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  Jeff Bailey   4/19/02,  11:00:52 PM
Ahhhh... the good old days! Have a great weekend!

Hopefully years from now we'll all be saying... I remember one day, I saw this big gap higher in Oxford Health on volume......

  Jeff Bailey   4/19/02,  10:58:52 PM
Harken Energy (AMEX:HEC) $1.62 -4.83% ... not profiling this one. But a little "lesson" on how you sometimes get a little lucky with some good research.

Not too long after SEV started making its move back in 1997, I saw an obscure volume spike one day in a stock by the name of Harken Energy (AMEX:HEC).

Called a client of mine that was working on the SEV sell in Columbia and asked him if he ever heard of Harken Energy (HEC). He asked me why I was curious. I asked him.... "why do you think." He told me that it just so happened that Harken (HEC) had the lease block just south of where they were drilling the SEV well. Well... it didn't take me too long to put things together and that volume spike that day made some sense. The MARKET put 2 and 2 together also. Did better on HEC and bought the break higher at $2.10 and sold too soon at $6 (it topped at $7.50) and eventually they finished the well, produced a little oil, but a lot more salt water.

  Jeff Bailey   4/19/02,  10:50:30 PM
Seven Seas Petroleum (AMEX:SEV) ... $3.02 +34.82% ... I traded this one back in 1997 when it was listed on the Toronto Stock Exchange and made some decent money from $3-$10. Got out way to early on its way to $30.

I recognized the symbol "SEV" just tonight. Hmmmm.... I thought. Another potential discovery in Columbia?

I mention this one for aggressive bulls only! Smaller oil/gas companies/stocks are very much like smaller gold mining companies/stocks. The MARKET is never sure just what lays at the bottom of the well/mine and speculation of riches can have investors doing crazy things to a stocks price.

In 1997, I had been out of the oil industry for about 3-years, but still knew some people in the business. Had a contact that was drilling the SEV well in Columbia back then. He had no more information than what was ever given to the public, but the initial well tests back in 1997 were showing some good flows and pressures from an initial exploration well.

Now I see old Seven Seas Petroleum as today's biggest market gainer.

Risk capital only. Link

  Jeff Bailey   4/19/02,  10:15:18 PM
Test your preception of risk If I asked you what sector was more "overbought" or "oversold" based on the bullish % data, which sector between healthcare and semiconductors would you think is more more bullish as it relates to the scale of 0%-100% bullish?


According to Dorsey/Wright and Assoc. Including today's trading, the "healthcare" group as a whole, is currently "bull confirmed" at 56% bullish. The semiconductor sector is currently "bull alert" at 54%.

In essence, "risk" for the bulls is just about even, but the "healthcare" group is actually showing a "cycle" of bullishness that is greater than the semiconductors.

While the bullish percent data doesn't necessarily tell us anything about price direction, it does tell us that there is still a great deal of potential bullishness in both the healthcare and semiconductor sectors.

When we begin looking at some of the bullish vertical counts, some of them may have seemed somewhat "unreasonable" a couple of months ago, but subscribers having seen the HMO Index (HMO.X) and its powerful surge in recent months, and begin to see some moves in the RXH.X and that subset of the healthcare sector, begin to understand the upside potential that still exists.

  Leigh Stevens   4/19/02,  7:45:06 PM
Subscriber QUESTION: "Can you tell us how to set up our qcharts like you talked about the slow stocs last night. I can't figure it out. I would prefer to do the longer trades as you share rather than these intraday trades that make me so nervous. Your style is different from what we have been used to hearing. I do understand we have to be rather quick these days with all the up and down daily swings, but so far I have been doing quite well."

RESPONSE: Assuming you use Q-charts here is what you do. (Other applications will do it a bit differently.) Once you apply a "study" like stochastics to a chart -right click on it and you can choose various "inputs" like LENGTH, smoothing, etc. The only ones I change is Length usually. So, if you highlight the "default" setting which is probably "14" -- enter instead 21; this gives you an hourly reading that is not whipping back and forth as much. On the DAILY charts, 14 is a good setting if you are looking for the occasional overbought or oversold readings that comes along maybe every other week. On Weekly charts, 8 is a good setting. But, experiment too.

  Leigh Stevens   4/19/02,  6:30:55 PM
TECHNICAL GLITCH - CHARTS last night (4/18)in my Option Investor Wrap up; Index Trader and Sector Trader, with one exception, all had WRONG! charts. Exception was FIRST chart shown (S&P 500) in Option Investor wrapup (Title: "WHIPPY") which was OK. All charts are NOW correct. Half the time is spent sometimes getting the right chart illustration so its a royal bummer not to get the right ones out on the site. So, like many of you, I will be checking the articles when I get home. And, we have meted out 50-lashs with a wet noodle to the technical person who had a bad night last night with technical problems. Hey, if he thinks this was trying, he should try trading this market!

  Leigh Stevens   4/19/02,  6:04:18 PM
Subscriber QUESTION: "I tend to favor oex & spx, and there seems little conviction for strong upside; would you favor just waiting for a move a little above present levels then go w/puts,(for example wait for a move to 655 in oex and buy puts @650) or go w/650 calls now and switch to puts at the top of the current range/670 2) if I were to look for a good 'substitute' for oex what would you suggest in stock puts/calls..." RESPONSE:1.) I think you can play OEX calls soon; switch to puts in 590-600 area if reached. Calls look good if OEX sucessfully re-tests 550 area; 2.) RE OEX substitutes - MSFT looks interesting here - rallying from its up trendline. If it broke out above 67-68, stock would then project to 90 area. Walmart (WMT) could be a put play if it reached 70, at prior top and then stalled, resulting in double top; JNJ Johnson & Johnson is one of best performers - buy calls on a pullback to 60 area.

