Option Investor
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Daily Newsletter, Tuesday, 11/06/2001

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PremierInvestor.net Newsletter                 Tuesday 11-06-2001
                                                   section 1 of 2
Copyright  2001, All rights reserved.
Redistribution in any form is strictly prohibited.

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In section one:

Market Wrap: Fed's 50 basis points, times three
Market Sentiment: Number ten sparks a late day rally
Play-of-the-Day:  The Ultimate Big Cap

-----------------------------------------------------------------
U.S. Market Numbers
-----------------------------------------------------------------
MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------
       11-6-2001            High     Low    Volume Advance/Decline
DJIA     9591.12 +150.09  9600.60  9386.51  1.3 bln   2053/1054
NASDAQ   1835.08 + 41.43  1835.49  1777.91  1.9 bln   2079/1513
S&P 100   576.30 +  9.62   576.86   563.14   Totals   4132/2567
S&P 500  1118.86 + 16.02  1119.73  1095.36
RUS 2000  442.78 +  5.24   442.79   435.70
DJ TRANS 2291.15 +  6.43  2292.36  2257.71
VIX        29.85 -  2.09    32.66    29.22
VXN        57.34 -  1.62    60.13    57.26
TRIN        0.91
Put/Call Ratio       .58
-----------------------------------------------------------------

===========
Market Wrap
===========

Fed's 50 basis points, times three

Take today's 50 basis point rate cut by the Fed, multiply by 3 
and you get the Dow Industrials up 150 points.  Equity bulls wish 
there was such an equation that ties a Fed rate cut to stock 
prices, but today's reaction was bullish as stocks jumped higher 
and broader market averages closed at their highest levels since 
the terrorist attacks on September 11th.

Today, the Federal Open Market Committee decided to lower its 
target for the federal funds rate by 50 basis points to 2%.  In 
related action, the Board of Governors approved a 50 basis point 
reduction in the discount rate to 1.5%.

Brief comments from the Fed indicated that the Committee 
continues to believe that the background of its long-run goals of 
price stability and sustainable economic growth and the 
information currently available, feels the risks are weighted 
mainly toward conditions that may generate economic weakness.

The Fed also believes that current economic conditions are due to 
a reallocation of resources by companies as they try to cut costs 
and protect the bottom line.  The Fed understands these actions 
and near-term implications for a drop in productivity for a time, 
but believes the longer-term prospects for productivity gains and 
economic stimulus remain favorable and should become evident one 
the unusual forces restraining demand abate.

NASDAQ Composite Index Chart - 





Today's rate cut by the Fed marks the 10th rate cut since the Fed 
began loosening on January 3rd of this year.  I've tried to show 
where past rate cuts have occurred, the basis point rate cut 
(pink is 50 basis, blue is 25 basis point cuts) and level the 
NASDAQ was trading near once rate cut was announced.  Today's 
close at $1,835 is the first time the NASDAQ Composite has 
managed to close above a level dating back to the four most 
recent rate cuts.  This may signal a change in market posture 
toward the belief that the Feds actions are finally going to be 
having some type of positive effect on the economy or at least 
NASDAQ stocks going forward.

If we count backward to three rate cuts (excluding today's) to 
the 7th rate cut on August 21st, we note the close of trading 
that day was $1,831, but for the first time since the Fed began 
cutting rates, the NASDAQ closed above a rate cut that occurred 
"three cuts ago" while also closing above the prior two rate cuts 
(8th and 9th).  This is a DEVIATION in past trading and we want 
to make note of that today.

It may be interesting to note that the Fed only cut rates 25 
basis points back on June 27th (6th rate cut) when the NASDAQ 
closed that day at 2,074.  What's interesting about that "25 
basis point cut" is that the Fed had been cutting 50 basis points 
prior to that time.  Perhaps the Fed thought the economy was 
improving (NASDAQ was higher than 3rd cut at $1,857).  

It's that period where the NASDAQ looked to be trying to recover 
from a recent low.  Only thing I notice different right now, is 
that we've now seen the NASDAQ close above the prior two rate 
cuts.  On June 27th, the NASDAQ did not close above the prior two 
rate cuts (April 18th $2,079 and May 15th $2,085) and also close 
above a 3rd prior rate cut dating back to August 21st close of 
$1,831.

The NASDAQ Composite is beginning to look like it is "predicting" 
some type of economic stimulus going forward if we are 
benchmarking back to past patterns.

Fed comments

I find it interesting to read the brief comments that come out of 
the FOMC meetings.  I'm not going to reprint all of the comments 
as subscribers can visit http://www.federalreserve.gov/fomc and 
click on the Meeting calendar, statements, and minutes link.  
What I find interesting is what the Fed was thinking at the time 
of their interest rate decision.  For those looking for more 
reading, print out the full minutes of the FOMC meeting.  Good 
bedtime reading!

Today's Fed Summary:

The patterns evident in recent months--declining profitability 
and business capital spending, weak expansion of consumption, and 
slowing growth abroad--continue to weigh on the economy. The 
associated easing of pressures on labor and product markets is 
expected to keep inflation contained. 

