Option Investor
Newsletter

Daily Newsletter, Thursday, 12/13/2001

HAVING TROUBLE PRINTING?
Printer friendly version
PremierInvestor.net Newsletter                Thursday 12-13-2001
                                                   section 1 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/5920_1.asp
=================================================================

In section one:

Market Wrap:      Sell!
Market Sentiment: Cuts and warnings take their toll
Play-of-the-Day:  JCP

-----------------------------------------------------------------
U.S. Market Numbers
-----------------------------------------------------------------
MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------
       12-13-2001           High     Low    Volume Advance/Decline
DJIA     9766.45 -128.36  9889.20  9745.07  1.4 bln   1065/2053
NASDAQ   1946.51 - 64.87  1985.79  1945.29  2.0 bln   1305/2316
S&P 100   570.60 -  9.77   580.37   569.85   Totals   2370/4369
S&P 500  1119.38 - 17.69  1137.07  1117.85
RUS 2000  468.67 -  6.64   475.31   468.67
DJ TRANS 2554.08 - 26.20  2580.46  2552.33
VIX        26.75 +  1.23    27.16    25.65
VXN        51.95 +  3.86    52.37    50.66
TRIN        1.04
Put/Call Ratio       .79
-----------------------------------------------------------------

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


Sell!

That's exactly what traders did today.  It wasn't just stocks 
that found a good round of selling.  Treasury bonds got sold too 
and there was a lot of cash raised from both markets.  That sets 
the stage for what could be an excellent buying opportunity.

For traders and investors, the key will be to be patient and very 
disciplined.  The trading strategy shouldn't be to simply start 
buying everything that falls to a level where you or I think a 
support level exists.  The proper strategy is to nip away with a 
bullish position or two and keep trade size small.  If you find a 
stock that looks like it has considerable room to fall based on a 
profit taking scenario, then look to short that stock.  It's one 
thing to simply sit and watch stocks fall and say "this market is 
so weak."  It's another thing to have some money on the short 
side and get a feel for what a bearish trader is doing.  That's 
when you really get a feel for strength and weakness.

When you short a stock (have real money on the line) thinking its 
going to get creamed 20% in a day or two, but the stock drops 10% 
in one day and rallies back 9% the next, you take on an entirely 
different view of how things are shaping up and how bulls and 
bears feel about their positions.  When that 9% next day rally 
comes from a level you thought might be support, you begin 
getting some confidence in other stocks you're thinking of 
trading bullish near a support level.

Follow all trades with a stop loss!  You should know by now that 
not every trade is going to hold just above your stop (if long) 
or just below your stop (if short).  Heck, you will most likely 
get stopped out of a trade or two that violates your stop by 25 
cents, then reverses course and trades like you thought it would.  
The prudent trader takes note of that action, adjusts his/her 
stop an additional 25 cents on the next trade and moves on.  The 
mistake made by most is to say, "If I hadn't used a stop, I'd 
have made money."  Tell that to the bullish Enron (NYSE:ENE) 
trader holding some stock at $10 and still looking for that rally 
back to $9 where they were going to set their stop, but didn't.

Look for 1,100, but plan for 1,060

On Tuesday, we mentioned that there were some rather 
"unreasonable" upward trends being violated to the downside.  The 
S&P 500 Index (SPX.X) broke an aggressive upward trend on Monday 
near the 1,154 level and things haven't gotten any better today 
for a short-term trader still holding long with no cash left for 
the pullback.

However, a trader that has been disciplined will look for some 
near-term support at the 1,100 level, but not be surprised if the 
SPX pulls back near the 1,060 level.  Here's why I say these are 
two near-term levels of support to be looking for.

S&P 500 Index Chart - 





I've left the longer-term downward trend on the SPX chart for a 
reason.  Think of it as a river's current.  Bullishness can be 
interpreted by the more extended period of time the SPX has 
traded above this downward trend than that found earlier this 
spring.  With our MACD indicator still rolling lower, but above 
the zero level, bulls need to be disciplined and look to trade 
partial positions.  Further technical bullishness in the SPX may 
be found near the 1,100 as this level acted very much like 
resistance in October as the 50-day moving average was falling.  
Once the SPX broke to the upside, there were undoubtedly some 
bears that didn't think a rally could last.  Support may now 
occur near the 1,100 level where the past resistance broken has a 
bear looking to cover on the decline.

