The Option Investor Newsletter Sunday 07-18-2004 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: Five Months Futures Wrap: See Note Index Trader Wrap: ANY DAY NOW? Editor's Plays: And the Winner Is? Market Sentiment: Bulls Can't Get A Break Ask the Analyst: Bullish % and NH/NL breadth analysis 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 7-16 WE 7-09 WE 7-02 WE 6-25 DOW 10139.78 - 73.44 10213 - 69.61 10282 - 89.01 - 44.57 Nasdaq 1883.15 - 63.18 1946.33 - 60.33 2006.66 - 18.81 + 38.74 S&P-100 535.90 - 6.73 542.63 - 4.54 547.17 - 2.58 - 5.06 S&P-500 1101.40 - 11.41 1112.81 - 12.57 1125.38 - 9.05 - 0.57 W5000 10731.86 -110.82 10842 -154.87 10997 - 76.05 + 39.48 SOX 410.46 - 40.68 451.14 - 6.17 457.31 - 21.60 + 25.83 RUT 555.48 - 8.25 563.73 - 18.99 582.72 - 4.98 + 17.16 TRAN 3088.33 + 0.36 3087.97 - 58.20 3146.17 - 18.01 + 95.61 ****************************************************************** Five Months by Jim Brown We have been trapped in this trading range for five months but it appears we may be in for a change of confinement. Instead of sitting in our cells staring at walls of charts that never move we may be in for a change of scenery. That change of scenery may include a lot more red if the current market sentiment continues to decline. Dow Chart Nasdaq Chart The markets roared out of the gate on the IBM earnings, Dell guidance and a tame expected CPI. That opening blast failed to hold and before the day was out we were trading at new lows for the month. Welcome to July. The market positive CPI at only +0.3% sent bonds soaring on thoughts the Fed was on hold for the near future. The CPI headline number was actually a little higher than most analysts expected but only due to higher energy prices. The core rate was only a minimal +0.1% for those who don't use food and energy. Considering energy prices are +17% higher than they were this time last year it is amazing that the current annual headline inflation rate is only +3.3%. Core inflation on an annual basis is only 1.9% and very tame. Raising the CPI for June was another +3.1% jump in gas prices after a +8.1% jump in May. With oil nearing $42 today the odds are good we will another jump in the July report. In the continuing saga of manufacturing surveys the California numbers were announced today. The headline number at 61.6 was still strong but well below the 66.9 high in the prior report. Unlike the other monthly surveys this is a quarterly update. Still the same trends we have seen in the others continued to appear in the CA report. Production slowed to 65.3 from 71 and New Orders fell to 58.4 from 71.3. Employment also slipped slightly. These numbers are still in expansion territory but indicate declining growth in the second quarter. The only other economic report Friday was the first take on the July Consumer Sentiment. The headline number barely moved at 96.0 from June's final at 95.6 but it was the highest level seen since January's 103.8. May saw the low for the year at 90.2 and this represents two months of gains if it holds through the next update. The present conditions component fell -2 points to 104.6 and the future expectations component rose +2 points to 90.4. Gas prices were given as the most negative input. Don't look now but oil prices are still climbing. Oil neared $42 once again and is showing no signs of easing. The global demand continues to increase and OPEC is already pumping at almost full capacity. This is a recurring nightmare for consumers and becoming a very large cloud on the future of earnings for corporations. Recently the stock market has traded opposite the oil market and today was no different. Keep your eye on oil prices next week as we could see a new high. Oil Chart The combination of economics and high oil prices sent bonds soaring to two month highs. The yield on the ten year fell to 4.361% which is very good for the home builder sector. They may get one more really good summer selling season after all. The drop in the CPI and the mixed economics all week sent the Fed funds futures even lower and we are very close to dropping one of the three remaining rate hikes that had been projected this year. The August hike is still on the table but one of the later hikes is on the verge of disappearing. The Fed has been exceptionally quiet the last two weeks but that will change soon. Greenspan gives what was formerly known as the Humphrey Hawkins testimony before the House and Senate committees on both Tuesday and Wednesday. I expect that interest rates and the softness in the economy will be high on the list for the Q&A session. The dollar hit a four month low on Friday despite strong assurances from the administration they support a strong dollar policy. Obviously talk is cheap. Ten-year Yield Chart The markets opened higher on the strength of IBM earnings but that bloom quickly wilted. IBM rose as high as 86.50 but slowly dropped into the close at 84.40. Good news simply does not last past the first coffee break in the current market. Dell added to the opening excitement by raising guidance by +2 cents and jumped nearly +$1 at the open. Dell said those better earnings came from a better tax rate and cost savings on components. Revenue guidance stayed the same and that blunted the positive earnings news. Dell gapped up almost $1 but kept only half that amount at the close. First, traders do not really care about the tax rate because it does not apply to growing sales. Second, lower prices on components suggests there is lower demand for components and could means weakness in the overall sector despite the Dell gains. In some cases gift horses really do have bad teeth. I'll be back! Martha Stewart repeated those words twice ala Terminator style at a press conference after she was sentenced. The domestic diva managed to turn an apology speech into a sales pitch for advertisers and customers while standing on the court steps. The blatant sales pitch just moments after being sentenced to five months in prison, five months under house arrest and two years probation was a little too much for some people. Most wanted her to just say I am sorry and get the sentence over so life at Martha Stewart Living could get back to normal. There was nothing normal about the action in MSO stock. Volume was about 50 times normal and it spiked from yesterday's close at 8.73 to a high of $12.29 and close at 11.81. The lighter than expected sentence and the prospect of putting the whole affair to bed brought the bargain hunters back to shop. Had you bought the July $10 call for its 10 cent close on Thursday it would have been the home run for the month with a close at $1.90 on Friday and high of $2.30. Despite IBM, DELL and MSO the markets still had trouble holding down breakfast. Good news does not stick any longer than hair spray in a Houston wind and the sellers appeared once again. A study out Friday morning showed foreign investors had been net sellers for the last three months and the selling was continuing. This is confounding analysts given the very respectable earnings we have seen so far this cycle. With 77 S&P companies already reported, a whopping 75% have beaten estimates, 19% reported inline and only 6% have missed estimates. If the current rate and quality of earnings continue we will post the fourth consecutive quarter of +20% gains. This would be only the fifth time ever that the market has seen a string of earnings this good. The earnings parade continues next week with a huge number of reporters. 170 S&P companies report along with hundreds of smaller ones. We will have a much better view of the future once those firms give guidance. So why are the gains not translating into a market rally? There are two main reasons and a bunch of little ones. The two biggest culprits are future expectations and event risk. Even the most optimistic expectations for 2005 earnings is only +10% for the entire year. Not 10% per quarter but for the entire year. This is a very big letdown from the high numbers we have been posting and the market is having trouble digesting the future outlook with a string of high risk events in our near future. I have mentioned it before and will not dwell on it but the Democratic convention begins next week on July 26th. This is the first high risk event followed by the Republican convention and the Olympics over the next 60 days. These are prime terrorist targets and at this point it make no difference if any attacks are even contemplated. It is pure risk avoidance coupled with decelerating earnings that is driving investor flight. Fly they did. For the week semiconductors ended down -9% but they are down -15.6% for the month. I missed the fire alarm on semis on July 1st but evidently I was the only one. The SOX closed at 411 on Friday and well below the 420 support range. The bottom has fallen out of the sector despite some positive earnings reports. Next real support is 375-385. There is a fire sale in progress and there will be some real bargains once the smoke clears. October is normally the buying season for semi stocks and that seems a long way off today. Next week we will get the Semi Book-to-Bill numbers for June and a drop from the 1.11 in May could actually accelerate the selling. SOX Chart With the SOX imploding the Russell-2000 never had a chance and when comparing 2003 gains there is far more profit waiting in the RUT than there was in the SOX. The Russell rebounded +85% off the Jan-2003 lows and has consolidated in the 560-590 range since Jan-2004. That consolidation appears about to resolve itself to the downside dragged down by the SOX. We saw a strong fight at 560 support but that level caved in at the close. In May there was a profit taking dip to 535-540 and we seem destined to visit that level again next week. Russell-2000 Chart Semis were not the only sector to get knocked for a significant loss. Airlines dropped -10% for the week as the price of oil soared. Retail continued to be weak as earnings warnings in the sector continued. ISI released a survey that showed sales in July were actually weaker than June and suggested the consumer had taken a real vacation from consuming. There was some serious market damage done Friday but despite the drops we are still clinging to the recent range. I say clinging because the Dow has broken its 200dma at 10197 and support for the last two weeks at 10160. The close at 10140 was the lowest close since May 26th. Since January we have fallen from the highs twice to trade in the 10000 range with the May drop the worst with an intraday spike to 9852 but a close back over 10K. The lowest close was 9906 with multiple closes in the 9950-10000 range. Considering the event risk ahead I can easily see the Dow back at the 10K level next week. Hopefully this will remain the bottom of our range as it has since January. Dow Chart - Weekly The Nasdaq is a different story. It closed on Friday at 1883 and right on the edge of a serious break. 1900 has been headline support since October with brief periodic dips to around 1875 which were always quickly bought. With the SOX and RUT imploding the Nasdaq is falling faster than a twin engine plane with both engines out. The 1900 level barely provided a speed bump to Friday's drop and with the SOX and RUT both under critical support it appears the Nasdaq could easily hit that 1875 level that has been a buy trigger for the last eight months. The only index that held support on Friday was the SPX at 1100. Actually the 200dma at 1103.66 provided support most of the afternoon but we did see it pierced right at the close when several late day sell programs stacked on top of each other. The SPX is the most critical of the indexes to support tests. The SPX is the most widely followed index for funds and the most widely program traded index. The 200dma is a critical support level for this index. It has held as support since April of 2003. This sets up a rebound potential for Monday morning. Since it has such a strong following and has been such strong support there should be some technical buying on Monday. It had better be strong because the S&P moving under the 200dma is also a sell signal for many speculative funds. Not a dump signal but a sign to lighten up. Should we move much below 1100 it could begin to get ugly very fast. Where are we going from here? How many times have we said the markets are at a crucial point and the next week would be pivotal? Consider it said again. The next week is going to be hectic to say the least. We have the Greenspan testimony on Tuesday (2:30) and Wednesday (10:00). Fortunately there are no major economic reports to provide negative sentiment and the few numbers we will get should be market neutral. We have over 500 companies reporting earnings but if the current trend continues 65% of those will beat the estimates. So far this cycle the number has been 75% but we know it declines as the cycle matures to include the smaller companies. Unfortunately good earnings news has failed to impress the market and the fire exits are still flashing red. The motivating event next week, besides Greenspan, will the coming Democratic convention on July 26th. The odds of a sustained rally are almost zero in advance of that event risk but we could see a rebound on Monday from our current SPX support level. I view any early bounce as only a short entry for the rest of the week. Hopefully the fear factor surrounding the convention will be much ado about nothing but the markets cannot afford to ignore it. This does bring up the potential for the Fed's Plunge Protection Team to suddenly appear with a couple buy programs in the interest of protecting the markets from overactive speculation. This is exactly the kind of crisis that they were created for under the Reagan administration. As for me I am going to be watching for an uptick in the futures at the Sunday night open to see if the SPX support at 1100-1103 will hold. If so I am going to be Long in the Futures Monitor with plans on reversing to short when any rebound fades. Conversely a break under SPX 1100 will have me looking for a short opportunity. This is one of those rare instances where the dividing line is so clear. For next week remain short below SPX 1100 and sell any rally over 1100 as it fails. Enter Very Passively, Exit Very Aggressively! Jim Brown *************** FUTURES MARKETS *************** 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 ******************** ANY DAY NOW? By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE – What a drag tech makes - that and oil, now climbing above 41 dollars - with these factors, the market is no longer so focused on an improving second half. Last week, the technical picture gave me some reason to start thinking about doing some bottom fishing - too soon! With a strong intermediate downturn dominating, it looks like the market may get still more oversold and extended on the downside, before a rebound develops. As far as sectors, the Semiconductor index (SOX) is dragging down Nasdaq and the Nas is being a drag on the S&P. Some key levels where support could develop and are areas to watch for signs of buying interest coming in again: SOX around 400-405(Friday close: 410.5); Nasdaq Composite (COMP) in the 1875-1865 zone (Fri close: 1883); if the S&P 500 (SPX) can't hold 1100, then 1080, at prior lows, is a target; if 535 is penetrated in the S&P 100 (OEX) then 530 is an objective (Fri close: 535.9); 34-34.5 looks to be, yet again, the low end of a broad QQQ trading range (Fri close: 34.7). FRIDAY'S TRADING ACTIVITY – The Nasdaq (Composite) closed below 1,900 for the first time in two months Friday. The blue chip NYSE traded stocks gave up early gains as rising oil prices and slowing demand in the tech sector generated concern over just how good future economic growth was going to be. A weaker-than-expected consumer sentiment report undermined investor confidence, and took the shine off tame inflation data for June that was indicated in the latest CPI report. THE NUMBERS – The S&P 500 (SPX) was down 5.30 points by the close (-0.5%) to 1101 and was off 1% for the week. The Dow (INDU) ended around its low for the day, -23.4 points (0.2%) at 10,139.78 - this after getting up to as high as 10,238.37 after some IBM news and CPI figures. INDU was off 0.7% on the week. The Nasdaq Composite (COMP) fell sharply, off by 29.5 points (- 1.5%) and closed at 1,883.15, first time below 1900 since late- May. The Composite fell slightly over 3% on the week - since the start of the earnings reporting season a couple of weeks back, COMP has fallen over 6%. The Russell 2000 (RUT), the market gauge of small capitalization stocks, was off 1.2% by the close, which was at 555.5 REPORTS & EARNINGS NEWS – The good news of the day was the U.S. retail inflation data for June - the Consumer Price Index (CPI) increased 0.3 percent in June, slightly ahead of expectations of a 0.2 percent gain, but the so-called "core inflation rate" dropped to its lowest rate of 2004. Core CPI, which excludes food and energy costs, rose only 0.1 percent. The University of Michigan's consumer sentiment index for July rose to 96.0 from a reading of 95.6 in June, but a bit under an expected 96.4. IBM gave some early support to the Dow early on, as the company's chief financial officer backed consensus forecasts for Big Blue's earnings in 2004 in the wake of Q2 results in which earnings topped analyst expectations but sales narrowly missed the Street's target. The IBM CFO also predicted the technology industry will post its best growth since 2000. Elsewhere in tech land, Dell (DELL) Computer was buoyed after the company indicated that its current quarterly earnings would rise 29% to 31 cents, topping its own target from before a couple percent due to better operating profitability rather than by growth in its previously estimated sales figures. Pfizer (PFE) extended a sharp decline from Thursday as it cautioned that 2004 sales would miss a $54 billion target set in April by at least $1 billion. OTHER MARKETS – In bonds, prices gained sharply on the inflation data as traders welcomed the prospect of moderate and measured rate increases. The benchmark 10-year note fell in price to a closing (higher) yield of 4.37%, versus 4.48% on the day prior day's trade. In the FOREX market, the dollar fell against its major rivals on the inflation data, as the speculation was that low inflation boosted the odds for only a gradual hike in interest rates over coming months, making holding dollars and dollar assets less