  Leigh Stevens   4/19/02,  5:16:29 PM

RESPONSE: BMY(Bristol)has managed to rally, but from $30, which it reached after an almost stright line drop from $51 -- the stock was in free fall on huge volume. Some would call it a "broken" stock -- at a minimum, these kind of patterns say that a long period of base building (i.e., sideways) is needed before this stock would rally much. Strong resistance and selling will be likely first at 34, then 39.25 and then in 50-51 area. Recent rally is about the best upside I see for a while.

JPM is another story, as stock has broken out to upside above multimonth down trendline on good volume. Last reaction low turned up from 50-day average and yesterday's advance above 200-day. Looks like stock has decent upside potential -- next objective: $43-45, based on a measured move equal to first leg up.

  Jeff Bailey   4/19/02,  5:09:14 PM
Cutter & Buck (CBUK) $7.70 +6.20% ... Company announces that CEO and Chairman Harvey Jones resigns, company lowers revenue guidance to $52-$54 million, no consensus available on revenue and only 1 analyst covering stock with EPS of $0.24 for April quarter. Link

  Jeff Bailey   4/19/02,  5:03:32 PM
Tyco Intl. (TYC) $29.89 -4.04% ... Bloomberg saying that a TYC spokesman said the company "isn't under investigation by the SEC. Period." This denial was in response to and SEC Insight report before the open speculating that the company was being investigated by the SEC.

  Jeff Bailey   4/19/02,  5:01:30 PM
WorldCom (WCOM) $5.95 -6% ... stock active and lower in after-hours at $5.00 (-15.9% from close) after warning on revenues of $21-$21.5 billion versus Multex consensus of $22 billion, blaming economic conditions, lower voice volumes, Internet and data network reductions by enterprise customers.

  Jeff Bailey   4/19/02,  4:54:57 PM
Industrial Metals Q-charts users that are interested in a chart of industrial metals might find the Goldman-Sachs Industrial Metals Sub Index (GYX) chart useful. Link

Kind of looks like PD, but on a different scale doesn't it? Link

  Jeff Bailey   4/19/02,  4:46:28 PM
Futures traders! Not sure how many commodity futures trader we have, I know "Guitar George" like to dabble in them, but I think a futures trader that knows what he/she is doing and understands how to control risk in the commodity futures area shold take a look at Bean Oil futures from the bullish side.

This past weekend, I was down in the 4-corners area of Colorado and talking to a bean farmer (he was looking for Turkey's too, said he only saw one and started laughing at me, not sure what was so funny) but he babbled something about drought conditions and how it was going to wipe out his bean crop.

So, I decided just now to look at some commodity charts from Dorsey/Wright and I see all these triple-top buy signals in the bean oil contracts. One that's very compelling is the Sept. 2002 contract that has it recently pulling into bullish support trend at $16.80, then reversing into current column of X and triggering a quadruple-top buy signal at $17.30 ($0.10 box scale) and sets up a potential spread quadruple-top with a trade at $17.60. Bullish vertical count is $18.70.

  Jeff Bailey   4/19/02,  4:28:01 PM
I tell you what! With VIX.x so low, a SanDisk June/July $20 straddle looks compelling. Check out the p/f chart of SNDK. Where do you see a potential short-squeeze taking place? ($24?) or potential drop? ($18.50). Link

Now, I think the proper strategy for an option's trader is to play the straddle. Here's why. I can almost see a sneaky "bear trap" take place with a trade at $18.50. You know, make the stock look like she's breaking down, suck in some weak holders and bears, create some liquidity, then shove it right back up a bears throat and take her higher, get a squeeze going on the break above $24.

Now, if that scenario for a bear trap is wrong (I've been wrong lots of times) then a total collapse has the put side of the trade working nicely.

However, I do think the "bear trap" scenario is in play as the NASDAQ-100 bullish percent continues to show some internal strength. Best time for a "bear trap" is just after the bullish percent reverses up.

I know we mentioned this one as bullish on the break of the bullish triangle back at $16.50. Stock has traded sideways since March from $19-$23 and been consolidating. Interesting technicals to be looking to play in coming sessions.

  Jeff Bailey   4/19/02,  4:18:12 PM
Wow! ... Iomega (IOM) $13.49 +19% ... was a stock one of the playwriters for PI had been looking at as bullish (Kent is his name). Stock simply blew up today.

This has me looking at SanDisk (SNDK) $20.01 -1.71% as decent trade setup for Monday off an "inside day". Never sure, but fishy close at $20.01, which really is close to the $20.00 strike and noting that the April $17.50, $20, $22.50 had pretty even distribution of open interest and $20.01 close today is right in the middle of that range.

Now that expiration is over, we might see a "release" of pressure perhaps applied due to positioning around expiration.

We've commented on how some of these "silly" computer components stocks like WDC, SNDK and now IOM have really acted strong. Almost as if there's some type of "boom" taking place or getting ready to in the PC component area. WDC=hard drives, SNDK=flash memory and IOM=zip drives.

  Leigh Stevens   4/19/02,  4:08:20 PM
Subscriber QUESTION: "I bought 3 OEX May 540 Puts for $8 each. I believe they went as high as 15. I decided to sell one for 12.50, but I still have the other two. They've been trading between 9 and 11.

You seem to be indicating somewhat of a bottom here, however you have noted some expected weakness in the OEX. I guess I'm a bit confused as to whether I should dump them in favor of calls or keep them, while waiting for the VIX to go back up. What's your opinion of this strategy? I know you can't give specific trade advice, but any input would be helpful.

