The Option Investor Newsletter Tuesday 12-14-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: New Highs! Futures Markets: See Note Index Trader Wrap: Market applauds rate hike Market Sentiment: On Your Mark Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 12-14-2004 High Low Volume Adv/Dcl DJIA 10676.45 + 38.10 10695.07 10621.03 1.97 bln 1967/1263 NASDAQ 2159.84 + 11.30 2163.50 2145.05 2.28 bln 1896/1261 S&P 100 572.42 + 2.01 573.50 569.75 Totals 3863/2524 S&P 500 1203.38 + 4.70 1205.29 1197.84 SOX 433.02 + 7.90 434.32 425.22 RUS 2000 643.54 + 5.51 643.62 637.67 DJ TRANS 3757.03 + 32.10 3758.41 3721.89 VIX 12.73 + 0.19 12.97 12.21 VXO (VIX-O)13.45 - 0.10 14.07 13.29 VXN 18.58 - 0.20 19.05 18.35 Total Volume 4,481M Total UpVol 2,650M Total DnVol 1,705M Total Adv 4383 Total Dcl 2936 52wk Highs 479 52wk Lows 49 TRIN 0.94 NAZTRIN 1.16 PUT/CALL 0.77 ************************************************************ New Highs! by Jim Brown The markets continued to trade higher before the Fed news today with a quarter point hike already priced into the mix. The Fed did not disappoint but lacking any new bias from the Fed traders were left looking for direction once the Fed meeting was over. Economics continue to be mixed and traders hoping for the Fed to unravel the puzzle were comforted only slightly by the same bias replay. Dow Chart Nasdaq Chart Chain Store Sales finally rebounded from last week with a +1.2% gain but only partly recovered the prior weeks -1.7% drop. The holiday shopping remains lackluster despite the drop in gas prices. All accounts suggest consumers have gotten used to steep discounts in the last two weeks of the season and are patiently waiting for the price slashing to begin. The International Trade deficit rose to record levels for October at -$55.5 billion. According to the BEA exports increased only marginally but imports soared. The $55.5B number was $5B worse than the $50.9B in September. Alan Greenspan must be losing sleep at night over this soaring imbalance given his comments in November. Consensus estimates were for only a slight gain to $51.6B. During October oil hit its highs over $55 and this accounted for the majority of the jump. The October number was a record high. If oil prices continue to slip the deficit will ease slightly and the weakening dollar should also help. Industrial Production rose +0.3% in November and less than half the previously announced +0.7% gain in October. That Oct number was also revised down to +0.6%. This was the second consecutive month of gains after flattening over the summer and dipping into negative territory in September. Business equipment and construction production increased +0.4%. This spending on equipment is driven by the tax depreciation incentives which expire on Dec-31st. The accelerated depreciation has produced a mini boom in computer equipment, servers, routers and switches over the last quarter. Capacity utilization is still only 77.6%, 73.5% for durable goods, and still weak enough to prevent any significant escalation in prices or a return of the inflation monster. Until manufacturers have pricing power brought on by rapid increases in demand the inflation component will remain tame. The tax incentives have driven a +10% rise in business equipment production while home electronics production has declined -6.4% over the same period. Another crack in the economic foundation appeared today in the Richmond Fed Manufacturing Survey. For the first time in over a year the index posted a negative growth number. September of last year began the year long run of growth in the area and it topped in September of 2004. Novembers decline to -3 was the second monthly decline from the high of 22 in September. The rate of decay appears fairly steep with the order backlog falling to -17 from -5 in October. Shipments fell to -3 from 14 in October. New orders fell to -8 from 3 last month. The six month outlook barely budged with a move down to 32 from 35 and its high for the year. All components fell in November, most for the second consecutive month. Given the growth in some areas is stagnating the drop in the Richmond region suggests there is a weakening in the broader economy at the manufacturing level. We must remember that there is normally a slump in the fourth quarter that should improve in Q1. We need to watch these various Fed reports for evidence of that rebound or lack of a rebound in January. On Wednesday we get the NY Manufacturing Survey and it has been very strong with new highs every month. The Manpower Employment Survey showed the net hiring plans for Q1-2005 were positive in 17 of 19 countries. They were better than Q1-2004 in 12 of 19 countries. The US is showing a net change for Q1 of 21%. The raw numbers show 24% of American companies are planning to hire, 10% are planning cuts and 59% are not planning any changes. This results in a positive outlook for Q1-2005 over Q4-2004 of 21% of companies hiring. Net hiring plans in the US exceed year ago numbers in every region. Only the Midwest is lower for the 4Q comparisons. This has been a reliable survey for tracking the long term trends and the current numbers suggest an average gain in jobs of about 200K per month for Q1-2005. The Fed met, talked and in the end changed four words in their statement from the last meeting and hiked rates by a quarter point as expected. According to the Fed risks to the upside/downside remain roughly equal, inflation remained contained, output is growing at a moderate pace and labor market conditions continue to improve gradually. Sounds like they are talking about a turtle race. They noted that energy prices had eased and employment conditions had returned to gradual instead of the "have improved" they used in the prior statement. This is a back step after the weak November Jobs report. Leaving the statement the same with the measured pace clause weakened the thought that they could quit at 2.5% and reinforced the prior 3.0% level as a stopping point for 2005. While the markets were tame most of the day while waiting for the Fed announcement there was plenty of stock news. Symantec got crushed with a -16% drop of -5.41 to $27.75 after news broke that they were in talks to buy Veritas Software. While this might be a logical progression for Symantec it immediately posed questions that the virus business may be easing. AOL now gives away Macafee software and analysts were questioning if this acquisition might be out of a need to diversify rather than just a new business opportunity. SYMC split 2:1 on Dec-1st and there had been very little post split depression despite the very strong gains. It appears it all hit on the same day. RIMM was hammered for a -$4.65 drop to $85 after a very volatile day. The appeals court handed down a ruling in their long running patent case that voided part of the lower court judgment but posed additional questions in other areas. In the initial excitement the stock spiked to $103.56 from 87.50 and then fell back to 92.50 before trading was halted. Once the news was disseminated the stock opened again for trading at 92.50 and fell to 82.18 once the news was fully understood. I won't waste the space here with the long description but it was a ruling in part for NTP and threw the case back into a hostile court. Analysts have been expecting an out of court settlement to remove the cloud if the ruling did not go the way RIMM was expecting. This could accelerate that process. RIMM is also trying to get the NTP patents overturned which would make all the court rulings obsolete. There is a strong argument that they will be successful in this endeavor. That makes it even more likely that NTP and RIMM will settle and business will continue without the cloud. It should be noted that RIMM has escrowed the full amount of the prior judgment and will not suffer any material damage regardless of the final outcome. RIMM was the editors play last Sunday in anticipation of this verdict. I am still positive on the stock and would buy it on the dip once it appears a bottom has formed. MSTR rounds out the lineup of losers with a -14% drop of -9.67 to $56 after it was announced the president and CFO was leaving