attractive. The U.S. dollar was off 1.1% again the Yen, to 108.62 yen. The euro rose 0.8% to $1.246. MY INDEX OUTLOOKS – S&P 500 Index (SPX) – Daily chart: Last week, I talked about the things I look for when an Index may be setting up to reverse trend. It looked to me like SPX was at or near a bottom - WRONG! Or, at least early to suggest exiting Index put position, at least all of them. Once the midweek rally failed in the 1120 area, it was back to renewed selling pressure. The close under the 200-day moving average was bearish. Now is a watch for whether the S&P (500) Index can hold around 1100 in the coming week and can rebound to back above its 200-day moving average, or if there will be another retreat to the 1080 area which I have highlighted at the dashed level line with a green arrow in the daily chart below - Call to Put Ratio - this is the above indicator (not labeled). Once again, put activity in individual stock options, relative to daily call volume, is at levels associated with an upcoming rebound. However, at times where there are new fundamental market assumptions that call into question the major market trend that has come before, bearishness can hit greater extremes - this type of extreme I measure by my call to put indicator. This was the case in early to mid-May if you look at the Call/Put levels there. Am still intrigued by the possibility that if lows are made in the 1090-1095 area, followed by a rebound, a possible head & shoulder's bottom would be in place. S&P 100 Index (OEX) – Daily chart: The S&P 100(OEX) failed to hold the 540 area and the up trendline that I thought might define support. A bearish close under the 200-day average is also bearish, but the 100 index tends to slip more under this key average than is the case with the 500 Index (SPX) in a bullish trend - a good example was in May when the OEX traded below it for several days. This was not situation with SPX as the 200-day average was not penetrated. Near support is at hand now as I measure it - at 535; with the next technical support comes in around 530, at the cluster of lows that formed at the May bottom. Near resistance is at 542-545 - a rebound back above 543, that holds this area in subsequent trading, is bullish. Next resistance is around 548. I would be alert in the coming week to signs of another upside reversal and not overstay in index puts, as it seems doubtful that there will be another whole new down "leg" here, given the approach to an oversold RSI reading and nearness to prior lows. Dow 30 Average (INDU) – Hourly close chart: A decline to 10,100 would represent a 62% retracement of the last upswing in the Dow, on an hourly closing basis. If there is an hourly and then daily close under 10,100 it would suggest then that INDU was heading to a retest of 10,000 again - the most bearish scenario is a "round-trip back to the lows in the low 9900 area. Once a retracement exceeds 62% to 2/3rds., a retreat to the starting point of the last rally is common. Key near resistance is at 10,175, then in the 10,250 area. Using my longer length RSI setting ("21") on the hourly chart suggests that the Dow as least is not yet down to a reading suggesting an oversold extreme - not as much as in May on a shorter-term basis as can be seen in the lower (Indicator) portion of the above chart. Nasdaq 100 (NDX) Index – Daily: 1450 continues to look like key resistance, 1380, key technical support. 1380 is a potential support area to watch. NDX could sink to 1370 and simply be back to the low end of what might be a broad trading range market. For some months now, NDX puts have been a buy at or above 1500 and buying NDX calls was quite favorable in the 1370-1380 zone. In my estimation, there is no major reason to suppose or speculate yet that NDX has built a significant top - rather than just having gone into a broad trading range. A broad trading range market is ideal of course for Index options traders - better than a strong trend higher or lower that offers fewer places to get back in to a major trade. Nasdaq 100 tracking Stock (QQQ) Daily: Previously, I suggested buying the stock in the 35 area. I favor purchases at 34-34.50, if reached, as an area to add to positions or stake out a new one. However, a close under 34.00 would be more than I expect currently and my risk point on being long the stock. Of course stop orders left in for automatic execution can't be based on a close here - a 33.70 sell stop is an alternative. I anticipate support coming in at the 34-34.5 area and near resistance at 35; then, at 35.50, which can be better seen further on in the hourly chart, past the daily chart immediately below - Nasdaq 100 tracking Stock (QQQ) Hourly: The hourly picture for the Q's is below. The falling (downside) wedge pattern that I have outlined, could be suggesting a type of "compression" of buying and selling forces such that a "recoil" effect may be coming - one that signals a rebound in the stock price fairly soon. So, far no signs of this - but reversals rarely come with bells on them. I keep waiting to hear that bell ringing at either a top or bottom but haven't heard either yet!! Good Trading Success! TRADER'S CORNER ARTICLE NOTE: I finished my series on Dow Theory last week – part 3, which dealt with defining a trend as to minor, intermediate and long- term (the major or primary trend), as well as a bit more on bullish/bearish price/indicator divergences. If interested, see – http://www.OptionInvestor.com/traderscorner/tc_071504_2.asp ************************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 ************** And the Winner Is? If you took my $20 bet on the Intel $25 put INQ-SE last week you are a happy camper this weekend. That 20 cent option close the week at $2.20 and a whopping 1000% gain. The Intel earnings surprised everyone with the inventory glut and the rest is history. Did anybody realize that they almost doubled their profits from last year? Doesn't matter once the spin doctors take control. All you need is Dan Niles on CNBC saying money in Intel is dead money for the next 3-6 months and the lemmings rush over the cliff. Conversely if you bet against me with the $27.50 call you found no buyers on Wednesday morning and your call expires worthless. It was only a lottery play and high risk but I like to profile a few of those when conditions warrant. Unfortunately I did not profile the July $10 call on MSO last week, which was selling for 5-10 cents up until Thursday's close. It went out at $1.90 on Friday after hitting a high of $2.30. Oh well, can't pick them all. Microsoft Update On June 27th I profiled a combination play on Microsoft in advance of their decision on cash disbursement due out by July 29th. They are supposed to announce a plan to give back that cash to the investors in some manner that might include a one time cash dividend of several dollars a share or a massive stock buyback or some yet unknown scheme. We entered a Aug-$27.50 Put MSQ-TY and the Aug $30 call MSQ-HF for about $1.00 depending on your fill. MSFT has declined to close at 27.47 on Friday. They announced a massive cost cutting program last week aimed at cutting $1 billion in costs. Things itemized on the list included hundreds of mundane employee benefits that barely cost more than a cup of coffee from the office vending machine. The announcement caused speculation that Microsoft may be hurting for earnings and needed to pinch pennies to hit profit targets. This is not a good sign for the cash disbursement project. Granted disbursing the cash on hand will not impact earnings but if times are tight it might make them much more tight fisted when the announcement comes. The put today is worth about 85 cents and the call 25 cents. I had hoped the stock would have moved higher on speculation and the put would be meaningless before now but the cost cutting announcement squashed that idea. We are now faced with a decision before the earnings announcement on July 22nd. There is the possibility they could announce their plan with earnings, especially if earnings are not that good. The plan would be a smoke screen to cover any earnings disappointment. The challenge now is which one to hold over earnings. If they announced a $2 per share cash disbursement for the nearly 11 billion shares outstanding that would use about one third of their cash and that may be about all the boys want to part with. I believe it would be a disappointment to those buyers who ran up the stock from $25.50 when the date was announced. That might bring the stock back down to the $26 level and coupled with any earnings disappointment maybe lower. Obviously this is all speculation. On the call side for 25 cents I think it is worth holding. Who knows, Microsoft might pull a rabbit out of their hat and surprise everyone with a $50 billion share buyback (1,818,181,818 shares) or 17% of the outstanding shares. A buyback of this magnitude would be such a shock to the market that we could see the stock shoot up to $32 almost overnight on speculation. (+17%) Remember not all shares are available for trading or for buyback. This would shrink the available pool. Again, only speculation but there is plenty of potential for a move in either direction. I said in the play profile we would decide before earnings which option to hold and which to dump. I lied. I am going to keep them both. If they do announce some crazy plan that rockets the stock or some earnings challenge and a wimpy plan we should plan on selling on the spike in either direction. If there is no easily recognizable answer then we will discuss this again next Sunday. I don't think there is a way we can lose money with our August positions but then Murphy is alive and well. Microsoft Chart *********************** News Corp Update $35.61 We saw a jump in NWS on Friday to $35.61 on an upgrade from CSFB but there is still no movement on the long term outlook. The company is putting the move to the U.S. exchanges to a vote in Oct/Nov and the polls are running strongly in favor. There is a vocal minority of Australian shareholders screaming foul but few analysts expect them to win. The plan was to sell covered calls against this position to offset our costs but we remain too far away from the next strike to do any good. The $40 Aug call is only 10 cents. Definitely not worth the risk. Current position: Long (6) Jan-2006 $40 Calls WLN-AH @ $3.83 http://members.OptionInvestor.com/editorplays/edply_041104_1.asp http://members.OptionInvestor.com/editorplays/edply_041804_1.asp ********************** PVN Call Update $14.17 http://members.OptionInvestor.com/editorplays/edply_061304_1.asp **************** MARKET SENTIMENT **************** Bulls Can't Get A Break - J. Brown July has been a very tough month for stocks. You might remember our comments a couple of weeks ago quoting the Stock Trader's Almanac that July was the beginning of the worst four months of the year for the NASDAQ. I hope it doesn't get much worse. The NASDAQ composite is down 8% on the month. Driving the move has been a 15% drop in the semiconductor index, a 13% drop in the software index, and a 12% drop in the networking index. The airlines are also getting crushed with a 19% drop for the month as crude oil prices have surged back above the $40.00 a barrel mark. Don't look now but they closed at $41.25 on Friday and oil was bouncing higher into the closing bell. The rising price of oil affects all of us not just the airlines. Manufacturers have to deal with the high cost of oil and consumers are feeling the pinch at the gas pump. Higher gasoline prices impact consumer spending, which supports more than 2/3rds of our economy. It was only a month ago that the market was intensely focused on the last week of June with the FOMC meeting and rate hike, the Iraq transfer of power and the jobs report. Investors were hoping that once those events passed the markets would move from their trading range. The hope was that those three events would pass without any negative surprises and we could rally into what was supposed to be a strong Q2 earnings season. Since then we've endured a painful parade of earnings warnings but most of them have been tech stocks. Despite the rash of warnings earnings are actually coming in higher than estimates with 75% of those S&P 500 components reporting beating expectations. Some of the tech bellwethers are doing okay. Granted Intel's report wasn't glowing but IBM managed to beat estimates, APPL turned in a stellar quarter (okay not a bellwether) and DELL raised estimates on Friday. Yet investors aren't inspired by the numbers as they look ahead to tougher year over year comparisons in the third and fourth quarters. Economic growth for the third quarter of 2003 was at twenty-year highs. There's no chance we'll be able to repeat that any time soon. Yet the economic picture isn't bad. General Electric's CEO said the economy was the best he'd seen in years. Most of the economic data coming out confirms that we're still expanding. Investors are just dealing with news that growth is slowing. We should be cheering that the economy is climbing at a moderate pace because it keeps the Federal Reserve to their "measured pace" plan for future interest rate hikes. Hmm.. if we're not worried about the economy or rising rates what could it be? How about the fact that the third quarter will host the Democratic and Republican conventions and the Olympics in Greece. All three are high-profile terrorist targets. After recent announcements from the Department of Homeland Defense about terrorists already in our country planning something big to disrupt our election process and Greece's inability to get their power grid up and running for the Olympics much less handle security... well you can see that investors would be negligent if they didn't consider the implications of such attacks and plan accordingly with their money (a.k.a. move to the sidelines). Next week should be interesting. Not only is it the peak in the Q2 earnings season with 173 S&P 500 components reporting earnings but hundreds of smaller companies will also report. Plus, we'll hear plenty of "Fedspeak". Here are some of the highlights for next week's calendar. On Monday we'll hear from Dow-component MMM for their Q2 earnings. Tuesday brings Philly Fed President Santomero as he speaks on the economy while Dow-component Altria Group (MO) reports earnings. Tuesday afternoon Alan Greenspan appears before the senate banking committee to answer questions and give testimony on the country's economic outlook. Wednesday we'll hear from Dow-components Honeywell (HON), Merck (MRK), Pfizer (PFE) and United Technologies (UTX). Plus, Wednesday morning will showcase Greenspan's appearance before the House financial services committee who will no doubt lob tougher questions at the chairman after seeing his responses on Tuesday. Thursday proves to be a massive day for earnings with dozens of announcements. We'll hear from Dow-components American Intl Group (AIG), Caterpillar (CAT), Coca-Cola (KO), McDonalds (MCD), Microsoft (MSFT) and SBC Communications (SBC). On Friday we'll hear more talk about the economy and monetary policy from Chicago Fed President Moskow. In summary traders should consider caution to be the better part of valor here. It might be tempting to try and catch some of the falling knives with tech stocks so oversold but such attempts to pick a bottom usually end up with painful injuries. This is probably not the best environment for bullish strategies. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8996 Current : 10139 Moving Averages: (Simple) 10-dma: 10221 50-dma: 10221 200-dma: 10197 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 960 Current : 1101 Moving Averages: (Simple) 10-dma: 1113 50-dma: 1117 200-dma: 1103 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1204 Current : 1392 Moving Averages: (Simple) 10-dma: 1433 50-dma: 1447 200-dma: 1446 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 14.34 -0.37 CBOE Mkt Volatility old VIX (VXO) = 15.35 -0.38 Nasdaq Volatility Index (VXN) = 20.94 -0.74 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.12 1,003,161 1,124,042 Equity Only 0.93 812,201 758,206 OEX 1.54 41,676 64,088 QQQ 6.68 23,937 160,011 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 64.7 + 0 Bear Confirmed NASDAQ-100 43.0 - 2 Bear Confirmed Dow Indust. 66.7 + 0 Bear Confirmed S&P 500 60.0 + 0 Bear Confirmed S&P 100 63.0 + 1 Bear 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: 1.44 10-dma: 1.35 21-dma: 1.26 55-dma: 1.31 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 1368 895 Decliners 1414 2069 New Highs 102 26 New Lows 43 118 Up Volume 652M 245M Down Vol. 1050M 1482M Total Vol. 1712M 1741M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 07/13/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Not much movement going on in the Commercial traders' positions for the large S&P futures contracts. They remain net bearish but by a small margin. Small traders remain net bullish but have upped their shorts a bit. Commercials Long Short Net % Of OI 06/22/04 407,842 415,462 ( 7,620) (0.9%) 06/29/04 405,273 413,351 ( 8,078) (0.9%) 07/06/04 402,952 416,526 (13,574) (1.7%) 07/16/04 407,166 416,869 ( 9,703) (1.2%) 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 06/22/04 124,985 89,934 35,051 16.3% 06/29/04 129,978 94,535 35,443 15.7% 07/06/04 132,423 90,748 41,675 18.7% 07/16/04 133,935 95,787 38,148 16.6% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 Commercial traders have reduced their long positions in the e-minis raising their net bearish positions several percentage points. Small traders are still very bullish. Commercials Long Short Net % Of OI 06/22/04 229,290 446,974 (217,684) (32.2%) 06/29/04 258,443 447,505 (189,062) (26.7%) 07/06/04 287,442 423,583 (136,141) (19.1%) 07/16/04 265,142 427,017 (161,875) (23.4%) 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 06/22/04 243,444 58,389 185,055 61.3% 06/29/04 236,492 47,780 188,712 66.3% 07/06/04 219,321 58,567 160,754 57.8% 07/16/04 225,410 57,699 167,711 59.