CSCO Generates Bounce
All right, folks. Here is the bounce we have been
expecting/waiting for. Futures are sharply higher this morning on the back of
Cisco’s earnings report last night. Cisco
(
CSCO |
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PowerRating) beat the consensus
estimate by $.02, and CEO John Chambers comments, suggesting a possible rebound
in technology spending (again), has the futures markets sharply higher. Now this
is pretty much standard operating procedure for Chambers, but the market seems
to believe it, or the shorts are scared enough to believe it.
Will it hold? This is a powerful spike opening, and the best course of action is
to watch, wait, and remember that the trend is DOWN. Daytraders and other
punters looking to take a shot at the
(
QQQ |
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News |
PowerRating)s on the short side, the $30.15 –
$30.40 area looks like first resistance. Hopefully, this short-covering blast,
be it two days or two weeks, will allow us to build some of the short strategies
we have been considering. For the time being, play matador.
Volatility
Yesterday, the VIX dropped .31 (the DJI was up) to 24.57, while the VXN
continued higher, tagging its 200-day moving average today (50.90), and
finishing up 1.00 to 50.12. The QQV gained 51 to 44.68 and is now perched above
its 200-day moving average (43.52). I am considering volatility as slightly
overbought in here, as both the VXN and QQV have reverted back to their 200-day
moving averages. The VIX is still well below its 200-day moving average, which
comes in at 26.38. Volatility should get slaughtered today on the rally. If it
does not, it will be a sign that the rally may not last long.
Yesterday we removed the
(
MSFT |
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PowerRating) and
(
MER |
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PowerRating) put calendar recommendations
because they were no longer appropriate as MSFT had declined below $50.00 and
MER had declined below $40.00. With today’s rally they may go back on the front
burner. Biotech, software and broker-dealers is where we are looking to
place shorts on this bounce.
Trade Updates (5/07/02)
Nothing done yesterday.
Working Orders (Old
Recommendations)
(
HAL |
Quote |
Chart |
News |
PowerRating) — Holders of the HAL July 20 buy-write, work to sell the HAL July
17.5/20 call spread at $1.00. This will "roll" the position into the
July 17.5 buy-write.
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all of the July 50 calls at $1.00 to close position.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Sell all of the May 25 calls at $.50 to close position.
New Actions (New Recommendations)
None.
Rolls/Adjustments
None.
On The Horizon…
Monitoring energy and materials stocks for possible long positions.
Recap of open trades
Long-term
Reverse Collars
None.
Buy-writes
(
AMR |
Quote |
Chart |
News |
PowerRating) — Long the August 25 buy-write at $22.00 (50%).
(
AOL |
Quote |
Chart |
News |
PowerRating) — Long the July 22.5 buy-write at
$19.40 (50%).
AOL — Long the October 20 buy-write at $16.30
(25%).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 20 buy-write at $15.00
(50%).
HAL — Long the July 17.5 buy-write at $14.50
(50%).
(
SEBL |
Quote |
Chart |
News |
PowerRating) — Long the August 27.5 buy-write at
$23.00 (50%).
Proxy buy-writes
DYN|DYN] — Long the January 15/June 20 proxy buy-write at $3.20 (50%).
Complex Strategies
None.
Directional Positions:
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30
(50%).
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 55 calls at $3.65 (100%).
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30
(50%).
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the May 15 calls at $.40 (50%).
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40
(50%).
Call Spread Positions:
None.
Put Positions
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the June 100 puts at an effective price of $2.75 (50%).
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the June 40 puts at 2.75 (50%).
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 55 puts at $1.00
credit, due to roll on 5/6/02 (37.5%).
Spread Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August/May 65 put calendar at $1.50 (50%).
Stops
None.
- Options trading involves substantial risk and
is not suitable for all Investors.
- Also note that spread strategies involve
multiple commissions and are not risk-free. Most spreads must be done in a
margin account.
- Because of the importance of tax
considerations to all options transactions, the investor considering options
should consult with a tax advisor as to how taxes may affect the outcome of
contemplated options transactions.
- Supporting documentation for claims,
comparisons, recommendations, statistics or other technical data will be
furnished upon request. One or more of the contributors to these
commentaries may have a position in one or more of the securities mentioned.
- It is important to note that the options
strategies discussed herein are not suitable to all investors. Options are
complex investment tools and involve substantial risk. Moreover spreading
strategies do not eliminate risk and involve multiple commissions.
- Note: All individuals must have read the ODD
carefully before trading options. To obtain the document, click on the OCC
link: https://www.theocc.com/publications/risks/riskchap1.jsp