Option Investor
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Daily Newsletter, Monday, 08/23/2004

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The Option Investor Newsletter                   Monday 08-23-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Higher Dollar Sinks Most Boats
Futures Wrap: See Note
Index Trader Wrap: Just like Tampakos and Jovtchev
Combos/Straddles: Another Monthly Stroll To The Bank


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
      08-23-2004           High     Low     Volume   Adv/Dcl
DJIA    10073.05 - 37.09 10131.08 10067.97 1.26 bln  982/1822
NASDAQ   1838.70 +  0.68  1849.12  1835.11 1.21 bln 1245/1797
S&P 100   534.89 -  1.15   537.72   534.33   Totals 2227/3619
S&P 500  1095.68 -  2.67  1101.40  1094.73
SOX       390.09 +  4.09   394.58   386.00
RUS 2000  543.47 -  4.45   549.97   543.44
DJ TRANS 3068.09 - 22.78  3117.03  3065.60
VIX        15.88 -  0.12    16.71    15.79
VXO (VIX-O)15.86 -  0.44    16.92    15.40
VXN        22.54 -  0.52    23.88    22.53
Total Volume 2,470M
Total UpVol  1,147M
Total DnVol  1,279M
Total Adv  2227
Total Dcl  3619
52wk Highs  112
52wk Lows    53
TRIN       0.72
PUT/CALL   0.80 
*******************************************************************

Higher Dollar Sinks Most Boats
Jonathan Levinson

The US Dollar Index rose throughout the session, trading above 89 
resistance as of this writing, and driving foreign currency 
pairs, US treasury bonds, gold, silver and oil lower.  Equities 
decline slightly, with the exception of the Nasdaq which held a 
fractional gain. 

It was a light volume session overall as the markets traded in 
the aftermath of last week's monthly options expiration.  Most of 
the price action was slow and listless, with the Nasdaq finishing 
higher by less than 1 point and the Dow losing 37 points compared 
more substantial declines in treasuries, metals and oil.  This 
was a bullish outcome for the Dow and Nasdaq following last 
week's strong gains and what had been deeply overbought intraday 
cycle oscillators as of this morning. 


Weekly Dow Chart


The strength that was beginning to appear a week ago from the 
prior weekly doji asserted itself for the remainder of last week 
and continued for much of today's session.  I noted that a move 
to the Dow's 10200-250 confluence range would threaten the weekly 
cycle downphase, and that continues to be the case following last 
week's gains.  While the weekly cycle downphase remains intact 
and the current bounce appears to be merely corrective, on the 
daily chart below it has a more impulsive feel, rising steeply 
from a bullish stochastic divergence and a week-long base (the 
weekly doji preceding last week's bullish engulfing candle).  A 
move above the 10250 zone would set up the Dow for a challenge of 
the declining channel resistance line atop the weekly bull flag, 
and suggest a retest of the year highs and beyond.  However, for 
such to occur, the gains from last week need to continue, and the 
daily cycle upphase will need to continue to strengthen above 
last week's lows at a bare minimum.  A break below the lower 
descending flag support line would abort this bullish scenario 
and suggest a test of 9600 support.


Daily Dow Chart


Today's 37 point decline retraced part of Friday's gains and 
respected the upper and lower trendlines on what appears to be a 
pennant between 10130 and 10050.  The lower rising support line 
coincides with the oscillator upphase, and a break below this 
lower line should cause that upphase to stall.  I believe that it 
would take a move below 9960 to start a new downphase, and were 
such to occur, it would be a very bearish development.  For the 
moment, however, it appears that today's action was merely 
corrective, and with the steeply rising pennant support line 
pressing toward an apex, we can look forward to a what will 
hopefully be a directional resolution as early as tomorrow.  For 
the time being, the daily cycle remains strongly up against the 
ongoing weekly cycle downphase.  