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders upped their long positions a bit boosting their bullish stature on the NDX. Small traders reduced both their longs and shorts but the drop in long positions actually left them move bearish. Commercials Long Short Net % of OI 06/22/04 40,397 37,413 2,984 3.8% 06/29/04 41,078 37,194 3,884 4.9% 07/06/04 42,245 37,343 4,902 6.2% 07/16/04 44,211 37,007 7,204 8.9% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 25,160 - 06/01/04 Small Traders Long Short Net % of OI 06/22/04 9,311 9,950 (639) ( 3.3%) 06/29/04 7,437 11,904 (4,467) (23.1%) 07/06/04 9,345 16,527 (7,182) (27.8%) 07/16/04 7,847 15,243 (7,396) (32.0%) Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercial traders are not making any big moves with their INDU futures positions and they remain net bullish. Meanwhile small traders have turned a bit more bearish, the most we've seen in weeks. Commercials Long Short Net % of OI 06/22/04 26,808 19,752 7,056 15.2% 06/29/04 27,278 20,512 6,766 14.1% 07/06/04 27,214 20,775 6,439 13.4% 07/16/04 27,773 20,573 7,200 14.9% 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 06/22/04 5,626 7,798 (2,172) (16.2%) 06/29/04 4,930 7,682 (2,752) (21.8%) 07/06/04 5,969 8,227 (2,258) (15.9%) 07/16/04 5,292 9,068 (3,776) (26.3%) 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 ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** Bullish % and NH/NL breadth analysis Jeff: Some of the indexes are thought to be near some support levels, but the Bullish % and Summation charts are looking ominous. Up, down or stand aside? I wish I knew. Brian This is an e-mail question I received on Monday, where the trader/investor attached several charts of various major market bullish %. I'm not going to show all the charts that the trader sent me, but you can find FREE bullish % charts at www.stockcharts.com for the very broad (3000 + stocks) NYSE Bullish % ($BNYA) and NASDAQ Composite Bullish % ($BPCOMPQ) in the same line chart as the S&P 500 Bullish % ($BPSX) the trader sent me, and shown below. I'm showing the chart just as the trader sent me, where he is using default RSI and MACD (which I have not used in past analysis), as well as 200-day SMA and 10-day SMA. I believe the trader/investor changed the 50-day SMA to a 10-day SMA so it might tie in with our "Market Snapshot" New High and New Low indications we follow at the end of each trading day, where we are using the NH/NL indications as a faster moving indicator of bullish or bearish leadership. Here's the S&P 500 Bullish % ($BPSPX) chart the trader sent me. S&P 500 Bullish % ($BPSPX) - line chart I'm proud that the trader is using the bullish % as an indicator of internal strength/weakness, where despite his either hearing or reading that "the indexes are thought to be near some price support levels," the bullish % charts are looking ominous. Now, I have never used the RSI (top of chart) indicator with the bullish %. I tend to use the bullish % charts as an indicator of how much MARKET RISK there is (above 70% is considered longer- term overbought and HIGH risk for bulls) and how strong or weak the market internals are for the bullish % I'm interpreting. Still, as I look at the RSI on the chart, it pretty much mimics the line chart of the $BPSPX, where the "Bearish Divergence" I point to would have had the RSI falling toward 30 when the $BPSPX line was still above 85%. Now, YOU the trader/investor can be the judge if the line chart and use of simple moving averages is useful. Remember that the S&P 500 Bullish % ($BPSPX) is measuring point and figure charts of 500 stocks and with 500 stocks, this broad measure of market internals will most likely be SLOWER moving than a narrower-based bullish % measuring 100 stocks. Friday's trade saw a net loss of 2 stocks to a reversing lower point and figure sell signal. Imagine you have two stacks of point and figure charts. One stack has charts that show a "buy signal" intact, while the other stack has charts that show a "sell signal" intact. At the end of each day, you would chart any changes, using the 3-box reversal method of point and figure charting. Those charts that showed a reversing upward point and figure buy signal (that negated the prior sell signal) move to the "buy signal pile," while those charts that showed a reversing down point and figure sell signal (that negated the prior buy signal) move over to the "sell signal pile" of charts. Right now, 300 of the 500 charts you are following with the bullish % are currently in the "buy signal pile" while 200 are in the sell signal pile. Here was my reply, which I'm going to try and expand on in a minute. Reply: I can make comment, but I think these moving average "crossovers" are a duplication of what I've noted in the NYSE and NASDAQ 5-day NH/NL and 10-day NH/NL indications. Both signaled caution last week. Right now the TEST is if the 5-day NH/NL and 10-day NH/NL "bottom out" before the broader and slower moving bullish % actually reverse lower. Now... both the VERY BROAD NYSE and NASDAQ Composite bullish % (3000 + stocks each) never have turned up like the broad S&P 500 did, or the NARROWER S&P 100 and NASDAQ-100 Bullish %. In essence, the BIG RIVERS (NYSE and NASDAQ Composite) were still flowing south, but the tributary rivers (SPX, OEX, NDX) were starting to see some dry up of selling, and filling with a little more bullishness. With these "rivers" all heading in somewhat different directions (the bullish %) that's what has created a tough market to trade, as it has been more range bound. So.... I've been trying to cover the NH/NL indications, as if these are the SALMON swimming in the river. When NH/NL breadth is strong, then the salmon are swimming upstream (NH outnumbering NL). When the 5-day moves below the 10-day then the salmon no longer have the bullish leadership, and they turn to swim downstream. Right now.... things seem to be moving downstream for not only the faster moving 5-day and 10-day NH/NL indications, but like you note, the slower moving bullish %, where you're using simple moving averages to chart the combined daily average moves. Did you see the charts I showed of the NYSE and NASDAQ NH/NL indications in Friday's Market Monitor Archive? This might give some insight as to what you are also seeing in the bullish % right now with your 10 and 200 day SMAs. I might use your question for this weekend's Ask the Analyst column. End of reply Now that we've looked at the chart Brian sent me, lets look at the point and figure method (Xs and Os) of charting the line chart. When I look at the line chart, with the inflection low of 57.6%, this IMMEDIATELY becomes a near-term RISK objective that you and I need to be aware of. S&P 500 Bullish % ($BPSPX) - 2% box size When I look at the $BPSPX using the 3-box reversal technique and conventional scale of 2% box size, Friday's trade would have this bullish % chart reversing BACK DOWN to "bear confirmed" status. In Brian's line chart, perhaps the 200-day SMA would have given a "heads up" that the PnF Bullish % chart was vulnerable to giving the "bear confirmed" reading at 72%. Bear confirmed as the 72% reading fell BELOW the 74% reading in early August of 2003 (red 8 is August). Since trading a relative low reading (on the PnF chart) of 58%, the %BPSPX reversed up to "bear correction" status, and Friday's action, combined with previous session's trade, now has the bullish % reversing back lower to "bear confirmed" status at 60%. One reason I like to view the bullish % on the conventional PnF chart, is to observe "meaningful" moves of 6% for reversals. The line chart that Brian sends gives us a little more action as we can see from the 10-day SMA. Current RISK analysis: With the broader S&P 500 Bullish % ($BPSPX) now reversing back lower to "bear confirmed" status, I must at least assess downside risk to 58% bullish, and in the context of PRICE for the S&P 500 Index (SPX.X) 1,101.39 -0.47%, to its May relative lows of 1,080. Now, here is where I want to bring in the NYSE and NASDAQ NH/NL Indications, and tie them in with Brian's question, of "up, down, or stand aside." Trade observations: On May 17, 2004 I profiled a BEARISH 1/2 position for the Dow Diamonds (DIA) $101.70 and the JULY $100 puts (which expired on Friday) when the DIA was trading $99.50. Then at HIGHER price of $103.90 on June 9, 2004 I profiled the additional 1/2 BEARISH position. While these puts were closed out prior to today's expiration, the trade resulted in a loss. Both of them. LOSSES in a BEARISH index trade despite very broad NYSE Bullish % ($BPNYA) and NASDAQ Bullish % (COMPQ), as well as the OEX , SPX and INDU all in "bear confirmed" status. ONLY the NASDAQ-100 Bullish % ($BPNDX) was in a bullish phase at "bull alert" status, which took place on May 27, 2004. I'm going to critique my bearish trade profiles against observations I make as it relates to the slower moving bullish % indications, but ALSO the NYSE and NASDAQ NH/NL indications, where I'm trying to learn from what apparently was a mistake. Table - Bullish % and NH/NL breadth In column B, I highlighted my bearish DIA trade profile dates. The ONLY good thing I did on May 17 was profile 1/2 bearish position instead of full position. From column C-H I list the various bullish % readings for the major indices. In BLACK underscore, I mark what ended up being inflection points. I'm only marking inflection points AFTER a 3- box reversal was observed (either to the upside, or downside). The MAIN REASON I've been providing some focus to the NH/NL indications (columns AE - AJ) is when I try to figure out "what went wrong" with my bearish DIA trade, the NH/NL indications might helped me avoid the 06/09/04 trade, if not the 05/17/04 trade when the NYSE NH/NL 5-day Average (column AE) had reached an inflection point low of 3.7% on May 12 (not shown due to vertical space limits on table). In hindsight trading had I waited one more day, the NYSE NH/NL 5-day average (12.5%) would have moved above its 10-day average (10.8%) from a very low level of NH/NL percentage. In essence, I was CORRECT to only profile/trade 1/2 position at what would be considered more "oversold" levels of NYSE NH/NL indications, but I thought rather certain that the NASDAQ NH/NL indications would continue their decline from slightly higher levels, thus continuing to weigh on the major indices like the Dow Industrials. I was incorrect. Now, what do I currently know, or observe as it relates to Brian's comments regarding "some of the indexes are thought to be near some support levels" while at the same time taking into consideration Brian's "ominous looking" bullish % indications. On May 25, in the OI Index Trader Wrap, I thought I observed the "trimming of a hedge" based on Market Volatility (VIX.X) 14.34 and S&P 500 Index (SPX.X) June option activity, where combined with SPX price action (SPX jumped from 1,095-1,113 and an 11-day base). If I benchmark that date and SPX price level, then Friday's close (07/16/04) for the SPX.X 1,101.39 is right back in that congestion low of mid-May. I know, based on bullish % observations that I'm starting to see a renewal of internals weakening (NDX Bullish % also reverses back lower to "bear confirmed" from "bull alert"). Brian's uncertainty, but alertness that the bullish % were "ominous" earlier in the week, would still have the bullish % readings STRONGER than they were on May 25th. By "STRONGER" I would mean that the SPX Bullish % is currently reading 60% compared to 58.40% on May 20th. That's not saying a lot though is it? I could make similar bullish % observations. So just as Brian may be a bit uncertain, and wondering if it is best to "stand aside" I've been trying to use past NH/NL indications versus current NH/NL indications as a "tie breaker." Based on my recent experience with the BEARISH profile in the DIA's, I am admittedly trying NOT to repeat a what is obviously a past mistake. As such, I am looking for any signs of strength, which is why I've been mentioning the NYSE NH/NL indications. Note that the S&P 100 Bullish % ($BPOEX) rose 1% in Friday's trade, with a net gain of one stock generating a reversing higher point and figure buy signal. In today's 01:00 Update, and I do think this is somewhat important, is my "best guessing" that the bullish leadership indication from the NYSE NH/NL 5-day ratio moving above it 10-day ratio might be due to more energy, steel or industrial metal stocks making new highs. While not trading a new 52-week high today, it was oil service provider Schlumberger (NYSE:SLB) $64.91 +0.06% that was the OEX component generating a reversing higher point and figure buy signal at $65.00 in Friday's session. And this Brian, is where we've really got to monitor these NH/NL breadth indications closely. Are the signs of renewed bullish leadership in the NYSE NH/NL indications (5-day moving above 10- day) just due to energy-related stocks? Or are there stocks in other sectors showing a resumption of bullish leadership by setting new 52-week highs? Answer: The broader bullish % are saying there aren't a lot of stock generating new "buy signals" of late, and bullishness must be more narrow. However, caution (1/2 bearish positions) can be implemented, using the NYSE NH/NL indications as a REASON to be cautious from the bearish side. Now, we've looked at Brian's line chart of the S&P 500 Bullish % ($BPSPX), we've looked at the PnF chart Bullish %, and we've looked at the "raw data" where I think the NYSE NH/NL indications gave me some confirmation that when I first traded bearish in the DIA's, had I waited one day, then the NYSE 5-day NH/NL moving above the NYSE 10-day NH/NL would have been a "tie breaker" that could have kept me from making a mistake. But, at some point, a trader/investor that has CONVICTION will actually trade. They'll stick their neck out, even with a 1/4 or 1/2 bullish position. If a trader has NO CONVICTION to their stated scenario and confirming technical analysis then they are best served to sit on the sidelines in cash. Let's look at the NYSE NH/NL point and figure chart. With Xs and Os, we chart the 10-day NH/NL ratio. I think this is why Brian placed the 10-day moving average on his line chart of the S&P 500 Bullish % ($BPSPX). Recently, I've been adding a "twist" to this chart, by placing the letter "f" on this chart, to add the observation of where the 5-day NH/NL ratio resides. Here too, I will use the 3-box reversal technique of PnF charting, so that I'm only recording a 6% reversal in this VERY SHORT-TERM moving average of NH/NL ratio. NYSE NH/NL Chart - 2% box size The "f"ive-day NH/NL ratio has just reversed back up, signaling some return of bullish leadership to the NYSE Composite, where the number of new highs has started to build relative to the number of stocks hitting new 52-week lows. In mid-May, it could well have been that this indicator was simply too "oversold" (below 30%) as the "f"ive-day plunged to 4% with 10-day falling to 12%, but when the 5-day did cross above the 10-day (green f) that was the true signal, or alert to a resumption of bullish leadership. I put GREATER weight in the major market bullish %, than I do in an indicator like the NH/NL bullish % (, but we can see how the NH/NL indicator will turn up and down much quicker than the bullish % that is measuring buy and sell signals ($BPSPX, $BPNYA, etc.) Why would this be the case? For the NYSE NH/NL indications, Friday's trade had 145 stocks hitting new 52-week highs and 52 stocks hitting new lows. Relative to over 3,000 stocks listed at the NYSE, we're only sampling price action of 197 stocks. For the NSADAQ NH/NL indications, 41 stocks hit new 52-week highs, and 161 stocks hitting new lows. Relative to a similar 3,000+ listed on the NASDAQ, we're only sampling price action of 202. Are we in a range bound market right now? The MARKET sure seems to think so as it relates to what the NYSE and NASDAQ NH/NL indications are doing. What is the S&P 500 Index (SPX.X) 1,101 comprised of? NYSE and NASDAQ-listed stocks. My thoughts are this Brian, and it extends beyond the bullish % data we're discussing today, but I would have to become more cautious from the bullish side. Even though the regional banks (BIX.X) are strong, the Dow Transports (TRAN) are strong, steel and industrial metal stocks are stock, "junk bonds" have shown some sign of renewed strength, and oil is back near all-time highs, all of which should be signaling some type of market vote toward economic growth (U.S. and global), the major market bullish % are once again turning back lower, and these BROADER market internals are concerning to a bull. But after seeing breaks above downward trends on the recent move up from the mid-May lows, I still think traders/investors should be looking to trade a "range-bound" market, where we try and buy near the lows of the range, and sell near the highs of the range. Major index trading has been very tough so far this year, and trading range-bound markets is tough as a trader really needs to be bullish when things are looking bearish and testing, or starting to break MAJOR near-term levels of support, then willing to sell into some strength. I do NOT think it wise to be trading "load the truck up" at any point, especially when we're getting so many conflicting signals. Conflicting signals that come in a range bound market. To some, this seems to be "don't trade at all, don't take any risk at all, don't stick your neck out at all." I couldn't disagree more. There is always opportunity. In my opinion, based on observation, I think traders should have a more bullish bias right now for the major indices, and look to trade the range. We looked at the NYSE NH/NL chart, and while there are signs of bullish leadership being renewed as we near support levels, the follow up work I did prior to the 03:15 PM update at OptionInvestor.com did show many of the new highs in the NYSE coming from energy stocks, some banks and cyclical stocks. It was a quick look at didn't encompass all 145 stocks that did trade a new 52-week high. Here's a look at the NASDAQ NH/NL chart. I think traders can be short in here, but I think with the NYSE NH/NL showing some sign of bullish leadership resuming, bears would be monitoring the WEAKER NASDAQ NH/NL breadth. NASDAQ NH/NL Chart - 2% box size The NASDAQ NH/NL chart is notably weaker, or lacks bullish leadership. When comparing this chart to that of the NYSE NH/NL, what would YOU be looking for, relative to what took place in mid-May? I (Jeff Bailey) would be looking for a reversal in this indicator. If you review the table of figures I posted earlier, I'm marking the inflection low in PINK for the "f"ive day on May 12. I then marked the 3-box reversal higher for the "f"ive day, which would have been at 26% on May 19th. For the 10-day (black Xs and Os) I mark the inflection low of 24%, which took place on May 20th, and its 3-box reversal higher to 30% on May 25th. Jeff Bailey ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- MMM 