RESPONSE: I assess the market at this juncture as having more upside potential than downside as we appear to just up from the low end of a trading range for ALL the indices. However, within the indices OEX has been weaker than the S&P 500, or we could say SPX has held up better on the recent decline; i.e., SPX at recent low was well above (30 pts) its prior low, whereas OEX made an approximate double bottom.

  Jeff Bailey   4/19/02,  4:07:09 PM
NASDAQ-100 Bullish % ($BPNDX) despite yesterday's downward jolt from plane crash news, we actually saw a net gain of stocks to buy signals on their point/figure chart. This is bullish divergence and still hint of internal strengthening. Last night's reading was 45% bullish. Link

AMAT is one of the 45 stocks showing a buy signal and boy what a buy signal to be playing at the triple-top of $25. Vertical count is bullish to $40 so some upside still left!

  Jeff Bailey   4/19/02,  4:01:52 PM
AMAT ... today was "inside day" for stock. This may be important near-term levels for shorter-term traders. A break to the upside on Monday could have MACD on daily crossing above signal and that could drive the stock. Still a favorable supply/demand picture with rather limited overhead supply. Link

  Jeff Bailey   4/19/02,  3:58:24 PM
Applied Materials (AMAT) $26.45 -1% ... stock just sitting here. Yesterday I profiled this one as bullish at $26.50, but thinking a trader with limited capital that has no money exposed to healthcare stocks might be better off in healthcare stocks right now than trying to fight some of the "concern" with big technology.

However, if I were looking for technology, then AMAT is top on my list for bulls in this area.

  Jeff Bailey   4/19/02,  3:48:43 PM
Oh My! Cardinal Health (CAH) blowing up! Broke that short-term trend from the bar chart like a hot knife cuts butter. $72.10 +2.63%

I think we were right that day that the stock dropped rather sharply to that triple-top near $68 that bears short below the $68 level would hold her together then drive her higher on further sector bullishness. Yesterday's trigger at $70 looking powerful! Link

  Jeff Bailey   4/19/02,  3:45:00 PM
RXH.X I want to spend a little more time and better analysis rather than just throwing out some ideas right now. 15-minutes shouldn't make or break us.

I do like that UHS Link though. I'm making some comparisons with its triple-top and the spread triple-top of THC Link .

If UHS does what TCH did, then I'm thinking the UHS July $50 isn't that bad of a bet. Just don't go overboard. Lots of stocks to look at and will be some good trades in the group on pullbacks so we will want to have some cash on hand. Just keep the cash limited in technology is kind of my thinking.

  Jeff Bailey   4/19/02,  3:38:18 PM
Jeff, PVN was featured a few months ago by Jim when it was around 2~3. Pretty big move to $8.13 since then. What is your take on PVN now please?

Well, I think I covered this before, but glad to do it again. I've simply taken a "fitted" retracement from $2.01 to $12.40 ($12.40 is at the upper end of the gap). What this does is give us a feel for what an institutional trader might be trading. The 50% level at $7.20 does a great job perhaps in us understanding why the stock opened at/near that level on 10/19/01 gap lower and then why perhaps the stock fell all the way to $2.01 at the low. Now we see how the 38.2% came into play at $5.97, then 50% again at $7.20 and now 61.8% at $8.43 serving as resistance. I think a bull is fine in the stock, but assessing risk to a stop below the 50% level of $7.20. A break above 61.8% retracement of $8.43 (lets say $8.51 to be safe) then further provides some upside in the "gap" which is basically an area void of supply.

Even above $7.20 we're in the "gap" area and right now it simply looks like the stock is digesting gains from the lows. This is normal during a time of profit taking. Be patient and wait for the break.

One reason the stock may also have "stalled out a bit" and why we're seeing some profit taking is that the bullish vertical count from the p/f chart dating clear back to December is $9.50. Hmmm... that must have been when Jim profiled it as bullish. Good trade so far!

Maybe Jim's a convert to p/f charting! Sometimes he kids me about my X and O charts.

  Jeff Bailey   4/19/02,  3:16:14 PM
Tenet Health (TCH) $73.72 +2.23% ... a little too extended here, but I think we profiled this as bullish back near $64 and again at $67 on the spread triple. Bullish vertical count is $103 so still a little upside left (grin.) Link

  Jeff Bailey   4/19/02,  3:13:27 PM
Universal Health (UHS) $46.83 +4.85% ... stock recently broke a triple-top at $44 and looks strong. Looks good for bullish trader in the July 45 Calls (UHSGI) $4.30 or the July $50 Calls (UHSGJ) $1.45. Link

  Jeff Bailey   4/19/02,  3:10:45 PM
Real quick... lets take a look at some RXH.X components that look decent for bullish trades here. I'm talking as it relates to the 03:00 intraday update that is on its way.

  Eric Utley   4/19/02,  2:54:49 PM
Hey Eric, SII is back up near its quad top at $69. From your commentary on Monday, are you still thinking this is a good place to short?

I've been battling with establishing a bearish position in Smith International (NYSE:SII) after the recent rebound to resistance Link , but haven't done anything yet. I actually had the trade entered into my browser yesterday, but didn't pull the trigger.

I really like the ease of risk management here, near the $69 level. But something is starting to rub me the wrong way with the trade. Each time a stock tests resistance (or support) that level grows inherently weaker. That's because supply (or demand) is reduced with each trade at that level.