Although continuing favorable trends bolster long-term prospects 
for productivity growth and the economy, the Committee continues 
to believe that against the background of its long-run goals of 
price stability and sustainable economic growth and of the 
information currently available, the risks are weighted mainly 
toward conditions that may generate economic weakness in the 
foreseeable future. 

Past comments

The June 27th (6th rate cut) comments read similar to today's 
brief summary with the only difference being that "easing of 
pressure on labor and product markets is expected to keep 
inflation contained."  The Fed cut just 25 basis points that day.  
Perhaps they were thinking that the economic slowdown was 
beginning to subside and the easing of workforce pricing 
pressures would also help some corporate bottom lines?

On August 21st (7th rate cut) comments take a turn toward concern 
as the Fed cuts 50 basis points.  "Household demand has been 
sustained, but business profits and capital spending continue to 
weaken and growth abroad is slowing, weighing on the U.S. 
economy.  The associated easing of pressures on labor and product 
markets is expected to keep inflation contained."  The last 
sentence is that of the June 27th, but now the Fed is becoming 
concerned 

On September 17th (8th rate cut) the Fed is responding to the 
terrorist attacks on September 11th, but waits for markets to be 
open for trading for all participants to be able to trade the 50 
basis point rate cut.  The Fed is talking about further economic 
decline due to higher unemployment, weaker production and 
business spending.

On October 2nd (9th rate cut) the Fed has changed it tone from 
August 21st comments regarding household spending.  "...Business 
and household spending as a consequence are being further 
damped."

Bringing it together

In Friday's wrap, we discussed some various sectors to be keeping 
an eye on.  What we wanted to do was "look for something that 
doesn't make sense."  Since the Fed has recently changed their 
tone toward "household demand" then that most likely means the 
consumer isn't spending and retail stocks should be getting 
crushed!  Since the MARKET is never wrong, lets look at the S&P 
Retail Index (RLX.X) and see if action there makes sense.

S&P Retail Index Chart - 





We can build a scenario for "household demand" and the Fed 
comments dating back to October 2nd.  At the close of trading 
that day, the RLX.X closed at $787, and today's close at $847 has 
this group of household-consumer-spending-stocks trading higher 
by 7.6%.  Now this doesn't make sense!

The first part of our scenario might be for further heads up to 
bullishness on a close above $860.  The rolling 200-day moving 
average (a longer-term moving average) and 50% retracement 
(retracement from the April 2000 highs to October 2000 lows) 
gives us a very good level to be monitoring.  Those that believe 
the longer-term trend is the overriding trend (downward trend is 
still bearish until broken to the upside) then understand that 
the MARKET is yet to believe everything is OK at the consumer 
level.  However, a break above the $900 level would most likely 
put this index above downward trend and 61.8% retracement.

If the MARKET is "all knowing" then the market might be convinced 
of an economic recovery occurring above the $900 level.

Maybe this is why Wal-Mart (NYSE:WMT) remains in the #1 slot of 
our Dow Portfolio of gain since its September 10th close (day 
prior to terrorist attacks we've been benchmarking from).  
Perhaps this is also why we were so quickly stopped out of a 
bearish play we highlighted in Dow component and fellow retailer 
Home Depot (NYSE:HD) on November 2nd at $39.25.  While the trade 
cost our portfolio a 4.39% loss, I expect to gain something for 
that cost.  With the stock now trading $42.70, shorting a more 
discount based retailing stock was obviously not the thing to 
have been doing on October 30th.

This stock could hold near-term fortunes

If there's one stock I'd have my eye on near-term, it would be 
shares of Dow component General Electric (NYSE:GE) $39.80.  A 
break above $40 could have this stock moving sharply higher near-
term and could have a significant impact on both the Dow 
Industrials and S&P 500 Index.  This stock looks like it is at a 
major "pivot point" or point where broader market bulls and bears 
collide.  General Electric (GE) has its proverbial finger in 
about every economic pie there is.  It's price action near-term 
could shape market action over the next couple of weeks.  Here's 
why.

General Electric Chart - 





It's almost "unconceivable" to think the economy could be 
improving without shares of GE going along for the ride.  Near-
term, this stock becomes a "guinea pig" for traders and investors 
to be keeping an eye on.  It's one of those broadly diversified 
companies that has a finger in just about every segment of the 
economy.  My test is this.  A break above $40.10 means that the 
MARKET believes there is hope that an economic recovery is near 
and that there's no holding back the diversification of GE.

The "final test" for economic recovery getting to a more healthy 
stage would be for the stock to break out of our regressions 
channel (something it was not able to do back in May and June for 
more than 3 sessions).  However, a trader having played the stock 
long back on April 10th with the break above $42.65, would have 
had an opportunity to profit from the stock's rise to upper 
regression channel just over one month later near $53 (23% gain).

Those not wanting to expose too much capital to a trade in GE on 
the break above $40.10 might take a look at the GE Dec. $40 calls 
(GELH) that are currently offered $1.95.  I'm only guessing, but 
would think a trade at $40.10 would have them offered 30 cents 
higher at $2.25.  1 contract costs you about $225 (plus 
commission) and gives you control of 100 shares until December 
21st, which is option expiration.  Risk of buying 100 shares of 
GE at $40.10 with a stop just below $38 at $38.75 is also about 
$225 on 100 shares.