3M Co Mon, Jul 19 Before the Bell 0.96 AKZOY Akzo Nobel N.V. Mon, Jul 19 -----N/A----- N/A ASD American Standard Mon, Jul 19 Before the Bell 0.72 ARMHY ARM Hldg Plc. Mon, Jul 19 -----N/A----- 0.04 AVB Avalonbay Commun Mon, Jul 19 After the Bell 0.80 BNK Banknorth Grp Inc. Mon, Jul 19 Before the Bell 0.57 BSX Boston Sci Corp Mon, Jul 19 Before the Bell 0.48 CF Charter One Fncl Mon, Jul 19 -----N/A----- 0.72 CGNX Cognex Mon, Jul 19 After the Bell 0.23 CNB Colonial BancGrp Mon, Jul 19 -----N/A----- 0.32 DNB D&B Mon, Jul 19 After the Bell 0.59 DOV Dover Corp Mon, Jul 19 After the Bell 0.48 DSL Downey Fncl Corp. Mon, Jul 19 Before the Bell 0.97 RE Everest Re Grp, Ltd.Mon, Jul 19 After the Bell 2.66 FNFG 1st Niagara Fncl GrpMon, Jul 19 Before the Bell 0.16 HE Hawaiian Electric Mon, Jul 19 After the Bell 0.39 HU Hudson Un Bancorp Mon, Jul 19 After the Bell 0.70 ICBC Ind Cmmnty Bank Mon, Jul 19 After the Bell 0.72 KFT Kraft Foods Mon, Jul 19 -----N/A----- 0.46 LEE Lee Enterprises, IncMon, Jul 19 -----N/A----- 0.54 LM Legg Mason Mon, Jul 19 Before the Bell 1.24 LXK Lexmark Intl, Inc. Mon, Jul 19 -----N/A----- 0.96 LNCR Lincare Hldg Mon, Jul 19 -----N/A----- 0.64 MAT Mattel Mon, Jul 19 -----N/A----- 0.05 NE Noble Corp Mon, Jul 19 -----N/A----- 0.25 NHY Norsk Hydro Mon, Jul 19 -----N/A----- N/A OXY Occidental Petrol Mon, Jul 19 Before the Bell 1.42 PKG Pack Corp of AmericaMon, Jul 19 After the Bell 0.08 PRK Park National Mon, Jul 19 -----N/A----- 1.74 PCL Plum Creek Timber Mon, Jul 19 After the Bell 0.31 PCH Potlatch Mon, Jul 19 After the Bell 1.35 RGF R&G FNCL Mon, Jul 19 -----N/A----- 0.68 STLD Steel Dynamics Mon, Jul 19 After the Bell 1.12 TRBS Texas Regional Mon, Jul 19 Before the Bell 0.60 TMA Thornburg Mortgage Mon, Jul 19 After the Bell N/A UDR Un Domin Rlty Trst Mon, Jul 19 After the Bell 0.39 ------------------------- TUESDAY ------------------------------ NDN 99 CENTS Only Tue, Jul 20 -----N/A----- 0.05 ACXM Acxiom Tue, Jul 20 After the Bell 0.13 AFCI Advanced Fibre Comm Tue, Jul 20 After the Bell 0.08 ATI Allegheny Tech Tue, Jul 20 Before the Bell -0.21 MO Altria Grp, Inc. Tue, Jul 20 -----N/A----- 1.27 AMTD Ameritrade Hldg CorpTue, Jul 20 -----N/A----- 0.15 AMCC App Micro Circuits Tue, Jul 20 -----N/A----- 0.00 AN AutoNation Tue, Jul 20 Before the Bell 0.35 AVY Avery Dennison Corp Tue, Jul 20 Before the Bell 0.73 BXS BancorpSouth, Inc. Tue, Jul 20 Before the Bell 0.37 BVC Bay View Capital Tue, Jul 20 After the Bell N/A BLK BlackRock, Inc. Tue, Jul 20 Before the Bell 0.71 BCC Boise Cascade Tue, Jul 20 Before the Bell 0.33 BXP Boston Properties Tue, Jul 20 After the Bell 1.00 CHRW C.H. Robinson WrldwdTue, Jul 20 After the Bell 0.37 BCR C.R. Bard, Inc. Tue, Jul 20 After the Bell 0.56 CNI Can Natl Railway Tue, Jul 20 -----N/A----- 0.72 CDWC CDW Computer CentersTue, Jul 20 -----N/A----- 0.66 CNT CENTERPOINT PPTYS TRTue, Jul 20 -----N/A----- 0.49 CEN Ceridian Tue, Jul 20 Before the Bell 0.19 CPS ChoicePoint, Inc. Tue, Jul 20 Before the Bell 0.40 CNF CNF Inc. Tue, Jul 20 After the Bell 0.57 CLP Colonial Prop Trust Tue, Jul 20 -----N/A----- 0.86 CVG Convergys Corp Tue, Jul 20 After the Bell 0.20 CYMI Cymer, Inc. Tue, Jul 20 Before the Bell 0.29 ET E*TRADE Grp, Inc. Tue, Jul 20 -----N/A----- 0.19 EMC EMC Corp Tue, Jul 20 Before the Bell 0.08 ESV ENSCO Intl Tue, Jul 20 Before the Bell 0.09 F Ford Motor Co Tue, Jul 20 Before the Bell 0.50 FCX Frprt-McMRan Cop GldTue, Jul 20 Before the Bell -0.21 FULT Fulton Fncl Tue, Jul 20 -----N/A----- 0.32 GNTX Gentex Tue, Jul 20 -----N/A----- 0.38 GDW Golden West Fncl Tue, Jul 20 -----N/A----- 2.00 GPT GreenPoint Fncl Tue, Jul 20 Before the Bell 0.96 HCN Health Care REIT Tue, Jul 20 After the Bell 0.74 HMA Health Mgmt Assoc Tue, Jul 20 Before the Bell 0.36 HUBb Hubbell Inc Tue, Jul 20 During the Market 0.57 IFX Infineon Tech AG Tue, Jul 20 Before the Bell N/A IPCR IPC Hldg Tue, Jul 20 After the Bell 1.24 JCI Johnson Controls Tue, Jul 20 Before the Bell 1.15 JRN Journal Comm, Inc. Tue, Jul 20 Before the Bell 0.24 LECO Lincoln Electric Tue, Jul 20 Before the Bell 0.52 LLTC Linear Tech Tue, Jul 20 After the Bell 0.30 MAN Manpower Tue, Jul 20 Before the Bell 0.52 MATW Matthews Intl Tue, Jul 20 -----N/A----- 0.40 MDCO MEDICINES CO Tue, Jul 20 After the Bell 0.08 MEL Mellon Fncl Corp Tue, Jul 20 During the Market 0.44 MRBK Merc Bankshares Tue, Jul 20 Before the Bell 0.72 MCHP Microchip Tech Tue, Jul 20 After the Bell 0.26 MIL Millipore Corp. Tue, Jul 20 -----N/A----- 0.55 MOT Motorola Inc. Tue, Jul 20 After the Bell 0.18 NVS Novartis Corp Tue, Jul 20 Before the Bell 0.59 JNC Nuveen Investments Tue, Jul 20 Before the Bell 0.40 OMM OMI Corp Tue, Jul 20 After the Bell 0.42 OI Owens Illinois Tue, Jul 20 After the Bell 0.48 PLT Plantronics, Inc. Tue, Jul 20 After the Bell 0.39 PPP Pogo Producing Tue, Jul 20 -----N/A----- 1.32 PTZ Pulitzer Inc. Tue, Jul 20 Before the Bell 0.57 RSH RadioShack Corp Tue, Jul 20 Before the Bell 0.39 RFMD RF Micro Devices Tue, Jul 20 After the Bell 0.04 SAFC Safeco Corp. Tue, Jul 20 Before the Bell 0.80 SANM Sanmina-SCI Corp. Tue, Jul 20 After the Bell 0.06 STX Seagate Tech Tue, Jul 20 After the Bell 0.00 SSD Simpson Manu Tue, Jul 20 After the Bell 0.84 SLG SL Green Rlty Tue, Jul 20 After the Bell 0.94 TSFG South Fncl Grp Inc Tue, Jul 20 Before the Bell 0.48 SOV Sovereign Bancorp Tue, Jul 20 After the Bell 0.41 STK Storage Tech Tue, Jul 20 After the Bell 0.31 SUNW Sun MicroSys Tue, Jul 20 -----N/A----- -0.04 TASR Taser Intl, Inc. Tue, Jul 20 Before the Bell 0.13 TER Teradyne Inc. Tue, Jul 20 After the Bell 0.37 TXN Texas Instruments Tue, Jul 20 After the Bell 0.25 CAKE Cheesecake Factory Tue, Jul 20 After the Bell 0.34 TRMK Trustmark Corp Tue, Jul 20 -----N/A----- 0.51 TSS TSYS Tue, Jul 20 -----N/A----- 0.18 USB U.S. Bancorp Tue, Jul 20 Before the Bell 0.53 UB UnionBanCal Tue, Jul 20 After the Bell 1.08 UBSI United Bankshares Tue, Jul 20 -----N/A----- 0.55 WFC Wells Fargo & Co Tue, Jul 20 Before the Bell 1.04 WABC Westamerica BanCorp Tue, Jul 20 During the Market 0.76 XTO XTO Energy Inc. Tue, Jul 20 -----N/A----- 0.55 ------------------------ WEDNESDAY ----------------------------- AGRa Agere Sys, Inc. Wed, Jul 21 Before the Bell 0.01 ALFA Alfa Corp Wed, Jul 21 Before the Bell 0.21 ALE Allete Wed, Jul 21 After the Bell 0.54 ADS Alliance Data Sys Wed, Jul 21 -----N/A----- 0.32 ALTR Altera Corp Wed, Jul 21 4:30 pm ET 0.17 ABK Ambac Fncl Grp Wed, Jul 21 Before the Bell 1.51 DOX Amdocs Limited Wed, Jul 21 -----N/A----- 0.30 AME AMETEK Inc. Wed, Jul 21 Before the Bell 0.38 APH Amphenol Wed, Jul 21 Before the Bell 0.42 AWE AT&T Wireless Wed, Jul 21 -----N/A----- -0.01 ATML Atmel Corp Wed, Jul 21 After the Bell 0.03 BJS BJ SVCS CO Wed, Jul 21 Before the Bell 0.41 BOKF BOK Fncl Wed, Jul 21 -----N/A----- 0.65 BR Burlington ResourcesWed, Jul 21 After the Bell 0.85 CSG Cadbury Schweppes Wed, Jul 21 -----N/A----- N/A CDN Cadence Design Sys Wed, Jul 21 After the Bell 0.15 COF Capital One Fncl Wed, Jul 21 After the Bell 1.50 CD Cendant Corp Wed, Jul 21 After the Bell 0.45 CERN Cerner Corp Wed, Jul 21 After the Bell 0.37 CHIR Chiron Wed, Jul 21 After the Bell 0.24 CTXS Citrix Sys Wed, Jul 21 After the Bell 0.18 CL Colgate-Palmolive Wed, Jul 21 -----N/A----- 0.66 COLM Columbia Sportswear Wed, Jul 21 After the Bell 0.23 CYH Cmmnty Health Sys Wed, Jul 21 After the Bell 0.36 CVD Covance Wed, Jul 21 After the Bell 0.36 DHI D.R. Horton Wed, Jul 21 Before the Bell 0.87 DCN Dana Wed, Jul 21 -----N/A----- 0.49 DO Dmnd Offshore DrllngWed, Jul 21 Before the Bell -0.02 DBD Diebold Wed, Jul 21 Before the Bell 0.60 DST DST Sys Wed, Jul 21 After the Bell 0.55 EK Eastman Kodak Co Wed, Jul 21 Before the Bell 0.59 EBAY eBay Wed, Jul 21 After the Bell 0.27 EFII Electronics Imaging Wed, Jul 21 After the Bell 0.24 ERES eResearch Tech Wed, Jul 21 After the Bell 0.14 ERICY Ericsson LM Tele Wed, Jul 21 -----N/A----- 0.29 FNM Fannie Mae Wed, Jul 21 Before the Bell 1.83 FDC First Data Wed, Jul 21 Before the Bell 0.53 FR First Ind Rlty TrustWed, Jul 21 After the Bell 0.65 FMBI 1st Midwest Bancorp Wed, Jul 21 Before the Bell 0.53 FHN First Tennessee NatlWed, Jul 21 Before the Bell 0.94 GD General Dynamics Wed, Jul 21 Before the Bell 1.40 GM General Motors Corp.Wed, Jul 21 Before the Bell 2.24 GYI GETTY IMAGES INC Wed, Jul 21 After the Bell 0.40 GPN Global Payments Inc.Wed, Jul 21 After the Bell 0.45 GG Goldcorp Wed, Jul 21 After the Bell 0.08 HET Harrah's Entertain Wed, Jul 21 -----N/A----- 0.79 HRH Hilb Rogal & Hobbs Wed, Jul 21 After the Bell 0.60 HON Honeywell Wed, Jul 21 Before the Bell 0.38 HMT Host Marriott Wed, Jul 21 Before the Bell 0.28 HCBK Hudson City Bancorp Wed, Jul 21 Before the Bell 0.31 HYSL Hyperion Wed, Jul 21 Before the Bell 0.40 ITW Illinois Tool Works Wed, Jul 21 Before the Bell 1.16 IMN Imation Corp. Wed, Jul 21 Before the Bell 0.51 IMCL ImClone Sys Inc Wed, Jul 21 -----N/A----- 0.22 IVGN Invitrogen Corp Wed, Jul 21 Before the Bell 0.74 JPM J.P. Morgan Chase Wed, Jul 21 Before the Bell 0.83 KMI Kinder Morgan Wed, Jul 21 -----N/A----- 0.83 NITE Knight Trading Grp Wed, Jul 21 Before the Bell 0.08 KNGT Knight Transport Wed, Jul 21 After the Bell 0.27 LRCX Lam Research Wed, Jul 21 After the Bell 0.26 LF LeapFrog EnterprisesWed, Jul 21 After the Bell -0.15 LEG Leggett & Platt Wed, Jul 21 After the Bell 0.38 LU Lucent Technologies Wed, Jul 21 Before the Bell 0.02 MXO Maxtor Corp Wed, Jul 21 After the Bell -0.17 MRK Merck & Co., Inc. Wed, Jul 21 Before the Bell 0.79 MERQ Mercury Interactive Wed, Jul 21 -----N/A----- 0.25 MEOH Methanex Wed, Jul 21 -----N/A----- 0.42 MGG MGM MIRAGE Wed, Jul 21 Before the Bell 0.58 MLNM Millennium Pharm Wed, Jul 21 After the Bell -0.10 MHK Mohawk Ind, Inc. Wed, Jul 21 After the Bell 1.30 NCEN New Century Fncl Wed, Jul 21 -----N/A----- 2.13 NYB NY Cmmnty Bancorp Wed, Jul 21 Before the Bell 0.50 NXTL Nextel Comm Wed, Jul 21 -----N/A----- 0.51 NTRS Northern Trust Wed, Jul 21 -----N/A----- 0.58 NCX NOVA Chemicals Wed, Jul 21 Before the Bell 0.16 PFCB P.F. Chang's Chna Wed, Jul 21 Before the Bell 0.32 PMTC PARAMETRIC TECH CORPWed, Jul 21 Before the Bell 0.04 PNR Pentair, Inc. Wed, Jul 21 Before the Bell 0.52 PNC PNC Fncl Serv Grp Wed, Jul 21 Before the Bell 1.01 PGN Progress Energy Wed, Jul 21 Before the Bell 0.72 QCOM QUALCOMM Inc. Wed, Jul 21 After the Bell 0.53 RDN Radian Grp Wed, Jul 21 After the Bell 1.16 ROG Rogers Corp Wed, Jul 21 After the Bell 0.71 RCN Rogers Wireless CommWed, Jul 21 -----N/A----- N/A RYL Ryland Grp Wed, Jul 21 After the Bell 2.52 SGP Schering-Plough Wed, Jul 21 Before the Bell -0.01 SCHL Scholastic Wed, Jul 21 After the Bell 0.85 SRA Serono S.A. Wed, Jul 21 After the Bell 0.19 SEBL Siebel Sys Wed, Jul 21 After the Bell 0.03 SIE Sierra Health Serv Wed, Jul 21 After the Bell 0.82 SWKS Skyworks Wed, Jul 21 After the Bell 0.07 FON Sprint FON Grp Wed, Jul 21 -----N/A----- 0.18 SWMAY Swedish Match Wed, Jul 21 -----N/A----- N/A SYMC Symantec Wed, Jul 21 After the Bell 0.34 SNV Synovus Fncl Corp. Wed, Jul 21 -----N/A----- 0.34 TDS Telephone Data Wed, Jul 21 Before the Bell 0.61 TLAB Tellabs Wed, Jul 21 Before the Bell 0.06 TMK Torchmark Wed, Jul 21 After the Bell 1.05 TAC TRANSALTA CORP Wed, Jul 21 -----N/A----- N/A USM U.S. Cellular Wed, Jul 21 Before the Bell 0.33 VOLVY Volvo AB Wed, Jul 21 Before the Bell 0.68 WM Washington Mutual Wed, Jul 21 After the Bell 0.61 WHR Whirlpool Corp Wed, Jul 21 Before the Bell 1.49 WSH Willis Grp Hldg LmtdWed, Jul 21 After the Bell 0.58 WPS WPS Resources Wed, Jul 21 -----N/A----- 0.33 WYE WYETH Wed, Jul 21 Before the Bell 0.59 ZION Zions Bancorp Wed, Jul 21 After the Bell 1.11 ------------------------- THUSDAY ----------------------------- RKY Adolph Coors, Co. Thu, Jul 22 Before the Bell 1.99 ALB Albemarle Corp Thu, Jul 22 -----N/A----- 0.42 ACV Alberto-Culver Co. Thu, Jul 22 -----N/A----- 0.54 ARB Arbitron Inc. Thu, Jul 22 Before the Bell 0.27 AF Astoria Fncl Corp Thu, Jul 22 Before the Bell 0.79 AZN AstraZeneca PLC Thu, Jul 22 -----N/A----- 0.48 ALV Autoliv Thu, Jul 22 Before the Bell 0.88 AVID Avid Tech, Inc. Thu, Jul 22 After the Bell 0.43 BHE Benchmark Elect Thu, Jul 22 Before the Bell 0.37 CNP CenterPoint Energy Thu, Jul 22 Before the Bell 0.21 CHRT Chrtrd Semicon Manu Thu, Jul 22 -----N/A----- 0.04 CME CHI MRCNTL HLDGS INCThu, Jul 22 Before the Bell 1.64 CIT CIT Grp Thu, Jul 22 Before the Bell 0.80 CFB Commercial Federal Thu, Jul 22 Before the Bell 0.44 BVN Co Minas Bnaventura Thu, Jul 22 -----N/A----- 0.38 ED Consolidated Edison Thu, Jul 22 -----N/A----- 0.26 CFC Countrywide Fncl Thu, Jul 22 Before the Bell 2.30 CYT Cytec Ind Inc. Thu, Jul 22 After the Bell 0.71 ELNK EarthLink Thu, Jul 22 Before the Bell 0.15 ECL Ecolab Inc. Thu, Jul 22 Before the Bell 0.29 LLY Eli Lilly Thu, Jul 22 Before the Bell 0.68 EGN Energen Thu, Jul 22 -----N/A----- 0.58 ELAB Eon Labs Thu, Jul 22 -----N/A----- 0.26 EFX Equifax Inc. Thu, Jul 22 Before the Bell 0.39 FHR Fairmont Htls & RsrtThu, Jul 22 -----N/A----- 0.36 FNF Fidelity Natl Fncl Thu, Jul 22 Before the Bell 1.12 FISV Fiserv Thu, Jul 22 Before the Bell 0.47 FLIR FLIR Sys, Inc. Thu, Jul 22 Before the Bell 0.39 FDRY Foundry Networks Thu, Jul 22 Before the Bell 0.14 BEN Franklin Resources Thu, Jul 22 -----N/A----- 0.76 GTW Gateway, Inc. Thu, Jul 22 After the Bell -0.14 GLK Great Lakes ChemicalThu, Jul 22 -----N/A----- 0.45 DA Grpe Danone Thu, Jul 22 -----N/A----- 0.48 GDT Guidant Thu, Jul 22 Before the Bell 0.58 HP Helmerich & Payne Thu, Jul 22 -----N/A----- 0.14 HSY Hershey Foods Corp Thu, Jul 22 Before the Bell 0.31 HNI HNI Corp Thu, Jul 22 -----N/A----- 0.41 IEX Idex Thu, Jul 22 Before the Bell 0.42 IR Ingersoll-Rand Co Thu, Jul 22 Before the Bell 1.30 IDTI Integrated Dev Tech Thu, Jul 22 -----N/A----- 0.09 IDC Interactive Data Thu, Jul 22 Before the Bell 0.20 IGT Intl Game Tech Thu, Jul 22 -----N/A----- 0.33 SFI iStar Fncl Thu, Jul 22 -----N/A----- N/A ESI ITT Edu Serv, Inc. Thu, Jul 22 -----N/A----- 0.30 JNS Janus Capital Grp Thu, Jul 22 Before the Bell 0.17 JBLU JetBlue Airways Thu, Jul 22 Before the Bell 0.21 KMB Kimberly Clark Thu, Jul 22 Before the Bell 0.89 KRI Knight Ridder Thu, Jul 22 Before the Bell 1.06 LEA Lear Corp. Thu, Jul 22 Before the Bell 1.62 LYO Lyondell Petrochem Thu, Jul 22 Before the Bell 0.08 NST NSTAR Thu, Jul 22 -----N/A----- 0.68 PTV Pactiv Thu, Jul 22 After the Bell 0.39 PHLY Phil Cnsldtd Hldg Thu, Jul 22 -----N/A----- 1.06 RSAS RSA Security Thu, Jul 22 After the Bell 0.11 TSG Sabre Hldg Corp. Thu, Jul 22 Before the Bell 0.43 SBC SBC Comm Thu, Jul 22 Before the Bell 0.36 SHR Schering AG Thu, Jul 22 Before the Bell N/A POOL SCP Pool Corp Thu, Jul 22 Before the Bell 1.16 S Sears, Roebuck Co. Thu, Jul 22 -----N/A----- 0.72 SHW Sherwin-Williams Thu, Jul 22 -----N/A----- 0.86 SIAL Sigma-Aldrich Corp Thu, Jul 22 After the Bell 0.82 SIVB Silicon Vlly BncshrsThu, Jul 22 -----N/A----- 0.39 SKYF Sky Fncl Grp Thu, Jul 22 Before the Bell 0.44 SFG StanCorp Fncl Grp Thu, Jul 22 Before the Bell 1.34 HOT Strwd Htls & Rsrts Thu, Jul 22 Before the Bell 0.37 SUN Sunoco Thu, Jul 22 -----N/A----- 2.39 SY Sybase Thu, Jul 22 Before the Bell 0.19 TKLC Tekelec Thu, Jul 22 After the Bell 0.09 TPX Tempur Pedic Intl Thu, Jul 22 After the Bell 0.18 TEX Terex Corp Thu, Jul 22 Before the Bell 0.81 TGN Texas Genco Hldg Thu, Jul 22 -----N/A----- N/A TXT Textron Inc. Thu, Jul 22 -----N/A----- 0.74 KO The Coca-Cola Co Thu, Jul 22 After the Bell 0.63 TBL The Timberland Co Thu, Jul 22 Before the Bell 0.18 TKR The Timken Co Thu, Jul 22 Before the Bell 0.32 TMS Thomson Thu, Jul 22 -----N/A----- N/A TRH Transatlantic Hldg Thu, Jul 22 -----N/A----- 1.64 TUES Tuesday Morning CorpThu, Jul 22 Before the Bell 0.22 UHS Universal Hlth Serv Thu, Jul 22 After the Bell 0.69 UST UST Inc. Thu, Jul 22 Before the Bell 0.77 VCI Valassis Comm Inc. Thu, Jul 22 Before the Bell 0.47 VRSN VeriSign, Inc. Thu, Jul 22 After the Bell 0.15 WFT Weatherford Intl Thu, Jul 22 Before the Bell 0.39 WEN Wendy's Intl Thu, Jul 22 -----N/A----- 0.62 XLNX Xilinx, Inc. Thu, Jul 22 After the Bell 0.28 ------------------------- FRIDAY ------------------------------- BLC Belo Fri, Jul 23 Before the Bell 0.38 CNH CNH Global N.V. Fri, Jul 23 Before the Bell 0.65 CMI Cummins Inc. Fri, Jul 23 Before the Bell 1.34 DASTY Dassault Systemes SAFri, Jul 23 -----N/A----- 0.33 DP Diagnostic Products Fri, Jul 23 Before the Bell 0.63 EEP Enbridge Enrgy PrtnrFri, Jul 23 Before the Bell 0.43 ENT Equant NV Fri, Jul 23 -----N/A----- N/A EYET Eyetech Pharm Fri, Jul 23 After the Bell -0.40 FPL FPL Grp Fri, Jul 23 Before the Bell 1.38 IT Gartner Fri, Jul 23 -----N/A----- 0.10 IMY Grupo IMSA, S.A. Fri, Jul 23 -----N/A----- 0.60 HAL Halliburton Co Fri, Jul 23 Before the Bell 0.33 ITT ITT Ind Fri, Jul 23 Before the Bell 1.15 KB Kookmin Bank Fri, Jul 23 -----N/A----- N/A HCR Manor Care Inc Fri, Jul 23 Before the Bell 0.45 MYG Maytag Fri, Jul 23 Before the Bell 0.40 PCAR PACCAR Fri, Jul 23 -----N/A----- 1.14 PGL Peoples Energy Corp.Fri, Jul 23 Before the Bell 0.31 R Ryder System, Inc. Fri, Jul 23 Before the Bell 0.69 SCG SCANA Fri, Jul 23 Before the Bell 0.43 SLB Schlumberger Fri, Jul 23 Before the Bell 0.48 SSCC Smurfit-Stone Cont Fri, Jul 23 Before the Bell -0.08 STHLY Stet Hellas Telecom Fri, Jul 23 -----N/A----- N/A TELN Telenor ASA Fri, Jul 23 -----N/A----- N/A TRP TransCanada Corp Fri, Jul 23 -----N/A----- N/A WY Weyerhaeuser Co. Fri, Jul 23 Before the Bell 1.10 XRX Xerox Corp Fri, Jul 23 Before the Bell 0.17 ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable BLUD Immucor, Inc 3:2 Jul 16th Jul 19th KNGT Knight Transportation Inc 3:2 Jul 20th Jul 21st CWTR Coldwater Creek Inc 3:2 Jul 23rd Jul 26th VAR Varian Medical Systems Inc2:1 Jul 30th Aug 2nd GTK GTECH Holdings Corp 2:1 Jul 30th Aug 2nd -------------------------- Economic Reports This Week -------------------------- This week is dominated by a tidal wave of earnings announcements with the majority reporting between Tuesday and Thursday. The economic schedule is light and will be overshadowed by corporate guidance looking forward. ============================================================== -For- ---------------- Monday, 07/19/04 ---------------- Semiconductor Book-to-Bill report ----------------- Tuesday, 07/20/04 ----------------- Housing Starts (BB) Jun Forecast: 2000K Previous: 1967K Building Permits (BB) Jun Forecast: 2000K Previous: 2097K ------------------- Wednesday, 07/21/04 ------------------- Federal Reserve Governor Santomero speaks ------------------ Thursday, 07/22/04 ------------------ Initial Claims (BB) 07/16 Forecast: N/A Previous: N/A Leading Indicators (BB) Jun Forecast: 0.3% Previous: 0.5% ---------------- Friday, 07/23/04 ---------------- None 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. 