The Option Investor Newsletter Sunday 08-01-2004 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: That Was Exciting Futures Wrap: See Note Index Trader Wrap: Up week, but a downer month for stocks Editor's Plays: Looking at the Future Market Sentiment: Here We Go Again Ask the Analyst: See Note Coming Events: Earnings, Splits, Economic Events Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 7-30 WE 7-23 WE 7-16 WE 7-09 DOW 10139.71 +177.49 9962.22 -177.56 10139.8 - 73.44 - 69.61 Nasdaq 1887.36 + 38.27 1849.09 - 34.06 1883.15 - 63.18 - 60.33 S&P-100 537.67 + 7.29 530.38 - 5.52 535.90 - 6.73 - 4.54 S&P-500 1101.72 + 15.52 1086.20 - 15.20 1101.40 - 11.41 - 12.57 W5000 10701.65 +147.83 10553.8 -178.04 10731.9 -110.82 -154.87 SOX 416.43 + 10.85 405.58 - 4.88 410.46 - 40.68 - 6.17 RUT 551.29 + 12.07 539.22 - 16.26 555.48 - 8.25 - 18.99 TRAN 3111.69 + 68.25 3043.44 - 44.89 3088.33 + 0.36 - 58.20 ****************************************************************** That Was Exciting by Jim Brown The market celebrated the end of convention event risk with a yawn and the concern immediately shifted to the lower than expected GDP. The critical convention event risk expired with no more excitement than a week old newspaper. Dow Chart – Daily Nasdaq Chart – Daily SPX Chart NYSE Composite Chart ($NYA.x) The big news for the morning was not the end of the convention risk but the unexpected drop in the Q2 GDP to +3.0% from +4.5% in Q1 was well below estimates of +3.8% growth. This was the lowest level for GDP since the +1.9% in Q1 of 2003. The biggest component drop was in personal consumption which fell from +4.1% in Q1 to only +1.0% in Q2. This was a major drop and confirms the retail weakness we have been hearing about for a couple months. Overall the GDP is still up +4.8% over the last four quarters but that is mostly due to the +7.4% jump in Q3-2003 as a result of the 2003 tax rebate. The minor rise in consumer spending was the smallest gain in over three years. While the GDP was a disaster the PMI was a blowout. The Business Barometer headline number was 64.7 compared to 56.4 in June. This did not completely reverse the drop in June from 68.0 in May but it does bring the report back in line with the prior two months. The Production component soared to 69.5 from 53.9 and New Orders rose to 68.7 from 56.8. Backlogs rose +6.5 to 60.2. The only component with a strong decline was employment which fell to 45.6 from 53.6. That was the worst labor reading since June-2003. Most notable was the drop in inflation with Prices Paid falling to 77.6 from 84.5. This was the first drop in PP since February. Also adding to the positive economic picture was the NAPM-NY which rose to 302.5 in July and well over the 290.9 in June. This is a multi month high and shows business conditions are still improving. Non manufacturing activity jumped +31% to 71 from 58.0. Current conditions jumped to 72.3 from 57.6 but the six-month outlook exploded to 78.5 from 60. Strong economics like the PMI and NY-NAPM along with the Philly Fed and Empire State survey suggests the ISM on Monday could see a strong upside surprise. The challenge is whether the rebound actually occurred in July or just the beginning of the rebound. The consensus estimates are for a headline number of 62.0 and right in line with the last four month average of 62.2. The recent high was 63.6 in January and we have seen numbers near 61 twice in Feb and June. A number over 63.0 would be seen as a very strong confirmation the economic soft patch is behind us. The markets should act positively to any strong number. The GDP sinking to +3.0% growth for the quarter and the uptick in the regional indexes for June/July suggests May was the weak link that dragged down the GDP. The best news was the falling inflation levels. With a soft GDP and inflation levels coming off their highs despite high energy prices the Fed should be ecstatic. The Fed meeting on August 10th is still showing the possibility of a rate hike but there is no possibility of a 50 point hike as there was in the past. The current Fed Funds Futures are pricing in a 25 point hike in August, November and December and would raise the target rate to 2.0% by year end. I believe the Fed will raise rates in August because to not raise them would raise questions about what does the Fed know that we don't. Since the hike is already priced in the Fed will get a free pass on this one. The final reading on the July Consumer Sentiment came in at 96.7, +2.0 over June's 95.6 and slightly over estimates. The dip in gas prices added to the slight rise in sentiment but with prices rising again we could see sentiment sink once that $2.00 per gallon rate is back to haunt us. Oil rose to an all time high at $43.85 and spiked well over previous levels. The reasoning analysts are giving is the potential for terrorist attacks causing a real slow down in deliveries. OPEC is reportedly pumping every barrel they can and well over the stated production quotas. Meanwhile the demand for oil is growing at a 24 year high. This means any production stoppage could send prices soaring even farther. The rumored target is Saudi Arabia where the regime is under attack and they are a major producer of high quality oil. Terror attacks have grown in intensity and frequency and the oil infrastructure is reportedly too wide spread to protect completely. Traders are fighting rumors that the production/transportation facilities could be attacked just before our elections in an effort to drive prices significantly higher and provide a voter backlash from high gas prices. Granted this is all just speculation but as you can see by the price there is worry. Oil supplies are actually rising in the U.S. and some traders feel the price spike will end badly. What was really surprising on Friday was the disconnect of the stock market from the oil price. Recently we have seen a strong divergence in prices when oil rose, stocks fell. This disconnect could be the symptom of an impending move higher in stocks. We saw support levels remain rock solid at 10100 on the Dow and 1098 on the SPX. The S&P futures closed at the high of the day at 1103.75. Unfortunately the market action on Friday was far from predictable. The price action on my charts was more like child's crayon scratching than a recognizable pattern. We tested highs and lows of the various support/resistance ranges almost at will with no directional trend. The strongest move of the day came just before the close when the Dow and SPX rebounded off their lows and returned to their highs in just the last 25 min of trading. Techs, which had been stronger turned weaker in the afternoon in stark divergence to the action in the Dow and SPX. The Dow traded in a 64-point range from 10086 to 10150. The 10100 support was rock solid and 10150 was equally solid resistance. We made the round trip to both levels multiple times over the last two days and the battle seems far from over. The Nasdaq traded in a narrow 20 point range just under 1900 and was supported by the SOX (+1.27%) and the Russell which traded over its 550 resistance high several times. The only trend was sideways and that was barely discernable. The easiest method of illustrating the abrupt swings in the market is to show an intraday chart of the Advance/Decline line. This chart shows alternating buy sell programs almost constantly throughout the entire day with major swings late in the afternoon. Those swings in the afternoon were +/- 700 issues on an alternating basis. Very difficult to trade when alternating buy/sell programs are running rampant. This is good news because volatility means change is in the wind. Adv/Dcl Chart I have been expecting a post convention rebound and I have to admit Friday was very frustrating. I kept expecting every rebound to break that overhead resistance and begin to move higher in anticipation of next week. Unfortunately that strong move up did not appear until the close when the futures moved to the high of the day. There were multiple reasons for the lack of momentum with the primary ones being the very low GDP and the nearly $44 oil. There also appeared to be a sell the news crowd that came to the market this morning also looking for a rally to sell into. The good news was the strong underlying bid at 10100 on the Dow and 1098 on the SPX. Buyers took a lot of shots but managed to hold the line. I may have been expecting too much for a summer Friday with barely over three billion shares traded but I have not changed my tune. Despite the choppy week and some new lows all around the indexes did manage to finish positive and at the highs for the week. It was the first positive week for the Dow and SPX since June-18th. The Dow gained +177 and the Nasdaq +38. Not great numbers but still a reversal of the trend. I view the strong underlying bid on Friday as proof that sellers are beginning to lose their grip on the market. With the S&P futures closing at a two week high and well over 1100 at 1103.75 it suggests we could see a very different market on Monday. I still believe that SPX 1100 resistance will break to the upside despite multiple failures at the 1102 level on Friday. Part of my reasoning is the trend for the last 11 election year cycles for the markets to rebound the first week of August. Secondarily we are still very oversold given the positive earnings we are seeing. I believe any rally will eventually fail but that is another story for another day. Treat any continued rebound as a trading rally only and keep your stops in place. With the convention over one of our fear factors has been put to rest. Kerry is still in a dead heat with Bush but his pep rally is over. I am sure he hoped to add some points in the polls but the latest survey showed Bush adding +2 points on Friday. The Kerry platform has been publicized and the critics are coming out the woodwork. Drug companies are under attack and price controls and green power are the hot topics. On the Republican side the Budget Office released the expected budget deficit today at -$445 billion. While that is a record deficit it is still not complete. The budget was offset by a +$155 billion social security surplus. Considering the state of the SS system that money should remain in the trust fund for future use instead if used to pay bills. The war in Iraq was not included and will be brought up as a supplemental item in the spring and is expected to be $50 billion. Add those together and we have a real budget deficit in the $650 billion range. This is why foreign investors are fleeing our markets with net withdrawals for the last three months. They believe the soaring deficit will require desperate measures that could handicap our economy and our markets. To be fair that deficit is the result of the post Y2K recession that began in early 2000, the 9/11 attack, massive expenditures for homeland defense and the huge tax rebates that helped to spark the economy in 2003. There are pros and cons on both sides but the main point I want to make is the market is watching the polls. The drop over the last three weeks could have been partly due to the convention event risk but not risks from terrorists. Had the convention produce a ground swell of support for some new program of price controls, budget cuts and cancellation of last years tax cuts then the market would have reacted negatively to any Kerry gain in the polls. With the convention over and no new agenda the danger, in both contexts, seems to have passed. The market is free to discount the race with the Republican pep rally still ahead. In stock news of note Intel announced a delay in the release of the new 4ghz Pentium 4 processor until the first quarter. Giving confusing reasons in English that would make Greenspan proud the company deftly avoided saying that by pushing the chip one quarter farther out they could dump their high inventory of older chips during the Q4 holiday sales cycle. Intel management is not stupid and they realized that by delaying the long awaited chip all the computers built in the 4Q would have to be built with the older chips. Does not take a rocket scientist to see the reasoning here. I ended last Sunday's article with instructions to look for good stocks over the next couple days that were beaten down with the market and then expect an end of week rebound. Monday was the low for the week and you got a second chance on Wednesday. The Dow finished +224 points off its lows for the week and the Nasdaq +54. If you followed my instructions you probably did well. For Monday the Thursday night instructions have not changed. Remain long over SPX 1100 and short/flat below that level. Hopefully we will get a stronger than expected ISM and we will be off to the races. As always, just like the GDP on Friday, there is the potential for a negative surprise so wait for the announcement volatility to pass before entering new positions. Enter Very Passively, Exit Very Aggressively! Jim Brown ************ FUTURES WRAP ************ 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 ******************** Up week, but a downer month for stocks The major indices finished the week with gains and broke a 4-week losing streak where some positive economic readings from July helped offset "slowing growth" reading from late spring. Oil jumped to record highs with shipments threatened by a legal battle between Russia's government and the country's biggest oil exporter, OAO Yukos Oil Co., by attacks on oil infrastructure in Saudi Arabia and Iraq and by civil unrest in Nigeria and Venezuela. Oil gushed higher with September futures (cl0u) $43.80 +2.45% posting its fifth weekly gain, the first time that has happened in more than a year. U.S. Market Watch - 07/30/04 Close