The Option Investor Newsletter Sunday 04-11-2004 Copyright 2004, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment In Section One: Wrap: Yahoo! Futures Market: See Note Index Trader Wrap: Home on the Range Index Trader Wrap: A week of rest Editor's Plays: Heard the News? Market Sentiment: Markets Pause For Easter Ask the Analyst: See Note 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 04-09 WE 04-02 WE 03-26 WE 03-19 DOW 10442.03 - 28.56 10470.6 +257.62 10212.9 + 26.37 - 53.48 Nasdaq 2052.86 - 4.31 2057.17 + 97.15 1960.02 + 19.55 - 44.26 S&P-100 556.12 - 1.98 558.10 + 14.58 543.52 - 0.16 - 6.24 S&P-500 1139.33 - 2.48 1141.81 + 33.75 1108.06 - 1.68 - 10.83 W5000 11166.06 - 36.36 11202.4 +362.24 10840.2 - 12.80 -115.20 SOX 511.78 - 2.08 513.86 + 34.61 479.25 + 15.90 - 21.75 RUT 597.88 - 5.57 603.45 + 30.53 572.92 + 2.18 - 12.10 TRAN 2926.88 - 39.78 2966.66 +130.76 2835.90 + 49.07 - 76.26 VIX 16.34 + .69 15.64 - 1.69 17.33 - 1.82 + 0.85 VXO 15.83 + .27 15.56 - 1.65 17.21 - 1.95 + 0.44 VXN 21.38 + .03 21.35 - 1.69 23.04 - 2.95 + 0.69 TRIN 0.82 0.52 0.89 1.93 Put/Call 0.74 0.68 0.77 1.03 ****************************************************************** Yahoo! by Jim Brown The earnings blowout by Yahoo had traders in Internet stocks yelling Yahoo! on Friday but they we about the only traders with any real excitement. YHOO gained +7.86 to $56.20 and a three year high. Unfortunately the broader markets were down across the board on weekend event fears. Only the Nasdaq and the SOX were able to close in positive territory thanks mostly to YHOO and Dell. Dow Chart - Daily Nasdaq Chart - Daily S&P Chart - Daily Thursday morning opened with a bang and the S&P rallied right to the 1150 resistance level on strong earnings. The gap open failed to hold once shorts covered on the stocks impacted and the trend for the day immediately turned down. It was not due to a lack of positive earnings news but more of an abundance of terror news. We had hostages in Iraq, bomb scares in Paris, refineries exploding in the US and the 9/11 testimony to provide unrest before the holidays. The economic news in the US was good with Chain Store Sales for March rising +7.0% and stretching the string of months over 6% to three. This was above expectations and suggests the consumer is not as concerned about conditions as the February sentiment reports suggested. Gains were broad based and were up +12.6% year over year. 61% of retailers beat expectations. Forecasters did predict a drop to only +5.5% growth in April due to the early Easter this year. Only +5.5% growth? Retailers would gladly take it. Jobless claims fell to 328,000 and the lowest level since Jan-2001. This is very good news and suggests employment is increasing and the April jobs report will show strong gains. This is one of those good news-bad news numbers. If we do see back to back blowout Jobs numbers the Fed would feel it necessary to start the rate hike process. More good news came from the Manufacturers Alliance Survey which set a new record high at 78 for 2004-Q1. The majority of the components rose with the exception of the investment index which fell to 69 from 81. The MAPI is showing strong correspondence to the ISM and the ISM has been above 60 for the last five months. This is the longest string since 1983. The Wholesale Trade numbers showed a big jump to +1.3% compared to estimates of only +0.5%. The inventory component jumped +1.2% and was twice the level expected by analysts. Wholesale sales also jumped +1.3%. Despite this bounce in sales the inventory to sale ratio remained at record low levels of 1.17. This is very positive as we move forward and suggests we will see even further gains in manufacturing to keep up with the pace of sales. This is however old data for the February period but the trend was definitely up and we saw nothing to change the trend in March. The good economic news is being helped by positive earnings and today was a good preview of next week. Yahoo blew out estimates Thursday night and jumped to a three year high. The Internet business is good and the survivors are doing very well. All the current players soared on the news but it was likely more of a Yahoo specific event. As Yahoo expands its reach with things like its acquisition of Monster.com, Inktomi, Overture and others it is becoming a broad based cash generator and not just an Internet portal. While ASKJ, CNET, INSP, FWHT, LOOK, AQNT, DCLK and SINA may have jumped to new levels on the news none of them have the breadth and depth of Yahoo. YHOO also announced a 2:1 split. Adding to the positive outlook for techs was the guidance upgrade from Dell. The company raised its guidance by +$200 million for the quarter and increased a planned stock buyback. While that was positive news the real excitement came from Dell's longer term comments. They said shipments of PCs and other Dell products were growing so quickly they would likely exceed their $60 billion sales goal for 2007. Last year they booked only $41 billion. This is strong statements from the computer manufacturer. They also said the long awaited IT replacement cycle had begun and corporations were finally replacing aging systems. Dell's CFO said they were seeing better than expected demand and they were hitting targets across every business category. He expects revenue to increase +25% in Q1. Dell rose to $35.60 on the news and close to a three month high. The very optimistic outlook from Dell helped power the SOX to a gain for the day despite the negative market action. Intel rose strongly at the open but closed negative because of lingering fears that the STX notebook warning this week was going to impact Intel's earnings next week. Also hitting Intel was news that Japan's FTC raided three Intel offices in an antitrust probe. AMD has complained in Europe and Asia that Intel has been competing unfairly by selling chips cheaper to push AMD out of the market. Antitrust rules overseas are seen as stricter than in the US and this is an example of the trouble AMD has caused. AMD also claims Intel threatened to halt shipments of chips to manufacturers that also sold computers made with AMD chips. Another major earnings release on Thursday came from GE which reported $3.2 billion in profit for the quarter. This amazing performance was inline with expectations and GE said nine of its 11 businesses had double-digit growth. Among its 11 divisions, profit rose 53 percent in its equipment and other services operation, 40 percent in advanced materials and 20 percent in its infrastructure business. Profits fell 28 percent in the energy division and 20 percent in insurance. They are continuing to grow with almost monthly acquisitions. They recently completed their acquisition of Amersham and have deals in the works to acquire INVN and Vivendi among others. Overall Jeff Immelt said business was booming with the broadest growth since early 2000. He said industrial orders had jumped +20% and sales in its growth business had jumped +29% for the quarter. Sounds like a pretty strong projection of the current economy. What all of this means for next week is that earnings are going to be strong for most companies. There are some weak spots like Seagate and SunMicro but overall the economy and earnings appear to be growing strongly. The question is will this translate into higher stock prices. The rally over the last two weeks has been on expectations of strong earnings. How much higher can it go? Will strong earnings from +300 companies next week push us higher in the face of continued terror threats and rising violence in Iraq or will traders call it a day, pocket profits and head to the safety of the sidelines? There is historical evidence that in presidential election years markets tend to decline after the April earnings peak until after the Democratic convention. That event is in late July. I think broad historical trends are just that, broadly historical and may not be specific to any single election year. The trend comes from the non-incumbent party using the economy as a club against the incumbent party and the negative sentiment created depresses the markets. Traders hate uncertainty and there will be uncertainty until the convention is over. Once all the issues have been dissected, the VP candidate named and the final race begins investors will decide how to place their bets. The other convention begins August 30th but is not deemed as important to traders. In theory the attacking party has to storm the castle with every weapon it can find and the incumbent party defends from a position of strength. This week was clearly a profit-taking week. The markets opened strong and concluded a two week rally on Tuesday. The flurry of earnings warnings headlined by NOK/STX put a cloud on techs and the sudden increase in violence in Iraq added rain to that cloud. Reports of bomb threats and the 9/11 inquisition focused traders thoughts on the long weekend event risk. It could not have been scripted any better. The markets needed to rest after a +563 point Dow romp. They used the multiple excuses above to take profits and reposition themselves for the coming week. In my opinion next week will start off with a bang assuming we have no explosions over the weekend. The Dow is very well positioned after the -130 point two day drop and the Nasdaq is in even better shape only -23 points off the highs for the week. Even better off is the Russell, which closed only -2 points from resistance at 600. The selling on Friday was light as was the volume and there was buying at the close as bargain hunters jumped in front of an expected Monday bounce. I am sure there were plenty of shorts covering as well but that also is bullish. It means they were also expecting a Monday bounce. If we do bounce next week there is still strong resistance in the Dow 10600-10650 range and it will be tough to break. The Nasdaq has strong resistance at 2090-2100. Both indexes have room to run but they will quickly run into a steep uphill climb. While I personally think we will start the week positive it will be much more difficult to end the week at a higher level. Should we move down on Monday the Dow has two retracement levels in the 10300-10350 range that should hold any selling. The Nasdaq has a little more risk with a large unfilled gap from April 2nd at 2013 and no strong support until 1980-2000. This would not be a major step backwards for either index but it would be a major black eye for April earnings sentiment and a potential resumption of the January down trend. For the week to be successful and for the April earnings run to be successful we must move higher on Monday/Tuesday. If we do not move higher early then the premise for any remaining April gains will be seriously in question. The challenge remains in the expectations. If the coming earnings reports contain guidance similar to Dell and YHOO then a case could be built for another quarter of strong growth. If these reports end up with a proliferation of only inline guidance then we could be in trouble. We have discussed before that comparisons for the rest of the year will become progressively harder. For Monday I would gladly join in any opening rally and ride it as far as it goes. I would also not hesitate to jump off the train should the momentum appear to slow as we near resistance. Despite the strong earnings potential sentiment is weakening. Whether from terror news, Iraq news, election concerns or just simply from a tired year long tech rally we don't know. We really should not care. Many investors have gone bust trading their beliefs instead of the market. Enjoy any rally we get next week but keep your stops in place in case it fails. 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 ******************** Home on the Range By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE – The range we're in is not the one where the deer and the antelope play, but a broad price range that the market indices may be locked in for a while. We've seen that the market can rebound sharply once stocks get cheaper, but it remains to be seen what will drive this market to above the highs already made in '04 - at least soon. Better earnings? Well, they're coming in at least in the early going for Q1 reports, but may be priced in. An economy in full swing? - a fall in the jobless rate and a boost in retail sales were in the news Thursday, but this also raises the specter of the Fed raising rates. Ah, the ever vigilant worried market! A more pacified Iraq would help no doubt. The market doesn't like uncertainty and the Middle East is full of surprises. Technically, the S&P - and these stocks are where the biggest money is going right now - has not broken out of a downtrend channel. To achieve an upside break out, a move is needed to above 1150 in the S&P 500, 560 in the 100 (OEX) and 10550-10600 in the Dow 30. In terms of the Nasdaq Composite (COMPX), resistance begins at 2080. A close or better, two, above this level, suggests a possible re-test of the prior (Jan) 2150 peak. Taking on new Index call or put positions looks like a roll of the dice and favors only chance odds. If you bought index calls anywhere near recent lows you have a relatively easy decision - exit with at least some of the gains as the market looks like it could churn around or fall back further off Thursday's high in the coming week. THURSDAY END-OF-WEEK TRADING ACTIVITY Profit taking set in NYSE stocks but the tech-heavy Nasdaq managed to eake out gains. The S&P 500 (SPX) was off 1% 1,139.33 on the close on Thursday, down 3 tenths of per cent on the week, as was the Dow 30 Industrials. The Nasdaq Composite (COMPX) up 2.62 points on the day to close at 2,052.86, but down from its intraday high of 2,075.33. The Composite garnered support from the chip stocks, as the SOX semiconductor index ran up nearly a percent. The Internet stock sector was firm under the influence of Yahoo's Q1 earnings, which blew away expectations. EARNINGS EXCITEMENT - A higher opening came on the back of some good to great earnings in several bellwether stocks. In the Dow, General Electric (GE) had released earnings, indicating that it earned 3.2 billion dollars (32 cents per share), which was in-line with estimates. GE said that 9 of its 11 business units had earnings growth of 10% or more in Q1. GE expects it overall earnings to grow 10% or more in 2005. In the not so exciting category, Dow stock Alcoa (AA) fell over 2%, after being down 5% on Wed., based on fallout from its announced Q1 earnings, which were under consensus estimates. ExxonMobil (MOB) rose over a percent in its price as crude oil continued to rise going into the long weekend and with Iraqi unrest in full swing. Yahoo! Inc. (YHOO), a mighty influence in the Nasdaq, had gained heavily in U.S. after hours trade and in Europe ahead of the U.S. opening, where I was