to take over as president of Mcafee. Eric Brown had been seen as the instrumental force behind the Microstrategy rebound from the 2001 disaster. Several brokers downgraded the stock to a hold from buy until a new face takes charge. Support is well below the current $56 level so this one could have some more to lose. GE confused investors today with an early affirmation of guidance and a positive outlook on the future. GE said it expects double digit growth in Q4, all of 2005 and for the foreseeable future. Jeffery Immelt told investors that GE had excellent momentum going into 2005 and the right businesses with the right team to sustain growth for years to come. GE expects to earn slightly less than $5.5 billion in Q4 with a 15% rise in revenue. In 2005 GE expects profits to increase 13-17% to nearly $20 billion. Cash is expected to grow at double digit rates as well despite a $15B stock buyback program announced last week. The surprise announcement spiked GE to $37.75 from $32.18 and sent all the indexes higher in late afternoon. Unfortunately for GE the good news could not keep the stock positive and it closed slightly negative after a four day ramp from $35.50. GE has been moving steadily higher although excruciatingly slowly since May. Investors sold the news today at $37.75 and probably glad to exit before hitting resistance at $40. Merck said today that 475 suits had already been filed due to the Vioxx drug withdrawal. They went to great lengths to paint a positive picture of their prospects without Vioxx and promised to defend themselves vigorously. The stock closed up +57 cents at $29.60 and a six-week high after rebounding from $25.60 in late November. Bill Gates was appointed to the board at Berkshire Hathaway and that is probably where he belongs. He and Warren Buffet both feel rich people don't pay enough taxes. My suggestion to them is send a check to Washington. $10 billion each should be just fine. I am sure they can find a use for the money. Talk is cheap and without action it rings hollow. The markets continued their end of year push higher today with the SPX and the Nasdaq closing at new three year highs. The Dow is gaining altitude but needs to pass 10753 to join the party. Abby Cohen made the CNBC guest list again and repeated her targets from last week for SPX 1350 and Dow 11800 for 2005. Since her target for year end 2004 was SPX 1250 she is getting a lot of face time on the networks to talk up the market. She is expecting a +10% gain for the S&P for 2005 and a GDP at +3.5%. She favors tech stocks in the S&P-500 and said we should see a continued rise into January from here. According to Abby tax selling is over and the flood of end of year retirement deposits has begun. Abby, nothing would please me more for you to be right. The Dow closed at 10681 and very near the highs for the day at 10695. This breakout for the industrials comes on the back of the small caps which have reversed their decline from last week and are challenging new highs again. The Russell closed at 643 and less than two points from an all time high. The Nasdaq finally closed over its January high at 2153 and came very close to setting a new intraday three year high. The Nasdaq is on the verge of a breakout as is the Russell and Dow and with the S&P leading the way they should not be far behind. However, we are looking at the highs being tested after a very strong four day rebound and we could be running out of traction at the end of a reasonable extension period. Nothing says we can't move higher but old highs are obvious places for sellers to wait and for longs to take profits. Once over these highs the short covering should increase and buyers hoping for a bigger dip will be forced to chase prices. I have to admit I am please with the markets performance and look forward to future gains. Unfortunately there is a historical trend for the day after the Fed to be weak regardless of the decision. That coupled with the close right at the highs on the Nasdaq, RUT and very close on the Dow could combine to produce a pause. One analyst called this a honeymoon rally on the drop in oil and the influx of year end cash. While honeymoons do end the marriage continues. I would look at any dip as a buying opportunity in anticipation of a continued rise into the year end. 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It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ************************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 ************************************************************** ***************** INDEX TRADER WRAP ***************** Market applauds rate hike The dollar, stocks and Treasuries all found gains by the close after the Federal Open Market Committee raised it target for the fed funds rate by 25 basis points to 2.25%. Oil Service, chips and Internet sectors lead a broad advance, while networking lagged. The very broad NYSE Composite ($NYA.X) 7,124 +0.31% closed at a new all-time high, while the broad S&P 500 Index (SPX.X) 1,203.38 +0.39% closed at a new 3-year high. The Securities Broker/Dealer Index (XBD.X) 152.07 +0.85% closed at an all-time high, where key earnings tomorrow from Lehman Brother (NYSE:LEH) $85.65 +0.74% will be closely monitored. With Lehman's stock price nearing its March 2004 all-time high of $89.72 and consensus looking for the broker to earn $1.68 per share, which closely matches the $1.71 per share earned in the year ago quarter, its time to see if the bullishness this group began signaling with ferocity in late October meets further MARKET approval. The Dow Transports (TRAN) 3,757 +0.86% closed at new multi-year highs and are closing in on an all-time high of 3,797 found in May of 1999. The CBOE Internet Index (INX.X) 211.99 +1.4% closed at a new 52- week high. U.S. Market Watch - 12/14/04 Close I've got a lot of things I need/want to get traders and investors updated on, so I'll be brief regarding today's yield curve action, where we see further flattening. The brokers can "get buy" a yield curve flattening with trade volumes and merger/acquisition activity, but the banks (BIX.X and BKX.X) can have a tougher time. Some market participants wonder, or question "why the longer- dated" maturities would find buying when the Fed said nothing about not raising rates in the foreseeable future, where further Fed tightening would most likely come under the backdrop of economic growth, which would bring some type of inflation, even modest rates, for the future. My "key indicator" to calm this worry at this point would be "junk bonds." Just last week, the PHF announced it would once again pay a $0.075 monthly dividend. If I multiply that dividend by 12 (12 months) and divide that amount by tonight's closing price of $9.99, I would derive at a dividend yield of 9.09%. My thoughts have to be that to take on the higher RISK of "junk bonds" for a 9.09% annual dividend, compared to the safety of the benchmark 10-year yield of 4.132%, the MARKET still has to have some underpinning bullish thoughts for the economy going forward. Market Snapshot / Internals - 12/14/04 Close At the beginning of tonight's Index Wrap, I "focus" on new highs. This is a focus of tonight's wrap and will be discussed rather thoroughly. Why? This was something I said I would do a couple of weeks ago should the NASDAQ Composite and NYSE Composite challenge their recent or longer-term 52-week highs after we did see both the NYSE and NASDAQ NH/NL indications reach some very strong, yet "overbought" readings. While the NYSE goes on to CLOSE at another all-time high, the NASDAQ Composite (COMPX) closes at a new 52-week high, but didn't get a "convincingly" bullish close above its recent 12/03/04 intra-day high of 2,164.63. I want to know why, and see if there is any reason for concern. NYSE and NASDAQ NH/NL measures - 12/03/04 high comparison With the NYSE Composite ($NYA.X) 7,124.61 +0.31% making a new 52- week high (12/03/04 prior high) and the NASDAQ Composite ($COMPX) 2,159.84 +0.52% challenging its recent 52-week high which was set intra-day on 12/03/04, I wanted to quickly check our bullish/bearish leadership indicators and the NH/NL readings. Both the NYSE and NASDAQ new highs are well off those readings found on or just around the 12/03/04 benchmarking of prior highs, but we are seeing some improvement, or rise in the shorter-term 5-day NH/NL ratios (columns AE and AI), which makes sense as the daily ratios (columns AD and AH) improve. If there were one sign of BEARISH divergence that I see, it is that today's NASDAQ NH/NL daily ratio (column AH) as not as bullish as that found on 12/03/04 at an almost exact price level comparison. Let's note that 12/09/04 was a recent inflection LOW from PRICE in both the NYSE and NASDAQ. What I think a TRADER and even an INVESTOR will do tonight, I make reference of the December 9 price lows, where without continued bullish progress in the NH/NL indications, we would then become alert to bullish leadership falling off, and downside PRICE action. I'm going to quickly show the NYSE NH/NL chart, where on 12/13/04 we would have seen the 10-day NH/NL ratio (column AF) find a 3- box reversal with a 90.00% reading after reaching 96.00%, but not 98.00% on 12/06/04. NYSE NH/NL Chart - "f"ive day and 10-day ratios Two things that I am currently thinking about in regards to the NYSE NH/NL indications. One is that we're in an historically bullish season, which tends to run from October (A) to May (5). Two is that there is very strong bullish leadership, which is resting a bit at the NYSE right now. First real sign of BEARISH leadership taking hold would be a 10-day NH/NL ratio falling to 62%. Trader and investors may take note how last year the NYSE 10-day NH/NL ratio stayed at readings of 98% to 92% from October (A) until March (4). Let's take a quick look at the NASDAQ NH/NL chart. NASDAQ NH/NL Chart - "f"ive day and 10-day ratios The NASDAQ's 10-day NH/NL ratio would currently have to fall 3- boxes to 84% for it to reverse into a column of O. Traders and investors will probably note the pattern of higher highs and higher lows from both the "f"ive day and 10-day charting as if bullish leadership expands, then rests, then expands, then rests. The NH/NL indications are a great way to keep "track" of the October-May seasonal bullishness that tends to grab hold of the U.S. equity markets. My thoughts are that for a historical bullish tendency to remain, then bullish leadership needs to hold in there. Current NH/NL Analysis : The recent pullback in the NH/NL ratios does give some upside room for further expansion, which can lead to higher prices for both indices. The continued test for trader/investors is to monitor these internal readings for bullish or bearish leadership. Here's a quick update of the NYSE Composite ($NYA.X) chart with the various "stacked" (blue) and "fitted 38.2%" (pink) retracement. NYSE Composite ($NYA.X) - Daily Intervals It is hard to believe that we could see a "short squeeze" in an index that holds over 3,000 stocks, but when bullish leadership is strong and overhead supply becomes limited, things can get out of hand. An "ultimate" goal for a bull in my mind would be the RESULTANT 7,258 level from the "fitted 38.2" at 6,611. The ONLY reason we placed the "fitted 38.2%" retracement on the NYSE was if it broke to an all-time high. If there is one thing I do not like about my retracement at this point, it is that it doesn't "explain" the 12/09/04 low. Why did the NYSE stop there? I'll have to work on that. If I can perhaps explain that low, then I might also be able to better identify a higher "yellow" zone of resistance. NASDAQ Composite (COMPX) - Daily Intervals The COMPX is nowhere near its all-time highs of 5,000, and while today's CLOSE is a new 52-week high close, this bull would have liked to have seen a little more conviction among buyers to press this very broad index above the 12/03/04 intra-day high of 2,165. What should be concerning to any bear at this point is that in January of this year, the very broad NASDAQ Composite Bullish % ($BPCOMPQ) which we update each morning at 09:00 AM EST rose to as high as 76% before falling to 34% bullish in late August as the COMPX fell to 1,750. Today's (Tuesday's) action had this very broad bullish % rising 0.34%, to 59.78%, with approximately 10 stocks generating reversing higher point and figure buy signals. We will continue to test our strength/weakness measures for the internals, but I would have to think that SHOULD this broad market bullish % get anywhere close to 70%, the COMPX isn't going to be trading below 2,150. What "has to happen" for the very broad NASDAQ Composite Bullish % ($BPCOMPQ) to rise higher? I would have to think that the NASDAQ NH/NL indicators need to continue to build and hold bullish leadership. Pivot Matrix - If you're a trader looking for the toughest and most "unpredictable" trade in this market, then look no further than the QQQQ into Friday's close. A wild swing from Research in Motion (NASDAQ:RIMM) $85.44 -5.16% from $103.56 to $82.18, upcoming quarterly expiration on Friday, and 8 components being removed, and 8 new stocks being added may provide some volatility. Only the Dow Diamonds (AMEX:DIA) $106.76 +0.29% have yet to see a trade at their MONTHLY R1, and the DIA missed it by a penny. A downgrade of Alcoa (NYSE:AA) $31.75 -1.73% didn't help, and my "key stock" in 3M (NYSE:MMM) $78.50 +0.02% (both are deep cyclicals) has the bullish side of me searching for clues or reasons to be more bearish. If I can come up with any, that the market doesn't continually disprove, then I'll let you know! Jeff Bailey **************** MARKET SENTIMENT **************** On Your Mark - J. Brown I don't want to be accused of being a cheerleader but the market is looking pretty strong right now. The major indices, as overbought as they are, look ready launch into the last two weeks that are historically some of the most bullish weeks of the year. There are plenty on Wall Street and Main Street expecting the early January effect to hit stocks starting tomorrow. Plus, it won't be much longer and we'll hear more talk of a Santa Claus rally too. The last two sessions have seen some positive market internals. Today the advancing stocks outnumbered decliners 9-to-5 on the NYSE and 3-to-2 on the NASDAQ. Plus, the last hour, post-FOMC rally today is evidence that traders appeared to be positioning themselves for the coming rally. Of course contrarian wisdom suggests that if everyone is looking for something to occur it usually fails to show up or fails to perform to the same expectations. However, this time, like the recent post-election rally, could be an exception to the contrarian viewpoint. We will, however, capitulate to the bears that nothing goes up forever or in a straight line. The more grizzled variety of bears might suggest that the piper has to be paid eventually and with the volatility indices this low the market should see a sharp correction someday. The good news for us is that we're not expecting any big pullbacks between now and year-end. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 9708 Current : 10676 Moving Averages: (Simple) 10-dma: 10566 50-dma: 10278 200-dma: 10237 S&P 500 ($SPX) 52-week High: 1197 52-week Low : 1053 Current : 1203 Moving Averages: (Simple) 10-dma: 1190 50-dma: 1153 200-dma: 1124 Nasdaq-100 ($NDX) 52-week High: 1631 52-week Low : 1301 Current : 1627 Moving Averages: (Simple) 10-dma: 1610 50-dma: 1522 200-dma: 1448 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 12.73 +0.19 CBOE Mkt Volatility old VIX (VXO) = 13.45 -0.10 Nasdaq Volatility Index (VXN) = 18.58 -0.20 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.77 939,542 727,301 Equity Only 0.61 702,696 425,477 OEX 1.35 35,646 48,141 QQQQ 2.43 20,030 48,847 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 75.6 + 0.4 Bear Correction NASDAQ-100 78.0 + 0 Bull Confirmed Dow Indust. 