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Daily Newsletter, Wednesday, 12/01/2004

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The Option Investor Newsletter                Wednesday 12-01-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Chipping Away  
Futures Wrap: See Note
Index Trader Wrap: Pressure cooker goes "pop" 


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
      12-01-2004           High     Low     Volume   Adv/Dcl
DJIA    10590.22 +162.20 10590.22 10425.76 2.19 bln 2012/ 830
NASDAQ   2138.23 + 41.42  2138.32  2104.58 2.20 bln 2075/ 989
S&P 100   566.21 +  8.74   566.21   557.47   Totals 4087/1819
S&P 500  1191.37 + 17.55  1191.37  1173.78
SOX       440.09 + 16.22   440.24   426.36
RUS 2000  643.68 +  9.91   644.21   633.77
DJ TRANS 3736.79 + 78.08  3738.08  3656.78
VIX        12.97 -  0.27    13.12    12.77
VXO (VIX-O)13.46 -  0.08    13.85    13.26
VXN        18.24 -  0.60    18.89    17.83
Total Volume 4,393M
Total UpVol  3,533M
Total DnVol    817M
Total Adv  4087
Total Dcl  1819
52wk Highs  619 
52wk Lows    20
TRIN       0.61
PUT/CALL   0.73
******************************************************************

Chipping Away
Linda Piazza

Ignoring dire headlines such as "British Pound Advances to
Twelve-Year High against the Dollar" and downgrades in several
semi-related stocks, indices chipped through overhead resistance
in Wednesday's trading.  Futures rose pre-market, chiseling into
that resistance.  Indices built on those chiseled steps, climbing
from the open into the close, through several economic releases. 
They climbed on strong volume, with the SOX, NWX, DDX, XBD, HMO,
TRAN, DJUSHB, GSO and GHA among the sector-related indices that
posted gains in excess of two percent.  Some posted gains much in
excess of that figure.    

Before the open, an attempt was made to whittle enthusisam for
semi-related stocks.  That effort couldn't dent enthusiasm ahead
of Intel's mid-quarter update Thursday, especially in the face of
good news from two of the sector's stocks.  The SOX gapped above
its 200-ema and traveled straight up to test its 200-sma, gaining
3.82 percent.  

Annotated Daily Chart of the SOX:

 

Efforts to whittle enthusiasm came from several sources and did
pressure European semi-related stocks.  Merrill Lynch had warned
that analysts might be too optimistic about Intel's earnings
ahead of its mid-quarter report on Thursday.  The U.S.
Semiconductor Equipment and Materials International reported its
expectation that demand for chip manufacturing equipment would
rise 59 percent this year but then perhaps fall as much as 5.1
percent next year.  Although markets reputedly look ahead and
discount future developments, U.S. markets appeared to
concentrate more on this year's expected sharp gains than on next
year's expected declines. 

In addition, European chip-related companies Infineon
Technologies and STMicroelectronics received downgrades.  Merrill
Lynch downgraded Infineon Technologies to a sell rating from its
previous neutral rating.  The firm cited specific problems within
Infineon as well as industry pricing and inventory surplus
problems.  Deutsche Bank downgraded STMicroelectronics to a hold
rating from the previous buy rating.  

U.S. investors ignored that news and focused on better news from
Fairchild Semiconductor (FCS) and Novellus (NVLS).  Both
countered the drearier reports, with FCS revising its Q4 outlook
to the higher end of previous forecasts for a decline of 5-10
percent.  FCS did note that gross margins would come in at the
lower end of previous estimates.  NVLS said that its Q4 results
would likely be in the top half of its predicted range, despite a
business climate for chip manufacturing equipment that remained
listless.  

Pre-market, pharmaceuticals also garnered attention, with Pfizer
(PFE) reaffirming its earnings forecast for the full year and
telling investors that it has twenty more drugs for which it will
seek approval by the end of 2006.  PFE closed 1.65 percent
higher.  Geopharma (GORX) also announced that its Belcher
Pharmaceuticals unit had received FDA approval for a drug used to
treat mucositis, an oral inflammation sometimes suffered by
cancer patients receiving radiation or chemotherapy.  That stock
was halted mid-afternoon, however, with some confusion persisting
as to whether that approval had been gained after all.  

Drugmakers had also been a focus sector in Europe, with
AstraZeneca (AZN) and GlaxoSmithKline (GSK) gaining ahead of our
open.  Gains in pharmaceuticals had helped lead the FTSE 100
higher, and our markets followed.