S&P 500 Index Chart - $10 box





The point and figure chart shows a level of support near 1,100, 
which correlates close to that found from our retracement 
bracket.  Firmer support is found near the double bottom in early 
November (red b).  With the SPX back on a sell signal, an 
investor/trader can now begin assessing preliminary risk to the 
downside and manage their account accordingly.

Why we've worked so hard

For a longer-term investor or swing trader, I see no reason to 
try and initiate any new positions tomorrow.  I would only manage 
those positions currently held in an account and sit tight.

On the above point and figure chart, I've marked the current sell 
signal and pointed out a similar sell signal that occurred back 
in June.  This is where our past conversations regarding bond 
YIELDS becomes critical to understand and monitor.  In June, we 
saw rotation coming back into bonds.  That observation was made 
by watching bond YIELDS.

Today we saw massive divergence and reaction to economic data.  
From the beginning of trading, stocks found sellers.  There 
appeared to be conviction to take profits.  In my book, this 
makes sense.  When the stock market wants to take profits, don't 
stand in its way.  Step to the side and watch things if your 
major indicators are saying buy, but the broader market just 
isn't cooperating.

The divergence I was today was the bond market's reaction to the 
economic data.  It took about an hour, but early on, we saw 
buying in Treasuries, but there was something in those economic 
numbers that the bond market didn't seem to dislike.  Some bond 
traders were saying that the retail sales number were bad, but 
when lumped together with the past couple of months, retail sales 
number appeared to be rather normal.  With that the bond market 
sold bonds and YIELDS headed higher.

This divergence is going to have many traders scratching their 
heads.  Why did the bond market react the way it did and sell a 
safe security (compared to a stock) even with a YIELD that was 
back up at the 5% level (talking about the 10-year bond)?  

The bullish argument for stocks is that the bond market didn't 
find anything alarming in today's economic data that didn't tell 
them something they didn't already know.  I don't think equity 
bulls can throw caution to the wind and start buying every stock 
in site based on today's bond market action as the 10-year YIELD 
did not break above a recent relative high.  However, there 
continues to be cash raised from the bond market and it may well 
be slated to buy some of the stronger stocks that are being sold 
on profit taking.

First sell signal in the upward trend

I've talked in depth about the often times found pattern of 
"first sell signal in the upward trend being a buying 
opportunity."  For the short-term trader, this is what you're 
looking for near-term.  Today we saw the first sell signal in the 
upward trend on the S&P 500.  With bond traders selling bonds 
today, a short-term trader is still cognizant that there has been 
quite a bit of cash generated from the selling of bonds in recent 
weeks and today's bond market action generated more cash.

NASDAQ-100 "bear confirmed"

Today's action has the NASDAQ-100 Bullish Percent ($BPNDX) now in 
"bear confirmed" status and this time it comes from an 
"overbought" level..  If you're not a short-term trader, or 
willing to withstand some volatility, don't try and trade many 
NASDAQ stocks right now.  Instead, look at trading some listed 
stocks on the NYSE that are less volatile and reside outside of 
technology.

NASDAQ-100 Bullish Percent Chart - 2% scale





Our key short-term indicator for assessing risk is now "bear 
confirmed" and I would discourage bullish technology traders from 
trying to initiate any new positions at this time.  

Bearish traders can be looking to short some technology stocks, 
just be cognizant that we've seen quite a bit of selling in the 
bond market and cash is building on the sidelines.  I think it 
best to go into a trade looking for a 7% decline, but not looking 
for a home run type of trade.  There are a lot of traders still 
holding short positions where some of those positions moved 
significantly against them, and they will be looking to cover 
those positions on weakness.  If we don't see a move back into 
bonds anytime soon, then expect that cash that has been coming 
out of the bond market to be ready to buy some support levels.

It's important for individual traders like you and I to 
understand how institutions buy stocks.  They don't say, "buy 
500,000 shares at $25" and that's where the trade occurs.  There 
order is placed with their trader and the trader may buy from 
$24-$26 depending on liquidity, then bill the trade out at net of 
$25.  Understand going in that you will need to be willing to 
take some heat early on in the trade.  By limiting your trade 
size to 1/2 positions, you're better able to use a little looser 
stop when initiating the trade.  Then, if the trade begins 
working in your favor, you can add to the bearish position as you 
get comfortable with how the stock is trading, lowering your 
initial stop along the way and reducing risk in the trade from 
there.

Osama bin Laden factor

Late today, there were reports that Northern Alliance troops may 
have surrounded caves where the believed "master mind" behind the 
September 11th terrorist attacks, Osama bin Laden, is hiding.