Don't over leverage!!!!!  If you would normally consider the 
purchase of 100 shares of a stock, then only buy 1 contract!  Too 
many traders/investors think that buying options is a chance to 
over leverage.  It's not, so don't do it!  Options are an 
opportunity to expose a lesser amount of capital, control your 
risk that should be equal to, but not greater than the risk of 
the stock itself.


Jeff Bailey
Senior Market Technician


================
Market Sentiment
================

Number ten sparks a late day rally
by Russ Moore

Number ten sparks a late day rally. The bulls got what they 
wanted as the Fed came through with another .50bps rate cut. It 
took the markets about an hour before they decided which 
direction to go, but once they got going it was a steady rise 
with the DOW posting a +1.6 percent gain. Tech stocks were very 
strong and that had the NASDAQ and NDX adding +2.3 and +2.9 
percent respectively.

Volume picked up noticeably after the FOMC decision, ending with 
1.33 billion shares trading hands on the big board, and 1.93 
billion shares moving on the tech index. Winners trounced losers 
by a 21/11 count on the NYSE and 21/15 margin on the NASDAQ.

Gold, oil and airlines were the only sectors ending in the red. 
Internet, chips, hardware, software, financials, biotechs and 
retailers were all strong on the day.

The Dow’s gains were helped in part, by news that the Helwett-
Packard/Compaq deal may be in jeopardy. The Hewlett family, which 
has a 5 percent stake in Hewlett stock, said it would vote 
against the proposed merger. Hewlett-Packard stock was up +17 
percent on the news while Compaq’s stock fell -5.3 percent.

There can be no doubt that the Fed is doing everything in its 
power to move the economy forward. Aggressive fiscal and monetary 
policies are being heralded by many, as the catalyst for a second 
quarter 2002 recovery. While investors will no doubt enjoy some 
of the benefits of the rate reductions i.e. declining mortgage 
rates and zero percent automobile financing, they will need to 
see and hear something positive on the corporate earnings front 
before loading up on equities. Until that happens, the “sideways 
shuffle” will be played a lot on Wall Street.

VIX 
Tuesday 11/06 close: 29.85


VXN
Tuesday 11/06 close: 57.34


30-yr Bonds
Tuesday 11/06 close: 4.86


Total Put/Call Ratio: .58


Equity Option Put/Call Ratio: .47


Index Option Put/Call Ratio:  1.32


===

NASDAQ 100 Index (NDX/QQQ)
52-Week High: 103.51
52-Week Low:   28.19
Current close: 38.19

Volume/Open Interest
Maximum calls: 35/68,102
Maximum puts : 33/96,864

Moving Averages
 10 DMA 35
 20 DMA 34
 50 DMA 33
200 DMA 43

Fibanocci Retracements
Relative High: 51.95 (05/22/01)
Relative Low:  27.00 (09/21/01)
38% 36.60
50% 39.57
62% 42.59

===

S&P 100 Index (OEX)
52-Week High:  834.93
52-Week Low:   491.70
Current close: 576.30

Volume/Open Interest
Maximum calls: 560/5,465
Maximum puts : 500/8,369

Moving Averages
 10 DMA  559
 20 DMA  559
 50 DMA  554
200 DMA  616

Fibanocci Retracements
Relative High: 680.03 (05/22/01)
Relative Low:  480.07 (09/21/01)
38% 556.14
50% 579.65
62% 603.55

===

S&P 500 (SPX)
52-Week High:  1530.01
52-Week Low:    965.80
Current close: 1118.86

Volume / Open Interest
Maximum calls: 1075/18,994
Maximum puts :  950/22,317

Moving Averages
 10 DMA 1088
 20 DMA 1086
 50 DMA 1081
200 DMA 1197

Fibanocci Retracements
Relative High: 1315.93 (05/22/01)
Relative Low:   944.75 (09/21/01)
38% 1086.75
50% 1130.62
62% 1175.23

==

DJIA (INDU)
52-Week High:  11,518.83
52-Week Low:    8,235.81
Current close:  9,591.12

Volume / Open Interest
Maximum Calls: 94/25,398
Maximum Puts   92/20,795

Moving Averages:
 10 DMA  9,343
 20 DMA  9,324
 50 DMA  9,336
200 DMA 10,241

Fibanocci Retracements
Relative High: 11,350.05 (05/22/01)
Relative Low    8,062.34 (05/21/01)
38%  9,308.92
50%  9,693.99
62% 10,085.60

==

Biotech Index (BTK)
52-Week High:  811.61
52-Week Low:   383.28
Current close: 585.81

Volume / Open Interest
Maximum Calls: 580/  525
Maximum Puts:  420/1,576

Moving Averages
 10 DMA 557
 20 DMA 528
 50 DMA 500
200 DMA 538

Fibanocci Retracements
Relative High: 811.61 (09/25/00)
Relative Low:  383.28 (03/22/01)
38% 546.22
50% 596.57
62% 646.71

==

Semiconductor Index (SOX)
52-Week High: 1280.84
52-Week Low:   362.00
Current close: 520.03

Volume / Open Interest
Maximum Calls: 570/ 509
Maximum Puts:  420/ 812

Moving Averages
 10 DMA 474
 20 DMA 459
 50 DMA 463
200 DMA 576

Fibanocci Retracements
Relative High: 710.78 (05/22/01)
Relative Low:  343.93 (09/27/01)
38% 484.50
50% 527.18
62% 570.57