Weekly Nasdaq Chart


Last week's move resolved the accumulation/distribution doji 
dilemma from the prior week to the upside, and set up a possible 
bull wedge breakout targeting the 2075 level.  However, there's 
substantial resistance along the way, and each level will be 
reinforced by the downside weekly cycle bias while the downphase 
persists.  1920 continues to look like the key make-or-break 
level for the current weekly cycle downphase above which we 
should begin to see buy signals on the oscillators as the bull 
wedge or even cup and handle breakout scenario comes into play.  
The current move is so far just a correction within the weekly 
cycle downphase, and 1835-45, the range that prevailed for much 
of today's session, is first confluence to test the daily cycle 
upphase discussed below.  So long as 1760 support remains intact, 
weekly cycle bulls can hope that the doji candle of 2 weeks ago 
was the early bottom of the current downphase.  


Daily Nasdaq Chart


On Friday, the Nasdaq closed just below its high of the day, and 
today's fractional gains built on that to continue the steep 
uptrend.  While the intraday oscillators were again overbought at 
the close, there was only sideways selling on the intraday cycles 
today, with most dips quickly bought back up.  On this chart, it 
appears that no less than a close below 1800 would be required to 
stall the current daily cycle upphase, with support below that at 
1775 and 1745.  Above 1845, next resistance is at 1860-65, 
followed by 1890-95. 


Weekly TNX Chart


The most recent downphase in the weekly chart of the ten year 
treasury note yield (TNX) has seen yields descend from a high of 
4.9% to the 4.13% lows.  As discussed in the weekend Futures 
Wrap, a daily cycle downphase appeared to be basing as of Friday 
for a new upleg, and we saw a powerful move higher in the TNX 
today, lifting the TNX to its 50-week EMA and testing 4.29% 
resistance.  The weekly cycle downphase is not over and could 
project to a retest of a 4% support, while a move above 4.4% 
resistance could spell a new upleg from a higher low.  Because of 
the bottoming action in the daily cycle and today's strong bounce 
higher, I'm guessing that we've seen the lows for this weekly 
cycle upphase, but it will take a weekly close above 4.4% at 
minimum to prove it.  For the day, the TNX rose 4.8 bps or 1.13% 
to close at 4.279%.


Weekly chart of Crude oil


Crude oil finished positive last week, but substantially below 
its intraday spike high above 49.  Had the week finished 
negative, it would have been a textbook gravestone doji.  It 
appears that the bears were off by a day, as today's decline 
completed the picture, breaking back below 47 with a 1.55 point 
loss to close at 46.10 for a 3.25% decline.  This weekly chart is 
displaying this week's candle based on only one out of five days' 
data, and so the picture is almost certain to change.  But a 
break below 46 should see a downside reversal and could 
constitute a bearish ascending wedge breakdown with an implied 
target as low as 36.  Note the 10-week stochastic bearish 
divergence, which also suggests a strong downphase to follow on a 
sell-signal if printed from current levels.  I expect former 
resistance in the 40-41 area to provide firm support.  However, 
the recent steep weekly uptrend appears to be under attack this 
week, and 46 is shaping up to be the key battleground.

Part of today's weakness in oil prices were attributed to the 
resumption of exports from Iraq's northern and southern outlets 
after a 3-month halt for the northern and 2-week halt for the 
southern.  CNN reported that the northern Kirkuk pipeline was 
pumping a little more than half its normal capacity at 454,000 
bpd, while flows from the southern Gulf terminals was running at 
its normal level of approximately 2M bpd.  This news dominated 
Russian news to the effect that Yukos intends to cut its output 
by 4.5% and reduce capital expenditures by more than 1/3.  Yukos 
CEO Steven Theede said that "Despite numerous requests to allow 
legal access to our bank accounts in order for Yukos to continue 
normal operations, collection orders remain in place and no cash 
is available to the company from those accounts."  Yukos 
currently accounts for approximately 20% of Russia's production, 
generating roughly 1.7M bpd.

The oil and broader markets mostly ignored increased fighting 
between U.S. Marines and Shiite fighters around a shrine in 
Najaf, with Al Jazeera reporting damage to the gold-domed mosque 
caused by the fighting.

