The Option Investor Newsletter Tuesday 11-23-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Market Misfire Futures Markets: See Note Index Trader Wrap: Shifting sentiment with oil Market Sentiment: Holding Up Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 11-23-2004 High Low Volume Adv/Dcl DJIA 10492.60 + 3.20 10514.99 10436.38 1.78 bln 1945/1291 NASDAQ 2084.28 - 0.91 2092.02 2068.98 2.10 bln 1740/1376 S&P 100 561.29 - 0.35 562.55 558.58 Totals 3685/2667 S&P 500 1176.94 - 0.30 1179.52 1171.41 SOX 429.71 - 3.20 436.38 426.89 RUS 2000 624.53 + 3.01 624.53 616.54 DJ TRANS 3621.08 + 11.80 3626.55 3582.60 VIX 12.67 - 0.30 12.91 12.57 VXO (VIX-O)13.08 - 0.50 13.71 12.81 VXN 18.43 - 0.34 18.97 18.35 Total Volume 4,187M Total UpVol 2,260M Total DnVol 1,855M Total Adv 4176 Total Dcl 3070 52wk Highs 512 52wk Lows 51 TRIN 1.30 NAZTRIN 0.90 PUT/CALL 0.79 ************************************************************ Market Misfire by Jim Brown Several times this week the markets tried to rally but sputtered and failed. The misfires all started off with a bang but could not produce enough momentum to push the Dow over 10500 for more than a few minutes. Like a rocket trying to escape the pull of gravity with only one booster each spike sputtered at the edge of resistance and fell back to earth. Unable to make a successful run with a frontal assault during cash trading hours there was a sneak attack after today's close that may prove more successful. Dow Chart Nasdaq Chart SPX Chart The economic reports came back to the forefront again today but it was not Chain Store Sales and National Activity Indexes that captured traders attention. It was the economics of oil that tanked the markets once again. Reportedly fears of shortages and disruptions in supply were the factors that sent crude back over $50 for most of the day. The spike back over the $50 level helped to shatter the confidence many analysts had developed suggesting the oil crisis was over. $50 oil is a red flag and the opening bounce in equities to Dow 10514 was immediately sold and we retreated back to 10450 where we stayed until oil closed for the day. I don't normally feel that the markets trade intraday in relation to each other as most reporters claim. However, today there was an exact correlation and it was striking. Compare the charts below for oil and the Dow. I don't think this correlation will continue at the same rate but the resurgence of high oil definitely elicited a knee jerk reaction from equities today. We have seen in the past that once the shock of $50 has passed the stock market tends to develop a resistance to the hourly fluctuations. Hopefully that will begin soon. On Wednesday we will get the oil inventories for the week and this bubble could be over as quickly as it began. Comparison Chart Oil/Dow Chain store sales spiked for the last week +0.8% and well over the -0.4% drop from the prior week. This should come as no surprise to anyone given the approach of the busiest shopping day of the year on Friday. I drove out of my way to a Super Wal-Mart on Sunday with my wife to shop for Thanksgiving dinner which is normally a big spread around my house. There was barely an empty space in the parking lot and a shortage of baskets at the door. It was a mad house with workers literally running to restock shelves as fast as buyers cleaned them out. I know a lot of people don't like Wal-Mart but with a line to get into the parking lot late on a Sunday night it is evident that there is no shortage of Wal-Mart shoppers. If you have not watched that CNBC special on Wal-Mart I highly recommend it just for the business methods they discuss. Business majors should be required to view it. Love them or hate them you still have to respect their methods and success. It also suggests that next weeks Chain Store Sales numbers should show huge seasonal gains before the season even gets underway. The Chicago Fed National Activity Index spiked sharply for October to +0.52 from -0.04 in September and only +0.17 in August. This number has been highly volatile over the last six months in what could be seen as serious cross currents in the economy. If this is the start of a new uptrend it definitely should get the attention of analysts. Production jumped to +0.27 from -0.10 in the prior month. 57 of the internal components contributed positively to the index while only seven contributed negatively. The three-month average at 0.22 has now indicated growth for fourteen consecutive months. The October Existing Home Sales remained flat with September at 6.75 million units. Hurricane sales continue to hold up the sales levels but there have been declines in many other regions. This decline could be seasonal, due to higher mortgage rates, held back by the elections or the prospect of higher energy prices. It is unknown which factor is the most likely but the home builders celebrated for the third day despite the regional numbers. While existing home sales are not directly related to the home building stocks it appears prosperity in one sector suggests continued prosperity in the other. One factor helping the builders was a drop in existing home inventory to only a 4.3 months supply and near a record low. As existing homes dwindle those shoppers may be pushed into the new home market. Stronger job growth should be a driving force to keep these trends in force. Despite the best wishes of most investors the chip sector just can't get a break and continues to drag on the broader tech sector. The SOX has struggled for two days to recover from the Friday beating but has not been able to find a bid. Today Intel was cut by CSFB who lowered their price target to $22 from $25. Intel had reached a three-month high of $24.81 last Thursday but has declined to $23.39 at today's close. According to CSFB, AMD is becoming a growing threat with the product gap merging and in some cases closed. The competitive edge is going to AMD where cost is -40% to -60% less than the Intel product. AMD has gone from $11 to $22 in the last three months and several analysts think the underdog could move even higher. The real problem with the chip sector according to analysts is the increasing capacity coming online and the inventory glut now. CSFB said there would be another 30% of capacity added by Intel over the next year and there is no demand for that capacity. This will eventually drive prices lower and impact margins with Intel being the most at risk for price. According to Merrill Lynch and the Gartner Group the demand for PCs in the consumer sector will drop in 2005 to less than 9% growth compared to 12% in 2004. The SOX fell on the Intel downgrade to close at 430 and well off the 445 highs from last week. After the close today ADI reported earnings that were inline with estimates at 34 cents but their outlook was less than exciting. They warned that the current quarter could be less than expected. High inventory levels were again the culprit but there is hope ahead. Order volatility is stabilizing and the excess inventory is expected to work its way out of the system by the end of the first quarter according to ADI. On the bright side TECD announced earnings at 64 cents that blew away estimates of 55 cents and raised their estimates for Q4 to well over current analyst forecasts. The stock jumped +2.30 in after hours trading. The company distributes high tech products and software around the world and had revenue of $4.8B for the quarter. Google was the beneficiary of new coverage by Goldman Sachs at an outperform and a price target of $215. The stock surged +$10 in after hours as shorts got their weekly beating. Goldman looked into their crystal ball and projected 25% earnings growth through 2009 base on global secular growth. That prediction could be very difficult to match since Google has warned twice in the last two weeks that earnings will slow. SIRI continued to move to a higher orbit since the addition of Mel Karmazan as CEO. The stock has soared from $4.75 to $6.75 in three days and traded 421 million shares on Tuesday. This was a new Nasdaq record for single share volume. Eventually this high flyer will come back to earth but it may not be soon. With only 800,000 subscribers and nearly $5 billion in debt the outcome is probably an acquisition by somebody like Viacom. Winning the war over XMSR may not occur in our lifetime but it won't be due to a lack of trying by SIRI. Despite the listless markets money continues to flow into funds with $4.5B in inflows for the week ended on Monday according to TrimTabs.com. They also estimate that more than $12B has come into the market so far in November. They are now tracking exchange traded funds and reported that the new GLD fund had seen inflows of $1.3B in the last three days. I know the question on your mind is not will Google move higher or SIRI plummet back to earth. Inquiring minds want to know what happened to the market and will there be a Thanksgiving rally. I can answer the rally portion of