==

Pharmaceutical Index (DRG)
52-Week High:  455.28
52-Week Low:   339.49
Current close: 395.98

Volume / Open Interest
Maximum Calls: 420/ 282
Maximum Puts:  400/1000

Moving Averages
 10 DMA 392
 20 DMA 394
 50 DMA 388
200 DMA 393

Fibanocci Retracements
Relative High: 448.43 (12/29/00)
Relative Low:  339.49 (03/22/01)
38% 382.22
50% 395.69
62% 409.03

*****

CBOT Commitment Of Traders Report: Friday 11/02
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the 
Chicago Board Of Trade. 

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 are not. 
Extreme divergence between each signals a possible market turn in 
favor of the commercial trader’s direction.   

S&P 500
Commercials   Long      Short      Net     %Change 
10/16/01     378,866   415,289   (36,423)   ( 6.0%)
10/23/01     377,177   413,658   (36,481)     0.1%
10/30/01     377,468   413,729   (36,261)   (0.06%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: (41,144)  - 5/1/01

Small Traders   Long      Short      Net      %Change
10/16/01       124,568    73,779    50,789     6.3%
10/23/01       127,016    71,212    55,804     9.9%
10/30/01       123,546    71,225    52,321    (6.2%)
  
Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100
Commercials   Long      Short      Net     %Change 
10/16/01      27,398    40,397   (12,999)   (2.7%)
10/23/01      29,920    40,358   (10,438)  (19.7%)
10/30/01      32,055    45,574   (13,519)   29.5%

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long      Short      Net      %Change
10/16/01       12,901     6,893    6,008      21.7%
10/23/01       11,567     6,934    4,633     (22.9%)
10/30/01       12,725     6,475    6,250      34.9%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

DOW JONES INDUSTRIAL
Commercials   Long      Short      Net     %Change 
10/16/01      25,402    10,267   15,135      3.1%
10/23/01      25,568    11,832   13,736     (9.2%)
10/30/01      25,872    12,556   13,316     (3.1%)

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short      Net      %Change
10/16/01       4,514    12,104    (7,590)    (13.5%)
10/23/01       4,902    11,900    (6,998)     (7.8%)
10/30/01       4,261    11,220    (6,959)      0.0%
 
Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01


                    Small Specs               Commercials
S&P 500         (Current)  (Previous)     (Current) (Previous)
Open Interest
Net Value        +52,321     +55,804        -36,261     -36,481

Total Open
Interest %       (+26.86%)  (+28.15%)     (-4.58%)   (-4.61%)
                 net-long   net-long      net-short  net-short


                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -6,959     -6,998          +13,316    13,736
Total Open
interest %       (-44.95%)    (-41.65%)      (+34.65%)  (+36.73%)
                 net-short   net-short     net-long    net-long


                     Small Spec              Commercials
NASDAQ 100      (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value         +6,250      +4,633         -13,519    -10,438

Total Open
Interest %        (+32.55%)   (+25.04%)     (-17.41%) (-14.85%)
                 net-long   net-long      net-short net-short


What COT Data Tells Us
----------------------
Indices:.For the third week in a row, Commercials have shown 
little change in their net-short positions on the S&P 500. We did 
see the Small Specs and Commercials move in opposite directions 
on the NASDAQ 100 with the Small Specs adding to their net-longs 
and the Commercials increasing their net-shorts.

Gold: No significant changes on Commercial positions.

10/02 67,122 contracts net-short
10/09 64,729 contracts net-short
10/16 51,816 contracts net-short
10/23 25,191 contracts net-short
10/30 33,199 contracts net-short

Data compiled as of Tuesday 10/30 by the CFTC.


=========================
Play-of-the-Day (Bullish)
=========================


General Electric - GE - close: 39.80 change: +1.03 stop: 37.75

Company Description
GE is a diversified services, technology and manufacturing 
company with a commitment to achieving customer success and 
worldwide leadership in each of its businesses. GE operates in 
more than 100 countries and employs 313,000 people worldwide. 
(source: company press release)

Why We Like It:
I agree very much with Mr. Bailey's analysis of GE and future 
market direction.  If the Dow Industrials are going to continue 
higher with this breakout above the 9500 level they'll be hard 
pressed to do it without GE joining the climb.  As far as I can 
tell, GE, with its market cap of about $380 billion is the 
largest company on the planet (readers should feel free to 
correct me if I'm wrong but I think MSFT is second at $340 
billion).  For years investors have used GE as a proxy for the 
market.  This time around shares of GE seem to be lagging a bit 
but this allows us to capture the move when it attempts to "catch 
up" with its Dow-component comrades.  We are electing to initiate 
this play only if our trigger point is hit.  The newsletter will 
hypothetically go long when GE trades $40.10.  Once this occurs 
our stop will be 37.75, which incidentally was the late afternoon 
dip in Friday's session.  If the stock doesn't trade to our 
trigger but you like the stock consider looking for a dip back to 
the bottom of its recent channel at $36.00.  We think the move up 
from $40 could be exciting as shorts decide to run for cover. 