In addition to that little technical tidbit, there have been a lot of variables enter the energy market this week, such as the ANWR legislation, Venezeula, and the Iraqi oil embargo. Like I told a reader earlier today, SII isn't the worst short in this market, but it's far from the best.

  Eric Utley   4/19/02,  2:45:15 PM
Hi Eric, BBH has been dancing around 110 level for few days now. Also it was inside day trade on 4/15 with a break upside. What are your thoughts on possible move upside from here?

If we're talking about the Biotech Holdrs (AMEX:BBH), we have to address the Biotech Index (BTK.X), which is off by about 1 percent today.

The BTK broke above a double-top at 484 Link on Tuesday. But as you can see on that chart, the bearish resistance line is coming into play at 515. Using that line, I think that the upside is pretty limited in the BTK from here. What's more, managing your downside risk is more difficult from here.

The actionable levels in the BTK (through using the BBH) right now are 450 and 515, both of which offer much more favorable risk management. At 450 and change, I'm a buyer of weakness with a stop at 450.00. While at 515, I'd be a bear for a trade.

  Jeff Bailey   4/19/02,  2:38:49 PM
Nokia (NOK) $17.39 -3.92% ... two consecutive gap days lower. Hints that the only buyers around at the open are bears locking in short-term gains. Very bearish here. P/F chart also bearish with vertical count of $14. Link

  Eric Utley   4/19/02,  2:38:49 PM
Adaptec (NASDAQ:ADPT) is working against me today to the tune of nearly 4 percent. The stock is back to where I shorted it Wednesday, near the $15 mark. Strength in the Disk Drive Index (DDX.X) isn't helping.

I've been searching for reasons to explain today's rally, in doing so I ran across the 1240 April calls open at the 15 strike. Given today's extremely light volume in the stock, it would be easy for a holder of those calls to bully the stock around.

I've still got a mental stop in at the $15.50 level Link , and will honor that stop no matter the explanation for today's strength.

Since I'm giving up about 50 cents of risk to the upside, I'm looking for downside of at the very least $1.50, which would put the stock near the $13.50 level, where I have a retracement. I'm not really stressing today's pop. Yesterday's breakdown from the previous inside day increased my conviction, and today's strength hasn't done anything to diminish my conviction.

  Jeff Bailey   4/19/02,  2:31:55 PM
Jeff: I bought some OHP at $41 in my retirement account back in March and like the gain, but think things are a little ahead of themselves (correct me if you think I'm wrong) and am thinking of a covered call. What do you think?

Hey... OHP has done a little better than I thought it might too. I looked back at some 03/14/02 commentary Link which shows the retracement a trader might be using.

Stock has broken the 61.8% retracement of $42.22 and I could see an "earnings run" to the 80.9% level of $48.15 as a level to then look at writing a covered call.

OHP is scheduled to report earnings on Wednesday, May 1 before the bell. Other stocks in the sector have been coming in with strong earnings, thus observation that stock still may run. Might want to start working up a strategy on the May $50's (OHPEJ). This would be an assumption that you are a willing seller of the stock at $50 + what you recieve from the sale of the call option (thinking $1.25 if stock is at/near $48).

  Leigh Stevens   4/19/02,  2:28:23 PM
Index/Sector update: The Semiconductor SOX index is worth a seperate comment. SOX may be heading back down toward some key technical support areas, which I peg first at 573 (last at 584). Even more key technical support would be found about 10 points under this in the 562-563 area, at the up trendline on the daily chart. As there are different ways to construct SOX's up trendline, we could also highlight the 557 area as a drop-dead/must-hold level if the SOX is going to start to lead the NAS out of the wilderness and into the hearts the true belivers. Well, techo buff that I am, I guess I am one of them. At least I still hold some of these fallen angels in my 401k -- they were bought cheap, but got cheaper!

  Leigh Stevens   4/19/02,  2:16:51 PM
Index Update: - None of the indexes have been able to get above minor resistances implied by their hourly down trendlines -- not enuf MO. Weakness in the Telemom ($XTC.X), Semiconductors (SOX), Wireless ($YLS.X) Networking ($NWX.X) and Biotechnology ($BTK.X)sectors are a drag on the market. The North American Telecom stocks are the worst hit. SOX is a key tech sector and the Nasdaq especially is less likely to get into gear without the Semi's pulling along.

  Jeff Bailey   4/19/02,  2:15:09 PM
Health Provider Index (RXH.X) $364.83 +1.36% ... technical breakout today above the 08/23/01 highs. Now leaves little overhead supply in the way, unless a trader thinks there's still stock owned dating back to June 1998. If so, don't care as that would be "uneducted money" as it looks now. Link

  Jeff Bailey   4/19/02,  2:04:40 PM
TYC lots of action in the May $30 calls/puts with both showing over 10,000 contracts volume today.

  Jeff Bailey   4/19/02,  1:59:57 PM
Tyco Intl. (TYC) $29.94 -3.88 ... stock under some pressure today on trading floor "rumor" that SEC Insight said before the opening of trading that there may be a new SEC inquiry of TYC. Stock also seems to be finding technical resistance at the 50-day MA. Link

I've had "fitted" retracement on TYC from $59.99 to $9.56 for several months, which has 50% up at $34.77 (served as resistance last rally) and 38.2% at $28.82 (served as support on 04/11/02). Looks range bound here, but MACD below zero looks vulnerable to rolling lower.

  Jeff Bailey   4/19/02,  1:55:06 PM
S&P Banks Index (BIX.X) 691.37 +0.01 .... has seen some selling on the 30-minute chart. 50-pd MA rising at 690.