This does not change the fact that the NASDAQ-100 Bullish % is 
now in "bear confirmed" status, but should be taken into 
consideration when initiating a short position.

To try and "predict" if his capture is going to happen or when it 
might happen is impossible.  All you or I can do is know that 
this potential event could occur and have a contingency plan in 
place to respond with the market environment.  My thoughts are 
that there would at least be a knee-jerk reaction of bullishness 
for stocks.

Final thought

I truly feel that today's stock market action is that of profit 
taking and not an economic reaction.  The stock market looks 
determined to take profits and for the bull that sold strength 
recently, he's glad to see it.

It's critical to follow the bond YIELDS.  If the economy is still 
worsening, then we shouldn't continue to see selling in bonds.

The best position to be in right now I feel is flat, or neutral 
to the market.  I feel it is a very good trading strategy to have 
one or two longs (as long as they're not technology related that 
is in a parabolic upward trend) and one or two short positions.

Subscribers that are uncomfortable with shorting should limit the 
number of bullish positions they hold, but look to add to those 
positions as the trade unfolds in your favor.  Too many times I 
have seen the NASDAQ-100 bullish % reverse from "overbought" 
levels like we're in and the declines among technology spill over 
to the broader market.  Expect volatility!  The shorter-term 
trader that is willing to lock in gains of 7% (long or short) or 
slides their stops toward profitability as the trade becomes 
profitable will do well.

If you're buying a stock at a level where you believe there is 
support and the stock bounces 7% in an hour, a day or two days 
and runs right to your targeted level of resistance, either lock 
in your gain there, or move your stop up to profitability!  Pay 
yourself for you correct analysis!


Jeff Bailey
Senior Market Technician


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

Cuts and warnings take their toll.
Russ Moore


Investors were given a smorgasbord of information today, most of 
it falling in to the bad news bin. Job cut announcements by 
Aetna, Qwest Communications and Applied Materials, along with 
profit warnings from Lucent and CIENA, had the bulls retreating 
and the bears licking their chops.

The DOW ended the session with a decline of –1.3 percent while 
the NASDAQ dropped –3.2 percent and the NDX –4.1 percent. Volume 
was solid with 1.42 billion shares exchanging hands on the big 
board and 2.07 billion shares moving on the tech index. Losers 
trounced winners by a 21/11 margin on the NYSE and 23/13 count on 
the NASDAQ.

Most sectors were showing red arrows with chip, networker, 
hardware, telecom, and airline the hardest hit. Biotech, gold, 
utility and oil service were headed the other way.

Plenty of economic data to digest and despite the market’s 
performance, the news wasn’t all-bad. Jobless claims fell –86,000 
to 394,000, far better than expected. Continuous claims rose 
+36,000, dropping the continuous claims number 331,000 below its’ 
peak.

Retail sales painted a different picture with a decline of –3.7 
percent versus the –2.9 percent forecast. The Producer Price 
Index fell –0.6 percent.

For now at least, it looks as though investors are focusing more 
on earnings. Increasing concerns about earnings, brought to light 
by the recent big name warnings, could put a damper on a January 
rally. 





VIX 
Thursday 12/13 close: 26.75


VXN
Thursday 12/13 close: 51.95


30-yr Bonds
Thursday 12/13 close: 5.53


Total Put/Call Ratio: .79


Equity Option Put/Call Ratio: .62


Index Option Put/Call Ratio:  1.91


===

NASDAQ 100 Index (NDX/QQQ)
52-Week High: 103.51
52-Week Low:   28.19
Current close: 39.76

Volume/Open Interest
Maximum calls: 40/145,379
Maximum puts : 40/117,925

Moving Averages
 10 DMA 41
 20 DMA 40
 50 DMA 37
200 DMA 40

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: 570.60

Volume/Open Interest
Maximum calls: 600/6,302
Maximum puts : 500/8,380
Moving Averages
 10 DMA  584
 20 DMA  587
 50 DMA  571
200 DMA  602

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: 1119.38

Volume / Open Interest
Maximum calls: 1150/54,026
Maximum puts : 1150/57,315
Moving Averages
 10 DMA 1146
 20 DMA 1145
 50 DMA 1111
200 DMA 1172