70.0 + 0 Bull Confirmed S&P 500 76.0 + 1.2 Bull Confirmed S&P 100 77.0 + 1 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: 1.00 10-dma: 1.04 21-dma: 1.01 55-dma: 1.05 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 1805 1835 Decliners 1011 1201 New Highs 211 153 New Lows 8 11 Up Volume 1220M 1222M Down Vol. 685M 931M Total Vol. 1952M 2230M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 12/07/04 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 Commercial traders are growing a tad more bearish while small traders have pushed to new bullish levels not seen in many weeks. Commercials Long Short Net % Of OI 11/16/04 452,149 468,048 (15,899) (1.7%) 11/23/04 462,408 491,384 (28,976) (3.0%) 11/30/04 462,394 491,813 (29,419) (3.0%) 12/07/04 450,072 498,057 (47,985) (5.0%) 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 11/16/04 166,862 156,751 10,111 3.1% 11/23/04 171,192 150,606 20,586 6.4% 11/30/04 176,031 148,876 27,155 8.3% 12/07/07 187,707 135,776 51,931 16.0% 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 There has been an interesting switch in the latest data. Commercial traders' bearish sentiment, while still strong, has dropped significantly. Meanwhile, small traders' bullish bias, while still extreme, has fallen significantly. Commercials Long Short Net % Of OI 11/16/04 371,282 796,279 (424,997) (36.4%) 11/23/04 412,724 849,091 (436,367) (34.6%) 11/30/04 439,074 855,440 (416,366) (32.2%) 12/07/04 470,553 805,234 (334,681) (26.2%) Most bearish reading of the year: (436,367) - 11/23/04 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 11/16/04 445,737 70,169 375,568 72.8% 11/23/04 400,995 62,080 338,915 73.1% 11/30/04 386,665 67,926 318,739 70.1% 12/07/04 311,838 66,496 245,342 64.8% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 We a similar move in the NDX futures. Commercials remain bullish but their enthusiasm has waned a bit. Small traders remain very bearish but their sentiment has faded a bit too. Commercials Long Short Net % of OI 11/16/04 55,737 33,683 22,054 24.6% 11/23/04 58,159 34,104 24,055 26.0% 11/30/04 56,629 30,571 26,058 29.8% 12/07/04 57,621 34,313 23,308 25.4% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 26,058 - 11/30/04 Small Traders Long Short Net % of OI 11/16/04 10,533 37,660 (27,127) (56.2%) 11/23/04 11,153 39,712 (28,559) (56.1%) 11/30/04 9,902 44,779 (34,877) (63.7%) 12/07/04 15,489 49,064 (33,575) (52.0%) Most bearish reading of the year: (34,877) - 11/30/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercials traders pared back their bearish sentiment while small traders became more bearish on the Industrials. Commercials Long Short Net % of OI 11/16/04 22,004 23,744 (1,740) (3.8%) 11/23/04 22,527 25,537 (3,010) (6.2%) 11/30/04 22,622 25,411 (2,789) (5.8%) 12/07/04 25,523 27,351 (1,828) (3.4%) 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 11/16/04 5,937 6,533 ( 596) ( 4.7%) 11/23/04 5,833 8,299 (2,466) (17.4%) 11/30/04 5,739 8,536 (2,797) (19.6%) 12/07/04 5,274 9,507 (4,233) (28.6%) 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. 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The Option Investor Newsletter Tuesday 12-14-2004 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: ARLP, ABK, BIIB, COF, EBAY, FLR, IBM, MDC, MWD, OSK, UTX, New Calls Plays: MHK, SWN Put Play Updates: ADI 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************************* Trade Smarter Using the latest Insider Trades Is the CEO selling off? Has a key insider loaded up on shares before a big price jump? Find out now. Get your free download of Real Time insider trades: http://www.realtimeinsider.com/default.asp?aid=637 ************************************************************** ******************** PLAY UPDATES - CALLS ******************** Alliance Resource - ARLP - cls: 69.00 chg: +2.49 stop: 61.85 A positive day in the markets fueled another day higher for ARLP. Shares added 3.7 percent on average volume. More importantly ARLP has now broken its short-term downtrend of lower highs. Plus its technical picture is improving and the MACD indicator is nearing a new buy signal. We are going to raise our stop loss a dollar to $62.85. Picked on December 5 at $ 65.82 Change since picked: + 3.18 Earnings Date 10/22/04 (confirmed) Average Daily Volume = 101 thousand Chart = --- Ambac Fincl Group - ABK - cls: 82.93 chg: -0.15 stop: 79.89 The IUX insurance sector didn't see much follow through on yesterday's breakout over the simple 200-dma. This could be a little disconcerting since the index looks so overbought already. Meanwhile ABK has seen some minor profit taking the last couple of sessions but traders bought the dip to $81.80 this morning and the stock rallied throughout the remainder of the session. We remain positive on ABK but readers may want to look for some follow through on today's bounce. Picked on December 01 at $82.26 Change since picked: + 0.67 Earnings Date 10/20/04 (confirmed) Average Daily Volume = 490 thousand Chart = --- Biogen Idec - BIIB - close: 66.19 change: -0.10 stop: 60.99 Monday's market rally also fueled a bullish technical breakout in the BTK biotech index over resistance at the 540 level. Unfortunately, there was not much follow through today. The same can be said for BIIB. The stock has not seen much follow through after its breakout above the $65 level a few days ago. We remain bullish on the stock and if a dip occurs we'd look for a bounce from its simple 10-dma. Picked on December 9 at $ 65.25 Change since picked: + 0.94 Earnings Date 01/26/05 (unconfirmed) Average Daily Volume = 3.5 million Chart = --- Capital One Financial - COF - cls: 81.86 chg: -0.12 stop: 76.99 COF had a bit of news today. The company is spending $155 million to buy eSmartloan from the National Bank of Kansas City. Shares of COF didn't react much to the news but the stock continues to look attractive over the $80.00 level. Its technical picture is bullish and the MACD is in a new buy signal. We're not expecting a dip but if one occurs we'd buy a bounce from $80. Picked on December 12 at $ 81.12 Change since picked: + 0.74 Earnings Date 01/19/05 (unconfirmed) Average Daily Volume = 1.4 million Chart = --- eBay Inc. - EBAY - close: 116.21 chg: +0.21 stop: 112.49 This could be it. EBAY has been consolidating sideways the past several days. Chart readers will notice how the consolidation has narrowed right up to the FOMC meeting today then EBAY began to slowly tick higher. We believe that EBAY is getting ready to spring forward and hit our target at $120.00. While we (the OI Newsletter) will exit at $120.00 more aggressive players may want to hold EBAY through the year-end to see just how high it can go. Just be sure to adjust your stops along the way. Picked on November 08 at $103.69 Change since picked: +12.52 Earnings Date 10/20/04 (confirmed) Average Daily Volume = 10.4 million Chart = --- Fluor Corp - FLR - close: 54.21 change: +0.43 stop: 51.49 FLR is almost there. Today's minor bounce put FLR back above the $54 mark and within striking distance of our exit point at $55.00. We are not suggesting new bullish positions. Instead we're suggesting that readers prepare to exit if they have not done any profit taking already. Picked on November 22 at $48.51 Change since picked: + 5.70 Earnings Date 10/27/04 (confirmed) Average Daily Volume = 521 thousand Chart = --- Intl Business Mach. - IBM - close: 97.31 chg: +0.86 stop: 93.95 IBM is trying to breakout of its new trading range between $96- 98. Today's bounce was certainly a good start but bulls might begin to feel a little frustrated with the very, short-term trend of lower highs. Fortunately, the market poised to move higher we're not worried. We are suggesting that readers prepare to exit when IBM trades into the $99-100 region. Picked on October 27 at $90.00 Change since picked: + 7.31 Earnings Date 10/18/04 (confirmed) Average Daily Volume = 4.7 million Chart = --- M D C Holdings - MDC - close: 83.45 change: +0.51 stop: 74.99 The rally continued on Monday for MDC but shares quickly faded from the $86 level. We were expecting some profit taking given MDC's sudden strength but it didn't occur today. Actually the stock began to track higher in the last hour with the broader market. Tomorrow should be positive for MDC too. After the bell tonight the company announced a 30 percent stock split. While we wish management would have made it easier with a more traditional 3:2, 2:1 or even a 3:1 stock split we're not going to complain. The plan is for shareholders to receive three extra shares as a stock dividend for every ten shares they own on the record date. Picked on December 