  Jeff Bailey   4/19/02,  1:53:54 PM
Breaking News .... There are reports that the government may be getting ready to issue some type of report in regards to "credible threats" made against Northeast banks. FBI has received unsubstantiated info that terrorists are considering attacks on US financial institutions.

  Jeff Bailey   4/19/02,  1:48:47 PM
EMC $10.80 -1.6% ... Also looking at 60-minute interval chart. See that 200-pd MA acting like resistance. 50-pd curlying higher at $10.31 and that's about all I see as near-term support.

30-minute interval has 200-pd MA right here at $10.82 and 50-pd trending higher just below at $10.63. Perhaps good chart for short-term trader. A break much below the 10.63 level on this time frame most likely sees some volume coming in.

  Jeff Bailey   4/19/02,  1:46:36 PM
Hi Jeff, Would you be able to update us on EMC?

"Mom said if you can't say something nice, don't say anything at all."

Well, not a lot happening here. Stock has traded sideways for most part. 50-day MA just above at $11.69 and would look for resistance there. Bulls need to be watching MACD on daily which recently crossed above signal, but if stock starts stalling out here, then risk of MACD rolling just under zero level could set test of the lows. Wednesday was "inside day" and yesterday stock broke to upside of that. Now we see today is setting up another potential "inside day". Lots of overhead supply in here from $11-$12 and break below today's inside day could have some short-term bulls pulling the plug. Link

  Mark Phillips   4/19/02,  1:09:37 PM
I've been attending to other tasks most of the morning, but need to chime in on the JNJ question that Jeff got from a reader.

We've got JNJ featured in our LEAP Call Potfolio currently (since 3/5/02), with a stop set at $61. Jeff said it all with respect to the PnF chart -- JNJ looks very strong and a run into the low $80s seems entirely reasonable.

Take a look at the stock's strength relative as compared to either the SPX or the DRG index. In either case, JNJ is still pushing to new all-time highs. On top of that, it looks like JNJ is about to push to a fresh all-time high, which will come with a print of $66.

I feel sorry for anyone holding LEAP Puts on this one(Big MO is in charge), as there just isn't a way to make an arguement for weakness over the short, intermediate or long term, especially following the solid earnings report out earlier this week.

  Jeff Bailey   4/19/02,  12:58:04 PM
North American Telecom (XTC.X) 583.70 -2.27% ... leads sector losers today after decent short-covering rally earlier in the week. Starting to hug downward trend from the 01/04/02 high attached to the 03/08/02 high.

Recently profiled 1/2 put in SBC looking good as SBC sets new 52-week low today. Looking like some bulls that may have thought they "bought the bottom" at $35 back in February had second thoughts on the rally into Wednesday as stock stopped right there. Our earlier plan from original profile for put 1/2 position was to look to average to full position on rally above $36 if it happened. While stock did rally, didn't make it above $36 and has trader thinking he/she is on the right side of this one with at least 1/2 position. Link

With Dorsey/Wright's telecom bullish percent "bull confirmed" at 32.5%, trade management for 1/2 position is best at this time.

Will also note that while the p/f chart of SBC is quite bearish and vertical count is to $26, relative strength versus the North American Telecom Index (XTC.X) still rather strong. Thus... again thinking is 1/2 position put is best strategy right now and anything below $30 or approaching $26 is probably area to lock in a gain. Link

  Leigh Stevens   4/19/02,  12:55:08 PM
Index Update: The Nasdaq Composite (COMP) is trading strictly sideway as traders/investors are laying off the tech darlings that broke so many hearts before, as tech is not finding large bids today. However, looks like COMP can a bit higher; Near resistance > 1815-1820. Doubt that there will be enuf mo to get it up this far, but next resistance = 1830; Nas 100 (NDX) - Index here also looks like it may break out above near resistance at 1394-1395; next resistance comes in at 1407, but more significant is 1420 area; QQQ - could see challange to overhead trendline in 35 area. Next resistance comes in 35.5 area -- this is tougher resistance. 35.5 is pivotal point for the Q's.

  Jeff Bailey   4/19/02,  12:49:59 PM
Can you give an opinion on up or down count for Johnson and Johnson. Someone on another service has it profiled as a leap put, but I see it as strong.

I'd have to agree with subscriber here. P/F charts are fantastic in my opinion as it relates to strategy/scenario for LEAPS as p/f chart quite good at longer-term analysis.

P/F chart very bullish right now longer-term. Link I think www.stockcharts.com p/f chart is incorrect and should show a triple-top buy signal at $60, with a nice little "bear trap" at $56. I have vertical count to $83. Relative strength vs. S&P 500 is strong Link as is versus Dow Industrials Link

Maybe other service was recommending selling the LEAPS puts naked?

  Leigh Stevens   4/19/02,  12:44:06 PM
DJX update - looks like the Dow index is going to break out above its minor hourly down trendline at 102.50 -- if so, it could travel a bit futher before next resistance at 103.25, at recent hourly high before the Milan plane freakout -- strength is coming from Walt Disney (DIS), American Express (AXP) - still up on that healthy gain in earnings they had. Also, Internation Paper (IP), Hewlett Packard (HWP) - investors finding something to like about the Compaq deal; Microsoft, out from under the microscope, is tradin up a little more than a buck, +2%.

  Jeff Bailey   4/19/02,  12:41:15 PM
Jeff, you mentioned TGH recently as a long term play. I bought the Oct 80 calls @ $5.00. Earnings are 08 May and the stock is moving nicely (calls are now 6.20 x 6.70). What do you think of this stock now, new 53 week high. I was thinking of loading up on more of the calls

I addressed this same question late last night from another subscriber that also played the Oct. $80's. (archive didn't work this morning and we're trying to get it up), but my advice was not to buy any more at current levels. Thinking is that a trader makes up his/her mind when you originally bought the calls and that amount of risk really "defines" your risk tolerance currently. I too get the feeling that I should "buy more" and this only happens when the trade works so well, so early. This is the emotion of greed! As traders/investors, we need to realize this and control it.

