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Daily Newsletter, Tuesday, 12/14/2004

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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. All that worry last week about Santa's failed
appearance has been forgotten.

Time is slipping away for the end of year renewal 
special. Don't wait for the last minute!

Buy the dips until the trend changes. 

Jim Brown
Editor


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FUTURES MARKETS
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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
*****************

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


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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


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********************
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 =



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

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

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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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. 



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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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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