Annotated Daily Chart of the SPX:

 

Annotated Daily Chart for the Nasdaq:

 

Annotated Daily Chart of the Dow:

 

Annotated Daily Chart of the Russell 2000:

 

A grouping of mostly encouraging economic news helped indices
chisel through resistance.  The first of the reports wasn't the
most encouraging.  The latest slate of survey information from
the Mortgage Bankers Association revealed that mortgage activity
slowed during Thanksgiving week.  The Composite Index dropped 5.8
percent; the Purchase Index, 0.6 percent and the Refinance Index,
12.3 percent, all on a seasonally adjusted basis and in
comparison to the previous week's numbers.  

Although the MBA pegged most of the blame on Thanksgiving week,
the later release of the Fed's Beige Book suggested otherwise. 
The MBA noted that the percentage share of FHA loans to all loans
had dropped markedly during 2004.  This suggests that first-time
buyers dropped away, perhaps signaling trouble for the home
builders.  Mortgage payments cheaper than rent had helped drive
new home sales, but those buyers might be tapped out.  The news
didn't impact the DJUSH, the Dow Jones US Home Construction
Index, negatively, with that index posting a 2.56 percent gain
for the day, one of the many indices posting more than 2 percent
gains. The average interest rate for a 30-year fixed-rate
mortgage rose to 5.78 percent, up from the previous week's 5.64
percent.  

Wednesday's slate of economic releases also included October's
Personal Income and Personal Spending, both released at 8:30. 
October's Personal income rose 0.6 percent, beating expectations
for a 0.5 percent climb.  September's rise had been only 0.2
percent.  Personal Spending rose a respectable 0.7 percent, with
September also having seen a respectable rise of 0.6 percent. 
Expectations had been for a rise of 0.4 percent.  The savings
rate was troubling, however, with the 0.2 percent rate touted as
the lowest since October 2001.  

October's Construction Spending and November's ISM Index were
both released at 10:00, with one a disappointment and one an
upside surprise.  Construction Spending was flat against an
expected rise of 0.8 percent, with lower spending on homebuilding
responsible for the flat number.  November's ISM surprised to the
upside, rising to 57.8 percent from October's 56.8 percent. 
Economists had expected a flat number.

Perhaps the drop in crude prices did more than all those economic
releases to help equities chip at resistance.  Crude prices
dropped from the open, with that drop accelerating after the
release of crude inventories near 10:30 EST.  With winter upon
us, distillates are the new focus of those numbers because
distillates include heating oil.  Distillates rose 2.3 million
barrels according to the Department of Energy.  Crude inventories
rose 900,000 barrels and gasoline inventories increased 3 million
barrels, with both those figures also supplied by the Department
of Energy. 

Annotated Daily Chart for Crude Futures for January Delivery:

 

November's Auto and Truck Sales were also released, with the
figures showing that Ford's (F) sales declined seven percent,
with the company also revealing that it would trim Q1 production
by eight percent.  DaimlerChrylser (DCX) saw sales increase by
four percent.  Nissan North America (NSANY), Toyota Motor (TM),
and Subaru saw sales increase, although Nissan outshone the
others by posting a 31 percent gain.  Mazda North American
Operations saw November sales 8.7 percent lower than last year's
for the same month.  

The Fed's Beige Book followed at 2:00, with the Fed generally
upbeat about continued economic growth.  All districts except
Chicago reported increases in economic activity.  

The Fed noted that overall consumer spending and lending activity
were uneven or mixed throughout the districts, while
manufacturing and service sector activity were strong or
increasing throughout the districts.  Not all districts report
service sector activity.  As has been apparent from recent MBA
reports, residential mortgage lending and refinancing ebbed.  

Demand for transportation services was characterized as robust. 
So was residential real estate activity, although some districts
reported some cooling.  Commercial real estate presented a
different story.  High vacancies and pricing pressures remained,
although some districts noted that the excess capacity was being
reduced.  Information on commercial real estate was mixed across
the districts, with the situation in Dallas and Richmond
appearing to improve while that in New York appeared to be
worsening.  

The Fed noted that large or even record crop production might be
seen in many regions, with quality and yields both expected to be
above average.  Labor markets improved.  

The section dealing with prices detailed increased price
pressures, with energy-related costs rising.  Some industries
were able to pass cost increases on to consumers, with retailers
less able to do so than manufacturers.  Costs for building
materials, particularly cement and steel, rose at the same time
that home sales cooled.  Dallas, particularly, saw a softening in
home sales.  