watching it, it beat expectations on it's earnings and also announced a 2 for 1 stock split. Ah, nothing gets the average small investor more excited than getting two for the price of one! Of course, the value is supposed to a half also, but it never seems to quite work out like this on this glamour stocks and tech darlings. YHOO reached a 52-week high of $56.24 after its Q1 earnings, announced after hours on Wednesday, was well above expectations. It's Q1 sales grew 168%. The stock closed up $7.86, or 16.3% at $56.21. Another tech darling, Dell Computer (DELL), was actively traded ahead of the Thursday opening. DELL climbed 81 cents, or 2.3%, to $35.63 after the computer maker raised its Q1 revenue forecast to $11.4 billion due to increasing sales in overseas markets. Dell also repeated its earnings estimate of 28 cents a share at its annual analyst day meeting in Austin, Texas. RETAIL SALES - There were a batch of March same-store sales reports and were quite robust. The stocks in this sector had been running up actively in recent weeks and were off on profit taking. Wal-Mart (WMT) indicated a 6% rise in same-store sales in March, against a monthly increase of 0.7 percent a year earlier. For April, WMT said it is expecting U.S. same-store sales to rise in the 4-6% range. The stock was down $1.29, tp $56.69. The Gap (GPS)had a 8% rise in March same-store sales, with sales at its Banana Republic chain jumping a whooping 25%. GPS was down 52 cents to close at $21.81. ECONOMIC NEWS - First-time unemployment insurance claims fell an unexpected 14,000 in the week ended April 3 - to 328,000 (from 342,000), which was the lowest in some 3 years. This drop in claims was beyond Street forecasts for a decline of maybe 2,000. The Labor Department's 4-week moving average of new claims, fell 3,250 last week to 336,750, the lowest in over 3 years. Wholesale inventories rose 1.2% in February, while sales rose 1.3%. The inventory gain was well above a forecasted 0.3%. The inventory build up as compared to strong sales, suggested an attempt to build inventories due to demand being strong. The inventory/sales ratio fell to a record low of 1.17 months. OTHER MARKETS – Treasury bonds ended lower on the job data, with the benchmark 10-year Note down 7/32 to 98 14/32 in pre-holiday shortened trade. The 10-year yield edged up to 4.19%, versus 4.15% at the Wednesday close. The dollar was higher. The Euro was down 0.7% against the greenback at $1.2086 while the British pound fell 0.3% to $1.8335. Versus the Yen, the dollar was up 1% to close at 106.28. MY INDEX OUTLOOKS – S&P 500 Index (SPX) – Daily chart: I am usually bearish on price patterns that have a series of highs that form such that a rounding top pattern is traced out, as I've done on the chart below. To break out above this bearish pattern such as at resistance implied at the red arrow, a move above 1150 in the S&P 500 (SPX) is needed. A close above 1160 and would suggest a new up leg. The rounding top and the near-term overbought condition in the stochastic indicator suggests a put purchase based on a risk to reward outlook - assuming an exiting stop point at 1155, downside potential is probably back to at least 1120, if not back to the up trendline and likely support in the low 1100 area. S&P 500 Index (SPX) – Weekly chart: The S&P is back in the middle of its broad uptrend channel which has support pegged at 1100 on the downside and 1200 above. I would not be surprised to see one more decline, maybe more of a slow sideways to lower drift, perhaps back to the lower trend channel boundary. I've had the feeling that the next sustained rally would come after a more fully oversold reading on the weekly oscillators (RSI & Stochastics)- this is hunch more than something that screams out at me. I know one thing - as my dear ol pappy told me, "Son, don't bet the ranch when you're in the middle of the stream" - or, in the middle of an expected range. At least for major bet-the-ranch kind of positions. S&P 100 Index (OEX) – Daily chart: There was a prior line of support around 563 that is proving to be at least minor resistance - support (once broken) "becomes" resistance (later on). A close above 563 in the S&P 100 (OEX) would overcome this selling pressure, in which case the key area becomes 570-572 to watch. If OEX closes above 572 and can stay above this level, I measure next upside potential to 590. Likely support is harder to figure: 549-550 is near support, but below that, it's just where it stops going down. The cluster of prior lows around 532-533 is an obvious key area however. Better to go to the hourly chart for more on this. S&P 100 Index (OEX) – Hourly chart: What is of interest in the hourly pattern is the fact that OEX is still within a downtrend channel and doesn't break out of this unless there is a decisive penetration of 560-561. We would be looking at 569-570 above that as key resistance - as implied by the prior cluster of hourly highs. The reason that the study of price history "works" to predict future activity is that this is simply the visual record of where sellers came in before. History repeats itself often enough to make some expected rules out of it all. Stay tuned. If the 560 area is key resistance in the OEX, with 570 as major technical resistance, then 530 is expected major support, at the low end of the downtrend channel. Based on the way the market acted this past week, it seems there should be enough buying interest under 550 to keep OEX from getting back down much under this area - but if prices did drop much below 550 for some reason, those prior lows around 533 and the low end of the channel (530) shown above is where I would expect a stop to a fall. Dow Industrials (INDU) Daily: The Dow chart looks much like the broader S&P - the rounding top pattern, move back to prior lows plus a return to the prior uptrend line suggest key technical resistance coming in at 10,555-10,600 in the Dow Industrials. 10,300 is near support, then the 10,200 area - a close under here would be a break of a trendline that goes back to a year ago low. 10,000 is the mother of all support however. Absent a weekly close under 10,000 I remain bullish on the longer-term trend. Nasdaq 100 (NDX) Index – Daily: The NDX index chart has some obvious features or aspects to suggest how to trade it. 1392-1400 is a major support area and place to buy Index calls. Near-term what I'm suggesting to watch is the gap area at 1458-1470, the little "break" in prices when this Index jumped to the upside on a higher opening last week. As gaps do fairly often get "filled in", 1460 is suggested as an area to watch as a possible buy point for calls. [For more on chart gaps, see my past week's Trader's Corner article at - http://www.OptionInvestor.com/traderscorner/tc_040604_2.asp The red arrow at the recent peak around 1500 came at the prior up trendline and offers an added bearish technical note. If I had wanted to go into the long weekend with one position or the other, I would rather have gone home short (in puts) than long (in calls). I'm not excited about further NDX potential unless there is a daily close or two above 1500, in which case we could see the Nas 100 index return to the area of its prior high in the 1550 area. Any sign of a top in this area suggests a put purchase based on a double top pattern. Nasdaq 100 tracking Stock (AMEX:QQQ)– Daily: The gap area where prices jumped higher from one day to the next last week, suggest minor support on pullbacks at 36.25-36.50. Next lower support, as noted at the green (up) arrow is at 35.50, at the previously broken down trendline. I would be a buyer of the stock in this area, with an exit point if there was a close under the 200-day moving average, currently intersecting at 34.65. I peg resistance at the level dashed lines - at 37.70, then 38.70. I would turn seller in the 38.70-39 area, not only to 38.70 exit long positions but to short the stock and buy puts. Nasdaq 100 tracking Stock (AMEX:QQQ)– Hourly: The hourly chart shows a definite bearish aspect as tops have formed just above 37, at around 37.15, multiple times. The last hourly top was accompanied by a bearish divergence on the two stochastic models (length 5 and 21) - if I had had to be either long or short ahead of the 3-day market hiatus, I would have been short based on the hourly pattern. My downside objective is to the 35.50 area, possibly to 34.50. FINAL NOTE: Please e-mail me on question(s) related to trading/technical analysis tools of interest. Good Trading Success! ******************** INDEX TRADER SUMMARY ******************** A week of rest Some mixed reactions to the first spat of quarterly earnings, some resurgence of resistance toward the coalition forces in Iraq, and some cautionary trade into the three-day weekend found the major indices finishing fractionally lower this week, and seeing a mixed to fractionally lower trade on Thursday. Market Snapshot / Internals - 04/08/04 Close The major indices jumped at the open, but then trended lower for the rest of the day on relatively light volume, as traders seemed a little more focused on protecting some gains into an extended weekend. Pivot Analysis Matrix Thursday's high and low for both the DIA and SPY was this week's range for both of these trackers, so you're not seeing double when looking at the DAILY/WEEKLY matrix levels for Monday. Tentative resistance correlation are found in the NDX/QQQ and SOX.X at the WEEKLY/DAILY Pivot, where more meaningful resistance would be higher at the MONTHLY R1s, where both the NDX/QQQ opened for trade Thursday's morning. Internet HOLDRs (AMEX:HHH) - Weekly Intervals Last weekend, it may have been economists' putting in some extra hours at the office and fine tuning their models to compensate for more robust job additions. This weekend it may be Internet analysts rerunning some numbers after Yahoo! Inc. (NASDAQ:YHOO) $56.21 +16.25% blew past analysts' estimates. The news sent the Internet HOLDRs (AMEX:HHH) $55.77 +5.74% surging to a 3-year high. The Internet Infrastructure HOLDRs (AMEX:IIH) $4.18 +2.70% was the second-biggest percentage gainer among the ETFs (Exchange Traded Funds). Starting next week, the Dow Industrials (INDU) 10,442.03 -0.36% will begin trading with its three new additions. Dow Industrials (INDU) - Components starting next week This is how the "new" price weighted Dow Industrials will look starting next week. In he age of wireless communications, Verizon (NYSE:VZ) $37.31 gets the nod over AT&T (NYSE:T), which sold its wireless division, while American International Group (NYSE:AIG) $76.27 is a refreshing addition, representing the insurance segment of the U.S. economy. With an aging population, Pfizer (NYSE:PFE) $35.60 complements Merck (NYSE:MRK) $44.63. With two drug components in the Dow Industrials, this year's presidential election results could loom large for both components, where healthcare and drug costs are a focal point. Eastman Kodak (NYSE:EK) $25.44 is transitioning toward digital products, some say a little too late, where the digital age may have simply been a determiner for International Paper (NYSE:IP) $42.01 -0.91% being removed. Personally, I'll miss T, EK and IP, but as the saying goes.... "times keep'a chang'n." Dow Industrials (INDU) Chart - Daily Intervals It was a marginally lower trade for the major indices this week, where Thursday's trade finds a close below last Friday's nonfarm payroll close. I thought today's question and answer coverage of the White House's National Security Adviser Condoleezza Rice by the Nine-Eleven commission helped cast a cloud over much of today's upbeat market news, where focus of what the current administration knew, or didn't know, and what the administration "should have done" prior to 09/11, was a bit unnerving ahead of the 3-day weekend. A jump in crude oil prices on increasing upheaval in Iraq may have also dampened bullish enthusiasm in Thursday's trade, where a trade at $36.25 on this contract has the $0.25 box size point and figure chart generating a double-top buy signal, negating the prior bearish vertical count of $31.75, and now hinting at a bullish price objective of $44.25. June Light, Sweet Crude Oil futures (cl04m) - Daily Intervals I should have changed my time intervals to 720 instead of Daily, as today's trade for June crude saw a session trade from $35.59 to $36.65 (not $34.23-$36.65 as displayed in data box), but the last two sessions has seen a sharp rebound in oil prices, where the escalation of war in Iraq has been building again. AMEX Gold Bugs Index ($HUI.X) - Daily Intervals I keep waiting for gold stocks to show some life above the 243 level, and one would think that with some of the geopolitical events taking place, and higher oil prices being somewhat inflationary, this group would catch a bullish bid. I'm not sure but what higher energy prices may be negatively impacting some of the gold miners, where a recent contract high in June gold finds the $HUI.X well off its highs. S&P 500 Index (SPX.X) Chart - Daily Intervals There may well have been some decisions made prior to today's open to continue to take some profits into the 3-day weekend, which of late, traders have been a little cautious on thoughts of potential terrorist strikes. The selling was very calm and methodical, and didn't depict a "that was the good news, now let'em have it." That darned 1,125 level shows up again, this time as WEEKLY S2, which is correlative with the MONTHLY Pivot, and with a rather narrow range of trade having been found this week, I would think the WEEKLY S2-R2 range could be traded. I placed a downward trend on the SPX, mainly because the SPX has closed back below last Friday's close where the nonfarm payrolls offered a bullish surprise, where follow through bullishness on Monday now marks a relative high. Technology stocks have comprised the bulk of the gains for the SPX, as financials, especially the banks trade just off their March lows. S&P Banks Index (BIX.X) - Daily Intervals I wanted to quickly review a chart of the S&P Bank Index (BIX.X), where tonight I'm making note that the BIX.X is sitting right near the base-end of rising regression from its March 2003 lows, where at this point, I'd have to say the "jury is still out" as to what impact Friday's nonfarm payroll data, along with the jump in Treasury YIELDS are having on this group. In Thursday morning's 09:00 AM EST Update, I noted that Commercial Federal (NYSE:CFB) $26.92 -3.47% warned on quarterly earnings, saying its mortgage lending business had slowed. With regional banks comprising the SPX/OEX, I would view a break much below WEEKLY S2 a potential negative, or at least a heavier weight for the SPX/OEX. Still, traders and investors noted that insurer Allstate (NYSE:ALL) $47.85 +4.36%, which surged to a 5-year high today, was a stock we touched on in Monday's Index Trader Wrap, when we quickly reviewed some of the OEX components. While the bankers/insurance trade could end up being a wash, where insurance stocks take up slack for the banks, we'll want to still keep a watch on Treasury YIELDS (10-year in our pivot matrix), which edged up fractionally from last Friday's close. Tonight I want to make the observation of trend in the above BIX.X chart, but also that downward trend in the 10-year YIELD ($TNX.X). 10-year YIELD ($TNX.X) Chart - Daily Intervals Broader equities have not responded negatively to the recent rise in Treasury YIELDs ($TNX.X), and I would still think gradual rise is acceptable near-term as the economy's growth can offset higher consumer borrowing rates. What would trigger a negative reaction toward stocks is a sharp unwinding in the bond market, where YIELDS rise quickly. NASDAQ-100 Tracker (QQQ) - Daily Intervals With the Internet HOLDRs breaking out to knew highs on Yahoo's! (YHOO) earnings, I was a bit surprised the QQQ didn't make more of a "euphoric" move, or trade above Monday's highs. I still think there's a better than 60/40 chance that the QQQ might see a backfill of its nonfarm payroll gap higher, which would find WEEKLY S2 in play. Many analysts had little negative to say regarding Dell Computer's (NASDAQ:DELL) $35.63 +2.32% upbeat guidance, where for the first time in a long time, Dell sounded more upbeat in regards to corporate IT spending really starting to show more sustainable growth. If simply eyeballing a bar chart of DELL relative to the QQQ, DELL is approaching its January relative highs of $36 (QQQ equivalent $37.87) and DELL's recent 52-week high was found at $37, right where the QQQ spiked to its 52-week high and QQQ MONTHLY R2. Jeff Bailey ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Heard the News? News Corp Ltd, headed by Rupert Murdoch and officially headquartered in Australia will be moving to the US. The global communications company makes 75% of its profit in the US and is run by Murdoch out of New York. Murdoch had kept NWS as an Australian company to avoid capital gains taxes while he bought other companies and sold the parts he did not want. He has decided that by reincorporating the company in the US he will gain access to a substantially larger investor base. Many global investors do not have access to the Australian market and while the stock does trade in the US as an ADR it is not widely held. Many mutual funds and all the index funds do not traffic in ADRs due to different accounting standards. By incorporating in the US and dumping the ADR status the stock will immediately become available for inclusion in the S&P-500 and index funds will be forced to buy it. With a current market cap in the $50 billion range they would have to buy a lot of it. One analyst estimated that by just moving to the US the stock could gain $10B in market cap even before it was eligible for the S&P. To be eligible the stock must trade in the US for one year. News Corp owns all or part of 20th Century Fox, Fox News, BSkyB, DirecTV and scores of newspapers and pay TV stations. Because of the time required for NWS to become part of the S&P this has to be a leap play. NWS is currently trading at $38.10. The January-2006 $40 call leap is $5.10. The $45 leap $3.30. If a trader wanted to own the stock now for $38.10 and sell the Jan-2006 $45 leap for $3.00 the return for a close over $45 in 2006 would be in the 35% range. It would also lock in your gains while providing only slightly less risk. With the stock expected to rise +20% once it is a US company it could rise another 20% once it is added to the S&P. That would target something in the $55 range before Jan-2006. That would make the return on the $40 leap about 200%. It all requires a leap of faith but all investing requires some faith. It is a long-term play and we can reduce that risk over the next 20 months by selling short term calls against our leap. This will further reduce our risk and increase our profit. I will continue to recommend these strategies on a monthly basis as time passes. Unfortunately NWS is on the top of an uptick cycle and the announcement this week only accelerated that cycle. I would love to wait for a pullback to something in the $34-36 range to enter but others are likely to see the potential and keep the price in motion. To offset the potential for buying at the highs I am going to suggest we stair step into this trade. Let's try to accumulate a position of six contracts of the NWS Jan-2006 $40 call leaps. (WLN-AH) Since the news on Tuesday provided a bounce in the stock lets not buy the first two contracts until we see a trade at $37. It moved down slightly on Thursday and maybe that is the beginning of a little short term profit taking. For the first two contracts we will buy them with either a trade at $37 or a trade at $38.50. That covers us against a resumption of the uptrend on Monday. For the next two levels we will try to wait for a pullback to $36 initially and then the 200dma, currently $34.50. If the stock moves higher we will deal with that when it happens. I am counting on the summer doldrums producing enough weakness to bring it back to the bottom of the current uptrend channel. Game Plan: Buy (2) Jan-2006 $40 Calls WLN-AH with a NWS trade at $37.00 or $38.50, whichever occurs first. Buy (2) Jan-2006 $40 Calls WLN-AH with a trade at $36. Buy (2) Jan-2006 $40 Calls WLN-AH with a touch of 200dma Once we have a position we will sell calls against the leaps to reduce our cost. (NWS) News Corp Chart - Daily Chips Dipped The Intel long play from last week was looking good as the market rose into Tuesday but the Seagate warning on Tuesday night and the Nokia warning Wednesday morning put the skids on chips. Back in early March Intel took a serious hit on news that laptop deliveries were slowing. Laptop chips are very high profit for Intel and a significant drop could impact profits. This week Seagate warned that demand for disk drives used in laptops had dropped one million units in the first quarter. This was a -7% decline in laptop shipments and a material problem for Intel. The recommended April $27.50 call was $1.10 when I recommended it last week. It closed at 60 cents on Thursday. Based on the Seagate warning I would close the play. The outlook for Intel is questionable. **************** MARKET SENTIMENT **************** Markets Pause For Easter - J. Brown As of last Monday the stock markets were very short-term overbought and due for a pull back. We got that pull back over the last three days with relatively mild profit taking. Thursday's weakness was completely related to the long weekend and investor concerns that we could see a terrorist event, especially with new fighting in Iraq and the recent string of bomb threats in Europe. Assuming the long Easter weekend is a quiet one the markets feel ready to resume the rally as the earnings parade begins again on Tuesday. Contributing to investor optimism was the strong earnings news on Wednesday evening. No doubt you've heard of YHOO's impressive numbers and 2:1 split announcement. This launched the Internet index to a new 2 1/2 year high and YHOO to new 3 1/2 year highs. RIMM and DNA joined in with strong earnings news and split announcements of their own. Even DELL chimed in by raising their revenue estimates. This completely erased the dark clouds created by Nokia's warning and Alcoa's earnings miss on Tuesday. First Call is predicting that earnings should grow between 17-20% so there is understandably a positive under current for stocks. Further contributing to the positive tone was the jobless claim numbers and news that corporate layoffs were at the lowest levels in three years. I'm not trying to downplay the rising tensions in Iraq. They're experiencing the worst fighting since the official end of the war. However, I believe that the U.S. army will do what it takes to regain control of the cities in question. The challenge to the stock market is the perception that this has become the quagmire it was feared to be, which will negatively impact Bush's reelection efforts. Fortunately with earnings season here Wall Street should be distracted for the next few weeks with corporate announcements and guidance. Watch out for the "sell-the-news" reaction we saw in January. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8145 Current : 10442 Moving Averages: (Simple) 10-dma: 10417 50-dma: 10455 200-dma: 9876 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 862 Current : 1139 Moving Averages: (Simple) 10-dma: 1133 50-dma: 1133 200-dma: 1063 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1018 Current : 1485 Moving Averages: (Simple) 10-dma: 1465 50-dma: 1459 200-dma: 1393 ----------------------------------------------------------------- The VIX and VXO traded higher on Thursday as traders loaded up on puts to protect positions over the long weekend. The VXN slipped lower on mild strength in tech stocks. CBOE Market Volatility Index (VIX) = 16.26 +0.50 CBOE Mkt Volatility old VIX (VXO) = 15.83 +0.41 Nasdaq Volatility Index (VXN) = 21.38 -0.61 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.74 701,853 516,837 Equity Only 0.59 576,071 338,140 OEX 0.92 36,625 33,752 QQQ 3.24 14,057 45,608 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 76.1 + 2 Bull Correction NASDAQ-100 53.0 + 0 Bear Correction Dow Indust. 90.0 + 7 Bear Correction S&P 500 77.2 + 0 Bear Confirmed S&P 100 80.0 + 1 Bull Correction Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 0.90 10-dma: 0.86 21-dma: 1.18 55-dma: 1.17 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 976 1427 Decliners 1794 1657 New Highs 107 132 New Lows 24 15 Up Volume 600M 876M Down Vol. 819M 789M Total Vol. 1437M 1682M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 03/30/04 *****EDITOR'S NOTE***** Look For New COT Data on Tuesday's Edition of the Market Sentiment! *********************** 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 Not much change in the commercial traders' positions this past week. Small traders turned a little less bearish. Commercials Long Short Net % Of OI 03/09/04 418,394 433,237 (14,843) (1.7%) 03/16/04 454,635 449,505 5,130 0.6% 03/23/04 401,456 418,732 (17,273) (2.1%) 03/30/04 407,987 420,624 (12,673) (1.5%) 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 03/09/04 155,947 88,317 67,630 27.7% 03/16/04 159,054 115,023 44,031 25.3% 03/23/04 130,648 89,943 40,705 18.5% 03/30/04 130,112 81,937 48,175 22.7% 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 Almost the same holds true here. Commercial traders edged up their short positions but not by much. Small traders turned a little less bullish. Commercials Long Short Net % Of OI 03/09/04 431,623 485,268 (53,645) ( 5.9%) 03/16/04 472,809 574,241 (101,432) ( 9.7%) 03/23/04 268,647 294,930 (26,283) ( 4.7%) 03/30/04 265,492 305,797 (40,305) ( 7.1%) 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 03/09/04 135,233 76,558 58,675 27.7% 03/16/04 192,136 96,691 95,445 33.0% 03/23/04 131,879 59,210 72,669 38.0% 03/30/04 123,494 59,550 63,944 35.0% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Whoa! Commercials turned bearish on the NASDAQ just before it broke out over resistance. Unless that's a typo by the COT it will be interesting to see how that number changes next week. Small traders turned more bearish. It's been a painful week for everyone here. Commercials Long Short Net % of OI 03/09/04 57,368 46,082 11,286 10.9% 03/16/04 68,285 54,899 13,386 10.9% 03/23/04 52,014 34,017 17,997 20.9% 03/30/04 52,749 67,967 (15,218) (12.6%) Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 13,386 - 03/16/04 Small Traders Long Short Net % of OI 03/09/04 15,533 8,070 7,463 31.6% 03/16/04 27,859 18,333 9,526 20.6% 03/23/04 9,884 12,887 (3,003) (13.2%) 03/30/04 8,928 16,551 (7,623) (30.0%) 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 Very little change in commercial traders' positions while small traders pared back their longs. Remember, these numbers are prior to the jobs report on Friday. Commercials Long Short Net % of OI 03/09/04 26,867 12,845 14,022 35.3% 03/16/04 32,317 17,514 14,803 29.7% 03/23/04 23,048 22,119 929 2.1% 03/30/04 23,642 22,180 1,462 3.2% 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 03/09/04 7,053 19,159 (12,106) (46.2%) 03/16/04 10,002 20,970 (10,968) (35.4%) 03/23/04 8,344 6,734 1,610 10.7% 03/30/04 7,020 6,711 309 2.3% Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** No Ask the Analyst this Week. ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- FNB F.N.B. Corporation Mon, Apr 12 -----N/A----- 0.29 GCI Gannett Mon, Apr 12 Before the Bell 1.00 IFIN Invest Finl Serv Corp Mon, Apr 12 -----N/A----- 0.45 MDC M.D.C Holdings Mon, Apr 12 After the Bell 1.44 NVLS Novellus Systems, Inc Mon, Apr 12 -----N/A----- 0.10 ROS Rostelecom Mon, Apr 12 -----N/A----- N/A NYT The New York Times Co Mon, Apr 12 Before the Bell 0.36 TSCO Tractor Supply Co Mon, Apr 12 After the Bell 0.05 ------------------------- TUESDAY ------------------------------ ASO AmSouth Bancorp Tue, Apr 13 Before the Bell 0.45 ARA ARACRUZ CELULOSE S A Tue, Apr 13 -----N/A----- 0.35 BBT BB&T Corporation Tue, Apr 13 Before the Bell 0.63 CBH Commerce Bancorp, Inc Tue, Apr 13 Before the Bell 0.75 CBSH Commerce Bancshares Tue, Apr 13 -----N/A----- 0.75 DJ Dow Jones & Company Tue, Apr 13 Before the Bell 0.20 INFY Infosys Tech LTD Tue, Apr 13 -----N/A----- 0.56 INTC Intel Corporation Tue, Apr 13 After the Bell 0.27 JEF Jefferies Group Tue, Apr 13 Before the Bell 0.45 JNJ Johnson & Johnson Tue, Apr 13 -----N/A----- 0.80 LLTC Linear Technology Tue, Apr 13 After the Bell 0.25 MI Marshall & Ilsley Tue, Apr 13 Before the Bell 0.62 MCD McDonalds Corporation Tue, Apr 13 -----N/A----- 0.37 PBG Pepsi Bottling Group Tue, Apr 13 Before the Bell 0.17 PHG Royal Philips Elect Tue, Apr 13 Before the Bell N/A STT State Street Corp Tue, Apr 13 Before the Bell 0.66 WABC Westamerica Bancorp Tue, Apr 13 -----N/A----- 0.75 WES Westcorp Tue, Apr 13 After the Bell 0.80 WFSI WFS Financial Tue, Apr 13 After the Bell 1.47 ------------------------ WEDNESDAY ----------------------------- ADTN ADTRAN, Inc. Wed, Apr 14 Before the Bell 0.22 AMD Advanced Micro Dev Wed, Apr 14 After the Bell 0.03 AMB AMB Property Corp Wed, Apr 14 After the Bell 0.53 ASD American Standard Wed, Apr 14 Before the Bell 1.13 AAPL Apple Computer, Inc. Wed, Apr 14 After the Bell 0.09 BAC Bank of America Corp Wed, Apr 14 Before the Bell 1.80 BRE BRE PROPERTIES INC Wed, Apr 14 After the Bell 0.57 BRO Brown & Brown Wed, Apr 14 After the Bell 0.49 CEC CEC Entertainment Wed, Apr 14 After the Bell 0.78 CYN City National Corp Wed, Apr 14 After the Bell 0.99 CNET CNET Networks Wed, Apr 14 After the Bell -0.04 CCK CROWN HOLDINGS INC Wed, Apr 14 After the Bell -0.05 DHI D.R. Horton Wed, Apr 14 After the Bell 0.71 DAL DELTA AIR LINES DEL Wed, Apr 14 Before the Bell -2.96 DRL Doral