Friday’s Options Alerts

• June 6, 2002
• TradingMarkets Editors

No follow through occurred after
yesterday’s reversal day. Merrill Lynch’s downgrade of Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) and the
semiconductor sector over valuation concerns sparked selling in the broader
market. Even after some cheerful forecasts from the Semiconductor Industry Association,
chip stocks fell 3%. Positive economic data failed to support the market as
weekly initial jobless claims numbers fell to a 13-month low. Weekly initial
claims dropped by a larger-than-expected 32,000 to 383,000.

Biotechs
(
$BTK.X |
Quote |
Chart |
News |
PowerRating), Telecom
(
$XTC.X |
Quote |
Chart |
News |
PowerRating), and semiconductor
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) issues took the
worst of today’s beating. Only gold
(
$XAU.X |
Quote |
Chart |
News |
PowerRating), oil service
(
$OSX.X |
Quote |
Chart |
News |
PowerRating),
and defensive
(
$DFI.X |
Quote |
Chart |
News |
PowerRating) issues escaped today’s selling. In after-hours
news, Intel lowered its second quarter revenue forecast to between $6.2 to $6.5
billion from $6.4 to $6.7billion. Watch for more downside tomorrow. For more information on today’s action, please refer to
the market
recap.

Fear was definitely back in the
markets today. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) gapped up, opened
near its lows and closed near the highs of the day. Volatility shot higher from
the open and never turned back. This shift
in intraday sentiment shows a big increase in fear. Today’s action
triggered CVR
2 and CVR
6 buy signals. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) also gapped up, opened near its lows
and closed slightly below the midpoint of its range. This shift in intraday sentiment shows an
increase in
fear. The VXN triggered a CVR
2 buy signal. With the additional CVR buy signals today, we could see more
of a bounce tomorrow.

Points of Significance:

Perot Systems
(
PER |
Quote |
Chart |
News |
PowerRating) dropped over
11% on
more than 12 times its average volume. The shares dropped for the second
consecutive day as allegations surfaced that the company taught energy
companies how to take advantage of loopholes in California’s energy market. The
company has been subpoenaed by the California Attorney General’s office. Shares
of the computer services firm fell to a 10-month low.

Activision
(
ATVI |
Quote |
Chart |
News |
PowerRating) fell over
7% on triple its average volume. The stock was up early in the week after they
raised guidance. However, the stock fell today as they announced a secondary
offering of 7.5 million shares priced at $33.40. Shares of Activision fell out
of its trading channel today.

L-3 Communications
(
LLL |
Quote |
Chart |
News |
PowerRating)
gained over 6% on four times its average volume. This came after the
company announced a public offering of 14 million shares. The money raised will
be used for debt reduction and acquisition purposes.

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

Please use stops on every trade!