Dallas Fed President Robert McTeer told CNBC in an interview 
today that in his view, the economic recovery "is in a soft spot 
right now" but that, despite persistently high prices of oil, the 
economy is not "in jeopardy".  He added that, on an inflation-
adjusted basis, oil prices are not particularly high.  "Petroleum 
products are in many, many things, and it is very important and 
it is troublesome, both in adding to price pressures and in 
adding to weakness overall."  While the Fed considers it in 
determining monetary policy, McTeer said that it remains one 
factor among many.  Addressing recent developments in Fed policy, 
he said that "The Fed has not really tightened monetary policy in 
any strict sense. It's reduced its degree of accommodation. The 
target fed funds rate is still only 1.5 percent - extremely low.  
The target fed funds rate is still negative or close to zero in 
real terms."

Overall, it was a quiet day news-wise with no major economic 
reports released.  

FDX was strong throughout the session, closing higher by 2.11% at 
80.97 after raising both fiscal Q1 and full-year guidance this 
morning.  The company said that it expects its business to remain 
strong despite threats to the global economy such as an extension 
of the rally in oil prices.  The company raised guidance for Q1 
earnings from $.90-$1.00 per share to 1$-$1.10, and for the full 
year from $4.20-$4.40 to $4.40-$4.60.  Consensus expectations 
were for $.96/share for the quarter and $4.48 for the year.  The 
company attributed the change to strong demand for international 
express, ground and less-than-truckload services.

WMT warned to day, lowering its August forecast and citing weak 
back-to-school demand.  The company reduced expectations for 
August sales from a 2%-4% increase to a 0%-2% increase.  Some 
analysts blamed the decline on increased prices for gasoline 
affecting low-income consumers in particular.  WMT was sold on 
the announcement, finishing the session lower by 1.56% to close 
at 53.80.  The Retail Index, the RLX, closed lower by .4% at 
385.70.

For tomorrow, we're left intermarket questions that edged a 
little closer to resolution today.  As noted last week, the daily 
cycle downphases for the US Dollar Index and the Ten year 
treasury yield entered bottoming territory, and today those 
assets made strong moves to the upside.  Gold, which had been 
looking equally toppy, declined 1.16% today.  Equities remain the 
wildcard for the simple reason that their daily cycle oscillators 
bottomed a week earlier and spent last week strengthening to the 
upside as price made strong gains.  The general trend I've 
observed since 2003 has been the tendency of the USD Index to 
trade against the prices of equities as part of the binary dollar 
relationship.  For this reason, I'd expect to see equities move 
lower as the dollar rises.  However, that relationship has been 
far from iron-clad, and furthermore, the daily oscillators show 
no indication of weakness for the Dow or Nasdaq yet.  For this 
reason, I remain open-minded to the possibility of a downside 
whipsaw for the Dow and Nasdaq, but until the daily oscillators 
turn back down, traders following that daily timeframe can 
continue to expect higher prices from the current cycle upphase. 
While the intraday cycles suggest weakness at the open tomorrow, 
that weakness should be sideways-down, corrective within the 
ongoing daily cycle upphase.  


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

Just like Tampakos and Jovtchev

Not unlike this weekends results of the Olympic gymnastics men's 
rings final, where Greece's Dimonisthenis Tampakos edged out 
Bulgaria's Jordan Jovtchev for the gold medal by just 0.012 of a 
point, bulls and bears battled it out with the major indices 
finishing mixed, where fractional gains and losses were common 
throughout the session.

Bulls may have faced some of the same challenges that Bulgaria's 
Jordan Jovtchev faced when challenging Tampakos on his home turf, 
where earlier this morning, Dow component and retailing giant 
Wal-Mart (NYSE:WMT) $53.80 -1.55% said August same store sales 
would come in below prior guidance as a slower than expected 
back-to-school season and temporary store closings in the south 
east from Hurricane Charles had hurt results.

With the S&P Retail Index (RLX.X) 385.70 -0.44% already doing 
battle with both its 200-day SMA (386.75) and trending lower 50-
day SMA (387.62) the negative weight of Wal-Mart's (WMT) weaker-
than-forecasted August same store sales revisions were just 
enough to have the Dow shedding 37 points by the close, and 
giving up its session's best level of trade from 10,130 in the 
final 90-minutes of trade.