The CBOE Internet Index (INX.X) 171.99 +0.19% edged higher on Friday, but holds the top spot among equity sector gainers (listed in the Market Watch) for the week, while mixed earnings and perhaps the Democrat's platform for restructuring the nations healthcare system in an attempt to slow the rise of healthcare costs sent the Health Provider Index (RXH.X) 348.37 down 4.32% on the week. Not listed in the U.S. Market Watch above is the Dow Jones U.S. Steel Index ($DJUSST) 126.18 +0.52%, which surged 8.87% on the week and 13.11% the past 20 sessions. It closed at an all-time high on Friday. Did you know there was a Dow Jones U.S. Toy Index ($DJUSTY) 275.47 -0.36%? I didn't until last night. It was down 2.79% this week, and has fallen 6.68% the past 20 sessions. A weaker than forecasted initial/preliminary second-quarter GDP reading, which showed the U.S. economy growing at a more modest 3.0% annual rate in the second quarter had Treasuries reversing much of their earlier week losses, where the benchmark 10-year yield fell a sharp 10 basis points in Friday's trade. The yield curve would have steepened this week, usually a bullish sign for equities with the shorter-dated 5-year yield rising 1.5 basis points, the belly of the curve rising 4.3 basis points, while the longest-dated 30-year yield ($TYX.X) rose 3.4 basis points. On a 4-week basis, the yield curve flattened notably, with the 5- year YIELD ($FVX.X) down 3.6 basis points, the 10-year YIELD ($TNX.X) down 8.9 basis points, and the 30-year yield ($TYX.X) falling 8.6 basis points. In last weekend's "Market Sentiment" column, I thought we might want to monitor the Broker Dealer Index (XBD.X) 119.39 -0.73% this week. The brokers carved out a 1.92% gain on the week, and that just about matches the indices gains. Here's a good index to again... MONITOR right now, get a feel for things after this week's release of July consumer confidence/sentiment readings, which were stronger than economists' forecast. Remember, these are SURVEYS and consumers don't always do what they say over the phone. Earnings season is starting to wind down a bit, with just about 75% of the S&P 500 Index (SPX.X) components having reported their quarterly earnings. Whew! Thank goodness. However, next week, we're going to get slammed with a bunch of economic data, so I would want us to have an additional "sentiment" index to keep track of. It's a beauty! By that I mean it looks WEAK, suspect to decline! It has something to prove! Or, I should say, it provides a test of which the MARKET has something to prove, buyers and sellers. What is it? Hint.... there's only 147 days left until the Christmas holiday. While I always wait until the last minute to buy holiday gifts for friends and family, institutions should have their list together, be accumulating some of their favorite names if a strong consumer, economy and holiday shopping season is to unfold. S&P Retail Index (RLX.X) - Daily Intervals When we look at the S&P 500 Index (SPX.X) later, you're going to see some similarities between the SPX.X and the Retail Index (RLX.X). Where relative to the SPX.X, the RLX.X looks a little stronger as it relates to its 21-day SMA and 200-day SMA. I think the RLX.X is a good sub-index to monitor the next couple of weeks. The MARKET's received some upbeat news on consumer sentiment surveys. Hey, that's fine, but those are surveys. Will the MARKET believe it and commit capital to it? The RLX.X holds that key. With rising oil and gasoline prices, economists are worried, with good cause, that higher gasoline prices are using up consumer's expendable cash they might otherwise be spending on camouflage clothing, new boots, goose decoys, a new shirt, a blouse, a skirt, washing machine, laptop computer, you name it. Heck, last week I filled up the 40-gallon tank on the "land yacht" and it set me back $72.00. That's a decent set of duck decoys. Ouch! Pivot Analysis Matrix - I've highlighted some of the support (green) and resistance (red) correlations in the Pivot Analysis Matrix where we have new MONTHLY pivot levels, which are derived from July's high/low and Friday's close. Now, I marked the Dow Industrials' (INDU) WEEKLY S1, WEEKLY R2 and MONTHLY R1, where I see some similarities with these levels as found in MAY's MONTHLY Pivots, where the INDU traded lower to start the month out, violating its then MONTHLY S2 (9,986) where I see this WEEK's (8/02-08/06) WEEKLY S1. In May, the INDU fell to a low of 9,852 and staged a rebound to close the month of May at 10,188 (just now seeing Monday's DAILY R2 of 10,188), where in June, the Dow Industrials (INDU) traded a high of 10,487 (would be ABOVE August's MONTHLY R1). Now, for July, we saw the indices fall from their opening bell on July 1. In this past Monday's "Market Wrap," fellow analyst Jonathan Levinson titled that wrap "Doji Day," and while Jonathan noted that Monday's intra-day action was not "the stuff of classic doji bottoms," the major indices did move higher from Monday's doji. Dow Industrials (INDU) Chart - Daily Intervals Some of my yellow zones haven't budged in a couple of weeks, so I'm leaving them right where they are. Stochastics seem positioned that near-term resistance is going to be formidable at all that confluence of SMA's and WEEKLY R1 and WEEKLY Pivot retracement of 10,226. Note from your Retail Index RLX.X the position of its 200-day SMA, which did see trade on Thursday (07/29/04). Again... I am not a candlestick expert, but other analysts at premierinvestor.net and OptionInvestor.com give better insight to the implications of "doji" patterns. Before I even knew about candlesticks, I observed on my own that a bar chart, where a bar shows an almost identical opening price and closing price created what I called an "iron cross," kind of like the male gymnast will perform on a set of rings. Envision yourself trying to perform an "iron cross" (I'm laughing to myself as I picture my arms being ripped from their sockets) and where after such a TRADE is seen, where it would appear the MARKET has agreed on a price, that a break up or down from that "iron cross" then has the MARKET further agreeing on price direction, whichever direction price breaks (up or down). Look at some weekly interval and monthly interval charts of stocks, or indices for this type of pattern. The Semiconductor Index (SOX.X) made a beautiful "upside down iron cross" as I call it in March of 2003. Just as its sector bullish % at Dorsey/Wright and Associates reversed up to "bull confirmed" status at 28%. Current sector status for the Semiconductor's is "bear confirmed" at 8% and would take a reversing higher reading of 14% to turn up to "bull alert." Speaking of bullish % indications. One of the best analogies I read this week, was from Dorsey/Wright. In the 09:00 AM Updates, I post the various major market bullish % readings. In one of their special e-mail updates, THEIR NYSE bullish % (not www.stockcharts.com, which I reference at 09:00 AM) reversed back lower this week. The analogy maid is that this action, in the very broad NYSE Bullish %, where NYSE listed stocks are more often a "buy and hold" type stock among institutional investors (mutual funds, pension funds, etc.) is that the DEFENSIVE team is on the field again. The analogy that I liked was .... "that the generals are still fighting the battle, but the soldiers are leaving the field. How long can the generals hold out? I don't know." This is why I (Jeff Bailey), like to try and pick out a couple of sectors that I feel might be "key" to figuring out the "how long" it might last question. The Broker/Dealer Index (XBD.X) is VERY WEAK, but did make a near-term "bottom" on July 19, while the broader S&P 500 Index (SPX.X) traded a recent "bottom" this Monday. To me, when a VERY WEAK index makes a bottom first, it is usually a sign of SHORT COVERING? The reason I think this is because SMART money must have shorted at the top, and perhaps that same SMART money is locking in some gains. It would be that SMART bulls sold the top and are just showing up again, but I've never been so smart as to buy long the extreme bottom of anything. It's much safer to wait for some signs of meaningful strength before getting long. However, its SO easy to buy a bottom when your short when all you're doing is locking in gains at a target. According to Dorsey/Wright and Associates, their Wall Street Bullish % (BPWALL) is still "bear confirmed" at 28%, would take a reversing higher reading of 34% to achieve "bull alert" status, and 44% to achieve "bull confirmed" status. S&P 500 Index (SPX.X) Chart - Daily Intervals Rebounds in the SPX from the 1,095 level (March and May) have shown some confirmation of strength with a trade above 1,111. As it relates to Friday's GDP data, some things run through my mind. Some economists and market analysts said they thought the upward revision to first quarter GDP (January-March) from 3.9% to 4.5% "offset" Friday's release of second quarter GDP (April-June) of 3.0%, which was below economists' forecast of 3.7%. Bull-chips! I say. What the upward revision to Q1 GDP does, is most likely "assure" 2004 total GDP coming in at 4% or more, but I don't think it "offsets" the preliminary Q2 GDP of 3.0%. While Q2 GDP will be revised (we're just getting the FINAL Q1) I would think that company's earnings, revenues, cash flows, whatever measure fundamentalists use, was already reported. First quarter is over and done with. If the MARKET is all- knowing (and I believe this to be true) then I say the SPX accurately depicts first quarter GDP figures, revised upward and all. Perhaps the "dashed red" cheaters trend, currently at 1,140 depicts the slowing rate of economic growth here in the U.S., where the solid red trend was perhaps reflecting the more bearish scenario of "inflation, banks crater, etc. etc" that was laid out in May. NASDAQ-100 Tracker (QQQ) - Daily Intervals QQQ $35.45-$35.41 should be a formidable near-term challenge and resistance. I don't dwell on my mistakes, but try to learn from them and review them. I got my bullish head handed to me on the most recent "pop" above the new MONTHLY Pivot on a 1/2 bullish long, and was stopped at $34.50 the very next day. A couple of traders asked if Wednesday's volume spike of 155.07 million shares was a "capitulation" climax of selling? It might have been. I'm VERY defensive in my trading when I try and pick a bottom with some longer-term call options, and on Tuesday, when JDS Uniphase (NSADAQ:JDSU) $3.45 +0.29% was falling to a 52-week low, out of admitted disgust, I profiled the writing/selling of the August $3.00 calls for $0.10 against the previously profiled December $3.00 calls. This was the WORST trade I made this week and leaves a bit of a bad taste in my mouth after a rather good week for trade profiles. I turned on the VOLUME indicator for the QQQ and crudely drew somewhat of a bowl shape where volume has been picking up a bit in the QQQ since about mid-June. I didn't catch the figures in time, but CNBC was quickly recapping some statistics from brokers regarding terrible trade volumes, investment banking deals, etc for recent months. Maybe we're starting to see some of the summer doldrums wearing off. Our daily volume indications from both the NYSE and NASDAQ in our market snapshot have certainly been rebounding in recent weeks, when volume in June was often-times hard presses to reach much above 1.2 billion shares on the NYSE, and 1.5 billion at the NASDAQ. Just for informational purposes, I averaged the daily volume for the NYSE in June, which approximates at 1.30 billion shares traded per day. In July, volume averaged approximately 1.39 billion shares, a 6.9% increase. For the NASDAQ, June's average daily volume was 1.58 billion shares traded per day. In July, average daily volume rose 8.2% to 1.71 billion shares traded. Market Snapshot / Internals - 07/30/04 Close I still sense, based on observation from the internals, that the bulk of buying being done this week (look at 5-day NH/NL ratios) is being done by bearish short covering. Certainly you've got some bulls in here looking for a bottom. NASDAQ's NH/NL indications have gotten pretty close to 0%, where late last week, and early this week, we were seeing new lows around the 200 level, where at best we saw 50 new highs and at worst, 15 new highs. As we get closer to 0% (as low as ratio can go) it's the NASDAQ NH/NL indications at both the 5-day and 10- day that show signs of greater improvement. Remember a couple of week's ago, the NYSE NH/NL indications at higher levels were showing the improvement while NASDAQ's NH/NL indications were still headed south. Then seemingly pulling the NYSE NH/NL indications back lower. In retrospect, as can often-times be found, it was as if MARKET participants were spending more time a couple of weeks ago buying some NYSE listed stocks, while at the same time, still distributing/selling NASDAQ listed stocks. Then, as distribution continued in the NASDAQ, the buyers went away at the NYSE and the recent revisiting of May's lows in the major indices has been found. For some real strength, or sign of renewed bullish leadership, I would really want to see BOTH the NYSE and NASDAQ NH/NL indications get in unison, and NOT just the 5-day NH/NL ratios turning up like they did this week, and NOT just the 5-day ratios above their 10-day NH/NL rations. A BEAR that has been short, and holding some handsome profits is more likely to use 5-day reversal up, or crossovers, to help make a decision on whether to cover and lock in some gains or let things ride, but the more powerful and more lasting bullish moves have come when BOTH the NYSE and NASDAQ 10-day NH/NL ratios are in unison to the upside. When Dorsey/Wright and Associates