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:  9,766.45

Volume / Open Interest
Maximum Calls: 98/25,716
Maximum Puts   90/47,531

Moving Averages:
 10 DMA  9,924
 20 DMA  9,902
 50 DMA  9,574
200 DMA 10,121

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: 567.58

Volume / Open Interest
Maximum Calls: 560/  707
Maximum Puts:  540/1,151

Moving Averages
 10 DMA 588
 20 DMA 592
 50 DMA 553
200 DMA 537

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: 536.59

Volume / Open Interest
Maximum Calls: 520/ 572
Maximum Puts:  470/1250

Moving Averages
 10 DMA 555
 20 DMA 538
 50 DMA 494
200 DMA 558

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: 375.16

Volume / Open Interest
Maximum Calls: 420/375
Maximum Puts:  360/325

Moving Averages
 10 DMA 390
 20 DMA 394
 50 DMA 393
200 DMA 391

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, 12/07. 
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 
11/20/01     369,784   415,822   (46,038)   13.6%
11/27/01     371,336   421,405   (50,069)    8.7%
12/04/01     360,315   420,919   (60,604)   21.0%

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
11/20/01       140,507    86,861    53,646     9.8%
11/27/01       151,317    92,807    58,510     9.1%
12/04/01       159,336    86,534    72,802    24.4%

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 
11/20/01      38,042    46,446    (8,404)  (20.0%)
11/27/01      37,259    48,315   (11,056)   31.5%
12/04/01      42,191    51,426    (9,235)  (16.5%)

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
11/20/01       12,933     8,230    4,703      (7.1%)
11/27/01       12,540     8,359    4,181     (11.1%)
12/04/01       11,808     8,311    3,497     (16.4%)

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 
11/20/01      25,033    11,525   13,508     (3.1%)
11/27/01      24,243    11,496   12,747     (5.6%)
12/04/01      22,703    10,739   10,739    (15.7%)

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
11/20/01       3,609    10,565    (6,956)    (13.3%)
11/27/01       4,228    10,630    (6,402)     (8.0%)
12/04/01       3,677     9,799    (6,122)     (4.4%)
 
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        +72,336     +58,510        -60,604     -50,069

Total Open
Interest %       (+29.61%)  (+23.97%)      (-7.76%)   (-6.32%)
                 net-long   net-long       net-short  net-short


                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -6,122     -4,228          +11,964    12,747
Total Open
interest %       (-45.43%)    (-43.09%)      (+35.78%)  (+35.67)
                 net-short   net-short     net-long    net-long


                     Small Spec              Commercials
NASDAQ 100      (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value         +3,497      +4,181         -9,235    -11,056

Total Open
Interest %        (+17.38%)   (+20.01%)     (-9.86%) (-12.92%)
                 net-long   net-long      net-short net-short


What COT Data Tells Us
----------------------
Indices:.It appears the Commercial players are not ready to join 
the bull’s party just yet. For the third consecutive week we’ve 
seen the Commercials add to their net-short positions (bearish). 
More importantly, the Small Specs gobbled up more long contracts 
thereby increasing the divergence between Commercial and Small 
Spec players.

Gold: Commercials engaged in a modest reversal as they flipped 
from net-long to net-short. Current holdings do not indicate a 
directional bias.

11/06 35,435 contracts net-short
11/13 23,637 contracts net-short
11/20  2,489 contracts net-short
11/27  1,738 contracts net-long
12/04  2,534 contracts net-short

Data compiled as of Tuesday 12/04 by the CFTC.


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

NEW BULLISH PLAY
=================

JC Penny Co.- JCP - close: 23.08 chg: -0.06 stop: 22.25

Company Description:
J. C. Penney Company, Inc. is one of America's largest department 
store, drugstore, catalog, and e-commerce retailers, employing 
approximately 270,000 associates. The Company operates 
approximately 1,080 JCPenney department stores in all 50 states, 
Puerto Rico, and Mexico. In addition, the Company operates 
approximately 50 Renner department stores in Brazil. Eckerd 
operates approximately 2,650 drugstores throughout the Southeast, 
Sunbelt, and Northeast regions of the U.S. JCPenney Catalog, 
including e-commerce, is the nation's largest catalog merchant of 
general merchandise. J. C. Penney Company, Inc. is the sponsor of 
JCPenney Afterschool, a partnership committed to providing kids 
with high-quality after school programs to help them reach their 
full potential. (source: Company Press Release)

Why We Like It:
While retail sales are far from impressive this holiday season, 
discount retailers and, in particular, those whose focus on areas 
other than apparel, have fared better than most.  Though JCP is 
one such example, the company's shares have seen selling as of 
late.  Five of the last six trading days have registered in the 
minus column for the retailer's stock, driving shares down to test 
the 200-dma two days ago and coming quite close to repeating the 
feat over the last two days.  