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To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** 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 07-18-2004 Sunday 2 of 5 In Section Two: Watch List: A Mixed List of Tech Dropped Calls: ITT 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 ********** A Mixed List of Tech ___________________________________________________________________ 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. ___________________________________________________________________ Research In Motion - RIMM - close: 62.90 change: +1.29 WHAT TO WATCH: Feeling bullish? RIMM has been slipping lower all month like most tech stocks but its weakness may be giving us a buy signal. RIMM has filled the gap from late June. Friday's session turned in a bullish hammer (reversal signal) candlestick. Aggressive traders could go long now and buy the bounce from Friday's test of the $59-60 level. The rest of us probably ought to wait for a little confirmation and see RIMM trade above the $65.00 mark before we consider bullish entries. We would target the highs near $72. Chart= --- eBay Inc - EBAY - close: 80.36 change: -3.10 WHAT TO WATCH: Ouch! After spending several days consolidating between $82-$85 underneath its simple 50-dma shares of EBAY have broken out - to the downside. The selling stalled at the $80.00 mark but it's arguable this level was saved by the closing bell. The momentum monster EBAY is finally starting to show some weakness as investors stare at its upcoming earnings report on July 21st. We would not suggest positions ahead of the report unless it was some sort of straddle. Chart= --- L-3 Communications - LLL - close: 60.21 change: -0.15 WHAT TO WATCH: We strongly considering adding LLL to the put list this weekend. We like how the oversold bounce from its early July drop to $60 stalled at the $62 level. Now LLL looks ready to breakdown under support at $60 and its simple 100-dma. Its P&F chart has produced a high-pole warning and a drop under $59 would produce a new sell signal. We would target a move to the $56-55 range but watch out for earnings on July 27th. Chart= --- Scientific Atlanta - SFA - close: 29.37 change: -0.84 WHAT TO WATCH: We also considered SFA for the weekend put list. After 6 1/2 months of consolidating sideways between $30 and $36 SFA is finally breaking down through support. The P&F chart looks pretty bearish with a triple-bottom breakdown sell signal and a $23 price target. We see some support in the $26.50 region but it may not hold. Earnings are expected on July 27th. Chart= ************************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 ^^^^^ ITT Industries - ITT - close: 81.22 chg: -0.52 stop: 80.95 Call us chicken but with the Dow Industrials falling to new two- month lows and looking dead set on hitting the 10K mark we think it's time to exit ITT. More diehard bulls can still take courage in the fact that ITT has not yet broken minor support at the $81.00 level but if you're going to stick it out you might want to put your stop under the $80.00 mark instead. We'd love to buy a bounce from its simple 100-dma currently near $79 but ITT is due to report earnings on Friday and that doesn't give us much time. Picked on July 11 at $ 82.86 Change since picked: - 1.64 Earnings Date 07/23/04 (confirmed) Average Daily Volume: 532 thousand Chart = PUTS ^^^^ None *********** DEFINITIONS *********** OI = Open Interest - the number of open contracts outstanding. Last Trade @ = Indicates where the option traded last. 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. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals 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 07-18-2004 Sunday 3 of 5 In Section Three: Current Calls: AET, ATK, HUG, PD, SUN, ZBRA New Calls: None Current Put Plays: DISH, IRF, MGA, PG New Puts: CEPH, GS ************************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 ****************** Aetna - AET - close: 87.16 change: -0.66 stop: 82.99 Company Description: As one of the nation's leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, Aetna puts information and helpful resources to work for its approximately 13.3 million medical members, 11.2 million dental members, 8.1 million pharmacy members and 12.4 million group insurance members to help them make better informed decisions about their health care and protect their finances against health-related risks. Aetna provides easy access to cost effective health care through a nationwide network of more than 618,000 health care professionals, including over 370,000 primary care and specialist doctors and 3,783 hospitals. (source: company press release) Why We Like It: AET continues to flex its relative strength muscles as the stock rallies from its lows near $80 two weeks ago. We were triggered on Wednesday's intraday rise to $86.55 and Thursday's performance put AET solidly above the $86.50 level. Now with the Industrials sinking we could see AET pull back to test the $86.00 level as support. Traders can look for the dip as a potential entry point to consider new plays but we would suggest you time your entry when the broader indices aren't falling too sharply (i.e. if the Dow is breaking under the 10,000 level we'd probably hesitate to initiate new long positions). Keep in mind we have just under two weeks now for AET to hit our target area near $92.00. Suggested Options: We are going to suggest the August 80s, 85s and 90s even though we do not plan to hold over the July 29th earnings report. BUY CALL AUG 80 AET-HP OI=6059 Current Ask $8.30 BUY CALL AUG 85 AET-HQ OI= 600 Current Ask $4.60 BUY CALL AUG 90 AET-HR OI=7059 Current Ask $2.05 Annotated Chart: Picked on July 14th at $86.55 Change since picked: + 0.61 Earnings Date 07/29/04 (confirmed) Average Daily Volume = 1.44 mln Chart = -- Alliant Tech - ATK - close: 65.62 chg: -0.06 stop: 62.99 Company Description: ATK is an advanced weapon and space systems company with sales of approximately $2.4 billion and strong positions in propulsion, composite structures, munitions, precision capabilities, and civil and sporting ammunition. The company is the world's leading supplier of solid propulsion systems and the nation's largest manufacturer of ammunition. ATK employs approximately 13,200 people. (source: company press release) Why We Like It: We can't complain with the action in ATK. The stock charged higher from the $62 level and almost hit the $67 mark before finally feeling some profit taking. We like how ATK is out performing most of its peers in the DFI defense index. It's probably no coincidence that the recent pull back to the $65 level happened to be a 38.2% Fibonacci retracement of its July rally. Short-term technicals are mixed but we would still consider bullish positions above the $65 level or even a bounce from previous resistance now new support at $64.00. ATK's P&F chart remains bullish with a $79.00 price target. It will be interesting to see if buying interest in defense stocks picks up more steam as we head toward the Democratic convention on July 26th since the meeting is such a terrorist target. Keep your eyes and ears open for news from larger defense contractors GD and NOC. GD is due to announce earnings on the 21st and NOC on the 29th. Positive or negative reports could influence trading in ATK. Suggested Options: We are going to suggest the August 60s and 65 calls. BUY CALL AUG 60 ATK-HL OI= 371 Current Ask $6.20 BUY CALL AUG 65 ATK-HM OI= 432 Current Ask $2.35 Annotated Chart: Picked on July 11 at $ 65.03 Change since picked: + 0.59 Earnings Date 08/05/04 (confirmed) Average Daily Volume: 335 thousand Chart = -- Hughes Supply - HUG - close: 60.19 change: +0.04 stop: 57.00 Company Description: Hughes Supply, Inc., founded in 1928, is one of the nation's largest diversified wholesale distributors of construction, repair and maintenance- related products, with nearly 500 locations in 38 states. Headquartered in Orlando, Florida, Hughes employs approximately 8,900 associates and generates annual revenues of approximately $3.5 billion. Hughes is a Fortune 500 company and was named the #2 Most Admired Company in America in the Wholesalers: Diversified Industry segment by Fortune Magazine. (source: company press release) Why We Like It: We have no complaints here. The Industrials have declined three days in a row but HUG has managed to breakout over resistance at the $60.00 level and trigger us at $60.51. We're encouraged that HUG managed to hold the $60 mark even as the Dow broke to new two-month lows on Friday. A quick refresher on HUG...we added the stock on Wednesday with a trigger to go long at $60.51, which would be a new all-time high. The company has been climbing on stronger sales. They've issued upside preannouncements ahead of their Q1 earnings report and again on July 7th for their Q2 reort. Same-store sales growth is in the 14-16 percent range and profits should jump 41-48 percent. Plus the stock has been getting some positive press from IBD about its recent acquisition and internal efficiency growth. It's still very possible that HUG will tick lower next week if the Industrials slip toward the 10K mark. We'd look for a bounce from the $59.00 level in HUG as a new entry point. Suggested Options: Our one big caveat with this play is the low option volume. Be careful with your order placement. We're going to suggest the August 60s but the 55s look good if you can afford them. BUY CALL AUG 55 HUG-HK OI=10 Current Ask $5.80 BUY CALL AUG 60 HUG-HL OI=68 Current Ask $2.25 Annotated Chart: Picked on July 15 at $ 60.51 Change since picked: - 0.32 Earnings Date 08/24/04 (unconfirmed) Average Daily Volume: 288 thousand Chart = -- Phelps Dodge - PD - close: 80.50 chg: -0.20 stop: 77.49*new* Company Description: Phelps Dodge Corp. is the world's second-largest producer of copper, a world leader in the production of molybdenum, the largest producer of molybdenum-based chemicals and continuous- cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ more than 13,500 people in 27 countries. (source: company press release) Why We Like It: PD is in the final lap of the race with just six more trading days to go before its pre-market earnings report on the 27th. Fortunately, after several days of fighting with resistance at the $80.00 level PD has managed to close above it. Metal and mining stocks continue to be pockets of strength for investors. Money is rotating into the group due to strong global demand as both east and west experience economic expansion. This close to earnings we probably wouldn't suggest new positions but if PD dips and bounces from the $79 level it might be worthwhile for nimble traders. We're going to officially set our exit target at $84.50 but we're probably going to exit next Friday to avoid any surprises the following week. We are going to raise our stop loss from $75.49 to $77.49, under Thursday's low and its simple 10-dma. Suggested Options: We like the August $75 and $80 calls and that gives us time to ride them into PD's earnings report in late July. BUY CALL AUG 75 PD-HO OI= 593 Current Ask $7.10 BUY CALL AUG 80 PD-HP OI=1887 Current Ask $3.80 Annotated Chart: Picked on July 07 at $ 78.75 Change since picked: + 1.75 Earnings Date 07/27/04 (confirmed) Average Daily Volume: 2.6 million Chart = --- Sunoco - SUN - close: 70.04 change: +2.78 stop: 66.49*new* Company Description: Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 890,000 barrels per day of refining capacity, approximately 4,900 retail sites selling gasoline and convenience items, over 4,500 miles of crude oil and refined product owned and operated pipelines and 37 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States. Sunoco is a significant manufacturer of petrochemicals with annual sales of approximately five billion pounds, largely chemical intermediates used to make fibers, plastics, film and resins. Utilizing a unique, patented technology, Sunoco also manufactures two million tons annually of high-quality metallurgical-grade coke for use in the steel industry. (source: company press release) Why We Like It: So far so good. It's only taken six trading days for SUN to hit the bottom edge of our suggested exit range at $70.00-72.00. We alerted readers in the MarketMonitor on Friday that SUN had hit the $70 mark. You may recall that SUN is benefiting from the rise in oil prices, which allow SUN stronger margins in its oil refinery business. Plus, SUN is also winning with the huge demand for steel products as it produces coke for steel producers. All told analysts are expecting a record quarter from the oil refiners and major oil producers. The suggested August 65 calls have risen from $3.50 to $5.90 (+68%) and the August 70s have climbed from $1.10 to $2.40 (+118%). We are not suggesting new bullish positions at this time since SUN is already in our exit range and nearing its Q2 earnings report on July 22nd. We plan to exit at $72.00 or Wednesday afternoon, which ever comes sooner. SUN reports on Thursday morning and estimates are $2.30 per share. We are raising our stop loss to $66.49. Suggested Options: We're not suggesting new bullish positions at this time. Readers should consider taking profits now or preparing to exit. Annotated Chart: Picked on July 08 at $ 66.67 Change since picked: + 3.37 Earnings Date 07/22/04 (confirmed) Average Daily Volume: 973 thousand Chart = --- Zebra Tech - ZBRA - close: 82.40 chg: -0.50 stop: 79.85 Company Description: Zebra Technologies Corporation 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: (Original update from Thursday) We are adding ZBRA to the call list because shares have finally pulled back to the bottom of its rising channel near its simple 50-dma. Actually, it's more than that. Yes, we've been waiting for the appropriate entry point but ZBRA's 3 percent gain today is a nice rebound from the $80.00 region and produces a bullish engulfing candlestick. Furthermore the gain was produced on almost double the average volume. On top of ZBRA's bullish performance when the Industrials and NASDAQ were sinking into the close the company announced a 3-for-2 split after the closing bell. Shares aren't trading too much higher after hours so we should still be able to get a decent entry point tomorrow. Our initial target is the $90.00 region and we need to get there before ZBRA's earnings report on July 28th. We'll start the play with a stop loss at today's low. WEEKEND UPDATE: Friday morning did see some follow through from Thursday's big day but the rally failed near the $84 level and its 10-dma. Readers can look for another bounce from the $80.00-82.00 levels as a new entry point. Suggested Options: We're going to suggest the August calls. Our favorite is the August 80s. BUY CALL AUG 80 ZBQ-HP OI= 178 Current Ask $4.80 BUY CALL AUG 85 ZBQ-HQ OI= 431 Current Ask $2.10 Annotated Chart: Picked on July 15 at $ 82.90 Change since picked: - 0.50 Earnings Date 07/28/04 (confirmed) Average Daily Volume: 401 thousand Chart = ************** NEW CALL PLAYS ************** None ************************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 ***************** EchoStar Comm. - DISH - close: 28.73 chg: -0.59 stop: 31.01 Company Description: EchoStar Communications Corporation serves 10 million satellite TV customers through its DISH Network(TM) and is a leading U.S. provider of advanced digital television services. DISH Network's services include hundreds of video and audio channels, Interactive TV, HDTV, sports and international programming, together with professional installation and 24-hour customer service. DISH Network is the leader in the sale of digital video recorders (DVRs). (source: company press release) Why We Like It: Strangely we haven't heard any more about the SEC letter requesting data from DISH about their subscriber numbers. It was this news that initially attracted us to the stock. Right now DISH still qualifies as a put candidate due to its relative weakness. The CSFB "out perform" rating midweek wasn't enough to power a rally through resistance at $30.00 and now DISH looks poised to hit new lows. Its P&F chart has done just that with a new double-bottom breakdown sell signal currently pointing to an $18 target. We're still targeting the $25.00 level and thankfully we have until some time in August before DISH announces earnings because it's not moving very fast. Suggested Options: Our favorite is the August 30s. BUY PUT AUG 32.50 UAB-TZ OI= 247 Current Ask $4.00 BUY PUT AUG 30.00 UAB-TF OI= 402 Current Ask $1.90 BUY PUT AUG 27.50 UAB-TY OI= 763 Current Ask $0.75 Annotated Chart: Picked on July 09th at $28.99 Change since picked: - 0.26 Earnings Date 08/11/04 (unconfirmed) Average Daily Volume = 2.5 mln Chart = --- Int'l Rectifier - IRF - close: 33.90 chg: -0.68 stop: 35.61*new* Company Description: International Rectifier Corporation is a designer, manufacturer and marketer of power management products and a worldwide supplier of a type of power semiconductor, MOSFET (a metal oxide semiconductor field effect transistor). Power semiconductors process electricity into a form more usable by electrical products. The company's products are divided among three broad product categories: analog integrated circuits (ICs) and advanced circuit devices, power systems and power components. IRF's products are used in a range of end markets, including consumer electronics, information technology, automotive, aerospace and defense, communications and industrial. Why we like it: The rotation out of semiconductor stocks continues. IRF tried to produce an oversold bounce this past week but it failed near round-number resistance at the $35.00 level. Coincidentally it also happened to be the underside of its broken trendline (see chart). Readers can still consider new bearish positions but watch your stop loss. We're going to lower our stop to $35.61. If you're already profitable in the play consider taking some money off the table. We will continue to target a drop toward the $31-30 range but we'll lean heavily toward exiting near $31. We have less than two weeks left before IRF's Q2 earnings report. Suggested Options: We're going to suggest the August 40s and August 35s. If you tend to be more of a gambling type the August 30s could work. BUY PUT AUG 40 IRF-TH OI=2388 Current Ask $6.50 BUY PUT AUG 35 IRF-TG OI= 988 Current Ask $2.65 BUY PUT AUG 30 IRF-TF OI= 94 Current Ask $0.75 Annotated Chart