What I suggest doing in longer-term calls like October, is to assess the calls in May. How's the sector doing? If sector still strong, but perhaps just pulling into support, while stock in group your trading (TGH) is acting similar, then a trader could reveiw today's observations of "I wish I had bought more on Wednesday at $71. Then you can perhaps round up. But... if you are saying in May... I whish I had sold at $XX.XX, then you're neutral, and not looking to add.

  Leigh Stevens   4/19/02,  12:30:08 PM
Index Update: The market has settled into quiet consolidation -- maybe everyone has had enuf of wild rides and are glad to maybe have a quiet expiration day. S&P 500 (SPX) is consolidating under key overhead resistance at 1130-1132. Am doubtful that we will see any breakout of this area soon, as momentum oscillators still are drifting down. Support > 1112, down to 1110 into Monday; OEX (SP 100) same pattern as its big brother, SPX -- looks even more like it will turn lower. Key near resistance > 564; key near support > 555. A decisive move above either level, should get some follow thru; DJX (Dow Index) - Some trendline resistance just about where its trading now (102.5), then at 102.7 - 103; then, 103.7; support > 101.5, then 101;

ON THIS DAY, today, the Navy Destroyer USS Cole, victim to terrorist attack in Yeman, is heading back to its home port with all repairs done -- happy trails!

  Jeff Bailey   4/19/02,  12:27:54 PM
Bids building a bit in Service Corp (SRV). Earlier I was looking at level II and saw a Chicago bid of 10,000 at $3.60 and still there, and Chicago offer of 10,000 at $3.74, whish is now 5,000 at $3.74. Either 5,000 went to an inside bidder, or a short-term trader looking to scalp some coin.

  Jeff Bailey   4/19/02,  12:24:50 PM
Key stock for Dow Indu and perhaps broader technology may well be IBM. Stock "single handedly" went from a top spot in Dow gainers from September 11th, to the bottom of the heap. Despite that massive decline, the Dow Indu has held in there. If IBM can firm and begin a slow trudge higher, could really help the Dow's performance.

IBM has a decent gap to be filled and has tried to get back above the gap to $90. Resistance is at $96 if the $90 level could be broken. This is one of the "tails of the snake" in the Dow right now, and should it be able to pull free, then could lift the DJX. Interesting that IBM didn't get hit to downside intraday yesterday on plane crash news. May hint that some bears in the stock were too buisy locking in some fat gains. Link

  Jeff Bailey   4/19/02,  12:16:38 PM
Oakley (OO) $19.70 -0.5% ... not sure if we have some bulls still long the stock or not, but those long from $18 or so might want to think over the weekend about looking to write some May covered calls next week. Sometimes after expiration, premiums will inflate a bit. May want to look at the May $20's (OOEW) currently bid $0.75. I know of a couple subscribers that did play the "buy run write" and wrote the April $20's. They might just keep the stock, then look to write the May $20's and get "two dividends" from the covered call strategy.

Will note from the retracement work we did ($26 to $10.29) stock trades just under the 61.8% retracement of $19.99.

  Jeff Bailey   4/19/02,  12:08:15 PM
CAH ... day trader that like 1,000 round share trades that may have taken the stock long at $70.05 yesterday, most likely sells 1/2 at this downward trend from bar chart, then waits it out. If $72 broken to upside,then comes back in with 500 to round to 1,000 as he/she then has some gains to work with.

day trader strategy for selling 1/2 at trend is to pay yourself some for buying when broader market was negative and making a quick $500.00.

  Jeff Bailey   4/19/02,  12:05:06 PM
CNBC... Bob saying that Healthcare has been the big winner "this week" and not technology. Where's he been the past quarter? Not here that's for sure.

  Leigh Stevens   4/19/02,  12:04:30 PM
Happy Friday! Hope that expirations go your way. If not, you have the weekend to forgetaboutit. ON THIS DAY in 1951, the old solder himself, General Douglas MacArthur, spoke before Congress. The highlight of this memorable address was General MacArthur stating that: “Old soldiers never die, they just fade away.” In honor of this day, fade away from your offices and places of work and enjoy a walk, window shipping or whatever for an hour.

  Jeff Bailey   4/19/02,  12:03:51 PM
Cardinal Health (CAH) $71.16 +1.29% ... will note that on bar chart, trend from the 10/22/01 high and attached to the recent rally highs of 03/28/02 has extension of that trend right here. Not a good place for bullish entry now. If a trader waited out yesterday's break, might as well wait another 85-cents to see if a break above $72 is cleared.

  Jeff Bailey   4/19/02,  12:01:02 PM
Cardinal Health (CAH) $71.23 +1.39% ... nice follow through for traders if long from yeaterday's alert to break above the $70.05 level. Look for near-term resistance at the $72 level (recent relative high), but if broken, then "the gloves come off." MACD on the daily still curling around but has not yet crossed above signal. Look for powerful move higher should we see break above $72 and MACD cross above signal so close to the zero level. Link

  Jeff Bailey   4/19/02,  11:57:00 AM
Biotech Index (BTK.X) $485.22 -1.21% ... ran right into a rounding flat 50-day MA today and found sellers. May become an observation worth noting if trading some stocks/indexes from below their 50-day MA's. Link

Yesterday's action in the biotechs has Dorsey/Wright's bullish percent for biotechs showing a net gain of 2.4%, but still reading "bull correction" at 37.4%. Needs a reading of 40% to get back into "bull confirmed" status.