12 at $ 81.01 Change since picked: + 2.44 Earnings Date 01/11/05 (unconfirmed) Average Daily Volume = 435 thousand Chart = --- Morgan Stanley - MWD - close: 54.71 chg: +0.31 stop: 51.50 On your mark. Get set. Go! The XBD broker-dealer index continues to show strength after its recent breakout over the 150 level. Likewise MWD broke out over resistance at $54.00 on Monday and hit our entry point to go long at $54.11. From our perspective the stock looks ready to take off. All we need is the starting gun and that will come in the form of LEH's earnings report tomorrow morning before the opening bell. Analysts are looking for LEH to earn $1.68 a share. When you consider the above average trading volume this past quarter and the mergers and IPOs the brokers should be sitting pretty well. Our short- term target remains $59-60. Don't forget we plan to exit ahead of MWD's earnings and let's hope we don't see a "sell the news" reaction. Picked on December 12 at $ 54.11 Change since picked: + 0.60 Earnings Date 12/21/04 (confirmed) Average Daily Volume = 4.6 million Chart = --- Oshkosh Truck - OSK - close: 65.83 change: +1.49 stop: 61.99*new* Our patience in OSK is finally beginning to pay off. Shares have been coiling under resistance at the $65 level for days. The stock broke out over this level on above average resistance with a 2.3 percent gain. Chart readers will also note the positive technicals and the new MACD buy signal. We've been targeting a move into the $67.50 region from the beginning and if OSK sees any follow through on today's gain it could reach our goal quickly. we are raising our stop loss to $61.99. Picked on November 07 at $ 62.16 Change since picked: + 3.67 Earnings Date 10/28/04 (confirmed) Average Daily Volume = 205 thousand Chart = --- United Tech. - UTX - close: 103.00 change: +0.13 stop: 97.89*new* After four very strong days in a row UTX was due for a pause. We're actually encouraged that UTX didn't see any profit taking today. That shows a distinct lack of willing sellers. Yet even if we did see UTX pull back a bounce from the $100 level looks like a good bullish entry point. We are raising our stop loss to $97.89, just under the $98 level of support. Picked on December 1 at $100.15 Change since picked: + 2.85 Earnings Date 10/20/04 (confirmed) Average Daily Volume = 1.8 million Chart = ************** NEW CALL PLAYS ************** Mohawk Industries - MHK - close: 91.00 chg: +2.25 stop: 86.99 Company Description: Mohawk currently operates five facilities in South Carolina located in: Ulmer, Calhoun Falls, Dillon, Landrum and Bennettsville. The company is headquartered in Calhoun, GA and is traded on the New York Stock Exchange. Mohawk is a leader in the floor covering industry with over $5 billion in annual revenues and produces and distributes carpet, ceramic tile, rugs, laminate, hard wood and home accessories. (source: company press release) Why We Like It: This might seem a little aggressive to go long MHK now. Its daily chart does look a bit overbought. However, if you look more closely you can see that shares have been digesting its late October gains for the last six weeks. This consolidation had MHK stuck in a trading range between $86 and $90. Now shares are breaking out as its technicals turn positive. Checking the Point & Figure chart we see a bullish buy signal with a $101 target. This matches closely with the average analyst price target at $98. We are going to buy the breakout today over $90 with a $99- 100 target. Our time horizon is six to eight weeks but we secretly suspect that MHK can get there much quicker. Suggested Options: We are going to suggest the February calls. Januarys are available. BUY CALL FEB 85 MHK-BQ OI= 370 current ask $7.70 BUY CALL FEB 90 MHK-BR OI=1169 current ask $4.20 BUY CALL FEB 95 MHK-BS OI= 135 current ask $1.85 Annotated Chart: Picked on December 14 at $ 91.00 Change since picked: + 0.00 Earnings Date 02/05/05 (unconfirmed) Average Daily Volume = 319 thousand Chart = -- Southwestern Energy - SWN - close: 51.05 chg: +0.65 stop: 47.99 Company Description: Southwestern Energy Company is an integrated natural gas company whose wholly-owned subsidiaries are engaged in oil and gas exploration and production, natural gas gathering, transmission, and marketing, and natural gas distribution. (source: company press release) Why We Like It: It doesn't matter if you think oil is going to $100 a barrel or $20 the short-term action suggests that the price of crude looks ready to produce an oversold bounce from support at the $40 region. Meanwhile we're seeing similar moves in the OIX oil index, which also looks ready to bounce. Big picture players will watch to see if the OIX makes a lower high, a double-top or break out to a new high. Meanwhile we want to play the rebound and SWN looks like a great candidate to catch the bounce. Shares have shown incredible relative strength against the market and its peers. The stock has bounced from its rising simple 40-dma in the past and it's doing it again today. Short-term technicals are already bullish. Our short-term target is $55.00-55.50 and buying the bounce from support allows us a decent stop loss. We do admit that SWN looks overbought and its P&F chart is very extended but you can't deny its relative strength. Until it breaks we're going to play the trend. Be aware that part of the risk here is a sudden drop in crude price could negatively affect SWN. Suggested Options: We are going to suggest the January and March calls. BUY CALL JAN 50 SWN-AJ OI= 92 current ask $3.40 BUY CALL JAN 55 SWN-AK OI=205 current ask $1.25 BUY CALL MAR 50 SWN-CJ OI=289 current ask $4.80 BUY CALL MAR 55 SWN-CK OI=233 current ask $2.65 Annotated Chart: Picked on December 14 at $ 51.05 Change since picked: + 0.00 Earnings Date 00/00/04 (confirmed) Average Daily Volume = 557 thousand Chart = ************************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 ******************* Analog Devices - ADI - close: 37.68 chg: +1.28 stop: 39.11 Uh-oh! This looks dangerous. From the beginning we suggested that this was more of a technical play and we'd be surprised to see the market rally without the semis. Well now the semiconductor sector is trying to bounce. If ADI trades over the $38 mark we'd consider an early exit. Keep an eye on the SOX index, which is testing resistance at its 200-dma. Picked on December 8 at $ 36.14 Change since picked: + 1.54 Earnings Date 11/23/04 (confirmed) Average Daily Volume = 4.1 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 12-14-2004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Internets, Transports and more Spreads & Straddles: Santa Claus Rally Continues! Premium Selling Plays: Naked Puts & Calls ********** WATCH LIST ********** Internets, 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. ___________________________________________________________________ Google Inc - GOOG - close: 178.69 change: +8.24 WHAT TO WATCH: Heads up! The six-week consolidation pattern in GOOG looks ready to give birth to a new bullish run higher. The stock has been coiling into a tighter and tighter pattern until after the FOMC meeting and then shares took off. Short-term technicals are already turning bullish and its MACD indicator is nearing a new buy signal. Aggressive traders may want to consider longs over $180. We would look for some resistance at $190 but our target would be $200. Chart= --- C.H.Robinson Worldwide - CHRW - close: 55.01 change: +1.06 WHAT TO WATCH: The Dow Transportation index broke out from its recent consolidation to hit new multi-year highs. This gave CHRW a boost as the stock nears resistance in the $55.00-55.50 region. Fortunately for the bulls CHRW has a positive trend of higher lows, bullish short-term technicals and a MACD indicator very close to a new buy signal. Consider going long over $55.50 with a $60 target. Chart= --- MicroStrategy - MSTR - close: 56.22 change: -9.67 WHAT TO WATCH: Ouch! MSTR lost almost 15 percent after its President and CFO Eric Brown resigned in order to leave and become CFO at McAfee Inc. (MFE). One analyst firm followed up on the news by downgrading MSTR from "strong buy" to "neutral". Given the extreme volume