that question with 100% confidence and I will do so in the Sunday newsletter. Everybody knows hindsight is always 20:20. The weakness in the markets this week is being attributed to tax selling by funds. I know it seems earlier than usual but that is because it is still November. You probably thought you forgot to tear that page off the calendar when I said tax sales. Seriously, I mentioned last weekend that the January effect had moved into December and that tax sales over the last several years had moved into the early days of December. If market analysts are right this week those sales have moved in front of Thanksgiving this year for one specific reason. The Microsoft dividend is due out next week and professional money managers are expecting a surge in liquidity that will float the markets for up to two weeks. Nobody wants to be selling then. They want to get the sales out of the way early and finish their new position entry before those funds hit the market. That positioning has created some serious volatility over the last three days that has been mostly program related. With the normal Thanksgiving trend being "buy Tuesday's close and sell on Monday" the selling should be behind us. The Dow touched 10600 last Wednesday and was promptly sold. The Greenspan event last Friday gave funds another reason to accelerate their dumping and the three bounces to 10500 this week were also sell triggers. During this volatility one thing remained firm. Support at 10450 emerged and became even stronger as Tuesday trading began to wind down. The underlying bid began to aggressively rise and we saw a rally at the close that took the Dow futures back over 10500. The Nasdaq has been struggling as well but did manage to post a higher low at 2070 today. With the exception of that higher low the chart for the last two weeks looks like a mirror image of the SOX. However, like the Dow there was concentrated buying in the futures after the close and we should see a pop back over 2090 at the open. The SPX also posted a higher low late in the afternoon with a close at 1177. The S&P futures ran up to 1180.50 after the bell and also suggest a higher open. The most bullish index was the Russell and that is the one that telegraphs the action of mutual funds. The Russell moved to a four day high just before the close at 623.50 and appeared ready to retest the 627 all time high from last week. After the close the Russell futures soared to 626.50 and also suggest the Russell will open higher tomorrow. Are you starting to see a common scenario developing here? Russell Chart Wilshire-5000 Chart Personally I believe the artificial pumping of the futures contracts after the close was an attempt to send the averages higher at the open and hopefully trigger some short covering on a low volume day. If they can get the markets going sharply higher at the bell then traders may believe the Thanksgiving rally is breaking out and jump on the train. This could be a cleverly disguised market manipulation scheme by big money to create a rally where none existed to either benefit from current longs already entered or to send the market higher over the holiday and give them a higher exit level on Monday. Personally I still believe it was the former as the latter leaves them in cash but at a higher level with stocks artificially higher in price. It makes more sense that they have already dumped the losers and used the dips to start new positions they now want to send higher. Wednesday has a flood of economic reports but none are expected to be market movers. Wednesday is a sentiment day where low volume tends to be bullish and there are few professional traders left in the office to try and sell into the rallies. Monday is the risky day once everyone comes back into the office to see what changes they still need to make before the Microsoft billions hits the market. Technically Dec 2nd is the pay date but I would not expect a sudden flagpole rally on that day. The money has to be disseminated and received by fund managers before they can spend it. The following Monday Dec-6th is the likely date for money flow to begin hitting the market. However, just because those are the critical dates it does not mean funds will not be jockeying for position as early as tomorrow in hopes of getting a pole position for that liquidity rally. I have to emphasize that all of this is just speculation and anything is possible. We never know what forces are at work behind the scenes and how much money is moving into or out of position or why. What we do know is the next three weeks could be an exciting time in the market and hopefully a profitable event. I plan on remaining long over SPX 1175 and suggest you do the same. This gives us a red light, green light traffic signal for the coming week. Decisions are simpler when made in advance and not in the heat of battle. Mine are made, are yours? If you have not seen the end of year renewal special we announced on Sunday please be sure to check it out tonight. Buy the dips until the trend changes. Jim Brown Editor ******************************************** Option Investor End of Year Renewal Special ******************************************** 2005 Is Only Six Weeks Away! We have gone to great lengths this year to provide you with a renewal package that could easily be our best ever. We have joined forces with several other top analysts to bring you a wide array of information that will make you money in 2005 and beyond. We realize the market is difficult at times but there is always more than one way to find profitable trades. There is a lot of information on the Internet but very little of it will make you money in 2005. We have strived to put together a package that could very easily pay for your Option Investor subscription not only for 2005 but very likely for life. Yes, for life! Other newsletters simply try to find ways to separate you from your money at subscription time. We try to find ways to make you money and enough money to keep you as subscribers for life! ******************************** Bonus Number One! Ten Great Stock Picks from Ten Top Newsletters We have joined forces with the newsletters and analysts below to provide you with eye opening insight into the opportunities ahead. Each analyst will provide you with their best pick for 2005 and explain how to make money in 2005 with that pick. Jonas Ferrs - Insider Moves Big Money Watch - Follow the Money Bill Martin - Find Profit Jim Brown - Option Investor David Fried - The Buyback Letter Dennis Slowther - Stealth Stocks Mark Rhodes - The Rhodes Report Steven Quickel - US Investment Report Richard Maroney - Dow Theory Forecasts Vivian Lewis - Global Investing ******************************** Bonus Number Two! Big Money Watch has produced a SPECIAL report titled: "Five Great Stocks for Four More Years" This special report profiles five stocks that will benefit from four more years of the Bush administration. ******************************** Bonus Number Three! Top Ten Stocks for the Coming Energy Crisis Jim Brown has spent the last three months researching the coming energy crisis. If you thought oil at $55 was bad then oil at $75 will really spoil your day unless you are invested in the right stocks well in advance. Guess what? They are not all oil stocks! If your investments in these ten stocks doubles, triples or even quadruples over the next five years then you can smile confidently when your neighbor is complaining about $5 gasoline. Everything is relative and you can afford to spend a little more for gas knowing the high prices are padding your investment account. ******************************** Bonus Number Four! Two 2005 Option Expiration Calendar Mousepads ******************************** Bonus Number Five! The 2005 Stock Traders Almanac The 2005 Stock Traders Almanac retails for $34.95 plus postage. For our End of Year subscribers we are passing our volume savings on to you and are offering the 2005 Almanacs for only $20.00. This is -43% off the retail price and postage inside the U.S. is included! ******************************** Two Choices, Five Bonuses, One great Special! Don't delay, sign up today. Orders are shipped on a first come, first served basis. Click here for more information on this great offer: *************** FUTURES MARKETS *************** Futures wrap is not emailed due to the excessive number of charts. It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ************************Advertisement************************* Get the most from your online options broker * fully-integrated trading tools for options or stock * Easy screens for spreads, collars, or covered calls * Free streaming quotes and Dow Jones news * Rated "Best" by Barron's, SmartMoney and Forbes Go to http://www.optionsxpress.com/marketing.asp?source=oinvest31 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ************************************************************** ***************** INDEX TRADER WRAP ***************** Shifting