  Jeff Bailey   4/19/02,  11:43:21 AM
Dow Industrials (INDU) 10,234 +0.28% ... Today's trade at $10,250 was enough to get p/f chart back into column of X, but real test is for trade above the 10,350 level to get back on a buy signal. Decent area in here to be implementing straddles or strangles as break from the $10,300-$10,100 range could bring significant move. Link

yesterday I profiled a put play in the DJX as market was sinking after the plane crash event in Milan. Trader that took that put trade, now has 1/2 of a strangle already established and could adjust scenario now that we feel crash was an accident and not an act of terrorism.

I will also note that I've had retracement on the INDU from 11,723 to 8,062. This has 80.9% at 11,023, 61.8% at 10,324 serving as resistance recently and 50% down at 9,892. MACD on daily chart is flat right now and just below zero. Still rather bearish and most likely needs to see INDU at 10,350 to get MACD crossing above signal. Link

  Leigh Stevens   4/19/02,  11:30:58 AM
Another note from a Subscriber: "MSFT is going to hold around $55 because that is "Max Pain" point for option buyers. These markets are completely manipulated especially around expiry time."

RESPONSE: I wouldn't disagree. Would note that my comment on MSFT was not just a look at upside potential for today, so was not focusing on the potential to lift off here today -- unwinding of options-related positions of course could hold the price to even strike. Funny, how often they go out on the strike price!!!

  Jeff Bailey   4/19/02,  11:28:43 AM
Yahoo! Inc. (YHOO) $14.82 -1.52% ... stock under some pressure today after last night's earnings from eBay (EBAY) in which I will note eBay saying ad revenue's declined 32% from the December quarter.

On bar chart, I have YHOO breaking upward trend yesterday and following through today. With retracement set at $22.31 to $8.11, 50% at $15.21 is broken to downside (also where upward trend is) and has bears targeting 38.2% at $13.53 as first target, then 19.1% at $10.82 as next target. This 19.1% retracement also correlates nice with the bearish vertical count from p/f chart. Link

P/F chart shows YHOO sitting right at bullish support trend, but this trend is very "young" or short and I don't think very powerful. If broken, we can perhaps see how a new bearish resistance trend would be started just above the $20 box back in March (top of column with red 3).

  Leigh Stevens   4/19/02,  11:25:16 AM
Subscriber question: "Did you mean this?" (from last night's OI Wrap) - Possible trading ranges ahead look like: Nasdaq 100 (NDX): Short-term: 1330 - 1500?

RESPONSE: More like 1480 -- a next leg up, if it were to develop in next 7-10 days, within definition of short term, could take up to this key resistance at the 4/1 high. My working definition of short-term is 1-2 days up to 1-2 weeks, intermediate-term, 2-3 days up to a few weeks.

  Leigh Stevens   4/19/02,  11:07:54 AM
Speaking of my last night Index Trader Wrap at Link , ALL the charts are INCORRECT & outdated relative to what I thought I submitted. Either I screwed up, or.... well, the charts are not the ones that I refer to and I will get them corrected ASAP. Sorry about that! We do our best here at OI and sometimes it can be a rush to meet deadlines and unforeseen things happen.

  Leigh Stevens   4/19/02,  11:02:14 AM
Index Update: ALL the major indexes - S&P 500 (SPX), S&P100 (OEX), DJX (Dow Jones), Nasdaq Composite (COMP), Nasdaq 100 (NDX) and QQQ Nas 100 tracking stock, have a similar pattern on the hourly charts, as they have turned lower from resistance implied by their down trendlines - as redraw after the breakout from a lower down trendline. They all look lower to me from here. Meanwhile the hourly stochastic I use (21) continues to come down. Still most "overbought" according to this indicator, is OEX and SPX. Wouldn't look to do any call buying again until these get into fully oversold area again. Key support levels are contained in my last night's Index Trader wrap at Link Will update these numbers if Indexes sink further from their recent hourly highs.

  Jeff Bailey   4/19/02,  10:49:08 AM
Service Corp. (SRV) $3.63 -21.5% .... I like Service Corp. (SRV) as bullish here for an aggressive bull at $3.65. I have regression channel on this one from the $8.00 highs and today's gap lower puts the stock right at the bottom of the channel.

Would treat this as an option at this point and trade small, but target the $4.50 level for a short-term trade, stop under this morning's low of $3.40. Aggressive short-term bulls only!

here's a link to a news story on why stock is down and it relates to human remains found at one of the company's burial facilities at its Menorah Gardens Cemetery in West Palm Beach. In December, alleged human remains had been mishandled at two of its Florida cemeteries in order to make room for additional burials. Link

  Jeff Bailey   4/19/02,  10:34:23 AM
PacifiCare Health (PHSY) $25.81 +21% ... in past comments, I've noted that this stock has rather LARGE short position on it. Most recent short interest from March 8 had short ratio at about 19.29 (19.29 days to cover based on average daily volume) and shorts are getting it handed to them in this one.

On April 3rd, we noted in MM at 04/3/02 that this may well have been "the stock" that was driving the bulk of that days gains in the HMO.X. Has continued to do so too, most likely to short squeeze.