With mostly encouraging economic news and a steep fall in crude
prices, investors were willing to overlook the dollar's weakness,
worries about the U.S. deficit's effect on foreign investment in
U.S. companies and bonds, and bothersome signs from analysts
commenting on the semi-related stocks.  Bulls want to see
excitement from Intel's mid-quarter update, a continued decline
in crude prices and a building on the breakouts made today.  If
those breakout levels are lost tomorrow, trade carefully,
especially ahead of Intel's mid-quarter update after the close
tomorrow.  Charts look great, the breakouts are there, but
sentiment measures perhaps show too much bullishness in the
markets, as if they're banking a bit too much on gains that will
come due to the MSFT dividend and Intel update.

Late-day developments include a shakeup in California's pension
giant Calpers, with President Sean Harrigan voted off his seat on
the board of directors.  Harrigan had been guiding the pension
giant into a leadership role in business reform, and was
reportedly targeted by pro-business groups that had the ear of
Governor Arnold Schwarzenegger.  

After-hours developments included same-store sales and a few
earnings reports, with same-store sales continuing tomorrow. 
Software maker Synopsis (SNPS) dropped after hours, last at
$18.23 after closing at $18.64.  The company reported a $0.19 per
share loss against an expectation of a $0.03 gain for the fourth
quarter.  Dollar General (DG) reported, saying that higher
gasoline prices were responsible for the company's eight percent
decrease in net income.  Starbucks (SBUX) same-store sales rose
13 percent, Men's Wearhouse (MW) gained 7.8 percent, and American
Eagle's (AEOS) surged 24.3 percent, with these among other
companies reporting.   

Thursday's economic releases include the usual 8:30 release of
jobless claims, followed by the 10:00 release of October's
Factory Orders.  Intel will provide its mid-quarter update on
Thursday after the close, so investors have a full day of pre-
Intel-release volatility to maneuver around on Thursday.


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


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*****************
INDEX TRADER WRAP
*****************

Pressure cooker goes "pop"

In last night's Index Trader Wrap, I mentioned that Tuesday's 
equity trade "felt heavy."  Today, the pressure cooker went "pop" 
as all heck broke loose in the energy futures markets, as gains 
in crude, distillate and unleaded gas inventories sent January 
Crude Oil futures (cl05f) $45.49 -7.4% plunging lower by $3.64.

In Thursday's electronic trade, January Crude did rise to $45.65 
after China said it would begin developing its own strategic oil 
reserve, and slowly establish a 90-day supply of oil beginning 
next September.  China hopes to establish the reserve by 2010.

The Chinese government has been building 52 tanks near the East 
China Sea, south of Shanghai, to stockpile a month's worth of 
oil.  Each tank will hold more than 25 million gallons (a 
petroleum barrel is 42 gallons).

Chinese officials did not say how they were going to pay for the 
stockpile, but it was speculated that the Chinese government may 
issue bonds, raise taxes, and introduce other fiscal measures to 
pay for the reserves program.

Hey... I might be able to broker a deal between the U.S. and 
China.  How about selling some of the US's recent stockpiles to 
China?  Help out a friend.  Narrow the trade deficit?  

I also hear the Russian government has an oil producer (Yukos) on 
the auction block.  China's already shown an interest in buying 
Canada's Husky.

Before we get started with tonight's wrap, NASDAQ-100 Tracker 
(NASDAQ:QQQQ) $39.92 investors/trader that do hold short/long 
positions in this security, may want to quickly check any STOP 
Loss/Profit orders with their brokers.  Make sure your orders are 
still standing and that the new symbol change doesn't leave you 
hanging in the wind, with no stop in place!

U.S. Market Watch - 12/01/04 Close

 

PINK arrows point to indices/sector that hit new 52-week highs in 
today's session.  Financial (blue arrows) got close to some of 
their very recent 52-week highs, and really helped the SPX/OEX 
offset some of their exposure to energy and utilities.

The Computer Technology Index (XCI.X) 720.19 +2.37% is right back 
at the 720 level where it triggered the triple top buy signal on 
November 17.  

The Semiconductor Index (SOX.X) 440.09 +3.82% closed above its 
trending lower 200-day SMA (438.25) and is back to within 
shouting distance of its recent relative high of 445.94 set on 
November 19.  An upbeat outlook from Fairchild Semi (NYSE:FCS) 
$16.70 +9.15% helped fuel today's sector advance.