sentiment with oil If I could just figure out for certain which way oil prices were headed, I'd have a much more comfortable feel for what to try and expect in coming sessions. Stocks seesawed with oil in Tuesday's trade, where the major equity indices and oil finished relatively unchanged ahead of tomorrow morning's weekly crude, distillate, and unleaded gas inventory report from the EIA. Oil - Continuous Contract ($WTIC) Chart - $0.25 box After giving a reversing higher point and figure buy signal on Friday at $47.50, the conventional $0.25-box chart of $WTIC has oil extending gains without so much as a 3-box reversal, and the bullish vertical count growing to $60.00. Ugh! If oil is headed to $60, that can't be good for equity market psychology, and with each passing day, traders and investors certainly get the feel that equity traders remain focused on what oil is doing at any given moment. Since the point-and-figure-tologist (one who uses point and figure charts) would chart X's up to $50.25 for today's trade and stop, as that's where the current column of X (demand) builds to. However, I also like to look as see where oil settled ($48.94) as well as some further selling into tomorrow's session ($48.73) to try and get a feel for things toward the close. I'd have to say that oil traders don't seem to be showing their hand, as oil settled almost smack-dab between Friday's buy signal and today's high. Meanwhile, the S&P 500 Index (SPX.X) 1,176.94 -0.02% would have finished today's session almost smack-dab in the middle of for Friday's opening tick and yesterday morning's low. But I'm going to go into tomorrow trade with the thought that by the close, oil will have settled below today's $48.94 settlement, as January Heating Oil (ho05f) $1.4579 matched yesterday's high, but did NOT exceed it like we saw in the January Crude Oil (cl05f) futures contract. January Crude Oil futures (cl05f) Chart - 30-min intervals The O/H/L/T in the above chart is Wednesday's (tomorrow's) electronic session already underway. I'm still keeping my "yellow" zone of resistance on the January contract, which ties to the point and figure chart. If that observation of "heating oil" being a leading indicator for Crude Oil (see this weekend's Ask the Analyst) column is the telling DIVERGENCE traders are keying off of, then I'll have a bearish bias for oil below WEEKLY R1 at this point, but will have to respect that rising 50-pd SMA and DAILY Pivot as the near-term support on the above chart. See how the 50-pd SMA seemed to be moving average resistance since late October until that "pop" higher from Friday? Resistance broken can become support. Market Snapshot / Internals - 11/23/04 Close Oil jumped higher at around 11:00 AM EST and I still think traders can see the impact that type of "pop" higher in oil has on things. The rather robust expansion of new highs at the NYSE is most likely attributed to "energy stocks" listed on the big board. Then as oil retreats toward its daily settlement, look at internals building to their best levels of the session on the advance decline lines. U.S. Market Watch - 11/23/04 Close Look at the Market Volatility Index (VIX.X) 12.67 -2.31%! Early this morning, the VIX.X plunged to a new all-time low of 12.57. At today's close, most active SPX options were the Dec. 1,175 puts (SPT-XO) with volume of 8,101 and OI of 54,588. This contract finished at $11.80 with average OHLC of $12.85. The Dec. 1,200 calls (SZP-LT) were the second-most active at 6,530 contracts with OI of 56,318. This contract finished at $5.40 with average OHLC of $5.05. With the VIX.X falling, I have to think the bulk of trade was put seller and call buyer. I should note that its is NOT the volume in the above mentioned put/calls that has my interest. Its the VIX.X at an all-time low that has me trying to figure out just what might be taking place, where as the VIX.X falls and the 1,175 puts are most active, why would anyone be willing to sell those puts with volatility and premiums so low? The pivot matrix might provide the answer. Pivot Matrix - If a trader is selling 1,175 for an average price of $12.85, what that trader has to be thinking is that the SPX will not close below 1,175 - 12.85 = 1,162.15. This 1,162.15 calculation would be pretty darned close to this WEEK's S1. Is the MARKET, or a TRADER so confident in a lower oil price reaction that they'd be selling Dec. 1,175 puts against that level? Then buying the out- the-money 1,200 calls in excess of WEEKLY R2? They might be. See today's low in the SPX comes right at/near the MONTHLY R2. Also note tomorrow's SPX DAILY S1 and MONTHLY R2 correlation. Let's consider that some important support with weekly energy inventories due out tomorrow morning at 10:30 AM EST. Here's a 30-minute interval chart of the SPX with our WEEKLY and MONTHLY Pivot retracement overlaid. S&P 500 Index (SPX.X) Chart - Daily Intervals As I look at the above SPX chart on 30-minute interval, something additional hits me. See that little "double-top" I point to at SPX 1,080? That's this morning's opening tick highs and this afternoon's highs. That looks almost IDENTICAL to the little double-top in Heating Oil futures from yesterday's high and today's high. My thinking here is that EQUITY bulls are simply waiting for the reaction to tomorrow's data, but buyers seem more eager than sellers. I also point down to the WEEKLY S2, where earlier this month, we can see how the SPX danced along this level before advancing to the recent highs of 1,188. While it is my assumption that today's action in the Dec. 1,175 puts was the opening up of "naked puts" and selling of 1,175 for approximately $12.85 throughout the session, I will want to check this first thing tomorrow morning against newly tabulated open interest. It could be an "old bear" selling those puts and closing out after seeing 1,188. Jeff Bailey **************** MARKET SENTIMENT **************** Holding Up - J. Brown Overall investors can feel pretty cheerful. The markets are holding up better than expected. I was looking for a dip this week to give us a good set up into the traditional Christmas rally. Unfortunately, it seems that there are so many investors looking to buy the dip that any pull back is going to have to fight to become more than a blip on the way up. At least that's what the bull inside of me wants to say. The bear inside of me continues to growl and point at all the stocks and indices that remain overbought, extended and due for a real consolidation all while the volatility indices trade near multi-year lows. There was a lot of talk today about the traditional Thanksgiving trade. What is the Thanksgiving trade? Historically the markets tend to be bullish the day before and the (half) day after the Thanksgiving holiday at least they were. This pattern was very consistent for years and years. The problem now is that it has become over publicized and the pattern has broken down over the past several years into more of a 50/50 toss up. Given how over- extended stocks are I'd still give it a 50/50 toss up but if I was forced to bet I might bet on the bulls. It's important to note that we'll start to see holiday trading volume the rest of this week as most of Wall Street's professionals head out early for Thanksgiving here in the states. Normally light trading volumes can exaggerate moves, especially in low volume stocks. Tomorrow brings several economic reports like the weekly initial jobless claims, the Durable goods orders for October, the revised Michigan sentiment number for November, the new home sales figures and the help wanted index. None are really expected to have an impact on trading. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 9585 Current : 10492 Moving Averages: (Simple) 10-dma: 10499 50-dma: 10168 200-dma: 10244 S&P 500 ($SPX) 52-week High: 1188 52-week Low : 1031 Current : 1176 Moving Averages: (Simple) 10-dma: 1176 50-dma: 1134 200-dma: 1121 Nasdaq-100 ($NDX) 52-week High: 1581 52-week Low : 1301 Current : 1562 Moving Averages: (Simple) 10-dma: 1556 50-dma: 1471 200-dma: 1440 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 12.67 -0.30 CBOE Mkt Volatility old VIX (VXO) = 13.08 -0.50 Nasdaq Volatility Index (VXN) = 18.43 -0.34 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.79 856,931 678,770 Equity Only 0.66 731,115 484,224 OEX 1.08 30,649 33,156 QQQ 1.66 44,470 73,937 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.0 + 0.5 Bear Correction NASDAQ-100 75.0 + 0 Bull Confirmed Dow Indust. 