U.S. Market Watch - 08/23/04 Close

 

October Crude Oil futures (cl04v) $46.03 -1.47% fell to one-week 
lows as supply concerns eased on broadly positive developments 
out of Iraq and Russia.

The October contract, which became the lead contract at the end 
of Friday's session, ended down 69 cents at $46.03.  On Friday, 
the September futures contract peaked at $49.40 a barrel on the 
New York Mercantile Exchange, before closing the session lower at 
$47.86.

There is still no resolution to the standoff in the Iraqi town of 
Najaf between militiamen loyal to rebel Shiite cleric Muqtada al-
Sadr and Iraqi and U.S. armed forces. 

The militiamen are reportedly holed up in the Imam Ali Shrine, 
which they have been using as a refuge while they attacked U.S 
and Iraqi forces in Najaf.

Homebuilders as depicted by the Dow Jones Home Construction Index 
(DJUSHB) 620.35 +1.58% took home the green ahead of tomorrow's 
lone economic report and July existing home sales.  Economists' 
look for existing home sales to slip from June's 6.95 million 
unit annual rate to 6.81 million unit rate.

Meanwhile, the dollar jumped against a weighted basket of 6 major 
foreign currencies with the U.S. Dollar Index (dx00y) 89.08 
+1.08% reclaiming its MONTHLY Pivot.  The dollar's strength had 
metal and mining stocks giving back some of last week's gains 
with the AMEX Gold Bugs Index ($HUI.X) 204.85 -2.21% resting from 
seven-straight sessions of gains.

Market Snapshot / Internals - 08/23/04 Close

 

Unlike the Olympic Gymnastics Center for the men's rings final, 
there seems to have been few market participants willing to trade 
in today session, where NYSE volume of just over 1.02 billion 
shares was the lightest for 2004.  NASDAQ's 1.22 billion shares 
were equally light and lowest daily volume of the year.

As the month of August draws to a close, average daily volume for 
the NYSE is a meager 1.28 billion per day, while NASDAQ has 
averaged a modest 1.48 billion.  I thought the summer doldrums 
were over after the NYSE managed just 1.30 billion per day and 
NASDAQ just 1.48 billion.  

We might be stuck with these types of volumes until after the 
Labor Day weekend, which tends to mark the end of summer.

NASDAQ-100 Tracker (QQQ) - Daily Intervals

 

NASDAQ-100 heavyweight Microsoft (NASDAQ:MSFT) $27.24 +0.44% 
gained 12 cents, but traded within Friday's range, and may have 
been the "swing stock" that had the QQQ showing a fractional gain 
by the close, where weakness in the Biotechnology Index (BTK.X) 
487.87 -1.29% was offset by fading strength from the 
Semiconductor Index (SOX.X) 390.09 +1.05%.  

NASDAQ-100 breadth finished fractionally bearish with 52 
decliners and 48 advancers.  Level 3 Communications (NASDAQ:LVLT) 
$2.72 +6.66% rose 17 cents, but wasn't able to reclaim its 
similarly trending lower 21-day SMA ($2.78) on a closing basis, 
while PETsMART (NASDAQ:PETM) $27.71 -3.01% lead the list of 
percentage losers and struggles to hold above its 200-day SMA 
($27.16) after reporting inline earnings last week.

Today's lows for the QQQ look to have been marked by a 
correlative DAILY Pivot and the $33.92 level from our WEEKLY 
Pivot retracement, and that correlation for near-term support 
stands tomorrow at DAILY S1.  Intra-day action had TRIN opening 
higher at 1.04 then falling in this morning's trade, only to 
close right back near 1.00 by the close.

S&P 500 Index (SPX.X) Chart - Daily Intervals

 

The broader S&P 500 Index (SPX.X) 1,095.68 -0.24% looks to be 
taking a rest at August's "Max Pain" option expiration level, 
where September's quarterly expiration is also currently 
tabulated at 1,100.00.  Resistance is marked by our old downward 
trend that serves as closing resistance for a second-straight 
session.  