The Disk Drive Index (DDX.X) 114.59 +5.08% erupted for a hefty 
5.5-point advance and closes in on its recent relative highs of 
116 found in early October.  

Having gotten stopped out of a 1/2 bullish call position in 
Apache Corp. (NYSE:APA) $51.85 -4.08% today (got scalped on the 
energy decline I sensed yesterday), some of the retailing reports 
had consumer clambering for digital cameras this holiday season.  

Camera clickers might need a flash memory chip to go with that 
new digital camera.  Disk Drive Index (DDX.X) and Semiconductor 
HOLDRs (AMEX:SMH) $33.73 +3.81% component SanDisk (NASDAQ:SNDK) 
$23.26 +3.01% might see some strong demand for its products into 
early next year.  I liked a 1/2 bullish position in the SNDK 
April $22.50 calls (SWQ-DX) at $3.30.

While not a component of the DDX.X, disk drive maker Western 
Digital (NYSE:WDC) $10.38 +6.24% launched above its neckline 
($9.75) of a massive reverse head and shoulder pattern after 
guiding its December quarter higher.  

Soon-to-be added to the SOX.X (Friday morning) shares of Marvell 
Technology (NASDAQ:MRVL) $33.13 +3.33% surged to another 52-week 
high, with WDC a large customer.

Market Snapshot / Internals - 12/01/04 Close

 

NASDAQ traders will view today's volume as very bullish, and help 
alleviate fears that a "volume top" was made on November 17, when 
the NASDAQ turned a heavy 2.23 billion shares.

Take note "big tech" bulls.  November 17.  Tech bulls will want 
to see the Computer Technology Index (XCI.X) 720.19 +2.37% follow 
through above its recent November 17 relative high.  

Kind'a like this....

NASDAQ Composite Index (COMPX) - Daily Intervals

 

I was cognizant of a possible "high volume top" from November 17, 
and tonight I'm checking the NH/NL indications closely.  No sign 
of any BEARISH DIVERGENCE from the daily NH/NL readings.  I would 
be questioning today's break higher if the number of new highs 
came in BELOW those found on November 17.

As we approach the January highs of 2,154 in the COMPX, I went 
back and checked some of the NH/NL daily readings back at that 
time.  The highest reading came at 571 new highs and 6 new lows 
on January 20.  It wasn't until January 26th that the NASDAQ 
Comp. traded its eventual 52-week price high and my 5-day NH/NL 
ratio had slipped to 98.4%, with the 10-day NH/NL ratio also at 
98.4%.  From their, the 5-day NH/NL ratio did fall below its 10-
day NH/NL ratio.

When our IT department archives today's Market Monitor, look way 
down at the bottom to some of my late Tuesday evening posts 
(12:30:11 AM EST) as I posted updated through Tuesday's trade of 
both the NYSE and NASDAQ NH/NL point and figure charts.

My notes of last night were for traders to understand the 
possibility that we could see similar NH/NL charts as that found 
last fall.  

Computer Technology Index (XCI.X) - Daily Intervals

 

We looked at the above chart in the November 16 Index Trader 
Wrap, and after the HPQ earnings report, and eventual test of 
720, the XCI.X suffered a brief setback.  One can imagine it was 
going to be tough to get a push above 720 today with the Intel 
(INTC) mid-quarter update tomorrow evening.

Now, I would have to think that with current stock settlement 
rules, we've probably seen some of Microsoft's (NASDAQ:MSFT) 
$27.25 +1.64% soon-to-be distributed $3 per share dividend having 
been invested the past couple of days.  The Vanguard 500 Index 
Fund, which is designed to track the S&P 500, and owns roughly 
100 million shares of MSFT, will most likely have to distribute 
all of its MSFT dividend on a weighted basis to the stocks in its 
fund.  However, the other top 4 mutual fund holders will pick and 
choose what stocks get some of the MSFT distribution.  

While the Vanguard 500 Index is the top mutual fund holder, its 
100 million share holding is pocket change to some of the top 
institutional holders, of which many hold MSFT shares in various 
mutual funds.  

FMR Corporation (Fidelity Management & Research) reportedly holds 
just over 452.5 million shares among its various funds.  Barclay 
Bank holds just over 379.6 million shares, while State Street 
Corp. holds 323.8 million shares.