Picked on November Xth at $40.10<-- not triggered yet
Gain since picked:         +0.00
Earnings Date              10/24 (confirmed)






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PremierInvestor.net Newsletter                 Tuesday 11-06-2001
                                                   section 2 of 2
Copyright  2001, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================
To view this email newsletter in HTML format with imbedded
charts and graphs, click here:
http://www.PremierInvestor.net/htmlemail/3678_2.asp
=================================================================

In section two:

Net Bulls
  Bullish Play Updates: ADPT, LRCX, NMTC

Stock Bottom / Active Trader
  New Bullish Play:     GE
  Bullish Play Updates: BMS, CLX, HON
  Bearish Play Updates: AHC, HCR, PPDI
  Closed Bearish Plays: BMY

High Risk / High Reward
  New Bullish Play:     AOL
  Bullish Play Updates: HTCH, HM

Split Trader
   - none -

Trading Ideas
  Value Plays With Bullish Signals
  Breakout to Upside (Stocks $5 to $20)
  Breakout to Upside (Stocks over $20)
  Breakout to Downside (Stocks over $20)
  Recently Overbought With Bearish Signals (Stocks over $20)


=================================================================
Net Bulls (NB) section
==================================================================

===============
NB Play Updates
===============

  --------------------
  Bullish Play Updates
  --------------------

Adaptec Inc - ADPT - close: 14.18 change: +0.33 stop: 13.50

Readers may have noticed some internal divergence between myself 
and Mr. Bailey's classification of ADPT.  Is it a semiconductor 
stock as I described it in the original play write up, or is it a 
disk drive stock?  According to Bailey, ADPT is a component of 
the AMEX Disk Drive Index (DDX).  He is correct.  However, other 
stock sorting criteria sorts ADPT as a semiconductor stock.  If I 
were to use the latest ADPT press release about their RAID 
drivers (which are software) and their ADPT RAID cards (which 
would be semiconductors) then we have more evidence that maybe 
ADPT can't be classified as just a disk drive stock or just a 
semiconductor stock.  The most telling clue may be from today's 
trading action.  The DDX traded flat with a +$0.02 change today.  
The SOX added 17 points to gain 3.3%.  ADPT added 2.38%.  This 
could make one believe that the market tends to trade ADPT like a 
chip stock.  Whatever the case, ADPT is bound to benefit from 
positive moves in both the DDX and the SOX.  In Monday's 
newsletter (and on the website) we raised the stop on ADPT to 
$13.50 to protect Monday's gains.  With the intraday low on 
Tuesday at 13.70 we're still in the running.  If the market can 
add another day to its bullish run we should be in good form.  
Please note that in Monday's write up we decided that if ADPT 
trades to $15.00 on an intraday move we will close the play at 
$15.00 even though long-term bulls will probably be looking for 
that bullish price objective of $20.00.  It looks like short-term 
resistance is at $14.20.  Be sure to adjust your stops as the
newsletter is currently up over 10% in the play.

Picked on November 2nd at $12.86
Gain since picked:         +1.32
Earnings Date              10/18 (confirmed)




---

Lam Research - LRCX - close: 22.10 change: +0.35 stop: 20.50 *new*

The positive moves in the SOX over the 500 level have helped fuel 
LRCX's third day over its 50-dma and its fifth positive day in a 
row.  The latter observation should give some traders pause for 
concern.  Short-term the stock is looking a little overbought 
even though the MACD is finally trading over the zero line again 
and appears to be picking up steam.  Another concern we have is 
how volume has slowly been slipping the past couple of days.  We 
can probably write that off as investors waiting for the FOMC 
decision but we didn't see a lot of volume come into LRCX after 
the announcement.  The SOX should now find some support at the 
500 level and likewise LRCX has been finding support near $21.25.  
We've chosen to raise our stop to 20.50, which is just below the 
50-dma currently resting at 20.69.  In our original write up we 
discussed the risk of trading LRCX long while its near the top of 
its trading channel but fortunately the surge near the close 
today helped push it through the top while also putting it above 
the $22 mark.  This is a bullish sign for tomorrow but one never 
knows how the market reacts the day after a fed meeting.  In the 
past it has been to "sell the news" the day after and then ramp 
the market up.  If we do get a dip traders can look for an entry 
at $21.50 or $21.25.  Under $21.25 we would be concerned about a
more prolonged pullback.  Depending on your investment horizon 
traders can target the top of the gap down at $23, price 
resistance at $24 or the 200-dma at $25 as potential targets.

Picked on November 2nd at $21.34
Gain since picked:         +0.76
Earnings Date              10/09 (confirmed)




---

Numerical Tech. - NMTC - close: 26.18 change:+0.11 stop: 24.25 *new*

Hmmm... traders should be thinking about NMTC's performance and 
how it relates to the SOX and the GSO.  The last two days have 
seen strong moves in the SOX and GSO but we've not seen a 
corresponding move in NMTC.  This immediately makes us cautious.  
We still think NMTC is a strong candidate to play bullish and the 
last two days have confirmed the breakout over $25.00 but we were 
looking for more oomph in the follow through.  As a result we've 
chosen to raise our stop a dollar to $24.25.  This is just below 
the late morning dip (about 10:55 AM) in Friday's trading.  The 
good news was the late morning dip today found buyers near 25.25, 
which is exactly what we want to see.  If the market dips 
tomorrow (or the SOX/GSO) we would look for potential entries 
near any round number from $25.25 to $24.75 but wait for the 
bounce up to begin.  