This is definitely a contrarian play if you consider that 
everything about the stock looks negative.  The current three-week 
trend is down.  MACD is strongly negative. Our short-term trading 
signal shows the 5-dma is under the 15-dma.  The stock is under 
its 50-dma.  Stochastics show the stock to be oversold but they 
have not yet begun to turn up.  Thus, we don't see this as a 
"screaming buy" but a chance to use a low-risk entry on a retail 
stock that had little reaction to the negative retail sales 
numbers today.  By starting the play with a stop at $22.25 we are 
risking 83 cents or 3.6%.  If a reversal does occur JCP might be 
able to trade back to $26 or more which would be a gain of 13%.  
The obstacles above us are the $24.00 level and the 50-dma also 
near the $24 level.  

We are being a little aggressive by trying to enter close to the 
200-dma.  More conservative traders may want to wait for the up 
trend to begin and a close over $23.50 might qualify as a trigger 
point.  Alternatively, as traders who don't care what direction a 
stock or market moves as long as we're moving with it, if shares 
of JCP do breakdown below the 200-dma after this third test as 
support we would consider bearish positions to capture the next 
leg down.

Picked on December 13th at $23.08
Change since picked:        +0.00
Earnings Date               02/12 (unconfirmed)









=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

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


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.



PremierInvestor.net Newsletter                Thursday 12-13-2001
                                                   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/5920_2.asp
=================================================================

In section two:

Net Bulls
  Bullish Play Updates: ACRT, RATL, XMSR

Stock Bottom / Active Trader
  New Bullish Plays:    JCP
  Bullish Play Updates: CAL, IRM
  Bearish Play Updates: CTIC
  Closed Bearish Plays: MO

High Risk / High Reward
  Bullish Play Updates: TDSC, MTSN, MCTR, LSTR, TXCC

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
  --------------------

Actrade Fincl. Tech - ACRT - cls: 31.70 change: -0.65 stop: 29.45

ACRT gave back some of its recent gains today, though the move 
really constituted little more than consolidation.  The stock has 
traded in a rather narrow range for the last three days (minus a 
small intraday dip on Wednesday), and there has been little volume 
to reinforce conviction in either direction.  Stochastics indicate 
that shares are potentially overbought but in contrast the MACD is 
starting to trend up again.  At any rate, support just above 30.00 
has held steadfast over the last five trading sessions.   Traders 
interested in buying the dip can look for bounces at $31.00, 
$30.50 and $30.25.

Picked on December 9th at $30.96
Change since picked:       +0.74
Earnings Date              10/25 (confirmed)




---

Rational Software - RATL - close: 22.29 change: -0.65 stop: 19.98

Today’s minor setback came as a broad market decline saw the GSO.X 
dip beneath its 200-dma of 186.65 to a close of 182.60.  Support 
in the index at the 10-dma held though, and continued strong 
volume of 7.4 million shares in RATL meant that the stock is still 
seeing a lot of interest.  We’re encouraged that the stock traded 
as heavily as it did today without violating recently established 
support near $21.00.  A dip to this area could provide for a 
worthwhile entry for our more conservative readers.  A close above 
23.00 would probably convince us to upwardly revise our stop on 
the trade but, for now we will leave it at 19.98 to allow for 
potential volatility.

Picked on December 11th at 21.11
Change since picked:       +1.18
Earnings Date              01/09




---

XM Satellite Radio - XMSR - cls: 14.04 change: +0.01 stop: 11.89

XMSR bucked the day’s trend, opening higher on the session and 
settling down with a fractional gain on the day.  Fortune magazine 
named the company’s product as its "Product of the Year", yet 
another compliment in the long list of accolades recently bestowed 
upon the company.  Shares traded as high as 14.35 today, inching 
closer to our initial target range of 14.65-15.00, as volume 
continued to pour into the stock.  Potential resistance is not far 
away and if the stock takes this level in the coming days, we'll 
likely bump our stop higher to lock in profits.  Ultimate 
resistance resides in the neighborhood of 17.00.  Traders 
interested in playing XMSR may wish to consider an entry price 
above resistance at 14.50 - 14.65 or any potential bounce near 
$13.00. 