Financial Wed, Apr 14 After the Bell 0.81 ETN Eaton Wed, Apr 14 Before the Bell 0.79 LRCX Lam Research Wed, Apr 14 After the Bell 0.10 MOGN MGI Pharma Wed, Apr 14 Before the Bell -0.08 MTG MGIC Investment Corp. Wed, Apr 14 Before the Bell 1.19 OCENY Oci N.V. Wed, Apr 14 Before the Bell N/A RJF Raymond James Wed, Apr 14 -----N/A----- 0.37 RDC Rowan Companies, Inc. Wed, Apr 14 Before the Bell -0.06 SNDK SanDisk Corp. Wed, Apr 14 After the Bell 0.32 TSFG South Financial Group Wed, Apr 14 Before the Bell 0.46 STLD Steel Dynamics Wed, Apr 14 After the Bell 0.49 TFX Teleflex, Incorp Wed, Apr 14 After the Bell 0.73 TXN Texas Instruments Wed, Apr 14 After the Bell 0.21 SSP The E.W. Scripps Co Wed, Apr 14 Before the Bell 0.71 PGR The Progressive Corp Wed, Apr 14 After the Bell 1.76 TSS TSYS Wed, Apr 14 -----N/A----- 0.17 ------------------------- THUSDAY ----------------------------- AD ADVO Thu, Apr 15 After the Bell 0.41 AVID Avid Technology, Inc. Thu, Apr 15 After the Bell 0.37 CSL Carlisle Companies Thu, Apr 15 Before the Bell 0.64 CATY Cathay General BancorpThu, Apr 15 After the Bell 0.75 CDWC CDW Computer Centers Thu, Apr 15 After the Bell 0.59 CEN Ceridian Thu, Apr 15 Before the Bell 0.16 C Citigroup Inc. Thu, Apr 15 Before the Bell 0.94 CMA Comerica Incorporated Thu, Apr 15 Before the Bell 0.89 CFBX Comm First Bankshares Thu, Apr 15 Before the Bell 0.47 CREE Cree Inc. Thu, Apr 15 -----N/A----- 0.18 CY Cypress Semiconductor Thu, Apr 15 Before the Bell 0.18 DCLK DoubleClick Thu, Apr 15 After the Bell 0.05 EWBC East West Bancorp Thu, Apr 15 Before the Bell 0.65 EMC EMC Corporation Thu, Apr 15 Before the Bell 0.06 EMMS Emmis Communications Thu, Apr 15 Before the Bell -0.08 EQT Equitable Resources Thu, Apr 15 Before the Bell 1.09 FCS Frchld Semiconr Intl Thu, Apr 15 Before the Bell 0.15 FITB Fifth Third Bancorp Thu, Apr 15 Before the Bell 0.75 FMER FirstMerit Thu, Apr 15 Before the Bell 0.33 GPC Genuine Parts Thu, Apr 15 Before the Bell 0.54 GENZ Genzyme Corporation Thu, Apr 15 -----N/A----- 0.37 GGG Graco Thu, Apr 15 After the Bell 0.30 HIB Hibernia Corp. Thu, Apr 15 Before the Bell 0.44 HCBK Hudson City Bancorp Thu, Apr 15 After the Bell 0.29 HBAN Huntington Bancshares Thu, Apr 15 Before the Bell 0.40 IBM Intl Business MachinesThu, Apr 15 After the Bell 0.93 JCI Johnson Controls Thu, Apr 15 Before the Bell 0.81 KEY KeyCorp Thu, Apr 15 Before the Bell 0.53 KRI Knight Ridder Thu, Apr 15 Before the Bell 0.67 LSTR Landstar System Thu, Apr 15 Before the Bell 0.23 LEXR Lexar Media Thu, Apr 15 After the Bell 0.12 LECO Lincoln Electric Thu, Apr 15 Before the Bell 0.39 LOGI Logitech Intl Thu, Apr 15 Before the Bell 0.69 MEG Media General Thu, Apr 15 Before the Bell 0.31 MOLX Molex Inc. Thu, Apr 15 -----N/A----- 0.22 NCC National City Thu, Apr 15 Before the Bell 0.72 NCF Natl Commerce Finl Thu, Apr 15 After the Bell 0.44 NAP National Processing Thu, Apr 15 Before the Bell 0.16 NFLX NetFlix.com Thu, Apr 15 After the Bell -0.03 NE Noble Corporation Thu, Apr 15 -----N/A----- 0.20 NFB North Fork Bancorp Thu, Apr 15 Before the Bell 0.67 PBCT People's Bank Thu, Apr 15 -----N/A----- 0.31 PEP PepsiCo Thu, Apr 15 Before the Bell 0.46 PMCS PMC-Sierra, Inc. Thu, Apr 15 After the Bell 0.04 PII Polaris Industries Thu, Apr 15 Before the Bell 0.30 PPG PPG Industries Thu, Apr 15 Before the Bell 0.58 RS Reliance Steel Thu, Apr 15 Before the Bell 0.81 SEBL Siebel Systems Thu, Apr 15 After the Bell 0.05 SLM SLM Corporation Thu, Apr 15 Before the Bell 0.50 LUV Southwest Airlines Thu, Apr 15 Before the Bell 0.04 SYK Stryker Thu, Apr 15 After the Bell 0.63 SUNW Sun Microsystems Thu, Apr 15 -----N/A----- -0.06 TCB TCF Financial Corp Thu, Apr 15 Before the Bell 0.85 MNI The McClatchy Company Thu, Apr 15 Before the Bell 0.59 TRB Tribune Thu, Apr 15 -----N/A----- 0.43 UCBH UCBH Holdings, Inc. Thu, Apr 15 After the Bell 0.37 UPC Union Planters Corp Thu, Apr 15 Before the Bell 0.50 UIS Unisys Thu, Apr 15 Before the Bell 0.09 WFSL Washington Federal Thu, Apr 15 Before the Bell 0.42 WBS Webster Financial CorpThu, Apr 15 Before the Bell 0.91 ------------------------- FRIDAY ------------------------------- BXS BancorpSouth, Inc. Fri, Apr 16 After the Bell 0.39 CPF Central Pacific Finl Fri, Apr 16 Before the Bell 0.49 CNB Colonial BancGroup Fri, Apr 16 Before the Bell 0.30 CBSS Compass Bancshares Fri, Apr 16 -----N/A----- 0.69 DPH Delphi Fri, Apr 16 Before the Bell 0.20 ET E*TRADE Group, Inc. Fri, Apr 16 Before the Bell 0.20 FFCH First Finl Holdings Fri, Apr 16 -----N/A----- 0.43 LEE Lee Ent, Incorp Fri, Apr 16 Before the Bell 0.36 NOK Nokia Fri, Apr 16 -----N/A----- 0.24 PTZ Pulitzer Inc. Fri, Apr 16 Before the Bell 0.38 RF Regions Financial CorpFri, Apr 16 Before the Bell 0.74 PIK Water Pik TechnologiesFri, Apr 16 -----N/A----- N/A WL Wilmington Trust Fri, Apr 16 Before the Bell 0.54 ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable CFC Countrywide Financial Corp3:2 Apr 12th Apr 13th CBU Community Bank System Inc 2:1 Apr 12th Apr 13th HIBB Hibbett Sporting Goods 3:2 Apr 16th Apr 19th AVD American Vanguard Corp 3:2 Apr 16th Apr 19th MSFG MainSource Financial Group3:2 Apr 16th Apr 19th SHFL Shuffle Master, Inc 3:2 Apr 16th Apr 19th UNFI United Natural Foods, Inc 2:1 Apr 19th Apr 20th MTLM Metal 2:1 Apr 20th Apr 21st CRED CREDO Petroleum Corp 3:2 Apr 20th Apr 21st -------------------------- Economic Reports This Week -------------------------- The Q1 Earnings parade begins on Tuesday and won't stop for the next four to five weeks. Plus we have a very heavy economic report schedule this week starting on Tuesday and running through Friday. ============================================================== -For- ---------------- Monday, 04/12/04 ---------------- None ----------------- Tuesday, 04/13/04 ----------------- Business Inventories (BB) Feb Forecast: 0.3% Previous: 0.1% Retail Sales (BB) Mar Forecast: 0.7% Previous: 0.7% Retail Sales Ex-auto (BB) Mar Forecast: 0.6% Previous: 0.0% Treasury Budget (DM) Mar Forecast: -$70.0B Previous: -$58.9B ------------------- Wednesday, 04/14/04 ------------------- Trade Balance (BB) Feb Forecast: -$42.6B Previous: -$43.1B CPI (BB) Mar Forecast: 0.3% Previous: 0.3% Core CPI (BB) Mar Forecast: 0.2% Previous: 0.2% ------------------ Thursday, 04/15/04 ------------------ Initial Claims (BB) 04/10 Forecast: N/A Previous: N/A NY Empire State Index (BB) Apr Fprecast: 29.0 Previous: 25.3 Philadelphia Fed (DM) Apr Forecast: 26.0 Previous: 24.2 ---------------- Friday, 04/16/04 ---------------- Housing Starts (BB) Mar Forecast: 1900K Previous: 1855K Building Permits (BB) Mar Forecast: 1910K Previous: 1909K Industrial Production (BB) Mar Forecast: 0.4% Previous: 0.7% Capacity Utilization (BB) Mar Forecast: 76.9% Previous: 76.6% Mich Sentiment-Prel. (DM) Apr Forecast: 96.5 Previous: 95.8 Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. 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The Option Investor Newsletter Sunday 04-11-2004 Sunday 2 of 5 In Section Two: Watch List: Stocks To Watch Next Week Dropped Calls: BBY, MGG Dropped Puts: None ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** Watch List ********** Stocks To Watch Next Week ___________________________________________________________________ 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. ___________________________________________________________________ Amazon.com - AMZN - close: 48.10 change: +2.25 WHAT TO WATCH: Internet stocks are back en vogue with YHOO's 16% gain on Thursday. The strong earnings report from the Internet portal sparked a 4.9% rally in Internet retailer AMZN. We took notice because AMZN closed above resistance at $47.50 and its simple 200-dma. Traders might start a pre-earnings momentum run in AMZN ahead of its April 22nd report. Chart= --- Borg Warner - BWA - close: 85.15 change: -0.65 WHAT TO WATCH: We strongly considered BWA for the weekend play list. The stock appears to have failed at price resistance at $88.00 and its simple 40-dma. With its MACD hinting at a bearish roll over and short-term technicals already showing weakness bearish traders could target a move back toward $80 and its 200- dma. Chart= --- Sina Corp - SINA - close: 41.19 change: +2.54 WHAT TO WATCH: YHOO's earnings announcement on Wednesday night sparked a wild fire in Internet stocks and the INX index hit a new 2 1/2 year high. SINA enjoyed a 6.5% rally as the stock gapped above resistance at $40.00 and its simple 50-dma. This looks like an aggressive entry point for a run to the $46 level as traders bid up the stock in anticipation of its April 26th earnings report. Unfortunately, that earnings date is unconfirmed. Chart= --- Electronic Arts - ERTS - close: 53.07 change: +0.04 WHAT TO WATCH: News that ERTS' president will be resigning sent the stock back toward support at $50.00 but traders saw the opportunity and bought the dip to $51.35. By Thursday's close shares had recouped all of its losses. This produced a bullish reversal-styled candlestick (a "hammer") but we need to see some follow through on Monday. If there is no follow through then bullish traders can look for ERTS to consolidate back towards the $50 level, which should be strong support. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- APOL $91.77 +1.32 - Shares of APOL and its subsidiary UOPX have been incredibly strong. So much so that we hesitate to recommend bullish plays because they look so overbought. Yet now both are above the $90 mark. Very aggressive traders might try and buy dips to the simple 10-dma but use a tight stop to protect your capital. NTES $56.60 +2.90 - NTES is another Internet stock boosted by YHOO's impressive performance. There is some resistance near $58 but NTES looks poised to run toward the $60 level. PD $78.90 -2.02 - Yup, we're putting PD back on the radar screen. The stock broke down below support at its 50-dma and the $80 mark. It would appear to be in a descending channel and bears could probably target the $74-73 level but its 100-dma near $75 could be support. Keep an eye on copper futures too, which are currently resting at support of its 50-dma. COP $71.12 +1.12 - Major oil stocks are also on the move with crude oil racing higher and poised to breakout over $37 a barrel. COP appears to be out performing its peers XOM and CVX but they all appear bullish. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ************************** 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 ^^^^^ Best Buy Company - BBY - close: 53.92 change: +1.62 stop: 50.75 There was certainly a compelling reason to add BBY to our Call list last week, as it looked like the stock was ready to finally break out from its recent consolidation. But the price action last week was not encouraging, as the stock rolled over near $54 and is now headed back towards the bottom of its range. Rather than hold onto this non-performing play, we'll pull the plug this weekend to make room for stronger candidates. The stock never activated our $55 entry trigger, reducing the play to no more than an academic exercise that so far has not worked in our favor. BBY may yet break out from this consolidation pattern, so we'll keep our eyes open for another bullish setup. Picked on April 4th at $53.92 Change since picked: +0.00 Earnings Date 6/16/04 (unconfirmed) Average Daily Volume = 3.75 mln Chart = --- MGM Mirage - MGG - close: 46.43 change: -0.66 stop: 46.75 The bidding war continues for British racetrack operator Wembley and MGG just officially upped its bid to $556 million. Yet we don't feel that the bidding news was to blame for Thursday's decline. Instead investors were taking profits ahead of the long weekend and MGG has been a big winner for the month of April. We were stopped out at $46.75 but traders still interested in the stock might want to watch it for a bounce from support at $46.00. Picked on March 25 at $ 45.69 Change since picked: + 0.74 Earnings Date 04/21/04 (confirmed) Average Daily Volume: 597 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. ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. 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The Option Investor Newsletter Sunday 04-11-2004 Sunday 3 of 5 In Section Three: Current Calls: CAT, EBAY, ESRX, NEM, NSM, PDCO, TK New Calls: SLAB, ZBRA Current Put Plays: AHC, CFC, LEH, UTSI New Puts: None ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** Caterpillar - CAT - close: 81.98 change: -0.12 stop: 78.95 Company Description: For more than 75 years, Caterpillar Inc. has been building the world's infrastructure and, in partnership with its worldwide dealer network, is driving positive and sustainable change on every continent. With 2003 sales and revenues of $22.76 billion, Caterpillar is a technology leader and the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. More than half of all sales were to customers outside of the United States, maintaining Caterpillar's position as a global supplier and leading U.S. exporter. The company employs nearly 70,000 people around the world. (source: company press release) Why We Like It: Bulls can't complain. The Dow Industrials have been slipping lower the last couple of sessions and Dow component CAT has managed to churn sideways maintaining most of its gains. The stock has been doing very well in spite of the looming threat of higher interest rates, which put pressure on heavy machinery companies like CAT. Another hurdle pressing in on CAT has been rising steel prices but the company says it can currently pass on these rising costs to the customer due to strong demand. That demand is coming from the recovering U.S. economy as well as an expanding global economy. Should shares of CAT slip back toward the $80.00 level we would use the dip as an entry point for new bullish positions. Our target remains firm at the $85.00 mark. However, traders looking for new positions should keep in mind that CAT's earnings are on April 22nd, which only gives us eight trading days for the stock to make its run higher. We will be dropping the play just before its earnings announcement. Suggested Options: We're going to suggest the May options since Aprils are due to expire in two weeks. Our favorite would be the May 75s if you can afford them. Otherwise the May 80s. ! Alert - April options EXPIRE on Friday! BUY CALL MAY 75 CAT-EO OI=2020 at $7.70 SL=5.25 BUY CALL MAY 80 CAT-EP OI=5663 at $3.90 SL=1.90 Annotated Chart: Picked on April 02 at $ 80.25 Change since picked: + 1.73 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 2.5 million Chart = --- eBay Inc - EBAY - close: 75.94 change: +2.04 stop: 70.95*new* Company Description: eBay is The World's Online Marketplace(TM). 