today and the breakdown under support at $60 and its 50-dma MSTR could see more selling. The next real support level is $50.00. Chart= --- ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- MRK $29.62 +0.57 - The strength in MRK is impressive and the breakout over $28.00 looks like a potential bullish entry point. Two things concern us... stronger resistance at $30.00 and tax loss selling between now and Dec. 31st. EOG $72.05 +0.49 - We still believe that EOG is a potential bullish candidate. Watch for a move over $72.50 and target a run towards $80. COG $45.52 +0.91 - COG is another oil-related stock that looks ready to rebound. EGN $57.35 +0.58 - EGN is a natural gas-related stock that is steadily creeping higher. The bounce from $55 could be an entry point. LEA $57.46 +1.02 - LEA has produced a three-candle bullish reversal pattern. Look for some follow through. ************************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 ************************************************************** ******************* SPREADS & STRADDLES ******************* Santa Claus Rally Continues! By Ray Cummins The major equity averages moved higher Tuesday amid positive comments on the economy from the Federal Reserve. The Fed announced it would raise the benchmark lending rate by a quarter percentage point and continue a "measured" pace of further rate hikes. The FOMC's upbeat comments also reassured investors that economic growth was continuing, with inflation well-contained. The Dow Jones Industrial Average closed up 38 points at 10,676, with General Electric (NYSE:GE) leading the blue-chip group higher after a positive profit forecast. The NASDAQ Composite Index climbed 10 points to 2,159 on the heels of Intel's (NASDAQ:INTC) bullish first-quarter outlook. The S&P 500 Index added 4 points to 1,203, its first close above the key 1,200 level since mid-2001. Winners enjoyed a 3 to 2 advantage over losers on both major exchanges. Volume was 1.5 billion on the Big Board, and 2.2 billion on the NASDAQ. Bond prices climbed higher amid expectations that inflation remains under control. The yield on the benchmark 10-year note ended at 4.13%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 12/12/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 40.50 30.41 DEC 35.0 36.6 0.23 36.40 (1.39) Closed WLP 113.90 113.10 DEC 100.0 105.0 0.50 104.50 0.50 Open CECO 35.00 40.85 DEC 25.0 30.0 0.60 29.40 0.60 Open EYET 45.64 42.87 DEC 30.0 35.0 0.45 34.55 0.45 Open XMSR 36.13 38.64 DEC 30.0 32.5 0.25 32.25 0.25 Open OIH 84.45 81.08 DEC 75.0 80.0 0.60 79.40 0.60 Open DWA 39.58 37.75 DEC 30.0 35.0 0.50 34.50 0.50 Open DRIV 38.31 41.80 DEC 30.0 35.0 0.35 34.65 0.35 Open NBR 52.72 49.57 DEC 47.5 50.0 0.40 49.60 (0.03) Closed NUE 54.05 49.99 DEC 45.0 50.0 0.45 49.55 0.44 Closed MRVL 31.53 33.61 JAN 25.0 27.5 0.40 27.10 0.40 Open CFC 33.21 35.18 JAN 27.5 30.0 0.30 29.70 0.30 Open EBAY 112.20 114.41 JAN 95.0 100.0 0.60 99.40 0.60 Open CYMI 34.11 29.38 JAN 25.0 30.0 0.50 29.50 (0.12) Open? LEND 46.85 47.94 JAN 35.0 40.0 0.50 39.50 0.50 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss Shares of Vimplecom (NYSE:VIP) plunged this week after the firm said it could owe up to $157 million in back taxes and penalties, based on preliminary conclusions of a review of its 2001 filing. The abrupt decline left traders with little opportunity to make effective adjustments, but the long (put) option in the spread limited potential losses. Nabors Industries (NYSE:NBR) and Nucor (NYSE:NUE) should have been closed early by conservative traders. Cymer (NASDAQ:CYMI) is a candidate for exit after the retreat in semiconductor shares. The position in Wellpoint (NYSE:WLP) is expected to expire at maximum profit, however the summary has not been adjusted to reflect the recent merger with Anthem (NYSE:ATH). CALL-CREDIT SPREADS Stock Pick Last Mon L/C S/C Credit CB G/L Status SEPR 45.44 48.97 DEC 55.0 50.0 1.00 51.00 1.00 Open? TTWO 33.24 33.71 DEC 40.0 37.5 0.30 37.80 0.30 Open GM 39.97 38.93 DEC 45.0 42.5 0.30 42.80 0.30 Open BSX 34.70 34.26 DEC 40.0 37.5 0.30 37.80 0.30 Open MXIM 42.50 42.10 DEC 50.0 45.0 0.70 45.70 0.70 Open BIIB 58.31 65.53 DEC 70.0 65.0 0.50 65.50 (0.03) Closed INSP 49.17 48.26 DEC 65.0 60.0 0.40 60.40 0.40 Open AMZN 38.55 39.05 DEC 45.0 42.5 0.30 42.80 0.30 Open OSIP 58.16 46.97 DEC 70.0 65.0 0.55 65.55 0.55 Open LXK 84.82 88.19 DEC 95.0 90.0 0.45 90.45 0.45 Open MBT 135.99 127.99 DEC 155.0 150.0 0.55 150.55 0.50 Open TASR 23.50 27.03 DEC 28.8 27.5 0.15 27.65 0.15 Open? SINA 37.93 35.71 JAN 50.0 45.0 0.60 45.60 0.60 Open LLY 53.33 55.04 JAN 65.0 60.0 0.65 60.65 0.65 Open NVLS 26.94 27.81 JAN 32.5 30.0 0.35 30.35 0.35 Open CCU 33.15 33.30 JAN 40.0 35.0 0.50 35.50 0.50 Open UVN 29.06 27.90 JAN 35.0 30.0 0.80 30.80 0.80 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss The position in Biogen-Idec (NASDAQ:BIIB) became a candidate for early exit after Thursday's rally. Sepracor (NASDAQ:SEPR) and Taser (NASDAQ:TASR) remain on the "watch" list. Electronic Arts (NASDAQ:ERTS) has previously been closed to limit losses. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status DE 69.26 70.56 DEC 70.0 70.0 4.50 4.25 Open? TK 54.45 45.24 DEC 55.0 55.0 3.75 10.25 Open? BTU 79.17 76.09 DEC 80.0 80.0 5.50 6.95 Open? The speculative position in Teekay Shipping (NYSE:TK) has offered nearly a 200% gain in only two weeks. Peabody Energy (NYSE:BTU) provided a favorable "early-exit" opportunity during Wednesday's session. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MRVL - Marvell Technology $34.89 *** New Multi-Year High! *** Marvell (NASDAQ:MRVL) designs, develops and markets integrated circuits utilizing proprietary communications mixed-signal and digital signal processing technology for communications-related markets. Marvell offers its customers a wide range of integrated circuit solutions using proprietary communications mixed-signal processing and digital signal processing technologies. Marvell's product groups include: storage products, consisting of a variety of read channel, system-on-chip and preamplifier products; and broadband communications products, consisting of a variety of transceiver products, switching products, internetworking products and wireless LAN products. MRVL - Marvell Technology $34.89 PLAY (conservative - bullish/credit spread): BUY PUT JAN-27.50 UVM-MY OI=490 ASK=$0.30 SELL PUT JAN-30.00 UVM-MF OI=599 BID=$0.55 INITIAL NET-CREDIT TARGET=$0.30-$0.35 POTENTIAL PROFIT(max)=14% B/E=$29.70 __________________________________________________________________ VRTS - Veritas Software $27.38 *** Symantec Buyout Target? *** Veritas Software (NASDAQ:VRTS) is an independent supplier of storage software products and services. Storage software includes storage management and data protection software, as well as clustering, replication and storage area networking software. The company offers solutions to help solve the problems of data intensive business environments by providing essential storage software and storage virtualization solutions that enables its customers to protect and access their business-critical data. The company's products operate across computing environments ranging from the desktop computer to the large enterprise data center, including storage area networks, to protect critical data, to provide high availability and to guard for disasters. VRTS - Veritas Software $27.38 PLAY (speculative - bullish/credit spread): BUY PUT JAN-22.50 VIV-MX OI=5883 ASK=$0.25 SELL PUT JAN-25.00 VIV-ME OI=12945 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.45-$0.50 POTENTIAL PROFIT(max)=22% B/E=$24.