Monday’s Options Alerts

• May 3, 2002
• TradingMarkets Editors

Stocks took a hit today,
but ended the
day off their lows as the jobless rate jumped to an eight-year high. The Nasdaq was once again the biggest loser, as it dropped another 2%. The Naz is now
trading at the lows of last October. Semiconductor issues
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) sliced
through the 500 level, falling below its .50 retracement level from last
September’s low. The biggest news of the day was that the unemployment rate rose
to 6%, besting estimates of 5.8%. This represents the highest level since August
of 1994. For more information on today’s action, please refer to
the market
recap.

Volatility shot up upon the release of
the jobless data, but settled down by the close. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating)
opened near its lows and closed near the midpoint of the range. This still suggests a
slight increase in fear. No CVR signals were triggered today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating)
also opened
near its lows and closed near the midpoint of the day. This too suggests a slight increase in fear. No CVR signals were triggered today
either. However the VXN is overbought, which means that techs are oversold.
Therefore we could very well see a bounce in tech issues soon.

Points of Significance

Enterprise Software maker Documentum
(
DCTM |
Quote |
Chart |
News |
PowerRating) dropped
17% on over five times its average volume. Software issues were under heavy
pressure today as investors sold everything in the tech sector. The stock has
taken out its 200-day moving average. DCTM had managed to stay above the key
average for almost seven months. There is heavy activity in the July 15 puts.

ESS Technology
(
ESST |
Quote |
Chart |
News |
PowerRating) dropped 13% on
almost double its average volume. The stock has traded in a tight consolidation
period since breaking down from a head-and-shoulders top. The stock did manage
to bounce of support at its .618 retracement from last September’s low. There is
heavy activity in the July 17.50 calls.

Semiconductor equipment maker ST
Microelectronics
(
STM |
Quote |
Chart |
News |
PowerRating) dropped 5% on triple its average volume. Like most
chip stocks, ST did not escape the selling. The stock broke down from a
descending triangle. ST has clearly been in a downtrend since January of 2000
and has been trading sideways for more that six months. A break below 27 would
not be good for the stock.

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!