Picked on December 10th at $13.06
Change since picked:        +0.98
Earnings Date                 N/A





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

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

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

JC Penny Co.- JCP - close: 23.08 chg: -0.06 stop: 22.25

Company Description:
J. C. Penney Company, Inc. is one of America's largest department 
store, drugstore, catalog, and e-commerce retailers, employing 
approximately 270,000 associates. The Company operates 
approximately 1,080 JCPenney department stores in all 50 states, 
Puerto Rico, and Mexico. In addition, the Company operates 
approximately 50 Renner department stores in Brazil. Eckerd 
operates approximately 2,650 drugstores throughout the Southeast, 
Sunbelt, and Northeast regions of the U.S. JCPenney Catalog, 
including e-commerce, is the nation's largest catalog merchant of 
general merchandise. J. C. Penney Company, Inc. is the sponsor of 
JCPenney Afterschool, a partnership committed to providing kids 
with high-quality after school programs to help them reach their 
full potential. (source: Company Press Release)

Why We Like It:
While retail sales are far from impressive this holiday season, 
discount retailers and, in particular, those whose focus on areas 
other than apparel, have fared better than most.  Though JCP is 
one such example, the company's shares have seen selling as of 
late.  Five of the last six trading days have registered in the 
minus column for the retailer's stock, driving shares down to test 
the 200-dma two days ago and coming quite close to repeating the 
feat over the last two days.  

This is definitely a contrarian play if you consider that 
everything about the stock looks negative.  The current three-week 
trend is down.  MACD is strongly negative. Our short-term trading 
signal shows the 5-dma is under the 15-dma.  The stock is under 
its 50-dma.  Stochastics show the stock to be oversold but they 
have not yet begun to turn up.  Thus, we don't see this as a 
"screaming buy" but a chance to use a low-risk entry on a retail 
stock that had little reaction to the negative retail sales 
numbers today.  By starting the play with a stop at $22.25 we are 
risking 83 cents or 3.6%.  If a reversal does occur JCP might be 
able to trade back to $26 or more which would be a gain of 13%.  
The obstacles above us are the $24.00 level and the 50-dma also 
near the $24 level.  

We are being a little aggressive by trying to enter close to the 
200-dma.  More conservative traders may want to wait for the up 
trend to begin and a close over $23.50 might qualify as a trigger 
point.  Alternatively, as traders who don't care what direction a 
stock or market moves as long as we're moving with it, if shares 
of JCP do breakdown below the 200-dma after this third test as 
support we would consider bearish positions to capture the next 
leg down.

Picked on December 13th at $23.08
Change since picked:        +0.00
Earnings Date               02/12 (unconfirmed)





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

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

Continental Airlines  - CAL - close: 24.22 change: -1.20 stop: 23.75

A slip in the overall market created by negative economic news and 
some profit taking helped drag shares of CAL back under the 10-dma 
today.  With this level of support now violated, we're a little 
concerned that bears could rear their heads and take the stock 
lower.  However, with less than 1 million shares changing hands on 
the session, we're not ready to look at today's move as one with 
conviction just yet.  The stock's decline has taken shares out of 
overbought territory and could constitute a nice entry point.  
However, with key support having been violated today, we strongly 
encourage traders to verify the direction of the stock before 
opening any new positions.  If the market even halfway cooperates 
on Friday CAL could bounce off the $24 level, which is supported 
by the 15-dma.

Picked on December 9th at   25.77
Change since picked:        -1.55
Earnings Date               10/31




---

Iron Mountain  - IRM - close: 43.74 change: -0.81 stop: 43.25

IRM has tracked the S&P for the last four sessions with today's 
decline dragging shares under short-term support of 44.00.  While 
we're tempted to cut our losses and close the position, our stop 
of 43.25 represents less than an additional 1% decline and it's 
certainly possible that shares could rebound come tomorrow.  If a 
rebound is to have any teeth, the stock will need to trade in 
excess of its average daily volume of 200,000 shares as well as 
regain short-term support of 44.00.  There is just over two weeks 
left of trading before IRM splits 3:2 at the end of the month.  
The dip today might be seen as a buying opportunity by those 
looking for any pre-split run up.  With this in mind, we'd rather 
take our chances in trading tomorrow.