made the analogy of "the generals are still fighting the battle, but the soldiers are leaving the field," I chuckle to myself a bit, with the recent action we saw when the NYSE NH/NL indications were showing improvement as the NASDAQ NH/NL indications really didn't show too much fight. I can now only envision a Civil War type of battle field, on a hot summer's day. The meadow, surrounded by trees is the battle field with blue and gray coats lurking in the surrounding woods on either side. Like a swarm of bees, a small group of blue coats come out of the wood, a hoop'n and a hallering! Then a much larger swarm of gray coats (bears at this point) appear from the other edge of the forest. They charge each other and meet in the middle, then the smaller group of blue coats suddenly turns and runs (after doing what damage they could to the blue coats) back where they came from yelling, "run away, run away" leaving their general to do battle by himself. The general either ends up meeting his maker, or turns and runs, yelling... "hey wait up for me!" These brief battles, where the blue coats (bulls) look to do battle, can be a trader's mentality at this point. Right now, the slower moving major market bullish % we update in the 09:00 Update has the bears winning the battle, so on a broader market basis (NYSE, COMPX, SPX, OEX, NDX, INDU) its the bulls strategy to try and take 10 troops against the bears 30 troops. If fortunate, the bulls lose just 1 soldier, while eliminating 3 or 4 of the bears. This can be done should the 10 bullish troops strategize and pick out 3 or 4 of their opponents and gang up on them. Slowly eliminating the number of bears. This would be more analogous to individual stock trading, in stronger sectors and stocks within those sectors. For the index trader the bulls are really waiting for sign that reinforcements have shown up, or enough bears have turned tail yelling... "run away, run away!" Jeff Bailey ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Looking at the Future The Russell has performed admirably over the last week with a rebound from 531 and the edge of disaster and back to its 551 close on Friday. This is a very strong rebound. Unfortunately I do not think it will hold. Normally Aug/Sept/Oct are bearish months for the small caps. Funds tend to favor large caps for the Q3 dip for the extra liquidity. They tend to put aside cash and wait for the September/October dip then buy small caps. With the rebound from the lows we are seeing a potential setup for the coming dip. I think we will see a further rise next week and then a decline to even lower lows in the weeks ahead. Pure speculation on my part but history tends to repeat. Because options are so expensive on the Russell-2000 we are going to look at options on the Ishares instead. The Russell Ishares (IWN) is about 1/3 the value of the Russell. Friday's close on the Russell was 551.29 and 164 on the IWN. The Russell has strong resistance at 563-565 which corresponds to 166-167 on the IWN. The game plan will be to buy three contracts of the Sept IWN-$160 puts IWN-UL. Buy one at the open on Monday and one on a touch of $165 another at $166. (One contract at each level) It was $3.30 at Friday's close with the IWN at $164. I would also recommend the November $160 put IWN-WL in order to still have time premium left during any Sept/Oct dip. However the current premium is $6.10 and that is too expensive for many readers. It is the best risk by far. I am willing to suggest the play with a September put because I expect the Olympics and Republican Convention event risk to pressure the small caps. This could provide added incentive to exit them early and not wait for the rush. The target on the play is $155 and the May lows. The low for last week was $159.10. Obviously if the target is hit it would be a very profitable trade. Considering the potential for a terrorist event over the next 45 days I think this is a very low risk trade. Whether the event happens or not we could still see the Russell sink on worry alone. BUY Sep $160 IWN Put IWN-UL (Closing price $3.30) BUY Nov $160 IWN Put IWN-WL (Closing price $6.10) The November put has the least risk. Stop loss = IWN $168 Profit target = IWN $155 Russell-2000 Chart IWN - Ishares Chart ****************** QQQ Update $34.91 The game plan was to buy the Aug-$33 QQQ Put QAV-TG at the open on Monday as terrorist insurance against an event at the convention. The price at the open was 35/40 cents. The instructions were to sell the put on Friday morning (20/25) once the convention was over and buy a Aug-$35 Call QQQ-HI (55/60) at the open. This was planned to capitalize on any post convention rebound. Unfortunately the rebound started earlier than expected and we paid more for the call than I wanted. We are down 15-20 cents on the put making our cost in the call 80 cents on a worst case basis. We have three weeks to run before expiration and the QQQ closed at $34.91 on Friday. Since the QQQ has already rebounded +1.20 off the lows for the week I am not expecting much more of a run. QQQ $35.50 will be our target exit point. The object of the game now is to get out with our costs and commissions. The market did not cooperate with the strategy but we have an excellent chance of getting out alive with a minor profit. http://members.OptionInvestor.com/editorplays/edply_072504_1.asp Microsoft Update $28.49 Microsoft has found support at $28.30 but can't seem to move higher and hold its gains. $28.80 has turned it back twice this week. The game plan was to exit our put with a target of $27. Let's change the exit to $27.50 and hope for a breakeven. The put closed Friday at 15 cents. Our cost is 25 cents. *********************** News Corp Update $33.90 Still not enough premium in the calls to justify the risk in selling calls against our leaps. The Aug-$35 call is only 25x40 cents. Be patient our time will come. 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 $13.78 Nice rebound off the $13 low for the week. PVN bounced off its 100dma and closed nearly $1 off its low for the week. http://members.OptionInvestor.com/editorplays/edply_061304_1.asp **************** MARKET SENTIMENT **************** Here We Go Again - J. Brown Now that earnings season is beginning to subside the market is rightfully turning back to its old worries about oil, interest rates, jobs and the economy. Oil is a major issue. Now that crude is hitting new highs above $42 a barrel the impact could be felt throughout the entire economy. Airliners and transports have to deal with higher fuel costs. Many manufacturers use petroleum in their creation process. Consumers will feel the pinch at the gas pump and that will affect retail sales across the board. Oil could be the easy villain to point to for the recent disappointment in the GDP numbers. Economists were looking for 3.7% GDP growth in the second quarter but the economy only grew 3% after the June "slump". Rising oil prices are a major factor. One analyst suggested that the "risk" premium in oil has hit $15 a barrel as fears mount of a terrorist attack and/or a complete melt down with the Russian oil giant Yukos. Thankfully we did see some positive economic numbers this past week. The University of Michigan consumer sentiment numbers rose in July and the Chicago PMI index jumped strongly from 56.4% in June to 64.7% in July. The Federal Reserve will certainly be watching the PMI number and the boatload of economic reports that are due to come out this week. Wall Street will once again focus on the interest rate issue as we approach the August 10th FOMC meeting. However, before we can make it to August 10th we have to get past the upcoming July jobs number due out this Friday. Estimates are for a gain of 230,000 jobs in July. The GDP slowdown and job growth are going to be major factors in the Fed's decision to hike rates and by how much. It's easy to wonder why the GDP number didn't come in stronger. Business has been brisk for corporate America. Of the companies that have reported their Q2 earnings the average profit growth has been about 26%. That's huge! Yet businesses aren't spending money like they should be and many have been guiding lower for the third quarter, which really fuels investor fears over another economic slow down. Of course this is nothing new. Our market wrap column has been discussing the reality of an earnings slow down and tougher year-over-year comparisons for weeks. August could be interesting. Not only do we have another Fed meeting but the Olympics begin in Greece and here at home we'll be preparing for the Republican National Convention. Both of the last two events are terrorist targets. According to the Stock Trader's Almanac August is pretty tough on stocks too. It's the worst month of the year for the Industrials and the S&P 500 over the last 15 years and the second worst month of the NASDAQ. Fortunately, election year Augusts tend to do a little bit better. Bulls also have an oversold bounce currently underway so this August may turn out better than most if buyers can keep the bounce moving. Be careful and watch those stop losses. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8997 Current : 10139 Moving Averages: (Simple) 10-dma: 10073 50-dma: 10209 200-dma: 10226 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 960 Current : 1101 Moving Averages: (Simple) 10-dma: 1096 50-dma: 1112 200-dma: 1107 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1204 Current : 1400 Moving Averages: (Simple) 10-dma: 1393 50-dma: 1432 200-dma: 1447 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 15.32 –0.36 CBOE Mkt Volatility old VIX (VXO) = 15.40 –0.06 Nasdaq Volatility Index (VXN) = 23.31 –0.68 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.63 544,250 344,652 Equity Only 0.53 464,179 247,812 OEX 0.71 18,325 13,090 QQQ 1.37 28,978 39,682 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 59.9 + 0 Bear Confirmed NASDAQ-100 33.0 + 0 Bear Confirmed Dow Indust. 53.3 + 0 Bear Confirmed S&P 500 54.0 + 0 Bear Confirmed S&P 100 55.0 + 0 Bear Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 0.96 10-dma: 1.07 21-dma: 1.44 55-dma: 1.17 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1640 1742 Decliners 1134 1276 New Highs 62 54 New Lows 36 62 Up Volume 861M 993M Down Vol. 664M 491M Total Vol. 1554M 1496M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 07/27/04 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 Commercials are turning a bit more bearish with a decrease in long positions and a small increase in shorts. Small traders are naturally turning a bit more bullish with a decrease in shorts. Commercials Long Short Net % Of OI 07/06/04 402,952 416,526 (13,574) (1.7%) 07/13/04 407,166 416,869 ( 9,703) (1.2%) 07/22/04 404,828 419,017 (14,189) (1.7%) 07/27/04 397,354 422,914 (25,560) (3.1%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 07/06/04 132,423 90,748 41,675 18.7% 07/13/04 133,935 95,787 38,148 16.6% 07/22/04 138,123 94,990 43,133 15.5% 07/27/04 135,136 90,433 44,703 19.8% 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 decreased their bearishness by upping their long contacts by about 20K. Small traders are hedging their bets a bit by reducing their bullish positions. Commercials Long Short Net % Of OI 07/06/04 287,442 423,583 (136,141) (19.1%) 07/13/04 265,142 427,017 (161,875) (23.4%) 07/22/04 309,972 428,240 (118,268) (16.0%) 07/27/04 337,615 429,477 ( 91,862) (12.0%) 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 07/06/04 219,321 58,567 160,754 57.8% 07/13/04 225,410 57,699 167,711 59.2% 07/22/04 212,078 62,416 149,662 54.5% 07/27/04 186,211 68,930 117,281 46.0% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders are still hovering around the same level of cautious bullishness for the last three weeks. Small traders have moved from bearish to less bearish to neutral in the last three weeks (thus a bullish progression in sentiment). Commercials Long Short Net % of OI 07/06/04 42,245 37,343 4,902 6.2% 07/13/04 44,211 37,007 7,204 8.9% 07/22/04 45,069 37,975 7,094 8.5% 07/27/04 43,042 35,935 7,107 9.0% 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 07/06/04 9,345 16,527 (7,182) (27.8%) 07/13/04 7,847 15,243 (7,396) (32.0%) 07/22/04 9,398 11,776 (2,378) (11.2%) 07/27/04 14,543 14,518 25 0.0% 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 The bullish sentiment from the commercial traders dipped a tad this past week with an increase in their short positions. Meanwhile small traders have significantly adjusted their positions to be less bearish. Commercials Long Short Net % of OI 07/06/04 27,214 20,775 6,439 13.4% 07/13/04 27,773 20,573 7,200 14.9% 07/22/04 27,957 20,389 7,568 15.7% 07/27/04 27,577 21,427 6,150 12.5% 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 07/06/04 5,969 8,227 (2,258) (15.9%) 07/13/04 5,292 9,068 (3,776) (26.3%) 07/22/04 4,857 7,297 (2,440) (20.1%) 07/27/04 5,310 6,099 ( 789) ( 6.9%) 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 *************** The Ask-the-Analyst column by Jeff Bailey will return next week. ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- ABN ABN Amro Hldgs Mon, Aug 2 Before the Bell N/A AMT American Tower Corp Mon, Aug 2 Before the Bell -0.16 ARI Arden Realty Inc Mon, Aug 2 After the Bell 0.63 BBD Banco Bradesco S.A. Mon, Aug 2 -----N/A----- N/A SAN Banc SantanderChile Mon, Aug 2 -----N/A----- 0.53 CUZ Cousins Props Inc Mon, Aug 2 After the Bell 0.55 ETR Entergy Mon, Aug 2 Before the Bell 1.14 FHCC First Health Grp Mon, Aug 2 Before the Bell 0.32 GTM GULFTERRA ENERGY Mon, Aug 2 Before the Bell 0.51 HMY Harmony Gold Mining Mon, Aug 2 Before the Bell -0.03 HBC HSBC Hldgs plc Mon, Aug 2 Before the Bell N/A MVSN Macrovision Mon, Aug 2 After the Bell 0.18 MNT Mentor Mon, Aug 2 After the Bell 0.34 MCY Mercury General Mon, Aug 2 -----N/A----- 1.02 NNDS NDS Grp PLC Mon, Aug 2 Before the Bell 0.19 NKTR NEKTAR THERAPEUTICS Mon, Aug 2 -----N/A----- -0.29 NTES Netease.com Inc Mon, Aug 2 After the Bell 0.40 OKE ONEOK Inc. Mon, Aug 2 After the Bell 0.16 PHRM Pharmion Corp Mon, Aug 2 After the Bell -0.55 PXD Pioneer Nat Res Mon, Aug 2 Before the Bell 0.72 PPS Post Props, Inc Mon, Aug 2 After the Bell 0.39 PG Procter & Gamble Co Mon, Aug 2 Before the Bell 0.48 QGENF Qiagen N.V. Mon, Aug 2 After the Bell 0.08 RJR R.J. Rynlds Tbcco Mon, Aug 2 Before the Bell 1.24 SUG Southern Union Co Mon, Aug 2 Before the Bell 0.04 SPW SPX Mon, Aug 2 Before the Bell 0.71 SRX SRA Intl, Inc. Mon, Aug 2 After the Bell 0.39 STO Statoil ASA Mon, Aug 2 Before the Bell N/A TLTOB Tele2 AB Mon, Aug 2 Before the Bell N/A TPP Teppco Mon, Aug 2 After the Bell 0.39 PFG The Principal Finl Mon, Aug 2 After the Bell 0.58 TP TPG NV Mon, Aug 2 Before the Bell 0.43 UCL Unocal Mon, Aug 2 After the Bell 0.83 WGL WGL Hldgs Mon, Aug 2 Before the Bell -0.16 ------------------------- TUESDAY ------------------------------ ASX Adv Semicon Eng Tue, Aug 3 -----N/A----- 0.09 AAA Altana AG Tue, Aug 3 Before the Bell N/A ACAS Am Capital Strategy Tue, Aug 3 -----N/A----- 0.67 AMH AmerUs Grp Co. Tue, Aug 3 After the Bell 1.00 AHL Aspen Ins Hldgs Ltd Tue, Aug 3 After the Bell 0.79 AGO Assured Guaranty Tue, Aug 3 After the Bell 0.44 ITU Banco Itau Hldg Fin Tue, Aug 3 -----N/A----- N/A BOX BOC Grp PLC Tue, Aug 3 -----N/A----- 0.60 FUN Cedar Fair LP Tue, Aug 3 -----N/A----- 0.36 CEPH Cephalon, Inc. Tue, Aug 3 After the Bell 0.39 CKFR CheckFree Tue, Aug 3 After the Bell 0.29 CZN Citizens Comm Co. Tue, Aug 3 Before the Bell 0.11 COH Coach, Inc. Tue, Aug 3 Before the Bell 0.31 CEI Crescent Rl Est Eq Tue, Aug 3 Before the Bell 0.27 CMLS Cumulus Media Inc. Tue, Aug 3 Before the Bell 0.17 DVA DaVita Tue, Aug 3 Before the Bell 0.51 DTC Domtar Inc. Tue, Aug 3 Before the Bell N/A EDMC Education Mgmt Corp Tue, Aug 3 After the Bell 0.18 EMR Emerson Electric Tue, Aug 3 Before the Bell 0.75 ETM Entercom Comm Tue, Aug 3 Before the Bell 0.45 EOG EOG Resources, Inc. Tue, Aug 3 -----N/A----- 1.00 EPC Epcos Tue, Aug 3 -----N/A----- N/A EOP Eq Office Prps TrustTue, Aug 3 Before the Bell 0.65 EQR Equity Residential Tue, Aug 3 Before the Bell 0.53 FTI Fmc Tech, Inc. Tue, Aug 3 Before the Bell 0.30 FBR Friedman Bill RamseyTue, Aug 3 After the Bell 0.57 GGB Gerdau S.A. Tue, Aug 3 -----N/A----- 0.36 GLG Glamis Gold Ltd Tue, Aug 3 Before the Bell 0.04 HCC HCC Ins Hldgs Tue, Aug 3 After the Bell 0.68 HNT Health Net, Inc. Tue, Aug 3 Before the Bell 0.50 HTG Hrtge Prop Inv Trst Tue, Aug 3 After the Bell 0.67 IMDC INAMED Tue, Aug 3 After the Bell 0.52 IACI InterActiveCorp Tue, Aug 3 After the Bell 0.21 IPR Intl Power Tue, Aug 3 -----N/A----- N/A KZL Kerzner Intl Ltd Tue, Aug 3 -----N/A----- 0.89 KCI KINETIC CONCEPTS INCTue, Aug 3 Before the Bell 0.36 LAF Lafarge North Am Tue, Aug 3 After the Bell 1.15 MPG Maguire Props, Inc. Tue, Aug 3 After the Bell 0.46 MLM Martin Marietta Mat Tue, Aug 3 Before the Bell 0.92 MDP Meredith Corp Tue, Aug 3 Before the Bell 0.72 MICC Millicom Intl Cell Tue, Aug 3 -----N/A----- 0.27 MLS Mills Corp Tue, Aug 3 Before the Bell 0.90 NFP Natl Finl Partners Tue, Aug 3 After the Bell 0.48 OCAS Ohio Casualty Tue, Aug 3 After the Bell 0.33 PDX Pediatrix Med Grp Tue, Aug 3 Before the Bell 0.99 PFGC PERFORMANCE FOOD GRPTue, Aug 3 Before the Bell 0.38 PER Perot Systems Tue, Aug 3 Before the Bell 0.15 PCG PG&E Corp Tue, Aug 3 Before the Bell 0.53 PL Protective Life CorpTue, Aug 3 -----N/A----- 0.77 PDLI Protein Design Tue, Aug 3 After the Bell -0.12 PRU Prudential Finl, IncTue, Aug 3 After the Bell 0.78 KWK Quicksilver Res Tue, Aug 3 After the Bell 0.16 Q Qwest Comm Tue, Aug 3 Before the Bell -0.13 RYAAY Ryanair Hldgs Tue, Aug 3 -----N/A----- 0.37 SILI Siliconix Tue, Aug 3 Before the Bell 0.55 THC Tenet Healthcare Tue, Aug 3 Before the Bell -0.01 TEVA Teva Pharmaceutical Tue, Aug 3 Before the Bell 0.32 TM Toyota Motor Corp Tue, Aug 3 -----N/A----- 1.56 TYC Tyco Intl Tue, Aug 3 Before the Bell 0.41 WPI Watson Pharm, Inc. Tue, Aug 3 Before the Bell 0.41 ------------------------ WEDNESDAY ----------------------------- AEM Agnico-Eagle Mines Wed, Aug 4 After the Bell 0.11 AOC Aon Corp Wed, Aug 4 After the Bell 0.52 AIV Apartment Inv & MgmtWed, Aug 4 Before the Bell 0.64 WTR Aqua America Wed, Aug 4 Before the Bell 0.19 AXS Axis Capital Hldgs Wed, Aug 4 After the Bell 0.86 BF BASF Wed, Aug 4 -----N/A----- N/A BCE BCE Wed, Aug 4 Before the Bell N/A BVF Biovail Corp Wed, Aug 4 Before the Bell 0.24 BSG BISYS GRP INC Wed, Aug 4 Before the Bell 0.17 BSY British Sky Brdcst Wed, Aug 4 -----N/A----- N/A CDIS Cal Dive Intl Wed, Aug 4 After the Bell 0.37 CNQ Canadian Natural ResWed, Aug 4 -----N/A----- 0.97 CI CIGNA Wed, Aug 4 Before the Bell 1.25 XEC Cimarex Energy Co. Wed, Aug 4 -----N/A----- 0.76 CNO CONSECO INC Wed, Aug 4 After the Bell 0.37 CXR COX RADIO INC Wed, Aug 4 Before the Bell 0.20 CSR Credit Suisse Grp Wed, Aug 4 Before the Bell N/A CVS CVS Corp Wed, Aug 4 Before the Bell 0.54 FST Forest Oil Corp Wed, Aug 4 After the Bell 0.51 FMS Fresenius Med Care Wed, Aug 4 -----N/A----- N/A GPK GRAPHIC PACKAGING Wed, Aug 4 -----N/A----- N/A HIG Hartford Finl Serv Wed, Aug 4 After the Bell 1.57 HIW Highwoods Props Wed, Aug 4 After the Bell 0.55 ICOS ICOS Corp Wed, Aug 4 -----N/A----- -0.98 ICST Intgrtd Crct Sys Wed, Aug 4 Before the Bell 0.26 JBX Jack in the Box Wed, Aug 4 -----N/A----- 0.54 KYPH Kyphon, Inc. Wed, Aug 4 After the Bell 0.08 NFS Ntnwd Finl Services Wed, Aug 4 After the Bell 0.80 NCRX NeighborCare, Inc. Wed, Aug 4 After the Bell 0.24 NTLI NTL INC Wed, Aug 4 -----N/A----- -2.57 OGE OGE Energy Wed, Aug 4 Before the Bell 0.43 PAA Plains All Am Ppln Wed, Aug 4 Before the Bell 0.55 PTP Plat Undrwrtrs HldgsWed, Aug 4 After the Bell 0.84 RL Polo Ralph Lauren Wed, Aug 4 Before the Bell 0.11 RA Reckson Ass Realty Wed, Aug 4 After the Bell 0.54 RRI Reliant Energy Wed, Aug 4 -----N/A----- -0.02 RRD RR Donnelley Wed, Aug 4 After the Bell 0.30 SPIL SILICONWARE PRCISIONWed, Aug 4 -----N/A----- 0.10 TRK Speedway MotorsportsWed, Aug 4 Before the Bell 0.91 SWC Stillwater Mining CoWed, Aug 4 Before the Bell 0.13 TSO Tesoro Petroleum Wed, Aug 4 Before the Bell 2.56 BCO The Brink's Co Wed, Aug 4 Before the Bell 0.33 TOM Tommy Hilfiger Wed, Aug 4 -----N/A----- -0.10 UVN Univision Comm Wed, Aug 4 After the Bell 0.19 UNM UnumProvident Corp Wed, Aug 4 After the Bell 0.39 WR Westar Energy, Inc. Wed, Aug 4 Before the Bell 0.33 WWCA Western Wireless Wed, Aug 4 After the Bell 0.37 ------------------------- THUSDAY ----------------------------- AL Alcan Inc. Thu, Aug 5 -----N/A----- 0.66 ATK Alliant Techsystems Thu, Aug 5 Before the Bell 0.72 AMLN Amylin Pharm Thu, Aug 5 Before the Bell -0.40 AAUK Anglo American Plc Thu, Aug 5 -----N/A----- N/A AIZ ASSURANT INC Thu, Aug 5 Before the Bell 0.63 BCS Barclays Bank PLC Thu, Aug 5 -----N/A----- N/A BRL Barr PharmaceuticalsThu, Aug 5 Before the Bell 0.57 BE BearingPoint, Inc. Thu, Aug 5 Before the Bell 0.08 BIO Bio-Rad LaboratoriesThu, Aug 5 After the Bell 0.80 BNN BRASCAN CORP Thu, Aug 5 Before the Bell 0.50 BGG Briggs & Stratton Thu, Aug 5 Before the Bell 1.53 CPN Calpine Corp Thu, Aug 5 Before the Bell -0.10 CPT Camden Prop Trust Thu, Aug 5 After the Bell 0.79 CHC CharterMac Thu, Aug 5 Before the Bell 0.63 CDL CITADEL BRDCST CORP Thu, Aug 5 -----N/A----- 0.04 CLX Clorox Thu, Aug 5 Before the Bell 0.83 CMS CMS Energy Corp. Thu, Aug 5 Before the Bell 0.07 CXW Corrections Corp. AmThu, Aug 5 Before the Bell 0.37 DEG Delhaize Grp Thu, Aug 5 Before the Bell N/A DVN Devon Energy Corp Thu, Aug 5 Before the Bell 2.02 GMST Gmstr-TV Guide Intl Thu, Aug 5 After the Bell -0.02 GPRO Gen-Probe Thu, Aug 5 After the Bell 0.19 GT Goodyear Tire RubberThu, Aug 5 Before the Bell 0.08 THX Houston Exploration Thu, Aug 5 -----N/A----- 1.51 IDA Idacorp Hldg Thu, Aug 5 Before the Bell 0.25 IST Ispat Intl Thu, Aug 5 -----N/A----- N/A KPP Kaneb Pipe Line PartThu, Aug 5 Before the Bell 0.71 KSE KeySpan Thu, Aug 5 Before the Bell 0.19 KG King PharmaceuticalsThu, Aug 5 Before the Bell 0.23 KOSP Kos Pharmaceuticals Thu, Aug 5 Before the Bell 0.54 LAMR LAMAR ADVERTISING COThu, Aug 5 Before the Bell 0.10 LFL LAN Chile Thu, Aug 5 -----N/A----- 0.24 MAC Macerich Co Thu, Aug 5 Before the Bell 0.89 CLI Mack-Cali Realty Thu, Aug 5 Before the Bell 0.87 MGA Magna Intl Inc. Thu, Aug 5 -----N/A----- 1.95 MFC Manulife Finl Corp Thu, Aug 5 After the Bell 0.54 NRG NRG Energy Thu, Aug 5 -----N/A----- N/A NVDA NVIDIA Corp Thu, Aug 5 -----N/A----- 0.15 OHP Oxford Health Plans Thu, Aug 5 Before the Bell 0.96 PNRA Panera Bread Thu, Aug 5 -----N/A----- 0.21 PEI Penn Rl Est Inv TrstThu, Aug 5 Before the Bell 0.85 PIXR Pixar Anim Studios Thu, Aug 5 After the Bell 0.37 PXP Plains Explor Prod Thu, Aug 5 Before the Bell 0.42 PDE Pride Intl Inc. Thu, Aug 5 After the Bell 0.05 PSA Public Storage Thu, Aug 5 -----N/A----- 0.76 PSD Puget Energy Thu, Aug 5 After the Bell 0.13 RWT Redwood Trust, Inc. Thu, Aug 5 -----N/A----- N/A RUK Reed Elsevier NV/PlcThu, Aug 5 -----N/A----- N/A RMD ResMed Inc. Thu, Aug 5 After the Bell 0.46 RBA Ritchie Bros AuctionThu, Aug 5 Before the Bell 0.41 SLE Sara Lee Thu, Aug 5 Before the Bell 0.43 SRE Sempra Energy Thu, Aug 5 -----N/A----- 0.65 SNN Smith & Nephew Thu, Aug 5 Before the Bell 0.49 STRA Strayer Education Thu, Aug 5 Before the Bell 0.73 TLD TDC A/S Thu, Aug 5 -----N/A----- N/A NZT Telecom Corp Nw ZlndThu, Aug 5 -----N/A----- N/A TS TENARIS S A Thu, Aug 5 -----N/A----- 0.60 DTV The DIRECTV Grp Thu, Aug 5 -----N/A----- 0.06 IPG Intrpblc Grp Co Thu, Aug 5 Before the Bell 0.09 PMI The PMI Grp, Inc. Thu, Aug 5 -----N/A----- 0.94 SVM The ServiceMaster CoThu, Aug 5 Before the Bell 0.24 TOT Total Thu, Aug 5 Before the Bell 2.22 TRZ Trizec Props, Inc. Thu, Aug 5 Before the Bell -0.59 UVV Universal Corp Thu, Aug 5 After the Bell N/A VRX Valeant Pharm Intl Thu, Aug 5 Before the Bell -0.01 VPI Vintage Petroleum Thu, Aug 5 -----N/A----- 0.51 HLTH WebMD Thu, Aug 5 After the Bell 0.10 WGR Western Gas Res Thu, Aug 5 Before the Bell 0.38 WMB Williams Co Inc. Thu, Aug 5 Before the Bell 0.07 WEC Wis Energy Corp Thu, Aug 5 Before the Bell 0.26 XMSR XM Satellite Radio Thu, Aug 5 Before the Bell -0.88 ------------------------- FRIDAY ------------------------------- ASN Archstone-Smith TrstFri, Aug 6 Before the Bell 0.45 AXA AXA Fri, Aug 6 -----N/A----- N/A EAGL EGL Fri, Aug 6 Before the Bell 0.25 ERF Enerplus Res Fund Fri, Aug 6 Before the Bell N/A HME Home Props, Inc. Fri, Aug 6 Before the Bell 0.75 KUB Kubota Ltd Fri, Aug 6 -----N/A----- N/A MXIM Maxim Intgrtd Prod Fri, Aug 6 After the Bell 0.36 POM Pepco Hldgs, Inc. Fri, Aug 6 -----N/A----- 0.28 TU TELUS Fri, Aug 6 -----N/A----- N/A TGN Texas Genco Hldgs Fri, Aug 6 Before the Bell N/A ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable VAR Varian Medical Systems Inc2:1 Jul 30th Aug 2nd GTK GTECH Holdings Corp 2:1 Jul 30th Aug 2nd CAPX Capital Crossing Bank 2:1 Aug 9th Aug 10th QCOM Qualcomm Inc 2:1 Aug 13th Aug 16th -------------------------- Economic Reports This Week -------------------------- Wall Street is still wading through a wave of Q2 earnings but the stream of economic data coming out this week is likely to take center stage. The ISM index is on Monday. Factory orders and ISM Services come out on Wednesday just to name a few. ============================================================== -For- ---------------- Monday, 08/02/04 ---------------- Auto Sales (NA) Jul Forecast: 5.6M Previous: 4.9M Truck Sales (NA) Jul Forecast: 7.6M Previous: 7.1M Construction Spending (DM) Jun Forecast: -0.1% Previous: 0.3% ISM Index (DM) Jul Forecast: 62.0 Previous: 61.1 ----------------- Tuesday, 08/03/04 ----------------- Personal Income (BB) Jun Forecast: 0.3% Previous: 0.6% Personal Spending (BB) Jun Forecast: 0.0% Previous: 1.0% ------------------- Wednesday, 08/04/04 ------------------- Factory Orders (DM) Jun Forecast: 0.6% Previous: -0.3% ISM Services (DM) Jul Forecast: 61.5 Previous: 59.9 Crude oil and Gasoline inventories ------------------ Thursday, 08/05/04 ------------------ Initial Claims (BB) 07/30 Forecast: N/A Previous: 345K Natural Gas inventories ---------------- Friday, 08/06/04 ---------------- Nonfarm Payrolls (BB) Jul Forecast: 233K Previous: 112K Unemployment Rate (BB) Jul Forecast: 5.6% Previous: 5.6% Hourly Earnings (BB) Jul Forecast: 0.3% Previous: 0.1% Average Workweek (BB) Jul Forecast: 33.8 Previous: 33.6 Consumer Credit (DM) Jun Forecast: $4.0B Previous: $8.2B Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is $49.95. The quarterly price is $129.