Picked on November 2nd at $25.44
Gain since picked:         +0.74
Earnings Date              10/10 (confirmed)









===============
NB Closed Plays
===============

  --------------------
  Closed Bullish Plays
  --------------------




==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

===============
AT New Plays
===============

  ----------------
  New Bullish Play
  ----------------

General Electric - GE - close: 39.80 change: +1.03 stop: 37.75

Company Description
GE is a diversified services, technology and manufacturing 
company with a commitment to achieving customer success and 
worldwide leadership in each of its businesses. GE operates in 
more than 100 countries and employs 313,000 people worldwide. 
(source: company press release)

Why We Like It:
I agree very much with Mr. Bailey's analysis of GE and future 
market direction.  If the Dow Industrials are going to continue 
higher with this breakout above the 9500 level they'll be hard 
pressed to do it without GE joining the climb.  As far as I can 
tell, GE, with its market cap of about $380 billion is the 
largest company on the planet (readers should feel free to 
correct me if I'm wrong but I think MSFT is second at $340 
billion).  For years investors have used GE as a proxy for the 
market.  This time around shares of GE seem to be lagging a bit 
but this allows us to capture the move when it attempts to "catch 
up" with its Dow-component comrades.  We are electing to initiate 
this play only if our trigger point is hit.  The newsletter will 
hypothetically go long when GE trades $40.10.  Once this occurs 
our stop will be 37.75, which incidentally was the late afternoon 
dip in Friday's session.  If the stock doesn't trade to our 
trigger but you like the stock consider looking for a dip back to 
the bottom of its recent channel at $36.00.  We think the move up 
from $40 could be exciting as shorts decide to run for cover. 

Picked on November Xth at $40.10<-- not triggered yet
Gain since picked:         +0.00
Earnings Date              10/24 (confirmed)





===============
AT Play Updates
===============

  --------------------
  Bullish Play Updates
  --------------------

Bemis Co. - BMS - close: 47.20 change: +2.13 stop: 43.75 *new*

Thank goodness!  Friday's update discussed our concerns that the 
stock was beginning to look tired and we needed to see a move 
soon.  Fortunately the move came today.  We've been talking about 
how the chart on BMS could have been interpreted to show a flag 
formation that usually denotes a temporary consolidation before 
the prevailing trend continues.  With the stock over the $45.50 
resistance level it should be free to makes its next bullish leg 
up.  Investors should also be encouraged that the previous three 
days of trading was on strong volume and today's breakout move 
came on very strong volume of 467K shares versus the average of 
only 154K.  Previous resistance should now become new support.  
If we see a pullback in the market, traders can look for a dip 
back to the 45.50 - 45.25 level but hopefully we'll see buyers 
step in sooner than that ($46 anyone?).  We're going to move our 
stop up to 43.75.

Picked on October 26th at $44.99
Gain since picked:         +2.21
Earnings Date              10/23 (confirmed)




---

Clorox Co. - CLX - close: 38.86 change: +0.60 stop: 36.85 

The extremely bullish trading formation we saw developing in CLX 
on Friday has produced a strong gap up for Monday with a follow 
through day on Tuesday.  After the gap up yesterday we raised our 
stop to 36.85 in Monday's newsletter.  Volume has been dropping 
off after the recent high of 4M shares.  Yet even today's 929K is 
above the average daily volume.  The strong move in this sector 
has not stopped and is on its fourth or fifth day of a new 
bullish trend depending on which equity you look at.  A breakout 
above $39 would be encouraging but we'd actually like to see the 
stock come back to $38 before trading higher.  There appears to 
be strong resistance at $39.50 to $39.75 but we are looking for 
CLX to eventually trade to $42.75.  

Picked on November 1st at $37.48
Gain since picked:         +1.38
Earnings Date              11/01 (confirmed)




---

Honeywell Intl - HON - close: 31.99 change: +0.01 stop: 29.00

Shares of HON have turned in a third day above its 50-dma which 
is nice confirmation that the stock should be able to build on 
its new upward trend.  The stock seems to be finding support just 
north of the $31 level as Monday's low was 3.14 and today's low 
was 31.12.  Granted this is in a "bullish" market with the Dow 
trading strongly the last few days but we're not complaining.  If 
the market does pullback we could see HON dipping to stronger 
support near $30.  More conservative traders may feel more 
comfortable with a tighter stop.  Adjust according to your risk 
tolerance.  Watch the Dow for indication of HON's short-term 
direction.  