66.6 + 3.3 Bull Confirmed S&P 500 73.0 + 0.2 Bull Confirmed S&P 100 72.0 + 2 Bull Confirmed Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 1.03 10-dma: 1.07 21-dma: 0.96 55-dma: 1.12 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 1708 1673 Decliners 1110 1319 New Highs 233 136 New Lows 11 19 Up Volume 970M 1144M Down Vol. 778M 876M Total Vol. 1782M 2048M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 11/16/04 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 For the first time in weeks the commercials are making a move. They upped their short positions days before the recent decline. Meanwhile small traders remain marginally net bullish. Commercials Long Short Net % Of OI 10/26/04 441,263 445,992 ( 4,729) (0.4%) 11/02/04 446,192 441,676 ( 4,516) (0.4%) 11/09/04 447,779 449,171 ( 1,392) (0.1%) 11/16/04 452,149 468,048 (15,899) (1.7%) 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 10/26/04 138,201 121,275 16,926 6.5% 11/02/04 136,290 132,040 4,250 1.5% 11/09/04 148,415 136,325 12,090 4.2% 11/16/04 166,862 156,751 10,111 3.1% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 Commercials traders also piled on the shorts in the e-minis to produce the most bearish reading in weeks. Small traders also put more money to work but remained strongly net bullish. Commercials Long Short Net % Of OI 10/26/04 276,128 509,552 (233,424) (29.7%) 11/02/04 307,053 580,081 (273,028) (30.7%) 11/09/04 337,164 672,903 (335,739) (33.2%) 11/16/04 371,282 796,279 (424,997) (36.4%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 10/26/04 345,908 64,061 281,847 68.7% 11/02/04 395,029 63,746 331,283 72.2% 11/09/04 392,253 58,999 333,254 73.8% 11/16/04 445,737 70,169 375,568 72.8% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercials added to both their longs and their shorts but saw no change in their bullish bias for the NDX. Small traders pared back some of their shorts but remained strong net bearish. Commercials Long Short Net % of OI 10/26/04 53,233 31,323 21,910 26.2% 11/02/04 53,002 31,231 21,771 25.0% 11/09/04 54,509 33,016 21,493 24.5% 11/16/04 55,737 33,683 22,054 24.6% 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 10/26/04 10,521 25,388 (14,867) (42.8%) 11/02/04 8,886 36,621 (27,735) (61.3%) 11/09/04 10,213 38,251 (28,038) (57.8%) 11/16/04 10,533 37,660 (27,127) (56.2%) Most bearish reading of the year: (28,038) - 11/09/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Given the latest data as of 11/16/04 it looks like commercials were beginning to bet on a pull back. There was a reduction in longs and an increase in shorts to create the first bearish reading in weeks. Small traders also increased their bearish bias. Commercials Long Short Net % of OI 10/26/04 25,707 24,855 852 1.6% 11/02/04 25,319 24,261 1,058 2.0% 11/09/04 22,863 22,463 400 0.8% 11/16/04 22,004 23,744 (1,740) (3.8%) 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 10/26/04 8,405 6,336 2,069 14.3% 11/02/04 7,952 6,306 1,261 8.8% 11/09/04 6,165 6,483 ( 318) ( 2.5%) 11/16/04 5,937 6,533 ( 596) ( 4.7%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ************************Advertisement************************* Insiders are Buying these 6 Rocket Stocks. In the last few weeks, we have pinpointed insider buying on six stocks that have the potential to deliver stratospheric gains. Click here for our SPECIAL REPORT on these 6 stocks insiders are buying and why you should too. http://www.insidermoves.com/default.asp?aid=618 ************************************************************** ****************** 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 Tuesday 11-23-2004 Copyright 2004, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: None Dropped Puts: None Call Play Updates: COP, DHR, EBAY, EOG, FDX, FLR, IBM, MUR, OSK, PTR, QCOM, SLB, SUN New Calls Plays: None Put Play Updates: FRX New Put Plays: None **************** PICKS WE DROPPED **************** When we drop a pick it doesn't mean we are recommending a sell on that play. Many dropped picks go on to be very profitable. We drop a pick because something happened to change its profile. News, price, direction, etc. We drop it because we don't want anyone else starting a new play at that time. We have hundreds of new readers with each issue who are unfamiliar with the previous history for that pick and we want them to look at any current pick as a valid play. CALLS: ***** None PUTS: ***** None ************************Advertisement************************* Get the most from your online options broker * fully-integrated trading tools for options or stock * Easy screens for spreads, collars, or covered calls * Free streaming quotes and Dow Jones news * Rated "Best" by Barron's, SmartMoney and Forbes Go to http://www.optionsxpress.com/marketing.asp?source=oinvest31 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ************************************************************** ******************** PLAY UPDATES - CALLS ******************** ConocoPhillips - COP - close: 89.70 change: +0.83 stop: 84.99*new* Ding! That was the sound of COP hitting round-number, psychological resistance at the $90.00 mark. The oil sector was relatively strong as crude oil prices traded above $50.00 a barrel for the first time in three weeks. Crude couldn't hold all of its gains but the pull back didn't affect COP. Shares of COP look poised to breakout over the $90 level soon. Should shares dip unexpectedly look for a bounce from the $88 level. We're raising our stop loss to $84.99. Short-term traders may consider taking some profits now. COP is up more than four points from our entry price. Picked on November 03 at $85.50 Change since picked: + 4.20 Earnings Date 10/27/04 (confirmed) Average Daily Volume = 3.0 million Chart = --- Danaher - DHR - close: 58.06 change: +0.12 stop: 55.95 We're impressed with DHR's relative strength. The stock is very overbought but continues to drift higher with a series of higher lows. Yes, that is a new sell signal on the MACD so we're not suggesting new bullish positions. Short-term traders may want to consider taking some money off the table here. Conservative traders may want to just tighten their stops instead. Our target remains the $60.00 region. Picked on October 27 at $54.99 Change since picked: + 3.05 Earnings Date 10/21/04 (confirmed) Average Daily Volume = 1.3 million Chart = --- eBay Inc. - EBAY - close: 109.53 chg: +0.05 stop: 102.49 Investors traditionally turn their attention to retailers as "Black Friday" approaches, which is the day after Thanksgiving. This is historically the opening bell for the holiday shopping season. Yet traders have also learned that online giants like AMZN and EBAY also do more than their fair share of holiday sales. Maybe that's why Monday's dip to $106 was bought so quickly. We remain very bullish on EBAY and while we'd like to see another dip as a new entry point it may not appear. Traders may be "forced" to buy the breakout over $111.00. Picked on November 80 at $103.69 Change since picked: + 5.84 Earnings Date 10/20/04 (confirmed) Average Daily Volume = 10.4 million Chart = --- EOG Resources - EOG - close: 74.05 change: +0.53 stop: 67.99 Exit alert! We notified our readers in the MarketMonitor this morning that it may be time to do some profit taking in EOG. Shares traded to $74.72, which is pretty close to our short-term target at $75.00. The stock is up more than 5 1/2 points from our entry point and the option values have soared. It's still not too late to take some money off the table. Yet we remain bullish and expect EOG to trade toward $80 by year-end. Right now we'd look for a dip if you were looking for new entries. A pull back to $72 may be a good spot to watch for a bounce. Picked on November 14 at $ 68.37 Change since picked: + 5.68 Earnings Date 10/26/04 (confirmed) Average Daily Volume = 1.1 million Chart = --- Fedex Corp - FDX - close: 95.43 change: +0.15 stop: 89.99 Wow! We remain impressed by the relative strength in FDX and the Dow Transports. Both have been consolidating the past several days and both look poised to breakout very soon to new highs. Readers can watch FDX for a move over $96 as a new entry point. Just keep in mind that our target is the $99-100 region. In the news FDX announced on Monday that its Board had declared a quarterly cash dividend of 7 cents per share payable on January 3rd, 2005 to shareholders on record as of December 13th. We are still suggesting short-term traders consider some profit taking. Picked on October 21 at $89.45 Change since picked: + 5.88 Earnings Date 09/22/04 (confirmed) Average Daily Volume = 1.5 million Chart = --- Fluor Corp - FLR - close: 51.85 change: +3.34 stop: 45.99*new* Double wow! We listed FLR last night with the breakout over resistance at $48.00 on strong volume. We thought shares look poised to trade higher but we didn't expect a 6.88 percent rally today. Volume was over six times the average on today's gain. FLR traded to an intraday high of $53.32. During that time we suggested to our MarketMonitor readers that anyone who entered this morning might want to consider exiting for a quick one-day pop. This high-volume rally is very bullish as is the close over the $50.00 level. Watch for a pull back toward $50.00 as a new entry point. We are raising our stop loss to $45.99. Our target remains the $55 to $60 range. Picked on November 22 at $48.51 Change since picked: + 3.34 Earnings Date 10/27/04 (confirmed) Average Daily Volume = 521 thousand Chart = --- Intl Business Mach. - IBM - close: 95.28 chg: +0.17 stop: 89.99 Hmm... last week's topping action never got very far. Looks like traders are buying the dip to $94. Yes, the stock remains overbought, extended and due for a larger pull back but it's not showing up. We still suggest short-term traders consider doing some profit taking here even though the short-term action looks poised to push IBM higher tomorrow. In the news IBM announced plans to buy Liberty Insurance Services Corp. The move puts IBM into the life insurance processing and administration services. Picked on October 27 at $90.00 Change since picked: + 5.28 Earnings Date 10/18/04 (confirmed) Average Daily Volume = 4.7 million Chart = --- Murphy Oil - MUR - close: 84.20 change: +0.60 stop: 78.99*new* The rally continues for MUR as the oil sector pushes to new all- time highs. Today's ramp up in crude oil prices certainly didn't hurt the sector. We were triggered on Monday as MUR broke out over resistance at the $82.00 level and hit our entry point at $82.25. We're very encouraged by the rising volume on the current rally and technicals remain bullish as MUR builds on its recent MACD buy signal. The next challenge is round-number resistance at $85 but we don't expect it to hold MUR back. If shares dip consider a bounce above $82.00 as a new entry point. We're raising our stop loss to $78.99. Picked on November 22 at $ 82.25 Change since picked: + 1.95 Earnings Date 10/26/04 (confirmed) Average Daily Volume = 500 thousand Chart = --- Oshkosh Truck - OSK - close: 63.15 change: +1.09 stop: 58.00*new* Hmm.. the pull back in OSK is being short-circuited by dip buying. Previously the price action and technical oscillators all pointed to a pull back. We've been suggesting readers watch for a dip to $60.00 as a new entry point. We may have to consider the possibility that any consolidation will postponed until after the holidays. Currently OSK remains stuck in the $62-64 trading range. If shares breakout over $64 we may have to use it as a momentum entry point. Currently, we're still hoping for a pull back! In the meantime we're raising our stop loss to $58.00. Picked on November 07 at $ 62.16 Change since picked: + 0.99 Earnings Date 10/28/04 (confirmed) Average Daily Volume = 205 thousand Chart = --- PetroChina Co - PTR - close: 56.60 change: +0.80 stop: 52.49 Strength in the oil sector helped push PTR to new one-year highs as the stock added 1.4 percent on heavy volume. We remain bullish and suggest readers watch for a dip to $56.00 as a new entry point. No change in stop or target. Picked on November 17 at $55.18 Change since picked: + 1.42 Earnings Date 00/00/04 (confirmed) Average Daily Volume = 288 thousand Chart = --- Qualcomm - QCOM - close: 40.73 change: -0.26 stop: 37.50 Monday's rebound back over the $40.00 level and its cloud of moving averages was very encouraging. Today's minor dip may be nothing more than another entry point. The MACD remains in its buy signal. No change in our stop loss or our strategy. Picked on November 15 at $ 40.51 Change since picked: + 0.22 Earnings Date 11/03/04 (confirmed) Average Daily Volume = 13.9 million Chart = --- Schlumberger - SLB - close: 66.10 change: -0.20 stop: 61.00 Hmm... today's action in SLB was a little odd. The OIX oil index and OSX oil services index traded higher as crude broke above the $50.00 a barrel mark for the first time in three weeks. Oil services out performed with a 1.16 percent gain. Yet SLB, an oil service stock, turned negative with an afternoon sell-off. We remain bullish, especially through the end of this year, but we suspect SLB could slip back toward the $65 region. Watch the dip for a new entry point. Picked on November 12 at $ 65.05 Change since picked: + 1.05 Earnings Date 10/22/04 (confirmed) Average Daily Volume = 3.9 million Chart = --- Sunoco Inc - SUN - close: 80.78 change: +0.61 stop: 74.89*new* Up, up and away! Oil refiner SUN is breaking out to new all-time highs. Yesterday's move over round-number, psychological resistance at the $80.00 level was very bullish. The stock appears to be a leader in the sector. Should shares dip watch for a bounce above $78.00 and use it as an entry point. We are raising our stop loss to the simple 40-dma at $74.89. Picked on November 18 at $78.25 Change since picked: + 2.53 Earnings Date 10/21/04 (confirmed) Average Daily Volume = 1.2 million Chart = ************** NEW CALL PLAYS ************** None ************************Advertisement************************* SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO Now you can follow the investment master's actual moves. To get a FREE report that details Warren Buffett's strategy and reveals his most recently disclosed, ACTUAL stock picks, Click HERE! http://www.bigmoneywatch.com/default.asp?aid=626 ************************************************************** ******************* PLAY UPDATES - PUTS ******************* Forest Labs - FRX - close: 37.70 change: +0.90 stop: 42.01 If you missed our update in Monday's newsletter we'll repeat what happened. Bank of America downgraded their coverage on FRX to a "sell" rating and slashed their price target to $34.00 before the opening bell on Monday. FRX gapped down to $39.07, immediately triggering us and shares slipped to an intraday low of $36.10 before closing at 36.80 on extremely heavy volume. This was a very bearish technical breakdown. Yet we suspected FRX could produce an oversold bounce today, which did occur. Actually it would not surprise us to see FRX fill the gap toward the $40.00 level, which should now act as resistance. Readers watching for an entry point can look for the failed rally under $40.00. We lowered our stop loss to $42.01 on yesterday's breakdown. Picked on November 22 at $39.07 Change since picked: - 1.37 Earnings Date 10/18/04 (confirmed) Average Daily Volume = 2.8 million Chart = ************* NEW PUT PLAYS ************* None ************************Advertisement************************* Get your FREE weekly charts of the NASDAQ! Hot Stix’ stock market report reveals simple, powerful strategies for profiting from the QQQ - whether down or up! http://www.hotstix.com/public/weekly.asp?aid=755 ************************************************************** ********** 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 Tuesday 11-23-2004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Drugs to Software and more! Traders Corner: Elliott Wave principles basics; part 3 Spreads & Straddles: A Mixed Session... Premium Selling Plays: Naked Puts & Calls ********** WATCH LIST ********** ___________________________________________________________________ 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. ___________________________________________________________________ Taro Pharmaceuticals - TARO - close: 28.51 change: +0.63 WHAT TO WATCH: TARO has a certain appeal if you're worried about stocks trading at nosebleed levels. Sure the drug sector hasn't been so strong lately but TARO has produced a consistent rebound once it began a few weeks ago. Currently the $30.00 level is the key resistance level to watch. A breakout over $30.00 would be a bullish entry point for a run toward $35 and its exponential 200- dma or the $40.00 level and its simple 200-dma. Currently the P&F chart shows a triple-top breakout buy signal with a $46 target. Chart= --- NCR Corp - NCR - close: 59.15 change: +1.78 WHAT TO WATCH: After three weeks of consolidating in a very narrow range between $56 and $58 shares of NCR is breaking out on very strong volume. This looks very bullish and traders may want to consider chasing today's three percent gain. These are new all-time highs and so there's nothing to slow NCR down. The bullish P&F chart points to an $83 target. We would use a short- term target at $65. Chart= --- Texas Industries - TXI - close: 57.96 change: +1.06 WHAT TO WATCH: TXI broke out over resistance at the $55.00 level a couple of weeks ago. Ever since it has consolidated sideways. Even though the stock is overbought and due for a pull back shares look poised to breakout again. Watch for the move over $58.00. These are new six and a half year highs for TXI and the nearest resistance appears to be the $67 region. Use a relatively tight stop. Chart= --- Symantec - SYMC - close: 62.75 change: +0.70 WHAT TO WATCH: We have had SYMC on the watch list or radar screen for several days now. The bullish consolidation under resistance at $62.00 has finally broken out. Today's gain and close at $62.75 looks like a bullish entry point. The challenge is that SYMC is due to split 2-for-1 on December 1st, which is next Wednesday. Right now we expect the stock to run higher but some stocks can have a post-split depression as momentum traders rotate out of the stock. Others don't see any depression at all but keep right on climbing. You have to decide if you're willing to hold over the stock split. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- EXP $75.65 +1.75 - The two-day rally has pushed EXP to another new all-time high. EGN $57.06 +0.58 - This natural gas stock is breaking out to new all-time highs. It looks like an entry point after the two-week consolidation. PRX $41.18 +2.67 - PRX is breaking out over resistance at the $40.00 mark but it still has price resistance near $42.50 bolstered by its 200-dma's. ************************Advertisement************************* Get the most from your online options broker * fully-integrated trading tools for options or stock * Easy screens for spreads, collars, or covered calls * Free streaming quotes and Dow Jones news * Rated "Best" by Barron's, SmartMoney and Forbes Go to http://www.optionsxpress.com/marketing.asp?source=oinvest31 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ************************************************************** ************** TRADERS CORNER ************** Elliott Wave principles basics; part 3 By Leigh Stevens I recently moved a pile of my books on technical analysis into a more remote bookstand away from my home office, as I was rarely looking up anything in any of these books. However, I kept my 2 Elliott wave books handy – one by Robert Precter and Robert Frost called "Elliott Wave Principle" and the other and most useful one called the "The Major Works of R.N. Elliott". Oh, there are a couple copies of my book (Essential Technical Analysis) that I left close by in case I want to refer someone to some topic or other – not because I think I am the last word on any subject. But Elliott has some VERY useful things to say about various chart patterns that you see over and over. So, if I could only take a couple of market analysis books with me to a desert island and I was still remotely studying the markets, well, Elliott would be one of them. He's long gone, but there is not that much new under the sun in terms of patterns as similar market patterns and cycles keep happening over and over. Anyway, I started these musings on wave patterns last month. The first article is at – http://www.OptionInvestor.com/traderscorner/tc_102604_1.asp I then continued with some Subscriber questions and went a bit further with the wave concept in part 2 – http://www.OptionInvestor.com/traderscorner/tc_111804_1.asp ONCE MORE WITH FEELING – A bull market or a basic up trend often unfolds in 3 advancing impulse" waves or moves, with 2 intervening counter- trend corrections or downswings - these all together make up what Elliott referred to as the 5-wave structure to a bull market trend, whether lasting 2-3 days, several weeks, months or years. The END or conclusion of one of these component moves or waves is where we put a number or letter. A good example, and this one is of a long-term up trend, was seen in GE back during the period shown below - I made a blanket statement on my notation on the above chart, that the 3 wave is the most powerful and biggest advance. That is, the second "leg" up in a bull market trend. This is usually, but not always the case. However, it does happen this way a lot, for example, on this hourly move in the Dow – Opps, the beginning of the first advance is cut off slightly (wave 1) but didn't rise much further than shown on the left. A bull market move, designated by the 5-wave structure or pattern is often followed by a down-up-down correction or 3-part structure designated by the Letters A, B and C (or as a, b and c) and can be seen clearly in a past chart example below which also illustrates a couple of other ideas. 1. The second down leg in a bear trend or bear market usually carries farther than the first decline. And, 2. There is a tendency for the patterns to alternate in distance and "regularity"; i.e, the rule of alternation – The Wave "rule of alternation" suggests that the strength of a move or the distance carried will alternate; e.g., a stronger and longer price swing will follow a relatively lesser advance and vice versa. And, if the first correction is relatively shallow, the next one will tend to be deeper. Bear markets or declining trends subdivide into the 3-part "a-b- c" structure illustrated in the chart above. The S&P 100 (OEX) Index chart is of the hourly closes for about 6-weeks and is a pretty typical a-b-c/down-up-down decline. The foregoing is Elliott wave in a very small nutshell – studying wave patterns, at least when they form the more obvious structures of wave up waves and a 3-part decline or bear trend/bear market is useful for trading, in giving some hint of how the trend may continue to unfold. Having an idea that a second advance is the one to go into more heavily and to hang in for a bigger move and not to be as quick to jump out, is pretty useful guidance. Knowing that an overall decline takes the form typically of a down-up-down pattern and that the second decline or wave "c" is the move that is usually most prolonged and steep is also quite valuable. Another chart example is next. By the way, usually the rebound (b) in an a-b-c pattern does not commonly retrace all of the first decline (a) – FURTHER BREAKDOWN OF WAVE PATTERNS - There is a further subdivision of the larger wave structure and its value is in helping you figure out when a particular move may in a FINAL stage of completion. Applying a different kind of alternating rule, impulse waves or up moves in bull market trends (waves 1, 3, and 5) in the same direction of the trend or up in this case, break down into a smaller wave-5 structure. The counter-trend waves 2 and 4 which are counter to the trend or are down moves in this case, break down into a further a-b-c (down-up-down) pattern or structure. Conversely, an a-b-c bearish downtrend has 2 moves in the direction of the trend which is down ("a" & "c") and 1 counter- trend wave "b". The moves in the SAME direction as the down trend (a & c) break down into a "smaller" 1-5 structure, whereas the counter-trend upswing “b” breaks down into a smaller a-b-c pattern. Some chart examples help to visualize this – as well, its helpful to memorize this simple rule: Moves in the SAME direction as the overall trend (up OR down) break down into further or "smaller" 5-part patterns AND Moves AGAINST the trend (up OR down) break down into a smaller a-b- c structure. An advancing trend that has 3 impulse waves up (1,3,5) and 2 counter-trend downswings making a 5-wave structure, also breaks down into smaller 1 to 5 and a-b-c patterns per the example shown, a chart and time frame for GE (weekly) seen already only without the breakdown into its smaller wave components – As I said, moves in the SAME direction as the up trend above break down into smaller 5-wave patterns, whereas the counter- trend downswings 2 and 4 break down into smaller a-b-c patterns (down-up-down price swings). A declining or bear market trend or an a-b-c (down-up-down) breaks down further into smaller 5-wave component moves for the "a" and "c" moves that are in the direction of the down trend; the "b" wave rebound that is counter to the trend, is broken down further into an a-b-c correction, only in this case the direction of the price swings are UP-down-UP as shown by going back to the OEX hourly chart – Examples or how I have labeled where one wave begins and ends, are for demonstration purposes and in an attempt to provide the basic concepts of how a trend is viewed in terms of its (Elliott) wave structure. I find the wave concepts in patterns useful mostly where the wave structure appears pretty clear cut – the success of successfully identifying a "classic" wave structure in an unfolding trend is whether it provided early recognition of a trend that led to a profitable investment or trade. Write me if this is clear, write me if it's not clear and/or if you find some useful example in some trend or other that is past or going on currently. And meanwhile ... Good Trading Success! ******************* SPREADS & STRADDLES ******************* A Mixed Session... By Ray Cummins Stocks rebounded in late trading Tuesday, closing the day nearly unchanged amid relatively light trading activity. The Dow Jones Industrial Average ended up 3 points at 10,492 with McDonald's (NYSE:MCD) and American International Group (NYSE:AIG) among the best performing blue-chips. The NASDAQ Composite Index finished where it started at 2,084, despite a downgrade of Intel (NASDAQ:INTC) that weighed on semiconductor stocks. The S&P 500 index closed at 1,176, with losses in biotech, homebuilding, drug and materials shares offsetting gains in energy, utility, airline and managed healthcare issues. Advancers led decliners 3 to 2 on the New York Stock Exchange and 6 to 5 on the NASDAQ. Big Board volume was 1.2 billion shares and technology traders swapped 1.9 billion shares. Bond prices drifted in a small range throughout the session with the 10-year note finishing down 1/32, while its yield climbed to 4.18%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 11/21/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 VIP 121.49 122.35 DEC 105.0 110.0 0.70 109.30 0.70 Open WLP 113.90 120.00 DEC 100.0 105.0 0.50 104.50 0.50 Open CECO 35.00 35.01 DEC 25.0 30.0 0.60 29.40 0.60 Open PJC 48.95 44.80 DEC 40.0 45.0 0.60 44.40 0.40 Open? EYET 45.64 44.01 DEC 30.0 35.0 0.45 34.55 0.45 Open XMSR 36.13 35.01 DEC 30.0 32.5 0.25 32.25 0.25 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss Piper Jaffray Companies (NYSE:PJC) is a candidate for early-exit after Friday's sharp decline. CALL-CREDIT SPREADS Stock Pick Last Mon L/C S/C Credit CB G/L Status SEPR 45.44 46.17 DEC 55.0 50.0 1.00 51.00 1.00 Open TTWO 33.24 32.64 DEC 40.0 37.5 0.30 37.80 0.30 Open ERTS 46.97 49.15 DEC 55.0 50.0 0.65 50.65 0.65 Open? GM 39.97 38.90 DEC 45.0 42.5 0.30 42.80 0.30 Open BSX 34.70 34.02 DEC 40.0 37.5 0.30 37.80 0.30 Open MXIM 42.50 42.58 DEC 50.0 45.0 0.70 45.70 0.70 Open BIIB 58.31 55.34 DEC 70.0 65.0 0.50 65.50 0.50 Open INSP 49.17 44.00 DEC 65.0 60.0 0.40 60.40 0.40 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Electronic Arts (NASDAQ:ERTS) is now on the "watch" list. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status NTES 40.00 52.41 NOV 40.0 40.0 5.00 12.00 Closed NEW 55.15 60.75 NOV 55.0 55.0 4.70 9.10 Closed SBUX 54.51 55.21 NOV 55.0 55.0 2.50 2.25 Closed COCO 17.75 16.00 NOV 17.5 17.5 0.85 1.40 Closed BCSI 19.93 17.53 NOV 20.0 20.0 2.40 2.50 Closed Speculative positions in Corinthian Colleges (NASDAQ:COCO), New Century Finance (NYSE:NEW) and Netease.com (NASDAQ:NTES) provided favorable straddle opportunities during the month of November. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ DRIV - Digital River $38.31 *** Next Leg Up? *** Digital River (NASDAQ:DRIV) is a provider of electronic commerce outsourcing solutions. As an application service provider, the company enables its clients to access its proprietary electronic commerce system over the Internet. Their technology platform allows the company to provide a suite of electronic commerce services such as e-commerce development and hosting, transaction processing, fraud screening, digital delivery, integration to physical fulfillment and customer service. Digital River also offers analytical marketing and merchandising services to assist clients in increasing Web page view traffic to, and sales through, their Web commerce systems. DRIV - Digital River $38.31 PLAY (less conservative - bullish/credit spread): BUY PUT DEC-30.00 DQI-XF OI=987 ASK=$0.15 SELL PUT DEC-35.00 DQI-XG OI=641 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.55-$0.60 POTENTIAL PROFIT(max)=12% B/E=$34.45 __________________________________________________________________ NBR - Nabors Industries $52.72 *** Sector Rally! *** Nabors Industries (NYSE:NBR) is a land drilling contractor that conducts oil, gas and geothermal land drilling operations in the lower 48 United States, Alaska, Canada, South and Central America, the Middle East and Africa. It is also a land well servicing and workover contractor with operations in the U.S. and Canada. The company owns hundreds of land workover and well servicing rigs in the United States and Canada. Nabor's also provides offshore platform workover and drilling rigs and owns a number of platform, jack-up and three barge rigs in the Gulf of Mexico and various international markets. These rigs provide well, workover and drilling services. NBR - Nabors Industries $52.72 PLAY (speculative - bullish/credit spread): BUY PUT DEC-47.50 NBR-XW OI=660 ASK=$0.35 SELL PUT DEC-50.00 NBR-XJ OI=1917 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.40-$0.45 POTENTIAL PROFIT(max)=19% B/E=$49.60 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ LXK - Lexmark Intl. $84.82 *** In A Trading Range? *** Lexmark International (NYSE:LXK) is a developer, manufacturer and supplier of printing solutions, including laser and inkjet printers, multifunction products and associated supplies and services for offices and homes. The company also markets dot matrix printers for printing single and multi-part forms for business users and develops, manufactures and markets a broad line of other office imaging products. LXK - Lexmark Intl. $84.82 PLAY (conservative - bearish/credit spread): BUY CALL DEC-95.00 LXK-LS OI=235 ASK=$0.10 SELL CALL DEC-90.00 LXK-LR OI=946 BID=$0.50 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=9% B/E=$90.45 __________________________________________________________________ MBT - Mobile TeleSystems $135.99 *** Premium-Selling Only! *** Mobile TeleSystems (NYSE:MBT) is a provider of mobile cellular communications services in the Russian Federation and Ukraine, employing technology based primarily on Global System for Mobile Communications. In addition to standard voice services, the company offers its subscribers value-added services, including voice mail, short message service, general packet radio service, various other information and entertainment services (including multimedia messaging service), and data and fax transmission. It also offers its subscribers the ability to roam automatically throughout Europe and in much of the rest of the world. MBT - Mobile TeleSystems $135.99 PLAY (less conservative - bearish/credit spread): BUY CALL DEC-155.00 MBT-LK OI=280 ASK=$0.50 SELL CALL DEC-150.00 MBT-LJ OI=982 BID=$1.00 INITIAL NET-CREDIT TARGET=$0.55-$0.65 POTENTIAL PROFIT(max)=12% B/E=$150.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ STRADDLES AND STRANGLES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Based on analysis of the historical option pricing and technical background, these positions meet the fundamental criteria for favorable volatility-based plays. _________________________________________________________________ No straddles or strangles today... ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ***************************************** PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS ***************************************** All of these issues have robust option premiums and favorable technical indications. However, current news and events, as well as market sentiment, will have an effect on these stocks so review each position thoroughly and make your own decision about its outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 11/21/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 MYGN DEC 17.50 17.05 18.66 0.45 5.52% 2.64% VTIV DEC 17.50 17.05 16.70 (0.35) 0.00% 0.00% IFLO DEC 15.00 14.55 18.69 0.45 6.89% 3.09% SEAC DEC 17.50 16.95 17.55 0.55 7.02% 3.24% ADLR DEC 12.50 12.10 14.01 0.40 6.88% 3.31% UTHR DEC 25.00 24.05 35.11 0.95 9.03% 3.95% RIGL DEC 20.00 19.70 25.39 0.30 4.02% 1.52% NFLD DEC 15.00 14.45 15.75 0.55 8.24% 3.81% RMBS DEC 17.50 16.75 20.68 0.75 9.88% 4.48% AGIX DEC 20.00 19.60 31.37 0.40 4.83% 2.04% ATI DEC 20.00 19.35 20.56 0.65 7.37% 3.36% MRVL DEC 25.00 24.60 30.84 0.40 5.17% 1.63% ELN DEC 22.50 22.15 27.83 0.35 4.93% 1.58% TSRA DEC 25.00 24.35 37.00 0.65 7.97% 2.67% VTS DEC 20.00 19.65 22.68 0.35 4.84% 1.78% ERICY DEC 30.00 29.60 32.89 0.40 3.44% 1.35% RMBS DEC 17.50 16.95 20.68 0.55 10.12% 3.24% TSRA DEC 30.00 29.65 37.00 0.35 4.12% 1.18% NCRX DEC 25.00 24.25 28.05 0.75 8.18% 3.09% IFLO DEC 17.50 17.00 18.69 0.50 7.38% 2.94% NTGR DEC 15.00 14.60 15.62 0.40 6.54% 2.74% ENZ DEC 17.50 17.05 17.90 0.45 6.32% 2.64% CECO DEC 30.00 29.30 35.01 0.70 7.67% 2.39% CRA DEC 12.50 12.20 13.32 0.30 6.11% 2.46% Special Tuesday Note: Atherogenics (NASDAQ:AGOX) became a potential "early-exit" candidate Monday after an analyst downgraded the stock based on the effectiveness of the company's experimental drug to treat hardening of the arteries. NAKED CALLS Stock Strike Strike Break Current Gain Max Simple Symbol Month Price Even Price (Loss) Yield Yield MNST DEC 30.00 30.60 27.36 0.60 4.91% 1.96% FOSL DEC 30.00 30.50 27.20 0.50 4.16% 1.64% SLAB DEC 35.00 35.55 30.82 0.55 4.84% 1.55% APPX DEC 35.00 35.60 29.02 0.60 7.73% 1.69% DIGE DEC 25.00 25.30 22.38 0.30 6.05% 1.19% MDCO DEC 30.00 30.35 24.85 0.35 5.01% 1.15% BOBJ DEC 25.00 25.40 22.92 0.40 5.96% 1.57% ENZN DEC 20.00 20.55 14.76 0.55 14.84% 2.68% TACT DEC 25.00 25.40 22.83 0.40 8.50% 1.57% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 TINY 14.30 DEC 12.50 QJT-XV 0.35 684 12.15 25 3.5% 10.0% AMED 33.58 DEC 30.00 CQW-XF 0.65 735 29.35 25 2.7% 7.5% ADLR 13.86 DEC 12.50 UAH-XV 0.25 154 12.25 25 2.5% 6.9% NANO 16.55 DEC 15.00 QNK-XC 0.30 42 14.70 25 2.5% 6.8% DHB 20.43 DEC 17.50 DHB-XW 0.30 670 17.20 25 2.1% 6.6% IDCC 20.41 DEC 17.50 DAQ-XW 0.30 1296 17.20 25 2.1% 6.6% ISRG 34.17 DEC 30.00 AXQ-XF 0.50 761 29.50 25 2.1% 6.1% HNT 27.23 DEC 25.00 HNT-XE 0.40 2619 24.60 25 2.0% 5.4% Abbreviations: 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. _________________________________________________________________ TINY - Harris & Harris Group $14.30 *** Entry Point? *** Harris & Harris Group (NYSE:TINY) is a venture capital investment company that is operating as a business development company. The company's investment objective is to achieve long-term capital appreciation, rather than current income, from its investments. The company has invested a substantial portion of its assets in