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** 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 08-01-2004 Sunday 2 of 5 In Section Two: Watch List: Possible Trading Candidates Dropped Calls: None Dropped Puts: STJ ************************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 ********** Possible Trading Candidates ___________________________________________________________________ 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. ___________________________________________________________________ Chicago Mercantile Exchg - close: 125.50 change: -0.95 WHAT TO WATCH: CME has produced an impressive rebound from its simple 100-dma with a string of higher lows. The area to watch is resistance at the $127.50 level, which has held the stock back for two weeks. Aggressive traders could go long over $127.50 while more conservative types could wait for a breakout above its 21, 40 and 50-dma's near the $130 mark. In spite of the massive drop CME's P&F chart is still bullish and points to a $180 price target. Chart= --- Strayer Education - STRA - close: 97.42 change: -3.17 WHAT TO WATCH: It's time to pay attention if you're a quick and nimble trader. STRA looks extremely bearish and the recent breakdown under $105 and the $100 levels has the stock pointed toward the $90 level or worse. Actually the whole sector looks bad (think CECO, COCO, EDMC, APOL and UOPX). The only thing stopping us from adding it to the play list as a put is the earnings report, which is due out the morning of August 5th. Chart= --- Moody's Corp - MCO - close: 68.10 change: +2.41 WHAT TO WATCH: The 3.66% rally on Friday has us a bit perplexed because we can't find the catalyst. Earnings were on Wednesday. Granted the earnings were strong and MCO beat estimates by 5 cents but then why didn't the stock rally on Thursday? Adding to the mystery was volume on Friday's rally, which was more than double the average volume. The breakout from its two-month trading range is very tempting and aggressive traders may want to nibble at it but MCO still has resistance in the $70-71 range. Chart= --- Zebra Technologies - ZBRA - close: 82.63 change: +1.96 WHAT TO WATCH: We mentioned ZBRA might be a bullish candidate again in the MarketMonitor on Friday. Shares bounced sharply from support at $75.00 (and its simple 100-dma). Earnings are now out of the way and the company beat estimates by 2 cents. Short-term technicals are bullish and its MACD is nearing a new "buy" signal. Friday's breakout over its 10, 21, 40 and 50-dma's looks like a buy signal for a run toward the $90 level. Don't forget ZBRA splits 3-for-2 on August 26th. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- XOM $46.30 +0.27 - With oil at new highs we continue to like the bullish trend in ExxonMobil. We would consider it a decent covered call candidate. BR $38.17 +0.36 - BR is another oil/gas stock that is nearing new highs and looks like a covered call candidate. APC $59.79 +0.64 - Yet another oil/gas play that is bouncing higher and nearing new highs. ************************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 ^^^^^ None PUTS ^^^^ St. Jude Medical - STJ - close: 68.13 chg: +1.11 stop: 68.50 Uh-oh! It's time to exit. STJ has shown a bit too much strength and managed to breakout over resistance at $68.00 and its simple 10-dma. Short-term technicals are turning upward as well. We're going to exit here to keep our losses at a minimum. Traders can keep STJ on their watch list for a rebound and a failed rally under the $70 level, which should remain tough resistance. Picked on July 25 at $ 66.75 Change since picked: + 1.38 Earnings Date 07/21/04 (confirmed) Average Daily Volume: 1.2 million Chart = *********** 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 08-01-2004 Sunday 3 of 5 In Section Three: Current Calls: ADSK, ETN, FDX, IR, HUG, SYMC, TXT New Calls: CCMP, IMO Current Put Plays: CEPH, DISH, MGA New Puts: None ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** Autodesk - ADSK - close: 40.14 change: +0.39 stop: 36.99 Company Description: Autodesk is the world's leading design software and digital content company, offering customers progressive business solutions through powerful technology products and services. Autodesk helps customers in the building, manufacturing, infrastructure, digital media, and wireless data services fields increase the value of their digital design data and improve efficiencies across their entire project lifecycle management processes. (source: company press release) Why We Like It: (Original Play from Thursday) The rebound in technology and the GSO software index looks tempting especially now with the GSO producing a new buy signal on its MACD indicator. One way to play the rebound in software is ADSK. The stock has weathered the storm in July much better than many of its peers. ADSK still maintains a bullish rising channel and its MACD is about to produce a new buy signal as well. A few days ago Piper Jaffray issued some comments on how ADSK channel checks were doing better than expected and that bodes well for its earnings date in late August. We want to play ADSK with a TRIGGER to go long at 40.05. If we are triggered we'll start the play with a stop loss at $36.99 and a short-term upside target at $45.00. Weekend Update: We didn't have to wait long for ADSK to trade through our TRIGGER to go long at $40.05. The stock shot higher on Friday and broke through round-number, psychological and historical resistance at $40.00 to hit $40.90 before slipping lower ahead of the weekend. The dip back to $40 can be seen as an entry point for new bullish positions. Suggested Options: Traders can choose from the August or September calls. The August $40 are our favorite. BUY CALL AUG 35 ADQ-HG OI= 317 Current Ask $5.80 BUY CALL AUG 40 ADQ-HH OI=2367 Current Ask $1.95 BUY CALL AUG 45 ADQ-HI OI= 881 Current Ask $0.40 BUY CALL SEP 40 ADQ-IH OI= 347 Current Ask $2.70 BUY CALL SEP 45 ADQ-II OI= 32 Current Ask $0.85 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 30 at $ 40.05 Change since picked: + 0.09 Earnings Date 08/19/04 (unconfirmed) Average Daily Volume: 2.1 million Chart = --- Eaton Corp - ETN - close: 64.58 change: -0.39 stop: 61.99 Company Description: Eaton Corporation is a diversified industrial manufacturer with 2003 sales of $8.1 billion. Eaton is a global leader in fluid power systems and services for industrial, mobile and aircraft equipment; electrical systems and components for power quality, distribution and control; automotive engine air management systems, powertrain solutions and specialty controls for performance, fuel economy and safety; and intelligent truck drivetrain systems for safety and fuel economy. Eaton has 55,000 employees and sells products to customers in more than 100 countries. (source: company press release) Why We Like It: (Original Play from Thursday) We're adding ETN as a technical breakout/relative strength play. Fortunately, earnings were pretty good to back up the stock price. The company reported back on July 15th and beat Wall Street estimates by 4 cents per share. ETN also beat the revenue estimates. Furthermore they issued positive upside guidance for the third quarter above analysts' estimates. Unfortunately, the market was dropping during their earnings report and the stock was unable to benefit from the positive news. Today shares managed to breakout (intraday) over round-number, psychological resistance at the $65 mark on volume 50% above normal. Its short-term technicals are positive and its MACD indicator has produced a new buy signal. We also like the triple-top breakout buy signal on its P&F chart with a $86 price target. We're only going to target a quick move to the $70 region and then re- evaluate our exit as ETN approaches. We'll start the play with a stop loss at $61.99, under the simple 40-dma. Weekend Update: ETN continues to consolidate under resistance at the $65 level. Fortunately buyers were there to buy the dip toward $64 and ETN was trading higher toward the close of the day. We would expect ETN to breakout very soon. More conservative traders can wait for the move over $65 before initiating positions. Suggested Options: Short-term traders can choose from the August or September calls. We like the August 65s as the Septembers look pretty new and don't have much open interest. BUY CALL AUG 60 ETN-HL OI= 107 Current Ask $4.90 BUY CALL AUG 65 ETN-HM OI=1296 Current Ask $1.35 BUY CALL AUG 70 ETN-HN OI= 50 Current Ask $0.25 BUY CALL SEP 65 ETN-IM OI= 93 Current Ask $2.40 BUY CALL SEP 70 ETN-IN OI= 0 Current Ask $0.65 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 29 at $ 64.98 Change since picked: - 0.39 Earnings Date 07/15/04 (confirmed) Average Daily Volume: 925 thousand Chart = --- Fedex Corp - FDX - close: 81.87 change: -0.04 stop: 79.00 Company Description: FedEx Corp. provides customers and businesses worldwide with the broadest portfolio of transportation, e-commerce and business services. With annual revenues of $25 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx and Kinko's brands. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 240,000 employees and contractors to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities.(source: company press release) Why We Like It: The Dow Transportation index produced a decent bounce this week in spite of crude oil hitting new highs over $42 a barrel. The bounce in FDX was not quite as impressive but then FDX held up better during the down turn. We are encouraged by the rebound from the $80 level and continue to suggest new bullish positions on a move past the $82.00 mark. In the news FDX has announced plans to add 18 new weekly flights to China including six new destinations. Suggested Options: We like the August and September calls. The $80 strike looks good. Remember, this is not a bullish environment. Wait for a bounce back above $82.00. BUY CALL AUG 80 FDX-HP OI=1858 Current Ask $2.95 BUY CALL AUG 85 FDX-HQ OI=5113 Current Ask $0.60 BUY CALL SEP 80 FDX-IP OI= 181 Current Ask $3.80 BUY CALL SEP 85 FDX-IQ OI= 213 Current Ask $0.40 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 20 at $ 82.81 Change since picked: - 0.93 Earnings Date 06/23/04 (confirmed) Average Daily Volume: 1.1 million Chart = --- Ingersoll-Rand - IR - close: 68.81 chg: -0.72 stop: 66.99 Company Description: IR is a leading innovation and solutions provider for the major global markets of Security and Safety, Climate Control, Industrial Solutions and Infrastructure. The company's diverse product portfolio encompasses such leading industrial and commercial brands as Schlage locks and security solutions; Thermo King transport temperature control equipment; Hussmann commercial and retail refrigeration equipment; Bobcat compact equipment; Club Car golf cars and utility vehicles; and Ingersoll-Rand industrial and construction equipment. In addition, IR offers products and services under many more premium brands for customers in industrial and commercial markets. (source: company press release) Why We Like It: (Original Play from Thursday) Now that the industrials are starting to produce an oversold bounce we want to capture the move by playing a stock that's been showing relative strength. Unlike most stocks shares of IR are trading with a gain for the month of July. This could be due to the company's earnings report on July 22nd. IR beat analysts estimates by 12 cents and turned in better than expected revenues. Furthermore IR's management guided higher for the third quarter above analysts' estimates. From the sounds of it IR's management is pretty upbeat. Here's an excerpt from their press release: "Activity in most of IR's major end markets continued to improve during the second quarter of 2004," said Henkel. "Second-quarter orders for the total company increased by approximately 16% compared to last year's activity. From our recent order pattern, we see a continuing recovery in most North American and European markets and continuing growth in Asia." "As we enter the second half of the year, we are positioned to generate dramatic growth and greater returns for our shareholders. Through our innovations we are driving dramatic growth and capturing market share. Our continuous improvement initiatives enhance operating efficiencies, facilitating a more profitable business. In addition, our businesses are increasingly operating as an integrated unit, generating powerful synergies from our collective talent, resources and brands." We really like IR's point-and-figure chart, which is showing a strong rebound from its P&F support. Currently the P&F chart also shows a recently minted buy signal with an $80 target. We are going to suggest readers use a TRIGGER at $70.01 to enter this play. Our target will be the $76-77.50 range. We'll start with a stop loss at $66.99. Weekend Update: Shares of IR saw a little profit taking on Friday as the stock continues to consolidate under resistance at $70. We remain un- triggered and wait for IR to breakout and hit our entry point at $70.01. Until then we'll sit on the sidelines. Suggested Options: Short-term traders can choose from the August or September calls. The August 65s and 70s looks good but we like the September 70s and 75s if you're a bit more aggressive. BUY CALL AUG 65 IR-HM OI=3052 Current Ask $4.40 BUY CALL AUG 70 IR-HN OI=1122 Current Ask $1.20 BUY CALL SEP 70 IR-IN OI=2074 Current Ask $2.10 BUY CALL SEP 75 IR-IO OI= 565 Current Ask $0.65 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 29 at $ xx.xx <-- see TRIGGER Change since picked: + 0.00 Earnings Date 07/22/04 (confirmed) Average Daily Volume: 1.3 million Chart = --- Hughes Supply - HUG - close: 60.99 change: +0.20 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 don't have much new to report on for HUG. The stock continues to show strength and drift higher. Unlike most of the market HUG is actually positive for the month of July. We would expect the prevailing trend to continue and see the push past the $60.50 level as an entry point for new bullish positions. The P&F chart hasn't changed much and points to a $66 target. We are targeting a move to the $65-66 range. No change in our stop loss yet. 