Picked on November 2nd at $31.15
Gain since picked:         +0.84
Earnings Date              10/24 (confirmed)





  --------------------
  Bearish Play Updates
  --------------------

Amerada Hess - AHC - close: 57.56 change: -0.50 stop: 60.05 *new*

Per our weekend write up, the $58 level was the key level to 
watch.  On Monday shares of AHC slowly drifted lower managing to 
close at $58.06 with the OIX index following suit.  Fast forward 
to Tuesday.  Today saw shares of AHC gap lower as the OIX index 
traded below the crucial support level of 290.  There are 
multiple factors weighing in on the Oil sector but one of the 
biggest is probably Russia's refusal to dance in step with OPECs 
struggle to raise the price of oil (who likes to keep oil between 
$22 and $28 a barrel).  If OPEC tries to curtail production to 
limit supply then cash-strapped Russia seems to be more than 
happy to come up with that supply even though it may keep the 
price of oil cheap or allow it to fall lower.  OPEC may not allow 
this to occur as Russia could then gain crucial market share 
against its rivals.  The drop in the price of oil has been a big 
factor in AHC's decline but the drop in AHC and the OIX was 
halted and reversed by the market's strong bullish reaction to 
the 50 basis point cut by the FOMC today.  Now both AHC and the 
OIX, which traded back above the crucial 290 level, have formed a 
hammer-style doji.  These candlestick formations can forecast a 
reversal in the trend.  While normally this may encourage us to 
really tighten our stop or take profits we're not convinced that 
AHC and the OIX will be able to truly reverse the trend for more 
than a day or two.  Thus, we are lowering our stop but only to 
$60.05.  This will allow for AHC, who is currently oversold, to 
bounce for a day or two before continuing to new lows.  Another 
strategy some traders may choose to apply is to set an extremely 
tight stop, which will probably be triggered tomorrow.  They 
would then gain the freedom to look for a new entry point if 
shares of AHC rollover again at $59 or $60.  One "signal" that is 
in favor of the bears is that even though the OIX traded back 
above key support of 290, AHC could not trade back above key 
support of $58.  Enter new positions carefully and confirm the 
direction of the sector.

Picked on November 2nd at $58.36
Gain since picked:         +0.80
Earnings Date              10/23 (confirmed)




---

Manor Care - HCR - close: 20.82 change: -0.90 stop: 21.75 *new*

Our play of the day for Tuesday performed on schedule with a gain 
of 4.14%.  What makes this move even more exciting is the 
divergence between the Healthcare index (HCX) and HCR.  We were 
expecting the HCX to trade lower today but the market's bullish 
reaction to the FOMC rate cut helped drive the index higher.  In 
contrast HCR fell to new relative lows on extremely high volume 
of 2 million shares (average volume is normally 697K).  In 
Monday's update we stated that if HCR traded to a low of $20.05 
intraday we would close the play for a profit.  This has not 
occurred but remains in effect.  The continuing weakness in HCR 
is encouraging us to lower our stop again.  This time we're 
placing the stop at 21.75 which is just above the Monday 
afternoon highs.  If we get stopped out here we can still pocket 
a 10% move.  Currently the short play stands with a 14% gain.

Picked on October 26th at $24.23
Gain since picked:         +3.41
Earnings Date              10/26 (confirmed)




---

Pharmaceutical Product Development Inc. - PPDI -
close: 24.31 change: -0.73 stop: 26.00 *new*

Our new bearish play in PPDI is performing to expectations as 
shares continue to follow through on the technical breakdown 
below support of $26.50.  Very conservative bearish traders could 
make use of one strategy that places your stop at the previous 
days high.  This tends to work on extreme trending stocks and 
would have worked on PPDI from 8/28 to 9/19 but would not have 
worked on a similar move back in March where bearish traders 
could have been prematurely stopped out before reaching the low 
under 17.50.  We are lowering our stop but only to $26.00 or 
breakeven.  We are encouraged by Tuesday's trading action in 
PPDI.  We had expected the Drug Index (DRG.X) to trade lower 
today but similar to the HCX, the market's bullish reaction to 
the FOMC rate cut helped drive the Drug index back above the 200-
dma.  Whether or not it can stay there is another story.  We 
encourage you to look at a 5-minute chart of HCR.  Active traders 
should notice how HCR tends to trade up a little in the morning 
before sellers lean on it again and drive it lower.  Today's 
action was very negative and there was heavy selling (resistance) 
at the 24.50 level for most of the session.  If HCR trades to 
$20.00 on an intraday spike down we will close the play for a 
profit.

Picked on November 2nd at $26.00
Gain since picked:         +1.69
Earnings Date              10/16 (confirmed)





===============
AT Closed Plays
===============

  --------------------
  Closed Bearish Plays
  --------------------

Bristol Myers Squibb - BMY - cls: 55.76 chg: +2.49 stop: 54.60 

The courts ruled that a U.S. regulator's decision to approve 
generic versions for BMY's Taxol drug was wrong.  Immediately 
shares of IVX and MYL, two companies who sell the copy cat 
versions fell on the news while BMY traded higher.  Fortunately 
for IVX and MYL it is unlikely that BMY would force them to take 
their generic versions off the market despite BMY's significant 
losses in Taxol sales this last quarter.  In addition to this 
moral win for BMY, shares of the stock traded higher after the 
company said it would reveal some of the drugs in its pipeline in 
an analysts conference tomorrow.  The volatile trading in BMY on 
Tuesday stopped us out midday at $54.60 for a 6 percent move.  At 
this point we would expect BMY to probably trade higher tomorrow 
but its 200-dma at 57.50 could be a tough obstacle to overcome.  

Picked on October 23rd at $58.02
Gain since picked:         +3.42
Earnings Date              10/23 (confirmed)






==================================================================
High Risk / High Reward (HR) section
==================================================================

===============
HR New Plays
===============

  ----------------
  New Bullish Play
  ----------------

AOL Time Warner - AOL - close: 35.15 change: +1.66 stop: 32.25

Company Description
The Internet powerhouse turned media mogul has become a 
communications company to worth watching.  Now the combination of 
American Online and Time Warner are developing the synergies 
between T.V. assets and Internet assets and everything in 
between.  

Why We Like It:
One of the assets AOL is planning to capitalize on is its film 
division it adopted when it merged with Time Warner.  From all 
the hoopla you and I are hearing about the upcoming Harry Potter 
movie it's going to be a windfall.  Whether this one movie is 
enough to drive the stock price is up for discussion but what 
traders should know by now it's not the facts that matter but 
investors perception of the facts.  If Wall Street thinks Harry 
Potter will work its magic for AOL then by all means the stock is 
likely to see buying interest.  I for one will donate my $8 at 
the box office to see the movie.  There's no counting how many 
parents will make multiple donations for their kids to see it 
more than once so the potential to be a box office mega-hit is 
there.  AOL has overhead resistance at $37.50, $40, $42.50 and 
its 200-dma is near $44.  Given enough hype about the movie that 
is due to hit theatres on Nov. 16th, we think the stock can trade 
over $40.  How high over $40 is an internal debate in the office.  
More conservative traders may want to use a tighter stop but 
we're placing ours 25 cents below Monday's low.  Long live Harry 
Potter but let's hope the Muggles are willing to watch the little 
bugger work some magic on the silver screen.

Picked on November 6th at $35.15 
Gain since picked:         +0.00
Earnings Date              10/17 (confirmed)





===============
HR Play Updates
===============

  --------------------
  Bullish Play Updates
  --------------------


Hutchinson Tech. - HTCH - close: 21.87 change: +0.65 stop: 20.10*new*

If you're following the new high risk/high reward plays then you 
know we were triggered in HTCH when it traded at $20.10 in 
Monday's session.  The stock erupted on Monday closing at 21.22.  
The AMEX disk drive index (DDX.X) also put in another strong day 
on Monday (after a string of strong days).  As noted in Sunday's 
write up, we suspected that the big move in HTCH was at least 
partially fueled by shorts deciding to cover their positions.  
The trend continued today with shares reaching a high of $21.90.  
Unfortunately, the stock really disappointed on earnings this 
afternoon with a loss of 43 cents a share versus estimates of 37 
cents a share.  Management did say they expected to breakeven by 
first quarter of next year but there is no telling how investors 
will react to the report.  To make matters worse, the DDX.X 
traded sideways and looks ready for a pull back of its own.  We 
are expecting a dip tomorrow and hopeful bulls will be looking 
for support between $20.50 and $21.00.  We've decided to limit 
our risk to breakeven by raising the stop to $20.10.  If the 
stock surprises us we'll close the play for a profit at $22.50.

Picked on November 5th at $20.10 
Gain since picked:         +1.77
Earnings Date              11/06 (confirmed)




---

Homestake Mining Co. - HM - close: 8.20 change: -0.10 stop: 7.95

The gold sector continues to trade sideways as investors throw 
money at anything tech or consumable.  The trading range on HM 
has narrowed in the last two days to 8.40 on the top side and 
8.15 on the bottom.  We would only consider a long play on HM if 
the stock trades above $8.50.  The 15-dma has been acting as 
resistance but most traders don't follow it.  We like to watch 
the 30-minute chart with the 15-day MA (or 195 period moving 
average) as a guide.  Enter passively.

Picked on November 2nd at $ 8.37
Gain since picked:         -0.17
Earnings Date              10/31 (confirmed)






==================
  Trading Ideas
==================

This section contains stocks that meet criteria which may make
them of interest to long and short side traders.  These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential.  However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.


--------------------------------- 
Value Plays With Bullish Signals 
--------------------------------- 
Ticker  Company Name               Close     Change 

SI      Siemens Aktkien            51.70     +0.84
MAY     May Department Stores      35.24     +1.35
AN      Autonation Inc             11.70     +0.69
LZ      Lubrizol Corp              29.99     +0.67
RYAN    Ryans Family Steak House   20.00     +0.85

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

FNSR    Finisar Corp               10.22     +1.45
MBG     Mandalay Resort Group      19.08     +2.03
DCLK    Doubleclick Inc             8.37     +1.32
GETY    Getty Images Inc           18.96     +1.85
GNTA    Genta Inc                  16.36     +1.09

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

FOX     Fox Entertainment Group    22.50     +1.13
RTRSY   Reuters Group              63.60     +1.60
CHIR    Chiron Corp                56.80     +1.45
BBI     Blockbuster Inc            28.12     +1.22
TOY     Toys R Us Inc              22.10     +1.68

----------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

SLB     Schlumberge Ltd            45.97     -1.37
NDN     99 Cents Only Stores       33.97     -2.27
ROP     Roper Industries           41.40     -1.25
SONC    Sonic Corp                 30.97     -4.28

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)	
------------------------------------------- 

PECS    Pec Solutions Inc         22.85     -2.31




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