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. (source: company press release) Why We Like It: The pre-earnings run up has officially begun. EBAY got an early start last Friday with the breakout over resistance at $70.00 (and $72.00) in strong volume. The Internet auction giant managed to hold on to its gains all week despite mild profit taking in some of the tech sectors and cautious apprehension ahead of YHOO's earnings announcement on Wednesday night. Fortunately, YHOO more than delivered by surpassing earnings estimates, raising guidance for the year and announcing a 2-for-1 stock split. Now it's EBAY's turn. While we're not expecting EBAY to announce a split but investors are likely to bid up shares in anticipation of the company's earnings announcement. We currently have seven trading days before EBAY announces. That may be too brief a timetable for more conservative traders so be sure you're comfortable with the risk. We are not planning to hold over EBAY's report. We're still expecting a dip but at this point it may only be to the $74 level. Bulls can use it as an entry point but remember the short time frame. We're going to raise our stop loss to $70.95. Suggested Options: EBAY's earnings are the 21st of April and we don't plan to hold over the event. However, April options expire on the 16th. So we're going to suggest May calls. Our favorite is the May 70s. Remember, we're suggesting a buy on the dip so these should get cheaper. ! Alert - April options EXPIRE on Friday! BUY CALL MAY 70 XBA-EN OI= 3050 at $7.20 SL=4.65 BUY CALL MAY 75 XBA-EO OI= 5998 at $3.80 SL=1.90 Annotated chart: Picked on April 01 at $ 72.25 Change since picked: + 3.69 Earnings Date 04/21/04 (confirmed) Average Daily Volume: 7.0 million Chart = --- Express Scripts - ESRX - close: 76.49 change: -0.31 stop: 74.00 Company Description: Express Scripts provides health care management and administration services on behalf of clients that include health maintenance organizations, health insurers, third-party administrators, employers and union-sponsored benefit plans. The company's fully integrated pharmacy benefit management services include network claims processing, mail pharmacy services, benefit design consultation, drug utilization review, formulary management, disease management, medical information management services and informed decision counseling services through its Express Health Line division. Why we like it: Traders had to be nimble to catch the breakout entry in shares of ESRX on Monday, as the stock soared to $78.50 before running out of steam. So we're actually pleased to see the stock pulling back over the past few days. In fact, Thursday's early dip could be viewed as another entry point for nimble traders, as the stock dipped to $75.60, almost to the 10-dma ($75.42) before bouncing back and then consolidating in the $76.00-76.50 area for the remainder of the day. With the amount of time ESRX spent banging into the $75-76 area as resistance, we should now expect that zone to provide solid support. The PnF chart still looks quite strong, and the bullishness indicated by its $93 price target was reinforced with last week's breakout, which gave us another Buy signal to work with. Traders that prefer to enter on strength will now need to see a rally through the $78.75 level before opening new positions, so clearly our preference is to buy the dips. With the stock trading in new high territory, picking a target above last week's highs is rather difficult, so we'll continue to target a run to $85. Note that our stop is now $74, just under the 30-dma ($74.52). Suggested Options: Shorter Term: The April $75 Call will offer short-term traders the best return on an immediate move, as it is currently in the money. But with April options expiring next week, the May strikes may be a better choice. Longer Term: Aggressive longer-term traders can use the May $80 Call, while the more conservative approach will be to use the May $75 strike. Our preferred option is the May $75 strike, as it is currently in the money and should provide sufficient time for the play to move in our favor. ! Alert - April options expire next week! BUY CALL APR-75 XTQ-DO OI= 714 at $2.40 SL=1.00 BUY CALL MAY-75*XTQ-EO OI=1760 at $4.10 SL=2.50 BUY CALL MAY-80 XTQ-EP OI= 699 at $1.65 SL=0.75 Annotated Chart of ESRX: Picked on April 4th at $75.36 Change since picked: +1.18 Earnings Date 4/28/04 (unconfirmed) Average Daily Volume = 1.04 mln Chart = --- Newmont Mining - NEM - close: 45.06 change: -0.30 stop: 43.50 Company Description: Newmont Mining Corporation is a holding company and is principally engaged in gold mining. As of the end of 2002, the company had gold reserves of 86.9 million equity ounces and an aggregate land position of approximately 63,000 square miles. NEM has operations in North America, South America, Australia, New Zealand, Indonesia, Uzbekistan and Turkey. In 2002, the company obtained more than 69% of its equity gold production from politically and economically stable countries, namely the United States, Canada and Australia. Why we like it: For the mining stocks, last week's action was dominated by consolidation following the negative reaction to the prior week's jobs report that raised the concern of rising interest rates and a potentially strengthening dollar. Despite those concerns, gold held up fairly well towards the end of the week, gravitating to the $420 level and NEM continued its consolidation near support in the $44.50-45.00 area. This still looks like a good point at which to initiate new positions, as the stock consolidates at support in preparation for the next upward thrust. More conservative traders will want to see a rally back over $46 before entering the fray, as such a move would provide confirmation that the stock is once again gaining strength for a push towards the late March highs and then towards strong resistance at $50. Maintain stops at $43.50, which is now solidly below the 50-dma ($43.83). Suggested Options: Shorter Term: The April $45 Call will offer short-term traders the best return on an immediate move, as it is currently at the money. With April strikes expiring next week, the May strikes appear to be the better choice. Longer Term: Aggressive longer-term traders can use the May $47 or $50 Calls, while the more conservative approach will be to use the June $47 strike. Our preferred option is the May $45 strike, as it is currently at the money and should provide sufficient time for the play to move in our favor. ! Alert - April options expire next week! BUY CALL APR-45 NEM-DI OI=15336 at $0.70 SL=0.35 BUY CALL MAY-45*NEM-EI OI= 4135 at $2.15 SL=1.00 BUY CALL MAY-47 NEM-EW OI= 9656 at $1.15 SL=0.50 BUY CALL JUN-47 NEM-FW OI= 6243 at $1.75 SL=0.80 Annotated Chart of NEM: Picked on March 28th at $46.15 Change since picked: -1.09 Earnings Date 2/04/04 (confirmed) Average Daily Volume = 6.32 mln Chart = --- National Semi. - NSM - cls: 48.20 chng: +1.00 stop: 45.40*new* Company Description: National Semiconductor Corporation designs, develops, manufactures and markets an array of semiconductor products, including a line of analog, mixed-signal and other integrated circuits (ICs). These products address a variety of markets and applications, including amplifiers, personal computers, power management, local and wide area networks (LANs and WANs), flat panel and cathode ray tube displays and imaging and wireless communications. The Company's operations are organized in five groups: the Analog Group, the Displays Group, the Information Appliance and Wireless Group, the Wired Communications Group and the Custom Solutions Group. Why we like it: In defiance of its detractors, the Semiconductor index (SOX.X) had a pretty solid week, hanging onto support near $500 and actually pushing slightly higher on Thursday. That performance pales in comparison to our NSM play though, as it maintained its gains from the prior week, dipped to fill the gap on Tuesday and then vaulted higher into the close on Thursday, notching another multi-year closing high. The bulls seem intent on driving shares of NSM up to test strong resistance at $50 and who are we to argue. Our final destination is close enough that we aren't enthusiastic about new entries, particularly not breakout entries. Aggressive traders can take advantage of dips into the $46.50-47.00 to enter new positions, but we need to keep a tight reign on the play with our stop now raised to $45.40, just under the bottom of Tuesday's dip. Suggested Options: Shorter Term: The April $45 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 May $50 Call, while the more conservative approach will be to use the May $45 strike. Our preferred option is the May $45 strike, as it is currently in the money and should provide sufficient time for the play to move further in our favor. ! Alert - April options expire next week! BUY CALL APR-45 NSM-DI OI= 9678 at $3.60 SL=1.75 BUY CALL MAY-45*NSM-EI OI=13482 at $5.00 SL=3.00 BUY CALL MAY-50 NSM-EJ OI= 3007 at $2.10 SL=1.00 Annotated Chart of NSM: Picked on March 30th at $44.43 Change since picked: +3.77 Earnings Date 6/10/04 (unconfirmed) Average Daily Volume = 4.27 mln Chart = --- Patterson Dental Co - PDCO - cls: 75.17 chg: +0.17 stop: 70.99*new* Company Description: Patterson Dental Company is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets. (source: company press release) Why We Like It: PDCO is right on track! The stock witness a very strong follow through to last week's breakout above resistance with rising volume to back it up. Investors applauded news that PDCO would be adding to its veterinary supply business with another acquisition. Furthermore we've very impressed by its relative strength the last couple of sessions. Investors have bought the dip or there's been a lack of sellers and PDCO appears to have new (very minor) support at $74.00. If the market should see any deeper profit taking next week then we might expect PDCO to pull back toward the $72.00-72.50 region. However, if the weekend is a quiet one then next week is liable to be bullish for the markets and PDCO. We're going to raise our stop loss to $70.99. FYI: the P&F breakout we pointed to last weekend has extended and now points to a $97 price target. We're still aiming for a run to the $77.50-80.00 region and thus it may not be prudent to consider new positions unless PDCO does pull back a couple of points. Suggested Options: We don't have to worry about earnings for PDCO until May. So we're going to suggest the May or July calls. Our favorite is the May 70s on a dip or the May 75s. ! Alert - April options EXPIRE on Friday! BUY CALL MAY 70 DOU-EN OI= 72 at $6.60 SL=3.50 BUY CALL MAY 75 DOU-EO OI=292 at $3.40 SL=1.70 BUY CALL JUL 70 DOU-GN OI=262 at $7.70 SL=4.50 BUY CALL JUL 75 DOU-GO OI=597 at $4.60 SL=2.35 Annotated Chart: Picked on April 04 at $ 72.14 Change since picked: + 3.03 Earnings Date 02/19/04 (confirmed) Average Daily Volume: 493 thousand Chart = --- Teekay Shipping - TK - close: 67.60 change: +0.86 stop: 65.95 Company Description: Teekay Shipping Corporation is the leading provider of international crude oil and petroleum product transportation services, transporting more than 10 percent of the world's sea- borne oil. With offices in 13 countries, Teekay employs 4,700 seagoing and shore-based staff around the world. The Company has earned a reputation for safety and excellence in providing transportation services to major oil companies, oil traders and government agencies worldwide. (source: company press release) Why We Like It: Crude oil prices have made a huge comeback this week and look poised to breakout over resistance at $37.00 a barrel. With some of the oil and oil service stocks breaking out odds are growing that TK will join them and break out over resistance at $70.00. The rising demand of oil means steady business for a fleet of oil tankers like TK and that's reflected in its steady climb higher. More aggressive traders who are not willing to wait for TK to trade at or through our TRIGGER at $70.05 can buy this bounce from its simple 40-dma. Suggested Options: Earnings for TK should be in late May so we're going to suggest the May or July calls. Right now our favorite would be the May 70s on a breakout but the 65s look good, especially on a dip. ! Alert - April options EXPIRE on Friday! BUY CALL MAY 65 TK-EM OI= 50 at $4.50 SL=2.25 BUY CALL MAY 70 TK-EN OI=1877 at $1.95 SL=1.00 BUY CALL MAY 75 TK-EO OI= 107 at $0.80 SL= -- BUY CALL JUL 70 TK-GN OI=1190 at $3.50 SL=1.75 Annotated Chart: Picked on April xx at $ xx.xx <-- see trigger Change since picked: + 0.00 Earnings Date 02/25/04 (confirmed) Average Daily Volume: 374 thousand Chart = ************** NEW CALL PLAYS ************** Silicon Labs. - SLAB - close: 58.50 change: +0.73 stop: 55.00 Company Description: Silicon Laboratories designs, manufactures and markets proprietary high-performance mixed-signal integrated circuits (ICs) for the wireless, wireline and optical communications industries. The company initially focused its efforts on developing ICs for the personal computer modem market and is now applying its mixed-signal and communications expertise to the development of ICs for other high growth communications devices, such as wireless telephones and optical network applications. Why we like it: A few weeks back, we played shares of SLAB on the breakdown below $52 support, a strategy that simply didn't work due to the stock's strong rebound, signifying that the breakdown was a bear trap. Since then, with the help of the rally in the Semiconductor index (SOX.X), SLAB has broken above all of its moving averages, smashed through its descending trendline and is very close to breaking out to new multi-year highs. How's that for a reversal of fortune? As SLAB pushed through the $57 level last week, the PnF chart once again turned bullish with a fresh Buy signal and the size of the column of X's is now giving a bullish price target of $80. Obviously, that's a bit much to hope for during the life of this play, but it does highlight the strength of the reversal. Thursday's intraday surge to $59 pushed the PnF chart right to the edge of a triple top buy signal and as can be seen on the price chart, a breakout over $60 should be significant. Daily Stochastics are already overbought from the rally of the past couple weeks, so it's entirely possible the stock will need to consolidate just below resistance before making that breakout move. We'll use a trigger at $60, which will force the bulls to prove their case before luring us into the play. Aggressive entries on the initial breakout looks attractive, with a pullback near $58 being another option. Once clear of near-term resistance, we'll have to use the weekly chart to gauge resistance and in that view, it appears there could be some mild resistance near $64 and then stronger resistance at $68-70. The one fly in the ointment -- which is also a potential bullish catalyst -- is that SLAB is due to report earnings on April 26th. Since we won't be holding over the announcement, it will have to be a quick play. We'll target a rally to the $68 level for the play, but more conservative traders may want to harvest partial gains if price stalls near $64. We'll use a stop at $55 initially (just under last Monday's intraday low) and look to tighten it after the stock completes its breakout. Suggested Options: Shorter Term: The April $60 Call will offer short-term traders the best return on an immediate move, but with April options expiring next week, the May strikes may be the better choice. Longer Term: Aggressive longer-term traders can use the May $60 Call, while the more conservative approach will be to use the May $55 strike. Our preferred option is the May $60 strike, as it will be at the money when the play is triggered. ! Alert - April options expire next week! BUY CALL APR-60 QFJ-DL OI=1618 at $0.95 SL=0.50 BUY CALL MAY-55 QFJ-EK OI= 340 at $6.10 SL=4.00 BUY CALL MAY-60*QFJ-EL OI= 763 at $3.40 SL=1.75 Annotated Chart of SLAB: Picked on April 11th at $58.50 Change since picked: +0.00 Earnings Date 4/26/04 (unconfirmed) Average Daily Volume = 1.46 mln Chart = --- Zebra Technologies - ZBRA - cls: 73.26 chg: +0.98 stop: 68.00 Company Description: Zebra Technologies Corp. delivers innovative and reliable on- demand printing solutions for business improvement and security applications in 90 countries around the world. More than 90 percent of Fortune 500 companies use Zebra-brand printers. A broad range of applications benefit from Zebra-brand thermal bar code, "smart" label, receipt, and card printers, resulting in enhanced security, increased productivity, improved quality, lower costs, and better customer service. The company has sold more than three million printers, including RFID printer/encoders and wireless mobile solutions, and also offers software, connectivity solutions, and printing supplies. (source: company press release) Why We Like It: ZBRA is on the forefront of the RIFD system development. This is a new industry standard to replace a large chunk of the ubiquitous bar code scanning. Furthermore the upgrade has essentially been mandated by Wal-Mart, the world's largest retailer, to be implemented in the next couple of years. With that kind of muscle behind the move ZBRA should see a steady stream of business as whole industries make the upgrade. Investors know it hence the strong bullish trend in ZBRA's stock price. We like the breakout over resistance at $73.00 today, which happened to produce a new bullish buy signal on its P&F chart. Optimistically we might see a run toward the $80.00 region before ZBRA's earnings report but we'll settle for a run toward $77. We'll initiate the play with a stop loss at $68 but more conservative traders can probably get away with a stop under $70. Suggested Options: Our favorite calls are the May 70s and 75s but remember we don't plan to hold over ZBRA's earnings report in late April. ! Alert - April options EXPIRE on Friday! BUY CALL MAY 70 ZBQ-EN OI=255 at $5.30 SL=3.25 BUY CALL MAY 75 ZBQ-EO OI=137 at $2.50 SL=1.25 Annotated Chart: Picked on April 11 at $ 73.26 Change since picked: + 0.00 Earnings Date 04/28/04 (unconfirmed) Average Daily Volume: 332 thousand Chart = ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Amerada Hess Corp. - AHC - close: 64.06 change: +1.02 stop: 65.50 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: Despite an apparent weakening near the 50-dma ($62.53) early last week, shares of AHC embarked on a pretty impressive rebound over the past two days and the prospects for this bearish trade candidate do not look good. This is precisely why we set our entry trigger where we did, as it would force the stock to break down before luring us into the play. Support held at the 50-dma and our trigger was never activated, keeping us from entering the play and getting caught on the wrong side of the past two days' rebound. AHC is still below downtrend resistance near $64.50 and the 30-dma ($64.55), but if those levels of resistance are broken, we'll have no choice but to drop the play. We still want to see proven weakness in the form of a breakdown under $61.75 before entering the play, and with that trigger in place, we cannot consider rollover entries at this higher level. Maintain stops at $65.50. Suggested Options: With April strikes expiring next week, we've chosen to focus only on the May strikes. Those with a more conservative approach will want to use the May 65 put. Aggressive traders looking for more insulation against time decay can use the May 60 strike. Our preferred option is the May 65 strike, as it is currently in the money and should provide ample time for the play to move in our favor. ! Alert - April options expire next week! BUY PUT MAY-65*AHC-QM OI= 249 at $2.70 SL=1.25 BUY PUT MAY-60 AHC-QL OI=1496 at $0.85 SL=0.40 Annotated Chart of AHC: Picked on April 1st at $63.15 Change since picked: +0.91 Earnings Date 4/28/04 (unconfirmed) Average Daily Volume = 905 K Chart = --- Countrywide Financial - CFC - close: 86.58 chg: -1.32 stop: 90.51*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. Mortgage banking businesses include loan production and servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime- quality loans. Also included in Countrywide's mortgage banking segment is the LandSafe group of companies that provide loan closing services. Diversified financial services encompass capital markets, banking, insurance, and global, largely through the activities of Countrywide Capital Markets, a mortgage- related investment banker; Countrywide Bank, a division of Treasury Bank, NA, a banking entity offering customers CDs, money market accounts, and home loan products; Balboa Life and Casualty Group, whose companies are national providers of property, liability, and life insurance; Balboa Reinsurance, a captive mortgage reinsurance company; and Global Home Loans, a European mortgage banking joint venture in which Countrywide holds a majority interest. (source: company press release) Why We Like It: (Original Write Up from Tuesday) We're suggesting a new bearish play in CFC mainly due to the technical breakdown in the share price but the fundamental picture may have changed as well. Interest rate sensitive stocks like mortgage lenders and homebuilders have been getting dumped the last three sessions because last Friday's job's report immediately sparked the threat of higher interest rates sooner than expected. Higher rates mean higher mortgage rates and that should mean slower business for lenders like CFC. The stock has already dropped $8.00 from its recent highs and yesterday we felt it looked too short-term oversold even though it broke down through support at $90.00 and its simple 50-dma. However, today's action looks like a failed rally at $90.00 (now new resistance) so we're willing to speculate on a move lower. CFC has some support in the $81.50-82.50 region and that's where we plan to target an exit point. Currently its P&F chart is in a bearish sell signal and points to a $77 price target. Coincidentally CFC appears to have produced a (bearish) double- top at $97. Earnings are April 21st and we don't plan to hold over the event. Traders should also note that CFC does have a 3-for-2 split on April 13th but given the current environment we don't think it will be a factor. Weekend Update: So far so good. The failed rally on Tuesday was indeed an entry point for new bearish positions. Investors are still selling interest rate sensitive stocks on fears the fed will raise rates sooner than expected. It doesn't help mortgage lenders like CFC that mortgage rates have risen sharply two weeks in a row. The drop under $87 has produced yet another bearish sell signal on its P&F chart. We are going to lower our stop loss to $90.51. Suggested Options: April options expire soon so we suggest using the May puts even though we plan to close the play before April 21st. Our favorites are the May 90s. ! Alert - April options EXPIRE on Friday! BUY PUT MAY 90 CFC-QR OI= 705 at $6.40 SL=3.95 BUY PUT MAY 85 CFC-QQ OI= 834 at $3.70 SL=1.85 Annotated Chart: Picked on April 06 at $ 88.50 Change since picked: - 1.92 Earnings Date 04/21/04 (confirmed) Average Daily Volume: 2.5 million Chart = --- Lehman Brothers - LEH - close: 80.78 change: -0.54 stop: 84.75 Company Description: Through its subsidiaries, LEH constitutes one of the leading global investment banks, serving institutional, corporate, government and high-net-worth individuals clients. The company is engaged primarily in providing financial services, including securities writing and direct placements, corporate finance and strategic advisory services, private equity investments and securities sales and trading. Completing its array of banking, research and trading capabilities, LEH also engages in the trading of foreign exchange, derivative products and certain commodities. Why we like it: It certainly looks like the $80 level is an important line in the sand for LEH, at least judging by last week's price action. The stock continues to underperform the Brokerage index (XBD.X) but so far has been unable to deliver the breakdown we're looking for. Thursday's afternoon dip saw a trade as low as $80.20 and the intraday violation of the 100-dma ($80.45) was encouraging. But the bulls bought that dip into the close, clearly wanting to avoid the trade below $80 that would signify a breakdown in progress. Our $80 entry trigger still appears to be in the right place, and we're looking for that trigger to be activated early next week. Aggressive traders can enter on the breakdown, while those with a more conservative bias can hold out for a subsequent failed rebound below what should be strong resistance near $82. For now, we'll maintain our stop at $84.75, just over the top of the most recent failed rally and the 50-dma ($84.50). Suggested Options: Aggressive short-term traders can use the April 80 Put, but with April options so close to expiration, the May strikes make more sense. The more conservative approach will be to use the May 80 put. Aggressive traders looking for more insulation against time decay will want to utilize the May 75 strike. Our preferred option is the May 80 strike, as it will be at the money when the play is triggered and should provide ample time for the play to move in our favor. ! Alert - April options expire next week! BUY PUT APR-80 LES-PP OI=5634 at $0.90 SL=0.45 BUY PUT MAY-80*LES-QP OI=1869 at $2.65 SL=1.25 BUY PUT MAY-75 LES-QO OI= 991 at $1.05 SL=0.50 Annotated Chart of LEH: Picked on April 6th at $81.77 Change since picked: -0.99 Earnings Date 3/16/04 (confirmed) Average Daily Volume = 2.20 mln Chart = --- UTStarcom, Inc. - UTSI - cls: 29.85 chng: -0.16 stop: 31.50*new* Company Description: UTStarcom, Inc., headquartered in Alameda, California, is a global provider of wireless and wireline access and Internet protocol (IP) switching solutions. The company designs, manufactures, sells and installs an integrated suite of future-ready access network and next-generation switching solutions. It enables wireless and wireline operators in fast-growth markets worldwide to offer voice, data and Internet access services rapidly and cost effectively by utilizing their existing infrastructure. UTSI's products provide a seamless migration from wireline to wireless, from narrowband to broadband and from circuit- to packet-based networks by employing next-generation network technology. The company's customers include public telecommunications service providers that operate wireless and wireline voice and data networks in rapidly growing communications markets worldwide. Why we like it: The initial breakdown in shares of UTSI looked promising, but those stubborn bulls stepped in to support the stock and it grudgingly rose to test the 20-dma ($30.43), which held as resistance going into the weekend. The stock is still below key resistance at the descending trendline ($30.75) and the 30-dma ($31.19), so the bearish case is still intact. The rebound off the lows last week came on steadily declining volume and Thursday's 1.6 million shares didn't even reach half the ADV. The rollover from the vicinity of the 20-dma certainly looks like a favorable entry into the play, but we really need to see selling volume increase to provide confirmation. Failed rallies below the falling trendline still look like viable entry points, while more conservative traders will want to wait for a break below $28.70 before playing. We're trimming our risk in the play this weekend by lowering our stop to $31.50. If UTSI is able to scale all those resistance levels and trade above $31.50, then we'll know the bears have lost the battle. Suggested Options: Aggressive short-term traders can use the April 30 Put, but need to be careful with April options expiring next week. Those with a more conservative approach will want to use the May 30 put. Aggressive traders looking for more insulation against time decay can use the May 25 strike. Our preferred option is the May 30 strike, as it is currently at the money and should provide ample time for the play to move in our favor. ! Alert - April options expire next week! BUY PUT APR-30 UON-PF OI=6205 at $0.90 SL=0.45 BUY PUT MAY-30*UON-QF OI=7449 at $2.05 SL=1.00 BUY PUT MAY-25 UON-QE OI=3072 at $0.50 SL=0.25 Annotated Chart of UTSI: Picked on March 30th at $29.38 Change since picked: +0.47 Earnings Date 4/27/04 (unconfirmed) Average Daily Volume = 3.59 mln Chart = ************* NEW PUT PLAYS ************* None ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 04-11-2004 Sunday 4 of 5 In Section Four: Leaps: See Note Option Spreads: April Quickies Coming On Sunday ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ***** LEAPS ***** Check the site on Monday for Mark Phillip's Leaps article! ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ************************ Option Spread Strategies ************************ April Quickies Coming On Sunday By Mike Parnos, Investing With Attitude It’s been an interesting week – and, fortunately, it’s over. The market is honoring the Easter Bunny and is closed on Friday. The positions in our CPTI portfolio are in pretty good shape. I will devote the next few days to “extensive” research (during the commercials) and try to come up with some exciting quickies for the last week of this option cycle. Hey! The Detroit Tigers are 4-0. That means that anything is possible. It’s enough to give one hope. __________________________________________________________ Position Adjustment The only position adjustment we’ve made recently is to buy back the OSX April $115 call for $.05 and roll it out to the May $110 call for $1.30. I’ll go over it in detail and discuss the ramifications in the Sunday column. __________________________________________________________ Something To Think About “Almost without exception, there is only one way to make a great deal of money in the business world – and that is in one’s own business. The man who wants to go into business for himself should choose a field that he knows and understands. Obviously, he can’t know everything there is to know from the very beginning, but he should not start until he has acquired a good, solid working knowledge of the business.” – J. Paul Getty, How To Be Rich Gee, where have you heard that before? If you don’t believe it when I say it, maybe you’ll believe it coming from J. Paul Getty. I still get emails from students who are diving into the pool before they know how to swim. It’s my pleasure to share my knowledge with you, but an inexperienced trader can get into big trouble if he doesn’t know what he’s doing. There’s not always a solution. I’m here to educate and to help you avoid having to learn those expensive lessons. Please, be careful. Take your time and learn the strategies thoroughly. There’s no rush. The market isn’t going anywhere. __________________________________________________________ APRIL CPTI POSITIONS April Position #1 – SPX Iron Condor – 1139.32 We sold 4 SPX April 1075 puts and bought 4 SPX April 1050 puts for credit of: $2.50 (x 4 contracts = $1,000). Then we sold 10 SPX April 1170 calls And bought 10 SPX April 1180 calls for a credit: $1.40 (x 10 contracts = $1,400). Total net credit and potential profit of about $2,400. Maximum profit range is 1075 to 1170. Safety range is about 1072.60 to 1177.40. Maintenance: $10,000 __________________________________________________________ April Position #2 – RUT Iron Condor – 597.88 We sold 10 RUT April 530 puts and bought 10 RUT April 520 puts for a credit of $1.10. Then sold 10 RUT April 610 calls and bought 10 RUT April 620 Calls for a credit of $1.15. Total net credit of about $2.25. Potential profit: $2,250. Maximum profit range: 530 to 610. Safety range: 527.75 to $612.25. Maintenance: $10,000. ______________________________________________________ April Position #3 – XAU Iron Condor - $101.62 Sold 10 XAU April 95 puts and bought 10 XAU April 90 puts for a credit of $.85 (x 10 contracts = $950). Sold 10 XAU April 110 puts and bought 10 XAU April 115 puts for a credit of $.55 (x 10 contracts = $550). Total net credit: $1.40. Potential profit: $1,400. Maximum profit range $95 to $110. Safety range: $93.60 to $111.40. ______________________________________________________ April Position #4 – OSX Calendar Spread Plus – $102.52 OSX is the Oil Index. This is a play on the common belief that oil prices will continue to move up over the next month or two. Bought 10 OSX June $115 calls (36 delta) and sold 10 OSX April $115 calls (23 delta) at a cost of $2.15 ($2,150). We also put on an April $100/$90 bull put spread and took in an extra $.70 ($700) to reduce the cost basis to $1.45 ($1,450). Adjustment: See description above. Details to follow on Sunday. ______________________________________________________ ONGOING POSITIONS QQQ ITM Strangle – Ongoing Long Term -- $36.94 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: Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts and calls – credit of $1,150. Dec. $34 puts and calls – credit of $1,500. Jan. $34 puts and calls – credit of $850. Feb. $34 calls and $36 puts – credit of $750. Mar. $34 calls and $37 puts – credit of $1,150. Apr. $34 calls and $37 puts – credit of $750 Total credit: $8,050. 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 – 556.12 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 maturing in seven years at a value of $100,000. The principal $100,000 investment is guaranteed. We’re trading the remaining $26,000 to generate a “risk free” return on the original investment. Long Term: Bought 3 OEX Jan. 2006 540 calls @ $81 (x 300 = $24,300) March: Sold 3 OEX 585 calls @ $3.10 (x 300 = $930) March: 535/525 Bull Put Spread for credit of $1.10 (x 300 = $330). Bought back 3 OEX March 585 calls for $.10 & sold 3 of March 560 calls for $1.35. A credit of $1.25 x 300 = $375.00. Bought back March 560 calls for $.15, locked in profit of $120 x 3 = $360. Cash position is $3,320 ($1,620 plus the unused $1,700). April Positions: OEX Bull Put Spread - $556.12. Sell 5 OEX April 515 puts and buy 5 contracts of April 505 puts for credit of $.90 (x 5 contracts = $450). Sell call against long 540 call. Sell 5 OEX April 570 calls for $1.35 (x 5 contracts = $675). New cash position is $2,640 plus unused $1,700 = $4,340. ______________________________________________________ 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, first look under "Education" on the OI home page and click on "Traders Corner." For more recent columns, you can look under “Strategies” and click on “Combinations.” 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. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 04-11-2004 Sunday 5 of 5 In Section Five: Spreads and Straddles: A Much-Needed Holiday! Premium-Selling Plays: Naked Puts & Calls ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* A Much-Needed Holiday! By Ray Cummins Stocks ended mixed ahead of Good Friday as geopolitical concerns neutralized investor optimism over favorable earnings from Yahoo! and Dell's positive revenue outlook. The Dow Jones Industrial Average slipped 39 points to 10,440 with Wal-Mart (NYSE:WMT) leading the blue-chip decliners amid a broad retreat in retail stocks. The NASDAQ Composite ended up 2 points at 2,052 on gains in the Internet group and a late buying spree in the chip sector. The S&P 500 index fell 1 point to 1,139 as gold, retail, aluminum, and homebuilding stocks slumped. Trading volume was 1.19 billion on the NYSE, where losers outpaced winners 2 to 1. On the technology exchange, 1.69 billion shares changed hands with decliners slightly ahead of gainers. In the U.S. bond market, the 10-year note was down 2/32 while its yield climbed to 4.17%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 04/07/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. PUT-CREDIT SPREADS Symbol Pick Last Month L/P S/P Credit C/B G/L Status APOL 77.82 90.45 APR 65 70 0.60 69.40 0.60 Open BZH 111.90 101.82 APR 95 100 0.70 99.30 0.70 Closed KBH 78.71 75.82 APR 65 70 0.55 69.45 0.55 Open COF 73.50 75.86 APR 60 65 0.50 64.50 0.50 Open SYMC 44.64 47.50 APR 37 40 0.35 39.65 0.35 Open DNA 106.82 108.45 APR 90 95 0.60 94.40 0.60 Open FDX 71.59 75.06 APR 65 70 0.85 69.15 0.85 Open LLL 56.67 62.10 APR 50 55 0.50 54.50 0.50 Open TASR 61.80 98.04 APR 45 50 0.60 49.40 0.60 Open DE 68.23 72.82 APR 60 65 0.40 64.60 0.40 Open FFIV 31.87 33.85 APR 25 30 0.55 29.45 0.55 Open MRVL 42.67 47.10 APR 37 40 0.20 39.80 0.20 Open KBH 80.80 75.82 APR 70 75 0.40 74.60 0.40 Closed NCEN 48.56 48.55 APR 40 45 0.45 44.55 0.45 Open RIMM 104.14 107.98 APR 85 90 0.50 89.50 0.50 Open YHOO 50.15 48.35 APR 45 47 0.35 47.15 0.35 Open HSIC 75.81 76.85 MAY 65 70 0.45 69.55 0.45 Open NAV 49.90 49.33 MAY 40 45 0.60 44.40 0.60 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss Positions in Countrywide Financial (NYSE:CFC) and Hughes Supply (NYSE:HUG), which is positive, have previously been closed to limit potential losses. Positions in Beazer (NYSE:BZH) and KB Home (NYSE:KBH); at the $75 strike, are candidates for early exit. CALL-CREDIT SPREADS Symbol Pick Last Month L/C S/C Credit C/B G/L Status DISH 35.50 32.96 APR 42 40 0.30 40.30 0.30 Open NVLS 31.15 33.40 APR 37 35 0.35 35.35 0.35 Open VSEA 40.85 43.71 APR 50 45 0.60 45.60 0.60 Open? SFA 31.96 33.74 APR 40 35 0.55 35.55 0.55 Open? BBBY 39.04 39.11 APR 45 42 0.25 42.75 0.25 Open MSTR 52.64 53.47 APR 65 60 0.60 60.60 0.60 Open NTLI 53.12 56.91 APR 65 60 0.60 60.60 0.60 Open? SINA 35.96 38.65 APR 45 40 0.70 40.70 0.70 Open? AFCO 27.85 28.39 APR 35 30 0.55 30.55 0.55 Open? CAM 43.90 44.88 APR 50 45 0.50 45.50 0.50 Closed CCMP 42.13 42.24 APR 50 45 0.45 45.45 0.45 Open XLNX 37.76 39.51 APR 42 40 0.25 40.25 0.25 Closed PHM 52.87 51.56 APR 60 55 0.40 55.40 0.40 Open SOHU 25.46 25.17 MAY 35 30 0.60 30.60 0.60 Open SFNT 31.65 32.07 MAY 40 35 0.70 35.70 0.70 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Bearish spreads on Adobe (NASDAQ:ADBE) and Cognos (NASDAQ:COGN), which is positive, have previously been closed to limit potential losses. Xilinx (NASDAQ:XLNX) and Cooper-Cameron (NYSE:CAM) are "early-exit" candidates. NTL Inc. (NASDAQ:NTLI), Applied Films (NASDAQ:AFCO), Varian Semi (NASDAQ:VSEA), Sina (NASDAQ:SINA) and Scientific Atlanta (NYSE:SFA) are on the "watch" list. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status GLBC 13.86 19.71 APR 15 12 1.80 5.50 Closed SNP 40.74 39.40 APR 40 40 5.70 5.70 Closed CCMP 44.55 42.24 APR 45 45 5.90 5.75 Closed AMX 35.66 38.84 MAY 35 35 3.65 5.00 Open AIG 74.28 76.25 MAY 75 75 5.60 7.80 Open SLB 65.13 60.76 MAY 65 65 6.75 6.50 Open BSTE 30.63 39.89 JUL 30 30 6.00 11.50 Open? MKSI 23.10 25.45 JUL 22 22 4.70 5.50 Open BRKS 22.66 22.37 APR 22 22 1.60 1.50 Open LF 19.67 20.27 JUN 20 20 3.50 3.25 Open The recent straddle in Biosite (NASDAQ:BSTE) has nearly doubled in value (as of April 8, 2004) and the speculative position in Global Crossing (NASDAQ:GLBC) provided a large short-term gain for those traders who paid a small premium to initiate the play. Prices for the new positions in American International (NYSE:AIG) and Schlumberger (NYSE:SLB), as well as any potential gains (max. value) for straddles in play during my recent absence from the market, will not be accurate. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 - 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ DNA - Genentech $112.00 *** Favorable Earnings! *** Genentech (NYSE:DNA) is a biotechnology firm using human genetic information to discover, develop, manufacture and commercialize biotherapeutics for significant unmet medical needs. The company manufactures and commercializes 10 biotechnology products directly in the United States. These include Herceptin, Rituxan, TNKase, Activase, Cathflo Activase, Nutropin Depot, Nutropin AQ, Nutropin human growth hormone, Protropin and Pulmozyme. The company also licenses several additional products to other companies and its product development efforts, including those of its collaborative partners, cover a wide range of medical conditions, including cancer, respiratory disorders, cardiovascular diseases, endocrine disorders and inflammatory and immune problems. DNA - Genentech $112.00 PLAY (very conservative - bullish/credit spread): BUY PUT MAY-95.00 DNA-QS OI=763 ASK=$0.55 SELL PUT MAY-100.00 DNA-QT OI=330 BID=$0.95 INITIAL NET-CREDIT TARGET=$0.50-$0.60 POTENTIAL PROFIT(max)=11% B/E=$99.50 __________________________________________________________________ EBAY - eBay Inc. $75.94 *** New "All-Time" High! *** eBay (NASDAQ:EBAY) is a Web-based community in which buyers and sellers are brought together to browse, buy and sell items such as collectibles, automobiles, high-end or premium art items, jewelry, consumer electronics and a host of practical and other miscellaneous items. The eBay trading platform is an automated, topically arranged service that supports an auction format in which sellers list items for sale and buyers bid on items of interest, and a fixed-price format in which sellers and buyers trade items at a fixed price established by sellers. Through its wholly owned and partially owned subsidiaries and affiliates, the Company operated online trading platforms directed towards the United States, Australia, Austria, Belgium, Canada, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Singapore, South Korea, Spain, Sweden, Switzerland and also the United Kingdom. EBAY - eBay Inc. $75.94 PLAY (conservative - bullish/credit spread): BUY PUT MAY-65.00 XBA-QM OI=6362 ASK=$0.45 SELL PUT MAY-70.00 XBA-QN OI=7861 BID=$1.10 INITIAL NET-CREDIT TARGET=$0.65-$0.75 POTENTIAL PROFIT(max)=15% B/E=$69.35 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ GENZ - Genzyme General $46.40 *** Next Leg Down? *** Genzyme General Division (NASDAQ:GENZ) is a division of Genzyme Corporation, a biotechnology and human healthcare company that develops products and provides services for unmet medical needs. Genzyme General develops and markets therapeutic products and diagnostic products and services with an emphasis on genetic disorders and other chronic debilitating diseases with defined patient populations. The company is organized into two segments, Therapeutics, which focuses on developing and marketing products for genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders, and specialty therapeutics, and Diagnostic Products, which develops, markets and distributes in vitro diagnostic products. The company also operates a wholly owned subsidiary, GelTex Pharmaceuticals. GENZ - Genzyme General $46.40 PLAY (less conservative - bearish/credit spread): BUY CALL MAY-55.00 GZQ-EK OI=665 ASK=$0.20 SELL CALL MAY-50.00 GZQ-EJ OI=1347 BID=$0.75 INITIAL NET-CREDIT TARGET=$0.60-$0.70 POTENTIAL PROFIT(max)=14% B/E=$50.60 __________________________________________________________________ PRX - Pharmaceutical Resources $55.25 *** A Big "Down" Day! *** Pharmaceutical Resources (NYSE:PRX) is a holding company that, through its subsidiaries, is in the business of developing, manufacturing and distributing a broad line of generic drugs in the United States. PRX operates primarily through its wholly owned subsidiary, Par Pharmaceutical, Inc., a manufacturer and distributor of generic drugs. PRX's product line consists of prescription and, to a lesser extent, over-the-counter generic drugs consisting of approximately 119 products representing various dosage strengths for 51 drugs. The company also has strategic alliances with several pharmaceutical and chemical companies. PRX markets its products primarily to wholesalers, retail drug store chains, drug distributors and repackagers. PRX - Pharmaceutical Resources $55.25 BUY CALL MAY-65.00 PRX-EM OI=861 ASK=$0.50 SELL CALL MAY-60.00 PRX-EL OI=947 BID=$1.20 INITIAL NET-CREDIT TARGET=$0.70-$0.80 POTENTIAL PROFIT(max)=16% B/E=$60.70 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. __________________________________________________________________ GCI - Gannett $90.42 *** Earnings Speculation Only! *** Gannett (NYSE:GCI) is a diversified news and information company that publishes newspapers, operates broadcasting stations and is engaged in marketing, commercial printing, a newswire service, data services and news programming. The firm is an international business operating primarily in the United States and in the U.K. Approximately 87% of its revenues come from domestic operations in 43 states, the District of Columbia and Guam. It has foreign operations in certain European and Asian markets. GCI - Gannett $90.42 PLAY (very speculative - neutral/debit straddle): BUY CALL APR-90.00 GCI-DR OI=824 ASK=$1.15 BUY PUT APR-90.00 GCI-PR OI=162 ASK=$0.75 INITIAL NET-DEBIT TARGET=1.60-$1.75 INITIAL TARGET PROFIT=$0.45-$0.80 __________________________________________________________________ SEBL - Siebel Systems $12.15 *** More