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. Traders might feel better playing the September 60s even though we plan to close this play before earnings expected on August 24. BUY CALL AUG 55 HUG-HK OI=11 Current Ask $6.30 BUY CALL AUG 60 HUG-HL OI=97 Current Ask $2.15 BUY CALL SEP 60 HUG-IL OI= 0 Current Ask $3.10 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 15 at $ 60.51 Change since picked: + 0.48 Earnings Date 08/24/04 (unconfirmed) Average Daily Volume: 288 thousand Chart = -- Symantec - SYMC - close: 46.76 change: +0.45 stop: 42.45 Company Description: Symantec is the global leader in information security providing a broad range of software, appliances and services designed to help individuals, small and mid-sized businesses, and large enterprises secure and manage their IT infrastructure. Symantec's Norton brand of products is the worldwide leader in consumer security and problem-solving solutions. Headquartered in Cupertino, Calif., Symantec has operations in more than 35 countries. (source: company press release) Why We Like It: It's been a good week for SYMC. The rebound in the software sector has been a big boost for SYMC. The most recent outbreak of viruses and worms has also lent strength to the stock as the dangers elevate awareness for antivirus companies like SYMC. We're very encouraged by the breakout over the $44 level, the 100-dma and round-number resistance at $45. Technicals are positive and SYMC's P&F chart has raised its target from $54 to $60. Remember that we're targeting a move to $49.50. Traders can look for a dip back toward the $45-46 levels as a potential entry point for new positions. Suggested Options: We like the August and September calls, specifically the $40 and $45 strikes. BUY CALL AUG 40 SYQ-HH OI= 6049 Current Ask $7.10 BUY CALL AUG 45 SYQ-HI OI=10864 Current Ask $2.70 BUY CALL SEP 45 SYQ-II OI= 853 Current Ask $3.60 Annotated chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 27 at $ 44.91 Change since picked: + 1.85 Earnings Date 07/21/04 (confirmed) Average Daily Volume: 5.4 million Chart = --- Textron - TXT - close: 61.30 change: -0.31 stop: 57.49 Company Description: Textron Inc. is a $10 billion multi-industry company with more than 43,000 employees in nearly 40 countries. The company leverages its global network of aircraft, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna Aircraft, Kautex, Lycoming, E-Z-GO and Greenlee, among others. (source: company press release) Why We Like It: Things are looking good for TXT. We added the stock to the call list last Monday after its high-volume breakout over resistance at the $60 level. The rally was initially fueled by its earnings where the company beat estimates by 13 cents and guided higher for the full year. The rally was boosted again by an upgrade from Smith Barney a week ago who raised TXT to a "buy" with a $70 target. Later this past week TXT announced a new $50 million contract for 175 armored vehicles to the Iraqi government. Technicals are positive and its P&F chart has broken out to a new buy signal with a $76 target. We're very encouraged that TXT has managed to consolidate some of its gains above the $60 level and the stock looked poised to hit new four-year highs as the markets closed on Friday. The recent action still looks like an entry point for new positions. Suggested Options: We like the August and September calls. Our favorites are the $55s and $60s with the Septembers looking like the better deal. BUY CALL AUG 55 TXT-HK OI= 0 Current Ask $6.60 BUY CALL AUG 60 TXT-HL OI=118 Current Ask $2.20 BUY CALL AUG 65 TXT-HM OI= 75 Current Ask $0.30 BUY CALL SEP 55 TXT-IK OI=588 Current Ask $6.90 BUY CALL SEP 60 TXT-IL OI=350 Current Ask $3.00 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 26th at $60.72 Change since picked: + 0.58 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 622 thousand Chart = ************** NEW CALL PLAYS ************** Cabot Micro - CCMP - close: 35.49 change: +0.61 stop: 31.75 Company Description: Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. The company's products play a critical role in the production of the most advanced semiconductor devices, enabling the manufacture of smaller, faster and more complex devices by its customers. (source: company press release) Why We Like It: CCMP isn't a pure-play semiconductor maker. Instead CCMP makes the various supplies and chemicals used in the process of chip manufacture. The stock exploded higher on July 22nd after the company reported earnings that beat estimates by 10 cents a share and came in above estimates on revenues. The volume on those first two post-earnings sessions was about four times the normal. Ever since then CCMP has been climbing higher on above average volume. We're encouraged to see it above technical resistance at its simple 100-dma and the breakout over the $35 level looks like a bullish entry point. Now that the SOX is producing an oversold bounce and CCMP is filling the gap there should be nothing to stop CCMP from running toward the $40 level. Traders can evaluate new positions here or look for a dip back to $34 and buy a bounce. We'll start the play with a stop loss at $31.75. We'll target $40.00 but its P&F chart points to a $52 target. Suggested Option: We like the August and September $35 calls with a preference for the September 35s. BUY CALL AUG 30 UKR-HF OI=1895 Current Ask $5.70 BUY CALL AUG 35 UKR-HG OI= 651 Current Ask $1.85 BUY CALL SEP 35 UKR-IG OI=1015 Current Ask $2.95 BUY CALL SEP 40 UKR-IH OI= 337 Current Ask $1.15 Annotated Chart: Picked on August 1st at $35.46 Change since picked: + 0.00 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 935 thousand Chart = -- Imperial Oil - IMO - close: 49.49 change: +0.77 stop: 46.75 Company Description: Imperial Oil is Canada's largest integrated oil company and its largest refiner and marketer of petroleum products with over 2,100 Esso-branded retail sites across the country. (source: company press release) Why We Like It: We've been looking for a way to play the rise in oil but so many of the larger oil stocks are very overbought or just don't move very quick. For example, XOM looks very bullish but it just creeps higher, which makes it a decent covered call play but not one for a directional call play. We like IMO for its technical breakout on its daily and Point-&-Figure charts. However, we are breaking the rules a bit. Normally we don't suggest stocks that don't have a certain minimum of average volume and IMO doesn't qualify. Volume is very light but that may be because IMO is a Canadian company primarily traded on the Toronto exchange. Fortunately, what volume we do see has been very strong during the recent rallies. The breakout over resistance at $48.00-48.50 is a new all-time high for IMO. While technicals are bullish and its MACD has produced a new buy signal we've also noted the spread triple-top breakout buy signal on its P&F chart with a $60 target. While we're willing to initiate long positions here some traders may want to wait and look for another pull back/bounce from the $48.00 level. More conservative traders might want to wait for IMO to breakout over the $50.00 mark, which could be round-number psychological resistance. Suggested Option: IMO does have both August and September calls available but there is very little action (a.k.a. no open interest) in the September strikes yet. That doesn't mean you can't trade the Septembers but we do suggest caution. BUY CALL AUG 45 IMO-HI OI=405 Current Ask $4.70 BUY CALL AUG 50 IMO-HJ OI=267 Current Ask $0.60 BUY CALL SEP 45 IMO-II OI= 2 Current Ask $4.90 BUY CALL SEP 50 IMO-IJ OI= 0 Current Ask $1.10 Annotated Chart: Picked on August 1st at $49.49 Change since picked: + 0.00 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 55 thousand Chart = ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Cephalon - CEPH - close: 50.54 change: -0.12 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: Time has almost run out. CEPH has managed to bounce higher with the rebound in the BTK biotech index and both of them are starting to fail under resistance. Unfortunately, CEPH is due to report Q2 earnings after the closing bell on Tuesday evening. We don't like to hold a directional position over an earnings announcement so we plan to close CEPH on Tuesday afternoon before they report. Suggested Options: CEPH is due to report earnings on Tuesday evening. We are not suggesting new positions at this time. Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 15 at $ 49.87 Change since picked: + 0.67 Earnings Date 08/03/04 (confirmed) Average Daily Volume: 969 thousand Chart = --- EchoStar Comm. - DISH - close: 27.75 chg: +0.21 stop: 29.05 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: Slowly but surely shares of DISH have continued to sink lower. The descending 21-dma has been overhead resistance for months and it's working well now. The close under the $28 level is encouraging if you're bearish and we plan to see DISH near our $25 target soon. Keep in mind that we only have 10 days left before DISH announces earnings and we're not going to hold over the report. If we don't drop DISH this coming Friday (6th) then we'll close it on the 9th. This could be a determining factor if you're considering new positions, which we would not recommend with such a short time horizon. Suggested Options: We are cautious right now. See play above for details. Our favorite is the August 30s. BUY PUT AUG 30.00 UAB-TF OI= 631 Current Ask $2.60 BUY PUT AUG 27.50 UAB-TY OI=1966 Current Ask $0.95 Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 09th at $28.99 Change since picked: - 1.24 Earnings Date 08/10/04 (confirmed) Average Daily Volume = 2.5 mln Chart = -- Magna Intl - MGA - close: 80.50 change: +0.25 stop: 82.01*new* 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: Exit Alert! We're quickly running out of time in MGA. The company is due to report earnings on the morning of Thursday, August 5th. Somehow we think MGA is going to hit our target at $75 by then. It could be we don't expect it. Conservative traders may want to exit now to reduce their risks or close the play with a small profit. Thus far the simple 200-dma, a technical level the stock pretty much ignored for the previous four months, has suddenly proven to be an obstacle for the bears. We're going to keep the play open for now and plan to close it on Wednesday afternoon just before the closing bell. In the meantime we're going to lower our stop loss to $82.01. Suggested Options: We are not suggesting new put positions at this time. Annotated Chart: * we apologize for the incomplete chart. It is missing a couple of sessions. Picked on July 15 at $ 81.53 Change since picked: - 1.03 Earnings Date 08/05/04 (confirmed) Average Daily Volume: 182 thousand Chart = ************* NEW PUT PLAYS ************* None ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 08-01-2004 Sunday 4 of 5 In Section Four: Leaps: Temporary Rebound? ************************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 ***** Temporary Rebound? Last week I mentioned that the game plan for the next couple of months was to target some good stocks and hope to fill our leaps on cheap prices on market weakness. We saw some serious market weakness last week but also a decent rebound. It is frustrating to watch stocks we are hoping to get in cheap add several dollars in price on the rebound. However, patience is the key over the next three months. Aug/Sep/Oct are the three most widely recognized months of the year for sudden drops and corrections. What we have seen in July may be just the tip of the iceberg. I am not saying this to scare anybody out of the market but to just remind everyone that this is a period where normal historical dips normally occur. We plan on taking advantage of these dips when/if they appear. Last week I profiled a couple stocks that I hoped to get cheap. The market this weak has rebounded to serious resistance levels but could still move higher next week. When you consider the period we are approaching and the potential for event risk around the Olympics (Aug 13-29) and the Republican convention (Aug 30-Sept 2) the odds of a resumption of the July slide are very good. I am going to suggest a couple put leaps this week that could be very profitable over the next couple months. Consider it terrorist insurance for your portfolio. **************************** SMH $32.90 Puts The semiconductor index has rebounded from 390 to just over 416 in the last three days. This was round number support and matched by support in various other indexes. It was not a material support level on the SOX. The next real support levels are 375 and 355. The SOX is too expensive to buy options so we will be looking at the SMH or semiconductor holders. The SMH dipped to 30.75 last week and has rebounded to 32.90. With 33.00 as strong resistance the odds of a material continued rebound are slim. Not impossible but slim. Next support is 30.50 and 27.75. With techs and small caps likely to make at least one more leg down I want to try and capture that move with some longer term options. Not leaps but far enough out to get us past the election. I want to always keep in the back of our mind that these are terrorist insurance until the profit targets are hit or the election is over. With the SMH at $32.90 and a minimum price target of $30 and possibly $28 I want to use either the Nov-$30 puts (SMH-WF) or the Nov-$35 puts (SMH-WG). I am ignoring the at the money 32.50 put as too expensive. SMH NOV-30.00 Put SMH-WF closing price $1.30 SMH NOV-35.00 Put SMH-WG closing price $3.70 Since the 35.00 put is already 2.10 in the money the real cost of the put is $1.60 and the delta is very high. As the SMH moves down the premium will increase much quicker than the at the money option. It is personal preference but I prefer in the money options on trades like this. We are going to target $28.00 for exit consideration but will watch it carefully under $30 for signs of a rebound. The entry target will be $33.50 The stop loss will be 35.00. SMH Chart – Daily SOX Chart **************************** Russell 2000 - 551.29 The Russell 2000 has rebounded from the edge of the cliff over the last several days from a low of 531 to Friday's close at 551. There is very strong resistance just above us at 565 and I believe strongly that the