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BEARISH PLAYS - CREDIT SPREADS All of these positions are favorable candidates for "bear-call" credit spreads, based on the current price or trading range of the underlying issue and its recent technical history or trend. The probability of profit from these positions may be higher than other plays in the same strategy, due to disparities in option pricing. However, current news and market sentiment will have an effect on these issues, so review each play individually and make your own decision about its future outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TTWO - Take-Two Int. Software $33.45 *** Stuck In A Range? *** Take-Two Interactive Software (NASDAQ:TTWO) is an integrated developer, marketer, distributor and publisher of interactive entertainment software games and accessories for the personal computer, PlayStation, PlayStation2, Nintendo Game Boy Color, Nintendo GameCube, Nintendo Game Boy Advance and the Xbox. The company publishes and develops products through various wholly owned subsidiaries including Rockstar Games, Rockstar Studios, Gathering of Developers, TalonSoft, Joytech, PopTop, Global Star and under the Take-Two brand name. The company maintains sales and marketing offices in Cincinnati, New York, Toronto, London, Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland. TTWO - Take-Two Int. Software $33.45 PLAY (conservative - bearish/credit spread): BUY CALL JAN-40.00 TUO-AH OI=1979 ASK=$0.30 SELL CALL JAN-37.50 TUO-AU OI=6132 BID=$0.55 INITIAL NET-CREDIT TARGET=$0.30-$0.35 POTENTIAL PROFIT(max)=14% B/E=$37.80 __________________________________________________________________ MSTR - MicroStrategy $56.22 *** Sell-Off Underway! *** MicroStrategy (NASDAQ:MSTR) is a global leader in the increasingly critical business intelligence software market. Large and small firms alike are harnessing MicroStrategy's business intelligence software to gain vital insights from their data to help them proactively enhance cost-efficiency, productivity and customer relations and optimize revenue-generating strategies. The firm's business intelligence platform offers exceptional capabilities that provide organizations, in virtually all facets of their operations, with user-friendly solutions to their data query, reporting, and advanced analytical needs, and distributes valuable insight on this data to users via Web, wireless, and voice. MSTR - MicroStrategy $56.22 PLAY (conservative - bearish/credit spread): BUY CALL JAN-70.00 EOU-AN OI=671 ASK=$0.80 SELL CALL JAN-65.00 EOU-AM OI=875 BID=$1.40 INITIAL NET-CREDIT TARGET=$0.65-$0.75 POTENTIAL PROFIT(max)=15% B/E=$65.65 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 12/12/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 21.87 0.45 5.52% 2.64% VTIV DEC 17.50 17.05 20.00 0.45 5.46% 2.64% IFLO DEC 15.00 14.55 18.71 0.45 6.89% 3.09% ADLR DEC 12.50 12.10 14.44 0.40 6.88% 3.31% UTHR DEC 25.00 24.05 42.96 0.95 9.03% 3.95% RIGL DEC 20.00 19.70 24.74 0.30 4.02% 1.52% NFLD DEC 15.00 14.45 18.74 0.55 8.24% 3.81% RMBS DEC 17.50 16.75 26.45 0.75 9.88% 4.48% AGIX DEC 20.00 19.60 24.22 0.40 4.83% 2.04% ATI DEC 20.00 19.35 20.96 0.65 7.37% 3.36% MRVL DEC 25.00 24.60 33.61 0.40 5.17% 1.63% ELN DEC 22.50 22.15 27.87 0.35 4.93% 1.58% TSRA DEC 25.00 24.35 38.25 0.65 7.97% 2.67% VTS DEC 20.00 19.65 20.00 0.35 4.84% 1.78% ERICY DEC 30.00 29.60 31.81 0.40 3.44% 1.35% RMBS DEC 17.50 16.95 26.45 0.55 10.12% 3.24% TSRA DEC 30.00 29.65 38.25 0.35 4.12% 1.18% NCRX DEC 25.00 24.25 29.44 0.75 8.18% 3.09% IFLO DEC 17.50 17.00 18.71 0.50 7.38% 2.94% NTGR DEC 15.00 14.60 17.14 0.40 6.54% 2.74% ENZ DEC 17.50 17.05 19.23 0.45 6.32% 2.64% CECO DEC 30.00 29.30 40.85 0.70 7.67% 2.39% CRA DEC 12.50 12.20 13.65 0.30 6.11% 2.46% DDS DEC 22.50 22.25 25.83 0.25 4.06% 1.12% SRNA DEC 20.00 19.60 20.74 0.40 5.87% 2.04% RAE DEC 7.50 7.25 7.70 0.25 10.80% 3.45% FXEN DEC 7.50 7.05 10.05 0.45 17.57% 6.38% NVDA DEC 17.50 17.10 23.31 0.40 6.91% 2.34% IDCC DEC 17.50 16.85 20.65 0.65 11.05% 3.86% MCIP DEC 17.50 17.05 19.00 0.45 7.70% 2.64% PLMO DEC 30.00 29.60 39.56 0.40 5.49% 1.35% TINY DEC 12.50 12.15 13.12 0.35 9.97% 2.88% IDCC DEC 17.50 17.20 20.65 0.30 6.57% 1.74% ADLR DEC 12.50 12.25 14.44 0.25 6.86% 2.04% NANO DEC 15.00 14.70 15.31 0.30 6.80% 2.04% ISRG DEC 30.00 29.50 33.94 0.50 6.08% 1.69% DHB DEC 17.50 17.20 18.34 0.30 6.59% 1.74% AMED DEC 30.00 29.35 31.80 0.65 7.53% 2.21% HNT DEC 25.00 24.60 29.00 0.40 5.37% 1.63% UTHR DEC 40.00 39.60 42.96 0.40 4.64% 1.01% ELAB DEC 22.50 22.30 26.76 0.20 4.07% 0.90% CTMI DEC 12.50 12.25 13.37 0.25 8.20% 2.04% DUSA DEC 12.50 12.25 14.24 0.25 8.26% 2.04% MCIP DEC 17.50 17.25 19.00 0.25 6.11% 1.45% RMBS DEC 20.00 19.65 26.45 0.35 7.55% 1.78% ZEUS DEC 20.00 19.70 23.54 0.30 6.48% 1.52% VISG JAN 7.50 7.10 7.72 0.40 7.51% 5.63% GIVN DEC 30.00 29.65 34.39 0.35 5.71% 1.18% RHAT JAN 12.50 12.05 15.85 0.45 6.06% 3.73% MSO DEC 20.00 19.60 26.10 0.40 10.85% 2.04% NKTR DEC 17.50 17.15 18.75 0.35 8.90% 2.04% NANO DEC 15.00 14.75 15.31 0.25 7.69% 1.69% ELAB DEC 25.00 24.65 26.76 0.35 6.45% 1.42% SHOP DEC 25.00 24.70 24.62 (0.08) 0.00% 0.00% NCRX JAN 25.00 24.40 29.44 0.60 4.78% 2.46% NTGR JAN 15.00 14.65 17.14 0.35 4.58% 2.39% RMBS JAN 17.50 17.10 26.45 0.40 4.87% 2.34% TLCV JAN 10.00 9.65 10.42 0.35 6.91% 3.63% WITS JAN 15.00 14.55 16.40 0.45 5.38% 3.09% IDCC JAN 17.50 16.95 20.65 0.55 6.62% 3.24% NVTL JAN 17.50 17.20 22.18 0.30 3.95% 1.74% MSO JAN 17.50 17.05 26.10 0.45 5.62% 2.64% Positions in Seachange International (NASDAQ:SEAC), which is currently profitable, and Pan American Silver (NASDAQ:PAAS), have previously been closed to limit potential losses. Rae Systems (NYSE:RAE), Shopping.com (NASDAQ:SHOP), Veritas DGC (NYSE:VTS) and Nanometrics (NASDAQ:NANO) are candidates for early exit. Allegheny Technologies (NYSE:ATI), LM Ericsson (NASDAQ:ERICY), Harris & Harris (NASDAQ:TINY) and TLC Vision (NASDAQ:TLCV) are on the "watch" list. NAKED CALLS Stock Strike Strike Break Current Gain Max Simple Symbol Month Price Even Price (Loss) Yield Yield MNST DEC 30.00 30.60 28.25 0.60 4.91% 1.96% FOSL DEC 30.00 30.50 25.00 0.50 4.16% 1.64% SLAB DEC 35.00 35.55 31.77 0.55 4.84% 1.55% APPX DEC 35.00 35.60 32.36 0.60 7.73% 1.69% DIGE DEC 25.00 25.30 24.21 0.30 6.05% 1.19% MDCO DEC 30.00 30.35 27.42 0.35 5.01% 1.15% BOBJ DEC 25.00 25.40 22.90 0.40 5.96% 1.57% ENZN DEC 20.00 20.55 14.84 0.55 14.84% 2.68% TACT DEC 25.00 25.40 21.29 0.40 8.50% 1.57% AMLN DEC 25.00 25.25 21.38 0.25 5.35% 0.99% ATMI DEC 25.00 25.40 23.78 0.40 5.74% 1.57% CELG DEC 30.00 30.45 28.84 0.45 6.31% 1.48% JBLU DEC 25.00 25.30 24.26 0.30 4.99% 1.19% AGIX DEC 30.00 30.35 24.22 0.35 8.24% 1.15% JUPM DEC 20.00 20.20 19.36 0.20 6.98% 0.99% CYBX DEC 22.50 22.85 18.54 0.35 11.25% 1.53% SNIC DEC 20.00 20.35 20.08 0.27 5.98% 1.72% PLAB DEC 20.00 20.30 16.53 0.30 8.40% 1.48% ARO DEC 30.00 30.55 29.40 0.55 8.89% 1.80% KYPH DEC 25.00 25.50 23.30 0.50 9.20% 1.96% MAY DEC 30.00 30.30 28.68 0.30 5.24% 0.99% TACT DEC 25.00 25.30 21.29 0.30 10.43% 1.19% APPX DEC 32.50 32.95 32.36 0.45 9.99% 1.37% OSIP DEC 55.00 55.65 46.97 0.65 13.28% 1.17% Special Tuesday Note: Kyphon (NASDAQ:KYPH), Monster Worldwide (NASDAQ:MNST) and Jupitermedia (NASDAQ:JUPM) are candidates for early exit after the recent rally. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 ADLR 15.60 JAN 12.50 UAH-MV 0.65 1507 11.85 39 4.3% 13.4% RMBS 27.11 JAN 20.00 BNQ-MD 0.55 6615 19.45 39 2.2% 7.2% IDCC 21.28 JAN 17.50 DAQ-MW 0.45 7144 17.05 39 2.1% 6.8% NFLD 20.41 JAN 17.50 DHQ-MW 0.45 292 17.05 39 2.1% 6.2% NKTR 19.46 JAN 17.50 QNX-MW 0.45 126 17.05 39 2.1% 5.6% NCRX 29.69 JAN 25.00 QNY-ME 0.45 283 24.55 39 1.4% 4.6% ALXN 23.83 JAN 20.00 XQN-MD 0.35 0 19.65 39 1.4% 4.5% AMLN 22.74 JAN 20.00 AQM_MD 0.35 4789 19.65 39 1.4% 4.1% 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. _________________________________________________________________ ADLR - Adolor $15.60 *** Speculation Only! *** Adolor (NASDAQ:ADLR) is a biopharmaceutical firm specializing in the discovery, development and marketing of prescription pain management products. Entereg, its lead product candidate, is being developed to manage postoperative ileus, a unique 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 the opioid bowel dysfunction, which can negatively impact the quality of life of patients using opioid analgesic products, such as morphine, for treating pain. The firm's next product candidate is a sterile lidocaine patch in clinical development for treating postoperative incisional pain. ADLR - Adolor $15.60 JAN 12.50 UAH-MV LB=0.65 OI=1507 CB=11.85 DE=39 TY=4.3% MY=13.4% _________________________________________________________________ RMBS - Rambus $27.11 *** Pure Premium-Selling! *** Rambus (NASDAQ:RMBS) creates a range of chip-to-chip interface technologies