Earnings Speculation! *** Siebel Systems (NASDAQ:SEBL) is a global provider of e-business applications software and is principally engaged in the design, development, sales and support of Siebel eBusiness Applications. This family of enterprise applications software enables a company to better manage its customer, partner and employee relationships. The company's eBusiness Applications are designed to meet the requirements for managing these relationships for organizations of all sizes, from small businesses to the largest multinational organizations and government agencies. SEBL - Siebel Systems $12.15 PLAY (very speculative - neutral/debit straddle): BUY CALL APR-12.50 SGQ-DV OI=24192 ASK=$0.25 BUY PUT APR-12.50 SGQ-PV OI=4184 ASK=$0.60 INITIAL NET-DEBIT TARGET=$0.70-$0.75 INITIAL TARGET PROFIT=$0.25-$0.40 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ All of these issues have robust option premiums and favorable technical indications. However, current news and events as well as market sentiment, will have an effect on these stocks so review each position thoroughly and make your own decision about its outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 04/07/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 APPX APR 33 32.48 46.56 0.90 5.98% 2.77% NEOL APR 15 14.65 20.24 0.35 5.57% 2.39% OSTK APR 25 24.30 32.82 0.70 7.25% 2.88% APPX APR 33 32.73 46.56 0.65 5.76% 1.99% ASKJ APR 25 24.15 38.08 0.85 9.04% 3.52% CLZR APR 11 11.07 15.36 0.17 4.72% 1.54% JNPR APR 22 21.85 27.21 0.65 7.82% 2.97% NEOL APR 15 14.65 20.24 0.35 6.74% 2.39% PDII APR 22 21.80 28.07 0.70 8.31% 3.21% SWIR APR 22 22.15 41.86 0.35 5.03% 1.58% APPX APR 33 33.03 46.56 0.35 4.71% 1.06% BRCM APR 35 34.55 42.19 0.45 4.64% 1.30% ELN APR 15 14.65 20.05 0.35 9.84% 2.39% OSTK APR 22 22.25 32.82 0.25 4.47% 1.12% PCLN APR 20 19.75 26.65 0.25 4.90% 1.27% SYMC APR 40 39.40 47.50 0.60 4.89% 1.52% XMSR APR 25 24.40 29.86 0.60 7.74% 2.46% YHOO APR 40 39.40 48.35 0.60 5.13% 1.52% APPX APR 35 34.45 46.56 0.55 6.27% 1.60% ASKJ APR 25 24.55 38.08 0.45 7.51% 1.83% CMC APR 30 29.60 31.30 0.40 4.72% 1.35% CSGS APR 15 14.65 17.07 0.35 7.65% 2.39% ECLG APR 17 17.20 21.88 0.30 6.26% 1.74% JILL APR 17 17.15 20.60 0.35 6.38% 2.04% MGAM APR 22 22.05 23.83 0.45 6.80% 2.04% PBY APR 25 24.50 27.77 0.50 5.97% 2.04% SUPG APR 8 7.15 7.66 0.35 16.86% 4.90% AGI APR 30 29.55 33.19 0.45 5.39% 1.52% ASKJ APR 25 24.60 38.08 0.40 6.62% 1.63% ENDP APR 20 19.75 25.97 0.25 4.98% 1.27% NFLD APR 12 12.15 15.80 0.35 12.17% 2.88% PBY APR 25 24.55 27.77 0.45 6.18% 1.83% PLMO APR 15 14.65 22.88 0.35 9.66% 2.39% RSAS APR 15 14.55 18.81 0.45 10.23% 3.09% SHFL APR 40 39.60 47.76 0.40 4.13% 1.01% SYMC APR 40 39.35 47.50 0.65 5.79% 1.65% ASCA APR 30 29.70 37.54 0.30 4.73% 1.01% ASKJ APR 30 29.40 38.08 0.60 9.72% 2.04% ERJ APR 30 29.40 32.21 0.60 8.22% 2.04% IMM APR 15 14.70 20.26 0.30 11.43% 2.04% INSP APR 30 29.70 39.82 0.30 5.70% 1.01% MICC APR 17 16.90 24.39 0.60 15.59% 3.55% MNST APR 22 22.20 27.66 0.30 5.95% 1.35% TKTX APR 15 14.50 16.22 0.50 17.25% 3.45% APPX APR 43 42.63 46.56 0.75 8.92% 1.76% ASKJ APR 30 29.70 38.08 0.30 6.44% 1.01% COCO APR 30 29.75 33.40 0.25 4.55% 0.84% FWHT MAY 17 17.15 21.84 0.35 4.27% 2.04% MICC MAY 17 17.15 24.39 0.35 4.39% 2.04% MNST MAY 22 21.95 27.66 0.55 4.48% 2.51% PLMO MAY 17 16.90 22.88 0.60 6.80% 3.55% TTN APR 17 17.25 19.60 0.25 8.43% 1.45% TTWO APR 35 34.55 36.04 0.45 6.40% 1.30% BARZ APR 35 34.35 40.83 0.65 12.11% 1.89% HNT MAY 22 22.00 27.25 0.50 4.76% 2.27% IPXL MAY 20 19.50 25.07 0.50 5.43% 2.56% SSNC MAY 22 21.60 28.71 0.90 7.85% 4.17% TRID APR 15 14.75 16.79 0.25 12.19% 1.69% UTHR APR 22 22.05 23.95 0.45 13.47% 2.04% XMSR APR 27 27.20 29.86 0.30 7.69% 1.10% ACCL MAY 17 17.25 21.64 0.25 4.08% 1.45% ADEX MAY 20 19.45 22.60 0.55 6.05% 2.83% IMM MAY 15 14.70 20.26 0.30 5.24% 2.04% IPXL MAY 20 19.65 25.07 0.35 4.93% 1.78% JBLU MAY 22 22.15 26.54 0.35 4.11% 1.58% LSCP MAY 22 21.95 28.97 0.55 6.11% 2.51% PDII APR 25 24.55 28.07 0.45 15.04% 1.83% TINY MAY 17 17.00 22.74 0.50 7.27% 2.94% USG MAY 15 14.25 17.71 0.75 11.45% 5.26% XMSR MAY 25 24.50 29.86 0.50 4.90% 2.04% Some of the new positions may not have been available at the listed prices, due to the recent market rallies. Positions in Amylin (NASDAQ:AMLN) and Nektar (NASDAQ:NKTR), although positive, have been closed to limit potential losses. NAKED CALLS Stock Strike Strike Cost Current Gain Max Simple Symbol Month Price Basis Price (Loss) Yield Yield SEAC APR 20 20.40 15.14 0.40 7.86% 1.96% ERES APR 35 35.30 29.63 0.30 4.73% 0.85% FARO APR 30 30.40 23.09 0.40 7.33% 1.32% AFCI APR 25 25.50 22.42 0.50 8.84% 1.96% FLSH APR 22 22.75 21.98 0.25 5.62% 1.10% ADTN APR 35 35.80 30.00 0.80 9.56% 2.23% DISH APR 35 35.65 32.96 0.65 6.34% 1.82% MTLM APR 40 40.60 39.35 0.60 9.68% 1.48% * BRL APR 50 50.40 48.39 0.40 4.08% 0.79% OVTI APR 30 30.50 28.68 0.50 10.89% 1.64% SNDK APR 32 32.75 32.25 0.25 6.38% 0.76% * HOV APR 42 42.90 39.85 0.40 7.29% 0.93% AFCI MAY 25 25.75 22.42 0.75 7.73% 2.91% QLGC MAY 37 37.95 32.21 0.45 4.22% 1.19% M-Systems Flash Disk (NASDAQ:FLSH) and Omnivision Technologies (NASDAQ:OVTI) are on the "watch" list. Conservative traders should consider closing positions in Sandisk (NASDAQ:SNDK) and Metal Management (NASDAQ:MTLM). Positions in Career Education (NASDAQ:CECO), NII Holdings (NASDAQ:NIHD), and Schnitzer Steel (NASDAQ:SCHN) have previously been closed to limit potential losses. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NEW NAKED-PUT CANDIDATES Stock Strike Strike Cost Current Max Max Simple Symbol Month Price Basis Price Profit Yield Yield ASKJ MAY 30 29.50 40.05 0.50 5.42% 1.69% BRCM MAY 37 36.70 42.85 0.80 5.86% 2.18% CLZR MAY 15 14.25 17.01 0.75 12.47% 5.26% FWHT MAY 20 19.35 23.11 0.65 8.83% 3.36% IMM MAY 17 17.05 21.66 0.45 8.37% 2.64% INSP MAY 35 34.45 45.26 0.55 5.28% 1.60% MRVL MAY 42 41.55 48.09 0.95 6.00% 2.29% NFLX MAY 27 27.10 37.65 0.40 4.65% 1.48% __________________________________________________________________ ASKJ - Ask Jeeves $40.05 *** Another New High! *** 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 $40.05 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 30 AUK QF 979 0.50 29.50 5.4% 1.7% * SELL PUT MAY 35 AUK QG 734 1.70 33.30 12.4% 5.1% __________________________________________________________________ BRCM - Broadcom $42.85 *** The Uptrend Resumes! *** Broadcom (NASDAQ:BRCM) is a leading provider of highly integrated silicon solutions that enable broadband communications and the networking of voice, video and data services. Using proprietary technologies and advanced design methodologies, Broadcom designs, develops and supplies complete system-on-a-chip solutions and related hardware and software applications for all broadband communications markets. Their diverse product portfolio includes solutions for digital cable and satellite set-top boxes; cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network processors; and SystemI/O(TM) server solutions. BRCM - Broadcom $42.85 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 35 RCQ QG 5567 0.40 34.60 3.8% 1.2% TS SELL PUT MAY 37.5 RCQ QT 3158 0.80 36.70 5.9% 2.2% * __________________________________________________________________ CLZR - Candela $17.01 *** Multi-Year High! *** Candela (NASDAQ:CLZR) develops, manufactures, and distributes innovative clinical solutions that enable physicians, surgeons, and personal care practitioners to treat selected cosmetic and medical conditions using lasers, aesthetic laser systems, and other advanced technologies. Founded near Boston in 1970, the company markets and services its products in over 60 countries from offices in the United States, Europe, Japan and other Asian locations. Candela established the aesthetic laser market 14 years ago, and currently has an installed base of over 6,000 lasers worldwide. CLZR - Candela $17.01 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 12.5 UKZ QV 278 0.15 12.35 3.9% 1.2% TS SELL PUT MAY 15 UKZ QC 149 0.75 14.25 12.5% 5.3% * __________________________________________________________________ FWHT - FindWhat.com $23.11 *** Strong Sector! *** FindWhat.com (NASDAQ:FWHT) operates online marketplaces that connect the consumers and businesses that are most likely to purchase specific goods and services with the advertisers that provide those goods and services. Online advertisers determine the per-click fee they will pay for their advertisements, which FindWhat.com and its private-label partners such as Terra Lycos's Lycos.com and HotBot distribute to millions of Internet users. Their network includes hundreds of distribution partners, such as CNET's Search.com, Excite, Webcrawler, NBCi, MetaCrawler, Dogpile, Go2Net and Microsoft Internet Explorer Autosearch. FWHT - FindWhat.com $23.11 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 20 HFQ QD 80 0.65 19.35 8.8% 3.4% * SELL PUT MAY 22.5 HFQ QX 0 1.50 21.00 13.6% 7.1% __________________________________________________________________ IMM - Immtech International $21.66 *** Drug Speculation! *** Immtech International (NYSE:IMM) is a pharmaceutical company focused on the development and commercialization of oral drugs to treat fungal, parasitic, bacterial and viral diseases. The company has development programs that include fungal infections, malaria, tuberculosis, hepatitis, pneumocystis carinii pneumonia and tropical medicine diseases, including the African sleeping sickness (a parasitic disease also known as trypanosomiasis) and leishmaniasis (a parasitic disease that destroys the liver). One of its most significant research developments was the discovery of oral drug delivery technology for dication drugs. This unique proprietary technology temporarily masks the positive charges of the dication, enabling the active compound to move easily across digestive membranes into blood circulation. IMM - Immtech International $21.66 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 17.5 IMM QW 220 0.45 17.05 8.4% 2.6% * SELL PUT MAY 20 IMM QD 130 1.25 18.75 14.0% 6.7% __________________________________________________________________ INSP - InfoSpace $45.26 *** Up & Into Outer-Space! *** InfoSpace (NASDAQ:INSP) develops and delivers a wireless and Internet platform of software and application services to a range of customers that span each of its wireline, merchant and wireless business units. Many of the company's products and application services are offered to its customers, which, in turn, offer these products and application services to their customers as their own solutions. InfoSpace provides its services across multiple platforms, including personal computers and non-PC devices. INSP - InfoSpace $45.26 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 35 IOU QG 204 0.55 34.45 5.3% 1.6% * SELL PUT MAY 40 IOU QH 7 1.70 38.30 10.8% 4.4% __________________________________________________________________ MRVL - Marvell Technology $48.09 *** New Multi-Year High! *** Marvell (NASDAQ:MRVL) designs, develops and markets integrated circuits utilizing proprietary communications mixed-signal and digital signal processing technology for communications-related markets. Marvell offers its customers a wide range of integrated circuit solutions using proprietary communications mixed-signal processing and digital signal processing technologies. Marvell's product groups include: storage products, consisting of a variety of read channel, system-on-chip and preamplifier products; and broadband communications products, consisting of a variety of transceiver products, switching products, internetworking products and wireless LAN products. MRVL - Marvell Technology $48.09 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 40 UVM QH 5422 0.50 39.50 4.0% 1.3% TS SELL PUT MAY 42.5 UVM QT 3400 0.95 41.55 6.0% 2.3% * __________________________________________________________________ NFLX - Netflix $37.65 *** On The Rebound! *** Netflix (NASDAQ:NFLX) is an online entertainment service in the United States that provides more than 600,000 subscribers access to a comprehensive library of more than 11,500 movie, television and other filmed entertainment titles. The company's standard subscription plan allows subscribers to have three titles out at the same time with no due dates, late fees or shipping charges. Subscribers can view as many titles as they want in a month and they select these titles at the firm's Website (www.netflix.com) aided by its proprietary CineMatch technology. They receive them on DVD by first-class mail and return them to the company at their convenience using prepaid mailers. Once a title has been returned, Netflix mails the next available title in a subscriber's queue. NFLX - Netflix $37.65 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 27.5 QNQ QY 1345 0.40 27.10 4.6% 1.5% * SELL PUT MAY 30 QNQ QF 3401 0.80 29.20 8.9% 2.7% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ADTN - Adtran $29.50 *** Premium-Selling Only! *** Adtran designs, develops, manufactures, markets and services a broad range of high-speed network access products utilized by providers of telecommunications services and corporate end users to implement advanced digital data services over both public and private networks. The company's business is arranged with two divisions, the Carrier Networks Division (CN) and the Enterprise Networks Division (EN), to enable it to quickly respond to the needs of the two important market segments that its products address. These two market segments are CN products for use in the service provider's Local Loop, including central office, remote terminal and customer premises, and EN products for use at enterprise headquarters, remote offices and telecommuting locations. Adtran offers more than 500 products built around a set of core technologies, and developed to address high-speed digital communications over the last mile of the Local Loop. ADTN - Adtran $29.50 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAY 35 RQA EG 1231 0.55 35.55 7.4% 1.5% * SELL CALL MAY 32.5 RQA EZ 1533 1.05 33.55 9.8% 3.1% __________________________________________________________________ FRED - Fred's $22.72 *** Sector Slump! *** Fred's (NASDAQ:FRED) operates 414 discount general merchandise stores in 14 states primarily in the southeastern United States. Fred's stores generally serve low-, middle- and fixed-income families located in small to medium-sized towns. Fred's stores combines everyday basic merchandise with certain specialty items to offer its customers a selection of general merchandise. The selection of merchandise is supplemented by seasonal specials, private label products and the inclusion of pharmacies in its stores. FRED - Fred's $22.72 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAY 25 FMU EE 391 0.45 25.45 5.7% 1.8% * SELL CALL MAY 22.5 FMU EX 0 1.30 23.80 11.3% 5.5% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... 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