Russell will not make it over that level in the coming week. Small caps are typically the weakest link in the fall months because of liquidity concerns. Funds want to be in the big caps or cash while waiting for the Sept/Oct dips. This is their best buying opportunity and this year should be no different. In fact with the event risk this year it could be a very good buying opportunity. I profiled this play in the Editors Plays section this week and liked it so much I thought readers of this section would benefit from it as well. The Russell options are too expensive for pure speculation plays so we are going to focus on the Ishares (IWN) The Russell closed at 551 on Friday an the IWN at 164. It trades at about 1/3 of the Russell value. The Russell has strong resistance at 563-565 which corresponds to 166-167 on the IWN. Because LEAP traders are used to paying a little more for options we are going to use the Nov-160 Put IWN-WM at $6.10. You might get it a little cheaper on Monday if the market manages to break upside resistance for a change. Resistance on the IWN is 166-167 and we closed at 164. If you are feeling aggressive I would buy the Nov $170 puts for $10.90, already 6.00 in the money and increase your delta on this play. The more you spend the more you risk because the delta cuts both ways on an in the money option. I do expect a continued rebound on Monday/Tuesday and the closer we can get to the 166 resistance the better the price on the put. I am not going to put a trigger on this and leave it up to you on when to enter. I plan on buying this option myself so I will use my price for the entry and I am targeting 166 for the entry but that could change. The target on the play is $155 and the May lows. The low for last week was $159.10. Obviously if the target is hit it would be a very profitable trade. Considering the potential for a terrorist event over the next 45 days I think this is a very low risk trade. Whether the event happens or not we could still see the Russell sink on worry alone. BUY Nov $160 IWN Put IWN-WL (Closing price $6.10) Stop loss = IWN $168 Profit target = IWN $155 IWN Chart Russell Chart **************************** Current Portfolio: RHAT Red Hat $17.12, stop $12.50 Entry $14.81 Recommended July-18th Current position: 2006 $20 LEAP Call YFX-AD cost $2.75 Current $3.80 Sept $12.50 ins put RCV-UV cost $0.55 Current 0.25 Initial play description: http://members.OptionInvestor.com/leaps/Lp_071804_1.asp Red Hat Chart ************************************** CIEN - Ciena Corp $2.82 - no stop Entry $3.09 Takeover candidate 2006 $5 LEAP Call YCD-AA $0.65 cost 70 cents. No insurance put Initial play description: http://members.OptionInvestor.com/leaps/Lp_071804_1.asp Ciena Chart TYC Tyco $31.00 Stop $29.50 Entry $28.32 2005 $30 LEAP Call TYC-AF $3.00 cost $2.15 +40% 2006 $30 LEAP Call WPA-AF $5.20 cost $4.00 +25% July $25 insurance put - expired - cost $.55 Tyco Chart HD Home Depot $33.00 Stop 34.50 Entry $34.69 2005 $35 LEAP Put HD-MG $2.95 cost $2.95 -3% 2006 $35 LEAP Put WHD-MG $4.40 cost $4.50 -4% May $40 Insurance put - expired - cost $.55 HD Chart Position Summary Graph LEAPS Watch List **Editors Note** In the event of a market drop due to a terrorist attack on U.S. soil all entry targets should be immediately cancelled. MER - Merrill Lynch $49.72 target entry $46.00 2006 $50 LEAP Call WZM-AJ Currently $7.20 target $5.00 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp MER Chart INTC - Intel $24.38 target entry $20.00 2006 $22 LEAP Call WNL-AX currently $5.00 2006 $25 LEAP Call WNL-AE currently $3.80 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp INTC Chart EBAY - EBAY $78.33 target entry $70.00 2006 $80 LEAP Call YEU-AP currently $14.20 http://members.OptionInvestor.com/leaps/Lp_072504_1.asp EBAY Chart JNPR - Juniper Networks $22.96 target entry $20.00 2006 $25 LEAP Call WBW-AE currently $5.20 http://members.OptionInvestor.com/leaps/Lp_072504_1.asp JNPR 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 ************************************************************** ********** 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 08-01-2004 Sunday 5 of 5 In Section Five: Spreads and Straddles: Finally, A Positive Week For Stocks! Premium-Selling Plays: Naked Puts and Calls ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* Finally, A Positive Week For Stocks! By Ray Cummins The major equity averages moved higher Friday, closing the week in positive territory despite another surge in crude oil prices. The Dow Industrial Average ended 10 points higher at 10,139 with Boeing (NYSE:BA), Coca-Cola (NYSE:KO), and McDonald's (NYSE:MCD among the best performers. The tech-heavy NASDAQ Composite rose 6 points to 1,887 as semiconductor and internet shares enjoyed buying pressure. The Standard & Poor's 500 Index added 1 point to close at 1,101 with airline, brokerage, and drug store stocks limiting the market's gains. Volume on the NYSE was 1.30 billion while 1.49 billion shares crossed on the NASDAQ. Breadth on the Big Board was positive by a ratio of 3 to 2, but the activity was slightly less bullish on the technology exchange. U.S. treasury prices were higher with the benchmark 10-year note jumping 26/32, while its yield fell to 4.47%. For the week, equity prices were higher with the blue-chip Dow average up 1.8%, the broad S&P 500 index advancing 1.4%, and the NASDAQ climbing 2.1%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 07/30/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 Mon L/P S/P Credit CB G/L Status FRE 63.57 64.31 AUG 55.0 60.0 0.55 59.45 0.55 Open POT 98.08 96.69 AUG 85.0 90.0 0.60 89.40 0.60 Open UOPX 89.09 86.17 AUG 75.0 80.0 0.60 79.40 0.60 Open FAST 54.74 62.38 AUG 45.0 50.0 0.60 49.40 0.60 Open PD 79.00 77.94 AUG 65.0 70.0 0.60 69.40 0.60 Open AAPL 32.30 32.34 AUG 27.5 30.0 0.30 29.70 0.30 Open FSH 58.66 58.20 AUG 50.0 55.0 0.65 54.35 0.65 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss Positions in Wellpoint Health (NYSE:WLP) and Anthem (NYSE:ATH) have previously been closed to limit losses. The position in Gilead Sciences (NASDAQ:GILD), which is currently profitable, also became a candidate for early exit when it moved below the sold (put) strike at $60. CALL-CREDIT SPREADS Stock Pick Last Mon L/C S/C Credit CB G/L Status LLTC 36.74 39.10 AUG 42.5 40.0 0.30 40.30 0.30 Open XLNX 31.53 29.43 AUG 37.5 35.0 0.25 35.25 0.25 Open MERQ 46.17 36.56 AUG 55.0 50.0 0.65 50.65 0.65 Open SMH 34.58 32.90 AUG 42.5 40.0 0.30 40.30 0.30 Open TLB 33.04 30.80 AUG 40.0 35.0 0.60 35.60 0.60 Open VAR 77.24 69.01 AUG 90.0 85.0 0.50 85.50 0.50 Open KLAC 43.33 41.23 AUG 50.0 47.5 0.25 47.75 0.25 Open NVLS 29.23 27.01 AUG 35.0 32.5 0.20 32.70 0.20 Open BZH 90.65 93.40 AUG 105.0 100.0 0.45 100.45 0.45 Open LLY 64.67 63.72 AUG 75.0 70.0 0.65 70.65 0.65 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Linear Technologies (NASDAQ:LLTC) will be a candidate for early exit on any move above $40. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status DVN 69.40 70.40 AUG 70.00 70.00 5.00 4.80 Open TBL 60.26 58.04 AUG 60.00 60.00 4.75 5.00 Open Timberland (NYSE:TBL) enjoyed a brief surge in volatility on 7/22, plunging to a low near $56.25 during the session. The move may have offered a break-even exit using only the bearish portion of the straddle, however I was not available to monitor trading in the TBL options so the play will remain open in the summary. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ANSS - Ansys $47.44 *** Favorable Earnings Spark Rally! *** Ansys (NASDAQ:ANSS) develops and globally markets engineering simulation software and technologies used by engineers and designers across a spectrum of industries, including aerospace, automotive, manufacturing, electronics and biomedical. Ansys focuses on the development of open and flexible solutions that enable users to analyze designs on the desktop, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. The company distributes its Ansys, DesignSpace, ICEM CFD Engineering and CAD products through a global network of channel partners, in addition to direct sales offices in strategic, global locations. ANSS - Ansys $47.44 PLAY (conservative - bullish/credit spread): BUY PUT AUG-40.00 QUS-TH OI=41 ASK=$0.25 SELL PUT AUG-45.00 QUS-TI OI=0 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=9% B/E=$44.55 __________________________________________________________________ WBSN - Websense $38.19 *** Rising Profits = Rising Stock! *** Websense (NASDAQ:WBSN) provides employee Internet management products that enable organizations to analyze, report and manage how their employees use computing resources, including Internet access, instant messaging, peer-to-peer file sharing, network bandwidth and desktop applications. The company's primary product offering is the Websense Enterprise software application, its central policy engine and management console. Websense Enterprise also serves as a platform for related Websense add-on modules such as Client Application Manager, Bandwidth Optimizer, instant message Attachment Manager and Client Policy Manager, and supports a variety of reporting options that allow organizations to document patterns of employees' use of computing resources. WBSN - Websense $38.19 PLAY (conservative - bullish/credit spread): BUY PUT AUG-30.00 DQH-TF OI=1148 ASK=$0.25 SELL PUT AUG-35.00 DQH-TG OI=255 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=9% B/E=$34.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BEARISH PLAYS - CREDIT SPREADS All of these positions are favorable candidates for "bear-call" credit spreads, based on the current price or trading range of the underlying issue and its recent technical history or trend. The probability of profit from these positions may be higher than other plays in the same strategy, due to disparities in option pricing. However, current news and market sentiment will have an effect on these issues, so review each play individually and make your own decision about its future outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ APOL - Apollo Group $83.50 *** Downtrend Underway? *** Apollo Group (NASDAQ:APOL) provides higher education to working adults. The company operates through its subsidiaries: The University of Phoenix, University of Phoenix Online, Institute for Professional Development, The College for Financial Planning Institutes Corporation and Western International University. The company offers its programs and services at 71 campuses and 121 learning centers in 37 states, Puerto Rico and Vancouver, British Columbia. APOL - Apollo Group $83.50 PLAY (less conservative - bearish/credit spread): BUY CALL AUG-95.00 OAQ-HS OI=4218 ASK=$0.30 SELL CALL AUG-90.00 OAQ-HR OI=6719 BID=$0.95 INITIAL NET-CREDIT TARGET=$0.65-$0.75 POTENTIAL PROFIT(max)=15% B/E=$90.65 __________________________________________________________________ ACS - Affiliated Computer $51.80 *** In A Trading Range? *** Affiliated Computer Services (NYSE:ACS) is a global company delivering comprehensive business process outsourcing and information technology outsourcing solutions to commercial and government clients. Within its commercial segment, ACS offers technology outsourcing, business process outsourcing and systems integration services to clients in such industries as insurance, utilities, manufacturing, financial institutions, telecom, healthcare, retail and transportation. In its state and local government segment, the firm is a business process outsourcing provider to state and local governments. ACS also provides systems integration services, business process outsourcing and technology outsourcing to federal agencies. ACS - Affiliated Computer $51.80 PLAY (conservative - bearish/credit spread): BUY CALL AUG-60.00 ACS-HL OI=616 ASK=$0.10 SELL CALL AUG-55.00 ACS-HK OI=7986 BID=$0.50 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=9% B/E=$55.45 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ STRADDLES AND STRANGLES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INDEX-BASED COMBINATION POSITIONS 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. _________________________________________________________________ OEX - S&P 100 Index $537.67 *** Credit-Spread Strangle *** 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. By combining two credit-spread positions, you can participate in a popular neutral-outlook strategy known as the "Long Iron Condor." It is often used with range-bound issues and it is a limited risk, limited profit position that provides a wide range for success. The benefit to this technique is that some brokers require less collateral for the combined position, as only one spread can lose money at expiration. You should consult with your brokerage firm to determine the maximum margin requirements before initiating the position. OEX - S&P 100 Index $537.67 PLAY (less conservative - bearish/credit spread): BUY CALL AUG-560.00 OEB-HL OI=11920 ASK=$0.45 SELL CALL AUG-555.00 OEB-HK OI=8048 BID=$0.90 INITIAL NET-CREDIT TARGET=$0.50-$0.55 POTENTIAL PROFIT(max)=11% B/E=$555.50 - and - PLAY (less conservative - bullish/credit spread): BUY PUT AUG-515.00 OEB-TC OI=7891 ASK=$1.40 SELL PUT AUG-520.00 OEB-TD OI=7996 BID=$1.85 INITIAL NET-CREDIT TARGET=$0.50-$0.55 POTENTIAL PROFIT(max)=11% B/E=$519.50 _________________________________________________________________ QQQ - Nasdaq-100 Trust $34.89 *** Premium-Selling Play! *** The Nasdaq-100 Trust Series I is a pooled investment designed to provide results that generally correspond to the price and yield performance of the Nasdaq-100 Index. The issue was created to provide investors with the opportunity to purchase units in the Nasdaq-100, representing proportionate undivided interests in the portfolio of securities