Most of the top mutual fund, and institutional holders tend to 
hold less than 5% of their holdings in cash.  Recent statistics 
show 64% of the public float (9.38 billion shares) is owned by 
institutional and mutual fund owners.

Did you notice today's close on the Russell 2000 Growth iShares 
(AMEX:IWO) $66.26 +1.64% today!  Here's something I thought an 
options trader might want to think about doing today, which might 
well be what some institutional bulls are doing.

While I've stuck with our previously outlined "seasonal bullish" 
strategy of establishing a full position (based on a full 
position being equivalent to $10,000 in an underlying equity), 
and have just two (2) call option in my Market Monitor profile, 
there are some of you subscribers managing larger accounts that 
might want to consider writing a covered call on a portion of 
your holdings.

Russell 2000 Growth iShares (IWO) - Daily Intervals

 

It was really neat to watch the IWO trade today.  Last night's 
close above $65.00 was encouraging to a bull, and boy-oh-boy, the 
IWO gravitated toward the $66.26 level early in today's session.  
Almost like a shy little kid clinging to its mom's pant leg on 
the first day of school.  

"Do I sell here?  The IWO had performed so well so fast, I can't 
believe it!" Is some of the e-mail I've received.

I can't tell a trader "yes, or no" but with supply limited, one 
thing an options trader/investor can do as the IWO nears a 
historical average gain of 12.9% (from $60.00) is to sell some 
covered calls.  I ran a calculation whereby selling some Dec. $67 
calls for $0.75, is similar to actually saying "I'm willing and 
able to sell at $67.75.  This doesn't ASSURE total profitability, 
but does generate some cash for the account, and give some 
benefit to the bullish trader that risked some of his/her 
capital.

I should note that Dorsey/Wright and Associates plots the IWO on 
a $0.50 box chart, so that it gives closer representation to the 
Russell 2000 Growth Index ($RUO.X).  With the IWO plotted on a 
$0.50 box size, its bullish vertical count is to $72.50, so there 
may be more upside that the historical seasonal average from 
November-May.  

Pivot Matrix - 

 

There go those regional banks again!  The BIX.X is first to trade 
its WEEKLY R2, and SPX/OEX bulls as well as broader-market bulls 
would sure like to see the BIX.X confirm further with another 52-
weeker and lead in the MONTHLY at R1.  If so, stocks should run 
into the end of the month.

Jeff Bailey


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The Option Investor Newsletter                Wednesday 12-01-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Watch List: Industrials to Transports and more
Stop Loss Updates: FRX, ABK, COP, EBAY, EOG, IBM, ITT, MUR, QCOM, 
                   SLB, SUN
Dropped Calls: None
Dropped Puts: None
New Calls: UTX
New Puts: None

**********
Watch List
**********

Industrials to Transports and more


___________________________________________________________________

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.
___________________________________________________________________


Ingersoll-Rand - IR - close: 77.42 change: +3.00

WHAT TO WATCH: Strong economic spending numbers and a sell-off in 
oil really put a bid under the industrial stocks.  Shares of IR 
broke out through resistance at $75.00 to hit new all-time highs 
on heavy volume.  This looks like a new bullish entry point but 
we'd prefer to buy a dip back toward $75 if we can get it, $76 if 
we can't.  The P&F chart looks bullish with an $83 target.

Chart=


---

Boeing Co - BA - close: 54.70 change: +1.13 

WHAT TO WATCH: The DFI defense index is hitting new all-time 
highs.  Meanwhile BA has rebounded back toward resistance near 
$55 to trade near three-year highs.  The daily chart of BA was 
beginning to look like a double-top but if shares can break out 
over $55.50 then bulls might feel better targeting a move to $60 
or its bullish P&F chart target at $62.  

Chart=


---

United Parcel Service - UPS - close: 85.35 change: +1.20 

WHAT TO WATCH: The Dow transports were very strong today with a 2 
percent gain to new multi-year highs.  UPS was almost as bullish 
with a 1.4 percent rally.  More importantly UPS broke out from 
its recent two-week consolidation pattern to hit new all-time 
highs.  Momentum traders may want to use this as an entry point 
but we'd be careful with the stop loss.  Don't set it too wide.

Chart=



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

TTC $74.10 +1.60 - We still like TTC with the breakout over 
$72.00 but earnings are expected on December 8th and we don't 
like to hold over an earnings report.  We do suspect that TTC 
will announce another stock split with its earnings report!  They 
last split 2:1 around the $70 region in April 2003.