that enhance the performance and cost-effectiveness of its customers' semiconductor and system products. The firm's interface solutions can be grouped into two major categories, memory interfaces and logic interfaces. Memory interfaces provide an interface between memory chips and logic chips. Logic interface solutions provide an interface between two logic chips. These advanced chip-to-chip interface solutions increase the data transfer rate between semiconductor chips, improving performance and reducing systems costs. RMBS - Rambus $27.11 JAN 20.00 BNQ-MD LB=0.55 OI=6615 CB=19.45 DE=39 TY=2.2% MY=7.2% _________________________________________________________________ IDCC - InterDigital Comm. $21.28 *** New Trading Range? *** InterDigital Communications (NASDAQ:IDCC) designs, develops and places into operation a variety of advanced wireless technologies, systems and products. IDCC, through its major involvement in the standards bodies and incubation efforts, monitors emerging technologies being developed to deliver voice and data in a wireless environment. Since 1999, it has been focusing on its product development on the air interface technology, referred as wideband code division multiple access (WCDMA), is comprised of two duplexing methods, frequency division duplex (FDD) and time division duplexing (TDD). IDCC - InterDigital Comm. $21.28 JAN 17.50 DAQ-MW LB=0.45 OI=7144 CB=17.05 DE=39 TY=2.1% MY=6.8% _________________________________________________________________ NFLD - Northfield Labs $20.41 *** Rally Mode! *** Northfield Laboratories (NASDAQ:NFLD) is engaged in the production of a safe and effective alternative to transfused blood for use in the treatment of acute blood loss. Its PolyHeme blood substitute product is a solution of chemically modified hemoglobin derived from human blood. PolyHeme simultaneously restores lost blood volume and hemoglobin levels and is designed for rapid, massive infusion. PolyHeme requires no cross-matching and is therefore immediately available and compatible with all blood types. It has an extended shelf life compared to blood. Northfield Labs purchases indated and outdated blood from The American Red Cross and Blood Centers of America for use as the starting material for PolyHeme. It uses a proprietary process of separation, filtration and chemical modification to produce PolyHeme. NFLD - Northfield Labs $20.41 JAN 17.50 DHQ-MW LB=0.45 OI=292 CB=17.05 DE=39 TY=2.1% MY=6.2% _________________________________________________________________ NKTR - Nektar Therapeutics $19.46 *** Entry Point? *** Nektar Therapeutics (NASDAQ:NKTR) makes drug delivery products based on its portfolio of technologies and expertise designed to improve drug performance throughout the drug development process. The company has developed three distinct technology platforms: Nektar Molecule Engineering, which uses advanced PEG (polyethylene glycol)ylation and PEG-based delivery systems to enable drug performance, Nektar Particle Engineering, which uses the company's expertise in pulmonary particle technology and supercritical fluids technology to design and manufacture optimal drug particles and Nektar Delivery Solutions, which uses advanced systems for pulmonary drug administration to improve therapeutic outcomes. NKTR - Nektar Therapeutics $19.46 JAN 17.50 QNX-MW LB=0.45 OI=126 CB=17.05 DE=39 TY=2.1% MY=5.6% _________________________________________________________________ NCRX - NeighborCare $29.69 *** A Healthy Stock! *** NeighborCare (NASDAQ:NCRX), formerly Genesis Health Ventures, is a provider of institutional pharmacy services in the United States. The company provides pharmacy services for beds in long-term care facilities in the U.S. and the District of Columbia. Its pharmacy operations consist of 62 institutional pharmacies, 32 community-based professional retail pharmacies and 20 on-site pharmacies, which are located in customers' facilities and serve only customers of that facility. In addition, NeighborCare operates 16 home infusion, respiratory and medical equipment distribution centers. NCRX - NeighborCare $29.69 JAN 25.00 QNY-ME LB=0.45 OI=283 CB=24.55 DE=39 TY=1.4% MY=4.6% _________________________________________________________________ ALXN - Alexion $23.83 *** Testing 2004 Highs! *** Alexion Pharmaceuticals (NASDAQ:ALXN) is engaged in the discovery and development of therapeutic products to treat patients with a wide array of severe disease states, including hematologic, cardiovascular and autoimmune disorders. The company devotes substantially all of its resources to drug discovery, research and product and clinical development. The company's significant expertise in the development of antibody therapeutics, as well as in understanding and inhibiting the aberrant manifestation of a component of the human immune system known as complement. ALXN - Alexion $23.83 JAN 20.00 XQN-MD LB=0.35 OI=0 CB=19.65 DE=39 TY=1.4% MY=4.5% _________________________________________________________________ AMLN - Amylin Pharmaceuticals $22.74 *** In A Trading Range? *** Amylin Pharmaceuticals (NASDAQ:AMLN) is a biopharmaceutical company engaged primarily in the discovery, development and commercialization of drug candidates for the treatment of diabetes, obesity and cardiovascular disease. The company has two lead drug candidates in late stage development for the treatment of diabetes, SYMLIN (pramlintide acetate) and Exenatide. Amylin is hoping for tentative FDA approvals for Symlin and Exenatide in March or April 2005. AMLN - Amylin Pharmaceuticals $22.74 JAN 20.00 AQM_MD LB=0.35 OI=4789 CB=19.65 DE=39 TY=1.4% MY=4.1% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ AFCO - Applied Films $20.12 *** New Downtrend? *** Applied Films (NASDAQ:AFCO) is a provider of thin-film deposition equipment to the flat panel display industry, the architectural, automotive, solar glass and web packaging industry. The firm's high-volume, large-area deposition systems are used by customers to deposit thin-films that enhance the material properties of the base substrate. These thin-films provide conductive, electronic, reflective, filter, barrier and other properties that become critical elements of the composition of its customers' products. Additionally, Applied Films sells coated glass substrates to the FPD industry. These products are used as a component in the manufacturing of liquid crystal displays. AFCO - Applied Films $20.12 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JAN 22.5 UOF-AX 186 0.30 22.80 3.9% 1.3% TS _________________________________________________________________ PDII - PDI Incorporated $23.73 *** Pure Premium-Selling! *** PDI (NASDAQ:PDII) is an innovative healthcare sales and marketing provider to biopharmaceutical and medical devices companies and and the diagnostics industry. Its three business units offer service and product-based capabilities for companies seeking to maximize profitable brand sales growth. The three units include PDI Pharmaceutical Products, PDI Sales and Marketing Services, and PDI Medical Devices and Diagnostics. PDII - PDI Incorporated $23.73 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JAN 30 PKU-AF 141 0.30 30.30 4.6% 1.0% _________________________________________________________________ SYMC - Symantec $27.45 *** A Big "Down" Day! *** Symantec (NASDAQ:SYMC) provides content and network security software and appliance solutions to enterprises, individuals and service providers. The firm provides client, gateway and server security solutions for virus protection, firewall and virtual private network, security management, intrusion detection, e-mail filtering and Internet content, remote management technologies and security services to enterprises and service providers worldwide. The company views its business in five operating major segments: enterprise security, enterprise administration, consumer products, services and other activities. SYMC - Symantec $27.45 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JAN 32.5 SYQ-AZ 10807 0.50 33.00 6.1% 1.5% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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
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