held by the Trust, which consists of substantially all of the securities, in substantially the same weighting, as the component securities of the underlying index. QQQ - Nasdaq-100 Trust $34.89 PLAY (speculative - neutral/debit strangle): SELL CALL SEP-37.00 QQQ-IK OI=219242 BID=$0.35 SELL PUT SEP-32.00 QAV-UF OI=67904 BID=$0.35 INITIAL NET-CREDIT TARGET=$0.75-$0.80 MAXIMUM PROFIT (MARGIN) = 10% UPSIDE B/E=$37.75 DOWNSIDE B/E=$31.25 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 07/30/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 NFI AUG 30.00 29.20 40.11 0.80 5.99% 2.74% NVTL AUG 20.00 19.50 22.97 0.50 5.77% 2.56% CBST AUG 10.00 9.65 10.38 0.35 6.43% 3.63% TASR AUG 30.00 29.15 31.29 0.85 5.67% 2.92% PETD AUG 25.00 24.35 26.61 0.65 4.86% 2.67% CRDN JUL 35.00 34.55 38.25 0.45 9.24% 1.30% CRDN JUL 35.00 34.70 38.25 0.30 7.43% 0.86% NFI AUG 30.00 29.40 40.11 0.60 4.68% 2.04% NVTL AUG 20.00 19.50 22.97 0.50 6.11% 2.56% TASR AUG 30.00 29.30 31.29 0.70 4.93% 2.39% EYET AUG 35.00 34.45 37.10 0.55 3.92% 1.60% SCHN AUG 30.00 29.00 30.93 1.00 6.53% 3.45% MGAM AUG 25.00 24.25 18.91 (5.34) 0.00% 0.00% FRO AUG 30.00 29.30 38.35 0.70 4.97% 2.39% GIVN AUG 30.00 29.45 34.44 0.55 4.21% 1.87% ATI AUG 15.00 14.50 20.05 0.50 7.89% 3.45% BEIQ AUG 25.00 24.00 24.01 0.01 0.08% 4.17% ESIO AUG 25.00 24.20 25.75 0.80 6.43% 3.31% AMHC AUG 25.00 24.25 27.23 0.75 5.98% 3.09% VTS AUG 22.50 21.85 24.63 0.65 5.72% 2.97% OSTK AUG 30.00 29.40 35.07 0.60 5.60% 2.04% KWK AUG 30.00 29.50 31.67 0.50 4.09% 1.69% ATI AUG 15.00 14.75 20.05 0.25 4.68% 1.69% EYET AUG 30.00 29.55 37.10 0.45 3.85% 1.52% ERES AUG 22.50 22.15 24.91 0.35 4.50% 1.58% CTSH AUG 22.50 22.05 27.55 0.45 4.61% 2.04% TECH AUG 40.00 38.75 39.80 1.05 5.27% 3.23% ELN AUG 20.00 19.70 20.55 0.30 4.31% 1.52% FARO AUG 20.00 19.65 23.53 0.35 5.77% 1.78% STLD AUG 30.00 29.60 32.75 0.40 3.50% 1.35% SRDX AUG 20.00 19.50 23.92 0.50 7.27% 2.56% NFI AUG 35.00 33.85 40.11 1.15 9.90% 3.40% ISG AUG 30.00 29.05 32.73 0.95 7.59% 3.27% LCAV AUG 25.00 24.35 26.09 0.65 6.54% 2.67% DHB AUG 12.50 12.15 15.21 0.35 8.54% 2.88% MSO AUG 10.00 9.65 11.29 0.35 9.88% 3.63% EENC AUG 12.50 12.25 13.59 0.25 4.83% 2.04% BLUD AUG 20.00 19.50 20.26 0.50 6.68% 2.56% ERES AUG 25.00 24.40 24.91 0.51 5.92% 2.46% IDCC AUG 17.50 17.05 19.24 0.45 6.72% 2.64% JNPR AUG 22.50 21.95 22.96 0.55 6.37% 2.51% NFI AUG 35.00 34.25 40.11 0.75 7.63% 2.19% JCOM AUG 25.00 24.45 25.51 0.55 5.80% 2.25% LCAV AUG 25.00 24.75 26.09 0.25 3.16% 1.01% CERN AUG 35.00 34.35 45.00 0.65 6.54% 1.89% VLCCF AUG 25.00 24.35 32.39 0.65 8.65% 2.67% Multimedia Games (NASDAQ:MGAM) was an unexpected loser Friday, plunging over $5 after the company missed its earning estimates and provided below-consensus guidance for the upcoming quarter. Needless to say, the position was closed after the announcement. Aeroflex (NASDAQ:ARXX) and Carrier Access (NASDAQ:CACS) have previously been closed to limit potential losses. A number of other issues are on the early-exit list including: BEIQ, TASR, JCOM, JNPR, ERES, ELN, TECH, KWK, ESIO, SCHN, and CBST. NAKED CALLS Stock Strike Strike Break Current Gain Max Simple Symbol Month Price Even Price (Loss) Yield Yield SLAB AUG 50.00 51.00 35.29 1.00 5.30% 1.96% SINA AUG 40.00 40.85 28.34 0.85 7.85% 2.08% ATRS AUG 30.00 30.85 25.11 0.85 6.52% 2.76% MRVL AUG 27.50 27.85 23.22 0.35 3.98% 1.26% MACR AUG 25.00 25.40 20.20 0.40 4.55% 1.57% ISIL AUG 20.00 20.45 18.36 0.45 5.72% 2.20% FLML AUG 25.00 25.50 18.85 0.50 8.15% 1.96% OTEX AUG 30.00 30.65 25.34 0.65 6.12% 2.12% TELK AUG 25.00 25.45 19.76 0.45 5.60% 1.77% ASKJ AUG 40.00 40.50 29.08 0.50 5.97% 1.23% DRIV AUG 30.00 30.85 28.10 0.85 7.92% 2.76% SINA AUG 35.00 35.45 28.34 0.45 6.42% 1.27% BSX AUG 40.00 40.50 38.26 0.50 3.58% 1.23% ICUI AUG 30.00 30.80 27.80 0.80 8.64% 2.60% WMGI AUG 35.00 35.65 27.63 0.65 5.46% 1.82% LSCP AUG 30.00 30.70 19.07 0.70 11.15% 2.28% ERICY AUG 30.00 30.65 26.71 0.65 8.01% 2.12% NTES AUG 40.00 40.45 37.25 0.45 6.31% 1.11% There was no viable position in Eon Labs (NASDAQ:ELAB), due to the "gap-down" opening on the day after the play was listed. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 KYPH 27.03 AUG 25.00 QYQ TE 0.50 90 24.50 19 3.3% 8.6% IDCC 19.24 AUG 17.50 DAQ TW 0.30 1004 17.20 19 2.8% 7.7% CYTC 24.20 AUG 22.50 YQK TX 0.40 561 22.10 19 2.9% 7.6% TOY 16.46 AUG 15.00 TOY TC 0.25 3726 14.75 19 2.7% 7.4% KRON 43.92 AUG 40.00 KUE UH 0.60 0 39.40 19 2.4% 6.7% UTHR 24.76 AUG 22.50 FUH TX 0.30 370 22.20 19 2.2% 6.0% CRK 21.04 AUG 20.00 CRK TD 0.25 58 19.75 19 2.0% 5.2% 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. _________________________________________________________________ KYPH - Kyphon $27.03 *** Earnings Speculation! *** Kyphon (NASDAQ:KYPH) develops medical devices to restore spinal anatomy using minimally invasive technology. The firm's initial marketing focus is on surgeons who repair spine fractures caused by osteoporosis. Kyphon's first commercial products, comprising its KyphX instruments, utilize its proprietary balloon technology. Surgeons use those tools to help repair fractures during minimally invasive spine surgeries. Its instruments have also been used in open surgical procedures. The firm sells various instruments for use in spine fracture procedures including: Bone Access Systems, Inflatable Bone Tamps, Inflation Syringes, Bone Filler Devices and Bone Biopsy Devices. Quarterly earnings are due on 8/4. KYPH - Kyphon $27.03 AUG 25.00 QYQ TE LB=0.50 OI=90 CB=24.50 DE=19 TY=3.3% MY=8.6% _________________________________________________________________ IDCC - InterDigital Comm. $19.24 *** Bottom Fishing! *** InterDigital Communications (NASDAQ:IDCC) specializes in the architecture, design and delivery of wireless technology and product platforms. Over the course of its corporate history, the company has amassed a substantial and significant library of digital wireless systems experience and know-how, and holds an extensive worldwide portfolio of patents in the wireless systems field. InterDigital markets its technologies and solutions primarily to wireless communications equipment producers and related suppliers. In addition, the company licenses its Time Division Multiple Access and Code Division Multiple Access patents to equipment manufacturers worldwide. IDCC - InterDigital Comm. $19.24 AUG 17.50 DAQ TW LB=0.30 OI=1004 CB=17.20 DE=19 TY=2.8% MY=7.7% _________________________________________________________________ CYTC - Cytyc $24.20 *** Strong Earnings = Rally! *** Cytyc (NASDAQ:CYTC) designs, develops, manufactures and markets sample preparation and imaging systems for medical diagnostic applications. The company's principal products are the ThinPrep System and ThinPrep Imaging System. The ThinPrep System is an automated system for the preparation of cervical specimens and non-gynecological samples on microscope slides. In addition, the company manufactures and markets the FirstCyte Breast Test, a risk assessment tool for women who are at high risk for breast cancer. CYTC - Cytyc $24.20 AUG 22.50 YQK TX LB=0.40 OI=561 CB=22.10 DE=19 TY=2.9% MY=7.6% _________________________________________________________________ TOY - Toys R Us $16.46 *** Entry Point? *** Toys R Us (NYSE:TOY) is a retailer of toys, baby products and children's apparel. As of January 31, 2004, the firm operated 1,501 retail stores worldwide. These consisted of 927 locations in the United States, 685 toy stores (including four Geoffrey stores), 198 specialty baby-juvenile stores; Babies R Us, and 44 children's clothing stores under the name Kids R Us. Toys R Us also sells merchandise on its Internet sites: www.toysrus.com, www.babiesrus.com, www.imaginarium.com, www.sportsrus.com and www.personalizedbyrus.com. TOY - Toys R Us $16.46 AUG 15.00 TOY TC LB=0.25 OI=3726 CB=14.75 DE=19 TY=2.7% MY=7.4% _________________________________________________________________ KRON - Kronos $43.92 *** On The Rebound! *** Kronos (NASDAQ:KRON) is a single-source provider of human resources, payroll, scheduling and time and labor solutions. The company's employee relationship management (ERM) solutions are the Workforce Central Suite, Kronos iSeries Central Suite and Timekeeper Central System. These unique solutions enable organizations to reduce costs and increase productivity, improve employee satisfaction, align employee performance with organizational objectives and put real-time information in the hands of decision makers. In addition to its core products, Kronos offers a variety of complementary products designed to help maximize ERM capabilities. Kronos maintains service and technical support organization that maintains systems and also provides professional and educational services. KRON - Kronos $43.92 AUG 40.00 KUE UH LB=0.60 OI=0 CB=39.40 DE=19 TY=2.4% MY=6.7% _________________________________________________________________ UTHR - United Therapeutics $24.76 *** Uptrend Intact! *** United Therapeutics (NASDAQ:UTHR) is a biotechnology company focused on the development and commercialization of therapeutics to treat chronic and life-threatening diseases in 3 therapeutic areas: cardiovascular medicine, infectious disease and oncology. It has 5 therapeutic platforms: Prostacyclin analogs are stable synthetic forms of a molecule that has effects on blood-vessel health and function; Remodulin has been approved in the United States for the treatment of pulmonary arterial hypertension in patients with New York Heart Association Class II-IV symptoms; Immunotherapeutic monoclonal antibodies are antibodies that activate patients' immune systems to treat cancer; Glycobiology anti-viral agents are a class of small molecules that may be effective as an oral therapy for hepatitis C or other infections, and Telemedicine involves portable digital devices that enable physicians to remotely monitor patients' bodily measurements. UTHR - United Therapeutics $24.76 AUG 22.50 FUH TX LB=0.30 OI=370 CB=22.20 DE=19 TY=2.2% MY=6.0% _________________________________________________________________ CRK - Comstock Resources $21.04 *** Strong Sector! *** Comstock Resources (NYSE:CRK) is an independent energy company engaged in the purchase, development, production and exploration of oil and natural gas properties. Comstock's oil and natural gas operations are concentrated in the Gulf of Mexico, east Texas/north Louisiana, southeast Texas and south Texas regions. In addition, the Company has properties in the Illinois Basin region in Kentucky and the Mid-Continent regions located in the Texas panhandle, Oklahoma and Kansas. Its oil and natural gas properties are estimated to have proved reserves of 616 billion cubic feet of natural gas equivalent (Bcfe) as of December 31, 2003. CRK - Comstock Resources $21.04 AUG 20.00 CRK TD LB=0.25 OI=58 CB=19.75 DE=19 TY=2.0% MY=5.2% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ACDO - Accredo Health $32.40 *** Sector Slump! *** Accredo Health (NASDAQ:ACDO) provides specialty retail pharmacy services, clinical services, reimbursement services and delivery services, pursuant to agreements with biotech drug manufacturers, relating to the treatment of patients with certain costly chronic diseases. The firm addresses the needs of the manufacturers by providing specialized services that facilitate product launch and patient acceptance, including the collection of timely drug utilization and patient compliance information, patient education and monitoring through the use of written materials and telephonic consultation, reimbursement expertise and overnight drug delivery. ACDO - Accredo Health $32.40 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 35 DZU HG 244 0.45 35.45 6.7% 1.3% _________________________________________________________________ SPW - SPX Corporation $40.95 *** Downtrend Intact! *** SPX Corporation (NYSE:SPW) is a global provider of technical products and systems, industrial products and services, flow technology and service solutions. The firm offers a collection of products, including scalable storage networking solutions, fire detection and building life-safety products, television and radio broadcast antennas and towers, life science products and services, transformers, compaction equipment, high-tech die castings, dock systems, cooling towers, air filtration products, valves, back-flow prevention and fluid handling equipment and metering and mixing solutions. Its products and services also include specialty service tools, diagnostic systems, service equipment and technical information services. SPX' products are used by customers in various industries, including chemical processing, pharmaceuticals, infrastructure, mineral processing, petrochemical, telecommunications, transportation, power, and financial services. Quarterly earnings are due on 8/2/04. SPW - SPX Corporation $40.95 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 45 SPW HI 526 0.40 45.40 5.0% 0.9% _________________________________________________________________ ULBI - Ultralife Batteries $16.39 ** Post-Earnings Sell-Off! ** Ultralife Batteries (NASDAQ:ULBI) develops, manufactures and markets a range of standard and customized lithium primary (non-rechargeable), lithium ion and lithium polymer rechargeable batteries for use in an array of applications. The company has focused on manufacturing a family of lithium primary batteries for military, industrial and consumer applications. Ultralife also supplies rechargeable lithium ion and lithium polymer batteries for use in portable electronic applications. ULBI - Ultralife Batteries $16.39 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL AUG 17.5 BMQ HW 75 0.40 17.90 11.0% 2.2% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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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