Key economic reports this week will have July durable goods 
orders expected to rise a modest 1.0% after a 0.9% gain in June.  
On Friday, economists forecast the PRELIMINARY Q2 GDP at 2.7%, 
after the advanced reading showed the economy grew at a 3.0% 
rate.

Pivot Analysis Matrix - 

 

Jeff Bailey



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****************
Combos/Straddles
****************

Another Monthly Stroll To The Bank
By Mike Parnos, Your Options Therapist (among other things)

This month (August) we kept our profit streak going.  It wasn’t without 
a few trials and tribulations, but we held firm, got a little lucky, and 
all of our positions closed comfortably within the established ranges.   

The new September positions below were based on last Thursday’s closing 
prices.  The premium now available will obviously be somewhat less.  Be careful.
______________________________________________________________

August CPTI Portfolio Results 
The August option cycle was the tenth cycle in the second year of 
tracking our Couch Potato Trading Institute portfolio. With our $7,620 
of profits, we've now accumulated a total of $46,370 in ten months - on 
a trading account size of about $40-45,000. 

Trade Summary
SPX - Iron Condor - Profit: $2,000
RUT - Iron Condor - Profit: $1,950
BBH - Iron Condor - Profit: $1,300
SPX - CS Boogie – Profit: $2,370
TOTAL AUGUST PROFITS: $7,620
(See position summary below)

Happy Returns Of The Day (Month) Report –
Once again, I calculated our hypothetical return on risk for this 
month's portfolio trades. The total amount of maintenance in the above 
three closed trades was $45,000. If we subtract the $7,620 of premium we 
originally took in, our real risk was only $37,380. When we divide 
$37,380 into our $7,620 profit, we get a return on our risk of 20.4%. 
_____________________________________________________________

AUGUST POSITION SUMMARY
August Position #1:  SPX Iron Condor – 1098.35
We sold 5 SPX August 1050 puts and bought 5 SPX August 1025 puts
For a credit of about $2.40 ($1,200).  Then we sold 5 SPX August 1155 
calls and bought 5 SPX August 1180 calls for a credit of about $1.60 
($800).  Potential profit of $2,000.  Maximum profit range: 1050 to 
1155.  PROFIT:  $2,000.

August Position #2 – RUT Iron Condor – 547.92
We sold 10 RUT August 520 puts and bought 10 RUT August 510 puts
for a credit of about $1.20 ($1,200).  Then we sold 10 RUT August 600 
calls and bought 10 RUT August 610 calls for a credit of about $.75 
($750).  Potential profit: $1,950.  Maximum profit range: 520 to 600.  
PROFIT: $1,950.

August Position #3 – BBH Iron Condor - $139.80
We sold 10 BBH August $130 puts and bought 10 BBH August $120 puts
for a credit of about $.60 ($600).  Then we sold 10 BBH August $150 
calls and bought 10 BBH August $160 calls for a credit of about $.70 
($700).  Profit potential: $1,300.  Maximum profit range: $130 to $150.  
PROFIT:  $1,300.

August Position – SPX – 1091.23
Don’t forget that our “Credit Spread Boogie” position was rolled out to 
August.  That should be fun to watch.  And, be alert.  We have to be 
prepared to adjust when necessary.  Originally we had a July bullish 
position, we then adjusted it to a bearish August position.  SPX closed 
below 1125. We keep our PROFIT:   $2,370. 
_______________________________________________________________ 

September Position #1 – SPX Iron Condor – 1091.23
The SPX has become our favorite index.  The premiums are respectable.  
The spreads are wide enough to do a little shaving, and we can create 
some huge trading ranges for safety purposes.

We sold 10 Sept. SPX 1015 puts and bought 10 September SPX 995 puts for 
a credit of about: $1.10 ($1,100).  Then we sold 10 September SPX 1140 
calls and bought 10 September SPX 1160 calls for a credit of about $1.40 
($1,400).  Total credit and potential profit of $2,500.  Maximum profit 
range: 1015 to 1040.  That’s a 125 point range.  It is going to require 
$20,000 in maintenance.  The return on risk will be about 14.3%.