Then on April 4th, we noted that Fulcrum was once again downgrading the stock, just after the stock looked to be breaking out on 04/03/02. This had/has me thinking that Fulcrum is/was one of the bigger shorts in the stock. Currently, I'm looking for another downgrade from Fulcrum, if the stock pulls back to the $22 level, an aggressive call option trader may want to have the May $22.50 (HYQEX) ready for a trade. Current bid/offer for HYQEX is $3.90x$4.20 and this may serve as a benchmark perhaps when targeting the $26 level.

  Leigh Stevens   4/19/02,  10:34:08 AM
"Oil is not a weapon", was what Ted, the talking head on CNBC, just said, quoting the Saudi oil minister -- Ted is a good guy and interviewed me once on air. My fav is Ron Ansana. Anyway, I digress, and comment made me want to short some oil futures -- guess I'll go lay down until the feeling passes. $OSX.X, oil services index may be making a top here -- it has hit 104.7 now three times in the past 3 weeks. Nearby crude futures has not been able to climb back to its $28 high. If it forms an apparent double top, like Gold, I am going to get up and buy oil index puts or short the crude. The jury is still out on gold, but nearby futures have hit same top in 307-309 area now three times. In Sector Trader last night I suggested buying the May 65 XAU(gold-silver index)puts again, but this time on an apparent reversal -- what you could call a bull trap or 1-day reversal; ie., new high (& near a prior peak), followed by a close well under the prior day.

  Jeff Bailey   4/19/02,  10:22:32 AM
Pacificare Health (PHSY) $26.00 +21.95% ... stock jumps higher after Goldman Sachs upgrades to "market outperform" from "market perform" with a target of $32; cites estension of $735 million senior credit facility by two years to Jan. 2005; says that refinancing is a positive signal regarding PHSY fundamentals as lenders have inside info ahead of Q1 earnings report.

  Leigh Stevens   4/19/02,  10:21:23 AM
Meanwhile if you want to buy a sector that is really moving you need only look at healthcare index $HMO.X. This sector has a big upside gap today on its chart. This after a several month long acceleration to the upside. If this chart (HMO) was a commodity, I would say this gap looks like what they call "exhaustion" gap -- Wow, in this market, when you get these straight up moves like this, do you throw caution to the wind and jump in hoping to put some green into your portfolio or do you play the odds that favor a return to earth or not? Anyway, OHP (Oxford), WLP (Wellpoint), UNH (Unitedhealth group), HUM (Humana), MME (MidAtlantic Medical), etc. are on FIRE! Suppose this may have something to do with our rising health care costs?

Another group, not a sector, is the S&P 600 small cap iShares on the Amex -- either IJR, the index itself, or the variations of growth (IJT) and "value" (IJS) iShares. All of the, especially the value component have been on a tear.

  Leigh Stevens   4/19/02,  10:03:38 AM
Microsoft's (MSFT) numbers looked substandard at first look last night. They came in less on the earnings per share, but 48 cents on operation earnings per share, which is several cents more than expected. Their "guidance" going forward is pretty conservative and they should be able to beat those numbers going forward. X-box is a loser, but company is poised to benfit from an increase in IT spending. Technically, the stock looks like it is at the low end of trading range -- although it did dip under $50 back in the fall. But range going forward looks to me like 55-65. If it continues to base above 55, there could be a pop up to 65 resistance. The May 60 call (MSQ EL)has been trading around a buck. With a another dip in the stock, that call will be cheaper. Near support on the stock looks like 56.

  Leigh Stevens   4/19/02,  9:46:31 AM
Opps! There was a problem I experienced with the Market Monitor and getting the stuff from yesterday into the archive -- SOOOO, you will have to wait to read all those exciting comments from yesterday - 4/18. I'll get our IT guys to put it up later. Thank goodness for IT, the high priests of technology.

  Leigh Stevens   4/19/02,  9:42:20 AM
Holy COW! MSFT has traded 16+ million shares already. And that number is climbing like gangbusters. the minute to minute chart is pretty wild. Looks like its going to climb some from here.

  Leigh Stevens   4/19/02,  9:36:40 AM
It's Showtime! I've been in computer he__ this morning, but, as I am an expert user, I knew what to do -- REBOOT.

Pretty crazy when they can't figure out earnings for a company -- Microsoft -- that may be surpasing GE in capitalization. ON operations side, MSFT actually beat expectations. The rest of their earnings-speak seems to be a bit of a mystery and if those high paid Street Analysts can't figure it out, I know I don't have a chance! ANyway MSFT is higher by a buck & a couple of percentage points. I feel for those individual holders -- not the institutions -- who may have dumped the stock last night thinking it was another swan that became a turkey that was going to get dumped today big time. Now, those folks would need to pay up to get back in if they want to. MSFT looks like its going to hold up above 55 at this point, going forward. Resistance in the stock comes in at 59.6, then, in $62 area.

  Jeff Bailey   4/19/02,  9:28:48 AM
Merrill Lynch is bullish on MSFT at the open and is playing some bets that the stock will benefit from rotation of cash toward the stock away from other large cap names, also citing a recovering economy. If that's the case, then we should see Copper prices surge if Freeport McMoran (FCX) is saying that copper production is down. If the economy is going to ramp up in the next quarter, then industrial metal usage should rise. If demand rised for a product where supply is down, we should see a powerful move in copper is my thinking. One thing we'll be doing is monitoring copper futures. This morning, the May contract (hg02k) is higher by 0.61% at $0.7315/lb

  Jeff Bailey   4/19/02,  9:28:28 AM
Stock futures have done an about face this morning after multiple brokerage upgrades and positive comments regarding some earnings reports from last night. S&P futures currently trade above fair value at +$4.90 to 1,127.90 and have been building gains into the opening bell. NASDAQ futures are also higher by 24 points at 1,411.50.


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