of IRF: Picked on July 6th at $37.00 Change since picked: - 3.10 Earnings Date 07/29/04 (confirmed) Average Daily Volume = 1.07 mln Chart = --- Magna Intl - MGA - close: 80.61 change: -0.92 stop: 84.51 Company Description: Magna, the most diversified automotive supplier in the world, designs, develops and manufactures automotive systems, assemblies, modules and components, and engineers and assembles complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks in North America, Europe, Mexico, South America and Asia. Magna's products include: automotive interior and closure components, systems and modules through Intier Automotive Inc.; metal body systems, components, assemblies and modules through Cosma International; exterior and interior mirror and engineered glass systems through Magna Donnelly; fascias, front and rear end modules, plastic body panels, exterior trim components and systems, greenhouse and sealing systems, roof modules and lighting components through Decoma International Inc.; various engine, transmission and fueling systems and components through Tesma International Inc.; a variety of drivetrain components through Magna Drivetrain; and complete vehicle engineering and assembly through Magna Steyr. Magna has approximately 75,000 employees in 212 manufacturing operations and 47 product development and engineering centres in 23 countries. (source: company press release) Why We Like It: (Original update from Thursday) We like MGA because it's giving us another chance to play the trading range. Shares have been oscillating in a very wide channel since last August. Now MGA is rolling over again so it's a simple play the move to the other side of its range. Yes, there are a host of moving averages between here at $81.53 and our target near $75.00 but MGA has been virtually ignoring them for months. Furthermore today's high volume drop looks like a good starting point for what could be a relatively quick trip lower. Please see the chart so further understand this play. WEEKEND UPDATE: Our range-trading play is off to a good start with MGA's 1.1 percent drop on Friday. MGA has now broken its 10, 21, 40 and 50-dma's. We might expect a little oversold bounce at $80.00 but then again it might now. It's not to late to consider plays with our target at $75.00. A failed rally under $82.50 would work great. Suggested Options: We're going to suggest the August puts. The August 85s or 80s could work well. BUY PUT AUG 85 MGA-TQ OI= 20 Current Ask $5.40 BUY PUT AUG 80 MGA-TP OI=203 Current Ask $2.00 BUY PUT AUG 75 MGA-TO OI= 20 Current Ask $0.70 Annotated Chart: Picked on July 15 at $ 81.53 Change since picked: - 0.92 Earnings Date 08/05/04 (unconfirmed) Average Daily Volume: 182 thousand Chart = -- Progressive - PGR - close: 78.56 chg: -0.44 stop: 82.35 Company Description: The Progressive group of insurance companies ranks third in the nation for auto insurance based on premiums written, offering its products by phone at 1-800-PROGRESSIVE, online at progressive.com and through more than 30,000 independent agencies and insurance brokers. (source: company press release) Why We Like It: (Original play from Thursday) Ouch! Earnings rise by 35 percent compared to a year ago but it's not enough to satisfy investors. PGR reported earnings on July 14th and only beat estimates by a penny. As usually Wall Street was looking for more. After the report UBS came out to reiterate their "reduce" rating. Traders immediately sold the stock this morning and PGR broke through major support at the $80.00 mark on big volume. This produced a new triple-bottom breakdown on its P&F chart with a $69.00 target. Recent reports suggest that auto insurance rates are going down or at least rising at a slower pace across the country. Investors may take PGR's recent results as a sign that business really could be slowing. After all there is a lot of room left for profit taking when we're talking about a stock that was trading at $15.00 in March of 2000. It wouldn't surprise us to see a bounce but as long as it trades under the $82.00 level and its 200-dma we should be okay. Patient traders can wait for a potential bounce to initiate plays on (preferably when the rally starts to fail). For the rest of us we'd consider positions as long as PGR trades under $80. There could be support at the $75.00 mark but we're going to target the $71-72 region. WEEKEND UPDATE: Friday was an excellent start to our new PGR put play. The stock tried to rally through the $79.50 level and couldn't and closed near its lows for the session. There is still a chance for an oversold bounce next week but with the major indices falling the odds are growing slimmer. Suggested Options: We're going to suggest the August or November puts but our favorites would be the August 80s. BUY PUT AUG 80 PGR-TP OI= 726 Current Ask $2.80 BUY PUT AUG 75 PGR-TO OI= 419 Current Ask $0.90 Annotated Chart: Picked on July 15 at $ 79.00 Change since picked: - 0.44 Earnings Date 07/14/04 (confirmed) Average Daily Volume: 655 thousand Chart = ************* NEW PUT PLAYS ************* Cephalon - CEPH - close: 49.87 change: -0.99 stop: 52.01 Company Description: Founded in 1987, Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and marketing of innovative products to treat sleep and neurological disorders, cancer and pain. Cephalon currently employs approximately 2,000 people in the United States and Europe. U.S. sites include the company's headquarters in West Chester, Pennsylvania, and offices and manufacturing facilities in Salt Lake City, Utah. Cephalon's major European offices are located in Guildford, England, Martinsried, Germany, and Maisons- Alfort, France. The company currently markets three proprietary products in the United States: PROVIGIL, GABITRIL, ACTIQ and more than 20 products internationally. (source: company press release) Why We Like It: This is not a market for bullish plays but it's tough to find bearish candidates that haven't fallen too far already. We decided to look through the biotech sector. The BTK biotech index has produced three failed rally attempts at its simple 200- dma in the last six sessions. Friday's failure looks very bearish and we'd expect the index to fall through the 480 level soon. In a similar vein CEPH has been struggling under the $52.00 level. Shares of CEPH were very weak earlier in the month when the BTK fell through its 200-dma. CEPH produced an oversold bounce from the $50.00 level but the rebound is failing under the $52 mark and now shares have closed under the $50 level for the first time since early January. Now before we continue allow us to remind you that any time you trade a biotech stock there is always headline risk. The company could come out for a cure to cancer or could fail some critical FDA approval. Either type of event would be disastrous if you were on the other side. Be sure to keep that in mind when you consider how much risk you're willing to take. We like CEPH for various reasons. The last time the company reported earnings on May 3rd they guided lower for the next quarter. Investors are likely to be cautious ahead of CEPH's next report. CEPH's P&F chart has produced a new triple-bottom breakdown sell signal with a $41 target. We're going to target an initial drop to the $45.00 level and then re-evaluate. One concern is that CEPH is due to report earnings on August 3rd and we do not plan to hold over the announcement. If you're following the headlines you'll notice that the CEPH/CIMA merger is almost complete but we do not expect it to have any impact on the stock price. Suggested Options: We would suggest the August puts. The 55s look great if you can afford them, if not then try the 50s. BUY PUT AUG 55 CQE-TK OI= 1253 Current Ask $5.60 BUY PUT AUG 50 CQE-TJ OI= 3642 Current Ask $2.00 BUY PUT AUG 45 CQE-TI OI= 1367 Current Ask $0.60 Annotated Chart: Picked on July 15 at $ 49.87 Change since picked: - 0.00 Earnings Date 08/03/04 (confirmed) Average Daily Volume: 969 thousand Chart = -- Goldman Sachs - GS - close: 87.25 change: -1.08 stop: 92.01 Company Description: Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net-worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world. (source: company press release) Why We Like It: We have been patiently waiting and watching GS to give the right bearish breakdown for days. This could be it. Through most of May and June GS traded range bound between $90-95. After a bear- trap drop through the $90 level GS rallied sharply higher after beating earnings estimates. The stock tried to breakout over the top of the range at $95.00 but failed. By then the sector slowdown had begun. Recent weakness in July for the XBD broker- dealer index looks very bearish for the group. Rival Merrill Lynch's recent earnings report confirms a seasonal slow down in the sector has begun that had not yet hit when GS reported earnings. That means when GS reports next its results will show the same slow down. The technical picture in GS looks bearish as well. Its MACD is in a sell signal. The stock closed at new multi-month lows on Friday, which confirmed the breakdown under $90.00 and also a breakdown under $87.50 (June low). It has broken a trendline of support dating back to June 2003 (see chart). Plus, its P&F chart has failed at resistance and produced a "bull-trap". A drop under the $87.00 mark will produce a new sell signal. We're going to suggest new bearish positions now with a target at $80- 82 range. Our initial stop will be $92.01. Suggested Options: We are going to suggest the August puts. Our favorite is the August 90s although the 85s look good too. BUY PUT AUG 90 GS-TR OI=4569 Current Ask $4.40 BUY PUT AUG 85 GS-TQ OI=3200 Current Ask $1.85 BUY PUT AUG 80 GS-TP OI=1832 Current Ask $0.70 Annotated Chart: Picked on July 15 at $ 87.25 Change since picked: - 0.00 Earnings Date 06/22/04 (confirmed) Average Daily Volume: 4.0 million Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. 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The Option Investor Newsletter Sunday 07-18-2004 Sunday 4 of 5 In Section Four: Leaps: Going to be Really Picky ************************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 ***** Going to be Really Picky With the potential for continued market weakness for the rest of the summer I am going to be really picky about adding new leaps on the call side. In reality market weakness is the right time to add call leaps because they are cheap but we as we near a potential market breakdown at Dow 10150 we need to focus on story stocks that have already been taken to the woodshed instead of strictly fundamental plays. As we go through this earnings cycle the opportunity to buy stocks on negative earnings news should increase. This week we saw Intel and Merrill Lynch knocked for huge losses despite earnings that were not that bad. I would not hesitate to add Intel this weekend except that the SOX is threatening to drop even further. Also, we know Intel has an inventory problem that could take 1-2 quarters to work off and the stock is likely to continue lower until that problem has been resolved. Intel has broken two levels of support and the next major level and my target for an entry would be in the $20 range. Intel Chart SOX Chart Merrill Lynch $49.35 Merrill is another stock that should be on our watch list for a post summer entry. They earned over $1 billion last quarter and prospects are great. They admitted they had restricted risk trading due to the low volatility in the market and I think that was a wise decision. Many firms have been thrashing themselves to pieces trying to find a profitable trade and instead suffering the death of a thousand cuts. Merrill has support in the $46 range and I would love to buy leaps at that level after the Republican convention and Olympic risk has passed. I am putting this on the watch list for a $46 target. We will reevaluate it with an eye on the calendar at that time. Merrill Lynch Chart Red Hat $15.75 The one stock I am adding this weekend is Red Hat. This is the most beat up stock on the market with a real chance for a recovery. The stock took a hit about a month ago when the CFO resigned to pursue other interests. The market was immediately suspicious and the stock tanked. Last week it was announced that they were restating earnings for the last three years due to a revenue recognition problem. They were booking a full month of income for subscription started in the middle of the month. They were paid for the entire month but their auditors they could not claim the income until the end of the subscription when it was completely earned. To resolve this they were going to a daily accounting method to account for revenue earned on a daily basis and not on a payment basis. The company claims this impacted less than 3% of their revenue and will have no material impact on results. Red Hat is a developer/provider of open source software and services including the Red Hat Linux operating system. For the fiscal year ended 2/29/04 they posted a +39% increase in revenues, higher margins and lower costs. The key to this play is the outlook. The company maintains a rosy outlook due to the growing move to switch from costly Microsoft operating systems to the considerably cheaper Linux model. There is a rising tide of companies that have noticed the price and speed improvements available with Linux and it is only going to grow. We have moved to Linux on several of our servers and they are much faster, easier to maintain, are strongly virus resistant and are almost free compared to the cost for a comparable Microsoft system. The stock has risen from $5 in Jan-2003 to a high of $29 in June-2004. The CFO resignation on June 7th knocked -$8 off the price and the revenue restatement last week took off another -$5 to close on Friday at $15. The Jan-2006 $20 LEAP Calls YFX-AD are currently $3.00. I do not want to take a chance on the 2005 leaps with a weak summer ahead. The September $12.50 puts RCV-UV are 60 cents and will serve as our LEAP insurance. $12.50 is also very strong support. Entry trigger: Because I expect market weakness next week I am planning on putting a trailing stop on the stock as an entry point. We will start it at $16.25 and trail it down $1.00 behind the stock price. If the stock continues to sell off with the market we will get a better entry. If we are not stopped into the trade we will enter on a touch of $13.00. Red Hat Chart ************************************** CIEN $3.09 No, that is not the price of the LEAP, it is the price of the stock. I know that seems like a strange stock to buy leaps on but I have an ulterior motive. There is a rumor making the rounds that CIEN is a takeover target and at that price there can only be upside. Ciena designs, manufacturers and sells open architecture, DWDM systems for fiber-optic communications networks and optical networking solutions. The previously high flying company needs help. For the six months ended 4/30/05 the company saw sales drop -2% but its net loss narrowed by -16%. It is making progress but nowhere near the revenue levels from the Internet boom days. CIEN has good products but it is carrying a load of debt and slowly working out of its problem. The lack of a boom like we see in Juniper has been due to a lag getting new products to market. I am not going to beat the drum about CIEN but only suggest it is a pretty cheap lottery play as a takeover candidate. A rumored suitor has been Siemens AG. According to the rumor they are looking for a way to get into the U.S. optical networking market and see CIEN as a potential entry. It is just a rumor but it could start other companies thinking in the same direction. The 2006 $5 LEAP Call YCD-AA is only 65 cents. The $2.50 call is only $1.40 but if you were going to spend that much money I would just buy the stock. We are not going to put an insurance put on this play because the Aug $2.50 put is 70 cents and more than the cost of the call. Side note: A cheaper way to play. Another way to play this would be to sell the August $2.50 put naked for 70 cents and hope you are put. This would give you the stock for a net cost of $1.80. If not put then sell the Sept $2.50 put and do it again. If not put for three months you have already recovered more than you could ever risk on the stock. The risk in this method is that a buyout occurs and the stock jumps several dollars and you miss out on the upside. You can protect yourself against this by purchasing the LEAP and selling the puts as well. You have upside protection and at $2.50 you really do not need downside protection. If you are really lucky you could sell the put for the next year and profit well more than any buyout. 2006 $5 LEAP Call YCD-AA 65 cents CIEN Chart - Daily CIEN Chart - weekly ************************** Closed plays LUV $14.67 We were stopped on the LUV leap when the stock traded $15 this week after the CEO suddenly stepped down. That coupled with the rising oil prices was too much for the stock to bear. We entered the play at $14.10 and were stopped at $15.00. 2005 $15 LEAP Call LUV-AC $1.25 stopped - cost 1.35 2006 $15 LEAP Call WUV-AC $2.60 stopped - cost 2.50 AIG $69.01 I am dropping this play before the stop. The decline is about to break a head and shoulders over the last six months with the neckline at $69. It took a turn for the worse in the last week and I see no reason to keep it in the portfolio. 2005 $75 Call AIG-AO 2.35 Friday's close - cost 3.80 2006 $80 Call WAP-AP 4.80 Friday's close - cost 5.90 *************************** Current Portfolio CHK Chesapeake Energy $15.97 **RAISE stop to $15.00** Entry $12.22 2005 $12 LEAP Call CHK-AV $3.80 cost $1.50 +130% 2006 $12 LEAP Call WZY-AV $4.80 cost $2.25 + 98% April $10 insurance put - expired - cost $.25 TYC Tyco $31.65 Stop $29.50 Entry $28.32 2005 $30 LEAP Call TYC-AF $3.50 cost $2.15 +37% 2006 $30 LEAP Call WPA-AF $5.50 cost $4.00 +24% July $25 insurance put - expired - cost $.55 HD Home Depot $33.92 ** Lower Stop to 35.50 ** Entry $34.69 2005 $35 LEAP Put HD-MG $2.90 cost $2.95 -22% 2006 $35 LEAP Put WHD-MG $4.50 cost $4.50 -17% May $40 Insurance put - expired - cost $.55 Summary Graph LEAPS Watch List MER - Merrill Lynch $48.77 target entry $46.00 or lower (wait for signal to enter) 2006 $50 LEAP Call WZM-AJ Currently $6.30 target $5.00 INTC - Intel $22.73 target entry $20.00 2006 $22 LEAP Call WNL-AX currently $4.10 2006 $25 LEAP Call WNL-AE currently $2.90 ************************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 ************************************************************** ********** 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 07-18-2004 Sunday 5 of 5 In Section Five: Conservative Stock Ownership: Covered-Calls Spreads and Straddles: A Bad Month For Market Bulls! Premium-Selling Plays: Naked Puts and Calls ******************************************* CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS ******************************************* Many investors find that writing "in-the-money" covered-calls fits their criteria for a conservative, easy-to-manage options strategy. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NEW COVERED-CALL CANDIDATES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The following group of issues is a list of potential candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. __________________________________________________________________ COVERED-CALLS Stock Last Option Option Last Open Cost Days Target Symbol Price Series Symbol Bid Int. Basis Exp. Yield SRDX 23.60 AUG 22.50 UZF HX 2.50 5447 21.10 33 6.1% VTIX 16.00 AUG 15.00 QBP HC 1.70 385 14.30 33 4.5% COSI 5.97 AUG 5.00 CQA HA 1.20 20 4.77 33 4.4% DUSA 10.65 AUG 10.00 FDU HB 1.10 154 9.55 33 4.3% SWC 16.15 AUG 15.00 SWC HC 1.70 395 14.45 33 3.5% ISG 32.36 AUG 30.00 ISG HF 3.30 774 29.06 33 3.0% FARO 24.60 AUG 22.50 QEJ HX 2.80 184 21.80 33 3.0% PLMO 34.99 AUG 30.00 UPY HF 5.90 2861 29.09 33 2.9% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). __________________________________________________________________ SRDX - SurModics $23.60 *** Earnings Speculation *** SurModics (NASDAQ:SRDX) is a provider of surface-modification solutions for medical device and biomedical applications. Its PhotoLink chemistry is the core technology platform on which many of its surface-modification capabilities are based. This technology helps modify and enhance the surface characteristics of medical devices and biomedical applications, thus improving performance, and, in some cases, enabling the development of new products. The firm commercializes its surface-modification technologies through licensing and royalty arrangements with medical device manufacturers that apply coatings to their own products. AUG 22.50 UZF HX LB=2.50 OI=5447 CB=21.10 DE=33 TY=6.1% __________________________________________________________________ VTIV - Ventiv Health $16.00 *** Consolidation Complete? *** Ventiv Health (NASDAQ:VTIV) is a provider of outsourced sales and marketing solutions for the pharmaceutical, biotechnology and life sciences industries. The company offers a range of integrated and standalone services, in a context of consultative partnership that identifies strategic goals and applies targeted, tailored solutions. The firm's portfolio of offerings includes integrated sales force recruitment, training and management; standalone sales force recruitment and regulatory compliance services; product, sample and literature fulfillment; product and brand management; brand/portfolio analytics and forecasting, and strategic and tactical planning. AUG 15.00 QBP HC LB=1.70 OI=385 CB=14.30 DE=33 TY=4.5% __________________________________________________________________ COSI - Cosi Inc. $5.97 *** Entry Point? *** Cosi Incorporated (NASDAQ:COSI) owns and operates 88 fast casual restaurants in 11 states and the District of Columbia. Cosi restaurants are all-day cafes that feature signature bread and coffee products. The majority of the company's restaurants offer breakfast, lunch, afternoon coffee, dinner and dessert menus. Cosi operates its restaurants in two primary formats: Cosi and Cosi Downtown. Cosi Downtown restaurants, which are located in non-residential central business districts, close for the day in the early evening, while Cosi restaurants offer dinner in a casual dining atmosphere. AUG 5.00 CQA HA LB=1.20 OI=20 CB=4.77 DE=33 TY=4.4% __________________________________________________________________ DUSA - DUSA Pharmaceuticals $10.65 *** On The Rebound? *** DUSA Pharmaceuticals (NASDAQ:DUSA) is a pharmaceutical company developing drugs in combination with light devices to treat or detect conditions in processes known as photodynamic therapy or photodetection. The firm is engaged primarily in the research, development and marketing of its first drug, Levulan brand of aminolevulinic acid HCl (ALA), for use in a range of medical conditions. When the company uses Levulan and follows it with exposure to light to treat a medical condition, it is known as Levulan photodynamic therapy (Levulan PDT). AUG 10.00 FDU HB LB=1.10 OI=154 CB=9.55 DE=33 TY=4.3% __________________________________________________________________ SWC - Stillwater Mining Company $16.15 *** Own This One! *** Stillwater Mining (NYSE:SWC) is engaged in the development, extraction, processing and refining of palladium, platinum and associated metals from a geological formation in Montana known as the J-M Reef, a narrow but extensive mineralized zone that contains the only significant (known) source of platinum group metals inside the United States. Stillwater conducts its mining operations at the Stillwater Mine near Nye, Montana, and at the East Boulder Mine near Big Timber, Montana. AUG 15.00 SWC HC LB=1.70 OI=395 CB=14.45 DE=33 TY=3.5% __________________________________________________________________ ISG - International Steel Group $32.36 *** Strong Sector! *** International Steel Group (NYSE:ISG) is an integrated steel manufacturing company. ISG has an annual raw steel production capability of about 18 million net tons and ships a variety of steel products from 11 steel producing and finishing facilities in six states. The company's principal products include a range of hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, rail products and semi-finished shapes serving the automotive, construction, appliance, plate, rail, container, tin and machinery markets. AUG 30.00 ISG HF LB=3.30 OI=774 CB=29.06 DE=33 TY=3.0% __________________________________________________________________ FARO - FARO Technologies $24.60 *** Sales Are Up! *** FARO Technologies (NASDAQ:FARO) designs, develops, markets and supports portable, software-driven, 3-D measurement systems used in a broad range of manufacturing and industrial applications. The firm's principal products are the Faro-Arm Control Station and Control Station Pro (articulated measuring devices), the Faro Laser Tracker and Laser Control Station and their companion Soft Check Tool and CAM2 software, respectively, which provide for computer-aided design (CAD)-based inspection and factory-level statistical process control. Faro's products bring precision measurement, quality inspection and specification conformance capabilities, integrated with CAD software, to the factory floor. AUG 22.50 QEJ HX LB=2.80 OI=184 CB=21.80 DE=33 TY=3.0% __________________________________________________________________ PLMO - palmOne $34.99 *** Testing 2004 Highs! *** palmOne (NASDAQ:PLMO) develops, builds and sells Palm-branded, hand-held devices, accessories and the Palm operating system (Palm OS). The company was historically organized into two operating segments: the Solutions Group and PalmSource. The Solutions Group develops and markets hand-held devices and accessories to provide the user with a simple, elegant and useful productivity tool. PalmSource developed and licensed the Palm OS and related software, which is referred to as the Palm platform. The Palm platform is the foundation for Palm devices, as well as for devices manufactured by third-party licensees. AUG 30.00 UPY HF LB=5.90 OI=2861 CB=29.09 DE=33 TY=2.9% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER IN SECTION ONE ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************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 Bad Month For Market Bulls! By Ray Cummins Stocks ended the week on a bearish note amid concerns over the slowing pace of the economy and the murky outlook for corporate profits. The Dow Jones Industrial Average declined 23 points to 10,139, despite gains in Johnson & Johnson (NYSE:JNJ), which rose more than 2% on news of more problems with Boston Scientific's heart device. Weakness in semiconductor-related shares helped drive the NASDAQ Composite down 29 points to 1,883, its lowest close in two months. Rising oil prices weighed on the broader market, with the Standard & Poor's 500 Index falling 5 points to 1,101 in a fifth consecutive week of losses. Trading was active with about 1.4 billion issues crossed on the New York Stock Exchange and 1.8 billion shares changing hands on the NASDAQ. Breadth was roughly neutral on the Big Board, however decliners ousted advancers more than 2 to 1 on the technology exchange. In the bond market, the 10-year note soared 31/32, while its yield fell to 4.36%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 07/16/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 Stock Pick Last Month L/P S/P Credit CB G/L Status AMZN 50.95 47.10 JUL 42.5 45.0 0.30 44.70 0.30 Closed YHOO 31.87 29.19 JUL 25.0 27.5 0.30 27.20 0.30 Closed CFC 69.15 72.37 JUL 60.0 63.3 0.35 63.03 0.35 Closed QCOM 69.86 68.28 JUL 60.0 65.0 0.45 64.55 0.45 Closed SWIR 33.83 29.97 JUL 25.0 30.0 0.90 29.10 0.87 Closed CTSH 24.25 24.92 JUL 20.0 22.5 0.27 22.23 0.27 Closed NUE 69.54 79.50 JUL 60.0 65.0 0.75 64.25 0.75 Closed SII 53.26 58.60 JUL 47.5 50.0 0.30 49.70 0.30 Closed RJR 65.90 65.86 JUL 55.0 60.0 0.35 59.65 0.35 Closed URBN 30.40 26.79 JUL 25.0 27.5 0.20 27.30 (0.51) Closed FRE 63.57 67.24 AUG 55.0 60.0 0.55 59.45 0.55 Open GILD 67.42 62.44 AUG 55.0 60.0 0.60 59.40 0.60 Open POT 98.08 96.05 AUG 85.0 90.0 0.60 89.40 0.60 Open UOPX 89.09 90.66 AUG 75.0 80.0 0.60 79.40 0.60 Open FAST 54.74 60.82 AUG 45.0 50.0 0.60 49.40 0.60 Open PD 79.00 80.50 AUG 65.0 70.0 0.60 69.40 0.60 Open ATH 91.31 93.40 AUG 80.0 85.0 0.45 84.55 0.45 Open WLP 112.90 114.85 AUG 100.0 105.0 0.50 104.50 0.50 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss The position in Ishares Russell 2000 Index (IWM) was not available at the recommended price. Photon Dynamics (NASDAQ:PHTN), Maxim Integrated Products (NASDAQ:MXIM), Amazon.com (NASDAQ:AMZN); at the $50 strike, and Plantronics (NYSE:PLT) have previously been closed to limit potential losses. CALL-CREDIT SPREADS Stock Pick Last Month L/C S/C Credit CB G/L Status APPX 34.03 26.39 JUL 45.0 40.0 0.50 40.50 0.50 Closed INSP 34.71 30.96 JUL 45.0 40.0 0.65 40.65 0.65 Closed WMS 28.75 29.30 JUL 35.0 30.0 0.65 30.65 0.65 Closed GS 90.21 87.25 JUL 100.0 95.0 0.70 95.70 0.70 Closed SYMC 42.42 40.56 JUL 50.0 45.0 0.65 45.65 0.65 Closed FRX 56.32 52.16 JUL 65.0 60.0 0.60 60.60 0.60 Closed CTX 47.34 43.70 JUL 52.5 50.0 0.30 50.30 0.30 Closed SINA 35.60 24.67 JUL 45.0 40.0 0.45 40.45 0.45 Closed CECO 44.45 42.25 JUL 55.0 50.0 0.55 50.55 0.55 Closed RYL 75.80 72.99 JUL 85.0 80.0 0.60 80.60 0.60 Closed LLTC 36.74 35.87 AUG 42.5 40.0 0.30 40.30 0.30 Open XLNX 31.53 29.76 AUG 37.5 35.0 0.25 35.25 0.25 Open MERQ 46.17 42.26 AUG 55.0 50.0 0.65 50.65 0.65 Open SMH 34.58 32.00 AUG 42.5 40.0 0.30 40.30 0.30 Open TLB 33.04 30.49 AUG 40.0 35.0 0.60 35.60 0.60 Open VAR 77.24 66.30 AUG 90.0 85.0 0.50 85.50 0.50 Open KLAC 43.33 39.36 AUG 50.0 47.5 0.25 47.75 0.25 Open NVLS 29.23 27.29 AUG 35.0 32.5 0.20 32.70 0.20 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Positions in Genzyme (NASDAQ:GENZ) and the Oil Service Holdrs (AMEX:OIH) have previously been closed to limit potential losses. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status GRMN 32.60 34.13 JUL 35.00 30.00 2.15 2.35 Closed SNDK 22.90 23.69 JUL 22.50 22.50 3.40 3.60 Closed GDT 56.02 54.55 JUL 55.00 55.00 4.80 4.50 Closed DNA 54.60 51.07 JUL 55.00 55.00 4.25 5.10 Closed OVTI 15.50 12.14 JUL 15.00 15.00 2.70 4.00 Closed MDC 64.77 66.85 JUL 65.00 65.00 4.00 5.00 Closed DVN 69.40 70.40 AUG 70.00 70.00 5.00 4.80 Open Straddle plays on Garmin (NASDAQ:GRMN), Sandisk (NASDAQ:SNDK) and Guidant (NYSE:GDT) were closed early in the interest of "capital preservation." Genentech (NYSE:DNA), M.D.C. Holdings (NYSE:MDC) and Omnivision (NASDAQ:OVTI) offered small profits. CREDIT STRANGLES Stock Pick Last Exp. Sold Sold Initial Current Play Symbol Price Price Month Call Put Credit Debit Status NFLX 32.31 23.02 JUL 37.50 27.50 0.55 4.50 Closed Netflix (NASDAQ:NFLX) endured a major sell-off Friday, despite a relatively benign earnings announcement. Traders who used a "buy-to-close" stop on the option (or a sell-short order on the stock) reduced the potential loss considerably, but the issue was definitely more volatile than expected. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INDEX-BASED CREDIT SPREADS As a trader, you may be familiar with options on individual stocks where you have the right to buy (call option) or the right to sell (put option) a particular stock at some predetermined price within some predetermined time. The buyer has the rights and the seller the obligations. With index options the basic ideas are the same. Index options allow you to make investment decisions on a specific industry group or on the market as a whole. Spread strategies can be made with index options similar to those made with individual stock options and professional traders also employ index spreads in common hedge strategies. Traders who participate in OTM credit spreads often utilize index-based options because they generally contain favorable "premium" and provide an underlying instrument less prone to huge, gapping moves. These positions will not be included in the portfolio summary. _________________________________________________________________ UTH - Utilities Holdrs Trust $82.42 *** Safety Sector! *** The Utilities Holdrs Trust (AMEX:UTH) is a unique instrument that represents an investor’s ownership in the stock of specified companies in the utilities sector. HOLDRS allow investors to own a diversified group of stocks in a single investment that is highly transparent, liquid and efficient. Each HOLDR is a fixed basket of 20 stocks (except the Telebras HOLDR, which holds 12 companies). They work operate much like ADRs; American Depositary Receipts, which allow U.S. investors to purchase foreign-owned companies on the U.S. exchanges in dollar denominated amounts. In just the same way, the investor actually owns the shares of each underlying company, receives dividends, proxies, and annual reports from each. The HOLDRs are not managed, and once the companies and amounts have been determined they are fixed, no companies will be substituted. In this way, the HOLDRs differ somewhat from Spiders (SPDRs), or Standard & Poor Depositary Receipts and other exchange traded funds, which will add and delete stocks on a regular basis, usually in conjunction with an index that they are tracking. A complete explanation of this issue, including the companies that make up each HOLDRS' particular industry, sector or group can be found here: http://www.holdrs.com/holdrs/main/index.asp?Action=Definition UTH - Utilities Holdrs Trust $82.42 PLAY (conservative - bullish/credit spread): BUY PUT AUG-75.00 UTH-TO OI=1561 ASK=$0.20 SELL PUT AUG-80.00 UTH-TP OI=423 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=9% B/E=$79.55 _________________________________________________________________ OIH - Oil Service Holdrs Trust $75.59 *** Oil Soars Again! *** The Oil Service Holdrs Trust (AMEX:OIH) is a unique instrument that represents an investor’s ownership in the stock of specified companies in the oil service sector. HOLDRS allow investors to own a diversified group of stocks in a single investment that is highly transparent, liquid and efficient. Each HOLDR is a fixed basket of 20 stocks (except the Telebras HOLDR, which holds 12 companies). They work operate much like ADRs; American Depositary Receipts, which allow U.S. investors to purchase foreign-owned companies on the U.S. exchanges in dollar denominated amounts. In just the same way, the investor actually owns the shares of each underlying company, receives dividends, proxies, and annual reports from each. The HOLDRs are not managed, and once the companies and amounts have been determined they are fixed, no companies will be substituted. In this way, the HOLDRs differ somewhat from Spiders (SPDRs), or Standard & Poor Depositary Receipts and other exchange traded funds, which will add and delete stocks on a regular basis, usually in conjunction with an index that they are tracking. A complete explanation of this issue, including the companies that make up each HOLDRS' particular industry, sector or group can be found here: http://www.holdrs.com/holdrs/main/index.asp?Action=Definition OIH - Oil Service Holdrs Trust $75.59 PLAY (conservative - bullish/credit spread): BUY PUT AUG-65.00 OIH-TM OI=1150 ASK=$0.25 SELL PUT AUG-70.00 OIH-TN OI=9359 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.50-$0.55 POTENTIAL PROFIT(max)=11% B/E=$69.50 _________________________________________________________________ BEARISH PLAYS - INDEX-BASED CREDIT SPREADS _________________________________________________________________ OEX - S&P 100 Index $535.90 *** Broad-Market Hedge *** Standard & Poor's 100 Index is a capitalization-weighted index of 100 stocks from a broad range of industries. The component stocks are weighted according to the total market value of their outstanding shares. The impact of a component's price change is proportional to the issue's total market value, which is the share price times the number of shares outstanding. Trading in S&P-100 options will ordinarily cease on the business day preceding the expiration date. OEX options generally may be exercised on any business day before the expiration date. OEX - S&P 100 Index $535.90 PLAY (less conservative - bearish/credit spread): BUY CALL AUG-560.00 OEB-HL OI=8528 ASK=$1.00 SELL CALL AUG-555.00 OEB-HK OI=2010 BID=$1.60 INITIAL NET-CREDIT TARGET=$0.65-$0.70 POTENTIAL PROFIT(max)=15% B/E=$555.65 _________________________________________________________________ DIA - DOW DIAMONDS $101.70 *** Doing The DOW! *** DOW DIAMONDS (AMEX:DIA) represent ownership in the DIAMONDS, Trust Series 1, a unit investment trust established to hold a portfolio of the equity securities that comprise the Dow Jones Industrial Average. DIAMONDS seek investment results that, before expenses, generally correspond to the price and yield performance of the DJIA. A complete explanation of this issue, including the companies that make up the DOW DIAMONDS - DIA can be found here: http://www.amex.com/?href=/etf/prodInf/EtPiOverview.jsp?Product_Symbol=DIA DIA - DOW DIAMONDS $101.70 PLAY (conservative - bearish/credit spread): BUY CALL AUG-106.00 DIA-HB OI=6653 ASK=$0.20 SELL CALL AUG-105.00 DIA-HE OI=6015 BID=$0.30 INITIAL NET-CREDIT TARGET=$0.10-$0.15 POTENTIAL PROFIT(max)=11% B/E=$105.10 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. _________________________________________________________________ TBL - The Timberland Company $60.26 *** Retail Sector! *** The Timberland Company (NYSE:TBL) designs, develops, engineers, markets and distributes, under the Timberland and Timberland PRO brands, footwear, apparel and accessories products for men, women and children. The company's products are sold primarily through independent retailers, better-grade department stores, athletic stores and other national retailers. In addition, its products are sold through specialty stores, Timberland factory outlet stores, timberland.com and franchisees in Europe. The firm's products are sold throughout the United States, Canada, Europe, Asia, Latin America and the Middle East. Earnings are due on July 22, 2004. TBL - The Timberland Company $60.26 PLAY (speculative - neutral/debit straddle): BUY CALL AUG-60.00 TBL-HL OI=336 ASK=$2.60 BUY PUT AUG-60.00 TBL-TL OI=413 ASK=$2.25 INITIAL NET-DEBIT TARGET=$4.60-$4.75 INITIAL TARGET PROFIT=$2.10-$3.30 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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... The Difference OneStopOption.com 888-281-9569 *************************************************************** ***************************************** 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 07/16/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 CVTX JUL 15.00 14.60 15.03 0.40 5.63% 2.74% DITC JUL 17.50 16.80 19.69 0.70 8.40% 4.17% SYNA JUL 17.50 16.85 16.98 0.13 1.50% 3.86% PTIE JUL 7.50 7.15 7.30 0.15 4.24% 4.90% BCC JUL 35.00 34.25 35.01 0.75 5.12% 2.19% JILL JUL 20.00 19.45 19.24 (0.22) 0.00% 0.00% LSS JUL 20.00 19.50 33.75 0.50 6.07% 2.56% OI JUL 15.00 14.65 15.76 0.35 5.64% 2.39% NVTL JUL 15.00 14.65 21.33 0.35 7.34% 2.39% PDII JUL 25.00 24.70 28.43 0.30 3.91% 1.21% RSAS JUL 17.50 17.05 18.64 0.45 6.22% 2.64% STLD JUL 25.00 24.45 33.10 0.55 5.33% 2.25% UPL JUL 30.00 29.55 41.75 0.45 4.14% 1.52% USG JUL 15.00 14.15 17.93 0.85 13.32% 6.01% ATI JUL 12.50 12.20 17.75 0.30 7.44% 2.46% BJS JUL 42.50 41.70 48.71 0.80 4.75% 1.92% LCAV JUL 25.00 24.35 27.48 0.65 6.85% 2.67% NCRX JUL 27.50 26.80 30.02 0.70 7.30% 2.61% NVTL JUL 17.50 17.05 21.33 0.45 8.97% 2.64% SSYS JUL 22.50 22.20 23.66 0.30 4.41% 1.35% SWIR JUL 30.00 28.85 29.97 1.12 10.38% 3.99% SYNA JUL 17.50 16.90 16.98 0.08 1.20% 3.55% YHOO JUL 30.00 29.20 29.19 (0.01) 0.00% 0.00% AMHC JUL 22.50 21.80 26.43 0.70 9.36% 3.21% CTSH JUL 22.50 22.20 24.92 0.30 4.34% 1.35% CYBX JUL 30.00 29.25 28.45 (0.80) 0.00% 0.00% ERES JUL 22.50 21.85 28.09 0.65 9.03% 2.97% HLEX JUL 15.00 14.65 13.39 (1.26) 0.00% 0.00% MINI JUL 20.00 19.65 25.45 0.35 5.89% 1.78% NFI JUL 30.00 29.30 42.41 0.70 9.77% 2.39% PTIE JUL 7.50 7.25 7.30 0.05 2.39% 3.45% RIMM JUL 50.00 49.15 62.90 0.85 6.57% 1.73% SGTL JUL 22.50 22.25 23.79 0.25 4.25% 1.12% BRCM JUL 40.00 39.30 37.32 (1.98) 0.00% 0.00% CSGP JUL 40.00 39.60 39.71 0.11 0.96% 1.01% DHB JUL 12.50 12.20 15.12 0.30 8.97% 2.46% DY JUL 25.00 24.65 25.80 0.35 4.63% 1.42% ERES JUL 22.50 22.20 28.09 0.30 4.97% 1.35% FWHT JUL 20.00 19.60 18.23 (1.37) 0.00% 0.00% GVHR JUL 22.50 22.20 21.22 (0.98) 0.00% 0.00% IMH JUL 20.00 19.75 22.44 0.25 4.41% 1.27% NVTL JUL 17.50 16.90 21.33 0.60 15.07% 3.55% PLMO JUL 25.00 24.55 34.99 0.45 7.28% 1.83% USG JUL 15.00 14.70 17.93 0.30 7.05% 2.04% BCC JUL 35.00 34.55 35.01 0.45 5.53% 1.30% CHIC JUL 20.00 19.65 20.44 0.35 7.68% 1.78% CENX JUL 22.50 22.00 24.31 0.50 9.64% 2.27% ENDP JUL 22.50 22.15 21.15 (1.00) 0.00% 0.00% IFIN JUL 37.50 37.05 43.87 0.45 5.93% 1.21% TASR JUL 30.00 29.65 40.24 0.35 6.39% 1.18% USG JUL 15.00 14.70 17.93 0.30 10.67% 2.04% VSAT JUL 22.50 22.20 19.01 (3.19) 0.00% 0.00% AMED JUL 30.00 29.50 29.13 (0.37) 0.00% 0.00% CIMA JUL 30.00 29.60 33.83 0.40 6.65% 1.35% ERES JUL 25.00 24.70 28.09 0.30 6.05% 1.21% ISRG JUL 17.50 17.25 20.01 0.25 7.04% 1.45% NFLX JUL 30.00 29.45 23.02 (6.43) 0.00% 0.00% NSM JUL 20.00 19.80 17.60 (2.20) 0.00% 0.00% NKTR JUL 17.50 17.15 17.60 0.35 10.49% 2.04% SWIR JUL 30.00 29.75 29.97 0.22 4.68% 0.84% XMSR JUL 25.00 24.65 25.19 0.35 6.82% 1.42% NFI AUG 30.00 29.20 42.41 0.80 5.99% 2.74% NVTL AUG 20.00 19.50 21.33 0.50 5.77% 2.56% CBST AUG 10.00 9.65 10.58 0.35 6.43% 3.63% CACS AUG 12.50 12.00 13.02 0.50 7.03% 4.17% ARXX AUG 12.50 12.10 11.79 (0.31) 0.00% 0.00% TASR AUG 30.00 29.15 40.24 0.85 5.67% 2.92% PETD AUG 25.00 24.35 28.01 0.65 4.86% 2.67% CRDN JUL 35.00 34.55 36.36 0.45 9.24% 1.30% CRDN JUL 35.00 34.70 36.36 0.30 7.43% 0.86% NFI AUG 30.00 29.40 42.41 0.60 4.68% 2.04% NVTL AUG 20.00 19.50 21.33 0.50 6.11% 2.56% TASR AUG 30.00 29.30 40.24 0.70 4.93% 2.39% EYET AUG 35.00 34.45 40.10 0.55 3.92% 1.60% SCHN AUG 30.00 29.00 33.04 1.00 6.53% 3.45% MGAM AUG 25.00 24.25 26.04 0.75 5.51% 3.09% FRO AUG 30.00 29.30 37.37 0.70 4.97% 2.39% GIVN AUG 30.00 29.45 37.15 0.55 4.21% 1.87% ATI AUG 15.00 14.50 17.75 0.50 7.89% 3.45% BEIQ AUG 25.00 24.00 25.60 1.00 7.61% 4.17% NFLX AUG 27.50 26.70 23.02 (3.68) 0.00% 0.00% ESIO AUG 25.00 24.20 24.33 0.13 1.05% 3.31% AMHC AUG 25.00 24.25 26.43 0.75 5.98% 3.09% VTS AUG 22.50 21.85 23.76 0.65 5.72% 2.97% OSTK AUG 30.00 29.40 35.05 0.60 5.60% 2.04% KWK AUG 30.00 29.50 33.98 0.50 4.09% 1.69% ATI AUG 15.00 14.75 17.75 0.25 4.68% 1.69% EYET AUG 30.00 29.55 40.10 0.45 3.85% 1.52% ERES AUG 22.50 22.15 28.09 0.35 4.50% 1.58% CTSH AUG 22.50 22.05 24.92 0.45 4.61% 2.04% TECH AUG 40.00 38.75 40.77 1.25 6.27% 3.23% GPRO AUG 40.00 39.10 42.63 0.90 5.00% 2.30% ELN AUG 20.00 19.70 24.91 0.30 4.31% 1.52% As noted previously, many of the issues in the portfolio were candidates for "early exit" and should have been closed last week for smaller than published losses. Steel Technologies (NASDAQ:STTX), which finished the month profitable, Amedisys (NASDAQ:AMED), and Micron (NYSE:MU) were among the positions previously in this group, and Broadcom (NASDAQ:BRCM), Endo Pharmaceuticals (NASDAQ:ENDP), National Semi (NYSE:NSM), Viasat (NASDAQ:VSAT), and Findwhat.com (NASDAQ:FWHT) offered plenty of opportunity to exit early with an acceptable loss. The only major surprise was Netflix (NASDAQ:NFLX), which tanked after posting mediocre second-quarter earnings. Fortunately, traders who used a "buy-to-close" stop order on the option (or a sell-short order on the stock) reduced the potential loss considerably. NAKED CALLS Stock Strike Strike Break Current Gain Max Simple Symbol Month Price Even Price (Loss) Yield Yield ASKJ JUL 45.00 45.55 30.29 0.55 6.50% 1.21% AMLN JUL 25.00 25.35 20.54 0.35 5.29% 1.38% ICOS JUL 30.00 30.45 22.52 0.45 5.26% 1.48% OIIM JUL 17.50 17.80 13.55 0.30 5.50% 1.69% INSP JUL 40.00 40.50 30.96 0.50 6.88% 1.23% RHAT JUL 25.00 25.60 15.15 0.60 9.08% 2.34% CECO JUL 65.00 65.90 42.25 0.90 7.19% 1.37% ESI JUL 45.00 45.50 34.50 0.50 5.47% 1.10% FMT JUL 20.00 20.40 18.38 0.40 8.75% 1.96% NBIX JUL 55.00 56.10 48.90 1.10 8.21% 1.96% SLAB JUL 50.00 50.75 40.90 0.75 6.39% 1.48% AGIX JUL 20.00 20.45 14.98 0.45 9.16% 2.20% LEND JUL 30.00 30.55 29.17 0.50 6.63% 1.64% TSS JUL 22.50 22.90 20.98 0.40 8.67% 1.75% PAYX JUL 35.00 35.40 30.20 0.40 4.97% 1.13% FEIC JUL 25.00 25.35 20.15 0.35 6.89% 1.38% WM JUL 40.00 40.30 39.50 0.30 3.79% 0.74% IPXL JUL 20.00 20.40 16.17 0.40 10.18% 1.96% PSFT JUL 20.00 20.25 17.68 0.25 6.99% 1.23% SLAB AUG 50.00 51.00 40.90 1.00 5.30% 1.96% SINA AUG 40.00 40.85 24.67 0.85 7.85% 2.08% ATRS AUG 30.00 30.85 22.44 0.85 6.52% 2.76% MRVL AUG 27.50 27.85 23.03 0.35 3.98% 1.26% MACR AUG 25.00 25.40 21.28 0.40 4.55% 1.57% ISIL AUG 20.00 20.45 17.34 0.45 5.72% 2.20% ELAB AUG 45.00 45.00 31.79 0.00 0.00% 0.00% FLML AUG 25.00 25.50 19.90 0.50 8.15% 1.96% OTEX AUG 30.00 30.65 25.38 0.65 6.12% 2.12% TELK AUG 25.00 25.45 20.68 0.45 5.60% 1.77% ASKJ AUG 40.00 40.50 30.29 0.50 5.97% 1.23% DRIV AUG 30.00 30.85 25.32 0.85 7.92% 2.76% SINA AUG 35.00 35.45 24.67 0.45 6.42% 1.27% There was no premium available in Eon Labs (NASDAQ:ELAB), due to the "gap-down" at the open on the day after the play was offered. Although currently profitable, the position in XM Satellite Radio (NASDAQ:XMSR) has 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 Last Option Option Last Open Cost Days Simple Max Symbol Price Series Symbol Bid Int. Basis Exp. Yield Yield NFI 42.41 AUG 35.00 NFI TG 1.15 866 33.85 33 3.1% 9.9% MSO 11.81 AUG 10.00 MSO TB 0.35 736 9.65 33 3.3% 9.9% DHB 15.12 AUG 12.50 DHB TV 0.35 677 12.15 33 2.7% 8.5% ISG 32.36 AUG 30.00 ISG TF 0.95 1256 29.05 33 3.0% 7.6% SRDX 23.60 AUG 20.00 UZF TD 0.50 6588 19.50 33 2.4% 7.3% LCAV 27.48 AUG 25.00 JVQ TE 0.65 2 24.35 33 2.5% 6.5% FARO 24.60 AUG 20.00 QEJ TD 0.35 64 19.65 33 1.6% 5.8% EENC 13.30 AUG 12.50 EMU TV 0.25 106 12.25 33 1.9% 4.8% STLD 33.10 AUG 30.00 RQL TF 0.40 355 29.60 33 1.2% 3.5% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, SY-Simple Yield (monthly basis without margin), MY-Maximum Yield (monthly basis with margin), TS-Target Shoot. _________________________________________________________________ NFI - Novastar $42.41 *** Recovery In Progress! *** NovaStar Financial (NYSE:NFI) is a specialty finance firm that originates, invests in and services residential nonconforming loans. NFI operates through three separate but inter-related units: mortgage lending and loan servicing, mortgage portfolio management and branch operations. The company offers a range of mortgage loan products to borrowers (nonconforming borrowers) that do not satisfy the credit, collateral, documentation or other underwriting standards prescribed by conventional mortgage lenders and loan buyers, including government-sponsored entities such as Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac). NFI - NovaStar Financial $42.41 AUG 35.00 NFI TG LB=1.15 OI=866 CB=33.85 DE=33 TY=3.1% MY=9.9% _________________________________________________________________ MSO - Martha Stewart $11.81 *** 16 Months For Martha... *** Martha Stewart Living Omnimedia (NYSE:MSO) is an unique content and commerce company that creates "how-to" content and domestic merchandise for homemakers and other consumers. The company's products are generally sold under brand labels incorporating the Martha Stewart brand name, which it leverages across a range of media and retail outlets. MSO primarily focuses on the domestic arts, providing consumers with ideas, information, merchandise and other resources. MSO - Martha Stewart $11.81 AUG 10.00 MSO TB LB=0.35 OI=736 CB=9.65 DE=33 TY=3.3% MY=9.9% _________________________________________________________________ DHB - DHB Industries $15.12 *** A Bullet-Proof Stock? *** DHB Industries (NYSE:DHB) is a holding company consisting of two major divisions: DHB Armor Group and DHB Sports Group. The Armor Group includes both Point Blank Body Armor and Protective Apparel Corporation of America. The Armor Group principally manufactures three basic types of body armor: concealable armor, which is worn beneath the user's clothing and designed to protect against less serious weapons; tactical armor, which is worn externally and is designed to protect against more serious threats, and modular concealable/tactical armor, which allows the wearer to customize the armor for either concealed or tactical use. DHB - DHB Industries $15.12 AUG 12.50 DHB TV LB=0.35 OI=677 CB=12.15 DE=33 TY=2.7% MY=8.5% _________________________________________________________________ ISG - International Steel Group $32.36 *** Strong Sector! *** International Steel Group (NYSE:ISG) is an integrated steel manufacturing company. ISG has an annual raw steel production capability of about 18 million net tons and ships a variety of steel products from 11 steel producing and finishing facilities in six states. The company's principal products include a range of hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, rail products and semi-finished shapes serving the automotive, construction, appliance, plate, rail, container, tin and machinery markets. ISG - International Steel Group $32.36 AUG 30.00 ISG TF LB=0.95 OI=1256 CB=29.05 DE=33 TY=3.0% MY=7.6% _________________________________________________________________ SRDX - SurModics $23.60 *** Earnings Speculation *** SurModics (NASDAQ:SRDX) is a provider of surface-modification solutions for medical device and biomedical applications. Its PhotoLink chemistry is the core technology platform on which many of its surface-modification capabilities are based. This technology helps modify and enhance the surface characteristics of medical devices and biomedical applications, thus improving performance, and, in some cases, enabling the development of new products. The firm commercializes its surface-modification technologies through licensing and royalty arrangements with medical device manufacturers that apply coatings to their own products. Earnings are due Wednesday, July 21. SRDX - SurModics $23.60 AUG 20.00 UZF TD LB=0.50 OI=6588 CB=19.50 DE=33 TY=2.4% MY=7.3% _________________________________________________________________ LCAV - LCA-Vision $27.48 *** Seeing Is Believing! *** LCA-Vision (NASDAQ:LCAV) is a developer and operator of laser vision correction centers under the brand name LasikPlus. The firm's vision centers provide the staff, facilities, equipment and support services for performing laser vision corrections that use advanced technologies to help correct nearsightedness, farsightedness and astigmatism. LCA uses fixed-site excimer lasers made by Bausch & Lomb, VISX and Alcon. Its centers are supported mainly by full-time, board-certified ophthalmologists and optometrists, as well as other healthcare professionals. Earnings are due Tuesday, July 27. LCAV - LCA-Vision $27.48 AUG 25.00 JVQ TE LB=0.65 OI=2 CB=24.35 DE=33 TY=2.5% MY=6.5% _________________________________________________________________ FARO - FARO Technologies $24.60 *** Sales Are Up! *** FARO Technologies (NASDAQ:FARO) designs, develops, markets and supports portable, software-driven, 3-D measurement systems used in a broad range of manufacturing and industrial applications. The firm's principal products are the Faro-Arm Control Station and Control Station Pro (articulated measuring devices), the Faro Laser Tracker and Laser Control Station and their companion Soft Check Tool and CAM2 software, respectively, which provide for computer-aided design (CAD)-based inspection and factory-level statistical process control. Faro's products bring precision measurement, quality inspection and specification conformance capabilities, integrated with CAD software, to the factory floor. FARO - FARO Technologies $24.60 AUG 20.00 QEJ TD LB=0.35 OI=64 CB=19.65 DE=33 TY=1.6% MY=5.8% _________________________________________________________________ EENC - Enterra Energy $13.30 *** Energy Sector Trust *** Enterra Energy Trust (NASDAQ:EENC) is an open-ended investment trust (unincorporated) whose main undertaking is to issue trust units and to acquire and hold debt instruments, royalties and other interests. Enterra Energy is the principal operating subsidiary of the Trust. Enterra Production Partnership, which was formed as a general partnership, holds all of the Trust's producing crude oil and natural gas properties. The partners of the Partnership are New Enterra and Enterra Energy Partner. AUG 12.50 EMU TV LB=0.25 OI=106 CB=12.25 DE=33 TY=1.9% MY=4.8% _________________________________________________________________ STLD - Steel Dynamics $33.10 *** Up, Up, And Away! *** Steel Dynamics (NASDAQ:STLD) is a steel manufacturing company. The company owns and operates electric arc furnace mini-mills. Its primary steel operations include the Flat Roll Division, the Structural and Rail Division and the Bar Products Division. The company produces hot- and cold-rolled steel products, galvanized sheet products, light gauge steel products, structural steel and rails and joists and deck materials. STLD - Steel Dynamics $33.10 AUG 30.00 RQL TF LB=0.40 OI=355 CB=29.60 DE=33 TY=1.2% MY=3.5% TS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BSX - Boston Scientific $37.40 *** Stent Recall = Sell-Off! *** Boston Scientific (NYSE:BSX) is a global developer, maker, and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, neurovascular intervention, electrophysiology, vascular surgery, endoscopy, oncology, urology and gynecology. The company's products are offered for sale by two dedicated business groups, Cardiovascular and Endosurgery. BSX - Boston Scientific $37.40 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 40 BSX HH 8938 0.60 40.60 4.3% 1.5% _________________________________________________________________ ICUI - ICU Medical $26.95 *** Mediocre Earnings Report! *** ICU Medical (NASDAQ:ICUI) is a developer and manufacturer of proprietary, disposable medical connection systems for use in intravenous therapy applications. The company's devices are designed to protect healthcare workers and their patients from exposure to infectious diseases such as Hepatitis B and C and Human Immunodeficiency Virus through accidental needle sticks. ICU Medical is also a provider of custom I.V. systems and low cost generic I.V. systems, and it incorporates its proprietary products on many of those custom I.V. systems. ICU Medical also manufactures and sells the Punctur-Guard line of blood collection needles. ICUI - ICU Medical $26.95 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 30 QPD HF 22 0.80 30.80 8.6% 2.6% _________________________________________________________________ WMGI - Wright Medical Group $32.38 *** Stuck In A Range? *** Wright Medical Group (NASDAQ:WMGI), through Wright Medical Technology, and other operating subsidiaries, is a global orthopaedic medical device company specializing in the design, manufacture and marketing of reconstructive joint devices and biologics products. Reconstructive joint devices are used to replace knee, hip and other joints that have deteriorated through disease or injury. Biologics are used to replace damaged or diseased bone, to stimulate bone growth and to provide other biological solutions for surgeons and their patients. WMGI - Wright Medical Group PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 35 QWM HG 158 0.65 35.65 5.5% 1.8% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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... The Difference OneStopOption.com 888-281-9569 *************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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