privately held start-up companies and in the development of new technologies in various industry segments. These privately held businesses generally tend to be thinly capitalized, unproven, small companies based on risky technologies that lack management depth and have not attained profitability nor have any history of operations. TINY - Harris & Harris Group $14.30 DEC 12.50 QJT-XV LB=0.35 OI=684 CB=12.15 DE=25 TY=3.5% MY=10.0% _________________________________________________________________ AMED - Amedisys $33.58 *** Consolidation Complete? *** Amedisys (NASDAQ:AMED) is a multi-state provider of home health and nursing services. The company operates home care nursing offices and has corporate offices in the southern and southeastern United States. The firm's wholly owned subsidiaries are Amedisys Arkansas, Cypress Health Services and Amedisys LA Acquisitions. The services provided in home healthcare include four primary categories: home health nursing services, infusion therapy, respiratory therapy and home medical equipment. AMED - Amedisys $33.58 DEC 30.00 CQW-XF LB=0.65 OI=735 CB=29.35 DE=25 TY=2.7% MY=7.5% _________________________________________________________________ ADLR - Adolor $13.86 *** A Pain-Free Stock! *** Adolor (NASDAQ:ADLR) is a biopharmaceutical firm specializing in the discovery, development and commercialization of prescription pain management products. Entereg (alvimopan), its lead product candidate, is being developed to manage postoperative ileus, a gastrointestinal side effect. Entereg is being evaluated as an oral dosage form for patients undergoing certain types of major abdominal surgery. It is also being developed to manage opioid bowel dysfunction, which can negatively impact the quality of life of patients using opioid analgesic products. Entereg is also being evaluated as a treatment for chronic constipation. The company's next product candidate is a sterile lidocaine patch in clinical development for treating postoperative incisional pain. ADLR - Adolor $13.86 DEC 12.50 UAH-XV LB=0.25 OI=154 CB=12.25 DE=25 TY=2.5% MY=6.9% _________________________________________________________________ NANO - Nanometrics $16.55 *** "Nano" Craze Resurfacing? *** Nanometrics (NASDAQ:NANO) designs, manufactures, markets and supports the thin film metrology systems for the semiconductor, flat panel display and magnetic recording head industries. The company's measurement systems use microscope-based, non-contact spectroscopic reflectometry. Some of the firm's systems provide complementary spectroscopic ellipsometry to measure the thickness and optical characteristics of films on a variety of substrates. In addition, the firm has both integrated and standalone optical critical metrology systems to measure critical dimensions of the patterns on semiconductor wafers. The company also manufactures a line of optical overlay registration systems that are used to determine the alignment accuracy of successive layers of chip patterns on wafers in the photolithography process. NANO - Nanometrics $16.55 DEC 15.00 QNK-XC LB=0.30 OI=42 CB=14.70 DE=25 TY=2.5% MY=6.8% _________________________________________________________________ DHB - DHB Industries $20.43 *** New 2004 High! *** DHB Industries (NYSE:DHB) is a holding company with two major divisions: DHB Armor Group and DHB Sports Group. The Armor Group includes Point Blank Body Armor and Protective Apparel Corporation of America and they manufacture various types of body armor. The Sports Group, which consists of NDL Products, manufactures and distributes protective athletic apparel and equipment, including elbow, breast, hip, groin, knee, shin and ankle supports and braces, as well as a line of therapy products. DHB - DHB Industries $20.43 DEC 17.50 DHB-XW LB=0.30 OI=670 CB=17.20 DE=25 TY=2.1% MY=6.6% _________________________________________________________________ IDCC - InterDigital Comm. $20.41 *** On The Rebound? *** InterDigital Communications (NASDAQ:IDCC) designs, develops and places into operation a range of advanced wireless technologies, systems and products. IDCC, through its involvement in the standards bodies and incubation efforts, monitors emerging technologies being developed to deliver voice and data in a wireless environment. It focuses on its technology and product development on the air interface technology, referred as wideband code division multiple access, is comprised of two duplexing methods, frequency division duplex and time division duplexing. IDCC - InterDigital Comm. $20.41 DEC 17.50 DAQ-XW LB=0.30 OI=1296 CB=17.20 DE=25 TY=2.1% MY=6.6% _________________________________________________________________ ISRG - Intuitive Surgical $34.17 *** Steady As A Surgeon! *** Intuitive Surgical (NASDAQ:ISRG) designs, manufactures and sells the da Vinci Surgical System. This system consists of a console, a patient-side cart, a vision system and proprietary "wristed" instruments. The da Vinci Surgical System seamlessly translates the surgeon's natural hand movements on instrument controls at a console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions or ports. In addition, the company designs, manufactures and markets a variety of smart disposable EndoWrist instruments. ISRG - Intuitive Surgical $34.17 DEC 30.00 AXQ-XF LB=0.50 OI=761 CB=29.50 DE=25 TY=2.1% MY=6.1% _________________________________________________________________ HNT - Health Net $27.23 *** Bottom-Fishing! *** Health Net (NYSE:HNT) is an integrated managed care organization that delivers managed healthcare services. The health plans and government contracts subsidiaries offer health benefits through its health maintenance organizations, insured preferred provider organizations and point-of-service plans through a variety of programs. In addition, it owns health and life insurance firms licensed to sell exclusive provider organization, PPO, POS and indemnity products, as well as auxiliary non-health products, such as life and accidental death and disability insurance. HNT - Health Net $27.23 DEC 25.00 HNT-XE LB=0.40 OI=2619 CB=24.60 DE=25 TY=2.0% MY=5.4% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ AGIX - AtheroGenics $24.09 *** Another Trend Reversal! *** AtheroGenics (NASDAQ:AGIX) is a research-based pharmaceutical company. The company is focused on the discovery, development and commercialization of novel drugs for the treatment of chronic inflammatory diseases, including atherosclerosis, rheumatoid arthritis, organ transplant rejection and asthma. AtheroGenics has developed a proprietary vascular protectant technology platform to discover drugs to treat these types of diseases. Based on its v-protectant technology platform, the company has advanced three major drug candidates into clinical development and is pursuing a number of other programs. AGIX - AtheroGenics $24.09 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL DEC 30 AUB-LF 13200 0.35 30.35 8.2% 1.2% _________________________________________________________________ CNCT - Connetics $26.35 *** A Big "Down" Day! *** Connetics Corporation (NASDAQ:CNCT) is a specialty pharmaceutical company focusing exclusively on the treatment of dermatological conditions. It markets two pharmaceutical products: OLUX Foam and Luxíq Foam. On February 9, 2004, the company announced that it had entered into a binding purchase agreement with Roche to acquire exclusive U.S. rights to Soriatane-brand acitretin, an approved oral medicine for the treatment of severe psoriasis in adults. Soriatane, a once-a-day oral retinoid approved in the United States, is used for the treatment of severe psoriasis in adults. CNCT - Connetics $26.35 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL DEC 30 UXU-LF 445 0.25 30.25 4.3% 0.8% _________________________________________________________________ JUPM - Jupitermedia $16.42 *** Profit-Taking Underway! *** Jupitermedia (NASDAQ:JUPM) is a global provider of original online information, images, research and events for information technology, business and creative professionals. The company operates four major interrelated and complementary businesses. JupiterWeb is its online media business. JupiterImages is its online images business. JupiterResearch is the firm's market research and consulting business. JupiterEvents is an offline conference and trade show business. JUPM - Jupitermedia $16.42 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL DEC 20 EUL-LD 248 0.20 20.20 7.0% 1.0% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* Get your FREE weekly charts of the NASDAQ! Hot Stix’ stock market report reveals simple, powerful strategies for profiting from the QQQ - whether down or up! http://www.hotstix.com/public/weekly.asp?aid=755 ************************************************************** ********** 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
Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.
To ensure you continue to receive email from Option Investor please add "email@example.com"
Option Investor Inc