Picked on December 6th at $45.58
Change since picked:       -1.84
Earnings Date               1/23 (unconfirmed)





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

Cell Therapeutics - CTIC - close: 24.90 change: +0.95 stop: 26.16

Biotech was one of the few sectors to post a gain today and CTIC 
followed the trend with a 4% gain.  The BTK.X fell just shy of the 
50-dma in early trading and was immediately met with buying 
interest that buoyed the average to a positive close for the first 
time in five sessions.  Everyone should be familiar with the idea 
of stock and market cycles.  Nothing moves in a straight line.  
With the Biotech index and CTIC both falling multiple days in a 
row, they were both short-term oversold and needed a bounce.  What 
makes us cautious was the bounce in the BTK.X was its second at 
the 50-dma.  Unfortunately for biotech bulls the index failed to 
rally back over the 580 level, which was previously support.  In 
like manner, shares of CTIC traded within 15 cents of its 200-dma 
but couldn't hold its gains.  As long as shares remain under the 
200-dma, bears will probably do all right.  Thus, if you have a 
bearish bias on the stock, today's action looks like a failed 
rally and therefore a potential new entry point.  We would 
probably look for confirmation tomorrow before committing any new 
capital.  More conservative traders may want to see the stock 
close under today's low of $23.55 first.  

Picked on December 11th at 24.54
Change since picked:       -0.36
Earnings Date              10/22 (confirmed)





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

  --------------------
  Closed Bearish Play
  --------------------

Phillip Morris - MO - close: 45.40 chg: +0.06 stop: 46.01

Early session buying saw shares of MO trade as high as 46.15 but 
waning conviction later in the day translated into another 
sideways move with shares closing at 45.40.  Unfortunately, the 
bounce higher early in the session took out or short, stopping out 
the trade at 46.01.  Readers might speculate on what caused the 
early morning rally in MO.  Was it a delayed reaction to the 
dividend news from Wednesday?  We don't think so.  Yes, the stock 
is likely to trade higher heading into the December 24th 
shareholder record date (so investors can capture MO's relatively 
high dividend).  However, we think the negative comments from 
brokers and tech companies over earnings and lay offs sent traders 
into defensive issues expecting a broad market sell-off.  The 
sell-off came but investors sold into MO's rally and the 15-dma 
continues to act as overhead resistance.  This just makes one more 
lower "peak" in the descending pattern for MO.  Try looking at the 
chart with a 60-minute interval.  The stock is still working in a 
bearish wedge pattern.  A couple of closes above $46 might 
convince us the bearish trend has been temporarily stopped but the 
50 & 200-dma looming overhead may be tough obstacles for the 
bulls.  We are closing the play with a small gain of $1.16.

Picked on December 1st at $47.17
Change since picked:       +1.16
Earnings Date              10/17





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

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

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

3D Systems Corp. - TDSC - close: 11.20 change: -0.03 stop: 10.74 

Lack of leadership in the broader markets is not doing TDSC any 
favors.  The stock has done nothing but consolidate sideways after 
its breakout last Friday.  Wednesday's bounce off its low of 
$10.95 was encouraging and the rebound continued higher through 
most of the session today.  Yet in the last 10 minutes, shares 
fell from 11.60 to 11.20.  This has painted an ominous looking 
failed rally pattern at its 50-dma (11.75).  We continue to be 
cautious on the stock and would now prefer to wait for shares to 
close over its 50-dma before committing any new capital or taking 
new positions.  More aggressive traders can try and target bounces 
at the $11.00 level but keep in mind it wouldn't take much to be 
stopped out at 10.74, although this should reduce any exposure.  
In the news yesterday, TDSC announced a strategic partnership with 
Spectra-Physics Lasers Inc in which TDSC expects to increase 
demand for their solid imaging systems.  

Picked on December 7th at 11.52
Change since picked:      -0.32
Earnings Date             10/17 (confirmed)




---

Mattson Tech. - MTSN - close: 7.65 change: -0.64 stop: 7.49 

It was bad news Thursday today and the earnings warnings combined 
with AMAT's lay off announcement combined with negative comments 
about AMD did a real number on the chip sector.  The SOX fell 39 
points (6.78%) to 536.  This puts the index below its 200-dma and 
below price support at 550.  If investors decide to do more profit 
taking in the sector that has improved so much these last three 
months we could see the SOX.X falling to the 500 level rather 
easily.  This means that MTSN could fall $7.00 and possibly $6.50 
- $6.60 if the sector does trip lower.  We had grown a little 
concerned on Wednesday when shares of MTSN traded down to 7.67 but 
the stock bounced near its 10-dma and closed back above the 
crucial $8.00 level again.  Now that the stock is below $8 we 
would not look to enter any new bullish positions.  In addition to 
AMAT's lay off news, MTSN announced their own restructuring 
announcement today.  Mattson will sculpt their three divisions 
into two units, which will include a previously announced 30% 
staff reduction.  