BDK $85.10 +1.01 - Momentum stock BDK has been a consistent 
winner throughout 2004.  Now share are edging toward resistance 
at $86.00. 

CME $207.61 +11.90 - Wow!  That's quite a rebound today.  CME has 
broken its two-week trend of lower highs but still has resistance 
near $211.

ETN $68.62 +1.22 - ETN is breaking out from its recent trading 
range to hit new highs.  This looks like an entry point.


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*****************
STOP-LOSS UPDATES
*****************

FRX - put play -
  Good news!  In spite of the market's big rally today
  and the 1.48 percent rally in the DRG drug index, 
  shares of FRX barely budged with a 22-cent gain 
  and remain under resistance at $39.50-40.00.
 
 
ABK - call play -
  Today's 2 percent rally in the insurance index 
  helped propel ABK to a 1.5 percent gain.  Shares
  broke through resistance at the $82.00 level and
  hit our TRIGGER to go long/buy calls at $82.26.
 
 
COP - call play -
  The sharp drop in oil sparked a sell-off in the 
  oil sector and the OIX index slipped 1.8 percent.
  Shares of COP fell 1.8 percent as well but managed
  to bounce from the $88.00 level, which is the first
  line of defense for the bulls. 
 
 
EBAY - call play -
   EBAY came back from an early morning loss and
   a boring afternoon to turn higher into the close for
   another all-time high.
 
 
EOG - call play - 
   We've been expecting a pull back.  Today's sell-off
  in the oil sector sparked a 2.6 percent decline in EOG.
 
IBM - call play -
  IBM managed to bounce from the bottom of its trading
  range near $94.00 but still needs to break through the
  top of the trading range near $96.65. 
 
ITT - call play -
  We're a little disappointed that ITT didn't participate
  more in today's market rally.  Watch for a move back
  above the $86.50 level.
 
MUR - call play -
  We've been expecting a pull back.  Today's 3 percent
  decline sent MUR back to support at $82.00.
 
 
QCOM - call play -
  The rally in the NASDAQ propelled QCOM to a 3.4 percent
  gain as it hit new four-week highs over minor resistance
  at $42.00.
 
SLB - call play -
  The sell-off in oil hit shares of SLB as well.  The stock has 
  broken round-number support at $65 and technical support
  at its 50-dma.  Shares were beginning to bounce from its
  200-dma before the close.
 
SUN - call play -
  We've been expecting a pull back and suggested readers
  watch for a dip toward the $80.00 level.  Well it's here.  
  If the $80 level breaks we'll look for additional support
  near $78.


*************
DROPPED CALLS
*************

None


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DROPPED PUTS
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NEW CALLS
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United Tech. - UTX - close: 100.15 change: +2.57 stop: 95.99

Company Description:
United Technologies Corp., based in Hartford, Connecticut, is a 
diversified company that provides a broad range of high 
technology products and support services to the building systems 
and aerospace industries.  (source: company press release)

Why We Like It:
A sell-off in oil has given new life to the industrial stocks and 
UTX is taking off.  Shares have been stuck in a narrow trading 
range for the last three and a half weeks between $96 and $98.  
Today the Dow-component UTX surged 2.6 percent on very strong 
volume to breakout over resistance at $98 and the round-number, 
psychological resistance level at $100.  Technicals are positive 
again and its P&F chart shows a triple-top breakout buy signal 
with a $123 target.  We believe that odds of a stock split 
announcement just increased now that UTX is trading in the triple 
digits.  The company last announced a 2:1 stock split in May of 
1999.  There are new all-time highs for UTX.  The next level of 
resistance is likely the $105 mark but we're going to target a 
move to $110 by the January options expiration.  If shares dip 
look for a bounce above the $98 level, which should be support.

Suggested Options:
We like the January 2005 calls.  

BUY CALL JAN  95 UTX-AS OI=3380 current ask $6.20
BUY CALL JAN 100 UTX-AT OI=7325 current ask $2.60
BUY CALL JAN 105 UTX-AA OI=2141 current ask $0.70
BUY CALL JAN 110 UTX-AB OI= 822 current ask $0.15

Annotated chart

 


Picked on December 1 at $100.15
Change since picked:     + 0.00
Earnings Date          10/20/04 (confirmed)
Average Daily Volume =      1.8 million  
Chart =





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NEW PUTS
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