September Position #2 – RUT Iron Condor – 537.44
The RUT gave us a big scare in August.  A lot of traders rolled out 
their 520 short puts when the price was violated a week ago.  It was the 
prudent thing to do.  The huge bounce could not have been predicted.  
Those that held had a 50/50 chance of success.  They rolled the dice and 
they won.

We sold 10 RUT September 500 puts and bought 10 RUT September 490 puts 
for a credit of about: $1.00 ($1,000).  Then we sold 10 RUT September 
580 calls and bought 10 RUT September 590 puts
Credit of about $1.00 ($1,150).   Total credit and profit potential of 
$2,000.  It’s a nice size maximum profit range of 500 to 580.  The 
maintenance requirement is only $10,000.  The return on risk will depend 
on what premium you take in.  If you take in $2,000, the return on risk 
will be 25%.

September Position #3 – SPX Credit Spread Boogie – 1091.23
In this August cycle, our Credit Spread Boogie play is going to be 100% 
profitable.  It may have taken two months to make this money, but it was 
well worth it.  So, let’s do it again.

We sold 3 September SPX 1105 calls and bought  3 September SPX 1130 
calls for a credit of about $7.00 ($2,100).  This is based on the 
feeling that, despite the recent bounce, the downtrend will continue.  
We’ve taken in $2,100.  We’re going to remain in this position until it 
costs $14.00 to unwind it.  That will be an indication that the trend 
has likely changed and we will then reposition ourselves in the opposite 
direction – playing enough contracts to replenish what we spent to close 
out the original spread.  The initial maintenance requirement is $7,500.  
However, keep some of your powder dry.  If we have to shift positions, 
we will need additional maintenance dollars for the additional 
contracts.

September Position #4 – OEX Iron Condor – 533.10
This position is in response to some requests for an OEX play.

We sold 10 September OEX 505 puts and bought 10 September OEX 495 puts 
for a credit of about: $.65 ($650).  Then we sold 10 September OEX 555 
calls and bought 10 September OEX 565 calls for a credit of about $.75 
($750).

Total net credit of about $1.40 ($1,400).  Maximum profit range: 505 to 
555.  Potential return on risk of about 16%.  It’s been a long time
 since I’ve traded the OEX in a condor.  I don’t remember how generous 
they are in shaving the bid/ask spreads.  Good luck.

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $33.67
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts of the 
2005 QQQ $29 calls for a total debit of $14,300.   We make money by 
selling near term puts and calls every month.  Here’s what we’ve done so 
far:  Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts 
and calls – credit of $1,150. Dec. $34 puts and calls – credit of 
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls and 
$36 puts – credit of $750. Mar. $34 calls and $37 puts – credit of 
$1,150. Apr. $34 calls and $37 puts – credit of $750.  May $34 calls and 
$37 puts – credit of $800.  

June $34 calls and $37 puts -- total net credit of $750.  We rolled out 
to the July $34 calls ($.20 credit) and $37 puts ($.60 credit) and took 
in a credit of $.80 ($800).  We rolled to the August $34 calls and $37 
puts, taking in a credit of $900.  For the September cycle, we rolled to 
the Sept. $34 calls and $37 puts, only yielding $.45 or $450 for the 
cycle. Our new total credit is now $11,750.

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

ZERO-PLUS Strategy.  OEX – 533.10
In my Feb. 8th column, I outlined a strategy based on an initial 
investment of $100,000.  $74,000 was spent on zero coupon bonds maturing 
in seven years at a value of $100,000.  The principal $100,000 
investment is guaranteed.  We’re trading the remaining $26,000 to 
generate a “risk free” return on the original investment.
Our current position:  We own 3 OEX December 2006 540 calls @ $81 (x 300 
= $24,300).  Our cash position as of May expiration was $4,390 plus 
unused $1,700 = $6,090.  From the June option cycle, we are able to 
officially add $1,175 to our cash position – that now stands at $6,265 
As of July expiration we had a total of $7,440.  We now add the $950 for 
the August expiration for a new total of $8,390.

New Zero Plus Positions For September  
September bull put spread 505/495 for credit of $.75 x 5 contracts = 
$375.  Short 555 call for credit of $1.20 x 5 = $600.  If all goes well, 
we’ll be able to add $975 to our cash position as we wait for the market 
to move up – hopefully in this lifetime.
_______________________________________________________________

August Quickie Results
A trending market is not conducive to quickies.  In previous months 
we’ve been in more of a consolidation mode.  But, trending markets have 
a tendency for short term dramatic moves, both up and down.  And, this 
month, that’s exactly what happened to us in August.  When the market 
began moving up dramatically in the first hour on Monday, smart traders 
would have aborted plans to place the quickie trades.  However, its 
easier said than done.  

So, after many months of winning quickies, those who participated had to 
accept a small loss on this month’s trade(s).  Maybe next month will be 
more productive.  As I always say, the quickies are dangerous and have 
to be closely monitored.  It’s only a week, but a lot of weird shit can 
happen in a week – and this month we got a taste of it (yuch!).
_______________________________________________________________

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

Mike Parnos, CPTI Master Strategist

 

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


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The Option Investor Newsletter                   Monday 08-23-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: None	
Dropped Calls: None
Dropped Puts: None
Watch List: RKY, BGG, TSA, NCEN


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Brokerage Group, addressing the demand for personalized, 
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within the same firm. Licensed Option Principals Andrew Aronson 
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**********
Watch List
**********

Adolph Coors - RKY - close: 68.39 change: +1.39

WHAT TO WATCH: The sharp rise in shares of RKY in June and July 
was quickly erased by a sharper fall.  The stock peaked at $80.00 
in mid-July and found support again near $65.  Now after two 
weeks of trying to find a bottom we're seeing signs of life 
again.  Today's 2% rally broke through its simple 21 and 100-
dma's.  Technicals have turned positive and its MACD has produced 
a new "buy" signal.  Watch for a breakout above resistance at 
$70.00 and its 40 and 50-dma's. 
 


---

Briggs Stratton - BGG - close: 75.00 change: +2.01 

WHAT TO WATCH: BGG crashed in early August as investors responded 
to its earnings report.  Shares tried to find support at the 
simple 200-dma but eventually dropped to $69.80 and looking like 
it was going to aim for the $64 region.  Fortunately for BGG 
investors the stock has turned things around.  The rally back to 
$75 has reversed its P&F sell signal into a new buy signal with 
an $86 target.  The stock has been pretty volatile lately so only 
aggressive players may want to take a closer look but BGG could 
rally back toward resistance at the $80 level again.  Watch out 
for the various moving averages overhead (21 and 100) 
 


---

The Sports Authority - TSA - close: 20.50 change: -1.65

WHAT TO WATCH:  The outlook for TSA just keeps getting worse!  In 
July the stock broke through support near $32.50 just days before 
the company issued an earnings warning and sent the stock gapping 
glower.  Now shares have fallen another 7.4% on almost three 
times the average volume on no discernible news.  TSA is expected 
to report earnings on Thursday with estimates at 44 cents a 
share.  We would not consider plays ahead of the report but 
afterwards watch for a drop under round-number support at $20.00.  
A quick look at the weekly chart shows the next level of 
significant support is the $15.00 level.  The P&F chart is 
extremely bearish with a $4.00 target.



---

New Century Financial - NCEN - close: 52.00 change: +1.03

WHAT TO WATCH: Mortgage lender NCEN is back in rally mode.  The 
stock has climbed back above the $50.00 mark and is nearing all-
time highs above $52.00.  We would look for a breakout over 
$52.50 or a dip and bounce from $50.00 as potential bullish entry 
points.  The bullish P&F chart shows a new triple-top breakout 
buy signal with a $70 target.  We would target a run to $57.50-
60.00.
 



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

COF $70.29 -0.56 - We're still watching COF for a breakout over 
$72.50

RCL $39.57 +0.27 - We're still watching RCL for a breakdown under 
$37.50.

EBAY $82.35 +0.98 - EBAY is still amazing with another gain and a 
breakout over its 40, 50 and 100-dma's. 


*******************
FREE TRIAL READERS
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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


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