Picked on December 7th at $ 8.16
Gain since picked:         -0.51
Earnings Date              11/13 (confirmed)




---

Mercator Software - MCTR - cls: 7.60 chg: -0.75 stop: 7.35 *new*

After the +8% gain yesterday we were hoping MCTR would show a 
little more strength in light of today's negative market action.  
Unfortunately, MCTR gave it all back with a 9% loss.  The stock 
tried to hold the $7.80 level this morning but shares drifted 
consistently lower throughout the session with a small bounce at 
7.50 late in the day.  The bulls still have two things going for 
them tomorrow.  The software sector was the least hit by today's 
tech woes and the GSO.X remains above price support at 180 and 
fractionally above its 10-dma.  In contrast, MCTR has closed below 
its 10-dma but still remains above support at its 15-dma, which 
has not been violated in weeks.  Therefore, we are raising our 
stop to $7.35, which is only a couple of cents below this 
indicator.  If shares slip below the 15-dma, MCTR will likely 
consolidate back to the $6.00 level (if not more).  The positive 
way to look at this current market weakness is when it is all done 
we'll have some great new entry points to target for the next leg 
higher.  

Picked on December 11th at $ 7.68
Gain since picked:          -0.08
Earnings Date               10/30 (confirmed)




---

Landstar System - LSTR - close: 72.89 change: +0.00 stop: 69.50

Volume was even more anemic than usual for LSTR.  The stock 
actually the mid part of the day higher after rallying up from its 
early morning lows.  We feel that the broader market weakness was 
the likely culprit for the afternoon dip.  Shares are building new 
short-term resistance at $74.00.  Fortunately, if LSTR keeps 
making these higher lows it will eventually breakout to the upside 
again.  Confirm stock direction before initiating any new 
positions.

Picked on December 10th at 73.26
Change since picked:       -0.37
Earnings Date               1/10 (unconfirmed)




---

TranSwitch - TXCC - close: 5.18 chg: -0.58 stop: 4.98

Ouch!  The weakness in the semiconductor sector (already discussed 
in the MTSN play above) weighed heavily on shares of TXCC.  The 
stock appears to be building a bearish wedge pattern which is not 
a good sign for our bullish bias.  The low on Tuesday was $5.18, 
which is exactly where shares closed today.  Odds are growing that 
if we don't see a bounce in the SOX tomorrow then TXCC could stop 
us out at $4.98.  Long-term investors who like the stock may want 
to consider potential entry points near $4.00 if a bounce that low 
occurs.  We would not create any new long positions until we see 
where the SOX (and TXCC) will eventually find support.  At this 
point we are not optimistic for TXCC.  A bearish wedge pattern has 
a downside breakout bias but it is not a guarantee. 

Picked on December 12th at $ 5.76
Change since picked:        -0.58
Earnings Date               01/16 (unconfirmed)





================== 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 

CIN     Cinergy Corp               29.96     +0.81
LEN     Lennar Corp                41.60     +0.53
RYL     Ryland Group               68.01     +1.01
ULAB    Unilab Corp                23.95     +0.67
UNS     Unisource Engergy Group    17.80     +1.02

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

RSG     Republic Services Inc      19.05     +1.24
LMNX    Luminex Corp               17.50     +1.43
SOL     Sola Intl                  18.56     +1.13
IDNX    Identix Inc                13.93     +1.56
HOTJ    Hotjobs.com                10.30     +3.83

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

IMNX    Immunex Corp               26.96     +2.51
HNZ     H.J. Heinz Co              39.50     +1.16
WLL     Williamette Industries     48.75     +3.25
ICOS    Icos Corp                  59.44     +2.74
RECN    Rscs Connection            27.90     +1.70

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

AVE     Aventis                    64.95     -1.25
TYC     Tyco Intl                  54.85     -1.10
BMY     Bristol-Myers Squibb       49.00     -1.45
AMGN    Amgen Inc                  60.19     -4.20
SPC     Saint Paul Companies       43.60     -2.78

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

BK      Bank of New York           39.94     -0.69
KEY     Keycorp                    23.15     -0.38
VAL     Valspar Corp               40.00     -1.43
HHS     Harte-Hanks Inc            25.64     -0.53
PDS     Precision Drilling Corp    23.57     -0.64
ELK     Elcor Corp                 24.79     -0.70





=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

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


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives