - Varian Semiconductor  $40.85  *** Chip Sector Slump! ***

Varian Semiconductor Equipment Associates (NAASDAQ:VSEA) designs,
manufactures, markets and services semiconductor processing
equipment used in the fabrication of integrated circuits.  The
company's product line includes EHP-200 and EHP-500 products,
EHPi-220 and EHPi-500 products, VIISion 80 LE and VIISion 200
products, and VIISta products.  Varian also provides customer
support and services such as The Varian Introduction Support
Teams and Varian Productivity Transfer Teams, FAB Care Plus,
VEDoc and Remote Assist.

VSEA - Varian Semiconductor  $40.85

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-50.00  UES-DJ  OI=80  ASK=$0.45
SELL CALL  APR-45.00  UES-DI  OI=61  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$45.60



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
STRADDLES AND STRANGLES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.

__________________________________________________________________

AIG - American Intl. Group  $74.28  *** Probability Play ***

American International Group (NYSE:AIG) is a holding company that,
through its subsidiaries, is engaged in a wide range of insurance
and insurance-related activities in the United States and abroad.
AIG's activities include general and life insurance operations as
well as financial services, retirement savings and financial asset
management.  AIG's general insurance subsidiaries are multiple
line companies writing substantially all lines of property and
casualty insurance.  One or more of these companies is licensed to
write substantially all of these lines in all states of the United
States and in approximately 70 foreign countries.

AIG - American Intl. Group  $74.28

PLAY (speculative - neutral/debit straddle):

BUY CALL  MAY-75.00  AIG-EO  OI=17191  ASK=$2.55
BUY PUT   MAY-75.00  AIG-QO  OI=1147   ASK=$3.20
INITIAL NET-DEBIT TARGET=5.50-$5.60
INITIAL TARGET PROFIT=$2.85-$4.10


__________________________________________________________________

SLB - Schlumberger  $74.28  *** Volatile Sector! ***

Schlumberger Limited (NYSE:SLB) is an oilfield services company
that supplies technology, project management and information
solutions that aim to optimize performance for customers working
in the international oil and gas industry.  The firm is comprised
of two primary business units.  Schlumberger Oilfield Services
supplies a wide range of products and services that support core
industrial operational processes.  WesternGeco, jointly owned with
Baker Hughes, is a large seismic company that provides advanced
acquisition and data processing surveys.

SLB - Schlumberger  $74.28

PLAY (speculative - neutral/debit straddle):

BUY CALL  MAY-65.00  SLB-EM  OI=2941  ASK=$3.00
BUY PUT   MAY-65.00  SLB-QM  OI=646   ASK=$3.90
INITIAL NET-DEBIT TARGET=6.60-$6.75
INITIAL TARGET PROFIT=$3.45-$5.15



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SEE DISCLAIMER - SECTION 1

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~




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